134 The actions taken on behalf of the plaintiffs when DOHA's favourable decision became known about 24 June were not well considered. Mr Osborne made a firm demand by a letter dated 26 June 2008 directed to Mr Clarke, who was Mr Velez's assistant solicitor, asserting entitlement to call on BBA to enter into and complete the agreement and related agreements tabled at the 19 December 2007 meeting (A12 3783). There was no proffer of the Schedules, which would contain information required to complete the agreements, which was available to the plaintiffs. There was no enquiry about the unnamed entities. The condition precedent in clause 2.1(b) was referred to and set out, but it was asserted that "save for the formal execution and exchange of those Agreements (which was deferred at the request of your client) the condition in clause 2.1(b) was satisfied at that meeting [i.e. 19 December 2007]." There were generalised assertions about the events of 19 December 2007, but no real reason was offered why it was said that the condition had been satisfied. The statement that formal execution and exchange of Agreements had been deferred at the request of BBA, while perhaps alluding to the change of arrangements expected with BBC, was lamentably incomplete because it did not refer to the plaintiffs' tax scheme for the attainment of which formal execution and exchange was not appropriate. Relationships had entered a markedly combative phase. Mr Osborne's correspondence became distinctly aggrieved and combative in tone, full of demand and exigency, not mediated by any indication of co-operative movement towards completion, such as producing the Schedules or information for Schedules from the plaintiffs' resources. There was no rational approach to what was necessary, and there was no rational acknowledgement of the need to fulfil condition precedent 2.1(b); that subject was left with the standing contention that it had been fulfilled on 19 December 2007. It must be said that that contention was absurd; and there was no real attempt to make it good in advocacy before me.
135 Notwithstanding these demands BBA was free to act, as it always had been, by making an assessment of its own interests in deciding whether further agreements would be entered into to acquire the Village and the Manor. Mr Tyndale and Ms Ku continued in that direction, proceeding to complete the CAR to obtain sufficient funds for completion; and sent it to Mr Topfer for approval. This CAR incorporated the modified structure of proposed loan agreements which Mr Klendjian was prepared to approve in his endorsement of the CAR; this differed significantly from the Loan Agreement document as drafted to 19 December 2007, which would have required to be redrafted. Further it would have been necessary that a subsidiary of CAGCare Pty Ltd be formed and introduced as the lender. If there had been an internal approval of the CAR, redraft of the Loan Agreement and other steps would have been necessary before the conditions of approval could be complied with. However Mr Topfer did not ever reply. He left Ms Ku and her CAR unanswered, from which I infer that he decided against approval at some time early in July 2008.
136 On 9 July 2008 the plaintiffs commenced the present proceedings, claiming specific performance, again without producing Schedules or making any other concrete contribution towards making specific performance possible. The parties moved from negotiations to the much more guarded and wary relationship between opposing litigants. With litigation the prospect that there would ever be agreement and fulfilment of the condition precedent vanished forever. BBA was not in all practicality going to commit a lot of capital to an incompletely defined purchase from someone who was suing it. The Court responded with alacrity, appointing a hearing for four days to commence on 11 August 2008, but the plaintiffs were unable to proceed then and after some debate before Rein J the hearing was adjourned. Meanwhile of course the transfer date which DOHA had agreed to extend to 15 July 2008 passed. After the "long stop" date provided for by the APPA as varied passed on 31 August 2008 CAGCare gave notice of termination, stating that clause 2.1(b) had not been satisfied, and demanded return of its deposit. The plaintiffs replied, asserting that the termination did not take effect but constituted a repudiation which was not accepted, and again demanding performance. The plaintiffs demanded performance by BBIPL of its Performance Guarantee obligations on 29 September 2008, one day before the last available day. On 9 September 2009 the plaintiffs stated they accepted the repudiation and withdrew the claim for specific performance. Since then the plaintiffs' principal claim has been for damages.
137 In my finding BBA remained sincerely attached to the project of acquiring Blue Hills Village and Manor until a very late stage; the first indications that BBA's enthusiasm was waning came only on 11 June 2008, and before then there were no such signs. This intention survived the events in February 2008 where it became clear that BBC would not be the purchaser; this turn of events led BBA and its officers, the team led by Mr Tyndale including Ms Ku, to direct their attention to holding and warehousing the asset until BBC was disposed to take it. This involved BBA in a new need to finance the project for a significant period. There were clear prospects of large economic advantages for BBA, and also for Ms Ku and Mr Tyndale, if the contemplated transactions ended successfully. Until the litigation in July Ms Ku remained sincerely attached to furthering the project, and gave detailed and close attention to the project and to obtaining CAR approval. BBA's pursuance of the business was sincerely intended; but not to the exclusion of any adverse commercial consideration which might emerge.
