Supreme Court of Queensland|1997-12-11|Before: Derrington J

Bond University Ltd v Limgold P/L and Nista P/L & Anor [1997] QSC 227 (11 December 1997)

[Bond University Ltd v. Limgold P/L and Nista P/L & Anor]

The present transaction is somewhat removed from the commonplace. It was also very complex, covering a changing situation over a long period of time, and there was little negotiation by parties at arm's length. Because it is necessary to trace a lengthy and complex history in some detail through its changes, it is desirable to lay out in advance some broad explanations of its framework so that a continuous thread may be more easily traced and the place and relevance of the detail can more easily be understood.

The plaintiff ("BUL") was incorporated to conduct a private university on land owned by the first defendants and subsequently mortgaged to the second defendant ("the Bank") which represents a group of Japanese banks that were creditors of EIE International Corporation ("EIE"), a Japanese land development company with international activities. BUL's incorporation was the result of a joint venture entered into between Bond Brewing Investments Pty Ltd and Bond Corporation Holdings Ltd (together compendiously referred to as "Bond") on the one hand and EIE on the other for the development of a large area of land, on part of which the university was then established. It still occupies the site. The first defendants were respectively owned by the joint venturers and together were used, among other things, as the land-holding vehicle for this purpose and the conduit for funding loans made to BUL.

Because of Bond's incapacity to contribute to mounting costs of the venture due to its own financial stress, its interest was bought out by EIE in 1992 with funds supplied by the Bank on security over the first defendants and their assets, including the subject land. As the result of EIE's default in meeting its obligations under the securities held by the Bank, the latter appointed receivers to the first defendants, and they have arranged to sell the land to the University of Queensland. This will threaten BUL with ejectment unless it can make other arrangements with that party.

In order to forestall this situation, it claims against the first defendants to be entitled to a ninety-nine year lease, or its equivalent in occupation rights, and seeks to enforce this by equitable remedies, principally based on proprietary estoppel or constructive trust. Alternatively, it claims damages under the Trade Practices Act or, in effect, restitution based on unjust enrichment of the defendants because of the sums outlaid by it in the formation and conduct of the university, the benefit of which, it says, will accrue to them if BUL is forced to vacate this land.

It is also claimed that as the result of the Bank's assumption of EIE's fiduciary duties, it inherited the obligations of the first defendants towards the plaintiff and/or that by its own conduct it directly became bound by similar obligations; and that its title as registered mortgagee of the land is subject to an equitable interest arising from those duties and obligations to the plaintiff.

The defendants deny that the conduct of any such party, in its proper context and limited to the true facts, can amount to the necessary promise or representation that would support the equitable and other claims made, that there was any relevant reliance by BUL on the alleged promise or representation, or that it suffered detriment. Alternatively, they argue that if a remedy be granted, it should be limited to monetary compensation, preferably set off against BUL's admitted debt to them of $94,297,221.11. Further in the alternative, they raise the principle of proportionality, that is, that the relief sought by the plaintiff is out of all proportion to the detriment alleged to have been suffered as the result of the alleged conduct. They also deny that any equitable lease or its equivalent could have come into existence, having regard to the uncertainty of its major terms. Further, or in the alternative, they point to BUL's significant delay in its action, during which it has obstructed their attempts to sell the land and then has stood by while the Bank's receiver conducted the sale, in which BUL itself was an unsuccessful bidder.

Limgold, or alternatively the Bank as its assignee counterclaims for the repayment of the debt which BUL admits it owes but which it claims is not yet due and payable because of the effect of a deed of subordination which also suspended BUL's obligation to repay the debt, or alternatively because of the original terms of the loans. The Bank claims that under the terms of the deed, the subordination and suspension have terminated and that under the terms of the original loans the debt has become payable immediately. In the alternative, if the deed permits the loans to become payable at once, BUL seeks rectification of it on the ground that it conflicts with the terms that had been agreed.

The evidence is heavy with complex detail but the general stream of relevant facts is fairly well defined. It is desirable to commence with a brief outline of the history of events and of the parties' relationship so that in the next section the detail with accompanying observations may be properly understood in the total context, which is essential in this case.

Prior to 1987, Bond and EIE together acquired a large area of vacant land at the Gold Coast in the name of the first defendants with the intention of fostering the establishment of a university on part of it and then selling the remainder as a residential subdivision at a premium generated by the university's presence. They were to be further reimbursed for their outlay on the campus land and buildings by selling it to a public investment trust after granting a lease to BUL. The return on the trust's investment was to be the income from rent paid at a commercial rate from the commencement of the lease. The substantial costs of the buildings were to be met from the funds generated by the sale, so that they were not to fall on the joint venturers' own resources.

To this end some independent persons were recruited to the venture to assist in the establishment of the university and BUL was incorporated on 12 February, 1987. In the course of this stage of development, statements were made to those recruits about the intended permanence of the university's existence and its presence on the site under the venture scheme. Its funds for its rent and its operational costs were to come from its earnings and donations from other sponsors, but plainly in the formative years that would be insufficient. In the first two or three years of its establishment it was to receive loans from the proceeds of the sale of the land to the trust. This scheme failed, so the plan was changed and the funds for its outgoings, including rent, were to come from its own independent borrowings. This plan also failed, and it had to look to the joint venturers indefinitely for operating funds. Nor could it pay any rent when after occupying the site during a period of establishment it opened on 15 May, 1989 with an enrolment well below the figure projected in its planning stages.

The failure of these plans not only threw these burdens on the joint venturers, but it also meant that they had to find from their own resources the cost of the expensive buildings on the campus amounting to about $200m., which had not been part of their anticipated outlays. They planned to recover these and the cost of the campus land by selling it to an investor, subject to a lease to BUL, but it could not enter into a commercial rent arrangement that would justify a purchaser's investment. Soon after, Bond began to suffer from a cash shortage that turned rapidly into financial disaster and it was unable to contribute its share of any of these costs. From 1990, because of its financial inadequacies EIE too was placed by the Bank under some management supervision that later became much more intrusive and intense because of its poor performance.

By late 1990 Bond, still unable to subscribe any funds to the venture, was threatened with receivership that would have terminated the whole venture, including the university. After protracted negotiations EIE was obliged to buy out its interest in order to save the project, but this was not completed until January 1992. Its own difficulties impeded its raising long-term finance for this purpose and to enable it to proceed with the purchase, so in order to sustain vital funding for the university, the Bank finally provided it with the necessary support This led to its granting the Bank various securities, including a mortgage over the subject lands and a debenture over its holdings in the first defendants. In the meantime BUL had lodged a caveat against the land to protect its interests. The Bank and EIE denied that it had any interest but after EIE and the Bank had made it clear that it would get its lease, the mortgage was registered on 27 October, 1992, but expressly subject to any prior interest of BUL, and the caveat was allowed to lapse. A second mortgage in favour of the Bank was subsequently registered. In the meantime, with the Bank's support EIE continued to fund BUL's operational expenses.

There had been assurances to BUL by the joint venturers of their willingness to grant it a long-term lease and to allow concessions because of its inability to pay rent, but it well understood that this was subject to an implicit proviso that the benefits would be limited to what the joint venturers could reasonably afford to provide. It knew of their respective financial situations and of the further stress of its own calls on their resources, and it knew that the assurances were given in the context of various schemes that the joint venturers were continually devising to try to achieve a successful outcome for all. This included the scheme under which the lease would be granted with suitable concessions but so limited that the property could be sold at a commercial price that would bring them some financial relief.

Significantly, it also unequivocally acknowledges that to the end of the transaction the joint venturers genuinely attempted to fulfil their assurances. This is borne out by the evidence. Apart from some delays because of the intervening uncertainties produced by the financial crises of the various parties, from 1989 they, and later EIE with the concurrence of the Bank, tried conscientiously but unsuccessfully to formulate a suitable lease which would have been granted. The obstacle was the deep uncertainty of the extent of rent concessions that BUL would need, and whether EIE could reasonaly afford them. Unfortunately, tax problems associated with its plan to provide concessions also interfered with this. The concession that had to be provided was not merely the cost of the rent foregone at the time. The grant of a lease with indefinite concessions would have severely reduced the value of the asset that it needed to sell at a reasonable price to help to meet its debts.

These were good reasons why the matter remained temporarily in abeyance but EIE, with the Bank's approval, continued to investigate ways to provide the lease. In the meantime BUL was permitted to continue to occupy the site and no rent has ever been paid, even to this day.

In 1993 after some change in the personnel controlling BUL, a new attempt was made to grant a lease on such terms and with such concessions as would be commercially acceptable to a purchaser but affordable to BUL and then to sell the land. After studying its financial state EIE, with the Bank's approval, proffered to it a thirty-year lease of a reduced area at an affordable rent payable in arrears and after a two year rent holiday which was to begin after it had occupied the premises rent-free for over four years. BUL rejected offer and its demands excluding compromise led to an impasse.

Soon after, EIE's poor performance of its obligation to the Bank led to the latter's withdrawal of support, and it lost its power to grant any lease either with or without the concessions that BUL would have needed. The Bank acted on its securities, leading to the sale of the land to the University of Queensland, but not until lengthy negotiations with BUL had proved fruitless. In those negotiations, BUL raised the brief suggestion of a claim of right to a long-term lease on grounds that had no foundation, but did not accept an invitation to substantiate it and, except for vague allusions to that claim, conducted its negotiations along other lines. It refused to provide its financial papers to allow the Bank to see whether negotiations were worthwhile and it temporised on the payment of rent for its occupation of the land. It was also very obstructive of the Bank's receiver. When he put the land up for sale, it became a bidder. When the completion of the sale to the University of Queensland was imminent, it then commenced this action.

It should be stressed, though it will not be constantly repeated, that from the beginning, it was plain from the nature of the enterprise, the establishment of a university, that all the participating parties intended that it should occupy the proposed site for a long time and that long tenure would be granted. Whenever the subject was adverted to, particularly in isolation from other considerations and more especially at times of mutual encouragement, this aspiration was clearly expressed in such terms, or at least implied. Consequently, whenever the proposed lease was mentioned in similar circumstances, it was spoken of in terms that assumed lengthy tenure. On some occasions, that result was taken for granted because it was the genuine intention of all parties, and they never resiled from it. EIE with the Bank's approval was still trying to do that at the end.

However, and this must be equally stressed, this goal was understood to be subject to conditions which, though implicit, were realistic and well understood. These changed with the changing schemes to provide the lease that were pursued as each was defeated by circumstances. The primary condition was that the joint venturers were to recoup their outlays on the university land and buildings, and for this result the lease had to provide for a commercial rent. When it became obvious that extensive concessions would be necessary, the joint venturers indicated that they would provide them but again it was clearly understood that they would provide only what they could reasonably afford. That level would change as their fortunes faded and Bond departed the scene, but in the end EIE, with the Bank's concurrence, offered a lease with the best terms that it reasonably could.

The university now has no registered lease nor even an agreement for lease. It is because the land is to be sold free of any interest except its acknowledged tenancy at will that it has brought these proceedings for the enforcement of its present claim to the substantial interests described above. In effect, the claim is that although with genuine goodwill the joint venturers tried to provide it with a lease and actually proffered one, this was not sufficient, and the expectations on which it relied in setting up its university entitled it to a long-term lease, even if that should be unreasonably financially detrimental to EIE and its creditors. Its difficulty lies in its emphasis on the intended result, which is not in issue, rather than on the conditions attached to it, which, associated with its rejection of the lease that was offered, were the reasons for its frustration.

It should be emphasised that the issue is not whether there was a promise of lengthy tenure or an assurance of substantial concessions, for both were offered to BUL and refused. It is whether the promise extended to an immutable ninety-nine year lease with all the rent concessions that BUL might be found to need, irrespective of their cost to the joint venturers and of any harm that the grant of such concessions might do to them; or whether these were subject to an implied condition of reasonable affordability, and if so whether the lease that was offered was sufficient because of this or in any case. Alternatively, BUL claims that EIE could have afforded the concessions it required, particularly as it had the support of the Bank.

In respect of BUL's indebtedness of $94m., because of its concerns over its large indebtedness and doubts as to the terms of repayment that had never been formulated, in August, 1989, it demanded and obtained from Limgold as the nominal provider of the loans a deed which suspended BUL's obligation to repay, and subordinated the debt to all other debts of the company until the deed's termination was triggered by one of three events. The trigger that became relevant was BUL's achievement of a surplus as defined in the deed. There is contention as to whether that has occurred, and if so, when, and as to its consequences.

