Kosho Pty Ltd & Anor v Trilogy Funds Management Ltd; Trilogy Funds Management Ltd & Ors v Fujino [2013] QSC 135

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - where developer (Kosho) entered into a finance facility with a lender (Trilogy) for a proposed development on the Gold Coast - where offer of finance subject to numerous Special Conditions - where Special Condition (p) required an "unconditional copy of the sale contract for the commercial property" to be provided and a 10 per cent deposit - whether Kosho's provision of a Put and Call Option Deed and Security Bond satisfied Special Condition (p)

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - CONDITIONS - GENERAL MATTERS - where Special Condition (s) required Trilogy to prepare a deed of assignment and consent which was satisfactory to Trilogy as lender and the Department of Main Roads - where Kosho claims that Trilogy engaged in unreasonable delay in negotiating and preparing a satisfactory deed - whether the delay by Trilogy was unreasonable

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - IMPLIED TERMS - GENERALLY - where Kosho alleges certain terms are implied into the finance facility- whether those terms meet the conditions for implication - whether a duty of good faith should be implied - whether Trilogy breached any implied terms

DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTION FOR BREACH OF CONTRACT - REMOTENESS AND CAUSATION - GENERAL PRINCIPLES - where the Kosho and a third party mortgagor seek damages for loss of the opportunity to derive a profit from proposed developments and loss of equity in their respective properties - whether any loss or damage was caused by Trilogy's alleged breach of contract - whether the plaintiffs have proved the quantum of their claimed loss and damage

Australian Securities and Investments Commission Act 2001 (Cth) s 12DA

Competition and Consumer Act 2010

Trade Practices Act 1974 (Cth) s 51AC, s 52

Attorney-General (NSW) v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557, applied

Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104, cited

BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; (1977) 180 CLR 266, cited

Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558, cited

Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) 244 ALR 759, cited

Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337, cited

Commonwealth Bank of Australia v Renstel Nominees Pty Ltd [2001] VSC 167, cited

Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471, cited

Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903; [1999] ATPR 41-703, cited

Higgins and Fidge v Drysdale [1996] VicRp 22; [1996] 1 VR 346, cited

Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41, cited

Jackson Nominees Pty Ltd v Hanson Building Products Pty Ltd [2006] QCA 126, cited

K & K Real Estate Pty Ltd v Adellos Pty Ltd [2010] NSWCA 302, cited

Laurelmont Pty Ltd v Stockdale & Leggo (Queensland) Pty Ltd [2001] QCA 212, cited

Lewis v Hillhouse [2005] QCA 316, cited

Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268, cited

McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579, cited

McGrath v Australia Naturalcare Products Pty Ltd [2008] FCAFC 2; (2008) 165 FCR 230, cited

Ministry of Defence v Wheeler [1997] EWCA Civ 2647; [1998] 1 All ER 790; 1 WLR 637, cited

Mullins v Kelly-Corbett [2010] QCA 354; (2011) Q ConvR 54-748, cited

Nilon v Bezzina [1988] 2 Qd R 420, applied

Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, cited

Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235, cited

Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126, cited

PSAL Ltd v Kellas-Sharpe [2012] QSC 31, cited

Questband Pty Ltd v Macquarie Bank Ltd [2009] QSC 7, cited

Rainy Sky S.A. and Ors v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900, cited

Ratcliffe v Evans [1892] 2 QB 524, cited

Renard Constructions (ME) v Minister for Public Works (1992) 26 NSWLR 234 cited

Secure Parking (WA) Pty Ltd v Wilson [2008] WASCA 268; (2008) 38 WAR 350, cited

Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596, cited

Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332, applied

South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; (2000) 177 ALR 611, cited

The Commonwealth v Amann Aviation Pty Ltd [1994] HCA 54; (1991) 174 CLR 64, applied

Toll (FGCT) Pty Limited v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, cited

Watson v Foxman (2000) 49 NSWLR 315, cited

R G Bain QC and I A Erskine for the plaintiffs in BS 4728 of 2010 and the defendant in BS 10543 of 2010 ("the Kosho/Fujino interests")

P J Flanagan SC and J M Horton for the defendant in BS 4728 of 2010 and for the plaintiffs in BS 10543 of 2010 ("the Trilogy interests")

This is a case about a proposed development on the Gold Coast that did not proceed because of lack of funds. In the first proceeding, the developer ("Kosho") sues over the alleged failure of a lender to provide funds under a 2009 Facility. The lender says that it was not obliged to do so because certain special conditions were not satisfied. In the second proceeding, the lender sues the director and sole shareholder of Kosho,

Ms Fujino, pursuant to a guarantee dated 19 October 2007 for monies which it says are payable by Kosho under the terms of an earlier facility agreement.

[1] In 2004 Kosho acquired land on the Nerang-Broadbeach Road at Nerang. It hoped to develop the 4.44 ha site into an integrated, mixed-use, master-planned development to be known as the Abadi Residential Village. The development was to be on a large scale incorporating 333 apartments (or 328 apartments and a

32 suite hotel) in addition to commercial/retail space. The first stage was to include 124 units in five separate buildings, with 1600 m² of shops and restaurants. The first stage, in turn comprised five individual stages: 1A, B1, B2, C and D.

[2] By mid-2007 Kosho's debt needed to be refinanced. It approached City Pacific Limited ("CPL"). On or about 17 October 2007 CPL as responsible entity of the Pacific First Mortgage Fund ("PFMF") offered Kosho a finance facility of $12,610,000 (2007 Facility). This offer was accepted by Kosho. The security provided for the 2007 Facility included a first registered mortgage over the development site at Nerang (which Kosho in these proceedings describes as "the Carrara land"), a first registered third party mortgage granted by City Co Pty Ltd ("City Co") over land situated at 3 Beach Road, Surfers Paradise ("the Surfers Paradise land") and a deed of guarantee and indemnity granted by Ms Fujino. City Co was associated with Kosho and formed part of a group known as Coast Land International. A proposal existed to develop a 19 storey boutique hotel on the Surfers Paradise land. In excess of $10m was advanced under the 2007 Facility. The 2007 Facility was for a term of 18 months.

[3] In early 2009 the Kosho interests (which I will refer to simply as Kosho) began negotiations for a new facility which would cover its existing debt and assist with sales and marketing, development and construction costs in relation to Stage 1A of the Abadi Residential Village. This culminated in a Letter of Offer dated

24 June 2009 from CPL for that purpose. This offer was promptly accepted by

Ms Fujino on behalf of Kosho and on behalf of City Co as third party mortgagor. The 2009 finance facility (2009 Facility) was for a total amount of $16m and the Letter of Offer dated 24 June 2009 stated:

"· $16,000,000.00 (Sixteen Million Dollars) to be advanced generally to meet the following costs:

Less proceeds from sale of Commercial Property ($2,647,937)"

[4] The 2007 Facility, which was originally due to expire on 19 April 2009, was extended, initially to 30 April 2009, and later to 30 June 2009, so as to enable Kosho to negotiate the 2009 facility. The term of the 2009 Facility was 12 months. In that regard, the letter stated:

"Facility to expire 30 June 2010. An option to extend the facility may be approved by the Lender provided the Lender is satisfied with the progress of the project and no event of default exists. It is the intention of the City Pacific First Mortgage Fund to finance the entire project (as per proposal dated March 2009), using best endeavours, however the facility will be reviewed on 30 June 2010 at which time a decision will be made on extending the facility if at all possible. Any extension will be at the sole discretion of the City Pacific First Mortgage Fund."