138 Intense attention was given to understanding and if possible overcoming the perceived CGT problem when noticed early in April 2008. The perception that there was a risk that $24 million of the money laid out would not be included in the cost base calculation, increasing liability for capital gains tax by many millions of dollars, would have brought consideration to a quick end if there had not been strong attachment to the project. I find that the detailed attention given to the CGT problem was genuine; indeed there was no evidence that the conduct of that business was not sincerely intended.
139 Mr Topfer was not an officer of CAGCare, and was to make a decision on behalf of BBA which had no contractual obligation. BBA was in a position of commercial risk and commercial interest which Mr Topfer was wholly at liberty to weigh up. By the end of June 2008 BBA was receiving combatively expressed demands for completion of the transaction, on documents which had not been settled, and the demands were not reasonably accommodated to the difficulties and to what needed to be done to comply. This is hardly likely to have moved BBA in the person of Mr Topfer to decide to enter more deeply into the relationship or to commit large sums of capital to it.
140 What the reasonable commercial endeavours in clause 2.2(a) are to be directed towards includes fulfilment of condition precedent 2.1(b) and entry into the agreements which would fulfil clause 2.1(b): that is, agreements on terms acceptable to CAGCare (and also to BHVLM). The obligation to use reasonable commercial endeavours is not an obligation to find some terms which are acceptable. It is plain, and the language of clause 2.2(a) in my reading recognises that reasonable commercial endeavours might be made but that the outcome might not be achieved.
141 Counsel gave me extensive references to case law in which obligations to exercise best endeavours, reasonable endeavours and similar expressions had been considered. These are not terms of art and can only be applied in relation to the contractual document in which they appear, the acts and events with which it deals and the object to which the endeavours are to be directed. In Cl 2 there is the word "commercial" which I have not seen in any of the case law cited. "Commercial" excludes any conduct which is not commercially motivated, and limits the field of action so as to exclude personal antipathy or other considerations which are not commercial in character. The obligation to use reasonable commercial endeavours is an obligation not to act capriciously, not capriciously to omit to act and not to act without some sound reason. The endeavours are commercial endeavours; as always in commerce, commercial endeavours are endeavours in pursuit of one's own interests; perhaps interests shared with others, but still one's own. The limits of reasonable commercial endeavours involve a judgment about what one's commercial interests are. The obligation is more qualified than an obligation to use best endeavours, or reasonable endeavours; but such obligations do not take the actor out of an entitlement to consider his own interests. I have been assisted by discussion in Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 at 143 - 144 (Dawson J). As Dawson J said at 144 of "best endeavours": "Clearly that leaves room for a balancing of interests and does not require the elimination of any conflict."
142 If the terms available were not acceptable to CAGCare for a commercial reason, or there are no acceptable terms, not entering into transaction documents was not a breach of clause 2.2(a). Deciding against the transaction for reasons of spite, antipathy or some other reason extraneous to commerce would produce breach of clause 2.2(a); deciding against agreement, or not reaching the point of decision for a commercial reason would not breach the obligation.
143 The condition precedent and the reasonable commercial endeavours obligation are not interdependent; if there was a breach of the reasonable commercial endeavours obligation the consequences are damages; the condition precedent has effect nonetheless. If CAGCare had prevented the condition precedent from being fulfilled by intended action or deliberate breach of some other contractual obligation for that purpose, reliance on the condition precedent might not be available to CAGCare. Nothing in the facts could support that outcome.
144 In my finding reasonable commercial endeavours did not require CAGCare to press BBA to allocate capital without making the modifications to the Loan Agreement and related documents which Mr Klendjian had decided, after full consideration, were appropriate.