Unless it is more fitting at the time to refer to a particular person who will then be identified, it will be convenient to refer compendiously to the representatives of BUL, Bond, EIE and the Bank simply by their respective principal's name when their knowledge or conduct is such as to bind or affect it. Similarly, except where the context demands reference to the first defendants expressly, they will be spoken of as though they were the joint venturers or EIE, depending on which had control of them at the time. The reason is that the representatives of the principals spoke of relevant matters as though they were themselves the owners of the land or the supplier of funds and without reference to the first defendants as the instruments for their actions and promises.

Because of an approach adopted in the plaintiff's case, it is desirable to give a prefatory word of warning. In this analysis, any tendency to consider the welfare of the university alone as though it were the only or even the prime purpose of the venture should be avoided. As all those involved knew from the beginning, and as BUL itself stresses in part of its argument when it suits it, the university project was only part, albeit an integral part, of a total venture. Its importance to the success of the financial purpose of the venture was a factor that the representatives of BUL could validly, and did, have in mind when assessing their position. Significantly, it also means that it shared the risks of the venture, for it had much to gain from it and was not above and removed from its vagaries, although its attitude as betrayed in its argument would suggest otherwise.

The most obvious of these risks included changing economic forces and, if they proved adverse, the financial decline and fall of the joint venturers that would deprive them of their capacity to provide indeterminate gratuitous benefits to the university as a preference over their own creditors. Just as the entrepreneurial prominence of the joint venturers would naturally lead to an expectation that their philanthropy would have some magnitude in good times, so it would be wrong to treat these risks as irrelevant to issues affecting BUL's legitimate expectations.

Equally, when the details of the project were first revealed, it was understood that the recoupment by the joint venturers of their very substantial outlays on the university through a commercial sale of the campus lands and buildings was to be a significant contribution to the success of the venture, and this required that a commercial rent be paid under the lease. Consequently, this factor, as well as their philanthropic attitude towards the university, must be included in the circumstantial background when construing their statements.

As a matter of balance it should also be remarked that in addition to the anticipated profits, the purpose behind the venture included the public relations benefit to the joint venturers from setting up a substantial educational institution, the prestige associated with it, and probably some satisfaction in creating it. Conversely, its failure would reflect badly upon them. This factor was influential in a number of the dealings which occurred later, particularly when BUL made demands on the joint venturers for benefits that, due to their deteriorating financial condition, they were unwilling to provide. In essence, their profits and financial well-being were not the only factors in the background context in which their assurances were given, but they also had an important role. It is convenient now to turn to the details of relevant events.

In 1986, the companies controlled by Mr Alan Bond were apparently prospering, and for various reasons he wished to be associated with a work of some prestige as part of his entrepreneurial activity. At the same time EIE had very substantial dealings in land holdings in Australia, and as a foreign entity it was concerned about the local response to this and wished to make some gesture of goodwill to deflect it. In a multi-purpose plan the two groups entered into a joint venture for the subdivisional development of a large area of residential land at the Gold Coast. It is agreed on all sides that the various features of the plan were mutually interdependent.

It proposed that part of the land be used for the establishment of the Bond University, the first private university in Australia, with ancillary facilities. In addition to making the land available, the joint venturers were to arrange for the erection of the necessary buildings on it, provide a lease to BUL, and then sell it. Another part of the land was to be dedicated as a commercial scientific research park, which was to be separate from the university but intended to work in co-operation with it to their mutual advantage. The third element of the plan was the subdivisional development of the remaining residential land, which was to be sold at a premium because of the ambience created by the university.

For the realisation of the university aspect of this plan, an Advisory Council headed by Professor Watts was recruited. It was the predecessor of what became the University Council and the BUL board after the company was incorporated in February, 1987. Its first meeting was held on 30 September, 1986, though Professor Watts had become involved before then. Although it makes no difference to the result, no action taken by any person associated with it as the result of an expectation generated in this period could have been the foundation of any present claim of BUL, for it was non-existent at that time. However, implied promises and assurances made to them acquired a certain indirect force because the same persons became the first members of the University Council and the company board after incorporation, and BUL can rely on an implied ratification of what had earlier been said to them.

As it turned out, further assurances confirmed what had gone before, but equally they were not unconditional. That they were accompanied by the genuine goodwill and support of the joint venturers was what gave them their greatest strength in their effective encouragement of BUL. What was presented in evidence as a series of assurances of a lease and of necessary concessions given without express reference to any implied limitations were in fact always made in the general context of the scheme that was being undertaken at the time towards that result, and they were always given and understood to depend on the success of the scheme and on their reasonable affordability to the joint venturers. The oral evidence, the contemporaneous written material and the parties' conduct all point to this contextual reservation even though it was not expressly mentioned. That is why the incidents of the lease that was proposed from time to time would vary in accordance with the scheme that was currently under consideration in the joint venturers' attempt to find a suitable answer.

As well as responding to the assurances given by the joint venturers there may well also have been a commitment by BUL to complete what had been begun by the Advisory Council, a commitment that was not dependent on them but operating collaterally. The alternative to its continuing with the process would have been the abandonment of the work that had already been done by the Advisory Council and Professor Watts. But these components all combined to encourage BUL to proceed.

It would be wrong to treat the assurances artificially as distinct from the scheme of which they were part, and indeed BUL acknowledges that this is so and that its expectations varied according to the exigencies of the situation at the time. However, it claims that there were some fundamental features that remained constant and were not to depend on the fortunes of the occasion, though it never explains why they should be different from other features. The length of the term of the proposed lease was one of these.

During this early period when the 'vision' of the joint venturers was explained to those recruited to help in the establishment of the university, much was said in broad and non-specific terms as to the intention that it be an enduring institution located on that site, clearly implying that it was intended that it have long tenure. However, this did not exclude the further implications referred to above, that the project was part of a larger enterprise that could well involve risk, or that the long-enduring stability of the university was a goal that was aspired to rather than a result that was promised, or that the proposal for long tenure would be conditional upon the university's capacity to accept its terms, subject to such concessions as the joint venturers could reasonably afford. Consequently, when the details became specific and the question of BUL's capacity to afford the high rent that was set for the lease caused concern, the matter of concessions was spoken of in terms of discretionary philanthropy by the joint venturers and not as of right for BUL.

This series of brave statements of extravagant aspirations of greatness and of the intention to pursue them was the first basis of the claim of reliance by those who undertook the establishment of the university, including Professor Watts, who was to become the founding Vice-Chancellor. He was of a somewhat entrepreneurial disposition himself and naturally had a personal as well as an altruistic interest in the university's welfare and quickly knew the developing details very well. There have been suggestions that the university Councillors relied on such vague statements to give them an assurance of permanence of occupation of the site, but they were not naive people, and they appreciated the substance of what was proposed.

More particularly, they did not believe simplistically that because the joint venturers were of very substantial status in the business world, their benefaction would be unlimited and entirely altruistic. While they were entitled to rely on the honesty of the joint venturers in making them, they knew very well that these implied assurances were not absolute and unqualified and that there were limitations on what their benefactors would and could afford to provide for the project. They understood that apart from their encouragement and goodwill, the principal contribution by the joint venturers to the university project did not involve expense so much as their facilitation of it by organisational experience and their backing of it as parties of wealth and power whose support would attract to it the further support it might need. It is quite possible and even likely that they did not anticipate fully how serious the limitations would become as circumstances changed. The case suggesting that they were gullible people who accepted these statements in their highest possible optimistic sense and without any sensible qualifications does not do them justice and is contrary to their performance as witnesses.

A number of BUL's arguments refer for support to the benefit to the joint venturers in the sale of the surrounding residential land from the premium that would be attracted by the presence of a prestigious university nearby. This, they say, was so fundamental to the scheme that the survival of the university was correspondingly fundamental, and this implied in turn the necessity of the grant of long tenure that was seen as essential to its long-term future. It is true that this was an essential part of the project under the only plan that was pursued, while it lasted; but it is wrong to say, as BUL sometimes implies, that this was the only plan that could have been pursued, that this benefit from the university's presence was the only source of such planned benefits, or that the joint venturers had no expectation of recovering anything directly from their heavy investment in the campus. As it has been explained, the recoupment of their outlays on it was also to come from the proceeds of the sale of the university land and buildings.

Other recoupment was to come from profits and incidental benefits to related companies from ancillary activities relating to the university, such as management companies controlling student accommodation, and the profits from the research park. These tend to favour the above argument as to the university's place in the scheme, but there is also the point that the financial benefits from the project were of equally major importance so that the welfare of the university was certainly not the only nor even the main consideration.

Consistently with this, the heavy cost of the buildings and some temporary financial support of BUL by way of loans for rent obligations and operational costs were not to be provided from the joint venturers' own resources but were to be lent from the proceeds of the sale of the land which was to be paid from the sale of the units in the public trust. The result of all this was that although they would themselves invest in the public trust that was to acquire the campus lands, the joint venturers were to have little net cost or depletion of their own resources from their material support of the university and if anything hoped to profit by it. Although there was to be some philanthropy and considerable genuine goodwill, it was not a case of grand endowment with an altruism that put the university before the interests of the joint venturers themselves. That is why the advances that were to be made would be by way of loan rather than gift, and residual questions such as interest were left open. This is the context in which the assurances of a lease and of rent concessions and funding were given and received.

The public trust was to attract subscriptions as an investment. Its income was to be the rent payable by BUL on a long-term lease from its commencement at a rate sufficient to provide a commercial return to the investors. It was recognised that it would not immediately have the financial capacity to pay this rent or other operating costs, but, as it has been mentioned, it was planned that for the first two or three years, loans would be made to it by the joint venturers from the proceeds of the sale to the trust. While they would be fully compensated for their outlays, and would profit from the other features of the venture, the cost to them aside from direct donations made at their discretion would be the deferral of the repayment of moneys lent.

At first the scheme was non-specific as to the terms on which BUL would occupy the campus except that it was strongly implied from the circumstances and expressed in general discussion between the joint venturers and members of the University Advisory Council and its successor, the University Council, that long tenure was intended. There was abundant evidence of this understanding, which, so far as it goes, was never challenged in the defence case. It was limited to a denial that any absolute assurances of a lease were given and alternatively the uncertainty of the terms of the proposed lease. At first its structure, particularly on financial details, was vague and always understood to be on terms that were to be devised. The volume of evidence concerning assurances given as to its duration does not detract from its provisional nature, which depended on the settling of its other terms.

One basic criterion was that, subject to some philanthropic consideration by the joint venturers, it was to be within the financial bounds of the scheme of the joint venture. Despite the confidence that was felt, and expressed, that it would come about, the proposed lease was certainly not a simple, unconditional and totally discrete arrangement divorced from the benefits, risks and constraints of the scheme. The general optimism could not have disguised the risk behind the venture that was to have for BUL the prize of a fully functional prestigious university, if it succeeded; and the joint venturers never undertook to provide that result unconditionally at their own expense.

It does not advance the resolution of the real issue that, as BUL says, "the joint venturers were involved in telling third parties that BUL would be entitled to long term tenure". In this proposition its unjustified elevation of an intended result into an entitlement may be overlooked because it makes no difference in substance to the result. It was known to its representatives that a number of matters were being represented to various authorities as an established position when it was only the intended course of action if and when other interdependent parts of the total plan were successfully achieved.

Indeed, in some cases the BUL representatives were themselves parties to the statements, which they knew were not entirely accurate but were a true representation of the part of the intended plan that was relevant to the discussion in which they were made. Implicit in this was excuse that the intended result that was represented as an accomplished fact was so stated on the assumption that all would proceed according to plan. That was Ms Nosworthy's excuse for this and it is quite understandable, but it is also the answer to BUL's argument that the joint venturers acted in the same reasonable way.

If by this evidence BUL intended to show that the provision of long tenure was part of the parties' genuine intention, it is correct and not an issue. If it is intended to suggest that it was a discrete and unconditional intention that was to remain unmarked by any disappointments as to other features central the overall plan, that is not what was said and it is unacceptable. It would fail to recognise or to accord sufficient weight to the inherent conditions and contingencies that it knows clearly attached to and were an integral part of the intention. These were not relevant to the discussions with the third parties referred to, and consequently their omission was meaningless. The limited statements of intention as such were true so far as they went, but the parties knew that they were also provisional only and this has a decisive effect on the implications that can be drawn from them in isolation.

In this context they could not have been interpreted by BUL representatives as implied promises that were independent of the scheme or the inherent conditions to that part of it. Indeed, the contrary was clearly the case, and any evidence to the effect that the joint venturers intended an unqualified promise or the recognition of absolute entitlement is at best rationalisation by witnesses who wish to advance BUL's cause.

