Freeman v National Australia Bank Limited

REASONS FOR JUDGMENT THE COURT: Introduction 1 On 12 March 2002, Spender J made a sequestration order against the estate of the appellant, Lynton Noel Charles Freeman. The order was made pursuant to a creditors petition filed by the National Australia Bank Ltd ('the Bank'). The Bank had sued Mr Freeman in the Supreme Court of Queensland for recovery of the possession of land under mortgage and for a debt owed to the Bank under an expired bank facility. 2 In the creditors petition it was asserted by the Bank that Mr Freeman owed it the amount of $1,427,890.08 pursuant to a Bill facility dated 19 December 1997 and an order of the Supreme Court of Queensland dated 11 October 2000. The Bank asserted it held security over property belonging to Mr Freeman, valued at $1,331,877.69, and comprising: (a) land (b) livestock (c) income derived from the land This left an unsecured amount of $96,012.39 said to be owed by Mr Freeman to the Bank. The act of bankruptcy relied upon was that: 'On 20 November 2000, an enforcement warrant issued against the real and personal property of the respondent debtor consequent upon a judgment obtained by the applicant creditor against the respondent debtor in Supreme Court of Queensland proceedings number S4013/98 was returned unsatisfied to the Supreme Court of Queensland on 20 December 2000.' 3 When Spender J made the sequestration order he ordered that it be stayed for twenty-one days. The purpose of the stay was to permit consideration by Mr Freeman of an appeal. A notice of appeal was filed on the last day of the stay. An amended notice of appeal was filed shortly thereafter. On 9 April 2002, Spender J further stayed the sequestration order pending the determination of the appeal. He nevertheless required Mr Freeman to prepare and file a statement of affairs with his trustee in bankruptcy. 4 A second amended notice of appeal was filed on 13 June 2002 and a Further Amended Notice of Appeal on 2 July 2002. There were three grounds of appeal in the latter notice which was considerably shorter than its predecessors. In the event only the first of the grounds raised in the Further Amended Notice of Appeal was relied upon. By that ground Mr Freeman seeks to have this Court consider further evidence. That evidence is said to raise an arguable case that he has a claim against the Bank for the sale of his property at an under value and that the claim, if made good, would exceed his indebtedness. The Ground of Appeal 5 The single ground of appeal relied upon in the case was that: 'The decision of the learned judge that there was "no other sufficient cause" to dismiss the petition within the meaning of s 52(2)(b) of the Bankruptcy Act 1966 was wrong in fact and law as there is new evidence available to the appellant (which was not before his Honour) that the appellant's claim against the respondent in matter No S2339 of 2002 in the Supreme Court at Brisbane has sufficient validity to justify dismissal or adjournment of the petition.' The Nature and History of the Bank's Proceedings against Mr Freeman in the Supreme Court of Queensland 6 The background to the proceedings in the Supreme Court of Queensland is conveniently set out in the judgment of White J in the Queensland Court of Appeal in National Australia Bank Ltd v Freeman [2001] QCA 473 and in the judgment of Ambrose J at first instance - National Australia Bank Ltd v Freeman [2000] QFC 295 Action No 4013 of 1998. 7 Mr Freeman was, in 1992, the registered lessee of about 10,000 hectares of grazing land known as Glassford Vale located about 100 kilometres south west of Gladstone. The property was used for cattle rearing, for some crops, for timber harvesting and for the extraction of gravel and mining for metal. In 1992, Mr Freeman had debts to a number of financial institutions in connection with his operation of the property. These obligations were refinanced with the Bank in mid 1992. The refinancing was by way of a loan repayable on demand and secured by a mortgage over the land and various stock mortgages. Mr Freeman's initial indebtedness to the Bank was about $480,000. The mortgages secured his indebtedness in respect of a farm management account, a fixed rate interest only loan account, a fully drawn advance account and an overdraft account. 8 Mr Freeman contended that an officer of the Bank had made representations to him in 1992 and 1993 that the Bank would support him in a plan he had to build up cattle numbers by holding back from sale female breeders. This would reduce for a time the cashflow from the property. He said that the Bank represented it would require interest only repayments until the number of cattle reached 2,500 or 1,000 female breeders or until the operations on the property as a whole generated a gross annual income of $240,000. He said that in reliance on these representations he increased his borrowings to purchase more cattle and to make improvements to the property. 