145 Even if it had been established that there had been a breach of clause 2.2(a) such breach had no effect on the course of events and on not entering into agreement. Until 24 and 26 June 2008 when DOHA's decisions became known, and until the condition precedent in cl 2.1(a) was fulfilled entry into agreements would achieve nothing. When DOHA's approvals became known CAGCare and BBA in the person of Ms Ku were in a high state of activity leading towards obtaining a commitment of capital by BBA. CAGCare had no capital of its own and the primary commercial endeavour required of it was to seek commitment of capital by BBA. Although many expressions by plaintiff's counsel and witnesses appeared to assume that BBA was bound by clause 2.2(a), that is plainly not so; the reasonable commercial endeavours obligation bound only CAGCare. Ms Ku made a whole-hearted and thorough attempt to obtain the commitment of capital, and her CAR was supported by a number of other persons within BBA's organisation by the time it was submitted on 30 June; and her activity in support of it continued afterwards. It was not successful, and without a commitment of capital it could have been commercially deranged for BBA, CAGCare or any other company and perilous for their directors to enter into any agreements.
146 The plaintiffs' senior counsel observed on the events of June 2008 that nothing in them indicated that there was any relevant matter of disagreement, controversy or dispute between the parties. Quite to the contrary, the CAR included a significantly modified form of proposal and agreement; if it had been approved further negotiation would have been required, and if this modification had not appeared in the CAR there would have been no prospect of approval, as Mr Klendjian would not have agreed and his agreement was a practical necessity.
147 The plaintiffs' senior counsel put forward very detailed analysis of the manner in which the business of the Group was managed from time to time, and of the points at which he contended there had not been reasonable commercial endeavours. The need to obtain involvement and commitment of BBC was an overwhelming realistic consideration, known to both parties by and before 19 December 2007. When BBC was known not to be interested, consideration of other means of financing the transaction and completing it was well within the scope of reasonable commercial endeavours; and there was time to pursue them while DOHA considered the application. Ms Ku's attention, when this development emerged, to other ways of progressing the transaction was an exemplification of reasonable commercial endeavours, not a breach of such an obligation. Intense and detailed consideration of the CGT problem was an exercise of reasonable commercial endeavours; it was necessary to undertake this in support of the essential project of obtaining a decision by BBA to commit capital. The plaintiffs joined in the endeavours to find a resolution to the perceived CGT problem. This consideration required inquiries to a number of people, resources which cost money, outside advice and detailed attention to modifications of what had earlier been considered, if some acceptable outcome was to emerge. Another course which could have been taken was to treat the prospect of a large Capital Gains Tax liability as a complete obstacle to be receded from, not an obstacle to be negotiated. In my judgment it would be incorrect to treat all this attention as not consistent with reasonable commercial endeavours. However if it is the correct view that the only commercial endeavours which should have been under consideration related to the transaction documents in the form which they took on 19 December 2007, that view would have required that when the CGT difficulty was perceived, internal approval should have been refused.
148 I am satisfied that there was no breach of cl 2.2(a) at any time. As CAGCare has incurred no liability, the first defendant BBIPL has incurred no liability under the Performance Guarantee. BBIPL's indemnity liability is co-extensive with CAGCare's liability. The machinery requirements relating to a demand in Clause 2.2(a) have a practical effect of limiting BBIPL's liability to an amount demanded in a written demand, which could only be made within a period which closed on 30 September 2008. A demand in fact was made on 29 September 2008, but has no effect.
149 Ms Ku referred to the transaction at one point in a draft CAR (T 273.1 - .3, 274.14.18) as an option. This was a passing reference, not an expression of an overall view held by her or BBA of the transaction, and she behaved in relation to the transaction as if she had a strong commitment to it. From the point of view of CAGCare and of the obligation of CAGCare, it was not an option. From the point of view of BBA, which had no contractual obligation about whether or not it would decide to furnish CAGCare with capital, the transaction could only proceed at the decision of BBA: this could be called an option.
150 The loss and damage alleged to flow from each of the three representations (see C46, 53 and 60) is that "the plaintiffs lost the opportunity for seeking alternative purchasers of the retirement Village and Manor in a falling market" and also consultants' costs of entering into and performing obligations under the APP agreement. In view of the terms of the representations alleged and the times when they were alleged to have been made I understand they allege an opportunity lost on 19 December 2007 when the APPA was entered into. Mr Tulich also spoke in evidence of a lost opportunity to return the property to the market at some stage in the first half of 2008; he said that the effect of this was not available to him because of his exclusive dealing obligation. The exclusive dealing obligation was accepted in the Heads of Agreement and was not imposed on 19 December 2007.
151 BHVML was contractually bound to CAGCare by the APPA which could not be completed without DOHA approvals, and provided the period to 30 June 2008 for those approvals to be obtained, soon extended by agreement to 31 August 2008. If the Partners had changed their course before then and withdrawn from dealings with BBA and sold or attempted to sell the Village and Manor to someone else they would have precipitated a breach of contract by BHVML. Further, the exclusive dealing provision in the Heads of Agreement bound the Partners and as a practical matter could not be departed from by BHVML. Mr Tulich was aware of this and said so in his evidence. Any alternative course to continuing to deal with the defendants would have involved the plaintiffs or some of them in breach of contract and possible liabilities. With these disincentives to alternative action it should not be found that the conduct complained of, if it was misleading or deceptive, caused the plaintiffs or any of them to lose any opportunity which was practically available to them, or to incur any loss which they had a real opportunity to avoid.
152 If the disappearance of the possibility that the proposed arrangements would ever be entered into and the proposed sale would ever be completed is conceived of as a loss to the plaintiffs, or as damage to them, which I do not accept, the loss and the damage arose out of events which, although they could not be foreseen in detail, could be clearly contemplated as possible outcomes of the complicated arrangements which the parties made, and proposed to make, by 19 December 2007. In terms of the APPA, possible outcomes in which all internal approvals would not come into existence within the time extended to 31 August 2008, given the complete control which each party had over the existence of internal approvals, and over the step of entering into executed agreements stipulated in the Heads of Agreement, were perfectly obvious at all times, and neither party had any right to feel aggrieved or even surprised if some such outcome occurred. An analysis in which the plaintiffs suffered loss or damage by any representation made to them by Mr Velez or Ms Ku or otherwise on behalf of the defendants, and that the loss or damage was the result of misleading or deceptive conduct in which the defendants engaged, is a wrong analysis.
153 It is my conclusion that the plaintiffs did not suffer any loss or damage at all, whether or not caused by conduct, representations or misrepresentations of defendants. The end result contemplated simply did not emerge. The Heads of Agreement made it clear that there was no intention to enter into legal relationships except with all relevant internal approvals and on exchange of executed documents. These things did not happen. There was no contractual obligation to make them happen. There was no misleading or deceptive conduct causing the plaintiffs to act on the basis that they would happen. The outcome, while not one that anyone expected or desired, was readily foreseeable; no contract was made apart from the APPA and that had no relevant effect because its condition precedent was not fulfilled.
154 Evidence relating to damages was led at the hearing but I deferred consideration and submissions in detail of damages, as I intended to take this up, as necessary, after coming to conclusions on liability.
155 Although the pleadings allege breaches of Clauses 2.2(b) to (e) relating to the conduct of the application to DOHA for approval with a transfer these allegations were not developed at the hearing and no basis for them was shown. The plaintiffs in their pleadings claimed that there had been a breach of the implied term requiring the contracting party to do all such things as are necessary on his part to enable the other party to have the benefit of the contract; see Secured Income Real Estate (Australia) Limited v St Martins Investment Pty Limited (1979) 144 CLR 596 at 607-608 (Mason J), Mason J's observations show the implication is readily made to support performance of a fundamental obligation, and may in some circumstances be made to entitle the other contracting parties to a benefit although not fundamental to the contract. It is not possible in the present case to identify a fundamental obligation, or any obligation to which the implied term could be said to be ancillary. It was not a contractual obligation of CAGCare to bring about completion of all the contemplated transactions; quite otherwise, CAGCare itself was not obliged to take the Allocated Places unless the condition precedent was fulfilled, and CAGCare's part in fulfilling it was no higher than using reasonable commercial endeavours. In my opinion the plaintiffs cannot rely on the implied term.
156 For these reasons I will give judgment for the defendants, with costs. CAGCare is entitled to the deposit and interest, and I will make a declaration and directions accordingly.
157 ORDERS:
(1) On the plaintiffs' claim, give judgment for the defendants with costs.
(2) On the cross-claim, declare that the cross-claimant CAGCare Pty Ltd is entitled to the deposit of $400,000 and interest thereon paid on 19 December 2007 and held as stakeholder by Osbornes lawyers pursuant to clause 4.2(d) of the Allocated Places Purchase Agreement.
(3) Direct that the cross-defendant Blue Hills Village Management (Liverpool) Pty Ltd direct Osbornes Lawyers to pay over the deposit and interest to the cross-claimant.
(4) Order that the cross-defendant pay the cross-claimant's costs of the cross-claim.
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