The offer was subject to numerous Special Conditions. Special Condition (g) related to progress payment claims in respect of construction. Special Condition (k) related to the mortgage over the Surfers Paradise land and provided:

"(k) The Lender agrees to release any encumbrance over Lot 3 Beach Road upon provision of a $3,000,000.00 cash payment and/or achieving Project (Stage 1A) loan to value ratio of 67% and/or future Project Sub-stages achieving a loan to value ratio less than 70%. Any release of security will be subject to an updated valuation of the remaining security property dated within 30 days of the release."

[5] The Special Conditions which assume greatest importance in the Kosho proceedings are Special Conditions (p), (q) and (s). These provide as follows:

"(p) This offer is subject to an unconditional copy of the sale contract for the commercial property being provided to the Lender's solicitor and confirmation from the Lender's solicitor that the sale is unconditional and a deposit of 10% has been paid.

(q) This offer is conditional upon the commercial property settling on or before 28 February 2010.

(s) This offer of finance is conditional on, and subject to:

(i) the borrower entering into a deed of assignment and consent in relation to the agreement between the Department of Main Roads, Kosho Pty Ltd and Club Cavill Pty Ltd (Assignment Deed) to be prepared by, and on terms satisfactory to the Lender;

(ii) the borrower causing Club Cavill Pty Ltd to enter into the Assignment Deed.

(iii) the Department of Main Roads confirming that it is satisfied with the terms of the Assignment Deed; and

(iv) the Assignment Deed being entered into and binding on the Borrower and Club Cavill Pty Ltd (and the Borrower providing two originals of the Assignment Deed executed by both the Borrower and Club Cavill Pty Ltd to the Lender) within 2 business days of receipt of the Assignment Deed."

[6] On 20 July 2009 Trilogy Funds Management Limited replaced CPL as responsible entity of PFMF.

[7] The funds to meet construction and consultant costs of $2,193,830 were never advanced. The Trilogy interests (which I will refer to simply as Trilogy) say that this was because Special Conditions (p), (q) and (s) were never satisfied.

[8] Kosho contends that Special Condition (p) was satisfied and that it was disabled from complying with Special Conditions (q) and (s) by Trilogy's conduct. Kosho's essential allegation is that Trilogy unreasonably delayed in its consideration and determination of Kosho's compliance with the requirements of the 2009 Facility, and, in particular, delayed in entering into a deed of assignment on terms satisfactory to Trilogy and terms satisfactory to the Department of Main Roads ("DMR") in accordance with Special Condition (s). It alleges that by failing to advance funds under the 2009 Facility by, at the latest, the end of October to early November 2009 so as to enable Kosho to commence the development and the construction of Stage 1A, Kosho was disabled from complying with Special Condition (q).

[9] Kosho alleges that by acting as it did, Trilogy breached certain implied terms of the 2009 Facility. Trilogy contests the existence of most of the alleged implied terms, and also denies that it breached any implied terms.

[10] Kosho makes a multi-million dollar claim for damages for breach of contract in respect of the profit which it says it would have earned from the successful development of the project. Trilogy responds that:

(a) the lender had no obligation to advance the funds, having regard to the terms of the offer and Special Conditions (p), (q) and (s);

(b) even if there was such an obligation, the additional funding was for Stage 1A of the development, and Kosho would therefore have had, in any event, to seek a great deal more funding in order to be in a position to derive profit;

(c) it is totally unrealistic to suggest that such funding could have been obtained at a cost which would have allowed Kosho to profit from the development (assuming it could in fact have been obtained); and

(d) the development would not, in any event, have returned a profit: the global financial crisis intervened and the Gold Coast property market fell into a major decline from which it has not, even yet, emerged.

[11] Kosho also advances claims for alleged misleading and deceptive conduct and alleged unconscionable conduct. Each of Kosho's claims give rise to the same essential issue of causation. There also is a substantial issue about the assessment of Kosho's alleged loss and damage.

[12] A separate issue arises in relation to CPL's alleged failure to discharge the mortgage over the Surfers Paradise land pursuant to a request made on 8 April 2009. The short answer to this claim is that the request to release the mortgage was superseded by negotiations whereby the Surfers Paradise land was to be offered as security as part of the 2009 Facility.

[13] In this proceeding Trilogy claims as a debt from Ms Fujino monies owing under the guarantee granted by her dated 19 October 2007. Ms Fujino defended this proceeding, and the substantive ground of defence was that, by reason of her alleged limited ability to read English, she was in a position of disadvantage when signing the guarantee, CPL was aware of the possibility that such disadvantage might exist and that the transaction was unfair. After this "unconscionability" issue was litigated and identified as the only substantive issue in the Fujino proceeding, Trilogy made written submissions filed 10 December 2012. It was only in the Kosho submissions filed 1 February 2013 that Ms Fujino abandoned reliance on the matters relating to her alleged position of disadvantage in executing the guarantee, which featured in her defence and counterclaim. The late abandonment of this defence and counterclaim has implications for costs.

[14] The remaining issue in the guarantee action is whether Kosho has a claim for damages which can be set-off against its liability under the 2007 Facility (as varied), and thereby reduce or extinguish the debt which Ms Fujino guaranteed. Accordingly, the Fujino proceeding depends on the resolution of the damages claim in the Kosho proceeding.

[15] The substantial issues may be summarised as follows:

(2) Did conduct by Trilogy, in breach of contract, disable Kosho from complying with Special Conditions (q) and (s)?

(3) Did Trilogy engage in the misleading and deceptive conduct which is alleged?

(4) Did Trilogy engage in the unconscionable conduct which is alleged?

(5) Issues of causation. The relevant inquiry is about the position that Kosho and City Co each would have been in if Trilogy had performed the contract and not engaged in the alleged conduct in breach of statute. A particular inquiry is whether Kosho would have been entitled to obtain an advance for the purpose of consultants' fees and construction costs if Trilogy had not conducted itself as alleged, and what would have happened if Kosho had obtained the requested funds.

(6) The final issue is the assessment of the quantum of any loss and damage that was caused to Kosho by any breach of contract and/or contravention of statute that is established by Kosho. Kosho and City Co each claim substantial damages on the basis of the loss of the opportunity to develop the Carrara land and the loss of the opportunity to develop the Surfers Paradise land and that each has suffered loss of equity in those properties.

[16] It is convenient to set out again the words of Special Condition (p):

"(p) This offer is subject to an unconditional copy of the sale contract for the commercial property being provided to the Lender's solicitor and confirmation from the Lender's solicitor that the sale is unconditional and a deposit of 10% has been paid."

It is common ground that the "commercial property" referred to in Special Condition (p) and also in Special Condition (q) is a commercial property comprising Stage 1A.

