Australian Securities & Investments Commission, In the Matter of Richstar Enterprises Pty Ltd ACN 099 071 968 (No 9) v Carey

CORPORATIONS - freezing orders affecting property of members of corporate property group - liberty to third parties to apply - option to purchase valuable land - held by member of corporate group as assignee from another member of corporate group - assigned option subject to freezing order - assignor company subject to fixed charge over 'land' and other property classes - assignment of option without notice to chargee - receivers appointed to assignor company under charge - application to vary freezing orders to enable receivers to assert and exercise rights to option held by assignee company - whether appropriate to determine substantive rights as an incident of protective proceedings under s 1323 of Corporations Act 2001 (Cth) - urgency - option due to expire within five weeks of hearing - unresolved question as to validity of option against Responsible Entity for syndicate of investors in relation to land - whether appropriate to make declaration as to whether charge over option fixed or floating at creation - discovery of documents - whether discovery should be ordered in favour of assignee company - relevance to commercial context of charge - relevance to construction of charge - whether charge fixed or floating - criteria for characterisation - case of urgency - no useful purpose served by discovery - discovery oppressive in circumstances of urgency - declaration made - charge fixed - freezing orders varied Corporations Act 2001 (Cth) s 1323 Federal Court of Australia Act 1976 (Cth) Australian Securities and Investments Commission, In the Matter of Richstar Enterprises Pty Ltd v Carey (No 3) (2006) 57 ACSR 307 cited Barba v Gas & Fuel Corporation of Victoria (1976) 136 CLR 120 cited London and South Western Railway Co v Gomm (1882) 20 Ch D 562 cited In re Yorkshire Woolcombers Association [1903] 3 Ch 284 cited United Builders Pty Ltd v Mutual Acceptance Ltd (1980) 44 CLR 673 cited Illingworth v Houldsworth [1904] AC 355 cited Agnew v Commissioner of Inland Revenue [2001] 2 AC 710 cited Re Spectrum Plus Limited [2005] 2 AC 680 cited Waters v Widdows [1984] VR 503 cited Deputy Commissioner of Taxation v LAI Corporation Pty Ltd (Receivers and Managers Appointed) [1987] WAR 15 cited Boambee Bay Pty Ltd (In liq) v Equus Financial Services Ltd (1991) 6 ACSR 532 cited Hanson Construction Materials v Vimwise Civil Engineering [2005] NSWSC 880 cited

REASONS FOR JUDGMENT ON MOTIONS TO ALLOW DEALINGS ON OPTION TO PURCHASE WARNBRO LAND Introduction 1 On 20 April 2006 orders were made under s 1323 of the Corporations Act 2001 (Cth) (the Act) and s 23 of the Federal Court of Australia Act 1976 (Cth) restraining Bowesco Pty Ltd (Bowesco) from disposing of or dealing with its assets pending investigations being carried out by the Australian Securities and Investments Commission into matters relating to Bowesco and other companies associated with the Westpoint Property and Finance Group - Australian Securities and Investments Commission, In the Matter of Richstar Enterprises Pty Ltd v Carey (No 3) (2006) 57 ACSR 307. 2 On 30 June 2006 the orders were varied. The substantive freezing order in respect of Bowesco's property is in the following terms: 'Bowesco, by itself, its servants, agents and employees, is restrained until 20 October 2006 or further order, from removing, or causing or permitting to be removed from any State of Australia and from Australia, or selling, charging, mortgaging or otherwise dealing with or disposing of or causing or permitting to be sold, charged, mortgaged or otherwise dealt with or disposed of, all or any of its assets (the "Bowesco Property"), whether held legally or beneficially by it.' At the time of the orders of 20 April and 30 June 2006 John Patrick Cronin and Shaun Robert Fraser had been appointed as receivers under a Deed of Charge granted by Bowesco in favour of Suncorp-Metway Ltd dated 8 October 2004. While receivers were appointed to the property of other Westpoint companies and officers on 20 April 2006 pursuant to s 1323, no such appointment was sought or made in respect of Bowesco because of the prior appointment of the Suncorp-Metway receivers. 