While accepting in argument that the statements referred to part of a scheme that failed, BUL argues that together with later statements and actions of the joint venturers they promoted "the idea that BUL was entitled to long term tenure and was not of a temporary nature". This artificially converts a continuing good intention into an `entitlement'. Aside again from this unjustified reference to entitlement, it is undoubtedly true that by their statements they made abundantly clear their continuing intention that BUL's long-term future would be secured by the grant of a suitable lease so that it would not be merely a transitory being. But this was always within the context of discussions as to plans and intentions relating to them, and was understood, if not fully appreciated as to its significance, to be subject to the financial limits of the scheme. This included the capacity of the joint venturers to afford any benefits that were necessary to that result. Unfortunately, this condition of affordability naturally continued throughout the transaction to qualify that intention, and had the effect of limiting the concessions that could be offered.

The difficult task of trying to frame a lease in terms as appropriate as possible to the original aspirations of the parties but with adjustments suitable to the reduced circumstances had begun in March 1988 with the drafting of proposed terms. The draft (Ex 19) spoke of a lease by the public trust of the academic buildings, but possibly not of the retail and commercial parts of the campus buildings, for ninety-nine years with an option for a further similar period. The rental was to be 10% (in later proposals this was to be reduced by donations in the early years to 6.5%) of the capital cost from the commencement of the lease. Although 10% was not set as a final figure, for that would have amounted to more than $20m. per annum, as events turned out the lowest figure discussed was always far outside the capacity of BUL to pay it, and that remains the position even now.

It was followed by a draft lease prepared by BUL's solicitors which was presented to it on 18 May. It still had the proposed trustee of the public trust as the lessor, but it contained no details as to the area demised, the terms of the rent or the length of tenure. This reflects the difficulty in finding a solution to the problem thrown up by BUL's incapacity to pay any reasonable rent in the definable future, if at all, and the joint venturers' known unwillingness to provide open-ended benefits.

When the draft was discussed in a Council meeting on 10 June, questions were raised by Professor Watts as to BUL's capacity to pay a rent that would reflect the very large capital cost of the extravagant buildings that were being built, and although the minutes of the meeting do not record it, he says that the Bond representatives gave an assurance that whatever was paid as rent would never put BUL's operation at risk (T95/23). No doubt something along these lines was mentioned, but whether it was in terms of an assurance or merely of an encouraging prediction or a hopeful intention is difficult to decide. There is difficulty in distinguishing these close but significantly distinct messages in respect of unrecorded casual remarks that are not confirmed later with the principals as might be expected, and because of a tendency to rationalisation in the evidence of many of these matters.

However, it is convenient to assume that it took the form of an assurance. Again BUL presents this as absolute, but in its context it was clearly implied to be qualified by its affordability. This is also established by the absence of any formal confirmation or even any written record or advertence to it, and by the complete absence of any implementation of it in the formal drafting that followed. It was not even raised later in discussions as to the amount of rent that BUL might afford to pay, but this is consistent with its remaining as a tacit understanding similar to the understanding as to affordability.

Proposed Heads of Agreement along the lines proposed, but significantly without any mention of concessions, were assented to by the university Council on 16 June, 1988, and the relevant committee was authorised to develop a lease in accordance with them, but again because of the difficulty in knowing what BUL could pay by way of rental, nothing came of this until September. Because of later mention of these Heads, it should be understood that it set a ninety-nine year term but although the rental was reduced, it was far beyond the level that BUL could afford, so various proposals were considered that ultimately led to a decision that BUL would seek very substantial independent finance.

Bond's representative gave an assurance of support in respect of possible concessions. This was a precursor of the more specific discussion that came much later when the prospect of BUL's obtaining independent finance became more remote, and it has limited value here. It was made by Bond only, and was confined to a context as to very high rental rates as distinct from the subject of payment of any rent at all. More importantly, Professor Watts understood this to be subject to the condition as to affordability, as he acknowledged. The true position is probably that although he knew this, he did not properly evaluate the risk of Bond's failure and was content to rely on the manifestly genuine goodwill behind the gesture.

With this knowledge, however, it is unlikely that he understood the assurance as excluding any risk to BUL or as absolutely assuring continuing philanthropy without any limitation of duration or cost. If he intended to convey that he had such an understanding, his recollection in this respect would seem to be unique. Further, if the joint venturers had intended that, it could have been easily done by linking the rate of rent to the amount of a defined surplus in BUL accounts. This was not done, and the simple explanation is that the assurances were manifestations of goodwill that were sufficient to act upon; but they were also subject to the realistic qualification that Bond would do only what it reasonably could to aid the university.

His cognate claim of detriment from reliance on this assurance is also suspect. He claims that in its absence he would have been able to call on 'corporate Australia' for sponsorship if BUL's financial position demanded it, but the success of such a call is very doubtful. It is noteworthy that soon after at a time when BUL was in a serious funding crisis and his garnering of outside support would have provided it and the joint venturers with welcome relief, he did not do so. Had he been able to obtain funds from any source, he would have pressed for them. It is likely that despite any encouraging signs he had from other potential sponsors, BUL's close association with Bond would have been unattractive to them at that time, and that he knows it.

Because of the joint venturers' continuing delay in producing a set of terms, further draft agreement to lease and lease documents were prepared by BUL's solicitors in the following September, but again they did not show the duration of the term, the rent to be paid or the land to be demised. Again, this merely shows the uncertainty inherent in the whole question at the time.

Because of the variety and inconclusive character of changing plans that were considered under proposals made by a financial adviser, it is difficult and unnecessary to trace precise details of the suggested arrangements as to the lease and rental accurately, but the following summary is close enough for present purposes. It was during these developments that the parties first began to realise that the original plan would have to be modified because the scheme for the sale of the campus to the public trust had proved patently unworkable and the joint venturers abandoned it in about October, 1988. However, the process under the original scheme was not quite exhausted because the plan for BUL to obtain long-term independent finance that would accommodate its operational shortfall in its formative years and allow it to pay a suitable rent was mutually adopted. It began searching for it early in 1989. Though this was pursued for some time, it gradually became clear that it would not succeed, even with the assistance of EIE's good offices in the Japanese finance market. Even then EIE continued to try to obtain it.

When BUL commenced its search in January, 1989, both it and the joint venturers were active parties in representing to various sources of finance, including government ministers and state instrumentalities, that a long-term lease was proposed which would require it to pay from its commencement the rent calculated on the capital costs of the land and buildings as described above. Broadly speaking, that was the proposed plan. Some went so far as to say that a lease had been granted, which of course was not true. But the basis of the lease referred to was the payment of a rent of at least 6.5% of the capital value from the commencement of the lease, which was far beyond BUL's dreams unless it obtained the finance.

It is now suggested by BUL that it was really intended that even if long-term finance was found it was still to have the concessions and that the misrepresentation as to the rent payable would be corrected in the course of negotiations with any financier who might show interest. This explanation is unacceptable. The assurance as to concessions had not gone that far. If funding were obtained, the need for them would be overcome, and there would have been no reason why BUL should not have been required to pay rent, for the recoupment of their outlays was certainly a serious part of the joint venturers' thinking at that time. Moreover, if the rent were immediately payable in the event of adequate funding, there would have been no misrepresentation to the people who were told that it would be payable. Apart from the issue of misrepresentation, if the rent payable was to be limited, there would have been a danger in overstating BUL's liability for it in such a presentation, for it might have thrown BUL's capacity to meet its obligations into serious doubt and deflected a potential lender before there was an opportunity to correct the representation.

While BUL's case promotes the importance of these representations that indicated that the parties intended that it should have a long-term lease, it finds it necessary to deprecate the importance of the rent tie to the lease that history has shown it could not pay. In this way it suggests a distinction between its hope and expectation of being granted such a lease and the joint venturers' hope and expectation of receiving a commercial return on their outlays through rent or sale.

The suggestion is egocentric and should be rejected, particularly as it is not supported by documentary corroboration or evidence of any conversations identifying such a distinction. Indeed, the tenor of the written material is to the contrary. The evidence supporting the suggestion is largely a present assessment of the past state of mind of the parties. It may have been an egocentric view at the time, or it may simply be a retrospective misjudgment due to the joint venturers' supportive willingness in offering this limited relief. It should be found that under this new proposal it was the general expectation that BUL would pay the stipulated rent from the commencement of the lease from this independent finance, subject perhaps to some limited temporary assistance from the joint venturers.

Although there is little evidence on the point, it seems likely from later events as well as the general circumstances that under the new plan the joint venturers contemplated following the thrust of the earlier one but with the difference that the land would be sold privately. It was intended that a long-term lease to the university should be in place so that the rental would be a reasonably attractive return for the purchaser's investment. However, the price for which it could be sold would plainly be affected by the amount of the rent and BUL's capacity to be a viable lessee, and so any concessions as to rent in the lease or uncertainty as to BUL's capacity to pay it would have reduced the expectation of a reasonable capital return from this source.

At this time the conversion of this capital into cash would probably have been much more important in their financial crises than any comparatively small return by way of rental. So although there was no great urgency they probably felt the deprivation of a reasonable sale more acutely than the mere non-receipt of the rent for that period. It will be more convenient to speak of their loss compendiously as the loss from any concessions that would need to be made, but the added and more onerous disadvantage was experienced also.

They did not immediately negotiate any sale to another investor, which would have been premature in the absence of a settled lease, but in an attempt to grant the lease they continued the line of investigation under which a commercial rent would still be payable but with affordable concessions. Affordability became a more pertinent factor because of their own deteriorating financial position. This was a very good reason why specific agreement as to a suitable formula that defined the concessions with some certainty was to be necessary.

Because EIE was working sympathetically if unsuccessfully to devise and present such a formula and probably expected that if it met the criteria it would be reasonably accepted by BUL, the specific extent of the assurance as to concessions never came up for discussion. This was the practical consequence of the criteria controlling them, for EIE would need to know the amount of the concessions with sufficient particularity before it could assess whether it could afford them.

Uncertainty as to these impeded the progress of the negotiations as to the terms of the lease but they proceeded on the assumption that they would succeed. The whole financial structure of the proposal had changed. The joint venturers were deprived of the funds from the sale and they were faced with paying for the erection of buildings costing nearly $200m. and the funding BUL's operational expenses from their own resources. This and other factors such as the university's own financial underperformance defeated any attempt to adhere to the original plan; but they investigated other means of carrying out their intention to provide a lease by other arrangements.

This is a reasonable example of the tie between the success of the project's schemes and the benefits that BUL was to receive to allow it to accept the lease. The failure of the scheme supporting the benefits could not have left the arrangement to provide them untouched. BUL acknowledges the reasonableness of this proposition but argues that there were some features, such as the actual grant of a lease and the length of its tenure, that were constant throughout the various schemes and not subject to abatement or alteration by the failure of the respective conditions or at all.

It is a feature of BUL's case throughout that while it correctly notes the beneficial changes of plans, such as those relating to rent that were made to meet its failure to attract independent funding or an adequate enrolment, it still relies on the unaltered continuation of the factors in the former scheme that favoured it, that is, the intended existence and length of the lease, as though they were to be absolutely unaffected by the change. Consequently, it is prepared to change its definition of the goal so that it becomes the grant of the long-term lease with the necessary rental concessions, but it is not prepared to recognise or give sufficient weight to the unfavourable factors that went with it in the change, such as the affordability of the concessions. This enables it to disregard their adverse consequences to the joint venturers.

Though some features remained superficially constant because they were important to all of the changing schemes as the goal to which they were directed, it is difficult to understand how they should have had an ultimate inviolability against disaster, or why, though keeping their quality as the result to be achieved if reasonably possible, they should not have been modified by way of reasonable compromise to meet other equally important considerations. The grant of the lease was not the only item of critical importance to the whole scheme, and the proposition that it should remain untouched while the others should bear the whole of the unexpected burdens and carry the whole of the risks is not entirely balanced.

The alternative is that some compromises, devised with goodwill and with a proper recognition of the importance of these matters to the respective parties, be made in suitable terms so as to reach a fair and reasonable result, but this is rejected by BUL. It wants primacy of its interest over the competing interests of the joint venturers and their creditors and total or near-total immunity from compromise for its claim to a ninety-nine year lease and says that the financial harm to EIE of providing the rent concessions is immaterial. This is inconsistent with the whole tenor of the relationship. It was one of philanthropic support and not one of obligation, even to the extent of the benefactors' own financial harm.

