26 Apart from on a few occasions, the parties paid the interest to the ANZ Bank during the period that the funds were borrowed from the bank.
27 In respect of the second loan, the conversation by Mr Fitzgerald concerning the matter was as follows:
"Durman: ComCap needs more working capital. It has already used up the $200,000 you and I advanced to it. We need to raise at least another $200,000.
Fitzgerald: I agree. I can raise another $100,000. Can you?
Durman: No. The bank probably won't lend me enough on my house. What we can do if you agree is take out a joint loan using the equity in both our homes as security.
Fitzgerald: Okay but I think if we advance to ComCap these additional moneys it should be treated like the First Loan but that ComCap should be required to pay monthly interest direct to the bank.
Durman: I agree."
28 In accordance with the discussions, the company paid the interest on that borrowing up until its discharge on 24 March 2005.
29 A matter that has to be determined is what liability the company had to the two individuals on their loans in respect of interest which the parties met on their borrowings for the first loan and which the company paid on the borrowings for the second loan. The company's accounts were charged with this interest expense and the shareholders loan accounts were credited with the interest they paid.
30 I return to the question of the date for repayment of loans as between the company and the individuals to see whether there is a genuine dispute as to whether the loans were due at the date of the demand.
31 I had the benefit of a number of submissions in respect of the principles to be applied and I think the most useful summation of what is a genuine dispute is that given by McLelland CJ in Equity in Eyota Pty Limited v Hanave Pty Limited (1994) 12 ACLC 669. At page 671 His Honour made the following comments respect of the expression "genuine dispute":
"It is, however, necessary to consider the meaning of the expression 'genuine dispute' where it occurs in s.459H. In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the 'serious question to be tried' criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat. This does not mean that the Court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit 'however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be' not having 'sufficient prima facie plausibility to merit further investigation as to (its) truth' (cf Eng Mee Yong v Letchumanan (1980) AC 331 at 341), or 'a patently feeble legal argument, or an assertion of facts unsupported by evidence' (cf South Australia v Wall (1980) 24 SASR 189 at 194).
But it does mean that, except in such an extreme case, a Court required to determine whether there is a genuine dispute should not embark upon an inquiry as to the credit of a witness or a deponent whose evidence is relied on as giving rise to the dispute. There is a clear difference between, on the one hand, determining whether there is a genuine dispute and, on the other hand, determining the merits of, or resolving, such a dispute. In Mibor Investments (at ACLC 1066; ACSR 366-7) Hayne J said, after referring to the state of the law prior to the enactment of Division 3 of Part 5.4 of the Corporations Law, and to the terms of Division 3:
'These matters, taken in combination, suggest that at least in most cases, it is not expected that the Court will embark upon any extended inquiry in order to determine whether there is a genuine dispute between the parties and certainly will not attempt to weigh the merits of that dispute. All that the legislation requires is that the Court conclude that there is a dispute and that it is a genuine dispute.'
In Re Morris Catering (Australia) Pty Limited (1993) 11 ACLC 919 at 922; (1993) 11 ACSR 601 at 605 Thomas J said:
'There is little doubt that Division 3 prescribes a formula that requires the Court to assess the position between the parties, and preserve demands where it can be seen that there is no genuine dispute and no sufficient genuine offsetting claim. That is not to say that the Court will examine the merits or settle the dispute. The specified limits of the Court's examination are the ascertainment of whether there is a "genuine dispute" and whether there is a "genuine claim".
It is often possible to discern the spurious, and to identify mere bluster or assertion. But beyond a perception of genuineness (or the lack of it) the Court has no function. It is not helpful to perceive that one party is more likely than the other to succeed, or that the eventual state of the account between the parties is more likely to be one result than another.
The essential task is relatively simply - to identify the genuine level of a claim (not the likely result of it) and to identify the genuine level of an offsetting claim (not the likely result of it).'
I respectfully agree with those statements."
32 If one looks at the matter as at 15 January 2006 when the parties signed the documents that had blanks as to the completion date, there certainly would be a patent ambiguity in the wider use of that term. The statement about completion date means nothing at all and it is incapable of any meaning (see Odgers Construction of Deeds and Statutes 5th ed at 76). Up until that time, there were no discussions between the parties as to the completion date or repayment date of the loans and accordingly in accordance with the usual principles the loan would be repayable upon demand although no demand was necessary for the debt to be due (see Collins v Benning (1701) 12 Mod Rep 444, Re McHenry, McDermott v Boyd, Barkers Claim [1894] 3 Ch 290, DFC New Zealand Ltd v McKenzie [1993] 2 NZLR 576 and Drinkwater v Craddyrack Pty Ltd (No 3), unreported, Young J, 28 November 1997 BC9706991. In the document the parties omitted something which it was necessary to state in order to completely define their contractual intentions. In cases of such a patent ambiguity, as a last resort, the Court may conclude that the parties had not reached agreement at all and the Court will declare the contract void for uncertainty. See Scammell & Nephew Ltd v Ouston [1941] AC 251 at 261.
33 However, with regard to this particular patent ambiguity a Court would not reach that result. That is because the law implies an obligation to repay in the absence of agreement when repayment is demanded.
34 The defendant puts forward the amended Loan Agreement as one that was agreed to by Mr Fitzgerald and thus there is a need to consider that document on the assumption that it may, as suggested by the defendant, be accepted as binding on the parties. If one looks at the completed document, all one has is some words that in the context of the completion date do not by themselves give a completion date. There is arguably an ambiguity in the document.
