First Plaintiff Second Plaintiff v Defendant

Supreme Court of Victoria|2012-03-06|Before: JUDD J

CONTRACT - Banker and customer - Agreement to forbear - Formation - Consideration

ESTOPPEL - Representation - Promissory Estoppel - Forbearance

2 The summons came on for hearing in the Practice Court and was referred for hearing by a judge in the Commercial Court. With the cooperation of the parties, directions were made for a trial to commence on 14 February 2012. The trial was conducted over 4 sitting days.

3 The plaintiffs' alleged that the bank had agreed on 22 December 2011 to forbear from taking any steps to enforce its security until 31 March 2012. The bank's agreement was said to follow from two conversations between the executive chairman of the plaintiffs, Patrick Farrugia, and a senior manager of the Commonwealth Bank, Andrew John Hopkins. The crucial conversations occurred on 20 and 22 December 2011.

4 The recollections of the conversations differed in material respects as well as emphasis. The two crucial conversations were not conducted in a vacuum. There was a chequered history to the relationship between the bank and its customer. There were particular conversations and some correspondence passing between the parties in the few weeks before the crucial conversations on which all parties relied to inform the topics under discussion and, more importantly, support the credibility of their version of events.

5 At 5pm on 30 November 2011 the plaintiffs were in default under the notices to pay and indebted to the bank for more than $68 million MP Pacific had guaranteed repayment of advances and other financial accommodation given to MP Investments by the bank. The loan agreement between the plaintiffs and the bank, dated April 2011, involved three tranches described as A, B and C. A related entity, MP Management (Aust) Pty Ltd was also indebted to the bank in the sum of $2.587 million secured by a mortgage over property at Mermaid Beach in Queensland. Repayment of that facility was due by 31 December 2011. The value of the Mermaid Beach security had been impaired as a result of flooding, and there was some uncertainty over insurance cover.

6 The plaintiffs' contended that the bank had agreed to forbear from taking any step to enforce its security against MP Investments until 31 March 2012 in consideration of payment of the amount owing under tranche A by 31 December 2011; payment of outstanding interest under tranche B by three instalments; repayment of the Mermaid Beach facility by 31 December 2011; the bringing up-to-date of all other loan facility obligations; and by providing the bank with an indicative valuation of the Lonsdale Street property, which was the primary security for the advances. The plaintiffs contended that they performed their side of the bargain before the bank resiled from its agreement on 10 or 20 January 2012. They contended that they had provided the indicative valuation and, by 31 December 2011, repaid the Mermaid Beach facility.

7 The bank denied any such agreement and on 20 January 2012 issued further demands which expired at 5pm on 6 February 2012.

8 The plaintiffs characterised the agreement upon which they relied as a new or subsequent agreement to the loan agreement under which they were indebted to the bank. They also alleged, in the alternative, that the bank was estopped from resiling from its promise not to exercise its default powers until 31 March 2012. They contended that each of the conditions for promissory estoppel enunciated by Brennan J in Waltons Stores (Interstate) Ltd v Maher & anor[1] had been satisfied.

9 The plaintiffs relied upon the conversations that occurred on 20 and 22 December 2011 to constitute a representation by the bank that induced them to assume that the bank would forbear from taking any steps to enforce its securities until 31 March 2012. They contended that they acted on that assumption by expending substantial amounts of money to arrange replacement finance from other lenders to repay the bank; by repaying the Mermaid Beach facility on 31 December 2011; and by the first plaintiff assuming an obligation to pay to MP Holdings (Aust) Pty Ltd the sum of $800,000 borrowed by MP Management to enable it to repay the Mermaid Beach facility on 31 December 2011.

10 The plaintiffs alleged that the bank has acted in breach of its agreement, and threatened to depart from the assumption induced by its conduct, by taking steps to enforce the securities prior to 31 March 2012. The plaintiffs sought the following orders:

Prior to 31 March 2012, the Defendant be restrained from taking any of the following acts:

(a) exercising any rights under the fixed and floating charge registered no. 1573799 dated 21 December 2007 made between the Firstnamed Plaintiff and the Defendant, including (but not limited to) the appointment of Receivers and Managers;

(b) exercising any rights under the fixed and floating charge registered no. 1765354 dated 4 March 2009 made between the Secondnamed Plaintiff and Defendant, including (but not limited to) the appointment of Receivers and Managers.

(c) under the Mortgage registered no. AF641943B dated 21 December 2007 ('First Mortgage') made by the Firstnamed Plaintiff in favour of the Defendant, taking possession of the mortgaged property and exercising a power of sale in relation to it;

(d) under the Mortgage registered no. AE808967V dated 4 March 2009 ('Second Mortgage') made by the Secondnamed Plaintiff in favour of the Defendant, taking possession of the mortgaged property and exercising a power of sale in relation to it;

(e) appointing Receivers and Managers pursuant to the First Mortgage;

(f) appointing Receivers and Managers pursuant to the Second Mortgage;

(g) exercising any other rights conferred by the First Mortgage and the Second Mortgage.

11 The plaintiffs characterised the issues in the following terms:

(1) a factual controversy concerning what was said at the meetings and during the discussions held on 19, 20 and 22 December 2011;

(2) the extent to which those conversations could be informed by prior communications between representatives of the plaintiffs and the defendant;

(3) the significance of the commercial context in the formulation of any relief.

12 The bank denied the alleged agreement, but said that if there was an agreement there was no consideration. Furthermore, the bank contended, any such agreement was subject to a condition that repayments would be made, which included payment of an instalment on 15 January 2012. The payment was never made. The bank also argued that any such agreement would have purported to be a waiver by the bank of a right that was not enforceable in the absence of writing.

13 The bank further contended that any agreement was repudiated by it on 10 January 2012 when, by an email, Mr Hopkins insisted upon the borrowers' compliance with inconsistent obligations. The bank contended that by their failure to perform their obligations, such as the payment of interest due on 15 January 2012, the plaintiffs elected to terminate the alleged agreement.

14 In relation to the plaintiffs' promissory estoppel case, the bank contended that there was no representation as alleged, but even if there were, it was not relied and the plaintiffs did not act to their detriment. The bank argued that the conduct on which the plaintiffs' relied was referable to their default under the facility agreement and their existing obligations.

15 Finally, the bank relied on the email from Mr Hopkins dated 10 January 2012, as well as fresh notices of demand dated 20 January 2012, to evidence its withdrawal of any representation or agreement. It also contended that failure to pay the first instalment of arrears of interest on 15 January 2012 relieved the bank from the burden of any such agreement or representation, if made.

16 It is sufficient to commence the chronology with the Second Further Amended and Restated Loan Agreement dated 13 April 2011. I will refer to it simply as the loan agreement. There were pre-existing facilities, recited in the title of the document extending back as far as 21 December 2007. The principal amount recorded as then outstanding was $68,446,709. Security included a fixed and floating charge dated 21 December 2007 granted by MP Investments; a fixed and floating charge dated 29 January 2009 granted by MP Pacific; a mortgage dated 21 December 2007 over the Lonsdale Street property; a mortgage dated 29 January 2009 over a property known as Waves in Byron Bay; and a mortgage dated April 2011 over another property in Byron Bay.

17 Under cl 10.6 of the loan agreement, MP Investments, as borrower, agreed to make minimum payments to the bank of $6 million in reduction of the principal outstanding on 30 September 2011; 31 December 2011; 31 March 2012; 30 June 2012 and 30 September 2012. Notwithstanding that obligation, the borrower was required to make payments totalling $24 million in reduction of the principal outstanding by 31 December 2011. Under cl 17.5, the parties agreed that a right may only be waived in writing, signed by the party giving the waiver.

18 The first instalment of $6 million, due on 30 September 2011, was not paid and default notices were sent to MP Investments and MP Pacific requiring repayment in full of the outstanding amount which, by that time was $68,634,789.23. Repayment was required by 5pm on 30 November 2011.

19 By the end of November 2011, MP Investments was already negotiating with St George Bank and Deutsche Bank for replacement finance. The new financier would require first mortgage security over the Lonsdale Street property, in addition to other securities, such as a fixed and floating charge and guarantee. Those requirements meant that the plaintiffs must first obtain the bank's agreement to discharge its mortgage over the Lonsdale Street property.