[17] On 3 January 2009 Kosho (as grantor) entered into a Put and Call Option Deed with a Japanese businessman, Hiroo Ota (as grantee). In simple terms, the Put and Call Option Deed granted Mr Ota a Call Option to purchase proposed Lots 1 to 10 (inclusive) in the commercial property that was to be constructed. It also granted Kosho a Put Option to require Mr Ota to purchase the lots. If the Call Option was exercised then a contract for the sale and purchase of each of the lots in the form of a contract contained in Schedule 2 to the Deed was to be delivered to Kosho along with a deposit amounting to 10 per cent of the purchase price of $8m plus GST. The unconditional contract contained in Schedule 2 was in the form of contract approved by the Real Estate Institute of Queensland and the Queensland Law Society for commercial land and buildings.

[18] The Put Option constituted an irrevocable offer by Mr Ota to enter into such a contract. The exercise of the Put Option required Kosho to deliver to Mr Ota an executed copy of the contract. The Put and Call Option Deed provided that a contract for the sale and purchase would come into existence between Mr Ota and Kosho upon the delivery of that executed contract. Mr Ota was required to execute the contract and cl 14.1 of the Deed granted Kosho an irrevocable power of attorney to sign on Mr Ota's behalf any contract of sale that came into existence under the Deed.

[19] Clause 12 of the Put and Call Option Deed required Mr Ota to pay a Security Bond to Kosho's solicitors when he signed the Deed, and provided for the Security Bond to be held by that firm as security for the performance of Mr Ota's obligations under the Deed. Clause 12.2 provided that if the Call Option or the Put Option was exercised, the part of the Security Bond set out in the Deed as relevant to each lot would be "credited towards the deposit payable" under the contract applicable to that lot. If neither the Call Option nor the Put Option was exercised any remaining amount of the Security Bond was to be refunded. A Security Bond of $800,000 was paid on 28 January 2009 and was held in Kosho's solicitor's trust account until October 2010, when Kosho terminated the Put and Call Option Deed and released the Security Bond back to Mr Ota.

[20] Clause 28 of the Put and Call Option conferred upon Kosho an entitlement to terminate the Deed in certain events, including if any approval by a federal, state or local government authority was not given, or was withdrawn, changed, suspended or declared invalid. Kosho also was able to terminate the Deed if any approval was subject to a condition that it was unable to comply with, or was dissatisfied with because, in Kosho's opinion, complying with a condition may prevent or hinder or delay the profitable completion and/or disposal of the development.

[21] CPL knew of the Put and Call arrangement as early as February 2009. Kosho's revised March 2009 funding submission which was provided to CPL on

2 April 2009 contained a copy of the Put and Call Option Deed.

[22] Kosho did not exercise its option, and neither did Mr Ota.

[23] Kosho submits that Special Condition (p) was satisfied by the provision of the Put and Call Option Deed on various dates after the 2009 Facility was agreed, including 29 June 2009, 2 July 2009 and 11 August 2009.

[24] Trilogy responds that Special Condition (p) was never satisfied since:

(a) what was provided by Kosho was a Put and Call Option Deed, and not a "sale contract";

(b) there was no deposit but a Security Bond which was to be credited "towards the deposit" payable under a yet to be executed sale contract and which, unlike a deposit, was to be refunded to the grantee if the option was not exercised; and

(c) the Put and Call Option Deed was not "unconditional" since it was conditional upon approvals and other conditions specified in cl 28.

[25] These contentions raise three issues as to whether Special Condition (p) was satisfied:

(a) Is the Put and Call Option Deed a "sale contract for the commercial property" within the meaning of Special Condition (p)?

(b) Was the Security Bond a "deposit" within the meaning of that Special Condition?

(c) Was the Put and Call Option Deed an "unconditional" sale contract for the commercial property?

If Trilogy is correct in its contention that Special Condition (p) was not satisfied, then Kosho argues that performance of the Special Condition was dispensed with by Kosho in the circumstances so that it was excused from actual performance.

The issue of construction: is the Put and Call Option Deed a "sale contract for the commercial property"?

[26] The principles of construction are not disputed. They can be shortly stated.

[27] The meaning of the contract is to be determined objectively according to what a reasonable person in the position of the parties would understand the words to mean. If there is ambiguity, regard may be had to the commercial purpose of the transaction and background knowledge which would have been available to the parties. An interpretation which will give the contract a businesslike operation is to be preferred. Commercial contracts should be construed to make commercial sense of them. An absurd, unreasonable or capricious result is to be avoided.

[28] The starting point is the natural and ordinary meaning of the expression. The Court seeks to ascertain what the parties meant by the words they have used. An objective approach is applied.[1] It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe.[2]

[29] Evidence of the surrounding circumstances is only admissible where the words are ambiguous. Unambiguous language cannot be disregarded simply because the contract would have a more commercial and businesslike operation if an interpretation different to that dictated by the language was adopted.

[30] The interpretation should accord with what commercial people in the position of the parties would understand the words to mean. The interpretation should be "consistent with business common sense."[3] In the case of an ambiguous expression, the "more commercially sensible" construction should be preferred.

[31] In summary, interpreting a commercial document such as the Letter of Offer requires attention to "the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure."[4]

[32] Kosho submits that a Put and Call Option Deed is the style of contract often used in off-the-plan "multiple lot" commercial sales in the development industry in Queensland. So much may be accepted. But that is not the present issue. The issue is whether the Put and Call Option Deed dated 3 January 2009 is a "sale contract for the commercial property" within the meaning of Special Condition (p). Kosho points to the terms of the Put and Call Option Deed, and submits that there were no rights to terminate reposed in the buyer and that "all the flexibility lay with the Seller". If the buyer did not exercise the Call Option, Kosho was entitled to exercise the Put Option and compel execution of a contract in terms of the unconditional contract appearing in Schedule 2. However, the fact that Kosho could have compelled Mr Ota's entry into (and later settlement of) an unconditional sale contract for the commercial property does not mean that the Put and Call Option Deed was itself a "sale contract for the commercial property" within the meaning of Special Condition (p). The language of Special Condition (p) and its context do not favour Kosho's construction of it.

[33] I accept Trilogy's submission that, by this condition, the lender sought the certainty of a pre-sale of the very first stage of the development which it was to fund. The

24 June 2009 Letter of Offer anticipated that the funding would be used, among other things, to meet consultants and construction costs in relation to Stage 1A and that the total amount of the 2009 Facility of $16m would be reduced by the proceeds of sale of the commercial property. Special Condition (q) indicates that as at 24 June 2009 the parties anticipated the construction of Stage 1A and settlement of the sale of the commercial property occurring on or before 28 February 2010.

[34] An unconditional sale contract for the commercial property, which bound the buyer of that property to pay an agreed purchase price, would provide a commercial lender with a higher degree of assurance of its loan being repaid or reduced in amount than a Put and Call Option Deed, which did not oblige either party to enter into such a contract and which permitted Kosho to terminate the Put and Call Option Deed in certain events. Such a Deed would provide the lender with no assurance that a sale contract for the commercial property would come into existence. No such contract would come into existence if neither party exercised its option, and no such contract would come into existence if Kosho chose to terminate the Deed (for example because it was dissatisfied with a condition which a local government authority placed upon the proposed development).

