_Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd & Ors_

_Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd & Ors_ - [2005] QSC 172 - QSC 2005 case summary — Zoe

[10]

58 It is necessary to recall that the primary judge accepted evidence given on the respondents' behalf about what was said, before the respondents executed the written loan agreements, on the subject of limiting the respondents' liability. The Court of Appeal's conclusions about the consequences that followed from that acceptance were directed to identifying what was the agreement between the parties rather than to the issues whether the statements about limited recourse were operative misrepresentations, or constituted misleading or deceptive conduct. Those issues require consideration not only of what was said, but also whether what was said misled the respondents. And neither at trial nor on appeal has there been any real attention given to whether what was said constituted misleading or deceptive conduct by Rural Finance, as distinct from the individual speaker, or some company in the Johnson Group other than Rural Finance. Nor has there been any focus upon what causal connection, if any, there was between the misleading representations allegedly made about limited recourse, earlier in June 1989, and the subsequent execution of the written loan agreements by, among others, Mr Thornton, a chartered accountant whom the primary judge found to be 'a businessman of considerable experience'.

59. The respondents' claims that there were operative misrepresentations and that the respondents were misled or deceived in this particular respect have not been decided by the primary judge or by the Court of Appeal. They should not be decided for the first time in these appeals. Rather, they should be decided at first instance and accordingly these questions should be remitted to the Supreme Court of Queensland for consideration conformably with the reasons of this Court.

60. If the respondents' claims about misrepresentation and about misleading or deceptive conduct concerning limited recourse are to be remitted for further consideration at first instance, it is prudent to remit the claims concerning the alleged representation about 'real' money. The conclusion reached earlier in these reasons about the real money point may suffice to prevent the respondents succeeding on this account. And further examination of the alleged misrepresentation about limited recourse may show that the evidence led at trial was insufficient to establish the respondents' claims of misrepresentation and of contravention of s 52 of the Trade Practices Act. These, however, are matters better reserved for further argument before the Supreme Court of Queensland, together with the limitation defence which the appellants pleaded. So, too, any remaining question about the effect of the assignments from Rural Finance to Equuscorp should be remitted for further consideration.

[17]

6. By an oral agreement made in June 1989 between Johnson on its own behalf and as agent for the Second Plaintiff and the Defendant ("the Operative Agreement") it was agreed that the Second Plaintiff would loan the Defendant the sum of $434,000.00 to enable it to acquire 500 units in the limited partnership upon the following terms:-

(a) the liability of the Defendant was, and is, limited;

(b) such liability was, and is, limited to a payment of $70,000.00 on 30 June 1989 and two payments of $35,000.00 each on 30 September 1989 and 31 December 1989;

(c) thereafter the income generated by the limited partnership would be applied in extinguishment of the balance of the said loan.

Particulars of Agreement

(i) Alastair Hasell and Tony Johnson acted on behalf of the Second Plantiff and on behalf of Johnson;

(ii) Barry Thornton acted on behalf of the Defendant;

(iii) the conversations relied on are approximately 2 telephone conversations and 2 conversations face to face between Thornton and Hasell and approximately 2 telephone conversations Hasell made to Tony Johnson in the presence of Thornton between in or about early June 1989 and 30 June 1989 but prior to the execution of the Loan Agreement;

19. In answer to the whole of the further Amended Statement of Claim the Defendant says:-

(a) at all times material to this action Johnson and one Hasell were the agents of the Second Plaintiff and one Thornton was the agent of the Defendant;

(b) to induce the Defendant to enter into the Operative Agreement and to subsequently sign the Loan Agreement Hasell and Johnson represented to Thornton that:-

(i) the liability of the Defendant pursuant to the Operative Agreement and the Loan Agreement was limited in the manner pleaded in paragraph 6 hereof; and

(ii) the Second Plaintiff had sufficient funds to lend to the Defendant (by way of a payment to the Respondent on behalf of the Defendant) to enable it to acquire 500 units in the limited partnership.