20 By 29 November 2011, MP Investments had received a preliminary response from St George under which it proposed to lend up to 60% of the value of the Lonsdale Street property. St George required a signed original valuation report by a 'panel valuer'. A continuing problem for the plaintiffs in their attempts to find replacement finance was that the indicative offers were not made in amounts sufficient to discharge the whole of the bank debt and meet other costs associated with works to be carried out on the Lonsdale Street property and for recovery of possession.

21 By 22 December 2011, CBRE Hotels Valuation & Advisory Services (a panel valuer) had provided an 'indicative' valuation of the Lonsdale Street property at $90 - $95 million. The basis of the valuation was 'as if complete', recognising that works were required to rectify defects. The cost of those works was estimated at around $5 million. Furthermore, MP Investments was required to pay Oaks Hotels, the current lessee, $5.3 million for vacant possession following a negotiated resolution of earlier litigation. There were other qualifications to the indicative valuation, including a new management agreement for the property, EBITDA guarantee, and planning approvals and permits. Thus, unless MP Investments could negotiate improved terms and conditions with St George or another financier, the amount of the finance 'under offer' would not be sufficient to discharges its obligation to the bank. While it is true that Mr Farrugia maintained that funding from other sources was available, the shortfall remained a continuing problem for Mr Farrugia in his negotiations with the bank.

22 The course of relevant discussions and written communications commenced on 30 November 2011, when Mr Farrugia sent an email to Mr Hopkins in which he gave three refinancing options. He attached the St George proposal for $60 million which was subject to a pre-commitment from Onyx once the present lessee had vacated. The plaintiffs expected that Onyx would enter into a management agreement for the Lonsdale Street property which was expected to enhance its value. A further offer of finance was expected from Deutsche for $70 million, including some mezzanine finance. The email mentioned the pay out to Oaks as well as refurbishment costs. The third facility mentioned was for $5 million from Suncorp, to be secured on a property at Byron Bay known as Waves.

23 In his proposal, Mr Farrugia said that he expected negotiations with Onyx to be finalised the same week. Importantly, he proposed a timetable. He proposed 31 December 2011 for completion of the Onyx agreement, presumably including board approval, and to reach agreement with St George and Suncorp. He proposed 31 March 2012 as the date on which the bank would be repaid $65 million, with the balance to be paid on 30 June 2012. That proposal, if accepted, would leave the bank unsecured by the Lonsdale Street property for more than $3 million between 31 March and 30 June 2012.

24 It appears that the St George proposal was not before the credit committee on 1 December when it considered what action the bank might take upon the expiry of the demands the previous day. Mr Farrugia did not accept that MP Investments was in default, although his reasons for refusing to accept the validity of the notices were not explained or explored. Notwithstanding this qualification, Mr Farrugia was anxious to obtain the bank's agreement not to exercise default powers under the loan agreement and security.

25 Sarel Roux Lategan was, in early December 2011, jointly responsible with Mr Hopkins for the management of the loan agreement. He was telephoned by Mr Farrugia on 1 December 2011, following the meeting of the credit committee earlier that day. By that time Mr Lategan had already prepared documents necessary for the appointment of Korda Mentha as receivers and managers, although the documents had not been provided to the committee. Korda Mentha had previously been engaged by the bank to provide advice and a report in relation to the plaintiffs' assets and business. Thus, it was plain that the bank was at least seriously considering the appointment of receivers and managers.

26 The evidence at trial did not extend to a detailed analysis of the circumstances in which the credit committee arrived at its decision on 1 December 2011, but it became clear from subsequent communications that the bank had decided not to appoint receivers and managers immediately, and proposed to reconsider its position on 19 January 2012. Even though the committee may not have been acquainted with the St George proposal received on 29 December 2011, the bank was aware that the plaintiffs were seeking alternative finance from St George and Deutsche.

27 Mr Lategan said that on 1 December he told Mr Farrugia of the decision by the credit committee to provide a short extension until 19 January 2012, and that a letter would be sent confirming the conditions of the extension. Mr Farrugia's account of his conversation with Mr Lategan was as follows:

Later, on 1 December 2011 I telephoned Hopkins in the afternoon because I wanted to know the outcome of the credit meeting and our proposal, but he was unavailable. I then telephoned Sorel Lategan the Senior Manager of Credit/Asset Management at Bankwest, he said words to the effect of "we have got the extension" and "the bank is supportive of the Onyx contract and the refinance through St George". He said it was a difficult meeting but he had got it through because 31 March was a good outcome for the bank. I then asked for to send a confirmation in writing. He did say that any conditions would be applied to the proposal. He said, we will be sending a letter confirming the extension. However, this did not occur.

28 Mr Lategan denied having made any mention of an extension to 31 March 2012. Mr Farrugia did not suggest that he had been told by Mr Lategan that the credit committee had agreed that the bank would not exercise its default powers until after 31 March 2012. After all, Mr Farrugia had put forward that date as a milestone for repayment.

29 Ultimately, nothing turns on the difference between the versions given by Mr Farrugia and Mr Lategan of the conversation on 1 December 2011. Having been advised by Mr Lategan of the decision of the credit committee on 1 December, Mr Farrugia sent an email to Messrs Hopkins and Lategan,

Andy and Sarel my sincere personal thanks to you both for your efforts at ECC in securing the extension in difficult circumstances.

Could I please have An email summary by return so I can clear for timing pending Gadens' formal correspondence which I have authorised Sarel on behalf of MPI and MPPI to issue to Steve Aitchison at holding Redlich an email to peter and I only.

Thanks again.

Best regards

30 There followed an email from Mr Hopkins dated 2 December 2011 in which he informed Mr Farrugia that MP Investments had been given until 19 January 2012, subject to certain conditions, to provide the bank with unconditional terms under which the debt would be repaid in full by 31 March 2012. Mr Hopkins said that 19 January 2012 had been selected because it was a time by which the bank believed MP Investments could reasonably respond and was a time after the holiday period convenient to the bank when its advisors would be available. The bank also recognised that little would be achieved by the appointment of receivers over the Christmas period. There was also a credit committee meeting scheduled for that day.

31 The plaintiffs contended that the date, 19 January 2012, was selected to make it more likely that the Mermaid Beach facility would be repaid on 31 December 2011. They argued that notwithstanding Mr Farrugia's proposal to repay the facility on 31 March 2012, there was no certainty that the Mermaid Beach facility would be repaid on time. In my view, the date was probably selected by the bank for all the reasons advanced, but primarily as a date on which the credit committee could review the account and decide whether to further stay its hand or commence recovery action.

32 The email of 2 December set out two conditions for the extension. First, MP Investments must agree to pay interest arrears, then estimated at around $750,000, over the next three months commencing that month. Second, it must provide additional security in the form of a mortgage over a property at Byron Bay. In his email, Mr Hopkins said that the bank's solicitors, Gadens, would provide appropriate legal documentation.

33 On 7 December 2011, Mr Farrugia received a letter from Gadens which addressed the conditions mentioned in the email of 2 December 2011. Mr Farrugia could not have misunderstood its significance. Mr Hopkins had mentioned 'appropriate legal documentation' in his email. Mr Farrugia well knew that the loan agreement contained usual provisions in relation to the waiver of rights, variation and the entirety of the agreement between the parties. As a lawyer, Mr Farrugia would have expected nothing less than formal documentation of the proposal, if only to protect the interests of the plaintiffs.

34 While the Gadens letter addressed the two conditions under which the bank was willing to defer the exercise of its default powers, it did not mention a repayment date of 31 March 2012, offers of replacement finance or valuations. Mr Farrugia said that the terms outlined in the Gadens letter were not consistent with what he believed had been approved by the credit committee following his conversation with Mr Lategan on 1 December.

35 I do not accept Mr Farrugia's evidence to the effect that during his conversation with Mr Lategan on 1 December he had understood Mr Lategan to refer to forbearance from the exercise of default powers until 31 March 2012. Having regard to the confirmatory email the following day, and the Gadens letter, it is improbable that Mr Lategan would have conveyed inconsistent information to Mr Farrugia. The limited extension proposed by the bank in the email of 2 December and in Gadens letter was of the time after which the bank would at liberty to enforce its security rights. The date, 31 March 2012, was proposed by Mr Farrugia as the date for final repayment.