[35] Special Condition (p) came to be negotiated in circumstances in which the parties had communicated about the Put and Call Option Deed dated 3 January 2009. If that Deed and the payment of the Security Bond under it were sufficient to meet the commercial purpose of Special Condition (p), then its inclusion seemingly was unnecessary. The inclusion of Special Condition (p) and the fact that its terms were not confined to provision of the previously agreed Put and Call Option Deed suggest that the parties envisaged that the provision of some other form of contract and confirmation of the payment of a 10 per cent deposit might satisfy the condition. It does not necessarily mean that provision of the Put and Call Option Deed and confirmation that a Security Bond had been paid pursuant to it would satisfy Special Condition (p). The condition might have been satisfied by the provision of a copy of the sale contract entered into upon the exercise of either the Put Option or the Call Option. It might have been satisfied by the provision of a different sale contract for the commercial property in the event that neither option was exercised. The language of Special Condition (p) indicates that before advancing funds under the 2009 Facility, CPL wished to obtain a copy of a contract for the sale of the commercial property, not simply a contract which would give rise to an unconditional, binding sale contract if and when an option was exercised.

[36] The conclusion that Special Condition (p) required a sale contract of the kind that was in Schedule 2 to the Deed, or some other form of immediately binding contract for the sale of the commercial property, and was not satisfied by provision of the Deed, is reinforced by the requirement that the contract be "unconditional" and that a "deposit" of 10 per cent had been paid. The payment of a deposit of 10 per cent was an earnest of a committed buyer's performance of its obligation to complete the sale contract and might be forfeited to the benefit of both the lender and the borrower if the buyer did not complete. By contrast, the provision of a copy of the Put and Call Option Deed and confirmation that a Security Bond had been paid pursuant to it provided no assurance that a "sale contract" would be entered into and a deposit paid pursuant to it. Either party to the Put and Call Option Deed might choose for either good or idiosyncratic reasons to not exercise the option. Kosho might choose for good or idiosyncratic reasons to terminate the Deed pursuant to

cl 28, perhaps in the hope of finding a buyer which would offer a higher purchase price. Such a course would provide a lender with far less assurance than a binding sale contract that the commercial property would be sold with the proceeds of sale available to reduce the loan.

[37] The text and context of Special Condition (p) lead me to conclude that the "sale contract for the commercial property" was one which imposed binding contractual obligations on a buyer which could be enforced to the benefit of the lender and the borrower, being in the form of a "sale contract", rather than a contract which gave each party to it an option to require the other to enter a sale contract for the commercial property if certain events came to pass.

[38] I conclude that the Put and Call Option Deed dated 3 January 2009 was not a "sale contract for the commercial property" within the meaning of Special Condition (p).

[39] In addition, any confirmation that the Security Bond provided for in cl 12 of the Deed had been paid did not amount to confirmation that "a deposit of 10 per cent" had been paid. The Security Bond was not a deposit. If a sale contract eventuated then the amount paid under the Security Bond might have been "credited towards the deposit payable" under the contract. The Security Bond was not a deposit and the absence of confirmation that "a deposit" of 10 per cent had been paid provides an additional ground upon which Special Condition (p) was not satisfied.

[40] This makes it unnecessary to determine the third sub-issue as to whether the Put and Call Option Deed was "unconditional". In its context I consider that the word "unconditional" was intended to require the sale contract to be one which was not subject to a condition which might result in it not being performed, such as a condition making it subject to finance. Trilogy argues that conditions such as those appearing in cl 28 of the Put and Call Option Deed, which reserved to Kosho wide discretions to not proceed with the project and to terminate the Deed in certain events, including changes to an approval or the imposition of conditions upon approval which Kosho was "dissatisfied with", made the Put and Call Option Deed a conditional one. Clause 28.3 made Kosho's obligations conditional upon it obtaining, by 15 January 2010, pre-sales of lots in the residential component of the development of an aggregate gross value of at least $50m. In response, Kosho submits that it obtained the relevant development approval on 20 January 2009, and the fact that it might terminate the Deed in certain circumstances under cl 28.1 ignores:

• the fact that it was entirely in Kosho's interests to obtain finance and settle the sale of the commercial property;

• that the relevant conditions were expressed to be for the benefit of Kosho and could be waived by it; and

• that upon the Call Option being exercised by it, Mr Ota became unconditionally and irrevocably bound to execute an unconditional contract in the form appearing in Schedule 2, and if he did not execute the contract, then Kosho might do so pursuant to its power of attorney.

[41] I am inclined to conclude that if the Put and Call Option Deed was in fact a "sale contract for the commercial property" and if Kosho had waived the benefit of the conditions contained in cl 28 then it would have become "unconditional" within the meaning of Special Condition (p). However, Kosho did not waive those conditions. Accordingly, the agreement was not "unconditional".

[42] If, however, Kosho is correct in submitting that the agreement was "unconditional", notwithstanding the presence of cl 28 which made the Deed and Kosho's obligations under it subject to certain conditions, then this tends to reinforce the conclusion which I have reached about the meaning of "sale contract for the commercial property". On Kosho's case it was sufficient for it to satisfy Special Condition (p) to again provide on 29 June 2009 a copy of the Put and Call Option Deed and to confirm that the Security Bond had been paid. On such an approach, the Special Condition having been satisfied, it would have been open to Kosho to terminate the Deed pursuant to cl 28 a short time afterwards if one or more of the circumstances stated in cl 28 existed. According to Kosho, Special Condition (p) would have been satisfied in circumstances in which neither party to the Put and Call Option Deed exercised its option, so as to cause an unconditional binding contract for the sale of the commercial property to come into existence. I decline to conclude that the parties, by their choice of the words contained in Special Condition (p), should be taken to have intended that Special Condition (p) would be satisfied in such a case. In their context, the words "sale contract for the commercial property" should be interpreted to refer to an immediately binding contract for the sale of the commercial property, not an agreement which conferred an option to require the other party to enter into such a contract in certain events.

[43] The interpretation urged by Trilogy, and which I prefer, best accords with the apparent commercial objective of Special Condition (p), namely to provide the lender with the assurance that an unconditional contract for the sale of the commercial property had been entered into, supported by the payment of a

10 per cent deposit, being a contract which would yield sale proceeds and thereby reduce the amount of the loan.

[44] I conclude that Kosho did not provide a "sale contract for the commercial property" within the meaning of Special Condition (p). There was no confirmation that such a sale contract was "unconditional" and that a "deposit" of 10 per cent had been paid. Kosho failed to satisfy Special Condition (p) and by reason of its non-compliance Trilogy was entitled not to advance the further funds that were the subject of the 2009 Letter of Offer.

Dispensation with performance of Special Condition (p)

[45] As an alternative to its contention that Special Condition (p) was satisfied, Kosho submits that it was excused from performance of the condition in the circumstances. This contention rests largely upon Trilogy's delay in advising Kosho that in Trilogy's view, Special Condition (p) was not satisfied.

[46] In response, Trilogy says that its delay in advising that Special Condition (p) had not been satisfied is immaterial since:

(a) Kosho does not plead that Trilogy's alleged omission amounted to a waiver of the condition or that some form of estoppel arose;

(b) no cause of action is advanced by Kosho which provides any other basis to ignore the condition; and

(c) a failure to advise another party to a contract that they have not met their obligations is, without more, no basis to say that the relevant obligation is expunged from the contract.