(c) the Defendant did enter into the Operative Agreement and sign the pro forma Loan Agreement in reliance upon such representations as the Second Plaintiff intended;

(d) the Defendant would not have done the acts pleaded in sub-paragraph (c) but for the representations pleaded in sub-paragraph (b) as the Second Plaintiff at all times knew;

(e) further, by an agreement made between the Second Plaintiff and the Defendant in November 1989 it was agreed that the terms of the Operative Agreement would be varied in that:-

(i) the Defendant would pay to the Second Plaintiff the second and final payment of $35,500.00 on 19 December 1989 in lieu of 31 December 1989;

(ii) in consideration of the same the Second Plaintiff would provide to the Defendant a document styled 'Guarantee' which recorded the terms of the Operative Agreement and would pay a rebate to the Defendant;

(iii) the Defendant made the payment of $35,500.00 on 19 December in exchange for which the Second Plaintiff provided the said document and paid the said rebate on 27 December 1989;

(iv) further, in December 1990 one Lynch and one Anthony Johnson on behalf of the Second Plaintiff informed one Russo and one Blunt on behalf of the First Plaintiff of the existence and terms of the Operative Agreement;

(v) in the premises any assignment between the Plaintiffs is subject to the equities pleaded in paragraphs 6 and 19(b) hereof;

(f) (i) in the further premises if the representations or any of them pleaded in paragraphs 6 and 19(b) are untrue the Defendant elects to avoid the Operative Agreement and the Loan Agreement;

(ii) alternatively the Defendant will suffer a detriment if the common assumption or the common intention arising from the Operative Agreement is now disavowed and accordingly the Plaintiffs are estopped from asserting that the Loan Agreement is the true agreement between the Second Plaintiff and the Defendant or that the Defendant is liable to either Plaintiff pursuant to either the Operative Agreement or the Loan Agreement.

20. If (which is denied) the said representations pleaded in paragraph 19(b)(i) were untrue and the Loan Agreement is binding on the Defendant such representations constitute misleading and deceptive conduct in trade or commerce.

20A. The representation pleaded in paragraph 19(b)(ii) was false and misleading in that the Second Plaintiff did not have sufficient funds to lend to the Defendant and did not in fact lend any funds to the Defendant as pleaded in paragraphs 11 and 17 hereof.

...

AND BY WAY OF COUNTERCLAIM

22. At the time when the Defendant entered into the Operative Agreement and subsequently signed the Loan Agreement the Second Plaintiff was:-

(a) a corporation within the meaning of the Trade Practices Act;

(b) engaged in trade and commerce;

(c) acted by its agents Johnson and Hasell.

23. The Defendant repeats and relies upon the facts pleaded in the Further Amended Defence and Counterclaim.

[20]

7. As to paragraphs 19, 20 and 20A of the Defence and Counter-Claim, the plaintiffs:

(a) Admit that at all material times, Thornton was the agent of the defendant;

(b) Deny the allegation that Johnson Farm Management Pty Ltd and Hasell were the agents of the second plaintiff with respect to any of the matters pleaded in paragraph 19 of the Defence and Counter-Claim including the making of the representations alleged therein and say that the plaintiffs believe the allegation to be untrue in that Johnson Farm Management Pty Ltd and Hasell had no authority from the second plaintiff to make the representations alleged or otherwise act in respect of any matters pleaded therein:

(c) Deny the allegations in paragraphs 19(b), 19(c), 19(d) and 19(e) and say that the plaintiffs believe them to be untrue on the grounds that:

(i) The defendant signed the Loan Agreement referred to in paragraph 2 of the Statement of Claim and adopted it as alleged in paragraphs 13 and 14 of the Statement of Claim;

(ii) The document styled 'Guarantee' was not executed by the second plaintiff or by any authorised party;

(iii) Lynch and Johnson did not inform Russo and Blunt of the existence of the 'Operative Agreement' in December 1990;

(iv) The document styled 'Guarantee', on its true construction, does not have the effect of altering the liability of the defendant pursuant to the Loan Agreement;

(v) The defendant does not now have, and at no time had, any entitlement or grounds to elect to avoid the Loan Agreement;

(vi) With respect to paragraph 19(b)(ii) because of

(A) the particulars previously given by the defendant of relevant conversations; and

(B) the failure of the defendant to make the allegation in any previous version of the defence.

(d) Say that the first plaintiff took the assignment of the second plaintiff's right, title and interest in the Loan Agreement in good faith, for valuable consideration, and without notice of the 'Operative Agreement' or the matters alleged in paragraph 6, 19(b)-(d) and 19(e) of the Defence and Counter-Claim.

(e) Say that in the premises, the first plaintiff is not subject to any prior equity in favour of the defendant.