36 What had been said by Mr Lategan on 1 December had, of course, been overtaken by the email from Mr Hopkins on the following day, which foreshadowed the Gadens letter and summarised the conditions. If what Mr Farrugia meant, when complaining about the Gadens letter, was that nothing was said about refinance proposals, valuations and a repayment date, he was no doubt correct. But having received the email on 2 December and the Gadens letter I am satisfied that Mr Farrugia well understood the purpose of the bank withholding further action until 19 January 2012 and thus the significance of the date. It was to give him time to come up with a concrete proposal for the retirement of the bank finance by his nominated date of 31 March 2012.

37 Mr Farrugia said that he telephoned Mr Lategan at his home on 10 December about the Gadens' letter, and asked him for his understanding of the bank's intentions. He said that MP Investments was unable to satisfy the conditions; in particular, the provision of the additional security. Mr Farrugia said he asked Mr Lategan about the 19 January deadline, because he understood the bank's proposal gave MP Investments until 31 March 2012. Mr Farrugia said that he was told by Mr Lategan that the 19 January deadline was not critical. Mr Lategan denied that he said any such thing. Mr Farrugia gave a more detailed account of what he was told by Mr Lategan. He said Mr Lategan said words to the effect,

Even if a report is required to be presented, I am the person who presents and I will say to Credit that the good news is that MP Management Facility... for $2.6 million has been paid out and this is significant to the bank, particularly when the security is impaired, that on MPI we have been unable to secure the payment of arrears as the security was utilised to repay the bank the MPM but the refinance of the property is progressing and further evidence of indicative finance offers from St George and Deutsche are made available with ideally some form of indicative valuation letter.

Mr Farrugia went on to say that he was told by Mr Lategan that he did not understand why a credit paper was even required on 19 January and that,

We will try and work through this with you and I will talk to Hopkins on Monday to discuss these concerns as to how we move forward.

38 Mr Lategan's evidence was that on about 1 December 2011 he had been appointed to a new position in the bank, that of Director, Risk & Portfolio Management and consequently would no longer have any involvement in the management of the MP Investments facility. He said that his last involvement with the credit committee was that day. Mr Lategan's evidence in that regard was not challenged. He said that as at the time of the telephone discussion on 10 December 2011 he had already planned his annual leave from 3 January to 24 January 2012, and thus knew that he would not be in a position to participate in any deliberations of the credit committee on 19 January 2012, even if he had not taken up his new position.

39 Mr Lategan said that he told Mr Farrugia that in his view the credit committee would not provide a further extension beyond 19 January 2012, unless there was concrete evidence of refinance from St George or Deutsche, together with a valuation or an indicative valuation by 19 January 2012 to support the financing levels. Mr Farrugia said that it would be difficult to get a final valuation.

40 Having regard to his scheduled holiday and new position it is improbable that Mr Lategan gave any indication to Mr Farrugia that he would participate in the January credit committee meeting. More importantly, I did not regard Mr Farrugia as a careful or truthful witness. He was evasive and quite plainly embellished the truth where it suited his purposes. His evidence was inconsistent with the contemporaneous documents, most notably his own communications. His attempts to explain material inconsistencies in his own correspondence were unconvincing. I reject the evidence of Mr Farrugia in which he attributed to Mr Lategan statements to the effect that the 19 January deadline was not critical and that Mr Lategan would advance MPI's case with the credit committee.

41 On 12 December 2011 there was a conference call attended by Mr Farrugia, Mr Hopkins, Peter Jesse Holland and Mr Lategan. The substantive accounts of that meeting were given by Mr Farrugia and Mr Hopkins. Mr Holland was a former banker and a financial advisor to the plaintiffs.

42 Mr Farrugia said that during the conference call he told those present that it would not be possible for MP Investments to provide the bank with unconditional terms of refinancing by 19 January 2012 because a condition precedent to finance, a final valuation of the Lonsdale Street property, could not be prepared by that date. He said that if refinancing were to be arranged for settlement by 31 March 2012 it would be necessary for the bank to keep 'the loan on foot' until that time. He explained to the bank that it would not be possible for MP Investments to meet the conditions set out in the Gadens' letter.

43 Mr Farrugia said that during the course of the 12 December telephone conference, Mr Holland had told Mr Hopkins that the Gadens letter had 'overreached', and that the intent of the bank was to support MP Investments and to forbear through to 31 March, rather than 19 January. Mr Farrugia went on to say that Mr Hopkins said, 'Yes Peter that is the case'. Mr Hopkins agreed that Mr Holland had asserted that the Gadens' letter had overreached, but rejected the contention that he had agreed to such a proposition. He also rejected the contention that he had conceded that the bank would forebear until 31 March, rather than 19 January. Mr Holland did not refer in his evidence to Mr Farrugia's assertion, or to the alleged response by Mr Hopkins.

44 Mr Hopkins gave a more detailed account of the meeting. He had prepared extensive notes which were subsequently type-written for the purpose of this proceeding and exhibited to an affidavit. His version of the discussions during the conference call is largely supported by the notes he took at the time, although it was clear that he relied on his notes for his recollection. Mr Hopkins' recollection was that he made it clear that it was a condition of the extension to 19 January 2012 that there would be additional collateral provided to secure the loan and interest arrears to be settled within 90 days.

45 Mr Hopkins gave evidence that Mr Farrugia had said that there were no concerns about the milestones set out in Gadens' letter, but that he did have concerns about the timing of the valuation. The St George offer was subject to valuation. According to Mr Hopkins, Mr Farrugia did not say that it would not be possible for the valuation to be completed prior to 19 January 2012, nor did he say that it would not be possible for the plaintiffs to provide the defendant with unconditional terms of refinance by that date. Mr Hopkins accepted that Mr Farrugia told him that the plaintiffs were unable to provide further security, but agreed that interest would be paid in instalments in January, February and March.

46 Whatever may be said about the detail of the exchange that occurred on 12 December 2011, I have no doubt that Mr Farrugia left the telephone conference under no misunderstanding about the bank's resolve to maintain the criticality of 19 January as the date by which an unconditional offer of finance would be required for settlement in full by 31 March. There remained outstanding conditions about the timing of interest payments and additional security.

47 I accept Mr Hopkins' evidence that he rejected the assertion by Mr Holland to the effect that the Gadens letter had over reached. The Gadens' letter was consistent with what Mr Hopkins had told Mr Farrugia in his email of 2 December 2011, but with more detail, as might be expected. The letter made provision for an acknowledgement by Mr Farrugia on behalf of MP Investments and other entities, and foreshadowed the preparation of a supplementary deed to be executed by the parties with supporting security documentation. Mr Farrugia may not have liked the bank's position, but it was unambiguous. The bank was prepared to agree not to exercise its default powers, but only until it had an opportunity to consider the suitability of proposed refinancing arrangements on 19 January 2012, and then subject to conditions.

48 Following the telephone conference on 12 December 2011, Mr Farrugia sent an email to Mr Hopkins and others asking that they resume discussions on the following day or after a proposed meeting with St George:

Andy/Peter, can we please resume tomorrow or Wednesday after we have met with St George tomorrow.

On the valuation side of things, Bill Cross of Cross Hotel Advisory (UK) has advised me tonight that we now have CBRE committed to val opinion pre 19 Jan with a final report to follow say in 14-21 days, with final sign off in Australia and Asia, to enable the val to be accessed and utilized by potential take out or investment parties. Preliminary indications (based upon comparable sales) are that the valuation will be circa $90-100M, dependant upon certain matters to be clarified such as Onyx parent or local Aust company guarantee support and forecast verification, which CBRE are well advanced upon.

Upon this basis I believe that we can target to achieve by 19 January, 2012 (for Financial closing 31 March 2012).