3 Variations to the Bowesco orders are now sought. They relate to an Option held by Bowesco and purportedly assigned to it by Westpoint Corporation Pty Ltd (Westpoint Corporation) in respect of land occupied by the Warnbro Fair Shopping Centre and land adjacent to it. 4 In August 1999 Westpoint Management Pty Ltd (Westpoint Management) was the Responsible Entity for the Warnbro Fair Syndicate and was registered proprietor of: '(a) Land known as the Warnbro Fair Shopping Centre (being Lot 909 on Diagram 94372 being the whole of the land comprised in Certificate of Title Volume 2121 Folio 890); and (b) Land known as the Stage 2 Land (being Lot 913 on Diagram 94372 being the whole of the land comprised in Certificate of Title Volume 2121 Folio 888).' By an agreement dated 31 August 1999 between Westpoint Management and Westpoint Corporation, Westpoint Management granted an Option to Westpoint Corporation to purchase the land. A number of amendments to the Option Agreement were made by agreement between Westpoint Management and Westpoint Corporation between 2001 and 2005. 5 On 28 September 2005 Westpoint Corporation granted a fixed and floating charge over all of its present and future undertaking and property and assets to Perpetual Nominees Ltd as custodian of The ING Mortgage Pool for ING Funds Management Ltd, as the Responsible Entity of The ING Mortgage Pool. For ease of reference Perpetual Nominees in this capacity shall be referred to as ING and the charge as the ING Charge. The ING Charge was registered on 13 October 2005. 6 By a Deed dated 7 October 2005 between Westpoint Management, Westpoint Corporation and Bowesco, entitled a 'Deed of Assignment of Option', Westpoint Corporation assigned the Option to Bowesco. ING was not given notice of and did not consent to the assignment of the Option. 7 On 24 January 2006 Messrs Oren Zohar, David Winterbottom and Mark Korda of KordaMentha Accountants were appointed by ING, under the ING Charge, as joint and several receivers to the property of Westpoint Corporation. They were also specifically appointed, on 19 July 2006, as receivers of the Option held by Bowesco. They are referred to, for present purposes, as the 'Option Receivers'. 8 The Option Receivers, filed a motion filed in these proceedings on 16 August 2006 pursuant to liberty to apply which was granted to third parties who might be affected by the freezing orders made on 20 April and 30 June 2006, applied to vary the orders made on 30 June 2006 to include a paragraph 4A such that those orders: 'Shall not prevent Mark Korda, Oren Zohar and David Winterbottom (the "Option Receivers") from exercising all rights, powers, privileges, benefits, discretions and authorities conferred upon them (either jointly or severally) by: (a) a Deed of Charge granted by Westpoint Corporation Pty Ltd (Receivers and Managers Appointed) (In Liquidation) in favour of Perpetual Nominees Limited as Custodian of The ING Mortgage Pool for ING Funds Management Limited ABN 21 003 002 800 as the Responsible Entity of The ING Mortgage Pool ("ING"), dated 28 September 2005, registered with the Plaintiff and having charge number 1298375; (b) a Deed of Appointment of Receiver made 19 July 2006 between ING and the Option Receivers; and (c) section 420 of the Corporations Act 2001.' 9 Bowesco on the other hand seeks an order, set out in a Minute, in the following terms: '1. The order made on 30 June 2006 restraining the Seventh Defendant from dealing with the option assigned to the Seventh Defendant by Westpoint Corporation Pty Ltd by deed of assignment dated 7 October 2006 be discharged. 2. The Plaintiff pay the Seventh Defendant's costs in relation to this application and the hearing in relation to the making of the preservation order referred to in order 1.' 10 For reasons which I now publish, I am of the view that the freezing order should be varied as proposed by the Option Receivers and a declaration made in their favour that the Option was subject to the fixed charge component of the ING Charge at its creation. The evidence 11 The Option Receivers relied upon the affidavits of Oren Zohar sworn 16 August and 7 and 11 September 2006. Bowesco relied upon the affidavits of Norman Carey sworn 8 September 2006 and 13 September 2006. Mr Carey's principal affidavit contained much material that was hearsay and conclusionary. However these proceedings have a degree of urgency about them as it appears that the Option, if still valid, will expire on or about 20 October 2006. The qualification 'if still valid' refers to an issue that may arise between ING and Elderslie Property Ltd, which has succeeded Westpoint Management as the Responsible Entity for the Warnbro Fair Syndicate. 