9 By mid 1993 Mr Freeman had borrowed about $800,000 from the Bank and his property was affected by drought. He said he had discussed the future of the property with the Bank at its Bundaberg branch and that the Bank agreed to carry him until the end of the drought or until he reached a gross annual income of $240,000 or the target cattle numbers. The representations and agreement were denied. 10 It was Mr Freeman's position before the Supreme Court of Queensland that his difficulties with the Bank began with the arrival of a new Bank officer at the Bundaberg branch in mid 1996. He was required to reduce his overdraft from $120,000 to $90,000 by the end of November 1996. To meet this demand he had to sell breeders. This reduced his herd and adversely affected his capacity to keep to his productivity plan. The money sought by the Bank would have to come from an interest subsidy which he would have received, from the Queensland Rural Assistance Authority, in the following April had the Bank provided the necessary support. 11 He complained that the Bank failed to support his application for an interest subsidy for 1997. The Bank regarded his operation as unviable and declined to guarantee support for the requisite twelve months in 1997. During 1997 the Bank continued to seek to have Mr Freeman improve his debt position and advised him that unless an acceptable proposal was received by the end of September in that year it would commence proceedings. The Legal Aid Office in Queensland wrote to the Bank on behalf of Mr Freeman on 23 September 1997 proposing a change of financiers at a discounted payout figure of $360,000 to take account of his alleged losses from the sale of breeder cattle. However the Bank was not prepared to release its securities without a full payment of principal and interest and wanted an acceptable plan to deal with the debt. In the event the Bank invited Mr Freeman to enter into a mediation. 12 Mediation proceeded on 4 December 1997 before Mr RR Douglas QC, then a barrister at the Queensland Bar. The mediation lasted a full day at the end of which a written agreement was produced which Mr Freeman and the Bank executed. This was known as the Deed of Mediation. 13 Relevant provisions of the Deed of Mediation are set out in the first instance judgment of Ambrose J and included the following: Recital E: 'E. As a result of the mediation Freeman has agreed to an offer from the Bank to forebear from enforcing the mortgages immediately to allow him to repay the facility indebtedness on the terms and conditions contained in this Deed.' Clause 3.1 provided: 'Freeman acknowledges that the Bank is entitled at any time on and from 5 March 1998 to issue to Freeman any Demands, Notices of Exercise of power of Sale and any other Notices which may be required to enable the Bank to exercise its power of sale.' Clauses 4.1 and 4.2 provided: '4.1 Freeman must use his best endeavours to refinance the debt or to sell the property and to exchange contracts of sale no later than 4 March 1998. Settlement of any sale or refinance must be effected no later than 6 April 1998. 4.2 In the event the refinance is not approved or contracts are not exchanged under clause 4.1 by 4 March 1998, Freeman agrees to deliver to the Bank by 6 April 1998 vacant possession of the property to enable the Bank to sell the property as mortgagee exercising power of sale.' Clause 6.1 provided: '6.1 Freeman acknowledges and agrees that clause 4.2 requires Freeman to give the Bank vacant possession of the property in the event that such refinance is not approved or contracts are not exchanged in accordance with that clause.' Clauses 7.1 and 7.2 provided: '7.1 In the event that Freeman does not comply with the provisions of the Deed, Freeman agrees that the Bank is entitled to commence proceedings so that a Writ of Possession for the property may issue. 7.2 Freeman agrees that he will not take any active part in the proceedings including, without limitation the filing of the defence of the proceedings.' Clause 8.1 provided: '8.1 Except as otherwise provided in this Deed, the Bank agrees to forebear from enforcing the Mortgages.' There was a release contained in cl 9 in the following terms: '9. RELEASE 9.1 By the execution of this Deed Freeman immediately, absolutely and unconditionally releases the Bank, its officers and agents, from all claims which Freeman now has or, but for this Deed might have had against the Bank, its officers and agents, in respect of the Facilities, the Mortgages, the Proceedings, or any other matters referred to in the recitals to the intent that this Deed may be pleaded by the Bank as a complete and absolute bar to any claims by Freeman in respect of the matters released by this Deed. 9.2 Clause 9.1 applies to the Bank mutatis mutandis.' 14 Mr Freeman's attempts to refinance were unsuccessful and on 4 March 1998 he was in default under the Deed of Mediation and therefore under the Bill facility. On 7 April 1998 the Bank sent a notice of termination of the facility which had expired on 6 April 1998. Mr Freeman did not pay the Bank the value of the bill of exchange on its maturity date. There was no dispute that he was in default under the Bill facility. 15 The Bank commenced proceedings for recovery of possession of the land and stock the subject of the securities on 1 May 1998. It claimed $1,029,255.05 together with interest to the date of issue of the proceedings and a further claim for interest falling due after their issue. Mr Freeman admitted default under the Bill facility but as Ambrose J characterised it, sought relief '… based upon events alleged to have occurred, representations and promises made, etc during the course of his dealings with the plaintiff from 1992 until the occasion of his executing a Deed of Mediation with the plaintiff subsequent to a Mediation conducted in December 1997'. 16 In his defence to the proceedings before Ambrose J Mr Freeman raised a number of matters going to the enforceability of the securities and of the Deed of Mediation. The latter he contended was voidable on account of unconscionable conduct by the Bank in procuring its execution. Ambrose J however, rejected all the defences and dismissed Mr Freeman's counterclaim and his claim to set off any sum against the money owed to the Bank. 17 Mr Freeman then appealed to the Court of Appeal in Queensland which, on 2 November 2001, dismissed his appeal with costs. White J wrote the judgment of the Court, with which Davies and Thomas JJA agreed. One of the contentions on appeal was that the Bank misrepresented to him at the time of mediation that the value of the secured property was $1.6 million. This was based upon a valuation from Herron Todd & White dated 8 December 1997 that the valuation on fair market value in aggregation was $1.5 million, in subdivision was $1.6 million and at a forced sale $1.3 million. Her Honour said: 'The submission was not developed and it is not apparent what use His Honour might have made of such a finding since it can have had no effect on his conclusion.' 18 Subsequently Mr Freeman instituted proceedings against the Bank in action number S2339 of 2002 in the Supreme Court of Queensland. These proceedings were based on the contention that the Bank was liable to Mr Freeman for the sale of the property, Glassford Vale, at an under value. A summary judgment application by the Bank was dismissed by Muir J on 7 May 2002 - Freeman v National Australia Bank Ltd [2002] QFC 148. His Honour held the applicable principles to be 'imprecise in their nature and their application difficult to assess in the absence of an established factual matrix'. The Judgment Appealed From 19 Spender J delivered three judgments in the proceedings on the creditors petition. The first was an interlocutory judgment in which His Honour dismissed a motion for review of a Deputy Registrar's decision refusing Mr Freeman an order for discovery. The motion, which was filed on 27 July 2001, sought an order that the National Australia Bank produce for inspection documents referred to in an affidavit attached to that motion. In dismissing the motion on 10 December 2001, Spender J referred to the circumstance that there had been a contested trial over four days before Ambrose J and a contested appeal in the Court of Appeal. He observed that it was quite unlikely that a reason could be made out why a court in bankruptcy should go behind that judgment. He said: 'In this case, Mr Freeman is seeking to re-litigate the question of whether he owes a debt to the National Australia Bank. That misunderstands the circumstances in which a Court of bankruptcy will exercise its discretion to go behind a judgment. Those circumstances plainly have not been made out in the present case.' His Honour was satisfied that the documents sought by Mr Freeman ought not to be the subject of an order for discovery under O 15 of the Federal Court Rules in the proceedings. The documents which he sought, some of which appeared to go to the question whether there had been compliance with the Bank's internal procedures, had not been shown to be relevant to any issue in the Federal Court proceedings apart from the issue of Mr Freeman's indebtedness. 20 In his reasons for judgment delivered on 12 March 2002, Spender J referred to the history of the proceedings in the Supreme Court of Queensland and noted that subsequent to the judgment of the Court of Appeal Mr Freeman had sought special leave to appeal to the High Court of Australia. At the time that his Honour's judgment was delivered the application for special leave had not been heard and one of the submissions which Mr Freeman put to the Court as a reason against the making of sequestration order was that to make such an order might prejudice his capacity to pursue that special leave application. His Honour said: 'While I acknowledge that that is a possible consequence of the making of a sequestration order, depending as it does on decisions that may be made by the Trustee of the estate should Mr Freeman be made bankrupt, such a consequence must be viewed in light of the prospects of special leave being granted. As the document to which I have referred makes plain, Mr Freeman is acting on his own behalf in his application for special leave, and such applications have a very low success rate.' His Honour assessed the prospect of special leave being granted as quite remote. The questions raised in the application seemed to be almost exclusively confined to the particular dealings between the Bank and Mr Freeman. In the event special leave to appeal to the High Court was refused on 14 March 2003. 21 His Honour identified the original grounds for Mr Freeman's defence to the petition as those appearing in his affidavit filed on 27 February 2001. 22 Spender J referred to the grounds for opposition to the petition initially filed by Mr Freeman. In a further document headed 'Amended Notice of Intention to Oppose Application or Petition' the following grounds of opposition to the petition were specified: 'To have the notice set aside. To amend the Notice to Oppose to include disputed service, not indebted as alleged or at all, livestock are not the property of the respondent. Quantum of the warrant incorrect. Frauded trial, fraud, intend (sic) to defraud, deceit, false pretences, false evidence, fabricating evidence, perverting justice, judgment between the parties is unresolved. Failure to produce documents. Deceptive and misleading conduct, unconscionable conduct, non-compliance with discovery order in the Supreme Court. Negligence.' 23 His Honour noted that the question of service had already been dealt with by an affidavit by Sergeant Harms which was filed on 13 July 2001. He also noted the outcome of the appeal to the Court of Appeal and the absence of any substance in any of the grounds of appeal raised by Mr Freeman. 24 His Honour referred to extensive affidavit material filed by Mr Freeman going to those matters compendiously referred to in the Amended Notice of Intention to Oppose the Petition. There were three affidavits sworn by a Mr Salmon before his Honour. He described Mr Salmon as a consultant specialising in assisting persons who assert that they are the victims of banking malpractice. These were not directed to questions of whether the enforcement warrant was returned unsatisfied. They were directed to questions of the Bank's behaviour. 25 There were also affidavits from Mr Freeman himself, from a registered valuer and agricultural consultant, Mr Quinlan, from Kristen Lynne Freeman and from Adam Noel Freeman. These affidavits concerned matters which were live in the Supreme Court trial and appeal, although they also went to the question of the failure to provide bank statements which was raised before his Honour. So far as the failure to provide bank statements was concerned, his Honour observed that the judgment debt was the amount owing as at October 2000. Issues relating to the debt before that date were the subject of the Supreme Court trial and since that date the Bank had relied on the statutory interest under the Supreme Court Act 1995 (Qld) in respect of which the bank statements had no bearing. His Honour identified two 'real questions' raised by Mr Freeman's defence: 1. Whether on the whole of the material the Court should go behind the judgment of the Supreme Court of Queensland. 2. That his Honour should deal with complaints that the receiver had sold Mr Freeman's property at an undervalue. 26 In relation to the first matter, namely whether the Court should go behind the judgments of the Supreme Court and the Court of Appeal, his Honour referred to Udovenko and Others v Mitchell (1997) 79 FCR 418 at 420-421. In that judgment Davies J referred to the authority of the High Court in Corney v Brien (1951) 84 CLR 343. Spender J referred to a passage from the judgment of Davies J which he described as the crucial statement for the present case: 'If the judgment in question followed a full investigation at trial on which both parties appeared, the Court will not reopen the matter unless a prima facie case of fraud or collusion or miscarriage of justice is made out.' 27 Applying that principle to the case before him, Spender J held that a prima facie case of fraud or collusion or miscarriage of justice had not been made out such as to impeach the judgment that was obtained after a full investigation at a trial at which both parties appeared and were represented by solicitors and counsel. His Honour held that despite the voluminous nature of the material which had been put forward by Mr Freeman no substantial reason had been shown for questioning whether there was in truth and reality a debt due to the petitioning creditor. 28 His Honour's observations in that respect were subject to the more particular matter raised by the second question, namely Mr Freeman's complaint that the sale of property by the receiver was at an undervalue. 29 At the time that the creditors petition came before his Honour, Mr Freeman had instituted proceedings against the Bank in the Supreme Court of Queensland in action number S2339 of 2002. In that action he claimed damages against the Bank for sale of his mortgaged property at an undervalue. His Honour referred to the statement of claim filed in those proceedings. It was alleged in the statement of claim that the Bank was mortgagee of Mr Freeman's interest in land under a registered Memorandum of Mortgage L85084 and the mortgagee of stock under Livestock Mortgage 920253. In par 6 of the statement of claim it was alleged that in or about June 2001 the Bank as mortgagee in possession enforcing its power of sale sold Mr Freeman's interest at a net price of $768,347.49. It was said that the sale of his interest at that price constituted a breach of a duty of care owed by the Bank to him. Particulars of the breach were: '(a) Failing to advertise the land and attributes, improvements, Timber royalties and potential property; (b) Failing to obtain the True Value.' (sic) Loss and damage said to flow from the breach of the duty of care comprised: (a) the grazing value at the time of sale; (b) the cattle; (c) the timber; (d) mining royalties; (e) gravel royalties; (f) Mined Screening Royalties; (g) Irrigation; (h) Interest on the sum of $7,081,652.51. The Bank defended the claim in part on the basis that the receiver was in truth Mr Freeman's agent and any claim he had was against the receiver as his principal, which claim would not assist him as against the Bank. His Honour accepted, on the authorities, that a provision in the mortgage had the effect that the receiver appointed by the mortgagee, exercising the power expressed in the mortgage, was acting as agent for the mortgagor. His Honour also held that the legal position was that if there were actual negligence in the conduct of the sale Mr Freeman would have a claim against the receiver. This was notwithstanding that the receiver would have received an indemnity from the Bank. 30 His Honour concluded that Mr Freeman had not established that there was in truth and reality a debt owing by him to the Bank arising from an offset based upon the sale of his property at an undervalue in breach of the Bank's duty to him. His Honour was satisfied of the act of bankruptcy alleged in the petition and the other matters of which the Act required proof. He was not satisfied that there was any other sufficient reason why a sequestration order ought not to be made. In those circumstances, he made the sequestration order against Mr Freeman's estate and made an order for costs to be paid in accordance with the provisions of the Bankruptcy Act 1966 (Cth). 31 On 9 April 2002, his Honour published reasons for making an order that proceedings under the sequestration order of 12 March 2002 be stayed until the determination of Mr Freeman's appeal against that sequestration order. In making that order his Honour identified, as a contentious point in the appeal, the question whether any default by the receiver in the sale of Mr Freeman's property could be sheeted home to the Bank notwithstanding the terms in the mortgage which provide that the receiver is the agent of the mortgagor. His Honour said he was not to be taken as indicating any view as to the strength of the point but was not prepared to say it was unarguable given that the property was sold at a figure which was considerably less than the valuation which the Bank's valuer had placed on the property at a not irrelevant time. Statutory Framework 32 The Bankruptcy Act 1966 (Cth) deals, in s 52, with the proceedings and order on a creditors petition. Relevantly for present purposes it provides: '52(1) At the hearing of a creditors petition, the Court shall require proof of: (a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient); (b) service of the petition; and (c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing; and if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor. … (2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor: (a) that he or she is able to pay his or her debts; or (b) that for other sufficient cause a sequestration order ought not to be made; it may dismiss the petition.' 33 Section 27 of the Federal Court of Australia Act 1976 (Cth) deals with the reception of evidence on appeal as follows: '27. In an appeal, the Court shall have regard to the evidence given in the proceedings out of which the appeal arose, and has power to draw inferences of fact and, in its discretion, to receive further evidence, which evidence may be taken: (a) on affidavit; or (b) by video link, audio link or other appropriate means in accordance with another provision of this Act or another law of the Commonwealth; or (c) by oral examination before the Court or a Judge; or (d) otherwise in accordance with section 46.' Section 46 deals with orders and commissions for examination of witnesses. The Proposed New Evidence - The Freeman Affidavit Sworn 7 May 2002 34 The proposed further evidence comprises two affidavits, one sworn by Mr Freeman himself on 7 May 2002, the other sworn on the same day by Mr David Quinlan, a registered valuer. 35 In his affidavit, Mr Freeman sets out that prior to about 18 June 2001 he was the registered leasehold owner of five lots of land covered by three grazing homestead freeholding leases and two special leases issued by the Minister for Lands under the Land Act 1994. The lots comprised approximately 10,000 hectares of predominantly grazing and cultivated land. Prior to 23 October 2000 he operated the land as a mixed enterprise, including grazing, cropping, timber harvesting, mining and extraction of commercial minerals. 36 The affidavit refers to millable timber on the land (pars 5 to 9). It describes the timber and refers to information he had received about its volume from the Department of Forestry. Mr Freeman goes on to say that in the period from January to October 2000 he grossed approximately $20,000 in timber royalties under a contract with a sleeper cutter. 37 The affidavit also describes the extent of irrigation on the land (pars 10 to 13). In these paragraphs Mr Freeman states that the land is watered by seasonal creeks with some permanent water holes. It has 19 dams, 5 bores and 5 wells. It has 60 acres of irrigated land serviced by a network of underground water mains fed by a well in Glassford Creek. The irrigation system has a capacity in excess of 15,000 gallons per hour down to 10,000 gallons per hour in dry times. He contends that the irrigated land has increased the carrying capacity of the property generally by approximately 200 to 400 bullocks per annum at a current value of approximately $1,200 per bullock depending on season and sale prices. It created a drought mitigation process. 38 The affidavit then deals with cultivation of the land (pars 14 to 16). The land comprises approximately 600 acres of cultivated land farmed under rotation. Mr Freeman refers to various crops which he has grown upon the land. He claims to have grossed approximately $500 per acre twice annually from the cash crops. Where the selling price of the crop would fail to reach that gross amount he otherwise used the crop as livestock fodder. 39 In relation to the carrying capacity of the land (pars 17 to 20) Mr Freeman claims the land had the capacity, because of the irrigation and cultivation of the land, to graze approximately 2,500 cattle on it. He claimed to be able to fatten and sell off 800 cattle through the breeding herd and an additional 200 to 400 bullocks more than he otherwise would expect to have done. Absent irrigation and cultivation, he estimated he would have been able to graze 1,600 cattle in dry times or 2,500 in good times. The cultivation allowed him to extend the fattening season throughout the year with the result that it became an annual enterprise instead of a seasonal one. 40 The affidavit then refers to a Mining Compensation Agreement (pars 21 to 46). Mr Freeman says that he first discovered mineral prospects in the land and surrounding area in about 1976. In late 1995 he entered into a Mining Joint Venture Agreement with a Mr Puce and with Roger and Ann Wenzel to explore, mine and market any minerals occurring in the land. They formed a company called Zinace Pty Ltd ('Zinace') in January 1996. The company took up a mineral exploration permit in May 1996 and a second permit in the later part of the same year. In May 1997 a Joint Venture Agreement was concluded between Zinace and North Mining Ltd ('North') for the exploration and mining of the tenements. 41 In September 1997 Mr Freeman entered into a Mining Compensation Agreement with Zinace in favour of himself in respect of the land. In or about that year Zinace had resolved to upgrade its exploration permit to a mineral development licence with a view to mining building stone on the property. North was not interested but required the Compensation Agreement to be made between Zinace and Mr Freeman before agreeing to the application for a mineral development licence proceeding. Under the agreement with Zinace the company agreed to buy the land at $5 million plus the value of millable timber on the land to be assessed, with settlement to occur on or by 9 September 1999. Zinace was to pay $3 per cubic metre of aggregate removed from the area during the period from October 1997 until settlement. A copy of the Compensation Agreement is exhibited to his affidavit (LNCF 1). 42 Mr Freeman claims that in September 1997 he spoke with Mr Luck of the Bank and advised him of the existence of valuable mining tenements on the property and of the Compensation Agreement. He says he told Mr Luck that he wanted to sell the land to Zinace under the Compensation Agreement and North's joint venture. A letter from the Bank dated 17 September 1997 is exhibited to the affidavit (LNCF 2). In that letter Mr Luck told Mr Freeman that the Bank disclaimed knowledge of any charge against the properties subject to its mortgage. 43 Mr Freeman alleges that his applications to the Department of Mines for mining development leases were sabotaged by the Bank which 'poisoned the well' with the Mining Registrar from 1998 onwards. After the property was sold by the Bank's receivers mining development lease documents were issued to Zinace. 44 Mr Freeman then claims that in March 1998 the Bank proposed a Workout Agreement under which it would extend time for compliance with its demands for repayment in exchange for a charge from Zinace over all its tenements (pars 47-49). However the agreement did not proceed. 45 Turning to the value of the land, Mr Freeman claims that in September 1997 HTW Valuers assessed the fair market value of the land at $1.5 million if sold in aggregate or $1.6 million if in subdivision. However, on 14 April 1998, according to an internal memorandum of the Bank, Mr Luck placed an estimated reserve of $770,000 on the land. The internal memorandum was exhibited to an affidavit sworn by Mr Freeman in July 2001. 46 He then recites the order made by Ambrose J on 11 October 2000 and the unsuccessful appeal (pars 54-56). The next topic in Mr Freeman's affidavit is the appointment of the receivers and managers (pars 57-58), they being Philip Arthur Hennessey and Geoffrey Earl Gray who were appointed on 11 October 2000. 47 He alleges an inadequate marketing program referring in particular to the limited duration of advertising of the sale of the land from 25 January 2001 to early March 2001. The land was put up for auction on 13 March 2001 but was passed in. 48 The absence of any proper advertisement of the property for sale is then addressed (pars 65-68). Mr Freeman exhibits an advertisement published on 1 March 2001 and refers to its failure to mention 'key features' of the property and in particular the irrigation. He also claims that the carrying capacity of the land was incorrectly advertised at 1,300 head of cattle. The true capacity, he says, is 2,000 to 2,500 cattle. He also complains that there was no mention in the advertisement of the Mining Compensation Agreement. 49 The next part of the affidavit is that particularly relied upon by Mr Freeman's counsel and refers to the alleged active participation by the Bank in the sale of the property at an undervalue (pars 69-77). He says in his affidavit that on or about 12 or 13 October 2000 he drove to Glassford Vale with Peter Lloyd of KPMG, representing the receivers and managers, for an inspection of the property. In the course of the inspection he asked Mr Lloyd when the property would be sold. He claims that Mr Lloyd said 'it's up to the Bank but about February or March 2001 I expect'. He asked Mr Lloyd how he would set the value if the property wasn't sold at auction. Mr Lloyd told him the Bank would do that. In the course of the return trip he asked Mr Lloyd how his firm, KPMG, had got the receivership. Mr Lloyd said to him 'the Bank is an audit client of KPMG'. 50 At this point in the affidavit Mr Freeman exhibits a memorandum from Mr Hennessey, the receiver, to Mr Luck of the Bank dated 9 January 2001 (LNCF 5). The memorandum enclosed correspondence for Mr Luck's perusal comprising outstanding rates and debtors advices from the Calliope Shire Council, details of cattle mustered and sold in conjunction with Primac Elders, details of cattle mustered and sold by one Sam Cox and a schedule of expenses paid and revenues received. Mr Hennessey then referred to advice from Mallesons that all amounts owing to the Calliope Shire Council would have to be paid by the receiver in order that the property could be sold with clear title. He requested the Bank's approval to pay the outstanding amount of $17,376.96 from receivership funds. He also requested that the Bank peruse the particulars of cattle mustered by Cox and confirm its approval to issue payment of $7,407.59 for the mustering of 54 cattle to that date. Mr Freeman asserts that the receivers reported to the Bank and kept the Bank informed of developments at each stage of the sale of the property. He also exhibits a copy of a facsimile dated 27 March 2001 from Mr Lloyd to Mr Luck (LNCF 6). This memorandum said shortly: 'Please find attached further offer dated 27 March from Ron and Ann Carige. Please confirm that this offer is also declined.' The written offer attached to the memorandum was for the sum of $90,000 per year for five years with a payment at the beginning of the sixth year of $150,000. The offer was made subject to suitable finance. The Proposed New Evidence - The Quinlan Affidavit Sworn 7 May 2002 51 Daniel Quinlan is a registered valuer. His affidavit exhibits a valuation report which he had been instructed to prepare by Mr Freeman in order to ascertain the unencumbered 'market value' of Glassford Vale as at 18 June 2001. In the valuation report he indicated that he had partially relied upon and/or considered the following matters: . Valuation dated 8 December 1997 by HTW Valuers Market Value in Subdivision - (highest and best use) - $1.6 million excluding commercial timber, gravel deposit value and mineral value under the Mining Compensation Agreement attached to the property. Stated valuation by HTW was 2,000 mixed head. . Auction brochure 1 May 1985 which described a carrying capacity of 2,500 mixed cattle in a breeding and fattening operation. . QRAA's estimate of carrying capacity. . Property inspection as of 17, 18 and 19 September 2000. The report assessed commercial timber on the property at a current value of $200,000. Carrying capacity was estimated at 2,400 head of adult stock by inspection. Mr Quinlan also referred to advice from Mr Freeman that a Mining Compensation Agreement had been negotiated and registered in the Mines Department. The valuer asserted that the purchasers of the property could have that agreement available to them. He referred in his report to the sale of the property on 18 July 2001 by the receivers and managers on behalf of the Bank for $800,000 following what appeared to have been a four to six week selling period. He considered the timeframe for the advertising was inadequate and the more reasonable advertising timeframe would be three months. He also claimed that the advertisements which he had seen excluded value improvements as well as mis-stating the sustainable carrying capacity of the property. The advertisements, he said, failed to mention irrigation, cultivation and the value of saleable timber and gravel attached to the property and developed on the property. If the Mining Compensation Agreement had existed at the time of sale the receivers and managers may have failed to advise their prospective purchasers that a Mining Compensation Agreement was present. 52 Mr Quinlan noted that on 8 December 1997 HTW Valuers had valued the property at $1.6 million at its highest and best use. A carrying capacity of 2,000 head of mixed cattle was assessed. Mr Quinlan found it difficult to believe that carrying capacity should have decreased by 1,300 head as suggested in the advertising material. Additionally the property market did not appear to have decreased since December 1997 such that the property would only be worth $800,000 at 18 June 2001. His valuation of the property as at 18 June 2001 was $2,200,000 plus timber sold by the receivers and managers up to the date of sale of Glassford Vale.