1. Onyx Management Contract Terms;

2. St George Final Facility terms Officer and acceptance (subject to val);

3. Preliminary valuation opinion CBRE

The security value enhancement of the Onyx precommit (with the Guarantee support as offered) now in hand and executed (which was not in place or promised at ECC) has to be recognized or go to credit at this point, when it is about to drive a value circa $100M, on an asset that six weeks ago Korda Mentha were suggesting had a value of circa $75M less costs (say net realizable $55M and NB: the GST cost alone at $5M on unit sales via KM strategy does not apply in moving from Oaks to Onyx as going concern). Surely in the interim (whilst we await CBRE) that 333 Capital can reaffirm for the bank the value enhancement of the precommit, when the bank is clearly focused on its security position.

Thanks

49 By reference to his email of 12 December there can be no doubt that Mr Farrugia understood the significance of 19 January 2012. He also understood that 31 March 2012 was the proposed date for repayment under an acceptable refinancing offer to be presented to the bank by 19 January. The relevance of 19 January had been made clear in the Gadens letter. In response, Mr Hopkins sent an email dated 13 December 2011 in which he said that he would be happy to reconvene later that day or following the St George meeting,

However, prior to our discussion the bank will require a formal response to Gadens' letter of last week and in particular MPI's ability to service the Tranche arrears and debt going forward.

50 On 14 December 2011, Mr Farrugia wrote to Mr Hopkins, responding to Gadens' letter. He did not contend that the letter misunderstood any position, overreached or that any of the conditions had been waived or modified by Mr Hopkins or Mr Lategan. Instead, Mr Farrugia expressly 'sought the bank's further indulgence to 31 March 2012'.

51 By his letter Mr Farrugia said that he proposed to convert the indicative terms provided by St George and Deutsche to offers of finance and believed that this could be done by 19 January 2011. He noted that there would be difficulty in obtaining a formal valuation by that date. He dealt with the requirement for additional security and explained that the Mermaid Beach facility was due for repayment at the end of December and that additional security would be required to refinance that property. He sought a reduction of default interest by having the bank waive the default position until 31 March 2012. Thus, while providing some explanation of MP Investments position, Mr Farrugia's letter did not in terms accept or reject the bank's position as set out in the Gadens letter of 7 December.

52 On 19 December 2011 there was a meeting between Mr Hopkins, Berwick Wilson of Korda Mentha, Mr Farrugia, Mr Holland and Benjamin Grootemaat. Mr Grootemaat is an employee of Engage Capital, a firm involved in negotiating finance on behalf of MP Investments from St George. Mr Wilson took notes.

53 Mr Farrugia said that Mr Hopkins expressed concern about the timing of the proposed valuation to support the offer of finance from St George. He deposed,

I said words to the effect that it would not be possible to obtain a final valuation by CBRE by 19 January 2012, but it might be possible to get an indicative valuation by 19 January 2012, although realistically the indicative valuation might take longer to obtain and it was unrealistic to expect any offers of finance by 19 January.

Mr Farrugia said that Mr Hopkins responded by saying words to the effect that he understood that only an indicative valuation would be possible by 19 January 2012, and invited him to put forward a proposal which Mr Hopkins would take to the bank's credit committee for its approval in the next day or so.

54 Mr Holland's evidence of the meeting was general and vague. He said that there were several matters covered which were characterised as the status of the St George indicative letter of offer, its conditionality and the status of the valuation which he said was critical to any final decision by St George. He said there was discussion about arrears and about the Mermaid Beach facility. Mr Holland said that while the St George offer was in place there was discussion concerning the amount of the facility which was limited to $60 million.

55 In relation to the second topic, arrears, Mr Holland elaborated by saying that there was a conversation as to where the money would come from to pay the arrears of interest, and that there were to be payments in January, February and March. Mr Holland said there was some discussion about securing the payment of the arrears and 'that was something of a difficult conversation because the security that was being discussed was not available', as it was required to support borrowing from another lender to enable repayment to the bank of the Mermaid Beach facility.

56 As to the third topic, the Mermaid Beach facility, Mr Holland mentioned the due date of 31 December. He said that the discussion about the repayment of that facility was bound up with the availability of security. Mr Holland's evidence in relation to what was said was unhelpful, save insofar as he identified topics of discussion blended with his own analysis.

57 Mr Holland agreed that prior to the meeting on 19 December he understood that the bank had agreed not to exercise its securities until 19 January 2012 subject to certain conditions. He recalled that towards the end of the meeting Mr Hopkins asked Mr Farrugia to confirm in writing a schedule for the payment of arrears of interest and Mr Farrugia agreed to provide such a schedule.

58 Mr Grootemaat also had a limited recollection of what was said at the 19 December 2011 meeting. He recalled asking Mr Hopkins whether the bank wanted the entire facility repaid or whether it would be prepared to exit the facility with a discount so he could be clear on the amount of refinancing that was required. He said that Mr Hopkins told him that the bank wanted the facility repaid in full. Mr Grootemaat did not have a clear recollection of the discussion concerning the Mermaid Beach facility. He recalled that Mr Hopkins had requested that Mr Farrugia provide a proposal for the payment of arrears of interest. Mr Grootemaat did not agree with the proposition that towards the end of the meeting Mr Hopkins said that the bank required a valuation and St George approval for finance by 19 January. Mr Grootemaat said that would not have been possible.

59 Mr Hopkins gave evidence that at the meeting of 19 December 2011 he said that the bank needed details of what the plaintiffs proposed for repayment of the facility. He said that the bank would only consider releasing its security if repaid in full. Mr Hopkins said that the plaintiffs only made an offer to pay $60 million by 31 March 2012 which was less than the full amount. He requested Mr Farrugia to put forward the plaintiffs' best proposal after which he would seek guidance from the credit panel.

60 Mr Wilson's account of the meeting was consistent with the account given by Mr Hopkins, although there was some difference in emphasis. Mr Wilson gave evidence that Mr Hopkins said that any proposal by the plaintiffs to repay the debt needed to be provided that day or on the following day to allow Mr Hopkins to take it to the credit committee. Mr Wilson gave evidence of discussion about the likely shortfall in the refinancing proposal from St George. He said that Mr Farrugia was told by Mr Hopkins that in addition to the plan to pay the arrears of interest, the bank required a valuation and St George approval by 19 January 2012.

61 Insofar as there was a material contest between the evidence given by the witnesses it is as to the confirmation of the bank's requirement of a valuation and offer of finance from St George by 19 January. Mr Hopkins did not recall making the statement attributed to him by Mr Wilson, to the effect that the bank required a full valuation and St George approval by 19 January 2012. But it is not as if the significance of 19 January had disappeared, as the plaintiffs would have it. In their notes of the meeting, Mr Hopkins and Mr Wilson both noted a statement by Mr Farrugia to the effect that he was 'looking forward at the position now for 19 January'.

62 Thus, whether or not Mr Hopkins made it clear at the end of the meeting, as Mr Wilson said he did, that a valuation and St George approval was required by 19 January, the date was acknowledged by Mr Farrugia as undoubtedly significant. There was a credit committee meeting scheduled for that day. Insofar as it is relevant, I am persuaded that the notes taken by Mr Wilson, and his assisted recollection of the meeting by reference to his notes, is a more accurate record of the important elements of the discussion, and that the criticality of 19 January 2012 was not lost on Mr Farrugia or his advisors. The meeting on 19 December 2011 took place against the background of the letter prepared by Mr Farrugia in response to Gadens' letter of 7 December 2011. Mr Farrugia's letter, dated 14 December 2011, made express reference to a proposal to convert the indicative terms provided by St George into an offer by 19 January 2011. That letter also acknowledged 31 March 2012 as the repayment date.

63 By the meeting on 19 December the bank had started to move its position on the requirement for an unconditional offer of finance by 19 January 2012. By 19 December it had been told that a final valuation would not be possible by 19 January 2012 and appeared to accept that fact. Mr Lategan seemed to acknowledge the possibility that the bank may accept an indicative valuation some days earlier. Mr Hopkins seemed not to be alarmed by a proposal on 20 December involving only an indicative valuation by 19 January.