Kosho accepts that it has not claimed that the condition was waived or that Trilogy is estopped from relying upon it. It does not advance any cause of action based upon Trilogy's delay and silence. It does not contradict the third proposition advanced by Trilogy and which I have summarised at (c) above. Instead, Kosho argues that it was for Trilogy to reject "the proffered performance" if it thought it had such an entitlement, and that, in the circumstances, it was excused from performing Special Condition (p).

[47] The essential facts concerning Trilogy's delay and the communication of its position in relation to satisfaction of Special Condition (p) are as follows. On

20 October 2009 Trilogy's then solicitors wrote to Kosho's then solicitors and noted that there were "a number of outstanding conditions precedent in respect of the above facility". The first outstanding condition that was nominated was "an unconditional sales contract for the commercial property". By letter dated

27 October 2009 Kosho's solicitors stated that a copy of the unconditional commercial sales contract had been provided on 29 June 2009 and that on

11 August 2009 Kosho's solicitors had confirmed that this document, namely the Put and Call Option Deed, was held on file. The letter also confirmed that $800,000 was held in the solicitors' trust account being the "security bond paid by the Grantee under the Put and Call Option Deed". Kosho's solicitors contended that all the required items had been provided. There was no immediate response to that correspondence, despite follow-up communications from Kosho's solicitors and its "Chief Executive Officer - project partner", Mr Slijderink.

[48] In February 2010 Trilogy and its solicitors were negotiating with DMR and its solicitors in connection with a deed of assignment that would satisfy Special Condition (s). They advised that once the final deed with DMR was satisfactory, and subject to the "conditions precedent" being satisfied, the PFMF would advance funding. On 17 February 2010 Trilogy's solicitors, Clayton Utz, declined to comment on specific Special Conditions until such time as the deed had been agreed with all parties. On 23 February 2010 Clayton Utz described an assertion in

Mr Slijderink's email of 18 February 2010 that Trilogy was satisfied with all other conditions and/or Special Conditions as "totally incorrect", and advised that Trilogy would not review the status of the loan conditions until the terms of the deed with DMR had been settled.

[49] Trilogy's solicitors' email of 23 February 2010 did not communicate an acceptance of Kosho's position in relation to Special Condition (p). The status of Special Condition (p) and other conditions was to be reviewed, but Trilogy did not resile from the position which it had adopted on 20 October 2009, namely that an unconditional sales contract for the commercial property had not been provided.

[50] In the absence of any plea or submission based upon principles of waiver or estoppel, Kosho's written submissions relied upon authorities concerned with "Dispensation with performance of condition" in arguing that it was excused from satisfying Special Condition (p). The authorities relied upon by Kosho in this regard are to the effect that "a plaintiff may be dispensed from performing a condition by the defendant expressly or impliedly intimating that it is useless for him to perform it and requesting him not to do so."[5] In oral submissions, Kosho's Senior Counsel acknowledged that the principle concerning dispensation with performance required an express or implied intimation that it was useless for Kosho to perform, and that no such intimation was given. This acknowledgment was correctly made since the evidence does not demonstrate that Trilogy intimated, either expressly or impliedly, that Kosho need not perform Special Condition (p), or that it was useless for it to do so.

[51] Kosho advanced a different argument, which had not been developed in its written submissions, or pleaded by it, that the provision of the Put and Call Option Deed and confirmation that the Security Bond had been paid constituted "substantial performance" of Special Condition (p). I am unable to agree that proffering the Put and Call Option Deed in lieu of a "sale contract for the commercial property" constituted substantial performance, or that it was accepted as such by Trilogy. For the reasons discussed in connection with the issue of construction, the Put and Call Option Deed differs substantially from a binding and unconditional sale contract of the kind which might have come into existence had Kosho or Mr Ota exercised their respective options. In addition, no deposit was paid and the absence of a deposit is another reason why there was not substantial performance of Special Condition (p). The payment of a Security Bond which was refundable in the event an option was not exercised is unlike a non-refundable deposit that is paid under an unconditional contract of the kind appearing in Schedule 2 to the Put and Call Option Deed.

[52] The failure of Kosho to satisfy Special Condition (p) (either according to its terms or in substance), coupled with the fact that Trilogy did not intimate to Kosho that it need not satisfy the condition, entitled Trilogy to not advance the further funds that were the subject of the 2009 Facility.

"(q) This offer is conditional upon the commercial property settling on or before 28 February 2010."

It is common ground that this condition was not satisfied. Kosho argues that it was disabled from being in a position to satisfy Special Condition (q) because of the failure of Trilogy to advance monies intended for consultants' costs in relation to the design of the commercial property and the costs needed to construct it. Documents associated with the requested funding, including a spreadsheet annexed to a funding submission anticipated that the construction costs for Commercial Building A would be $880,000, spread over five months with an anticipated settlement of the commercial property in the seventh month of the project timeline yielding $2,750,000. Kosho had no other source of available funds to meet the required construction costs, let alone consultants' costs which would have to be incurred to specify the construction that was to be undertaken so as to facilitate entry into an anticipated tripartite agreement between Kosho, the builder and CPL as mortgagee.

[54] If Kosho had established that it satisfied Special Condition (p) and satisfied the other conditions (particularly Special Condition (s)) so as to entitle it to have further funds advanced to it in mid to late 2009, then I may have been satisfied that Trilogy's breach of agreement in not advancing the funds disabled Kosho from being in a position to satisfy Special Condition (q). However, Kosho's failure to comply with Special Condition (p) meant that there was no obligation on Trilogy to advance funds under the 2009 Facility. Therefore, whilst the failure to advance monies intended for construction costs disabled Kosho from satisfying Special Condition (q) Trilogy was not obliged to advance those monies because Special Condition (p) was not satisfied.

[55] As to Special Condition (q), if both Conditions (p) and (s) had been satisfied then Trilogy would have been obliged to advance monies intended for construction costs once those conditions were satisfied. Any failure to do so may have disabled Kosho from satisfying Special Condition (q), depending on questions of timing. Since Trilogy was not obliged to advance monies because Kosho failed to satisfy Special Condition (p) Kosho's inability to satisfy Special Condition (q) was not the result of a breach of contract by Trilogy. Kosho's failure to satisfy Special Condition (q) is not excused by reason of Trilogy's breach of an obligation to advance the required construction costs.

[56] I have concluded that Trilogy was not obliged to advance further funds under the 2009 Facility including funds intended for construction costs, because Special Condition (p) was not satisfied. In the circumstances, Kosho's failure to satisfy Special Condition (q) provides an additional ground upon which Trilogy can rely in defence of Kosho's claim that it was entitled to have further funds advanced to it.

Special Condition (s) and its contractual context

[57] It is convenient to again set out Special Condition (s):

"(s) This offer of finance is conditional on, and subject to:

(i) the borrower entering into a deed of assignment and consent in relation to the agreement between the Department of Main Roads, Kosho Pty Ltd and Club Cavill Pty Ltd (Assignment Deed) to be prepared by, and on terms satisfactory to the Lender;

(ii) the borrower causing Club Cavill Pty Ltd to enter into the Assignment Deed.