Taken with the provision and subordination of the large loans that were made, such an entitlement would have provided BUL with the virtual certainty of a massive benefit while insulating it from any risks of the venture. Conversely, if as it happened there was an economic turn for the worse and the joint venturers were put in financial jeopardy, it could have caused the joint venturers grave harm at a time of their financial vulnerability. This would have been contrary to any underlying understanding that BUL must have derived from the nature of the enterprise or what was said, yet it was the recurring assumption of many of its arguments. The implication that BUL was to share in the risk of the venture was much of the same order as that which it relies on relating to the long tenure expected for a university. It was only that in the beginning the risk appeared negligible.

It is true that the goal of a long-term lease had some special enduring quality so that the parties continued to work towards it, but with the changes in the means of achieving it came a subtle difference. Unless some other means could be devised, the need to provide unassessable but obviously substantial concessions and the ability of the joint venturers to afford them made the prospect of long tenure, or of any lease at all, less secure, but the assurance of the genuine endeavours of the joint venturers to try to achieve it remained.

It was generally understood, though not specifically expressed, that this necessary radical departure from the original plan was designed to overcome the consequences of BUL's financial failure. This was largely not its fault nor was it the fault of the joint venturers who were doing all they could to help it. It was also understood that this heavy burden cast on them had not been part of the assurances upon which BUL had undertaken the venture. The joint venturers would not have been in breach of any commitment if they had simply declined to provide funding or any rental concessions of the magnitude required or to erect the campus buildings from their own resources, and the force of external factors would have terminated the whole arrangement. Their adoption of a new scheme did not mean that all former assurances were totally abandoned, but equally it did not follow that their pursuit of the same goal as before meant that the conditions were to remain the same.

BUL's alternative argument for total freedom from any conditions as the result of the special quality of the constant goal is that the paramount purpose of all this activity was to provide it with a lease, and that the concessions that were finally found to be necessary were merely a means of adjusting the feature of rent, which was insignificant to entrepreneurs of the stature of the joint venturers. Again this misstates the emphasis of the relative values applying. The grant of a lease was certainly the point of the exercise but, as it has been explained, the joint venturers' own commercial wellbeing was of the same order of importance, the more so because of the very large cost to them of what they had already given.

As it turned out, because EIE sought to fulfil this philanthropic goal as far as it could, a substantial lease with concessions was later offered, but it was rejected on the basis that it was not enough. The difficulty with BUL's justification of this lies in this attempt to make the grant of a long-term lease at any cost to the grantor an unqualifiable imperative of the arrangements between the parties, totally independent of the financial state of the scheme of which it was a part and of the capacity of the grantor to afford it. That was not the way in which it was understood at the time. This concept of affordability will be discussed when its significance becomes clearer.

The joint venturers turned their attention to devising the terms of the lease that would provide BUL with the concessions necessary for it to be able to accept it. EIE was having difficulty in obtaining an assurance of tax relief in respect of the transaction that would have made the concessions more affordable, and it seems to have taken the view that before they could be finally embodied in a binding lease, their extent had to be reasonably foreseen and definable in order to enable it to assess whether it could afford them.

Though it had always been an implicit element of the provision of financial assistance or concessions, it was at this later time that the factor of affordability became more germane in a practical way and of most importance in the history of this period. A lease with large and particularly indeterminate concessions would have had a seriously adverse effect on the sale value of the reversion. As this represented a saleable asset as a means of recoupment of large outlays and satisfying its creditors, any serious depreciation in its value in this way had to be evaluated and treated cautiously.

With the frustration of the original plan, while the joint venturer's persisted with their intention to provide the university with a ninety-nine year lease, the most relevant part was the conditional nature of that intention. Their continuing genuine desire to find a way to provide a lease is acknowledged, and they tried to do so. There was however no talk of BUL's entitlement to a lease. That would have introduced an alien element into the atmosphere of co-operation. The grant of the lease was part of the prevailing line of positive discussion so that, given the goodwill of the joint venturers, things were said and actions were taken in the optimistic expectation that the necessary conditions would be fulfilled and it would eventually be forthcoming, but they did not imply any absolute element.

BUL's unquestioning co-operation in the various attempts to find a way to give it a lease was in accordance with what would only be expected in the circumstances. It entered into arrangements that were not strictly orthodox because, given the genuineness of the joint venturers, it was assumed that it had a lease when that was only their intention. So when a lease of part of the commercial area of the campus had to be provided to Westpac, in anticipation of the result it was decided to have BUL enter into the transaction as sub-lessor under an agreement for lease. This was a convenient way of doing business in a period when matters were unresolved so that the formalities could be not be strictly observed but goodwill led to reasonable optimism of the result that was assumed. It was based on the common confident expectation of a successful outcome. There was a reasonable implication that if in the end a suitable lease could not be arranged, these premature anticipatory actions, such as the grant of sub-leases by BUL, could be reversed or re-adjusted. For example, if BUL had accepted the lease later offered by EIE, then everything would have fallen into place, but since it did not there has been no suggestion that these affairs are not adjustable.

This was not an unequivocal expression of any certainty of the outcome. If such an interpretation were genuinely held by BUL, it would have completely misinterpreted the joint venturers' actions that merely reflected their good intentions. These were the equivalent in principle of their allowing BUL into rent-free occupation despite the absence of a lease.

In any case, in the factual context in which they were made the implications to be drawn from these statements and actions were at their best equivocal as to essential issues, particularly the condition of affordability, and were probably well understood to have been provisional only, though supported by genuine goodwill.

Conversely, the Bank's argument that the joint venturers' willingness to grant a lease was understood to be dependent on agreement as to the terms of rental and other details is not quite a correct version of the position because it too is incomplete. They undertook to grant the lease and to that end to provide the concessions that would enable BUL to accept it, providing they could reasonably do so. The difficulty was not a matter of agreement because the parties were generally agreed as to what was intended. It was a matter of finding the result that met all the competing conditions.

As it will be seen, in 1993 when BUL's income improved and BUL's capacity to pay rent in the future could be reasonably anticipated, Mr Ogawa, an EIE employee who was highly motivated was able to produce a set of terms that reasonably did so. The failure to finalise the lease stemmed in part from BUL's disregard of EIE's reasonable protection of its own interests in the critical state of affairs of the time, but this does not mean that it was not in accordance with the full understanding that had been engendered. The Bank's further argument that the terms of any such understanding were too vague to found a right in BUL will be discussed later.

BUL's answer to this is that the formulation of and agreement as to the rent was not a precondition to the grant has validity to a point. There was no difficulty in agreeing as to the appropriate measure for determining the rate of rent, which was to be such as to enable BUL to survive. That was in accord with simple commonsense as well as the joint venturers' goodwill, but there was the other dimension. The joint venturers had to be able to afford the concessions that would allow that rate, and the first answer did not mean that they would be unlimited or more than could reasonably be afforded. There was no uncertainty as to the way in which the rent should be fixed but whether the uncertain amount of the concessions could be afforded.

In further support of its claim that agreement was irrelevant to EIE's obligation, BUL refers to the undoubted special relationship between these parties and from this draws the reasonable inference that their arrangement was different from the usual case where agreement is necessary to a binding obligation. This special relationship of support and co-operative philanthropy certainly had an effect that distinguished this from the usual case where the parties negotiate at arm's length and where more formal manifestations of conditions and qualifications, of the acceptance of specific obligations or the grant of rights, and of the fact of agreement would be necessary. However, the proposition conflicts with BUL's other proposition that because limitations on the assurances of the joint venturers were not specifically expressed or mentioned they did not exist or had no force. This will be discussed later. It is certainly true that there was a special relationship. In addition, estoppel does not depend on any agreement.

Whatever the basis of a cause of action of this kind, the obligation of the person responsible for the promise or representation does not exceed its proper content Any conditions or limitations implied through that same special relationship are as essential to that content as the promise or representation itself. Here, it was known by implication and accepted, though it was not expressly stated and agreed to, that the undertaking was to make only such concessions as could be afforded. Because of the good faith of that approach, BUL is correct in its proposition that express agreement in specific terms was not seen as an issue. But since the mutually satisfactory level of concessions had to be resolved before a lease could be viable, and they could be determined only in terms of a rental and other terms that the parties accepted as conforming with the total arrangement, it is not to the point and not entirely correct to argue, as BUL does, that because no witness said that the formulation of the rent was a precondition of the lease, it was not so. In the special relationship that existed, it would not have been necessary to say it, and it probably would not have been said. However, this point is an irrelevant distraction. This is different from the case where a transaction fails because the parties could not agree on the criteria controlling the result. If BUL had reciprocated EIE's goodwill when a suitable lease was offered, their failure to agree on the implementation of the criteria would have merely established its impossibility at that time. The rejection of this argument of the Bank is of little import.

When these changing events cast uncertainty on the prospects of the concessions, the joint venturers, and particularly EIE, were slow to produce an alternative formulation that could resolve the conflicting interests. One further problem that must have faced EIE was Bond's default in its contributions to the venture and especially to the large and unexpected burdens of providing indefinite funding for BUL and of paying for the construction of the university buildings. In EIE's own state of financial difficulty it must have been uncertain as to what concessions on top of these it alone could afford to undertake.

Although BUL's financial uncertainty was a serious contributor to the uncertainty and it had no solution except its request for concessions, it pressed to have the lease granted. As practical and intelligent people, its representatives' awareness of the rumoured problems of the joint venturers made them anxious to have this security. It is likely that they recognised that the original scheme had failed, but they must have been encouraged by the continuing goodwill of the joint venturers in pursuing alternative means of providing it through new strategies and by the assurances of support that they received, but they still knew of the risks.

There could also have been a further reason for delay, though it was only of minor and temporary importance. Because of its failure to meet planned targets and because its continuing demand for operational funding could not be sustained indefinitely, there must have been some doubt as to BUL's prospects of survival. In the risky business of setting up the first private university in Australia, until that became more reasonably assured it must have made the joint venturers cautious as to how much further they should go in providing further substantial benefits lest they be wasted. BUL's winding up would have meant that a lease, granted to BUL on the favourable terms, would accrue to the benefit of another party whom they had no reason to benefit. Moreover, the new lessee might not be as suitable to the advancement of the rest of the project as they might wish.

This prospect of failure was rarely if ever expressly adverted to, probably because an emphasis on success was deliberately adopted. Nevertheless, until it was seen that the university would become viable with continued support, the pace of action could have been influenced by this factor. The only relevant result of this was to contribute temporarily in delaying the joint venturers' confidence to grant rental concessions in the lease, and it had no other effect on the final result. In any case it never came to the point where this alone delayed the drafting of the lease. Although it was a contributing factor, it was substantially if not entirely subsumed in the delay caused by the difficulty in trying to devise a mutually affordable rental formula that was caused by the same uncertainties.

In an attempt to disparage the idea that the intention to grant the lease was conditional upon some reasonable prospect of its survival, BUL suggests that if that were so, then at that time it would have been left without any expectation upon which it could rely until its survival was established. That is not so. It had a conditional expectation upon which it could rely and which would have served it appropriately if the result had turned on that point. This was fortified by the further justifiable expectation that the joint venturers would continue to provide their philanthropic support to the extent indicated above. These were far from fanciful or light grounds, but they did not exclude some risks as BUL's case would suggest.

As an alternative course it would have been possible to make the university's survival a condition subsequent in a suitable lease, but that would have been a very embarrassing term to insert in a registered lease that would publish the uncertainty as to the university's prospects to all who would see it, and a difficult and unusual one to formulate.

Unfortunately, towards mid-1989 when the university was due to open, it had failed to find any independent finance and seemed unlikely to do so. The enrolment of the first intake of students was far below the projected figures and although the numbers increased, this deficit continued for the whole of the relevant period. For example, its planned enrolment by the end of the first stage in 1991 was 2500, but in the seven years to the time of trial its highest enrolment had been about 1650. It is said with some justification that this was not its fault because the public's perception of the insecurity of the university's future raised by Bond's growing problems turned off the interest of many potential students. However, it was probably compounded by BUL's own poor financial management that damaged its credit with suppliers as well as inducing the joint venturers to impose severe constraints on its funding. However, the relevant problem was not a question of its fault. It was simply the result of its participation in a venture associated with Bond for all the advantages that it would bring, and the accompanying disadvantages had to be accepted as part of the risk, even though they may not have been adequately considered at the time.

This manifest disappointment as to enrolment and financial viability during the whole of the relevant period must have had a destructive effect on the financial planning of the scheme that included the provision of a lease with only modest concessions. It would be 1993 before BUL would have even a small surplus in its accounts, and then only because it was not called upon to pay rent or to contribute to maintenance and repair costs. This state of affairs did not admit of any reasonable assessment of the concessions that would have to be written into a lease. Nor had it been the basis of the assurances that were made under a scheme whereby the need for concessions was to be considerably less.

Nor did it assist towards their affordability by the joint venturers. Contrary to all the plans on which the assurances had been given, it meant that the joint venturers and particularly EIE had to supply from their own resources very substantial funds for the university's operating costs until it could support itself. The most disturbing feature must have been that the extent and duration of both the funding and the concessions could not then be evaluated, which with Bond's financial misbehaviour and its own financial stresses must have caused EIE some indecision. This is the only reasonable explanation for its failure to act, for it was certainly not due to any lack of good intention. This serious uncertainty again changed the whole picture relating to the lease and justified its postponement until BUL's chances of survival and the joint venturers' capacity to provide the necessary concessions could be assessed. In the meantime, consistently with their genuine goodwill, they continued to provide encouragement and other support of a more practical nature.

It is further claimed that these manifestations of continued commitment amounted to a confirmation that BUL could expect to be there for ninety-nine years or at least a long time. In support it is argued that the alternative would have been for the joint venturers to say to BUL in effect: "Well, things are very tough. You should have known that you had nothing from day one and never did.", and that this was contrary to the commitment that was shown. This is similar to an earlier argument and is plainly wrong on both counts.

The commitment was that BUL would have the continuing support so far as it was affordable, and this applied to the goal of long tenure. This did not imply that BUL had nothing. It had a justified but contingent expectation of a lease; and it had a justified expectation of the genuine goodwill of the joint venturers. Together, these gave a very valuable, if contingent prospect even before the benefits had been provided, and those that were actually provided and offered were very substantial, even if in the misadventures that followed the benefits were not all that were hoped for. This line probably reflects BUL's persistent refusal in argument to acknowledge the existence or at least the effect of the condition that was acknowledged by its witnesses.

As further support of its attempt to devalue the condition, it advances the argument that because the plan of the joint venture, while it lasted, always intended that this university be the one to fulfil its purpose, and because the buildings that were erected were of a style and quality that matched that intention, there was no other use within the plan to which the land could be put than occupation by this university. This, it is said, implied the certainty of the grant of a long-term lease to BUL and contributed to the justification of that expectation.

This proposition was raised often in BUL's argument and in the explanation of some witnesses as to how, despite what the joint venturers clearly implied as to a limit to their philanthropy, they came to an expectation of entitlement to a lease as a matter of inevitability. The facts are broadly correct but the conclusion is defective. Undoubtedly the establishment of this university was the strong intent of all the parties to the venture, so far as it went, and while it lasted they did not pursue or even consider any alternative result. The lease that EIE would later offer was in conformity with this intent. However, until negotiations failed irretrievably they never reached the point where an alternative course required consideration, but if the exigencies of the situation demanded it, occupation of the campus by another university was plainly an alternative option to be taken up if this university had palpably failed. The factors mentioned in BUL's submissions were certainly consistent with an intended grant of a lease to BUL, but that was not inevitable as claimed and they did not detract from the condition of affordability. Particular care must be taken to observe this distinction.

The manifestations of limits to the support that would be provided are in direct conflict with the picture of unlimited support to any necessary extent that BUL tries to paint. While they never failed to produce continuing funding, the joint venturers showed express reluctance to undertake this burden for very long, much less indefinitely. In plain terms which were never contradicted, they said that their support of the university had not been part of the original plan and was not part of their responsibility. For example, they said this on 26 May when they undertook to continue funding but limited their promise to the next eight weeks. They also strictly limited their guarantees of future funding until forced to extend them by threats by BUL to wind itself up.

This is another example of the understanding accepted by all parties at the time that any assurances had to be read in the context of the scheme under which they were made, that they were not absolute and unconditional, and that they were vulnerable to the vicissitudes of the scheme. Most relevantly, the joint venturers' reluctance to provide funds impliedly emphasised the constraints imposed on their assurances by their capacity to afford them. Conversely, the fact that they continued to provide them and their other expressions of support also implied their continuing goodwill and that they would try to find a way to provide the necessary help, but no more than that. BUL's arguments relating to these gestures ignore the former and draw too much from the latter.

It has been suggested in evidence that while the written material certainly exhibits some reluctance by the joint venturers to give an assurance of indeterminate funding, their representatives gave personal spoken assurances, never recorded nor noted in writing, that despite this, "underneath it all there was goodwill towards BUL and that the joint venture parties would not let BUL fail, and in the event they did not" (T. 239). So far as it goes, this is acceptable if it is understood as showing that the joint venturers' warnings as to the limits of their philanthropy were softened by genuine assurances of goodwill and support in averting failure, so far as they could reasonably afford to do so. It is not an acceptable interpretation if, contrary to the prevailing circumstances, read in the total context of the matter, and contrary to the mood and implications of the written restrictions, it is suggested that they were unconditional assurances of unlimited support for an unlimited time, if that were necessary, unaffected by the financial condition of the parties.

This would ignore the whole context, which was much more complicated than that. The clear and powerful reservations made formally in writing from the joint venturers themselves, as distinct from informal verbal comments by their representatives on the Council who may have been expressing their personal opinions as councillors, would be meaningless. They made it abundantly clear that the donors were not the source of an endless supply of benefits contrary to the prudent preservation of their own financial health.

Conversely, the Bank's contrary claim that these limitations strictly defined the extent of the support that would be forthcoming cannot be fully accepted because of the effect of the element of goodwill as reflected in their spoken assurances and general attitude. The true position lies in the sensible middle ground described above, and their conduct shows that that is how it was understood by most interested parties at the time.

The above reference to the fact that in the event the joint venturers did not let BUL fail does no more for BUL's case than to show that in respect of the provision of operating funds EIE found that it could reasonably afford to provide them as far as they went or, more accurately, that it could not afford not to provide them while they remained as limited as they were. This does not advance its case on the issue whether after providing all the other benefits it could have afforded to provide more benefits in the lease than it offered. But there is another implication from this point. Since despite its own difficulties that strengthened its reluctance to do so, it still continued to the end to provide the funds, it should be more fully appreciated that, as BUL claims, EIE maintained its genuine goodwill throughout.

This is of particular importance in the appraisal of the quality of the lease that was later offered in respect of its reasonable affordability. If it had stretched its resources in respect of funding, there is no reason to believe that it did not also do so then, though its capacity to afford more would have been weakened by the provision of funding and the other financial loads it had to carry. There is no answer to this in the Bank's control of EIE's affairs for it permitted EIE to provide the funding and even provided the money for it to do so, and the terms of the lease that was offered were sympathetic and in accord with the limits on EIE's capacity.

At the same time as they imposed limits of the amount of funding to which they would commit themselves, the joint venturers made public expressions of support of the university. This was badly needed to provide it with some credibility in its search for independent funding and to avoid further depletion of the confidence of potential students and creditors. Apart from its uninspiring enrolment level, the further emergence of public knowledge of the financial weakness of the joint venturers themselves, and particularly Bond, was continuing to have a deleterious effect on confidence in the university.

On 15 May, 1989, Mr Bond had tried to repair this by informing the Council of the joint venturers' strong commitment to its welfare, which of course was true. It is noticeable that he gave no unconditional assurance. Nor did he express any condition to the commitment, but the purpose of the statement was to give encouragement and the expression of continued commitment, albeit one understood to have limits, was of value to BUL in those circumstances. The nature of its arguments on these expressions of support that they had to be all or nothing is just not right since the intermediate position had a logical point and considerable value.

Later, when agreement was reached to provide additional funding from time to time, the joint venturers continued to accompany it with public declarations of support. The same considerations apply to them. Though it is likely that at the time of these events some of its witnesses had a somewhat vague recognition of these things, these public and private expressions of support are now claimed to have inspired an expectation that such support would include the grant of a long-term lease. There must be a strong suspicion that they well knew and connived at Mr Bond's and the others' deliberate intention to raise public confidence by this means, and that they personally made a much more restrained appraisal of their public message. The private messages of goodwill were no more than that. As with their understanding of the effect of the assurances, if the claim of these witnesses is limited to saying that such a grant was the genuine goal but that it was subject to the same conditions as applied to those assurances referred to above, then it was perfectly reasonable; but if more is suggested then it is not justified either in the context or in reason.

Consequently, the message carried by the public and private statements of support was not in conflict with implications flowing from the joint venturers' express limitation of the future funding that could be expected when the two were read together. They indicated to responsible members of BUL that while their assurances were honest they were not absolute and unlimited. They were subject to the existing qualifications, which were already well understood. As most of the university Councillors had some knowledge of their financial stress that exacerbated this added unplanned burden, the reconciliation of these superficially conflicting messages should have been obvious, and in fact in most cases it was well understood..

Statements of encouragement must be distinguished from assurances intended to be relied on as a virtual promise, for while a philanthropic party may be generous with its encouragement, it might well be less forthcoming with its assurances of the delivery of actual benefits. In their evidence, some of the BUL witnesses failed to recognise this distinction, at least in their evidence, and tried to use expressions of encouragement to fortify such assurances as were given or to modify the conditions behind them. In a suitable case such an effect is possible, but that was not what happened here, and the witnesses realised that. This, incidentally, accounts in part for their anxiety as to the lease despite the encouragement, and for their pressure to have it resolved notwithstanding BUL's incapacity say when it could pay a commercial rent.

Subject to the circumstances, to be binding, assurances should usually be clear in the case of purely gratuitous benefits, the more so when the total benefaction involved is very large, and even more so when it is suggested that it may be at the cost of serious financial harm to the benefactor. This is magnified further when the benefactor is known to be in serious financial difficulty. All of these operated in the present case so that unconditional assurances to be relied on would be found only if they were very clearly given. But on the evidence it is not necessary to have recourse to this measure: it is enough if these things are merely read sensibly and in their context. Where the evidence depends on subjective interpretation, consistent objective evidence will be sought, especially where it has a retrospective element.

BUL continued to fail to attract its projected enrolment but it was permitted to remain in rent-free occupation of the campus while the uncertainties unravelled themselves through time. In that process, partly because of the stigma of its association with Bond but also partly because of its own poor financial showing, it abandoned hope of finding an independent funding source in Australia, though EIE unsuccessfully continued to try to obtain it from Japanese sources, first in the form of a loan to BUL and then by borrowing in its own name to on-lend to it.

At this stage, this lack of resources was forcing BUL to borrow $750,000 per week from the joint venturers for its running costs, which of course did not include rent or repairs and maintenance. Bond's failure to contribute meant that EIE was the source of these funds which in turn it was forced to borrow from the Bank. This seriously strained its philanthropy which to its credit it maintained, but that did not deter BUL from pressing for a lease without any regard for its difficulties.

In this it has been consistent. In its submissions, it has addressed all the issues with a single-minded focus on its own problems, which at that time were certainly severe. The many crises that could have been fatal to its very existence would understandably have produced an egocentric emphasis. This has the disadvantage that in its presentation of the relevant circumstances in which statements were made and assumptions adopted, it has given little or no balanced attention to the legitimate interests of the parties taking the risks by providing the benefits, that is, EIE and the Bank.

It is now convenient to discuss the factor of affordability more closely. For relevance it is desirable first to be mindful of the circumstances of its application. In this case estoppel depends upon reliance by BUL on assurances or promises or the like as a result of a reasonable expectation engendered by the respective parties to be estopped. To be reasonable, that expectation must take into account and give proper value to such conditional features of the promises or assurances relied on as BUL knew or should have known, and in the present circumstances this includes affordability.

Its basis is that it was an integral part of the assurances or understanding said to be relied on. (In this there is some analogy with the reasoning behind the basis for reference to the objective expectation of the parties to a contract. See Contract Law: Fulfilling the Reasonable Expectations of Honest Men: Lord Scarman (1997) 113 LQR 433). Consequently, for its full meaning, it should be read together with them and interpreted in the light of the whole transaction, including the fact that the project was part of a risk venture for profit to the joint venturers. Though it had been an implied element of the earliest arrangements, it had little practical relevance until this time when the benefits assured became indeterminate but very large and the benefactors had other very large unexpected costs on top of their own seriously declining resources. Its meaning did not change, but, for example, as the fortunes of the joint venturers declined, what they could afford obviously diminished; and the more the unrecoupable cost of this venture that was already spent, the less they could afford to spend further on it.

When they were asked, several university Councillors in general terms acknowledged this implied condition as applying to any assurance as to the lease and the concessions relating to it. As might be expected, most treated it as being in the 'of course' category though they may not have given it the attention it deserved. Because it was largely a product of inference from the broad range of the circumstances, it is not defined by sharp edges; but its broad thrust is reasonably clear. To borrow from BUL's own description in argument as to the extent of concessions it expected, the concessions to be supplied by the joint venturers was to be "according to (their) means, but not so much as was detrimental to (their) continuation as a business". It was not something the parties discussed directly and so its precise content was never inferentially defined by what was said.

This measure, quite correctly proposed by BUL as a reasonable inference from the circumstances in respect of its own affairs, it would deny to the joint venturers in respect of theirs. However, their wellbeing should have been understood to be at least as fundamental to them as that of the university and in these circumstances, it would have been unrealistic and unreasonable to expect that the preservation of the beneficiary was intended to be given priority over that of the benefactors. If anything, the implied limitation against self-harm should and was understood to prevail in the end over general assurances, though some reasonable flexibility would be expected to operate before that point. This means that it would be unreasonable to interpret them to imply that they would apply even if it were "so much as was detrimental to (their) continuation as a business". The effect of this was that the concessions required by BUL beyond what was finally offered to it were not covered by the assurances if it would have been unacceptably harmful to the joint venturers to provide them.

BUL correctly points out that the assurances were never expressed in conditional terms, but again this ignores the influence of the factual background. In earlier optimistic times, the conditions were not usually relevant because the proposed benefits were small and affordable within the scheme itself, and they surfaced only when it failed and other material problems intruded. Then they were "part of a set of assumptions that underpinned other discussions that were going on...rather than...something that was the subject of specific debate". This very apt description by Ms Nosworthy of the assumptions concerning the anticipated length of tenure applies equally to this conditional feature. Even in the later and more critical situation, they remained unexpressed but were already well understood. Besides, since at that time EIE was sensitive as to its financial reputation it probably would not have been anxious to publicise its difficulties by such a reference and the tone of any discussions seems to have been designedly positive and encouraging.

Unfortunately the university Councillors who admitted to recognising this conditional feature were not taken in evidence to their understanding of its effects on the plans for the lease. Typical of this is the evidence led from Mr Schultz. Though in error on some minor issues, he was very honest and realistic and freely acknowledged his understanding of its existence. Yet his evidence reads:

"MR MORRISON: Going back one step to March '88 when you first started on this council, and given your concern for the university running up debts and incurring costs and the lack of documentation, for want of a better word, in relation to-----?-- Proper management processes.

Much better than mine. If someone had said to you in those early days that the university had no right to stay on the land, to expect tenure or have tenure----?-- I would never have become involved in the first place. I mean, it was my chance to be part of history. I mean, I was excited about it and wanted to be there and have something to do with it. It was something I was excited about and interested in and I wanted to play my part.

Did your understanding about the university's right to tenure play any part in you continuing?-- I am not quite sure I understand the question exactly, but---

I asked you if someone had said the university had no right to expect anything and you said you wouldn't have been there----?-- That's right, I wouldn't have. It was never discussed in that - I mean, that was an issue that never got discussion that we didn't have right to tenure or that we could get kicked out."

The question, so selectively framed in extreme terms, is patently wrong in its premises. It should have been: "If after so much had been done towards the establishment of BUL, someone had said that the original basis for the grant of the lease had failed but that without any guarantee of the result the sponsors intended and were genuinely committed to trying to provide tenure so far as their financial circumstances reasonably permitted, what would your attitude have been?" It is likely that the expected response was the reason why such a pertinent question was avoided in favour of one that had no relevance.

Nor were these witnesses taken to the precise point of explaining how the difficulty of uncertainty and affordability was to be overcome and whether it was expected that the benefits would be provided, even if they could not be afforded and would cause harm to the donor. The evidence was left as a set of generalised statements of comfort in the expectation of a long-term lease, but properly the only comfort that could have been taken was in the continuing genuine commitment of the joint venturers to try to resolve the problem. That is what happened.

In trying to avoid the effect of this factor as reinforced by the joint venturers' express limitations on present funding and their reluctance to commit themselves to its future supply, BUL has sought to confine it to the sense of their simply being able to find the resources to provide the necessary concessions, no matter how expensive and damaging to them that might have been. It says that it was entitled to believe that they had sufficient funds for that purpose, so that there was virtually no risk that this condition would be an impediment. This would have the effect that the issue of affordability would be meaningless, which is the intention of the argument. To be fair, it is desirable to set it out as it was presented:

"4.2 At the time the statements were made, and the enterprise embarked upon, both EIE and Bond Corporation were companies of some stature and were financially well off. Strains and tensions which became evident later had not then surfaced. Consequently the University representatives were dealing with corporations that a high profile in the development area, apparently unlimited access to funds and were giving all the signs of being deeply committed to the project. In those circumstances one may ask rhetorically why it would be unreasonable to believe what they said. Indeed, more than one witness has commented on the fact that an element in the dealings was the apparent stature and financial capability of the joint venture partners.

'Now, when this project was set up it was set up at a time when Bond Corporation was, you know, been given an AO and was sort of Australia's hero, and EIE was a major Japanese company with significant investments in Australia. Both of the companies appeared to be, not only solvent, but spectacularly successful and the university was conceived against the background of those two companies investing in a large project on the Gold Coast of which the university was a centre piece. It had a lot of publicity.'"

All of this evidence is correct and it merely reveals the error of judgment and the failure of some but not all Councillors to consider the adverse contingencies. It is true that the joint venturers were deeply committed to the project, but that did not exclude from consideration a prudent recognition of the possible pitfalls in the event that the fortunes of the joint venturers waned, nor that the plans for the university were not part of a risk venture that might fail or be modified if it proved to be unreasonably costly or financially damaging. In fact, these things were probably generally understood and any surprise sprang up because it was not expected that the catastrophe would fall as heavily as it did, if at all.

No doubt it underrated the risk because of the perception of the sponsors' substantial wealth and its representatives' critical scrutiny may have been dulled by this. They would have had a justifiable expectation of substantial philanthropic support while the joint venturers remained rich, and they actually enjoyed this in some abundance, but even then the implied condition would have excluded relatively excessive expense. This is confirmed by the conduct of the parties even before the financial strains and tensions appeared. The joint venturers insisted on limits and BUL did not demur.

It is necessary here to remember once more that a lease with concessions was in fact offered and at best for BUL's case, its only complaint could be that because of EIE's own financial needs those concessions were not as extensive as it wanted. This complaint is that it was entitled to have its total requirements to ensure its security even if that could cause harm to the benefactors and the interests of their creditors, providing they could find the resources to provide it. Neither the assurances nor the circumstances ever supported such an incautious view. The argument is in error in treating the assurances as isolated from the restrictive indications or as abrogating them when in fact the two should be read together.

It sometimes seems that these arguments tacitly assume that the joint venturers failed completely to offer any lease or concessions. That of course is not so. With the Bank's approval EIE offered a substantial lease with substantial concessions because it wanted to help the university and this honoured the assurances given. Consequently these arguments must relate only to the question whether the limitations on the terms of the offered lease were justified by the factor of affordability at a time when EIE was in serious financial difficulties but still exercising its continuing goodwill. BUL says that this was not enough and that it had to provide the university with a ninety-nine year lease and all the concessions it might need, even though these may have caused it further serious financial harm.

Even at the time when the enterprise was first embarked upon and before any "strains and tensions" appeared, there were limits. The arrangement required that BUL would pay an "arms-length" very substantial commercial rent from the commencement of the lease while the sponsors were to provide little benefits from their own resources, and they quickly made it clear that their support in that respect was limited. At that time affordability was not so much related to their financial health as to avoiding excessive leakage from the profits of the venture. When they remodelled the scheme, their express reluctance to assure future funds reinforced the original understanding of limits on the level of support.

BUL argues that these were neutralised by casual assurances of their representatives on the Council that the necessary support would be forthcoming, but the contrary would be equally valid. If the two messages are read together, the most acceptable construction of the whole is that the joint venturers would continue to be fully supportive within affordability. Though their genuine expressions of goodwill emphasised the positive side, these were not understood to have changed anything. It was just that the prevailing mood of optimistic endeavour did not direct much thought in this direction. When BUL needed further significant funding and concessions, the limit of affordability meant that the further funding sometimes had to be extracted by threats and then only sparingly and grudgingly. By then this constraint attracted more attention and anxiety because the financial insecurity of the joint venturers themselves was generally known.

It might be remarked parenthetically that this elevation of affordability's importance did not take anything from BUL's 'entitlement' for the condition was always part of it and only attained that importance when BUL required much larger concessions than had ever been contemplated when the original scheme was formulated.

From this history it is plainly immaterial that when little in the way of funding or concessions was anticipated, Bond and EIE had the trappings of success if that perception did not remain when later assurances as to the provision of substantial benefits were given. This does not even touch the issue whether an assumption of the continuing future success of such entrepreneurs was ever valid.

The joint venturers' imposition of constraints on funding and BUL's failure to invoke any entitlement is a factor in the above analysis in showing the consistency of their respective conduct with the mutual understanding that support had to be affordable.

BUL may have taken the view put in argument that this constraint was merely the action of 'profitable giants' with 'bottomless pockets' that were writing these letters only 'to bring BUL to heel' in respect of its irresponsible spending, and had nothing to do with their own capacity to afford the funding. If it did have this view, later events showed that it was both egregiously wrong and unjustified. Indeed, this error may well have been at the root of some of its attitudes that are otherwise logically insupportable. It would have miscalculated the financial strength of the joint venturers, which was totally inexcusable after rumours of their problems emerged, and before that it was part of the risk of associating with parties of this kind, as circumstances have so dramatically demonstrated.

If BUL really believed in its 'entitlement' to a lease, that may have been the product of the same misconceptions, perhaps fortified by the equally mistaken belief that the assumed essentiality of its university's presence to the profitability of the whole venture would have forced the joint venturers in the end to give it a lease with the concessions it demanded, whatever they said in the meantime.

Though it was never indicated by the joint venturers, by this misguided route some BUL members could have persuaded themselves that the issue of affordability, though present, was probably marginalised and had no real or practical meaning. Others however took a more level approach and were increasingly concerned by the declining fortunes of the joint venturers. This was the reason why they were anxious to obtain a lease while understanding the difficulty in providing it, particularly with BUL's overall financial uncertainty.

The measure of affordability could not have included the Bank's providing EIE with the resources, to its own prejudice, to provide the benefits, for it could not have been thought that it bound itself to such bounty. It was the principal creditor that would suffer loss from any shortfall of payment that would be magnified by such a preference to BUL, and although it co-operated with EIE's philanthropic plans, it never assumed the mantle of benefactor in its own right. On the contrary it expressly rejected it. It is probably also relevant that it had duties to protect the interests of BUL's other creditor banks that had entrusted it with the management of the arrangement with EIE.

The concept of affordability is less restricted than BUL submits. The term has been adopted during the trial as a compendious description of this limitation. It was not used by the parties during the transaction and so its meaning does not depend on the definition of that term but is to be inferred from the circumstances that led to the understanding of those Councillors who acknowledged its existence. This assumes that there would be a philanthropic factor at some cost, but not so large as to sacrifice the interests of the joint venturers or their creditors. Within these parameters it becomes a matter of reasonableness and goodwill.

As it has been remarked, the argument also misses the very important point that BUL always knew that the development of the university was part of a risk venture, in which its own prize was the acquisition of a substantial operating university through the financial help of its co-venturers. The argument assumes that it was to be entitled to a guaranteed result of great value from the venture without any participation in its risk, while those who were providing it with considerable benefits were to assume all the risk, even at the cost of serious loss to themselves and their creditors. But that aside, the measure of affordability that was mutually understood was not as BUL submits, nor was it entitled to have the perception suggested, if indeed it did have it.

One of the most serious dangers in BUL's argument in this area lies in retrospectively viewing the extent of the need for concessions as it can now be seen, which has the virtue of certainty that was absent at the time. The lease was never granted because, except for the offer that was refused, it was not possible to formulate a rent clause that could be seen at the time to meet the needs of all parties, including affordability. Valid hindsight shows that except in respect of that offer, it never was affordable, which is why there is no evidence whatever to the contrary. If it had been so, such was EIE's unquestioned goodwill that BUL would have had its lease.

On a related issue, it is true, as BUL claims, that no witness spoke of any conversation where an agreement as to rental was mentioned as a condition of the grant of the lease, but that is irrelevant. Parties to negotiations for an agreement rarely express an obvious condition that all the terms must be agreed to before they are bound by terms that are agreed. It is almost always implicit, and the circumstances known to the various parties in this case were certainly such as to carry that clear implication. BUL would never have thought that the assurances of the joint venturers' intention to provide a lease were free of such implicit conditions as agreement on rental simply because none was expressly mentioned.

It would also have been contrary to the prevailing co-operative atmosphere to introduce such expressions of reservations. The negotiations hardly amounted to arm's length bargaining as between strangers where every term not reasonably implicit would have to be spelt out. Before any discussions as to the terms, all assurances concerning a lease must have been understood to have been subject to the details to be worked out, though BUL's representatives justifiably believed that the joint venturers would be strongly supportive, as indeed was the case. To have expanded this to a promise of unlimited concessions beyond their capacity to afford them would have required a naivete that was alien to those persons.

In this way, the conditions naturally escaped mention for simple and practical reasons. Yet the evidence as a whole shows that they undoubtedly existed, though on some occasions some BUL representatives acted as if its interests were the only and unconditional consideration. This was not consonant with the general tone of the relationship and was really motivated by some desperation to extract as much security for the university as possible rather than by any belief in an unconditional entitlement. Its justification was simply essential need, and while that was enough, in the conflict of negotiation that took place, if guarantees of the university's welfare at any cost had been an available argument, it would certainly have been pressed, and it was not. In response to BUL's attitude, the joint venturers resented that their genuine efforts were not appreciated.

BUL goes further to suggest that the formulation of terms for its payment of rent at a suitable rate and within a suitable time was a requirement of higher clarity than had previously existed as a condition to the assurances of a long-term lease, but this too is wrong. When it was first discussed in broad terms that did not descend to such details, that did not imply, and nothing was said to suggest, that the normal incidents of a lease would not require agreement. It was certainly implied that so far as the joint venturers could reasonably afford it the rental to be set would be within BUL's capacity to pay it, but no more than that. When the original proposal had failed and the lease was delayed while discussion as to rental concessions were taking place, which with the admitted goodwill of the joint venturers is totally consistent with the essentiality of agreement for otherwise it would have been granted. Without agreement as to the concessions and the rent, the grant could not be made, and the inference of affordability was an essential part of it.

Similarly, BUL did not claim that these matters imposed a need for clarity beyond the original assurances and that the lease should be granted without any regard to them. For a variety of reasons, it wanted to have the security of the lease even if it could not afford to pay the rent. That would have had the effect of deferring the problem, and that would have allowed it to exert pressure for further concessions as it did with guarantees of funding and the subordination deed, for it believed that the joint venturers could not afford to allow it to fail. If it felt that the delay from the rental question was outside the common understanding, it could have raised the point.

These views does not diminish the importance of the earlier apparent financial standing of the joint venturers to the general understanding as to the extent of the benefits that might be forthcoming. While the circumstances implied that the assurances of the benefits contemplated their affordability, those same circumstances also included the support of two entrepreneurs with the trappings of wealth and success who spoke in terms of philanthropic vision and who had a strong financial interest in a successful result. Consequently, BUL was entitled to rely on them to lend their strength while it lasted to the provision of any necessary assistance so far as they could reasonably afford it.

They tried to do this. Their burdens that led to their offering less benefits than had been hoped was unfortunately increased by their own financial stress and the other unplanned benefits that they had to confer on the university. These naturally reduced the range of what they could afford in this direction. As well as supplying operational funding reaching $94m. and then subordinating and postponing the debt, erecting buildings at a cost of about $200m., and permitting the university to occupy them free of rent until the matter was decided, they conscientiously tried to find and finally offered an affordable lease that BUL should have found acceptable. But in the intermediate stages they were unable to do so since BUL's financial state was so poor and its prospects so unpredictable that the affordability of its needs were difficult to assess.

In a related argument, it is also said that "many of the witnesses were united in saying that the financial capability of the joint venturers had little or nothing to do with BUL's entitlement to occupy the land", and some passages of evidence were cited in purported support of this proposition. Aside from any doubt as to whether the witnesses may have been referring to the university's rent-free occupation in advance of the hoped-for lease, these passages have no value on this issue for a variety of reasons. The first is their contradiction by the acknowledgments of the condition of affordability that were made. This has already been discussed. The second is that some of the witnesses were simply trying to help the plaintiff's case or were rationalising as to their past state of mind. In some cases it is quite possible that they were simply revealing their own failure to think sufficiently about the matter at the time or were relying on the absence of discussion of it.

Usually the attention of the witness was not taken to the critical point where the joint venturers' financial capacity was cogent, that is, the allowance of indeterminate rent concessions at a cost that the joint venturers might not afford and at the possible expense of creditors. In addition, Professors Watts and Lovering did not deny the connection and said no more than that they believed that the financial support would be found in some way. This is a frank response that was fully consistent with the view that they were really relying on the goodwill of the joint venturers, which was perfectly valid, and hoping that they would find a way to produce a satisfactory result that could be afforded. These various witnesses seemed to recognise that this element of affordability was a factor in this. However, any failure on their part to appreciate the extent or significance of the danger does not exclude its relevance or cogency.

Ms Nosworthy seems clearly to have accepted that EIE would proceed with its commitment to BUL only so far as it was able. Professor Mortley did not know whether there was a connection between the lease and affordability or not. In his comment on the point, Dr Ishizaki discussed only the connection between the lease and BUL's own generation of income. And Mr Bond, Mr Lucas and Mr Fox merely took the usual opportunity to favour BUL's case through contrived interpretations of past opinions. When evidence was led from the university Councillors of their understanding or interpretation of the tenure that they were led to expect by the combination of the statements of support by the joint venturers and the expected longevity of a university, except for the selective examination referred to, they were generally not asked about or were carefully shepherded away from this issue of affordability of the concessions and its effect on their views, so that is largely unknown.

Where the witnesses spoke of their erroneous or incomplete views of the whole transaction, or where they spoke of only an artificially detached part of it, their understanding or interpretation is irrelevant.

Further, the remedy is available only to the extent that the joint venturers made a promise or representation to BUL as a whole, either directly or through its representative. In the latter case, any omission by the representative to convey a full and accurate account of the relevant message does not assist its claim. For example, an insufficient instruction in the history of the matter is a possible explanation as to why Ms Nosworthy seems to have continually underestimated the reasonable expectations of the joint venturers as to their recoupment of their outlays from the sale of the property, which depended on the rent that BUL would bind itself to pay. This in turn seems to have affected her expectation of the degree of sacrifice of their own interests that they were prepared to make, so far as that was to be properly implied from their assurances of support in the form of concessions. Of course, this is only speculation, but it would seem to be the best explanation why her demands and expectations paid so little regard to the resulting burden on them, despite their attitude of goodwill.

Conversely, their implied qualifications to later assurances as to rent concessions that were recognised by Ms Nosworthy as Chancellor cannot be disregarded simply because other members of the Council did not know of or did not consider them because their special interests were directed to other aspects of the Council's work or because they did not think about it.

At the opposite end of the argument, the defendants contend that after the failure of the first scheme this change of circumstances and variation of the arrangements between the parties under the new scheme meant that the earlier understanding as to the goal of a long-term lease was also abandoned. This too suffers from the same error of isolating selective parts of the transaction. It does not follow that their embarkation on a new scheme as the result of the failure of an earlier one signifies the abandonment of the earlier goal. Nothing direct was said to that effect, and in the circumstances of this case it would have required a clearer indication to dispel the firm understanding of the intended goal that had developed. Everything indicates that the joint venturers gave the university to understand that the provision of a long-term lease remained the goal and that so far as it was reasonably affordable they would provide practical assistance to achieve it.

At the same time, with this need to change the scheme to pursue the same goal, there were some implied variations in the arrangements affecting it, including greater emphasis on a affordability since the new scheme involved additional onerous philanthropy. The difficulty was exacerbated by BUL's failure to achieve financial standards planned under that scheme, leading to the need for greater assistance for an uncertain duration. Moreover, in the absence of any clear indication to the contrary, of which there was none, the greater the burden thrust on the benefactors by such a change, the less secure was the expected result in its original pristine form. But that did not mean that the goal did not remain the same.

In an alternative argument, BUL acknowledges that their financial reversals had the effect of limiting the extent of the expectation that they were raising, but argues that they "remained wholly committed to giving every support that they possibly could and (financially) so long as they could". This is correct in saying that they remained committed to giving support, but it overstates the extent of self-inflicted harm they undertook to tolerate. It would have been unreasonable to expect that in a state of distress they would provide the university with full security with the last of their available resources, or resources that they might need for recovery, or even resources that they might need for their general well-being. It also fails to have any regard to the heavy unplanned burdens referred to above that they did provide and the further benefits under the lease that they later offered. These things reflected a very strong commitment in action, but there had to be a reasonable limit.

BUL says that because of its strength and the joint venturers' deep personal involvement in the establishment of the university, it was entitled to believe the expectations that they created. This is perfectly true, but it is the content of those expectations where the controversy lies. It contends that these factors helped to fashion its belief that simply and without any relevant qualification a long-term lease would be provided, which has already been discussed. This commitment and involvement certainly justified comfort of genuine support beyond the level of an ordinary sponsor with unfettered inclination, but that did not mean total and unqualified obligation.

This argument assumes that there is only one alternative to a philanthropists' total discretion, and that is total assurance. The assurance of help to the extent of reasonable affordability is significantly greater than the former and significantly less than the latter, and it is this middle ground that is supported by the joint venturers' commitment and involvement.

Further, any expectations they excited should have been inferentially confined to reality from the limited nature of the benefits contemplated under the original scheme, and even more by the joint venturers' reluctance to commit themselves to continued funding and their disclaimer of any such obligation. These deliberate limits on commitment defeat any reading that it excluded or put unrealistic limitations on the condition of affordability. Such an interpretation depends upon a far more remote inference.

However, the strength of that commitment would have influenced the measure of affordability. For example, the joint venturers' conditional commitment to provide operational funding and rent concessions was a larger commitment than before and it changed the level of affordability that applied. At this new level it was more liberal, but even then it was still significant. As it turned out, the results betrayed no want of commitment for despite all that had been provided and despite EIE's serious financial state, it found a way to offer substantial concessions for a lease.

In this attempt to attribute primacy to its claim for a lease at any cost to the joint venturers, BUL refers to the evidence of many witnesses who in answer to confined and often leading questions said in effect that the grant was "a given" and that there was no issue on the point. The witnesses did not say that it was a `given' at any price. So far as they go within that narrow range, these propositions have some element of truth: it is the inference to be drawn from them that is not acceptable. It was commonly accepted by all parties, and never put in issue, that a lease was intended as fulfilling a very important need, and there was always an optimistic assumption that it would be granted. And indeed it was in accordance with this that EIE later made its offer as part of the continuing common intention to achieve the same goal, but it always remained equally 'given' within the common understanding that the condition of affordability had to be met. This whole argument is strange since, when they were asked, so many of the university Councillors readily conceded their recognition of it.

A similar argument says that BUL's 'entitlement' to occupy the land as lessee should not be found to be subject to implied limitations based on contingent events unless they were made expressly or clearly enough to put it on notice that if they occurred it would have to leave the campus contrary to the 'entitlement'. This begs the question by assuming the primacy of the 'entitlement' with a distinct and inferior condition whereas the assurances were to have operation only if and to the extent that the conditions, which were part of them, were discharged. It also supposes some unexplained subordination of the conditions because they were implied terms.

The argument further suggests that the university's actual occupation of the site attracted some circumstantial support for its claim for primacy of its `entitlement'. This is just not so. It certainly evidenced the genuine attitude of the joint venturers and their desired intention and optimistic assumption of a successful outcome, but no more than that is necessary to explain this feature. It was also essential to the university's progress and survival that it go into occupation as soon as possible, and it is understandable that this should be permitted even though the lease and its terms were still contingent.

These contingencies were not closed or reduced by the indulgence. When the occupation began, which is the time when its ramifications should be viewed, it was anticipated that BUL would sign a lease committing it to paying a full commercial rent with some modest assistance. Even when that plan failed and substantial concessions became necessary, the condition as to their affordability became of central importance, but the continued occupation did not conflict with it because that issue was expected to be resolved. It would for example have been appropriate on the chance of success, to have allowed the occupation as a temporary measure to give the university the opportunity to establish itself, even if in the end it were found that the problem could not be resolved. If the offer of a lease that was made had been accepted, the contingent nature of this anticipatory occupation would not have been questioned.

The point is that while the permitted occupation conformed with the joint venturers' deep intention to grant the lease if possible, it did not conflict with the existence of the condition that might reduce its benefits or, at the worst, terminate the occupation. It was not accompanied by the grant of the lease, which has negative implications strongly consistent with its contingent nature. BUL's reasoning assumes that the only alternative to the grant of a ninety-nine year lease with full concessions for its total security is not to grant any lease or concessions at all, and that allowing it into occupation is consistent only with the former. This is merely taking argumentative advantage of a practical and philanthropic gesture that accorded with genuine and optimistic but provisional intentions. Its provisional nature was well known and understood but omitted from the argument.

It will be useful to summarise the position at this critical time. Under this new understanding, the goal of a long-term lease remained, but it was subject to three relevant conditions or qualifications that were or should have been recognised. The first was that it would depend on BUL's reasonable prospects of survival to justify. The second had changed with the circumstances. The condition that BUL would pay a commercial rent remained but this was now to be relieved by concessions sufficient to ensure its survival, so far as possible. (See for example the evidence of Professor Lovering - T 180) . The third condition, consequent upon these developments, was that the joint venturers could reasonably afford to provide such concessions or, in other words, could afford to bear the loss in the sale value of the land that would accompany them.

Progress depended on the successful negotiation of terms that would marry such competing factors. Obviously they inter-operated simultaneously, but each had a different significance which at different times had a changing bearing on the result. Because of the difficulties that this presented, that progress was slow. In addition, with the financial and organizational turmoil caused by Bond's failing status, it was an understandable temporary strategy for EIE, upon which the whole of the burden was falling, to pause to see how events turned out and to decide whether what BUL might need could be afforded.

This is contrary to the essential feature of BUL's arguments, that is, that the assurances given was simply that it would receive a long-term lease and that any conditions as to affordability were either met or were inoperative in the circumstances; and that what followed was merely an attempt to formulate a suitable rental system to meet the needs of the occasion in conformity with this basic plan. It does not admit the importance that, objectively, the conditions should have enjoyed if all the circumstances are taken into account. Simply because the conditions were necessarily changed to try to achieve the constant goal that favoured the university, despite their significance it now seeks to relegates them to an inferiority that they did not suffer at the time.

Its error is to isolate a favourable element, the goal of a long-term lease, out of its total context of an integrated combination of objectives, their conditions and their means that changed over the period, and to claim that because that element was a constant it should prevail alone and untouched by the conditions that in different forms or degrees always qualified. It is perfectly reasonable that without being an absolute imperative the goal should have remained the same because of the logical desirability of long tenure for a university, but that did not call for an immunity from modification if the exigencies of the occasion demanded it.

BUL is not alone in permitting a partisan view of the arrangements to distort its perception of them by overemphasis of a favourable feature. In their submissions, the defendants stressed the conditions that applied in the original arrangement as though they applied at all stages, and they did not properly allow for their modification and the substitution of others as they were found to be impractical in the changing circumstances. The argument should have been confined to the conditions operating at the time under discussion, but understood in the light of what had gone before.

To return to the historical account of the matter, BUL continued to fall far below its projected enrolments and overspent its budget through some fiscal indiscipline, and it was still failing to attract independent funding. Bond's financial position was growing more desperate and it continued to default on its contributions to the project, throwing the whole burden onto EIE, which was having its own financial stress. BUL still failed to attract long-term or even short-term independent finance. And although the joint venturers agreed to extend further operational finance for eight weeks maximum, with a reminder that it was never to be part of their ongoing obligations, BUL extracted a further commitment from them by a threat of being forced to wind itself up. This was quite justifiable from BUL's point of view, but EIE probably intended to provide it anyway, and after its generosity its reaction to such threats was probably adverse.

These things threw the further planning into greater uncertainty. The documentary evidence of this period shows clearly that extensive discussion simply failed to produce any decision on the rental arrangement. On 30 June, 1989, Ms Pidcock of BUL stated to its accountants that no agreement had been finalised as yet, and that it was likely to be finalised once negotiations by the joint venturers concerning long-term funding had been finalised, which of course was never achieved.

Then on 19 July, in speaking of their proposals for concessions as a way of meeting BUL's financial inadequacy, financial advisers engaged by the joint venturers for the purpose noted in a memorandum to the university Council that "The sponsors have not agreed to either the no rent scenario nor the reduced rent scenarios at 3 and 4". They had prepared alternative plans showing the rental at 6.5% and 8% of the capital cost payable from the commencement of the lease, with some subordination of an additional amount, but the impossibility of BUL's meeting any of these had required the consideration of further concessions, which was the sticking point. On 21 July, they noted that while the other basic terms of the lease had been agreed,"the exact net amounts effectively payable under the lease are yet to be finalised".

These facts reveal a number of relevant points. The joint venturers were still looking for some reasonable commercial recoupment of their outlays, the concessions that BUL needed were not being provided, and it was not complaining that assurances relating to them were not being kept.

The next relevant event was the presentation of a draft "Leasing Heads of Agreement" to BUL (Ex 94) by the joint venturers on about 27 July in answer to BUL's further pressure for its production, though it had no capacity to pay any rent and on the contrary was still depending heavily on them for funding. Again the draft proposed a ninety-nine year lease of "Academic Areas and relevant Land and all Areas other than the Research Park, the Facilities Areas, the Retail Areas and the Commercial Areas" at a rent, to be paid from 1990, of 10% of the cost and/or value of the relevant lands and buildings and interest through to completion. That would have meant a rent in excess of $20m. per annum, and it made no provision for concessions. However, it was still in accord with the pre-existing arrangements, and was said without contradiction to be in "the same terms as were the subject of an in principle Council resolution some time ago", referring to the decision of the previous year that had not been productive.

Again nothing came of this because without independent funding or suitable concessions BUL could not afford to pay the rent proposed, even if the figure were reduced to 6.5% for the early stages as was proposed in some exercises. As late as 20 July, the Council had been discussing what was described as "a financial crisis affecting the university". The impracticability of this suggests that while showing their own bona fides, the joint venturers were demonstrating to BUL that its pressure was unreasonable in the absence of agreement as to the level of concessions. It emphasised the difficulty that would have to be overcome to define and assure them.

Naturally, BUL does not suggest that this led to any binding agreement, though it would later in negotiations make some such suggestion which will be discussed in its place. But it would portray the production of this document as an affirmation of the joint venturers' commitment to the constant goal. That is so, but it also strongly confirmed the contingent nature of that goal. In a more limited way, it led to some relief from further pressure while they tried to sort out all their interrelated problems that extended well beyond the subject of concessions. In evidence, Ms Nosworthy, who was Chancellor at the time, explained her view of the situation in this way:

"Well, look, I am not a property lawyer. I mean, I would concede that there was some disagreement about some of the terms which would go into a long-term lease. Now, I don't really - unless you want me to express a legal opinion, which I don't feel qualified to do - I mean, what I would simply say is that my understanding throughout was that there was a common view that eventually when the various difficulties of the joint venture parties were resolved the university would be entitled to a long-term lease. Now, I concede that there was disagreement at various times about what the lease - what the structure of the rental in that lease should be, that's certainly right, and although I saw one document called - one lease document which was in draft form, not all of those provisions were filled in - and there was - certainly so far as I am concerned I never took part in any detailed negotiations of a final form of a lease agreement. So, what you are asking me is whether there was certainty about all the terms of the lease. No, I don't think there was certainty about a number of them. However, what I am certain about is that there was a common intention by all of the parties that a lease ultimately be granted.

"The grant wasn't something to occur unilaterally, as might have occurred if what was in prospect was a grant for a peppercorn?-- Yeah.

It was to be in return for valuable covenants to pay rent?-- I think that's right. I don't disagree with that. Where I think we are at odds is in the timing of when that valuable rent, as you put it, would kick in. I don't assert that there was an agreement that forever and a day the university would pay a peppercorn rent. What I do assert is that it was common ground that there would be a period at the commencement of operations of the university during which period the university would be unable to afford to pay any rent or more than a minimal rent and that it was common ground that the rental structure to be put into the lease would reflect that and that over time the rental would rise in that structure to a reasonable commercial rental. . . ." (T347 - 348)

Her critical suppositions are not quite fair and ignore BUL's share of such fault as there was in planning, financial irresponsibility and assessment of external support. She is correct that "there was a common intention by all of the parties that a lease ultimately be granted", even though the comment is incomplete in failing to voice the conditions operating on that intention. She is equally correct that the parties recognised that the university could not pay rent in its early years if it did not find independent finance, and the joint venturers were willing and tried to provide some concessions as best they could. They allowed it to remain in rent-free occupation for another four years and then offered it a further rent-free holiday for two years under the proffered lease.

Although it was plain generally, and even from the above extract from her evidence, that her focus on the university's welfare distracted Ms Nosworthy from an objective allowance for EIE's reasonable self-interest, she has always agreed that this provision of rental support was conditional on the capacity of the joint venturers, and this meant EIE, to afford it. As the documentary evidence shows, this required agreement on some form of limitation upon its amount and duration. However the continuing impossibility of knowing what that would be simply precluded determination of whether it could be afforded.

These events are important in demonstrating that affordability as a recognised factor denied any absolute assurance to BUL of the amount of concessions necessary to achieve a concluded lease. Otherwise that could have been easily accommodated in the draft or alternatively in a formal acknowledgment. If the draft had not properly reflected the true state of affairs, adverse comment would have appeared in the Council minutes and there would have been significant controversy. None of this happened, and on the contrary, while temporary concessions were allowed in the form of rent-free occupation, no lease was granted despite the agitation of the staff for the security that it represented. Contrary to its present arguments, BUL did not claim that it was entitled to the lease and the concessions necessary to make it. Its reticence in this situation may be contrasted with its earlier and later effective actions that saw the respective grants of guaranteed funding and of the Deed of Subrogation.

The defendants deny that there was a general understanding that, the question of affordability aside, BUL's payment of rent was to be deferred until it could afford to pay it. This fails to answer the realities that all parties wanted the university to survive, and that that required at least some deferral if it were to have the intended lease. It is also inconsistent with what followed, namely, rent-free occupation right up to the time the draft terms prepared by Mr Ogawa of EIE offered a rent-free period which it was hoped would meet its needs.

Conversely, as Ms Nosworthy properly volunteered, no-one could have realistically believed that this rent deferral was to be unlimited and unconditional, and this view too is borne out by later events. For example, despite his sympathetic approach, Mr Ogawa's limitation of the rent-free concession and his adjustment of other terms to compensate for it would reflect the general understanding.

By August, 1989, it was EIE's policy to allow a lease with the rent at first calculated at the rate of interest repayments on long-term finance, presumably on the value of the capital assets, plus depreciation, to be charged from about that time and paid from any surplus, but otherwise accruing; and a rent at the rate of 8% of the capital cost as soon as the operation reached the break even point, which was then expected to be 1992 (Ex 206). The lease period and the area to be included in it were not worked out. This was not communicated to BUL, possibly because it was overtaken by events such as its requests for further substantial funding to meet its shortfall that put its viability in doubt, but more likely because of Bond's rapid public decline. Its default in providing its share of funding and the costs of the building programme had already been the first signs of its incipient permanent removal from any contributory role and consequently from the venture, but the threat of its general financial collapse put the venture wholly in doubt. Even without its own critical problems, this would have affected EIE's capacity to afford further benefits, at least until the position was clarified.

However, its attempts to formulate the terms of the lease, and its failure to implement them before Bond's collapse, have certain relevant implications which should be conveniently summarised:

* It remained committed to providing a lease if it could reasonably do so.

* The sticking point was the uncertainty of BUL's capacity to pay a commercial rent, both in respect of amount and time, if ever. Any premature obligation would simply lead to a demand for further funding to meet it. It is doubtful whether in any case it would or could have agreed to an ultimate figure based on 8% of the capital cost, and at that time its chances of reaching that capacity in the foreseeable future were rapidly diminishing.

* Despite its sympathetic support, it was EIE's policy to limit fairly strictly the extent of the concessions. It certainly could not be read as an attitude of total support or an assurance of large or indeterminate concessions, and this probably led to the abandonment of the proposal because the contingent nature of the calculation could leave the amount forgiven larger than might have been intended.

* EIE still regarded the provision of a suitable rental in the lease as of considerable importance to it, and was still looking for a timely commercial return on its very large investment on the campus.

* When Bond's failure soon after led to the casting on EIE of the whole burden of funding BUL's operations and of meeting the costs of construction of the remaining buildings, and then required it to find the funds to buy out Bond's share in order to save the project, its capacity to reasonably afford even these concessions alone would be more doubtful.

Bond University Ltd v Limgold P/L and Nista P/L & Anor [1997] QSC 227

At a glance

Court

Decision date

Before

Source

Judgment (824 paragraphs)

Bond University Ltd v Limgold P/L and Nista P/L & Anor [1997] QSC 227 (11 December 1997)

Parties

Legislation Cited (2)

Cases Cited (13)