64 The plaintiffs submitted that the conversations prior to 20 December 2011 provide a necessary context to the crucial conversations between Mr Farrugia and Mr Hopkins on 20 and 22 December 2011. They submitted that prior to 20 December 2012, the bank had been told that St George required a valuation and that the plaintiffs objective was to obtain an offer subject to valuation. That is, a conditional offer. The plaintiffs submitted that the bank knew that an unconditional offer was impossible by 19 January 2012. They submitted that the bank knew that the management agreement with Onyx for the Lonsdale Street property was under negotiation and that other steps were being taken that would involve the plaintiffs incurring costs. The plaintiffs submitted that Mr Hopkins knew that if forbearance was limited to 19 January 2012 the plaintiffs would have no certainty that it could achieve an unconditional offer by that time. They alleged that the bank also knew that repayment of the Mermaid Beach facility was a sensitive issue, in the sense that the security was impaired, further security was required to refinance and that there was a risk that the bank would not be repaid.

65 While the context could be used to argue that one version of the conversations on 20 and 22 December 2011 might be preferred over the other, it did little to inform the content of the exchange. That is because the plaintiffs relied on precise words spoken on 20 December, in the form of a proposal that was accepted on 22 December so as to constitute a binding contract or a promise or representation to support an estoppel. At one point in their submissions in relation to the estoppel case the plaintiffs submitted that it was important to examine what was not said, just as it was important to understand what was in fact said. They submitted that Mr Hopkins did not inform Mr Farrugia that he should not rely upon what was said; and that Mr Hopkins did not say that the bank required an unconditional offer of finance by 19 January 2012.

66 Accepting for present purposes that the contentions concerning what Mr Hopkins did not say are correct, it is of no consequence. The plaintiffs' case relied upon a very narrow factual premise - that by accepting the 'proposal' put by Mr Farrugia on 20 December 2011, Mr Hopkins agreed that the bank would 'forbear from taking enforcement action prior to 31 March 2012...'

67 In his first affidavit, sworn in support of an interlocutory injunction, Mr Farrugia gave the following account of his conversation with Mr Hopkins on 20 December 2011:

On 20 December 2011, I called Hopkins. I said words to the effect that MPI proposed that Bankwest agree to forebear from taking enforcement action prior to 31 March 2012, subject to the following conditions (Proposal):

(a) Tranche A of the Loan be up to date by 31 December 2011 (which would require the payment of $376,000);

(b) the payment of arrears on Tranche B of the Loan in three instalments, ($222,000 by 15 January 2012; $300,000 by 28 February 2012; $300,000 by 31 March 2012);

(c) the repayment in full of the Mermaid Facility by 31 December 2012;

(d) all other facilities with Bankwest were required to be up to date and not in default;

(e) the provision of an indicative valuation from CBRE by 19 January 2012, valuing the Lonsdale Property at $90 million or more.

68 There was no question that a conversation took place. Mr Hopkins said that Mr Farrugia did put forward a proposal for the bank's consideration, the substance of which was as follows: (a) tranche A interest would be paid by the following week; (b) tranche B arrears of interest would be paid over three instalments over the next 90 days with the first payment no later than 15 January 2012; and (c) an indicative valuation from CBRE would be provided by 19 January 2012. Mr Hopkins said that he told Mr Farrugia that the valuation would need to be done as soon as possible.

69 Mr Hopkins made a file note of the telephone conversation which was consistent with his evidence but went further, referring to the repayment of the Mermaid Beach facility in early January. Mr Hopkins' note concerning the Mermaid Beach facility was to the effect that, due to the holiday period, it may not be repaid until early January.

70 The critical component of the conversation, from the plaintiff's perspective, was Mr Farrugia's proposal that the bank 'forbear from taking enforcement action prior to 31 March 2012, subject to the following conditions...'. Thus, according to Mr Farrugia's version of the conversation, the date of 31 March 2012 had been transformed from the date for repayment of the loan, to a date before which the bank agreed it would not exercise its default powers.

71 Mr Farrugia said that on 22 December 2011 Mr Hopkins telephoned him and said that 'the proposal had been approved by the credit committee and was accepted'. He said that Mr Hopkins asked him to formally document the proposal for the bank's records. Thus, according to Mr Farrugia, the response was brief and necessarily informed by a shared understanding of the 'proposal' that was advanced on 20 December 2011.

72 The introduction by Mr Farrugia into his proposal of the concept of forbearance until 31 March 2012 was, it might be thought, such a departure from the pre-existing platform of proposed terms and conditions under consideration, that it could not have been overlooked by Mr Hopkins. Mr Hopkins said that his recollection of the substance of the conversation was to the effect that he informed Mr Farrugia that the Bank would be willing to proceed with the extension until 19 January 2012 subject to the receipt of tranche B interest arrears. He requested Mr Farrugia to confirm the repayment schedule in writing. Thus, according to Mr Hopkins, the focus of the extension of time before enforcement action remained 19 January 2012, which was the date of the next credit committee meeting.

73 When Mr Farrugia reduced his proposal to writing on 23 December 2011, one might think that forbearance till 31 March 2012 would achieve prominence. It was, according to the plaintiffs, a matter of paramount importance. But in his email sent on the following day, there was no mention of it. Instead, Mr Farrugia acknowledged things that would need to be done 'in the leadup to the Bank's next internal ECC meeting on 19 January 2012', and that MP Investments 'targeted closing 31 March 2012' in an amount less than that required to discharge the facility.

74 Mr Farrugia argued that by the time of the conversations on 20 and 22 December 2011, 19 January 2012 had lost significance as the date of expiry of conditional forbearance. This, he said, followed the telephone conference that took place on 12 December 2011 and his proposal of 14 December 2011. He argued that the date lost significance once the bank was told and accepted that an unconditional offer of finance could not be obtained by 19 January 2012.

75 Mr Farrugia also contended that, as a consequence of the telephone conference on 12 December 2011, the bank had abandoned its formal requirements set out in the email of 2 December and the Gadens letter. Mr Farrugia said that it had become evident during the conference call on 12 December that when the bank had last considered his proposal on 1 December, the credit committee did not have the St George terms sheet. He said that the bank was informed during the telephone conference on 12 December that it would not be possible to provide unconditional terms of refinance by 19 January 2012. There was also the problem of additional security. Mr Farrugia said,

As a consequence we formed the view in that discussion and sought the bank's commitment, or at least Hopkins' commitment, in respect of forbearance to the 31st because otherwise we couldn't go on.

76 The foregoing statement by Mr Farrugia, made during his cross-examination, was a material embellishment on his evidence in chief, which made no mention 'of forbearance to the 31st' during the conversation on 12 December. In his evidence in chief, Mr Farrugia spoke only of 31 March 2012 as a date for repayment. Later in his evidence he justified his failure to mention the new forbearance date of 31 March 2012 in his email of 23 December 2011 because,

There was no need, we'd dealt with it on the 14th and the 12th.

77 Again, and a little later in his evidence, Mr Farrugia attributed to Mr Holland a conversation in which Mr Hopkins was said to have confirmed that it was the intent of the bank to forbear to 31 March 2012, because MP Investments was unable to convert the St George proposal into an unconditional offer by 19 January 2012.

78 Mr Holland did not give evidence of any commitment to forbear on the exercise of default powers until 31 March 2012. I reject Mr Farrugia's evidence to the effect that on 12 December 2011 there had been any mention of 'forbearance to 31 March 2012' or that the bank, whether through Mr Hopkins or Mr Lategan, said anything that might reasonably have been interpreted as an agreement to extend the forbearance date of 19 January 2012, which in any event was conditional, to 31 March 2012. Mr Farrugia made no mention of any such agreement, or even indication, in his email of 14 December 2011. 31 March 2012 remained the proposed date for repayment.

79 On 23 December 2011 Mr Farrugia sent a lengthy email to Mr Hopkins. Mr Hopkins had commenced his Christmas vacation on the previous day and did not read the email until his return to work on Monday 10 January 2012.

... on 23 December 2001, I sent Hopkins an email summarising, amongst other things, matters discussed and agreed between MPI and the banks. The email attached an indicative valuation from CBRE valuing the property at $90 - $95 million. In that email I omitted to confirm that the facilities would be fully repaid on 31 March 2012.

81 The email of 23 December 2011 acknowledged the significance of 19 January 2012 as the 'next internal ECC meeting' and made no mention of any agreement by the bank that it would not exercise its default powers until 31 March 2012. Mr Farrugia said, of course, that to record such an agreement was unnecessary because 'we dealt with [it] on the 14th and the 12th'. If that was so, why mention the forbearance period at all in the conversation with Mr Hopkins on 20 December?