12 Bowesco's counsel submitted that part of its case in opposition to the argument that ING has any interest in the Option was that the ING Charge, so far as it affected the Option, was a floating charge. Bowesco contended that the assignment of the Option was part of the ordinary course of Westpoint Corporation's business and that the Option, as an asset of Bowesco, was not the subject of the fixed part of the charge. That is to say, the assignment by Westpoint Corporation of the Option to Bowesco was not in breach of the ING Charge and Bowesco was not affected by any equity in favour of ING. Alternatively, if the Option were subject to the fixed charge, ING had waived its rights in relation to a dealing with the Option. Counsel submitted that in order to properly advance its contention, Bowesco needed access to a range of documents, in particular documents which had been seized by the Australia Securities and Investments Commission (ASIC), going to the nature of the Westpoint Group business, the course of negotiations prior to the grant of the charge and the post charge course of business which would inform the construction of the charge and support the contention that it was a floating charge so far as it affected the Option. The post charge dealings were also directed to an alleged waiver by ING of rights in relation to business dealings with property nominally covered by the charge which waiver, was said to extend to the assignment of the Option . 13 I heard argument on the merits of the motions and adjourned the matter part heard on the basis that further argument could be advanced going to the necessity for the proposed discovery or production of documents on subpoena. Bowesco was given leave to file any further affidavit upon which it might wish to rely by close of business on Wednesday, 13 September 2006. A supplementary affidavit sworn by Mr Carey was filed on 13 September 2006. The matter came back for argument yesterday, Thursday, 14 September 2006, and judgment was reserved until today. In the course of argument on both days questions arose about the extent to which the variation orders sought would resolve disputes about the ownership of the assigned Option. Incidental to those questions was the concern whether it is appropriate for the Court in proceedings relating to the implementation of orders made under s 1323 to determine substantive disputes as to property rights affected by such orders. These questions are considered below. The nature of these proceedings, the alternative dispositions and their utility 14 The motions relating to the variation of the orders of 30 June 2006 as against Bowesco arise as an incident of these proceedings which were brought by the ASIC for the appointment of receivers and for freezing and asset disclosure orders in relation to a number of companies and individuals associated with the Westpoint Group, of which Bowesco is one. It seems that both the Option Receivers and Bowesco seek a variation of orders which affect Bowesco's capacity to deal with the Option as a property of Bowesco. Underlying this however, is the Option Receivers' substantive position that, in effect, Bowesco holds the Option with notice of ING's ownership of it and thereby presumably as constructive trustee of it for ING. The real argument raised between the two parties is about the effective ownership of the Option and whether, in equity, it belongs to ING or to Bowesco. 15 The substantive question arises as an incident of the implementation of the orders made pursuant to s 1323 of the Act . Those orders were made as a protective measure with respect to assets held by companies in the Westpoint Group pending the outcome of ongoing ASIC investigations into the affairs of the Group. In the ordinary course it is undesirable and potentially confusing to decide substantive property disputes as an incident of the implementation and application of such orders. 16 In this case there is a degree of urgency about the realisation of such benefits as the Option may yield. It may potentially provide access to a very valuable property. It is in nobody's interests that, if valid, it should be allowed to expire pending resolution of a dispute about its ownership. Arising out of that concern, I was prepared to hear argument on the substantive question as well as the desirability of dealing with it as an incident of these proceedings as against requiring the parties to commence separate proceedings. Incidental to these arguments was Bowesco's contention that no substantive determination should be made without it having had an opportunity to obtain the production of documents by way of discovery or subpoena so that it could mount arguments relevant to the construction of the charge based on the factual matrix in which it was created. In particular, Bowesco wished to advance an argument that the assignment to it of the Option was part of the long-standing ordinary course of business of Westpoint Corporation in choosing special purpose vehicles from within the Westpoint Group to implement specific property development projects. The Option Receivers on the other hand maintained that the production of documents was neither necessary nor appropriate in order to properly construe the ING Charge. They pointed out that there are some 3,000 boxes of documents which have been seized by ASIC and which it would be necessary to consider in order to respond to the discovery sought. In the circumstances, that would be oppressive. 17 Another aspect of the debate ventilated yesterday was that, even if Bowesco were to succeed in its contention that the Option was not the subject of the fixed charge component of the ING Charge, there would still be questions between the liquidators of Westpoint Corporation and Bowesco as to whether the assignment of the Option was an uncommercial transaction. 18 A further complication is that Mr Simon Reid and Mr Andrew Beech were appointed as liquidators of Westpoint Management on 11 April 2006. They would therefore appear to have assumed its responsibilities as Responsible Entity for the Warnbro Fair Syndicate. On 4 August 2006 the members of the Warnbro Fair Syndicate voted to replace Westpoint Management (effectively, the liquidators) with Elderslie Property Ltd (Elderslie) as Responsible Entity. Mr Zohar's supplementary affidavit of 7 September 2006 confirms, by reference to an ASIC search, that Elderslie has been the Responsible Entity since 9 August 2006. According to Mr Zohar, Elderslie has been taking steps to sell the land the subject of the Option in a way that is inconsistent with the regime under the Option Agreement and detrimental to the Option Receivers' efforts to realise the benefit of the Option. 19 In a circular letter dated 30 August 2006 to persons who had expressed interest in acquiring the Warnbro Fair Shopping Centre, Elderslie stated that it had: '(a) with effect from 9 August 2006 replaced Westpoint Management as Responsible Entity of the Warnbro Fair Syndicate; (b) negotiated with the Lender who appointed KordaMentha as receiver and manager to terminate the appointment of KordaMentha with effect from 25 August 2006.' According to Elderslie the result was that it had become the owner of the centre and that KordaMentha was no longer in a position to sell it. Elderslie said in the circular letter that it was committed to selling the centre and looking to settle the sale as soon as practicably possible. The letter made no reference to the Option. 20 It is apparent from these matters that if the Court were to determine and make a declaration, as an incident of these proceedings, that the Option was not subject to the fixed component of the ING Charge, issues would remain as between Bowesco and the Westpoint Corporation liquidators about the validity of the assignment of the Option. Over and above that, there would appear to be a question between Elderslie and Bowesco about the validity of the Option. If a declaration were to be made that the Option were subject to the fixed component of the ING Charge, then an outstanding question could still arise between the Option Receivers and Elderslie about the validity of the Option. That of course might be resolved commercially. It is also necessary to bear in mind that Elderslie is not a party to the present proceedings. 21 In the meantime the Option Receivers say that they have negotiated with a third party (the Nominee) at arms length so that if the freezing orders are varied as proposed, the Nominee can take and exercise the Option. Mr Zohar's supplementary affidavit of 7 September 2006 says that the details and status of this negotiated arrangement are confidential and commercially sensitive. They were not further disclosed in the affidavit. He said that the Nominee would not be in a position to exercise the Option and complete the purchase of the property until the freezing orders had been varied. Mr Zohar said that the Nominee wishes to exercise the Option immediately. Subject to Elderslie's compliance with the terms of the Option Agreement he anticipated that settlement of the sale of the property would take place 30 days after the exercise of the Option. Funds would then be available to pay the investors and creditors of the Warnbro Fair Syndicate. Any delay in the determination of the application would delay that distribution. Mr Zohar also said that he believed that any delay in exercising the Option would prejudice the position of the Option Receivers and/or the Nominee for the following reasons: (a) The Nominee has already completed its due diligence and inquiries in relation to the property and calculated its price accordingly. On that basis the Nominee wishes to have settlement of the sale of the property as soon as possible. Any delay would increase the prospects of a material change in circumstances; and (b) The steps being taken by Elderslie to sell the property independently of the Option are in direct conflict with the rights of the Option Receivers and the Nominee under the Option Agreement. 