(a) The inclusion of residential buildings on the proposed subdivision was an important element in Cox's plans for the project. This was well known to Esanda.
(b) It was well known to Esanda that the project contemplated by Cox was not a conventional subdivisional scheme: that it was designed to attract a high standard of construction by recourse to large subdivisional allotment sizes and restrictive building covenants on the allotments: that this was a semi-retirement type activity by Cox and one envisaged to take place in stages over a period of years.
(c) Probably as early as February 1991, Swinton had instructed Tennant that Esanda would not be financing housing construction on the subdivision. This decision was not conveyed to Cox. It was a decision made prior to the Hanrahan valuation of lot 12. It did not necessarily preclude the provision of housing construction finance at a later time.
(d) It was clear to Cox from the terms of the February, March and April approvals that housing finance was not included in the approval facilities.
(e) If Cox had raised the absence of housing finance with Esanda prior to the Canberra meeting, it was in terms that were in keeping with Cox's evidence that he "did not object to the fact that [Esanda] had not provided finance to [the] first house." I think this was the result of Esanda's favourable response to his subdivisional proposal and Cox's expectation that he would not encounter any particular difficulty in gaining Esanda's approval of further finance.
(f) Esanda's first clear refusal to provide housing finance, I think, was conveyed to Cox at the Canberra meeting. I do not accept that the refusal was based upon the terms of Hanrahan's valuation of lot 12.
(g) Tennant was unable to satisfactorily explain Esanda's decision to refuse housing finance. I do not accept Swinton's evidence that the refusal was based upon Hanrahan's valuation of lot 12 for the reasons that (i) I think Swinton's instruction to Tennant not to include housing finance in the proposed facility was given about February 1991 when Tennant undertook preparation of the Tennant memorandum; (ii) It does not accord with Tennant's statement to Cox in mid-1991 that Esanda would not provide finance for "any housing of any description".
(h) I think Esanda had decided as early as February 1991 to keep its options open in relation to the provision of housing and further finance beyond stage 1 of the project. This was not clearly conveyed to Cox.
(i) Both parties accepted that success in marketing stage 1 of the project would influence the course of further development of the subdivision and the provision of additional finance by Esanda.
(j) Although the April approval stipulated retirement of the proposed facility on 1 February 1992 I am satisfied that neither party expected the loan to be retired at that time for the reasons that:
(i) it was clear from all of Cox's dealings with Esanda that the facility was being sought and provided in connection with a project estimated to extend over several years.
(ii) Even with a successful marketing of stage 1, it was not likely that the proceeds of sale would have enabled retirement of the loan within nine months.
(iii) Cox had a good credit rating with Esanda and his security to debt ratio was well within Esanda's lending criterion, such that it was highly unlikely that Esanda would have reason to call up the loan.
(iv) The summer holiday season offered the more auspicious conditions for marketing of the subdivision. One would expect that sales in the earlier months would not be significant.
(k) I am reasonably satisfied that Cox was content to proceed with subdivision finance only, buoyed by his enthusiasm for the successful marketing of stage 1 and his confidence that Esanda would provide construction cost finance when required.
69 The contentions in the Amended Statement of Claim Further Amended (the statement of claim), asserted that, in negotiations for finance, representatives of Esanda and of the bank made certain representations to him.
70 In the case of Sowton, it was alleged that he represented to Cox that the bank would provide the required finance for the development and construction of dwellings on the Narooma property. There is some support for that in the evidence of Gschwend. However, I am satisfied that no such representation was made by Sowton and I do not understand Cox to be persisting in such an allegation. The evidence is, I think, unequivocal to the effect that the bank would not be playing any part, other than in providing bridging finance, in the financing of the proposed project and that any such financing would have to be considered by Esanda to whom Cox was then referred by Sowton. I have little doubt that the reference of the application for finance by Sowton to Esanda was done in a spirit of optimism that the application would be well received and went with Sowton's, in principle, support.
71 As a corollary to that allegation, Cox further contended that Sowton represented to him that Esanda would provide all necessary finance for the subdivision and development of the Narooma property. In my view, there is no credible evidence to support that allegation.
72 As to Esanda, Cox asserted that Taylor represented to him that Esanda would progressively make funds available up to $2,100,000 up to the end of 1992 to finance the proposed development (the Taylor representation). It was also alleged that Tennant represented to Cox that written documents were a mere formality and that Cox would be provided with further documents as the development progressed (the Tennant representation). Taylor was said to have participated in aspects of those representations. Another representation was attributed to Tennant, namely, that additional loans would be provided for the construction of dwellings under the same mortgage document as applied to the original loan for the land development (Tennant's further representation). Cox asserted that Swinton represented to him that there was no need to seek alternative or additional finance other than from Esanda as the required finance for the development would be provided by Esanda (the Swinton representation).
73 As noted above, there is no substance in Cox's case against the bank and Cox has assented to that.
74 As to the case against Esanda, I have had some difficulty in reconciling the case as evidenced by Cox with the representation case as pleaded.