82 I reject Mr Farrugia's evidence concerning his introduction of the concept of forbearance until 31 March 2012, whether on 12, 14 or 20 December 2011. His evidence in that regard was contrived. I am satisfied that the bank did not agree to an extension of the forbearance period to 31 March 2012 at any time. On the contrary, the only period of forbearance under consideration was to 19 January 2012, and then subject to conditions. The email of 23 December 2011 suggested agreement on the conditions, but went on to acknowledge a shortfall from the 'targeted' refinancing proposal and a mechanism to deal with the shortfall.

83 Upon his return to his office on 10 January 2012, Mr Hopkins responded by expressing his concern that certain matters had not 'been agreed upon'. He enumerated matters to be resolved. Tranche B arrears remained outstanding. The tranche A facility was said to be in order as at 31 December 2011. He said

Whilst a payment plan for the arrears as at 20 December 2011 has been agreed this remains subject to MPI providing the bank by 19 January 2012 with unconditional terms on a refinance that would see the bank get repaid in full by 31 March 2012. In the meantime the bank reserves its rights in respect of the breaches to date.

For the avoidance of doubt, during discussions between MPI and the bank, the bank have made it clear that they fully expect MPI to honour its obligations under its current facilities which in turn would see the bank's debt repaid in full. The purpose of the extension provided to 19 January 2012 has been to allow MPI to make sufficient progress with a refinance to receive unconditional terms acceptable to the bank. Accordingly, the bank would only consider the release of the secured property in the event that they receive sufficient proceeds which would see the bank's debt repaid in full by 31 March 2012. Your email makes no proposal in relation to the payment of the shortfall after your proposed re-financing and appears to expect that the bank will merely discharge its securities (we note that St George will not permit second mortgage security) leaving a significant unsecured shortfall. This is not acceptable to the bank.

84 Following Mr Hopkins' email of 10 January 2012, communications continued between Mr Farrugia and Mr Hopkins. Mr Farrugia maintained in correspondence from as early as 17 January 2012, that an agreement had been reached in terms of the email of 23 December 2011, and that MP Investments had acted in accordance with that agreement. He suggested that the bank had changed its position from 'what we understood was the agreed position between us'. But terms of the 'agreed position' were not clarified. Mr Farrugia did not suggest that the 'agreed position' included a term under which the bank would not exercise its default powers until 31 March 2012.

85 There were continuing discussions concerning steps to refinance and deal with the shortfall. On 19 January 2012, Mr Hopkins advised Mr Farrugia that as he had not provided an acceptable proposal for the repayment in full of the bank's debt, it would commence enforcement action and that fresh demands would be served by its solicitors. Mr Farrugia requested the bank to go slow on the issue of demands to allow them further time to conclude discussions with Deutsche.

86 In the event, new demands issued, dated 20 January 2012, claiming an outstanding amount against MP Investments and MP Pacific Nominees (as guarantor) in the sum of $68,830,524.25.

87 Deutsche issued a terms sheet on 31 January 2012 proposing a facility limit of $75 million plus fees and an interest reserve.

88 The default notices served on 20 January expired at 5 pm on 6 February. On that day Mr Farrugia sent an email to Mr Hopkins. After noting some progress with refinancing he said:

Can we please obtain a reprieve on enforcement for say 48 hours (from the 5pm set for today) to allow us to agree something between Engage and the bank and ourselves on the arrears position on tranche B. This proceeding was commenced at 10am on 6 February 2012 with the issue of a generally endorsed writ and summons for interlocutory relief.

89 The issues as outlined by the parties were potentially complex, inviting a consideration of whether there was valuable consideration given for a promise made by the bank not to exercise its default powers until 31 March 2012; whether there was a 'practical benefit' to the bank that might meet that requirement; whether the obligation incurred by MP Investments to guarantee repayment of $800,000 borrowed by MP Management (Aust) Pty Ltd from MP Holdings (Aust) Pty Ltd to assist in the repayment of the Mermaid Beach facility was an act in reliance on the plaintiffs' claimed assumption; whether MP Investments's failure to make the 15 January interest payment discharged the bank from any agreement it may have made concerning forbearance; and what, if any, equity was appropriate to remedy the plaintiffs' position. Ultimately, none of those issues arise as a result of the findings of fact, although each will be briefly addressed.

90 While the plaintiffs did not abandon their contract case, they emphasised their claim for relief based on equitable principles. For that purpose they identified the preconditions set out by Brennan J, as he then was, in Waltons Stores (Interstate) Ltd v Maher[2]

In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed or expected that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.

91 The plaintiffs drew a distinction between the requirements for contract and the basis upon which a representation, reliance and detriment may afford a remedy. The plaintiffs submitted, correctly in my view, that whereas the 'no waiver' clause in the loan agreement may be antithetical to their contract case, it would not provide any impediment to an equitable remedy.[3] Such a clause may, of course, have a bearing on whether the plaintiffs made any assumption about the bank's position and questions of reliance.

92 The plaintiffs relied on the judgment of Dodds-Streeton JA in Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd[4], in which her Honour analysed the requirements for a sufficiently well defined representation to support promissory estoppel. That authority was of little assistance because there was no ambiguity about the definition by the plaintiffs of the representation. The representation was a promise to forbear until 31 March 2012. No other representation was advanced. In Accurate Finance, her Honour noted that it is well-established that a court, when construing a representation said to found an estoppel, need not strive to ascertain a meaning as it must when construing a contract.[5]

93 A little later in her judgment, her Honour said,

A representation which is insufficiently certain or complete to create a contract may found proprietary estoppel. Where necessary to inhibit unconscionability, equity will construe a representation robustly in context, to determine its meaning as reasonably understood by the addressee. In my opinion, the standard of certainty, clarity and completeness required of the representation cannot sensibly be determined in isolation from other elements of proprietary estoppel in the circumstances of each particular case. Moreover, ambiguity or indeterminacy generated by the representor in the context of unconscionable conduct should not confer immunity from equity's 'long arm'.[6]

94 There was no occasion to construe that which was explicitly defined as a promise to forbear until a particular date, when the evidence to support the promise involved the acceptance of 'the proposal'.

95 The conduct relied upon by the plaintiffs to support promissory estoppel is the promise not to enforce default powers until 31 March 2012. In that sense, the greater flexibility acknowledged in the formulation of a representation[7] is unnecessary. In their points of claim the plaintiffs alleged the relevant term of the contract to be agreement by the bank 'to forbear from taking any steps in the enforcement of any of its security held in respect of the Loan until 31 March 2012.' The basis for the estoppel was an allegation that the plaintiffs were 'induced by representations... whereby 'the plaintiffs assumed that the (bank) would forbear from taking any steps in the enforcement of the securities held in respect of the Loan until 31 March 2012.' This was not a case in which the plaintiffs might have been induced into an assumption by what was not said. The case was put on the basis of the bank's acceptance of a clearly articulated proposal by Mr Farrugia.

96 The plaintiffs contend that the court should accept Mr Farrugia's evidence to the effect that he advanced such a proposal because, from as early as 12 December 2011, the plaintiffs through Mr Farrugia and Mr Holland had made it clear that they would be unable to provide an unconditional offer of finance, sufficient to repay the bank, by 19 January 2012. The plaintiffs submitted that an unconditional offer of finance from St George would not have been possible until much later, perhaps early March, because of the requirement to have in place the Onyx management contract and a full valuation from an approved valuer. Accordingly, the plaintiffs argued, Mr Hopkins and the bank must have appreciated the futility of pressing for an unconditional offer of finance by that date and, by their continuing negotiations, be taken to have abandoned that requirement.

97 Mr Hopkins accepted that at the meeting on 19 December 2011, he was told that a final CBRE valuation would not be available before 19 January and therefore there would not be unconditional finance available by that date. He conceded, in cross-examination, that he did not expressly tell Mr Farrugia that if there was no unconditional offer by 19 January 2012 'the jig was up'. Mr Hopkins said that his primary concern at the meeting was the fact that the proposed offer from St George would not be sufficient to repay the bank. He agreed that he was working with Mr Farrugia towards a repayment date of 31 March 2012.

98 The bank submitted that there was no suggestion of any waiver of its requirement of an unconditional offer of finance by 19 January 2012 for settlement by 31 March 2012 as a condition of any further forbearance beyond that date. Forbearance to that date was conditional on an agreed plan for the payment of arrears of interest, repayment of Mermaid Beach facility and payment of the first instalment of arrears in January. It was also conditional on a formal documented agreement.

99 The credit committee was to meet on 19 January 2012. Mr Hopkins conceded some scepticism, even doubt about the ability of the plaintiffs to meet the 19 January 2011 deadline. Nonetheless, he insisted on an unconditional offer by that date, although he seemed to accept that the only valuation available at that time would be 'indicative'. The contemporaneous documents evidence the continuing significance of that date to the parties. Mr Hopkins believed that 'things still could be pushed a lot harder' by Mr Farrugia to achieve an unconditional offer by that date. The bank was keeping the pressure on Mr Farrugia and the plaintiffs' advisors. They, in turn, were seeking to modify the bank's requirements so as to avoid the risk that the bank would exercise its default powers after 19 January 2012.

100 One need go no further than Mr Farrugia's emailed correspondence to demonstrate the continuing significance of 19 January 2012. In his email of 12 December, following the telephone conference, he said that he had been informed that CBRE had committed to provide a valuation opinion before 19 January 2012, with a final report to follow, say in 14 to 21 days. He went on,

Upon this basis I believe that we can target to achieve by 19 January 2012 (for financial close in 31 March 2012).

101 In his email letter of 14 January 2011, responding to Gadens' letter, he said,

We propose to convert these indicative terms (St George and/or Deutsche) to offers of finance and we believe that we can do this by 19 January 2011.

102 In his contentious email of 23 December 2011, Mr Farrugia said,

The purpose of this email is, as requested, to summarise:

firstly, matters discussed and agreed between us; and
secondly, those matters calling for the bank's formal response and where necessary approval;
in the lead up to the bank's next internal ECC Meeting on 19 January 2012.

There was a heading 'CBA/Bank West ECC Meeting 19/1/12 Key Matters for resolve.'

103 The position of the bank, while pushing for resolution of an account in default, was coloured by its acceptance that it would be impractical to exercise default powers prior to 19 January 2012. Mr Hopkins conceded as much under cross-examination. The unavailability of advisors and the Christmas period meant that earlier action would not have been practical. While it was unlikely that the bank would exercise the default powers prior to 19 January 2012, it maintained the importance of that date as the time by which the plaintiffs must put forward an acceptable proposal to refinance the facility. The focus of negotiations from the banks perspective was to obtain an acceptable offer of finance by 19 January 2012 which could be considered by the credit committee when deciding what action the bank would take thereafter. The bank was no longer insisting on a final valuation by that date. To that extent, the position of the bank had changed. Nevertheless, Mr Farrugia was looking towards that date as one by which it would be necessary to satisfy the bank of the plaintiffs' ability to repay by 31 March 2012, if the bank was to thereafter forbear on the exercise of its default powers.

104 A further fact relied upon by the plaintiffs to support their version of the conversations of 20 and 22 December 2012 was Mr Farrugia's suggested willingness to 'throw in the keys' if it was not possible to satisfy the requirements of the bank. Thus, the plaintiffs submitted, the continuing negotiations demonstrated flexibility on the part of the bank in the face of known difficulties, such as the inability to obtain a valuation and unconditional offer of finance by 19 January 2012, and the availability of additional security. The plaintiffs submitted that bank's willingness to continue to negotiate indicated a degree of flexibility which would make more probable the agreement alleged by the plaintiffs to forbear until 31 March 2012.

105 The difficulty with that submission is that all eyes were focussed on what could be achieved by 19 January 2012. One might ask, why the bank would have given away any opportunity to bring pressure to bear on the plaintiffs to put their best case forward by that date, and instead give an open-ended commitment not to exercise default powers until 31 March 2012. There would have been no certainty of receiving an unconditional offer of repayment prior to that date. It is that 'commercial reality' upon which the bank relied to submit the inherent improbability of the agreement alleged by the plaintiffs.

106 There is great force in the bank's submission, but it is only one factor in my rejection of the evidence of Mr Farrugia concerning the alleged agreement with Mr Hopkins on 20 and 22 December 2011. In my opinion, the plaintiffs' case for an agreement in the terms alleged must fail.

107 The bank submitted that even if an agreement as alleged were to be found there was a want of valuable consideration, because the plaintiffs were under existing obligations to perform the contract to repay the facilities and interest, and any refinancing costs they might have incurred were not incurred as a consequence of any such agreement.

108 The plaintiffs identified the consideration to be: (a) repayment of the amount owed under tranche A by 31 December 2011; (b) repayment of outstanding interest in three instalments, the first on 15 January 2012, the second on 28 February 2012 and the third on 31 March 2012; (c) repayment of the Mermaid Beach facility by 31 December 2011; (d) bringing up to date all other loan facility agreements; (e) providing the bank with an indicative valuation of the Lonsdale Street property.

109 The plaintiffs claim to have performed two of the obligations: (a) provided the indicative valuation; and (b) paid out the Mermaid Beach facility.

110 The plaintiffs argued that the strict approach to the matter of consideration, enunciated in Foakes v Beer[8] had been replaced in Australia by a more 'sophisticated' approach following the decision in William v Roffey Brothers & Nichols (Contractors) Ltd.[9] As a consequence, the plaintiffs argued, a practical benefit enjoyed by the bank or some prejudice avoided may constitute adequate consideration so as to permit the enforcement of the promise as a contract.

111 The defendants drew a distinction between executory contracts, where something more was to be done by the promisee in performance of the contract; and cases where the only remaining act was the repayment of money advanced by a lender. In the former category of case the promisor might have enjoyed a real and tangible benefit or avoided a material detriment by offering an additional payment or granting an indulgence. Such cases are exemplified by the facts in Williams v Roffey Bros and Musumeci v Winadell Pty Ltd.[10]

112 I accept that there are cases in which a benefit may be obvious even though there are existing contractual obligations and entitlements. The case of a contractor offered an inducement to continue to perform his contract so as to avoid a greater loss is but one example. I also accept that in the case of banker and customer, circumstances may arise in which a bank may compromise its position in order to secure certainty of payment and avoid cost, inconvenience and perhaps loss associated with recovery action. There remains, however, a question of principle involving the requirement that there be consideration moving from the promisee.

113 In Amos v Citibank Ltd[11] the Queensland Court of Appeal, referring to the facts in Williams v Roffey Bros, said,

In circumstances in which a contract of that character remains at least to some extent executory on both sides, it is not difficult to identify as the consideration the commercial benefit which results from having performance in fact carried out, or, conversely, the detriment likely to be suffered if it is not. See also Musumeci v Winadell Pty Ltd (1994) 34 out, or, conversely, the detriment likely to be suffered if it is not. See also Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723, which is a further instance of that kind, where the decision in Williams v Roffey was followed at least in part. But it is a different matter where, as here, the subject matter of agreement is not a contractual obligation which is still to be performed, but simply a debt which has arisen, become due, and is payable forthwith by one party to the other. It may be that, as Peter Gibson LJ has said, "when a creditor and a debtor, who are at arms length, reach agreement on the payment of a debt by instalments to accommodate the debtor, a creditor will no doubt always see a practical benefit to himself in so doing": see Re Selectmove Ltd [1995] 1 WLR 474, 481, where, the Court of Appeal declined to extend Williams v Roffey to an alleged agreement to pay the whole debt by instalments in the future. Even that is not the case we are now called on to consider. Here the debtor claims no more than that the creditor has agreed, and is consequently bound, to accept a sum less than the amount that was incontrovertibly due to him. In those instances, and in the absence of anything resembling an estoppel, the common law rule continues to prevail that some valuable consideration in law must be shown for the creditor's promise to release the unpaid balance of the debt.[12]

114 It is unnecessary to decide in this case whether the requirement that there be valuable consideration moving from the promisee may be displaced in favour of an inquiry into the benefit derived by the promisor. The plaintiffs did not advance their case on the basis that the benefit to the bank was the chance to recover all or most of the outstanding amount by a particular date, as against the prospect of realising on its security with the attendant cost, inconvenience, and potential loss. Such a case would have involved a different evidentiary basis, and one which might not have been palatable to the plaintiffs. Instead, the plaintiffs advanced their case for consideration on a very narrow basis - the timely repayment of the Mermaid Beach facility and the payment of overdue interest. Thus, the 'practical benefit' concept did not arise for consideration and the plaintiffs remain confronted by the well-settled principle in Foakes v Beer.