(iii) the Department of Main Roads confirming that it is satisfied with the terms of the Assignment Deed; and

(iv) the Assignment Deed being entered into and binding on the Borrower and Club Cavill Pty Ltd (and the Borrower providing two originals of the Assignment Deed executed by both the Borrower and Club Cavill Pty Ltd to the Lender) within 2 business days of receipt of the Assignment Deed."

Subclause (s)(i) requires the deed of assignment and consent to be "in relation to" the 5 June 2007 Deed of Agreement. The deed of assignment and consent is to be prepared by the lender. Its terms are to be "satisfactory" to the lender. They also must be satisfactory to DMR which, of course, was not a party to the 2009 Facility, and was not an entity which Trilogy could direct. DMR was free to withhold any confirmation that it was satisfied with the terms of the deed of assignment and consent for whatever reason. Special Condition (s) envisaged that Kosho would cause its related entity, Club Cavill Pty Ltd ("Club Cavill"), to enter into the deed and that it and Club Cavill enter into it within two days of receipt.

[58] Special Condition (t) provides an important context. It relevantly provides:

"As part of this facility the City Pacific First Mortgage Fund agrees to rebate costs and fees to the borrower to a maximum amount of $2,800,000.00. This is compensation for the transfer of the rights and obligations to Sunrise Waters Pty Ltd as agreed between Club Cavill (a related entity of the borrower) and the Department of Main Roads, in relation to the adjacent Sunrise Waters property in accordance with special condition (s).

The compensation is paid on the basis that it is in full and final settlement of all claims that the Borrower and/or Club Cavill may have at any time in relation to the resumption of the land from the property by the Department of Main Roads. ..."

Special Condition (t) then continues to describe that the compensation will be paid by way of a discount to prevailing interest rates as well as a rebate on certain fees that would otherwise have been charged on the 2009 Facility.

[59] Special Condition (s) was not satisfied. Kosho submits that this is because of Trilogy's unreasonable delay or its absence of good faith in seeking illegitimately to exploit the opportunity to extract new and additional rights for the benefit of itself and a defaulting borrower of the PFMF, Sunrise Waters Pty Ltd ("Sunrise Waters").

(a) It understandably sought the assignment of those rights, which had a relationship to the subject matter of the 2007 Deed of Agreement that was to be assigned.

(b) Considerable effort was made to reach agreement between the various parties in relation to the terms of a deed of assignment and consent that would be satisfactory to the various parties, including Trilogy as lender and DMR.

(c) DMR understandably wanted something in return for the valuable rights that were being negotiated, and never communicated its satisfaction of the terms of any proposed deed of assignment and consent.

(d) The delay in concluding negotiations and documenting an assignment that was satisfactory to all parties was for reasons that cannot be attributed to Trilogy, or which cannot be attributed solely or principally to Trilogy.

(e) The allegation of unreasonable delay and a lack of good faith on its part cannot be sustained on the evidence.

[61] These submissions require consideration of the background to the Deed of Agreement between Club Cavill, Kosho and the State of Queensland (acting through DMR) made on 5 June 2007, and the lengthy course of negotiations about the terms of a deed that would be satisfactory to Trilogy and DMR.

[62] Issues of construction arise about the meaning of Special Condition (s), particularly:

(a) whether the matters in respect of which Trilogy sought specific provision were "in relation to" the agreement between Club Cavill, Kosho and DMR; and

(b) the constraints on Trilogy's freedom to decide that the terms of a deed of assignment and consent were not "satisfactory" to it, or that a deed of assignment and consent would be "satisfactory" to it only if it included certain provisions. What are the matters about which Trilogy might legitimately seek satisfactory terms? Must it act in good faith in seeking the inclusion of terms that are satisfactory to it?

The last issue may be approached as a matter of construction: that properly construed, Special Condition (s) requires good faith on Trilogy's part in preparation of terms, their negotiation with DMR and arriving at a state of satisfaction with those terms. Expressed differently, the argument is that, as a matter of construction, Trilogy cannot find terms to be unsatisfactory on grounds that are capricious, advanced for an illegitimate purpose or otherwise advanced without good faith. If, however, Special Condition (s) is not construed as necessarily importing notions of good faith, then the issue of good faith may arise for consideration in the context of an implied term. Part of Kosho's case is that the 2009 Facility included an implied term that CPL "would in (sic) all times act in good faith in their dealings with Kosho in relation to their consideration of, and determining issues of satisfaction in relation to, the conditions precedents under the finance facility".

[63] It is appropriate to defer consideration of whether, as a matter of law, Trilogy was obliged to act in good faith in determining whether it was satisfied with the terms of a proposed deed of assignment and consent until I have made findings of fact about Trilogy's conduct, including its alleged unreasonable delay in determining issues of satisfaction.

Background to the negotiation of Special Condition (s)

[64] Club Cavill is a related entity of Kosho and City Co. Club Cavill and Kosho owned adjoining parcels of land. Part of Club Cavill's land was resumed under the Acquisition of Land Act 1967 (Qld) by DMR for the purpose of future road construction. Club Cavill obtained compensation rights as a result in 2005.

[65] On 4 August 2006 the Council issued preliminary approval in respect of a development application that had been lodged in 2003. The preliminary approval was in respect of the Club Cavill land, land owned by Kosho and the resumed land. An appeal was filed on 13 September 2006 in relation to the approval, and at the time of the 5 June 2007 Deed of Agreement this appeal remained unresolved.

[66] If Club Cavill, or any successor in title to the Club Cavill land, wished to pursue its development in accordance with the preliminary approval or any future Council approval then it required access to the resumed land to complete flood mitigation works in respect of the development. Mr Slijderink on behalf of Club Cavill and Kosho negotiated the Deed of Agreement with the State of Queensland acting through DMR. One aspect of the Agreement was a grant by DMR to Club Cavill and to Kosho (if required), their respective successors in title and any future owners of the land, rights of access for all purposes connected with the execution of the works contemplated by the preliminary approval and any future approvals. An important right was the right to excavate and remove from the resumed land soil for the purposes of flood mitigation and as otherwise required by the approval, and to transport the soil to the Club Cavill and Kosho lands for use as fill material on those lands in accordance with the building approval and any future approvals. In return for these valuable rights Club Cavill agreed "with effect from the date on which it commences development" on the Club Cavill land to waive any rights to compensation under the Acquisition of Land Act 1967 it may have against the DMR for the taking of the resumed land. In short, Club Cavill agreed with DMR to forego its compensation rights, but only on a conditional basis. If it did not commence development on the Club Cavill land, then its compensation rights were not waived.

[67] The soil rights that Club Cavill acquired were valuable. As Mr Slijderink explained, there was a significant advantage in acquiring the soil rights. Otherwise the owner would have to obtain operational works approvals and in a flood plain that may take many years.

[68] Club Cavill agreed to sell its land to Sunrise Waters. Significantly, the agreement did not convey the soil rights. This worked greatly to the disadvantage of Sunrise Waters. Officers of DMR later privately expressed some sympathy for Sunrise Waters' predicament and harboured some suspicion that Sunrise Waters acquired the Club Cavill land without knowing that it had not bargained to acquire the soil rights.