75 In his evidence, the emphasis was upon the failure of Esanda to provide additional funds for housing development in lots 5 and 9 of the subdivision. Application for this finance was not made by Cox until the last quarter of 1991 and was declined by Swinton on about 10 December 1991.
76 The evidence of Cox was that the provision of that additional finance was crucial to the success of stage 1. It was Cox's opinion that residential development was essential to stamp the subdivision with the up-market character that he envisaged for the project and to engender purchaser interest in the subdivision.
77 Esanda's witnesses shared that opinion to the extent that it was accepted that building activity stimulated consumer interest.
78 Although a housing development had formed part of Cox's concept for the project, the evidence which I have outlined earlier in these reasons, calls for the conclusion that in relation to stage 1 financing, Cox raised no objection of any significance to the limiting of the April approval facilities to estimated subdivision costs.
79 Nor, it seems, did he 'dig his heals in' at the Canberra meeting with Tennant when it was made clear that a loan to meet building costs was not available. Cox's evidence was that he did not press for building finance as he regarded the inclusion of housing development in stage 1 as an "after-thought". This evidence is difficult to reconcile with the representation case as pleaded.
80 In evaluating the evidence concerning the Taylor representations, I think that much of Taylor's evidence may be disregarded as unreliable for the reasons earlier given. Still, I think it is taking credulity beyond the bounds of common experience to attribute to Esanda, through Cox's dealings with Taylor, representations in terms of the Taylor representations, or to the extent that anything was said by Taylor as to future lending by Esanda to Cox, that Cox acted under the misapprehension that Esanda would lend him $2,100,000 for the project.
81 There is no doubt that it was conveyed to Cox that he could reasonably expect funding from Esanda for the progressive development of the project. It is equally clear that no unqualified undertaking was given to provide unquantified financial requirements to Cox.
82 I did not understand Cox to assert otherwise. He freely accepted that success of stage 1 was an important factor and that successive requirements for further funding would have to go through the conventional lending scrutiny that Esanda employed in dealing with such applications.
83 Those observations apply with like force to the Tennant representations. Tennant, I think, endeavoured to give his evidence to the best of his recollection. As with all Esanda officers, his evidence suffered from the absence of contemporaneous diary notes of dealings with Cox.
84 The Tennant representations, in my view, on the evidence, do not amount to anything significantly more than an assurance that Esanda was genuinely interested in providing finance for the project: that, in some respects, the terms of the loan facility were inappropriate to the concept of lending in stages, (I think the terms of the April approval clearly fell into that category) and that project funding could be accommodated under existing security documents.
85 In the light of Cox's evidence of his dealings with Esanda in relation to housing construction finance in the first half of 1991, I do not accept that any unqualified undertaking to provide such finance was given by Tennant. I accept Tennant's evidence that, prior to the Canberra meeting, Tennant had been acting on Swinton's instructions to limit consideration of the terms of any loan facility to subdivision costs.
86 In view of the absence of contemporaneous records of either party, the time that had passed since the conversations relied upon took place, the effect of the distress occasioned to Cox by the failure of the project, as he envisaged it, the inconsistencies in the evidence as outlined earlier in these reasons, it would be unrealistic to place much reliance upon discussions between the parties to found a case based upon the representations as pleaded.
87 A further difficulty confronts Cox's representation case. Correspondence between Cox and Esanda in 1993 presented Cox on several occasions with the opportunity of raising the allegations of misrepresentation relied on by him in these proceedings. He failed to do so.
88 The Swinton representation, as pleaded, was not substantiated by the evidence. The Swinton representation was alleged to be made "prior to entry into the agreement for loan." Cox's evidence, of the Swinton representation was of one made in the first half of October 1991, long after the "agreement for loan", at a time when Swinton visited Narooma to discuss progress with the sale of allotments in stage 1. This was the meeting that discussed the provision by Esanda of finance for the housing development of lots 5 and 9. That is dealt with in more detail later in these reasons.
89 Notwithstanding, the evidence of circumstances in which the 'April approval facility' was provided leave little doubt that Cox was led to believe that Esanda, in principle, was seriously interested in progressively funding the development and that Cox could reasonably expect that required funds would be forthcoming, subject, principally, to the market success of stage 1.
90 As earlier stated, I do not accept that Esanda treated the retirement date of the April approval facility as being other than a safety value should anything unforeseen eventuate, given the market conditions that existed at the time of the April approval (they were not buoyant) : the state of the subdivision works at that time (they were not completed until the second half of 1991): the unreality of expecting settlement of sufficient sales of allotments to permit retirement of the loan at the end of January 1992 (Cox was substantially dependent on that income for the retirement of the loan): the common ground that the anticipated relationship was likely to involve, the provision of financial accommodation by Esanda in stages. It is clear that the retirement date was, in substance, a review date which would result in an extension of the loan, provided Esanda's lending criteria were being satisfied and there were reasonable signs of the successful marketing of stage 1 allotments.