(f) Say further and alternatively that if the representation alleged in paragraph 19(b)(i) was made:

(i) The defendant became aware that the said representation was untrue on receipt of a notice of assignment from the first plaintiff on or about 27 March 1991 or alternatively, on receipt of a letter of demand from the first plaintiff on or about 11 July 1991;

(ii) The defendant thereafter acted in the manner referred to in paragraph 13(a), (b), (d), (f), (g), (h), (i) and (j) of the Statement of Claim;

(iii) The defendant by its said conduct elected to affirm the Loan Agreement;

(iv) In the premises, the defendant's purported termination of the Loan Agreement is ineffective;

(g) Say further and alternatively with respect to paragraphs 19(b)(ii) and 20A that if the representation alleged in paragraph 19(b)(ii) was made:

(i) The representation was not untrue, false or misleading as the second plaintiff lent and applied the principal sum in accordance with the defendant's direction and in discharge of its obligations under clause 8 and 9 of the Loan Agreement in the manner pleaded in paragraph 10 of the Statement of Claim;

(ii) Alternatively, if (contrary to the plaintiffs' contention), the representation was untrue:

(A) the defendant with knowledge that it was untrue adopted the Loan Agreement as alleged in paragraphs 13 and 14 of the Statement of Claim;

(B) the defendant by its said conduct elected to affirm the Loan Agreement;

(C) in the premises, the defendant's purported termination of the Loan Agreement is ineffective;

(h) Deny the allegations in paragraph 20 and say that the plaintiffs believe them to be untrue on the grounds that if the statements pleaded in paragraph 19(b)(i) were made, they did not constitute misleading or deceptive conduct within section 52 of the Trade Practices Act 1974 as a matter of law;

(i) Say further and in the alternative that:

(i) By executing the Loan Agreement and giving the original of that agreement to or leaving it with the second plaintiff, in circumstances where the Loan Agreement, by clause 24, expressly permitted its assignment, the defendant impliedly represented that the Loan Agreement recorded the terms of the agreement between the defendant and second plaintiff as to the matters dealt with in it and was intended by them to be binding according to its terms;

(ii) The first plaintiff acted in reliance on each of those representations and was induced thereby to enter into the agreement alleged in paragraph 21 of the Statement of Claim and undertake its obligations thereunder or alternatively, to accept the assignment of the second plaintiff's right, title and interest in and to the Loan Agreement effected by the Notice of Assignment referred to in paragraph 22(a) of the Statement of Claim and to become liable to make a payment to the second plaintiff in respect of the assignment;

(iii) In the premises, the defendant is estopped from denying that the Loan Agreement has effect according to its terms or asserting that the assignment of the Loan Agreement to the first plaintiff is subject to any prior equities.

8. Further and in the alternative, by reason of the matters referred to in paragraphs 7(d), 7(g)(i) and (ii) hereof, any prior equity in favour of the defendant (which is denied), is postponed to the rights of the first plaintiff under the Loan Agreement.

9. Further and in the alternative, by reason of the matters referred to in paragraph 7(g) hereof, it is not unconscionable for the first plaintiff to insist on its strict legal rights under the Loan Agreement notwithstanding the matters (which are denied), alleged in paragraph 19(e)(vii) of the Defence and Counter-Claim.

10. Further and in the further alternative, if which is denied, the agreement termed the 'Operative Agreement' was entered into, it is void and unenforceable for want of consideration.

11. Save as aforesaid, the plaintiffs do not admit any allegations in the Defence and Counter-Claim which have not been specifically pleaded to herein.

Particulars

The plaintiffs are presently unable to ascertain the truth or falsity of any such allegations.

ANSWER

12. As to the Counter-Claim, the plaintiffs repeat and rely on paragraphs 1 to 11 hereof.

13. As to paragraph 22 of the Defence and Counter-Claim, the plaintiffs:

[45]

[22] It was submitted on behalf of the defendants that the representation alleged in paragraph 19(b)(ii) of the defence and counterclaim was made by the second defendant by its conduct, which included providing to the borrowers prior to their signing the written loan agreements an order form (part of exhibit 85), the prospectus (exhibit 13), and the document entitled 'Important Late News' (exhibit 14). Mr Thornton denied having seen the last-mentioned document until the proceedings began, but that makes no material difference to the defendants' case on this issue. Clearly enough the representation was made, and the defendants did sign the loan agreements relying on the representation. I am not satisfied, however, that the representation was false or misleading because, in conformity with the reasons of the High Court, the resolution of the issue raised by paragraph 20A of the defence and counterclaim must be reached on the premiss that the result of the transactions constituting the round-robin that took place at a Melbourne branch of the Westpac Banking Corporation on 30 June 1989 was that, in accordance with its obligations under the written loan agreements, the second plaintiff applied money it lent to the defendants in payment of the application moneys due from the defendants for the units being bought: reasons of the High Court, paragraphs 9, 10, and 46. It was submitted on behalf of the defendants that although there had been a finding by the High Court that the second plaintiff performed its obligations under the loan agreements there had been no finding that any indebtedness existed between the second plaintiff and the defendants as a result of that performance. That submission cannot, in my view, be sustained because it has been determined that debts were created and satisfied at all points in the round-robin until, at its end, the defendants owed the second plaintiff certain sums: reasons of the High Court, paragraph 46. That determination is conclusive, and it may therefore be accepted that a debt is owed by the defendants as a result of the payments made on their behalf on 30 June 1989.