115 On the assumption that there was an agreement and adequate consideration, I would find that payment of the instalment of interest by 15 January 2012 was an essential term of the agreement that, once not performed, discharged the bank from any obligation of further performance.

116 I have found that Mr Farrugia did not incorporate in his proposal to Mr Hopkins in the telephone call on 20 December 2011 words to the effect that MP Investments proposed that the bank agree to forbear from taking enforcement action prior to 31 March 2012 on the conditions mentioned in paragraph 26 of his affidavit sworn 6 February 2012.

117 I have found that the proposal that was put by Mr Farrugia was generally in terms of the evidence given by Mr Hopkins, including things to be done in time for the next credit meeting on 19 January 2012. The proposal also included repayment of the Mermaid Beach facility in early January. There was no mention of 31 March 2012 or, for that matter, of forbearance or the exercise of the default powers.

118 I have found that on 22 December 2011 Mr Hopkins conveyed to Mr Farrugia that the bank would be willing to proceed with the extension until 19 March 2012 subject to receipt of interest arrears in accordance with Mr Farrugia's proposal. The first payment was to be made no later than 15 January. The payment schedule was to be confirmed in writing. In Mr Farrugia's email of 23 December 2011 there was no mention of any extension to 31 March 2012.

119 Because of the precision with which the plaintiffs defined the alleged agreement and representation upon which they relied, the finding that there was no such agreement is sufficient to dispose of the promissory estoppel case. Nevertheless, I will address each of the requirements for promissory estoppel as if such a representation had been made by the bank in the terms and circumstances alleged.

120 The plaintiffs did not establish that they had assumed that the bank would not be free to withdraw from its promise that it would forbear on the exercise of default powers until 31 March 2012. The plaintiffs well knew that the bank would require formal documentation to record any such agreement. Mr Farrugia was a lawyer and commercially astute. His past dealings with the bank made it plain that formal documentation was essential to any change in the relationship. The email of 2 December 2012 and the Gadens letter confirmed that requirement, if confirmation were necessary. During the course of negotiations he was required to put proposals and responses in writing. In my view the bank took all reasonable steps to make it clear that formal documentation would be required.

121 The plaintiffs' own conduct, relied upon to support the estoppel, is the same as that relied upon as the consideration for the agreement, but with one additional matter. Mr Farrugia deposed that:

In mid-December 2011, I had a meeting with my fellow MP and director, John Kerr and told him that in order for the Mermaid facility to be refinanced, MPM would need to procure a loan from MPH for the shortfall amount of approximately $800,000. I said to Kerr that those moneys would be made available by MPH for a short period until the MPI refinance of the Lonsdale property was complete at 31 March 2012. I informed Kerr about the funding applications then made by MPI with Deutsche Bank and St George which were progressing satisfactorily. Mr Kerr said to me that he understood the transactions being arranged and said to me that he agreed for them to continue on the basis that MPI would be repaying the MPM loan from MPH on 31 March 2012.

122 The plaintiffs submitted that the obligation of MP Investments to repay the loan from MP Holdings was a relevant detriment incurred on the assumption that the bank would not withdraw from the expected legal relationship.

123 In my opinion this new form of detriment, recently and imprecisely formulated by the plaintiffs, does not support the equity for which they contend. If MP Investments incurred an obligation to MP Holdings in the sum of $800,000 it was because Mr Farrugia and Mr Kerr made a private agreement to bind MP Investments in 'mid-December'. I am not satisfied that the obligation post-dated the conversation on 22 December 2011. The generality of 'mid-December' employed to identify the time at which the conversation took place, is at best unsatisfactorily vague. Had the conversation taken place after 22 December 2011, one would expect that Mr Farrugia would have been precise in his evidence to fix the time at which the obligation had been incurred as after, and consequent upon, his reaching agreement with the bank.

124 The plaintiffs also relied upon the work undertaken by them in procuring replacement finance as well as the costs incurred. They submitted that had they not been induced by the representation or promise they would have 'thrown in the keys' because they knew, as did the bank, that an unconditional offer of finance, coupled with a formal valuation, could not be achieved by 19 January 2012. By so structuring their argument, the plaintiffs attempted to overcome the bank's argument that they were committed to incur costs associated with refinancing from well before 22 December 2011.

125 I do not accept that Mr Farrugia was prepared to 'throw in the keys' as he claimed. It is true that the bank was made, and became, increasingly aware of the real likelihood that a formal valuation would not be available by 19 January 2012. It is in that context that Mr Hopkins seemed content with an 'indicative' valuation by 19 January. In that regard, there was some movement by the bank on its requirements. What did not change, however, was the significance of 19 January 2012, as the date upon which the credit committee would once again review the bank's position. Mr Farrugia was not about to 'throw in the keys'.

126 In response to the plaintiffs' promissory estoppel case, the bank contended that any promise was conditional on compliance with the repayment obligation specified by the bank, including an interest instalment due on 15 January 2012. The bank submitted that, as the instalment was not paid, it was discharged from the burden of any such promise.

127 It is common ground that the bank's agreement to forbear was conditional. I have found that the plaintiffs well knew that the bank required formal documentation, and, accordingly, did not rely upon any promise to forbear until such documentation had been completed. Putting that consideration to one side, the bank's contention that it was relieved from further performance of its promise, if the promisee failed to perform a condition, was correct. That is because, in the circumstances of this case, it would be unreasonable for the promisee to have continued to make the assumption relied upon.

128 The bank also argued that it had the right to retract any such promise or representation and did so on 10 January 2012, alternatively with the service of fresh default notices on 20 January 2012. The plaintiffs argued that the development of promissory estoppel in Australia looked to relieve plaintiffs from unconscionable conduct to avoid the detriment occasioned by the conduct. They submitted that the three requirements enunciated by the Privy Council in Ajayi v RT Briscoe (Nigeria) Ltd[13] no longer defined the scope of the doctrine between contracting parties. In that case, the Privy Council accepted that a promisor might resile from the promise by giving reasonable notice, provided that the promise could resume its position.

129 The position between the parties on the requirements for equitable relief was not materially different. Both acknowledged that the principles set out by Brennan J in Walton's case were applicable. The bank sought to rely upon Mr Hopkins's email of 10 January 2012, alternatively the service of fresh notices of demand on 20 January 2012, as giving the plaintiffs reasonable notice of a change in the bank's position. In my view this is a case in which it would have been open to the bank to resile from its promise on reasonable notice because it was possible for the plaintiffs to resume their anterior position.

130 The bank also argued that the minimum equity necessary to remedy any detriment was measured by any costs incurred by the plaintiffs between 22 December 2011 and 20 January 2012 at the latest. The cost detriment claimed by the plaintiffs was incurred in their attempts to obtain replacement finance. Such detriment could only be referable to the promise if the plaintiffs were correct in their contention that they would have 'thrown in the keys' had they known the bank was unwilling to forbear beyond 19 January 2012. I have already rejected that contention.

131 For the reasons outlined above, the injunction sought by the plaintiffs is refused and the proceeding is dismissed.

[3] Pacific Brands Sports &Leisure Pty Ltdv UnderworksPty Ltd (2006) FCAFC 40 at [107]- [108].

[5] Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2008] VSCA 86, [132].

[6] Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2008] VSCA 86, [178].

[7] Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2008] VSCA 86, [132].

[10] (1994) 34 NSWLR 723. See also Dome Resources NL and anor v Michael Bernard Silver and anor [2008] NSWCA 322.

[11] Unreported, Queensland Court of Appeal, 10 May 1996; BC9601842.

At a glance

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Judgment (173 paragraphs)

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Cases Cited (2)