[69] The sale of the property to Sunrise Waters settled in August 2007. Club Cavill continued to assert its entitlement to compensation. In a letter to Crown Law, which acted on behalf of DMR, dated 30 January 2008, Club Cavill and Kosho's lawyers noted that Club Cavill's waiver of its right to compensation only took effect "from the date on which it commences development" on the lot which had been sold to Sunrise Waters on 17 August 2007. Since Club Cavill had not commenced or carried out any works on that lot the right to compensation remained. Kosho and Club Cavill's lawyers sought confirmation that DMR and Crown Law had not had any dealings with Sunrise Waters which had the effect of according it any of Kosho and Club Cavill's rights and entitlements under the Deed of Agreement dated

5 June 2007 "or which has otherwise touched upon the rights or entitlements held by our clients pursuant to the Deed". Kosho and Club Cavill continued to assert a right to claim compensation from the State of Queensland in relation to the resumption.

[70] A meeting was held on 13 February 2009 at the offices of CPL to discuss Club Cavill's compensation rights and the entitlements afforded to it under the Deed of Agreement with DMR and the possible assignment of those rights to CPL. The meeting also discussed the future funding of Kosho's Abadi Residential Village project. Mr Slijderink on behalf of Kosho advanced what he told the meeting was a "commercially practical and equitable solution in regards to mitigating the PFMF financial exposure to Sunrise Waters". At the time receivers had been appointed to sell the land and an expression of interest campaign was due to end in March.

Mr Slijderink referred to his company's continuing right to claim compensation from DMR and the fact that Sunrise Waters needed to obtain the rights and entitlements afforded to Club Cavill under the Deed of Agreement so that it could maximise the development potential of the land and commence bulk earthworks. Mr Slijderink went on to assert that the claim to compensation was worth well in excess of $10m and probably exceeded $20m. He proposed a mutually beneficial outcome that would involve a payment in exchange for the compensation rights. This was the genesis of what eventually became Special Conditions (s) and (t) in the 2009 Facility. Kosho and Club Cavill were offering the opportunity for CPL to maximise the development potential of the Sunrise Waters land.

The course of events concerning satisfaction of Special Condition (s)

[71] The negotiation of a deed of assignment and consent that was satisfactory to Trilogy, DMR and otherwise satisfied Special Condition (s) proved complicated and protracted. It is necessary to canvass these events in some detail in order to determine the validity of Kosho's claim that Trilogy engaged in unreasonable delay and that Trilogy's "illegitimate pursuit of self interest" in seeking to settle upon a form of document with DMR manifests an absence of good faith on Trilogy's part.

[72] On 24 June 2009, the same day as Kosho and City Co confirmed that they wished to proceed in accordance with the 24 June Letter of Offer, Club Cavill confirmed it would be waiving all rights, including rights to compensation, in respect of the resumed land and would release the lender from all liability in relation to the resumption or matters related to the resumption.

[73] On 23 June 2009 CPL's then solicitors, Minter Ellison had sent to Crown Law a draft deed of assignment and consent for its "urgent consideration". Mr Slijderink sought a copy of the proposed document. CPL's lending manager, Mr McCosh, followed up with Minter Ellison as to how negotiation of the agreement was progressing. Crown Law was unable to respond due to the workload of the Assistant Crown Solicitor with the conduct of the matter. However, she wrote to Minter Ellison on 22 July 2009 with comments and proposed changes to the draft deed. Importantly, the letter of 22 July 2009 advised:

"As your client is obtaining access rights over the resumed land to enable your client to exercise its development rights under the development approval, then in consideration of my client agreeing to the assignment of Club Cavill's rights under the Deed of Agreement, my client requires your client to waive any compensation rights that it may have."

[74] On 27 July 2009 Kosho and Club Cavill wrote to the solicitors for the other parties confirming acceptance of the changes proposed by Crown Law/DMR. In that email, Mr Slijderink wrote:

"In advancing this matter and for clarity we reiterate the purpose of the Assignment Deed is to achieve the following mutually beneficial outcomes:

• Grant access to the resumed lands to facilitate the Sunrise Waters development approval; which without such rights being granted the existing development consent would be unable to be utilized (invalid); and
• Secure development rights in accordance with the Preliminary Development Approval and associated Operational Works Approvals (OPW Approvals) for the benefit of future land owners...and to specifically facilitate sale of the subject Sunrise Waters lands to a third party (on said basis); and
• Sale proceeds from the sale of the subject Sunrise Waters Lands are to be used to discharge their existing Loan facility (benefiting the fund)".

He went on to note that upon the proposed assignment taking place "access to the lands will be granted to all successors in Title (sic) to facilitate any works required to implement the preliminary development approval (and associated approval requirements)." The letter concluded with a request for the proposed changes to be accepted so that the matter could be finalised.

[75] There followed a lengthy gap between July and December 2009 when little, if anything, was done to progress the required deed. Part of the delay may be explained by Trilogy's appointment as responsible entity of the PFMF on or about 20 July 2009. However, this cannot explain, let alone justify, a delay of five months.

[76] Trilogy appointed new solicitors, Clayton Utz, and on 7 December 2009 a Senior Credit Manager from Trilogy attended upon Mr Campbell, a Project Manager from DMR, in order to brief Mr Campbell about matters. In an email to Mr Wakerley of DMR on that day, Mr Campbell canvassed the possibility of appointing Clayton Utz to act for DMR "to try and resolve this mess once and for all." Part of the mess involved the Sunrise Waters land. Sunrise Waters required access rights over the resumed land for a services corridor and pedestrian access. In his evidence,

Mr Wakerley explained that that issue arose after an objection to the grant of the approval and a planning appeal was submitted. Those rights were needed by any owner of the land to complete the development.

[77] In December 2009 Mr Hinrichsen of Trilogy assumed carriage of the matter. Trilogy suggested that it might be possible for another Clayton Utz partner to act for DMR if it resulted "in a smoother, more timely progress of the matter." DMR retained Crown Law to continue to act on its behalf.

[78] On 11 December 2009 the partner from Clayton Utz with carriage of the matter on behalf of Trilogy, Mr Noble, sent a draft deed to Crown Law. At about this time

Mr Slijderink was aware that DMR was reviewing the deed. On 14 December 2009 Mr Hinrichsen requested DMR review the deed "as quickly as possible." DMR officers for their part did not wish to deal directly with Mr Slijderink and on

15 December 2009 Mr Wakerley decided that Mr Slijderink should be referred to Mr Noble at Clayton Utz to respond to his inquiries.

[79] Discussions continued between Clayton Utz and Crown Law and on 22 December 2009 Clayton Utz sent to Crown Law an updated version of the deed which provided in cl 4(d):

"(d) Kosho and Club Cavill covenant that on payment of the amount which is not to exceed $2.8 million referred to in paragraph (t) of the special conditions in the letter dated 24 June 2009 from City Pacific Limited to Kosho is in full and final settlement of all claims that Kosho and/or Club Cavill may have at any time had in relation to the Resumption (including the Deed of Agreement) as those rights now vest entirely with Trilogy."

[80] On 14 January 2010 Crown Law provided its comments on the draft and relevantly advised:

"My client requires Club Cavill, Sunrise and Trilogy to waive their compensation rights under the Acquisition of Land Act. As Trilogy will be obtaining access rights over the resumed land to enable the exercise of the development rights in respect of the River Central Precinct Land, then my client requires a waiver of compensation."