[47]

1. To induce the defendants to enter into and continue negotiations concerning investment in the Red Claw project the representations pleaded in paragraph 19(b) of the defence and counterclaim were made in June 1989 on behalf of Johnson Farm Management and the second plaintiff.

2. The representation pleaded in paragraph 19(b)(i) was made up to 29 June 1989 but not after that, and so not on 30 June 1989 when it was withdrawn when the loan agreements were presented for signature by the defendants.

3. The representation pleaded in paragraph 19(b)(ii) was made in June 1989 up to and including 30 June 1989.

4. The defendants signed the loan agreements relying on the representation alleged in paragraph 19(b)(ii), as the second plaintiff intended, but not on that alleged in paragraph 19(b)(i), which was withdrawn on 30 June 1989 before the loan agreements were signed and was replaced by an undertaking of secondary liability by Johnson Farm Management.

5. The representation alleged in paragraph 19(b)(i) did not induce the defendants to sign the loan agreements because it was withdrawn on 30 June 1989 before the loan agreements were signed and was replaced by an undertaking of secondary liability by Johnson Farm Management.

6. The defendants would not have signed the loan agreements but for the representation alleged in paragraph 19(b)(ii).

7. The representation alleged in paragraph 19(b)(i) did not constitute relevant misleading or deceptive conduct in trade or commerce because it was withdrawn on 30 June 1989 before the loan agreements were signed and replaced by an undertaking of secondary liability by Johnson Farm Management.

8. The representation alleged in paragraph 19(b)(ii) was not false, misleading, or deceptive as the second plaintiff had sufficient funds to lend to the defendants and in fact lent money to the defendants by means of a round-robin.

9. There was no common assumption or common intention arising from the alleged operative agreements as there were no operative agreements as alleged in paragraph 6 of the defence and counterclaim.

10. The representation alleged in paragraph 19(b)(i) was not made at any relevant time, and that alleged in paragraph 19(b)(ii) was not untrue, and accordingly the defendants have no ground to elect to avoid the loan agreements.

[84]

[36] The defendants' second line of attack on the assignments concerned only the agreement of 7 January 1991: the agreement did not effect an absolute assignment of any class B loan, it was pleaded in paragraph 18(b). That very issue came before the Court of Appeal in appeal no. 262 of 1993 (Equus Financial Services Limited v. Glengallen [sic] Investments Pty Ltd, unreported 19 May 1994) in which the first plaintiff under its former name was the appellant and Glengallan Investments Pty Ltd the respondent (the second plaintiff had not been joined then). Fitzgerald P. and Derrington J. concluded that there had been an assignment effected by the agreement of 7 January 1991. Fitzgerald P. concluded it was unnecessary to decide whether either, or both, the deed and the notice served in reliance on it constituted an absolute assignment within the meaning of s. 199 of the Property Law Act 1974. It was sufficient, his Honour observed, if either, or both, constituted an equitable assignment. Having referred to clause 2.2.4 and to item 4, annexures A (notice of assignment and direction) and A2 (letter to customer), and clause 4.1.2.2 (which provided that the assignor covenanted and agreed with the assignee to deliver to the assignee on or before the date of the deed a notice to each customer in the form provided for in annexure A), his Honour concluded that it was plain that an acknowledgment was not to be received from the borrower and the payment for the assignment of a class B loan agreement was not to be made by the appellant to the second plaintiff, until after a document substantially in terms of the notice given to Glengallan Investments Pty Ltd had been given to the borrower. In those circumstances, his Honour concluded, 'the proper conclusion is that the parties to the Deed, the appellant and the Deed, the appellant and [the second plaintiff], intended that each class B Loan Agreement was to be assigned to the appellant by the Deed, or in any event, by, or prior to, the Notice or equivalent document'. Derrington J. concluded that, despite the absence of any direct statement to that effect, on the proper construction of clause 2.2.4 the parties agreed to unconditional assignments of class B loan agreements which were to take effect in law at once. The third member of the court, McPherson J.A., allowed that it was possible that what had been agreed was no more than an enforceable agreement to assign.

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