91 With his confidence in the market attraction of the site of the project, there was little reason for Cox to think that he was undertaking an undue risk in embarking upon the purchase of the Narooma property with the view to subdivision and, then embarking upon the subdivision without having a facility in place which, in terms, covered the whole project.
92 The proposal had been favourably received by the bank and, in turn, Esanda. The only thing that could go wrong was that Cox could find that his confidence in the success of the project was misplaced. He did not have to worry unduly about the retirement date of the facility viz 1 February 1992.
93 If those findings could be expressed in terms of representations it would be along the following lines:
"(a) Esanda accepts that the project is a good concept, located on a picturesque elevated ocean-view, undeveloped site.
(b) Esanda understands that the subdivision is aimed at the "executive" level of the market and has no problem with that, except that it may slow progress in sales.
(c) Esanda understands that the project is planned in stages and success of stage 1 will influence its attitude to further funding.
(d) Esanda also accepts that the project concept envisages the construction of some residential buildings to stimulate consumer interest and to establish the character of the proposed development.
(e) Cox may reasonably expect the provision by Esanda of finance for the project in stages, provided that stage 1 of the project meets with success in the market and the borrowing meets Esanda's lending criteria."
94 In short, Cox had been led to believe that, in-principle, funding, would be available from Esanda to cover the financing of the project, provided that finance required from time to time satisfied Esanda's lending criteria and market experience in relation to stage 1 was favourable. However, Cox did not have an approval from Esanda committing it to funding the project.
95 The conduct of Esanda that draws my criticism is that which occurred in the second half of 1991. The subdivision work was not completed until September that year. It was the evidence, I think uncontradicted, that the time conducive to sale of subdivisional lots fell within the holiday season periods when substantial numbers of visitors took holidays at Narooma. Yet it was the evidence of Swinton that on the occasion of his visit to Narooma in the company of Tennant at a time in late September to mid October, he had become:
"progressively more concerned at the lack of sale of lots from Mr Cox's subdivision [and that he conveyed] Esanda's concerns to Mr Cox on a number of occasions from August 1991 until November or December 1992"
96 Given the fact that the subdivision had not been completed until September 1991 and the unlikelihood of any significant sales being effected prior to the holiday season I am unable to accept that evidence. If Swinton genuinely held that view I would not regard it as reasonable.
97 It is more likely that Esanda had concerns, generally, about subdivisional developments in recreational areas in the context of prevailing economic conditions.
98 The evidence, I think, established that Cox had priced the allotments in the subdivision, probably above market price. That was the evidence of the agent witnesses called by Esanda and, in substance, I see no reason to disagree with the thrust of that evidence, although I think their estimates of market value in some respects lacked adequate research and were geared to early sale. The agent witnesses, clearly, had little patience with Cox's approach to marketing the allotments and were not imbued with his assessment of the superiority of his site as a resort development.
99 According to Swinton his concern in relation to the marketing of the allotments of stage 1 of the subdivision led to his visit with Tennant to Narooma in late September, or early October 1991 (the Narooma meeting). It was one of two visits to the site by Swinton about that time. There is considerable inconsistency in the evidence adduced of the Narooma meeting which involved a site inspection as well as a dinner engagement on the evening of the visit. There was a dispute as to who was in attendance and the extent of involvement of those present.
100 Maria das Gracias Cox (Mrs Cox) was a Brazilian national who came to Australia in 1989 and whose command of English was limited. There was some dispute as to that limitation. Clearly, at the time of giving evidence, Mrs Cox showed a reasonable understanding of the English language and a capacity to express herself in English. Neither Tennant nor Swinton could remember the presence of Gschwend at any time at the meeting other than during a period when they attended at the office in Cox's house. I think it is reasonably clear that Gschwend was present also at the dinner engagement.
101 The significance of the meeting lies in the statements attributed to Swinton by Cox and his witnesses to the effect that it would not be necessary for Cox to seek finance for housing construction "elsewhere" and that, subject to formalities, funds would be available from Esanda.
102 Tennant and Swinton accept that housing construction finance was raised at this meeting and that the proposal was not rejected by Swinton who agreed that he saw marketing benefits in construction activity on the site. However, both Tennant and Swinton were adamant that no commitment was given to provide such financial assistance and that it was made clear to Cox that a satisfactory proposal would have to come from him and be considered by Esanda. It was their evidence that Cox undertook to provide plans for the proposed two houses on lots 5 and 9 and undertook to obtain a feasibility report by Hanrahan.
103 The evidence of Mrs Cox was that at the dinner engagement, which she described as a "celebration", Swinton had undertaken on behalf of Esanda to finance the construction of the first two houses on the estate. She attributed to him the further statement that "he thought the project had been a great success".
104 It was Cox's evidence that he was at pains at this meeting to obtain some commitment from Esanda to provide finance for residential building construction: that Swinton informed him that it would be necessary to have plans drawn up and valuations performed by Hanrahan and that his application would be improved by the exchanging of contracts on certain allotments for which Cox had obtained a buyer: that he extracted an implicit assurance from Swinton as to the availability of Esanda finance in the following way: