Cunningham v Westpac Banking Corporation Limited

Solicitor for the Applicant: Wright Law

Solicitor for the First, Second and Third Respondents: Mr D Savage SC with Mr E Goodwin

Solicitor for the First, Second and Third Respondents: King & Wood Mallesons

Counsel for the Fourth Respondent: The Fourth Respondent did not appear

Counsel for the Fifth Respondent: The Fifth Respondent did not appear

Counsel for the Sixth Respondent: The Sixth Respondent did not appear

Counsel for the Seventh Respondent: The Seventh Respondent did not appear

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 657 of 2011

BURANDA PROPERTIES PTY LIMITED (RECEIVERS & MANAGERS APPOINTED)

JUDGE: REEVES J DATE OF ORDER: 5 OcToBER 2012 WHERE MADE: BRISBANE

1. The originating application filed 20 December 2011 be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 657 of 2011

BURANDA PROPERTIES PTY LIMITED (RECEIVERS & MANAGERS APPOINTED)

JUDGE: REEVES J DATE: 5 OctoBER 2012 PLACE: BRISBANE

iNTRODUCTION 1 By these proceedings, Mr Cunningham, the applicant, seeks to set aside a settlement deed that was made on 17 November 2010 to compromise a set of proceedings (NSD 1033 of 2010) that were, as at that date, in the third day of a trial before Dowsett J in this Court (the Original Proceedings). 2 The Original Proceedings were commenced by a company called Buranda Properties Pty Ltd (Buranda) as the trustee for the Cunningham Property Trust. The respondents to those proceedings were Westpac Banking Corporation Limited (Westpac) and Mr JR Park and Mr MF Mentha as receivers and managers of Buranda (the Receivers) appointed by Westpac. Mr Cunningham is the sole director of Buranda and he and his family are the only beneficiaries of the Cunningham Property Trust. 3 To found the relief he seeks in these proceedings, Mr Cunningham claims that, through their lawyers Mallesons Stephens Jaques (Mallesons), Westpac and the Receivers, the first to third respondents in these proceedings, (for convenience, I will refer to the three respondents jointly as Westpac) made certain representations in the negotiations leading up to the execution of the settlement deed which were misleading or deceptive in contravention of s 52 of the Trade Practices Act 1974 (Cth) (the TPA).

The issues 4 The usual issues that arise in litigation of this kind under s 52 of the TPA arise in these proceedings. They are: (a) were the alleged representations made; (b) if so, were they misleading or deceptive in contravention of s 52 of the TPA; (c) if so, did some, or all, of the representations cause Mr Cunningham to enter into the settlement deed; (d) if so, did Mr Cunningham suffer, or is he likely to suffer, any loss or detriment; and (e) if so, should the relief Mr Cunningham seeks be granted. 5 Before considering these issues, it is necessary to essay the factual background to the Original Proceedings and to these proceedings.

The Phoenix Development 6 Over a period of some years before 2007, Mr and Mrs Cunningham and Buranda had acquired and amalgamated several parcels of land within a large urban block of land bounded by Logan Road, Maynard Street, Sword Street and Deshon Street, Woolloongabba in the city of Brisbane (the Woolloongabba Land). That land was acquired with the object of obtaining a development approval for a mixed use development on the amalgamated block comprising 493 residential units, 24 townhouses, 137 short term accommodation units, 14,000 sq metres of office space and 7,000 sq metres of retail space to be known as the Phoenix Development.

Westpac provides finance 7 On 21 December 2007, Buranda and Westpac entered into a business finance agreement (the BF Agreement) by which the bank agreed to advance $32,570,000 to Buranda (the Facility). The principal purpose of the Facility was to refinance Buranda's indebtedness to St George Bank Limited. It was an express term of the BF Agreement that the Facility would expire on 30 June 2009. 8 To secure the BF Agreement, Westpac took mortgages over the Woolloongabba Land owned by Buranda and a third party mortgage over three properties that were jointly owned by Mr and Mrs Cunningham: 174 Logan Road, 3 Sword Street and 6 Maynard Street. It also took a registered charge over the assets and undertaking of Buranda, a guarantee and indemnity from Mr Cunningham and a guarantee and indemnity from Mrs Cunningham. Mr Cunningham's guarantee was limited to $32,570,000 plus charges, interest and expenses. Mrs Cunningham's guarantee was limited to the aggregate value of the three jointly owned properties at the time of recovery under the third party mortgage over those properties. 9 On 9 September 2009, Westpac and Buranda entered into an agreement to vary the BF Agreement (the Variation Agreement). It was an express term of the Variation Agreement the Facility would expire on 31 August 2010. The Variation Agreement also contained a timetable for the structured repayment of the Facility. In particular, it required the Facility to be reduced to a maximum of $21,550,000 by 31 March 2010.

Mrs Cunningham offers to purchase two lots 10 On 23 February 2010, Mrs Cunningham offered to purchase the property at 170 Logan Road (owned by Buranda) for the sum of $4,200,000 and the property at 174 Logan Road (owned jointly with her husband) for the sum of $2,300,000 to be settled by 29 March 2010. Because both these properties were part of the securities for the BF Agreement, Westpac's consent was required. The Variation Agreement stated "Despite anything else in this [agreement], where [Westpac] agrees to the sale of a property subject to its security, the terms and conditions of any such contract of sale must be satisfactory to [Westpac] in its sole discretion". In early March 2010, Westpac decided not to consent to this sale to Mrs Cunningham. It was common ground in the Supreme Court caveat proceedings (see at [15] below) that Westpac did this in order "to preserve the opportunity of selling all of the Woolloongabba [Land] in one line": see Buranda Properties Pty Ltd (Receivers and Managers Appointed) v Buranda Properties Pty Ltd as t'ee [2010] QSC 357 (Buranda QSC) at [14].

Buranda defaults 11 As noted above, on 31 March 2010, the Facility was due to be reduced to a maximum of $21,550,000. That did not occur. As a result, on 1 April 2010, Westpac sent separate letters of demand to Buranda and Mr Cunningham for the sum of $28,222,355.39. No part of either of those demands was met. On 7 May 2010, the Receivers were appointed to Buranda by Westpac. 12 On 30 June 2010, the Facility was due to be reduced to a maximum of $6,200,000. That did not occur either.

The Original Proceedings and the caveat proceedings 13 On 12 August 2010, Buranda filed the Original Proceedings against Westpac in the Federal Court of Australia. Those proceedings were subsequently amended to seek relief against the Receivers as well. After that amendment, the originating application in the Original Proceedings sought the following relief: (a) a declaration that the appointment on 7 May 2010 of the Receivers was invalid; (b) damages at common law and under s 82 of the TPA; and (c) an order under s 87 of the TPA varying the Variation Agreement "so as to set a new timetable for the reduction of debt under the [Facility]". 14 In its statement of claim in the Original Proceedings, Buranda alleged that Westpac had acted in breach of various implied terms of the Variation Agreement by refusing the offer of Mrs Cunningham to purchase Lots 170 and 174 Logan Road (see at [10] above). It also alleged that Westpac had made various representations about the best approach to the sale of the Woolloongabba Land, which representations were alleged to be misleading or deceptive in breach of s 52 of the TPA. 15 At about the same time as the Original Proceedings were filed, Mr Cunningham lodged a caveat, in the name of Buranda, over the Woolloongabba Land. Because they wished to attempt to sell that land at auction, the Receivers issued an application in the Supreme Court of Queensland seeking an order to remove that caveat. On 10 September 2010, Wilson J held that there was a serious question to be tried as to (Buranda QSC at [26]): … whether [Buranda's] failure to meet the third milestone for debt reduction as required by the Variation Agreement was caused by Westpac's breach of that agreement in refusing to consent to a sale of 170-174 Logan Road because it preferred that all of the land be sold as one parcel. Her Honour also determined that the balance of convenience favoured Buranda (see at [34]) and therefore dismissed the Receivers' application. However, her Honour reserved the question of costs on that application to await the decision in the Federal Court proceedings, that is the Original Proceedings. 16 On about 6 October 2010, Westpac filed a cross-claim in the Original Proceedings claiming $29,863,076.37 against Buranda as the principal debtor and against Mr Cunningham as guarantor. Westpac also sought a declaration regarding the amount owed by Mrs Cunningham under her guarantee to Westpac.

The settlement negotiations - the MSJ letter 17 The trial of the Original Proceedings was due to commence on 15 November 2010. On 5 November 2010, Mallesons sent a "without prejudice" letter to Lazarus Legal Group (Lazarus), the solicitors then acting for Buranda, Mr Cunningham and Mrs Cunningham (the MSJ letter) proposing in principle terms of settlement for the Original Proceedings. This letter responded to an earlier offer that had been made by Mr Lazarus on behalf of Buranda soon after the decision in Buranda QSC. Accordingly, the first part of the MSJ letter addressed that issue in some detail. Then, in the second part of the letter, Mallesons advised as follows: B Receivers and Managers' sale Since their appointment, the receivers and managers have appointed agents and conducted an extensive marketing campaign for the sale of the secured lots. As a result, we are pleased to advise that the receivers and managers have entered into an agreement to sell the secured lots at Logan Road and Deshon Street, Woolloongabba for a purchase price of $35M (exclusive of GST and adjustments) subject to various conditions. This offer is well in excess of the CBRE and JLL valuations for those lots. If the conditions of the sale by the receivers and managers are satisfied and the sale is settled, it is expected to clear your client's debt to [Westpac] in full with the release of the Stanley Street and Maynard Street properties from [Westpac's] securities for the benefit of your client. At this amount and on current estimates we expect there will be a return to your client out of the sale proceeds. (Emphasis added) 18 This section of the letter concluded with a statement about the effect of Buranda's continuing caveat over the Woolloongabba Land and the related liability Mrs Cunningham may have under the undertaking as to damages she had given in the Supreme Court proceedings. That statement was as follows: In the event that the above sale does not proceed because of the existence of your client's caveats, [Westpac] and the receivers and managers will be seeking any loss from Mrs Cunningham pursuant to her undertaking given in the Supreme Court Proceedings ("Undertaking") should it be found that those caveats were lodged without reasonable cause. (Emphasis in original) 19 The third part of the MSJ letter contained the offer in principle to compromise the Original Proceedings. It was as follows: C Bank's proposal In an endeavour to avoid the further costs, interest and inconvenience associated with litigation and the risk of action being taken against Mrs Cunningham pursuant to the undertaking, [Westpac] is prepared to resolve this matter on the following in principle basis: 1 Your clients will immediately consent to the dismissal of the Supreme Court Proceedings and the Federal Court Proceedings with no order as to costs (without prejudice to [Westpac's] and [the] receivers and managers' rights to recover their costs under the terms of the securities). 2 Your clients consent to the sale of the Logan Road and Deshon Street properties by the receivers and managers for a purchase price of $35M (exclusive of GST and adjustments). 3 Your clients and related entities (including Dinerite and PCTC Investments) agree to: (a) immediately remove any caveats and vacate the Logan Road and Deshon Street properties to enable the settlement of the sale of those properties to occur; and (b) otherwise cooperate with the receivers and managers to facilitate that settlement. 4 Full mutual releases between your clients and related entities on the one hand and [Westpac] and the receivers and managers on the other. 5 Pending the sale of the Logan Road and Deshon Street properties, [Westpac] and the receivers and managers will agree not to take any further action under the securities in respect to the other mortgaged lots without your clients' written consent unless such action is deemed necessary by our clients to preserve those lots. 6 Upon the settlement of the above sale of the Logan Road and Deshon Street properties and repayment of Buranda's outstanding debt, [Westpac] will as soon as reasonably practicable: (a) terminate the receivership and release the securities over the Stanley Street and Maynard Street and any balance property; and (b) pay to your clients any surplus proceeds of the Logan Road and Deshon Street properties (subject to any valid claims having priority in respect to such surplus including the claims of the Commissioner of State Revenue for outstanding land tax pursuant to garnishee notices dated 29 October 2010). 7 In the event that the above sale of the Logan Road and Deshon Street properties does not proceed at the end of the purchaser's due diligence and option period being 4 months from the date of this letter or settlement of the sale and repayment of [Westpac] debt does not proceed within 8 months of the date of this letter (or such further periods agreed by [Westpac] in writing at its absolute discretion) for any reason, [Westpac] and the receivers and managers will be entitled to proceed to sell the mortgaged lots and otherwise enforce the securities at their absolute discretion without further reference to your clients. The above proposal is not an offer capable of immediate acceptance. Upon receipt of confirmation of the above in principle terms, [Westpac] will require us to prepare a deed of settlement and release incorporating the above terms as well as such other provisions required by [Westpac] to reflect the agreement. [Westpac] and the receivers and managers will not be bound by any proposal until an acceptable deed of settlement has been executed and exchanged between the parties. (Emphasis added)

The Phoenix 8 Agreement 20 On the same date as the MSJ letter (5 November 2010), the Receivers caused Buranda to make an irrevocable offer to Phoenix 8 Asia-Pacific Pty Ltd (Phoenix 8). The deed recording that irrevocable offer was signed by both the Receivers for and on behalf of Buranda, and by the directors of Phoenix 8 (the Phoenix 8 Agreement). This was "the agreement to sell" the Woolloongabba Land that is referred to in the MSJ letter. An identical version of the same deed was signed on 12 November 2010. It is an agreed fact in these proceedings that this occurred because the notice required under s 421(2) of the Environmental Protection Act 1994 (Qld) was not annexed to the 5 November 2010 version of the deed. Accordingly, that notice was annexed to the deed after 5 November 2010 and the deed was re-executed on 12 November 2010.

Buranda makes two counter offers 21 Lazarus responded to the MSJ letter on 8 November 2010. Among other things, that letter contained a statement to the following effect: "We note that the Receivers & Managers have entered into an agreement to sell the properties at Logan Road and Deshon Street for $35,000,000.00." After highlighting various risks which Lazarus claimed Westpac faced in the Original Proceedings, that letter proceeded to make the following offer: Notwithstanding this, our clients are prepared to settle the proceedings on the following basis: 1 Our clients' total liability to [Westpac] be reduced to $21 million as at 8 November 2010; 2 The sale of the Logan Road and Deshon Street properties be permitted to proceed at $35 million; 3 [Westpac] bears the costs of the receivership and its legal costs of the proceedings, without any right to claim them from any of our clients under any security [Westpac] holds or otherwise; 4 The proceedings be stood over pending sale of the Logan Road and Deshon Street properties; 5 Upon the sale of the Logan Road and Deshon Street properties for the sum of $35 million: a. The surplus proceeds of sale above $21 million be released to our clients; b. The release of 837 Stanley Street, Woolloongabba, 1020 Stanley Street East, East Brisbane and 6 Maynard Street, Woolloongabba to our clients; c. The Receivers & Managers forthwith retire; d. [Westpac] release all remaining security to our clients; e. The proceedings be dismissed with full mutual releases. This offer is open for acceptance to 5:00pm (Sydney time) on Tuesday 9th November 2010, after which time it will lapse. 22 Two days later, Mr Dwyer, an employee of Mr Cunningham, forwarded an email to Mr Stewart SC. Mr Cunningham said in his evidence this email was sent with his knowledge and consent. At this time Mr Stewart was acting for Buranda and Mr and Mrs Cunningham and he was to appear on their behalf at the trial of the Original Proceedings. Following receipt of this email from Mr Dwyer, Mr Stewart sent the contents of the offer contained in it to Mr Sullivan SC, who was at the time acting for Westpac (the 10 November Offer). That offer was in the following terms: … I am prepared to accept that the debt to Westpac is reduced to $25,000,000 (Cunningham Offer) and the terms of the Deed of Settlement, amongst other things, is to include the following terms: 1. The Cunningham Offer will be taken as being the amount owing inclusive of all costs up to the date of the Deed of Settlement. Only normal interest as set out in the original Business Finance Agreement can be applied to the debt after this date unless the Receiver's Buyer fails to perform and BP doesn't settle the debt as set out in 7. 2. [Westpac] is to pay outstanding Council rates and State Govt land tax up to the date of the Deed of Settlement and this will not increase the agreed amount owed 3. The deal includes extinguishment of the Undertaking that Tracey gave during the Supreme Court application 4. The Receivers are retired but still allowed to act as agent of BP in relation to the sale to the Receiver's Buyer. [Westpac] to pay their costs for this service and they are to report to both parties on a weekly basis. Perhaps this could be achieved through a voluntary administration or another structure that can be agreed. 5. [Westpac] to immediately release the mortgages over 1020 Stanley St, 837 Stanley St, 6 Maynard St. 6. BP to be free to pursue the reconfiguration and subdivision of the 6 x 300 sqm lots at the rear of 170 and 174 Logan Rd. The sale to the Receiver's Buyer to be on the basis of the reduced land area. 7. If the sale to the Receiver's Buyer fails and Buranda Properties doesn't find alternate buyer or refinances the outstanding debt in its modified amount within 60 days of either the Buyer giving notice that it is not satisfied with its due diligence exercise or fails to settle within 8 months of the date of the Deed of Settlement then [Westpac] can exercise its rights and enforce its securities. 8. BP to be given 30 days from the date of the Deed of Settlement to pay [Westpac] out at the present value of the 'Cunningham Offer' in full and final settlement. I say the present value of the 'Cunningham Offer' as the latest arrangements won't see [Westpac] in funds for at least 8 months and our proposal might see their monies returned in 45 to 60 days. Additionally there is a significant risk that the sale won't proceed past due diligence and as such there is risk reduction discount that should be applied to the cash settlement if it occurs within 45 to 60 days. We can work out the maths if we want to go this way. This arrangement would mean that the Receivers Buyers would not be in an exclusive position for the first 30 days of their 4 month due diligence period. This offer is valid until 5pm EST Wednesday 10 November 2010 at which point it can be taken to be rescinded. (Errors in original)

Mallesons' response of 12 November 23 In response to these two offers, Mallesons sent a letter to Lazarus on 12 November 2010. Among other things, that letter stated: [Westpac] remains willing to resolve this matter on the terms set out in paragraphs 1-7 of our correspondence of 5 November 2010. In addition, [Westpac] is prepared to reduce the debt owing by your clients as at 11 November 2010 to $31,427,608.28, providing a $1M discount. Costs and interest will continue to accrue on this reduced amount from 11 November 2010 in accordance with [Westpac's] facilities and securities. In response to some of the specific matters raised in your clients' offer of 10 November 2010, we are instructed as follows: 1 [Westpac] is not prepared to pay any outstanding council rates and land tax owing in respect to the mortgaged properties. Those costs have always been your clients' responsibility that should be paid by your clients and will come out of any sale proceeds as a first ranking statutory charge; 2 The receivers and managers will not retire until the sale of the Logan Road and Deshon Street properties is completed; 3 [Westpac] will not release any of its security until it receives the agreed amount to be owing from your clients; and 4 The agreement which has been reached is for the whole of the Logan Road and Deshon Street properties. Our clients are not in a position to carve-out from the sale any of those properties. 24 These paragraphs appear to correspond to paras 2, 4, 5 and 6 respectively of the 10 November Offer (see [22] above).

The trial begins, the settlement deed is executed and the consent orders are made 25 The trial of the Original Proceedings proceeded before Dowsett J on 15, 16 and 17 November 2010. On the third day of that trial Mr Cunningham, Mrs Cunningham, Buranda and two other related entities entered into a deed of settlement (settlement deed). It is this settlement deed that Mr Cunningham seeks to set aside in these proceedings. Except that Westpac agreed to a further reduction in the total debt to $31,220,000, this deed essentially reflected the terms of the offer contained in the MSJ letter as varied by the letter from Mallesons of 12 November 2010 (see at [23] above). Prior to signing this settlement deed, Mr Cunningham received advice from Mr Stewart and Mr Barry Lazarus. Their advice was to the effect that Buranda and Mr and Mrs Cunningham should settle on the terms proposed in the settlement deed. 26 The settlement deed mentioned the Phoenix 8 Agreement at least twice. The first occasion was in cl 2, which stated: Westpac and the Receivers make no representations, statements or warranties with respect to (including but not limited to) … the Sale, including whether the conditions of the Sale will be satisfied or that the Sale will proceed to completion. 27 The interpretation clause of the deed (cl 14) contained the following definition of "Sale": Sale means the confidential agreement dated 12 November 2010 entered into by the Receivers for a price of $35,000,000 (exclusive of GST and adjustments) for sale of the Logan Road site, as defined in the Proceeding, which forms part of the Secured Property and which is defined by title references, including, but not limited to: [21 parcels of land, the addresses and real property descriptions of which were then set out]. 28 On 18 November 2010, in accordance with the terms of the settlement deed, the parties to the original proceeding submitted a proposed consent order to Dowsett J. On the same date, Dowsett J made the following orders by consent (Consent Order): 1. [Buranda's] further amended application be dismissed. 2. [Buranda] pay to [Westpac] the sum of $31,220,000 (inclusive of costs and interest) as at 16 November 2010 pursuant to the Buranda mortgages, the charge and the [BF] Agreement as varied by the Variation Agreement. 3. [Mrs Cunningham] pay to [Westpac] the sum of $31,220,000 (inclusive of costs and interest) as at 16 November 2010, pursuant to the mortgages and [Mrs Cunningham's] Guarantee. 4. Pursuant to section 127 of the Land Title Act 1994 (Qld) caveat numbers 713392309 and 713392647 be withdrawn by [Buranda] and [Mr and Mrs Cunningham].

Some subsequent history 29 The validity of the securities listed in Sch 2 to the settlement deed was not in dispute in the Original Proceedings and nor is it in dispute in these proceedings. 30 After November 2010, the Receivers granted three extensions to Phoenix 8 under the Phoenix 8 Agreement. Ultimately the Receivers decided that Phoenix 8 was not going to proceed with the purchase in a timely manner and refused to grant any further extensions. After the Phoenix 8 Agreement failed, the Receivers attempted, without success, to sell the Woolloongabba Land. That remained the position at the trial of these proceedings. 31 Mr Cunningham commenced these proceedings on 20 December 2011. In his originating application he sought the following relief: 1 A declaration that the agreement titled "Deed of Settlement and Release - Buranda Properties & Ors" dated 17 November 2010 was validly rescinded by the Applicant by service of this Originating Application and Statement of Claim in these proceedings. 2 An order pursuant to s.87(2)(a) of the Competition and Consumer Act 2010 (Cth) or alternatively s.12GM(7)(a) of the Australian Securities and Investments Commission Act 2001 (Cth) declaring the whole of the agreement titled "Deed of Settlement and Release - Buranda Properties & Ors" dated 17 November 2010 void and of no effect. 3 An order that the orders made on 18 November 2010 in Federal Court of Australia proceedings number NSD 1033 of 2010 between Buranda Properties Pty Limited (Receivers & Managers Appointed) and Westpac Banking Corporation Limited and others be set aside. 4 An order that Federal Court of Australia proceedings number NSD 1033 of 2010 between Buranda Properties Pty Limited (Receivers & Managers Appointed) and Westpac Banking Corporation Limited and others be restored to the list. 5 An order pursuant to sections s.80(1) and s.87(2) of the Competition and Consumer Act 2010 (Cth) or alternatively sections 12GD(1) and 12GM(7)(a) of the Australian Securities and Investments Commission Act 2001 (Cth) restraining the first, second and third respondents from asserting any rights under or pursuant to the agreement titled "Deed of Settlement and Release - Buranda Properties & Ors" dated 17 November 2010 or the orders made on 18 November 2010 in proceedings NSD 1033 of 2010. 6 An order pursuant to s.80(1) of the Competition and Consumer Act 2010 (Cth) or alternatively s.12GD(1) of the Australian Securities and Investments Commission Act 2001 (Cth) restraining the first respondent from charging any interest on any amount owed to it from 17 November 2010 onwards until further order. 7 Damages including damages pursuant to s87(1)A and/or s.82 of the Competition and Consumer Act 2010 (Cth) or alternatively s12GM(1) of the Australian Securities and Investments Commission Act 2001 (Cth). 8 Interest on damages. 9 Costs. 10 Interest on costs.

The alleged representations were made in the MSJ letter 32 During the weeks leading up to the trial of these proceedings, and on the first day of that trial, Mr Cunningham was given leave to amend his statement of claim on a number of occasions. In the final amended version of the statement of claim, the representations he alleges were made by Westpac are set out in para 11A as follows: 11A. In the premises of the matters pleaded in paragraphs 10A, 10B and 10C above, [Westpac] represented to the [Mr Cunningham]: (i) the [Receivers] had entered into an agreement to sell the [Woolloongabba Land] subject to various conditions ("the Sale Agreement"); (ii) the agreed purchase price for the [Woolloongabba Land] was $35,000,000 (exclusive of GST and adjustments); (iv) if the conditions of sale by the [Receivers] are satisfied and the sale is settled, it is expected to clear [Buranda's] debt to [Westpac] in full with the release of the Stanley Street and Maynard Street properties from [Westpac's] securities for the benefit of [Buranda]. At this amount and on current estimates we expect there will be a return to [Buranda] out of the sale proceeds; (v) in the event that the sale of the [Woolloongabba Land] does not proceed at the end of the purchaser's due diligence and option period being four months from 5 November 2010 or settlement of the sale and repayment of [Westpac's] debt does not proceed within eight months of 5 November 2010 (or such further periods agreed by [Westpac] in writing at its absolute discretion) for any reason, [Westpac] and the [Receivers] will be entitled to proceed to sell the mortgaged lots and otherwise enforce the securities at their absolute discretion without further reference to Buranda and [Mr Cunningham]. 33 This paragraph of the further amended statement of claim essentially replicates the paragraphs of the MSJ letter which are emphasised above (at [17] and [19]). It is therefore not surprising that, by the conclusion of final submissions at the trial of these proceedings, it was common ground between the parties that each of the representations pleaded in para 11A of the further amended statement of claim (above) were made by Mallesons in the MSJ letter as agents for Westpac. Accordingly, I have no difficulty in finding that those representations were in fact made.

The representations were not misleading or deceptive 34 In para 13 of his further amended statement of claim, Mr Cunningham claimed that Westpac's representations (above) were misleading or deceptive in two respects. They are as follows: In truth and in fact the Representations were false and misleading or deceptive in that: a. the [Receivers] had not entered into an agreement to sell the [Woolloongabba Land] for the sum of $35,000,000.00 but rather had only given an option to the prospective purchaser to enter into such agreement, or had only sought expressions of interest at best; c. contracts for the purchase of the [Woolloongabba Land] had not been entered into with the prospective purchaser; 35 In essence, Mr Cunningham claims that the representations in the MSJ letter misleadingly described the Phoenix 8 Agreement as a final agreement for sale when, in fact, the Phoenix 8 Agreement was only an option, or "only sought expressions of interest at best" and, in fact, no agreement had been entered into to sell the Woolloongabba Land. 36 In Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25, French CJ said of the approach to the characterisation of conduct as misleading or deceptive that: "Characterisation is a task that generally requires consideration of whether the impugned conduct viewed as a whole has a tendency to lead a person into error" (footnotes omitted). His Honour added that this process was "necessarily objective": see at [25] referring to Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198. 37 In Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592; [2004] HCA 60, McHugh J (at [109]) outlined the range of matters that are relevant in an assessment as to whether conduct - in this case, in the form of written representations - is to be characterised as misleading or deceptive contrary to s 52 of the TPA. His Honour said: The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document. (Footnotes omitted) 38 As the principles set out above show, the determination whether the representations contained in the MSJ letter are misleading or deceptive relevantly requires an objective assessment to be made of those representations in the context of the MSJ letter as a whole and all of the relevant circumstances surrounding the preparation and despatch of that letter. In this case, I consider the relevant surrounding circumstances included the following: (a) The MSJ letter was a written communication passing between two firms of lawyers and accordingly it was expressed in the kind of legal language with which both the author and the recipient would be expected to be familiar. (b) It was sent in the course of complex and lengthy written negotiations (described in detail at [17]-[19] and [21]-[24] above) to settle the Original Proceedings during the weeks leading up to the trial of those proceedings on 15 November 2010. (c) It was preceded by an offer from Mr Lazarus for Buranda and was succeeded by two counter-offers from each of the parties. (d) It was a lengthy four page letter separated into three parts. The middle part (the smallest) contained the notification of the sale of the Woolloongabba Land and expressed some views about the basis upon which that sale was achieved. Of the other two parts, one (the first part of the letter) contained a careful analysis of the weakness of Buranda's case in the Original Proceedings and the consequential rejection of its earlier offer. The other contained Westpac's detailed counter-offer for the settlement of the Original Proceedings (see at [17]-[19] above). (e) During this period, all concerned (including Mr and Mrs Cunningham) were being advised by competent lawyers including Mr Stewart of senior counsel who was to represent them at the trial of the Original Proceedings. (f) While each of the written communications passing between the parties, including the MSJ letter, contained numerous statements and explanations about various aspects of the matters in dispute between them, there was not, at any time, a request made by Buranda or Mr and Mrs Cunningham for any clarification about the terms of sale described in the MSJ letter. (g) Further, Mr Cunningham did not give any evidence that he sought such clarification or advice from Mr Lazarus, so it can be inferred he did not do so. (h) Finally, during this period, Mr and Mrs Cunningham and Buranda were in default under the terms of the BF Agreement and the Variation Agreement and that default gave rise to a right on the part of Westpac to impose default interest in relation to the moneys due under the Facility. 39 Having identified the relevant circumstances surrounding the preparation and despatch of the MSJ letter, it is next necessary to examine that letter itself and to make an objective assessment as to whether the representations contained in it had a tendency to lead Buranda and the Cunninghams into error in relation to the sale described in it viz the Phoenix 8 Agreement. It is appropriate to begin with what the MSJ letter actually stated. Contrary to what Mr Cunningham alleges in para 13a of his further amended statement of claim, it did not simply describe the Phoenix 8 Agreement as an "agreement to sell the land". Instead, it expressly stated that the agreement to sell was "subject to various conditions", and was subject to a "purchaser's due diligence and option period [of] 4 months from the date of this letter or settlement of the sale", as per the representations pleaded in para 11A of Mr Cunningham's further amended statement of claim. It obviously does not avail Mr Cunningham to misquote the representations in the MSJ letter and to then claim that this misquoted version of them is misleading or deceptive. Nonetheless, this does not address the essence of Mr Cunningham's claim that the Phoenix 8 Agreement was not an agreement at all (see at [35] above). 40 So, it is necessary to turn to the Phoenix 8 Agreement to see whether the representations as pleaded in para 11A represented a fair and accurate description of it, or more pertinently for present purposes, they did not describe it in a way that could be characterised as misleading or deceptive in the sense that it had a tendency to lead Buranda and the Cunninghams into error. 41 On this question, Mr Lee for Mr Cunningham submitted that the assessment must be directed to the "true substance of the document". On that basis, he submitted that the Phoenix 8 Agreement was "in substance an offer made to Phoenix 8 entitling Phoenix 8 within a period of 120 days to agree to purchase the land for $35,000,000". Mr Lee submitted that to describe the Phoenix 8 Agreement as an agreement for sale was "to engage in a torture of language". Finally, he submitted that the Phoenix 8 Agreement could be described as a contract for sale "since it contemplates that a contract for sale of the property might come into existence upon the occurrence of certain events. At the time of the execution of [it, however] there was no contract of sale." Mr Savage SC, for Westpac, submitted that when it is properly analysed, the Phoenix 8 Agreement was an agreement whereby the buyer agreed to enter into a contract of sale for the Woolloongabba Land, which agreement was subject to conditions for due diligence and an option period. 42 It can be seen from these submissions that the central difference between these two constructions of the Phoenix 8 Agreement is that Mr Lee submits it was merely an offer to sell the Woolloongabba Land and not an agreement at all, whereas Mr Savage submits it was an agreement to enter into a contract for the sale of that land subject to Phoenix 8 conducting due diligence. For the reasons set out below, I consider Mr Savage's description of the Phoenix 8 Agreement is the most accurate description of it. 43 Mr Savage provided the Court with a document in which he listed the relevant terms of the Phoenix 8 Agreement which, he submitted, demonstrated that it was, in fact, an agreement. That list is lengthy, but it is appropriate to set it out in full because it does identify the numerous features of the Phoenix 8 Agreement that show why it can accurately be described as "an agreement to sell" as distinct from a mere offer to sell. It is as follows: (a) it is executed as a deed of both parties; (b) it has attached to the document a form 30c the form required under the Property Agents and Motor Dealers Act 2000 Chapter 11 which apply for contracts of sale for residential property; (c) it describes the parties on the facing page as buyer and seller; (d) it defines "agreement" by cl.1.1 as meaning the deed; (e) it obliges the buyer upon execution of the agreement to pay the offer fee: see cl.2.1, see also cl.2.10; (f) it obliges both parties to be bound by particular terms and conditions in a contract annexed to the deed upon acceptance of the offer contained in the deed (which cannot be withdrawn): see cl.2.7; (g) it provides for the seller's consent to the buyer's conduct of a due diligence: see cl.2.12; (h) it provides for the waiver of the cooling-off period contained in the Property Agents and Motor Dealers Act by delivery of a form 32a (under the provisions of that Act) on the "agreement date": ie the date of the instrument, not the date of the further contract apprehended by the instrument: see cl.2.13; (i) it provides for rights upon termination of "this agreement" including the assignment of rights in any development application: see cl.2.14; (j) it allows the buyer to deal with the property and indemnifies the seller from liability for loss arising from such dealings: see cll.3.3, 3.4 and 3.6; (k) it acknowledges the "agreement" constitutes valid and legally binding obligations enforceable ... in accordance with its terms except to the extent limited by (particular exemptions): see for the buyer cl.5d; (l) it contains a covenant on behalf of the buyer that it has carried out various investigations about the subject property and acknowledges satisfaction of the matter set out in special condition 5 of the contract which annexed: see cl.10.1, ie that clause in the standard form contract special conditions (page 9) which prevent rescission of the contract for the conditions there set out; (m) there are particular rights on the seller to terminate and to keep the offer fee: see cl.12; (n) there is a right to a rescission under 15.3 for any breach of warranty or failure to comply with particular legislation; (o) there is a choice of law provision which requires that any agreement is governed by and construed in accordance with the laws of Queensland which include those provisions of the Property Agents and Motor Dealers Act and the Environmental Protection Act requiring statutory notices prior to an agreement for sale; (p) it provides that time is of the essence of "this agreement". 44 As well as the terms listed above, the operative clauses of the Phoenix 8 Agreement show how Buranda's offer is coupled with various obligations on the part of Phoenix 8. From Buranda's perspective, the operative clause was cl 2.2 as follows: 2.2 Nature of Offer The Offer constitutes an irrevocable offer by the Seller to enter into a binding Contract for the sale and purchase of the Property, which may be accepted strictly in accordance with the provisions of this Agreement during the Offer Period, otherwise the Offer will lapse. 45 From Phoenix 8's perspective, the operative clause is 2.5 as follows: 2.5 Acceptance of Offer by Buyer Subject to the Buyer satisfying the conditions in clause 2.3 and 2.4, the Offer may be accepted at any time during the Offer Period by serving at the Notice Address of the Seller or the Seller's Solicitors by personal delivery or pre-paid post: (a) an Offer Acceptance Notice signed by the Buyer and identifying the Buyer or the Buyer's nominee as the proposed buyer under the Contract; (b) two copies of the Contract (which must be prepared by the Buyer) completed with the details of the Buyer or the Buyer's nominee as Buyer and executed by the Buyer or the Buyer's nominee (as the case may require); and (c) a bank cheque in favour of the Seller in payment of the Deposit, or the Buyer may accept the Offer during the Offer Period by serving an Offer Acceptance Notice (signed by the Buyer and identifying the Buyer or the Buyer's nominee as the buyer) by facsimile in which case the Contract and bank cheque for the Deposit referred to in paragraphs (b) and (c) of this clause must be delivered personally or by pre-paid post, within two Business Days of service of the Offer Acceptance Notice. … The "Offer Period" was defined in the "definitions and interpretation" clause to mean 120 days. The "Offer Fee" was likewise defined as $8,907.55. The agreement had attached to it a "contract" which was defined as the contract for sale which will bind the parties if the offer were accepted. 46 While the expression "due diligence" was defined to have the same meaning as in the contract, the contract did not appear to contain any definition of that expression. Nonetheless, it is apparent from a number of clauses of the agreement that Phoenix 8 was to conduct due diligence in relation to the sale. The expression "due diligence" was expressly mentioned in 2.3 and 2.12(a) as follows: 2.3 Precondition to accepting Offer On or before the date that is 70 days after the Offer Commencement Date, the Buyer must, by written notice to the Seller, provide an update on the status of its Due Diligence enquiries … 2.12 Seller's consent The Seller: (a) authorises the Buyer and its Authorised Representatives upon reasonable Notice first given to the Seller to enter the Property for all purposes reasonably incidental to the Buyer's Due Diligence; (Emphasis added) 47 Apart from these express mentions of due diligence, there was a number of clauses of the Phoenix 8 Agreement that facilitated Phoenix 8's ability to conduct its due diligence. For example, under cl 3.2, Phoenix 8 was granted access to the property to erect signs for the purposes of a development application; to inspect the property to obtain any certificate or report and to carry out soil tests on the property for building construction purposes. Further, cll 3.4 to 3.7 inclusive contain various provisions about the lodgement of a development application in relation to the property. In particular, cl 3.7 provided that: Information and documents The Buyer must: (a) provide the Seller with periodic reports about the status of any Development Application made by the Buyer; and (b) after a written request by the Seller, supply the Seller with copies of all correspondence, reports, plans and other documents which relate to any Development Application. 48 Finally, it should be noted that, as well as satisfying the condition in cl 2.3 (see at [45] above), Phoenix 8 was required under cl 2.5 to satisfy the condition in cl 2.4. That clause required Phoenix 8 to accept the terms of the related offer at the same time as accepting the offer. The expression "related offer" was defined elsewhere in the agreement as an offer made in similar terms by the Cunninghams. 49 Taking into account all the relevant surrounding circumstances set out above (at [38]), the relevant parts of the Phoenix 8 Agreement set out in Mr Savage's submissions (at [43]) and the provisions of the agreement that describe the operative terms of that agreement, including the offer period and due diligence provisions set out above (at [44]-[48]), on an objective assessment I consider that the representations in the MSJ letter accurately described the Phoenix 8 Agreement as: an agreement to sell the Woolloongabba Land; on various conditions; which conditions included a due diligence and option period of four months. That being so, I do not consider those representations had a tendency to lead Mr Cunningham into error about the true nature of that agreement. Conversely, I do not consider that Mr Cunningham has made out the allegations pleaded in para 13 of his third further amended statement of claim (see at [34]-[35] above), the critical one being that the Phoenix 8 Agreement did not represent a contract for the purchase or sale of the Woolloongabba Land. 50 For these reasons, I do not consider Mr Cunningham has established that the representations contained in the MSJ letter are misleading or deceptive such that they contravene s 52 of the TPA. 51 This conclusion is sufficient to dispose of Mr Cunningham's application in these proceedings. However, since the parties made comprehensive submissions on the other issues that have been raised, I will briefly state my conclusions on those issues and summarise my reasons for reaching them.

The representations did cause Mr Cunningham to enter into the settlement deed 52 It is well-established that it is only necessary for Mr Cunningham to prove that the representations were a cause of him entering into the settlement deed: see I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited (2002) 210 CLR 109; [2002] HCA 41 at [57] per Gaudron, Gummow and Hayne JJ. 53 Mr Cunningham gave evidence that he entered into the settlement deed: "Because it represented a sale of $35 million. It put an end to the proceedings and it was considered a reasonable commercial outcome." Earlier Mr Cunningham described his understanding of the contents of the MSJ letter in the following terms: [MR LEE:] Okay. Mr Cunningham, when you read that letter and in particular, that part of it what did you understand was being proposed?---That the receivers had entered into a sale for the property, that there was going to be a four-month due diligence period and then there'd be a settlement shortly afterwards. And - okay. In the event that the sale proceeded as contemplated, what did you understand you would be left with out of that process, that is, Buranda and you?---Approximately - and I say two to $3 million of surplus funds and, in addition to that, there would be about another four and a half million dollars of property, unencumbered property that would be returned to us. 54 Given the dire financial circumstances Buranda and the Cunninghams were in at this particular time, I have little difficulty in accepting Mr Cunningham's evidence that he entered into the settlement deed at least partly because of his understanding that the Phoenix 8 sale represented a sale of the Woolloongabba Land for $35,000,000. I do not consider this conclusion is affected by the views Mr Cunningham expressed in para 8 of the 10 November Offer (see at [22] above) that "there is a significant risk that the sale won't proceed past due diligence".

Mr Cunningham has not shown that he has suffered, or is likely to suffer, loss or detriment 55 Paragraph 17 of Mr Cunningham's further amended statement of claim is to the following effect: By reason of the matters pleaded herein, the Applicant has suffered, and will continue to suffer, loss and damage. Particulars a. The seventh respondent in its capacity as trustee lost the opportunity of pursuing its claim in proceedings NSD 1033 of 2010 which resulted in loss to the Applicant by reason of his entitlement to participate as a beneficiary in the capital of the trust; b. Alternatively, in the event that this Honourable Court does not grant rescission of the Settlement Agreement and set aside the orders made on 18 November 2010 in proceedings NSD 1033 of 2010, the applicant lost the value of the seventh respondent's cause of action in proceedings NSD 1033 of 2010 by reason of his entitlement to participate as a beneficiary in the capital of the trust. c. Liability pursuant to the consent orders made in proceedings NSD 1033 of 2010 and the "Securities" as that term is defined in clause 14.1 of the Settlement Deed. 56 In his submissions, Mr Lee submitted that, assuming the applicant entered into the settlement deed induced by the misleading or deceptive conduct of Westpac, he "… should be put back into the position he would have been in had the [representations] not occurred, that is he should be put back in the position immediately before the execution of the deed, which means the [original] proceedings will have to be restored to the list and recommenced." 57 Assuming for the purposes of this issue (as Mr Lee has above) that Buranda and the Cunninghams were induced to enter into the settlement deed by Westpac's misleading or deceptive conduct, there is any number of reasons why neither Mr Cunningham's case as pleaded in para 17 (above), nor his counsel's submission can be accepted on this damages issue. They include the following: (a) As the orders of Dowsett J have long since been entered and perfected, the circumstances in which those orders could be set aside, such that the Original Proceedings could "be restored to the list and recommenced", are extremely limited: see DJL v The Central Authority (2000) 201 CLR 226; [2000] HCA 17 and Yevad Products Pty Ltd v Brookfield (2005) 147 FCR 282; [2005] FCAFC 263 at [22]-[33]. Nothing has been put before the Court which would demonstrate that this is one of those rare cases where those final orders of Dowsett J could be set aside. It is self-evident that unless those orders are set aside, Mr Cunningham cannot be put back in the position either he, or Buranda, was in before executing the settlement deed. Moreover, in that event, it will not avail Mr Cunningham to set aside the settlement deed. (b) In any event, even if the orders of Dowsett J were set aside, putting aside for the moment Mr Cunningham's personal position (see at (c) below), to obtain the relief he seeks, Mr Cunningham would have to show that Buranda would have achieved a greater benefit or suffered a lesser detriment if it had not entered into the settlement deed: see Marks v GIO Australia Holdings (1998) 196 CLR 494 at [48] per McHugh, Hayne and Callinan JJ. To do that, Mr Cunningham would effectively have to show that Buranda would have achieved a better outcome if it had proceeded with the Original Proceedings. In practical terms, this means he would have to show that Buranda had reasonable prospects of succeeding in those proceedings. Given the state of the evidence in these proceedings, I consider he has no prospects of doing that. That is so because there is no evidence before this Court to establish what Buranda's prospects of succeeding in those proceedings were. If anything, the evidence is contraindicative of success. The only part of Mr Cunningham's evidence-in-chief that was specifically directed to this issue was the following: Did you consider that there was any risk of loss in the proceedings commenced by Buranda in the Federal Court?---Yes This rather curious response was not further explored by Mr Cunningham's counsel. Nor did he call any other evidence on the issue. On the other hand, Westpac adduced evidence that Mr Cunningham was advised by Mr Stewart and Mr Lazarus that Buranda was very unlikely to succeed in the Original Proceedings. That appears in Mr Lazarus' filenotes of the conferences held between Mr Cunningham and his legal team before, and during, the trial of the Original Proceedings. It follows from all this that Mr Cunningham has failed to adduce any evidence to show the requisite greater benefits or lesser detriments that would flow to Buranda by pursuing the Original Proceedings. (c) Finally, even if Mr Cunningham were able to succeed in showing that Buranda would have achieved greater benefits or suffered lesser detriments by not entering into the settlement deed and instead pursuing the Original Proceedings, even that would not be sufficient to achieve the relief he seeks. Since he is the only applicant in these proceedings, he would also have to show that the greater benefits or lesser detriments concerned affected him personally. To attempt to do that, he has relied upon his "entitlement to participate as beneficiary in the capital of the [Cunningham Property Trust]" as pleaded in para 17a of the third further amended statement of claim. However, on that aspect, Mr Cunningham has to confront a significant difficulty. That is, his entitlement to participate as a beneficiary in the capital of the Cunningham Property Trust is subject to the right of Buranda, as the trustee of the trust, to indemnity out of the trust estate for, among other things, the obligations it has incurred to Westpac: see Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; [1998] HCA 4 at [47]-[49] per Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ. On that issue, it is an agreed fact in these proceedings that Buranda remains in notional default under the BF Agreement and the Variation Agreement and, if the settlement deed were to be set aside and that default reactivated, the default interest rate under the BF Agreement and the Variation Agreement would result in a current liability for Buranda in excess of $42,000,000. As against this liability, there is no evidence before this Court as to the present value of the Woolloongabba Land, or of the prospects of selling it in the current market. However, it can be readily inferred that its present market value must be less than the sale price of $35,000,000 under the proposed, but unsuccessful, sale to Phoenix 8. If that is so, it would necessarily follow that there are insufficient assets in the Cunningham Property Trust to meet the trustee's indemnity. In other words, even if Mr Cunningham were able to establish that Buranda had suffered a relevant detriment, he has failed to show that that detriment would have affected him personally.

Conclusion 58 For the reasons set out above, Mr Cunningham's originating application filed 20 December 2011 must be dismissed. I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.