35 After the documents had the schedule completed by Mr Durman's insertions there was further correspondence between him and the company's solicitors in which he sought to have various documents registered. The solicitors raised the question as to the proper execution of the documents and the absence of details as to when the loans were to be repaid. In a letter of 2 February 2005, to the solicitors, Mr Durman had this to say in response:
" We will pass an internal resolution in regards to timing of the full repayment of the loan. This will be covered in terms of the wording in the agreements in that we will review the arrangements quarterly, but pass a resolution to have them repaid in full within five years from drawdown."
36 There was no resolution subsequently passed but if the loans were to be repaid in full within five years from drawdown then the repayments would not be due until either 16 December 2007 or 26 March 2008. In the light of this letter, it becomes apparent that what Mr Durman was trying to do when he inserted words in the space for the completion date in the schedule was to refer to this quarterly review of arrangements for repayment. In his letter to the solicitors Mr Durman also referred to the fact that there would be a resolution passed that the company would pay interest payments to him and Mr Fitzgerald. There is no evidence of such a resolution. It does perhaps explain some of the insertions in the schedule by Mr Durman.
37 On the case put forward by Mr Durman, which has been adopted by the plaintiff as the basis of what they allege to be a genuine dispute the arrangement seems to be for an ultimate repayment in five years with a review on a quarterly basis to see if the parties could agree to change to an earlier repayment date. The events to which I am now referring have occurred after the execution of the loan agreement and after the insertions by Mr Durman. The thrust of modern authority is that such conduct cannot be used for the purpose of construing a written contract.
38 A convenient to modern starting point for this discussion is a decision of the full Court of the Supreme Court of Victoria in FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd (1993) 2 V.R. 343. The Court held that the conduct of the parties subsequent to the making of the contract was not relevant to the interpretation of the contract. There was an extensive review of English and High Court authority by Brooking J who gave the majority judgement. That decision has been doubted in one respect by a first instance decision of the New South Wales Supreme Court. In Spunwill Pty Ltd v Bab Pty Ltd (1994) 36 NSWLR 290, Santow J subjected the Victorian decision to detailed scrutiny and considered that there was one exception to the rule. At page 312 he concluded his discussion in these terms:
" Rather than there being a special rule of construction specifically excluding consideration of post-contractual conduct, the weight of Australian authority seems to support the proposition that such extrinsic evidence is excluded only by the parol evidence rule. Thus, evidence of post-contractual conduct may in some circumstances be considered under recognised exceptions to that general rule, and in particular the surrounding circumstances exception. Though the relevance of subsequent conduct as an aid to construction is as evidence of a party's subjective belief as to what the contract meant when it was made, use of such conduct will be legitimate under the objective theory of the contract in the limited circumstances where conduct evidences a clear and mutual subjective intention as to what the contract originally meant. There appears to be no justification in principle for excluding such evidence of a mutual subjective intention at the time of contracting merely because the evidence itself arises subsequent to the making of the contract. "
39 Subsequent New South Wales first instance cases have varied and some have declined to follow this exception (see Bryson J in Sportsvision Australia v Tallglen Pty Ltd (1998) 44 NSWLR 103 at 116). Even if one were to accept the legal position as put forward by Santow J it is plain that the conduct which it is suggested one should have regard is not conduct which goes to what the parties originally meant. It is only conduct in which the parties are perhaps considering what they will do in the future, it having been pointed out and they no doubt knew, that there was no agreement as to when the loan was to be repaid.
40 However it seems that the Court of Appeal has now decided to accept the view expressed by Bryson J in Magill v National Australia Bank Limited [2001] NSWCA 221. The court per Ipp AJA, Meagher, Heydon JJA agreeing, said at 50-53:
" The admissibility of subsequent conduct as an aid to the construction of a contract remains to be authoritatively resolved. It is sufficient to point to the differing views flowing from Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 expressed by Santow J in Spunwill Pty Ltd v Bab Pty Ltd (1994) 36 NSWLR 290 (where subsequent conduct was held to be potentially admissible) and by Bryson J in Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 (where the contrary was held).
In my respectful opinion the views expressed in Sportsvision Australia Pty Ltd v Tallglen Pty Ltd are to be preferred. Like Bryson J, I consider the reasoning of Lord Reid in James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 at 603 to be unanswerable. His Lordship there said:
"I must say that I had thought that it is now well settled that it is not legitimate to use as an aid in the construction of the contract anything which the parties said or did after it was made. Otherwise one might have the result that a contract meant one thing the day it was signed, but by reason of subsequent events meant something different a month or year later".
The force of these remarks is well illustrated by the present case. I have come to the conclusion that, as at 20 November 1978, upon a construction of the written record of the contract of loan constituted by the letter of that date, CBC was the lender of the loan to be made thereunder, and not PIBA. In theory, were it to be permissible to have regard to the conversation nearly two months later between Mr Magill and Mr Munro, the contract of loan might then be differently construed, with PIBA and not CBC being held to be the lender. On this basis, CBC would be held to be the lender for nearly two months and PIBA the lender thereafter. This would be a situation of incongruity that the law could not tolerate.
Other intermediate courts of appeal have concluded that subsequent conduct is not admissible for the purposes of construing a contract: see FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343; Hamfray Carpets Australia Pty Ltd v Hycraft Carpets Pty Ltd (1996) ACLC 555; Winstonu Pty Ltd t/as Harvey Norman Electrics v Pitson [2001] FCA 541. This is the law of England: L Schuler AG v Wickman Machine Tools Sales Ltd [1974] AC 235. I would adopt this rule."