22 Mr Norman Carey who swore affidavits in support of Bowesco's position in these proceedings asserted that there are a number of alternative ways in which Bowesco could facilitate the development or alternatively obtain potentially long term benefits. It could undertake the property development in its own right by entering into a 'turn key' design and construction contract backed by a financier. Alternatively, he said, there are a number of property developers who would be interested in participating in the development and effectively undertaking the role originally envisaged for Westpoint Corporation. Given the existing income stream from the established shopping centre and the prospective income from the stage 2 development, there would be a number of financiers and investors who would be interested in providing development finance. 23 Mr Carey claimed, that from his experience as a property developer, he knew that the development of the property as he outlined it was the most appropriate way to achieve the maximum benefit for Bowesco from its right to exercise the Option. This included the opportunity to deliver to Bowesco a long term interest in the Warnbro Fair Shopping Centre and the stage 2 development on the adjacent vacant land. A long term interest of that type, given Bowesco's investment strategy, would be of significantly greater value than a mere sale of the Option for cash. 24 Mr Carey asserted that the mere sale of the Warnbro Option as proposed by Mr Zohar would result in the least possible benefit flowing to the Warnbro Option holder. The real value of the Option lay in the opportunity it provided to develop and maintain a long term interest in the developed property. Mr Carey asserted that the sale of the Warnbro Option in the manner proposed by Mr Zohar would result in substantial prejudice being suffered by Bowesco. If it were ultimately found by the Court that Bowesco were entitled to the Warnbro Option, the prejudice would not be ameliorated by the sale of the Option for cash given that the proposed sale was not the most effective way to exercise and fulfil the rights granted. 25 Mr Carey's evidence on this point reflected a somewhat speculative and optimistic view of what Bowesco could do if it exercised the Option. Given the current travails of the Westpoint Group generally and of Mr Carey in particular, common sense suggests that the prospects of finding major finance for a development in which Bowesco would have any role to play would not be great. 26 The evidence relating to the commercial imperatives behind an early resolution of the dispute about the Option rights and the comparative benefits to be obtained through sale of the Option by the Option Receivers on the one hand, and its exercise by Bowesco on the other, does not inform the construction of the charge. That evidence however highlights the urgency of a resolution of this matter and, to that extent, informs the procedure which should be followed for its resolution including the question whether discovery should be ordered and the proceedings further adjourned. 27 The orders made on 20 April 2006 and 30 June 2006 in relation to the property of Bowesco were freezing orders. The substantive question in this case goes to the scope of the property affected by those orders. If the Option is in truth subject to the ING fixed charge, then the Option Receivers should not be hampered in their ability to enforce the charge disposing of the Option. The Option Receivers, in the course of their submissions, proposed that the Court should make a declaration, if it so found, that the Option was subject to the fixed charge component of the ING Charge. If such a finding were made in favour of the Option Receivers, then it would determine the question of the entitlement to the Option rights as between the Option Receivers and Bowesco. Any wider dispute between the Option Receivers and Elderslie would have to be resolved in separate proceedings or by some form of commercial negotiation. On the other hand if the Court were of the opinion that the Option was not subject to the fixed component of the ING Charge, a number of matters would remain to be resolved going to its ownership. In that event, a declaration would not be desirable. 28 In my opinion, I should proceed to consider the Option Receivers' contention that the Option is subject to the fixed charge and decide whether I can resolve that question without directing interlocutory discovery and/or production of documents under subpoena as is sought by Bowesco. If I decide adversely to Bowesco on that procedural question, then I will determine whether or not the declaration sought by the Option Receivers should be made. If I decide in favour of Bowesco in relation to that question, then two courses are open:

The matter is further adjourned and orders made for an expedited trial of the issue in these proceedings or the commencement of separate proceedings in relation to the charge and the assignment.
The Option be dealt with in order to protect the position of all parties by the appointment of a receiver to the Option under s 1323 empowered to assign it to the Option Receivers on a proviso that the proceeds are to be held pending resolution of the entitlement to them. The question of validity of the Option as between the Option Receivers and Elderslie would have to be resolved between them. The Option Agreement 29 The Option Agreement was dated 31 August 1999 and made between Westpoint Management and Westpoint Corporation. It recited that Westpoint Management had entered into agreements to become the registered proprietor and owner in fee simple of the property defined as Lots 913 and 909 on Diagram 94372 with two certificates of title, volume 2121 folio 888 and volume 2121 folio 890. The Option fee was the sum of $100. The purchase price of the property, which was to be payable upon the exercise of the Option, was to be calculated according to a formula set out in cl 6 of the Option Agreement. The purchase price was to be the greater of : '(i) The sum calculated in accordance with the formula in clause 6(b)(i) and (ii) The sum determined in accordance with clause 6(b)(ii).' The formula was (PP = [BR + PR + VR + I] - Q) /PY. In that formula 'PP' meant Purchase Price. 'BR" meant rent payable by tenants of the property for the month in which the Relevant Date fell multiplied by 12. 'PR' meant any percentage or turnover rent paid or payable by a tenant for the 12 months ending on the last day of the month preceding the month in which the Relevant Date fell. 'VR' meant the annual market rent of any part of the property which was lettable but vacant at the relevant date. 'I' meant the total of all other income collected for the 12 months ending on the last day of the month preceding that in which the Relevant Date fell. The various sources of that income were then set out. 'PY' meant the passing yield referred to on page 3 of the Prospectus lodged on 25 August 1999 with ASIC by Westpoint Management to raise $9,660,000 to allow its participation in the purchase of the property. The effective purchase price was varied downwards by amendments made to the Option between 2001 and 2005. The ING Charge 30 The ING Charge was dated 28 September 2005 and was made between ING and Westpoint Corporation. The quantum of the Secured Money was not defined by the Charge. 31 The nature of the Charge was set out in cl 4.1, which provides: 'Nature of Charge This document constitutes: (a) a fixed charge over any interest of the Chargor in any present or future: (i) land; (ii) goods, plant and equipment (other than stock in trade); (iii) marketable security or unit in a unit trust; (iv) goodwill attaching to any property or business; (v) Licence; (vi) uncalled and called but unpaid capital of the Chargor and premiums on capital of the Chargor; (vii) books of account and other documents, records and software relating to the Chargor's business and activities; (viii) Title Document to any property; (ix) intellectual property rights, including all patents, copyrights, trade and service marks, business names, designs, trade secrets and confidential information whether registered or not and any rights relating to any of them; (x) Encumbrance over any property; (xi) right relating to any Compensation Event; (xii) benefit of any contract to which the Chargor is a party, including any insurance policy; and (xiii) Charged Debt, proceeds of any Charged Debt and money from time to time standing to the credit of the Deposit Account; and (b) a floating charge over the balance of the Secured Property.' The Priority Deed 32 On 28 September 2005 ING also entered into a Priority Deed with Treasury Custodians Pty Ltd, St George Bank Pty Ltd, Perpetual Trustee Australia Ltd, Bowesco and Westpoint Corporation. The Priority Deed related, inter alia, to Lender Securities which were defined in cl 1.1 to mean: '(a) Each registered mortgage over the Land given by the Security Provider to the Lender; (b) Each registered fixed and floating charge in favour of the Lender from the Security Provider over the whole of its assets and undertaking; and (c) any other present or future Security granted by the Security Provider to the Lender relating to the property referred to above.' The 'Security Provider' was defined as Westpoint Corporation. The Lender was ING. The securities referred to in the Deed included the Lender's security. The fifth financier's security referred to securities held by Bowesco from Westpoint Corporation. 33 In cl 2.1 of the Priority Deed the parties agreed that the securities, to the extent that they affected the same property, would rank at law and in equity in the following order of priority: '(a) first, the Lender Security to the extent of all amounts the payment of which is secured by the Lender Securities, up to a maximum of $46,200,000 plus: (i) interest…; (ii) all accrued but unpaid costs and expenses…; (iii) all Taxes and registration and other fees….' This placed, as a first priority as against other intra-group securities, the securities held by Perpetual Nominees including the ING Charge. The Loan Agreement 34 A Loan Agreement also dated 28 September 2005 was entered into between ING, Westpoint Corporation, Vannin Pty Ltd, Huntingdale Village Pty Ltd, Silkchime Pty Ltd and Warwick Entertainment Centre Pty Ltd. 35 ING was referred to in the document as the 'Lender'. The borrowers were the other parties just mentioned. They were set out in Schedule 1 of the Loan Agreement. Clause 9.4 of the Loan Agreement provided, inter alia: 'The Borrower must ensure that each Transaction Party … (c) Disposals: does not dispose of any of its assets, either in a single transaction or in a series of transactions whether related or not and whether voluntary or involuntary except disposals: (i) made with the prior consent of the Lender; or (ii) made for market value in the ordinary course of its ordinary trading business.' 36 The Loan Agreement itself was preceded by a letter dated 8 September 2005 to the directors of Westpoint Corporation from brokers called the Treasury Group of Companies (the Treasury Group). It was Mr Carey's evidence that Westpoint Corporation had developed a relationship with the Treasury Group. The Treasury Group had negotiated a number of significant finance facilities for companies within the Westpoint Group. He stated his belief the Treasury Group had begun to understand the business model and approach taken by the Westpoint Group of Companies and, more particularly, by Westpoint Corporation and that it began to understand 'the financial needs of the Westpoint Group'. 37 According to Mr Carey, in the months leading up to September 2005, negotiations took place between Westpoint Corporation and the Treasury Group with a view to the Treasury Group 'sourcing' a substantial finance facility for Westpoint Corporation. These negotiations were principally undertaken by Mr Graeme Rundle, the chief financial officer of Westpoint Corporation and the Westpoint Group. Under the management structure of the Group Mr Rundle reported to Mr Carey. Given the significance of the facility being negotiated with the Treasury Group Mr Carey was personally involved with the 'senior decisions' in relation to that facility. 38 Mr Carey referred to the letter dated 8 September 2005 whereby, he said, the Treasury Group: '… made a formal offer of a loan facility of $45,294,000 with the purpose of refinancing existing lenders and providing an ongoing "sell down" or, further, working capital for Westpoint Corporation.' Under the facility Westpoint Corporation and a number of Westpoint Group of Companies were to provide real property security as the initial security under a Perpetual Facility Agreement. The lender under the Perpetual Facility Agreement was to be ING. 39 The letter of offer of 8 September 2005 was exhibited to Mr Carey's affidavit. It identified the lender as ING and the borrowers as Westpoint Corporation, Vannin, Huntingdale Village, Silkchime and Warwick Entertainment Centre. The loan amount was specified as $45,294,000 but not exceeding 70% of the value of the real estate security. The loan term was three years. The purpose of the loan was stated to be 'to refinance existing Lenders and provide a sell down facility'. 40 Under the heading 'Security' the letter stated: 'You acknowledge that the loan will be secured by the following transaction documents. Settlement of the loan is conditional upon this security being provided in form and substance satisfactory to the Lender.' Under the heading 'Registered First Mortgage Over Properties at ….', there was a list of properties. Under the heading 'Joint and Several Guarantees of …', four companies were listed including Westpoint Management. Mr Carey was also listed as a joint and several guarantor. Under the heading 'First Ranking Debenture Charges of the Assets and Undertaking ….', there appeared a list of companies including Westpoint Corporation and Westpoint Management. The further securities listed included a Deed of Priority between the first and second mortgagees and a Deed of Cross Collateralisation between all borrowers and guarantors within the facility. In submissions made on behalf of Bowesco reliance was placed upon the specific list of first mortgage securities to support the proposition that the ING Charge as subsequently entered into as part of the loan transaction was not intended to be fixed as to the Option. 41 In my opinion the letter of 8 September 2005 was overtaken by the terms of the Loan Agreement and the charge which were plainly intended, along with the Priority Deed, to be the documents defining the relationships between the parties. The letter does not govern the construction of the charge nor the scope of its application in matters relevant to this proceeding. Negotiations and post transaction dealings in relation to the Perpetual Facility 42 According to Mr Carey he was informed by Mr Rundle and believed:

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