In other words, DMR required an unconditional waiver of compensation rights in return for access rights over the resumed land to enable the development to proceed in accordance with the approvals.

[81] On 9 February 2010 Clayton Utz sent to Crown Law a document which marked up the changes which Trilogy accepted and commented on other amendments which were not acceptable to it. Clayton Utz sought any further comments from Crown Law on the document, following which it was to be sent to Kosho and Club Cavill for their approval. Sunrise Waters, which was made a party to the draft deed, agreed to the document in the proposed form.

[82] On 23 February 2010 Mr Slijderink wrote to Clayton Utz and inquired about the status of the deed of assignment, noting "for completeness" that "your client has now had 8 months to have settled the Deed of Assignment".

[83] Kosho appointed new lawyers, Q5 Lawyers, which on 26 February 2010 wrote to Clayton Utz, requesting a copy of the draft deed of assignment for urgent review. Throughout this period Kosho and its lawyers complained about the delay and sought to be involved in the negotiation of the final deed. Mr Slijderink sought an urgent meeting with Trilogy's CEO, Mr Griffin, in order to discuss matters.

[84] In the first two weeks of March 2010 Trilogy and DMR, through their solicitors, continued communications about the finalisation of the deed, including making provision for the access corridor. On 9 March 2010 Mr Noble wrote to Kosho's solicitors, apologised on Trilogy's behalf for the delay and advised that Trilogy would prefer to finalise its negotiations with DMR prior to providing the deed to Kosho for its input. At that stage Crown Law was seeking further instructions on a few issues and had promised to revert to Mr Noble later that week. He proposed to chase them up the next day if he had not heard from them. Mr Noble advised that Trilogy was "very keen to finalise this matter and as evidence, executives of my client were in Brisbane last week to meet with senior government officers to move this matter along."

[85] On 11 March 2010 Mr Wakerley communicated with Mr Campbell in connection with advice received from Crown Law in relation to the proposed deed. At that stage it was proposed that Crown Law would submit queries and requirements to Clayton Utz for response, to be followed by a meeting of all parties to discuss resolution of the matter. One point raised in the advice was that there was still a conditional waiver of the right to claim compensation for the land resumed, and the waiver was tied to commencing a proposed development within a certain time frame. Mr Wakerley expressed the view that the stage had been reached where DMR would only agree to the assignment if the conditional waiver was made unconditional. Mr Wakerley expressed the opinion that DMR was free to make this commercial judgment. He was concerned that the current circumstances could be repeated if the land was on-sold and the agreement was not amended in this respect.

[86] On 19 March 2010 Mr Hinrichsen wrote directly to Crown Law seeking an early meeting to finalise the matter. I mention in passing that this and other communications from Trilogy at this time are inconsistent with an intent on Trilogy's part to delay matters and frustrate Kosho's satisfaction of Special Condition (s). Mr Hinrichsen's email of 19 March 2010 explained that it was Trilogy's responsibility as replacement manager for the PFMF to gain the most value for its unit holders and that the way forward for the Fund was to achieve a full development approval for the Sunrise Waters land as soon as possible. The deed that had been submitted to Crown Law and DMR was said to be the only way to move forward. Mr Hinrichsen complained about Trilogy incurring significant legal bills in the back and forth between lawyers without any real progress. He sought to have the matter settled as soon as possible and therefore proposed a meeting.

[87] Ms Hill of Crown Law sought instructions in relation to the proposed meeting. On 22 March 2010 Mr Hinrichsen wrote directly to DMR officers seeking to set up a meeting to sort out the final issues on the Sunrise Waters land. It appears that a meeting was scheduled for 25 March 2010, however, there is no account of what was discussed at any such meeting. In late March 2010 Mr Slijderink continued to request to be included in the negotiations over the deed.

[88] Negotiation of the final terms of the deed appears to have stalled after March 2010. The reason for this is largely unexplained. Matters were revived in July 2010, despite the term of the 2009 Facility having expired on 30 June 2010. On

7 July 2010 Crown Law wrote to Clayton Utz, and on 9 July 2010 it responded with a marked-up version of the document in response which was said to provide a solution which should be acceptable to both parties. On 16 July 2010

Mr Hinrichsen wrote to Clayton Utz with a copy to Crown Law requesting that Clayton Utz chase up Crown Law in the matter. He remarked:

"The delay in final agreement is becoming quite ridiculous given we had an agreed position back in March. I am almost inclined to let Club Cavill/Kosho back in to sort this out".

[89] On 16 July 2010 Crown Law responded and Ms Hill remarked that she also thought:

"... we had reached agreement in March, but unfortunately, the amended document provided to me did not reflect that agreement. Subsequent documentation has introduced new issues which were not originally part of the negotiations. Accordingly, the delay is not Crown Law's."

[90] Negotiations continued with further revisions to the deed being exchanged in September 2010. In September 2010 Mr Campbell of DMR advised that he was happy with the proposed deed and would recommend that it be signed if the other parties were happy with it. He noted that Club Cavill had lodged a $66m claim against the State which was being handled by Crown Law.

[91] Kosho submits that the email exchanges in July 2010 were "apparently manufactured" in order "to serve and protect Trilogy's interests" after proceedings had been commenced by Kosho in May 2010. I am not persuaded that this is the case. Mr Fazzolari was copied in on the email of 16 July 2010, and may be assumed to have had an interest in the matter in his capacity as Senior Credit Manager. He was not cross-examined and the evidence does not permit me to conclude that the July 2010 emails were manufactured by Trilogy. Like earlier emails, Mr Hinrichsen's email of 16 July 2010 expresses frustration at the delay in achieving final agreement. Still, matters were permitted to drift between March and July 2010. There is no adequate explanation as to why matters were not resolved more expeditiously during this time.

[92] One issue which arose in the course of negotiation was the express provision of access rights in respect of a services corridor and for pedestrian access. As noted, Trilogy submits, based upon the evidence of Mr Wakerley, that these rights were needed for any owner to undertake the development of the Sunrise Waters land. Kosho in response advances substantial arguments to the effect that the 2007 Deed of Agreement between Club Cavill, Kosho and DMR already granted full rights and entitlements to enter the resumed land and to complete all works required to implement the preliminary approval and any future approvals. It submits that Club Cavill already was able to undertake any works required to satisfy any development approval or future approval, including the access corridor and pedestrian access. Although there is some force in these arguments I am not persuaded that it was unreasonable of Trilogy and its lawyers to seek clarification by way of specific provision in the deed of assignment in relation to such matters. I am not persuaded that the terms of cl 4 of the 2007 Deed of Agreement and the rights of access granted under it were sufficient to ensure the creation and maintenance of a services corridor and a pedestrian corridor on the resumed land.

[93] Kosho submits that it was incumbent on Trilogy to facilitate "the timeous satisfaction" of Special Condition (s), and that it lay "entirely in the control of Trilogy to facilitate what was contemplated by the Letter of Offer - a simple deed of assignment of rights already existing under the 2007 Deed of Agreement". I am not satisfied that satisfaction of Special Condition (s) lay entirely in the control of Trilogy, or that satisfaction of it would necessarily be achieved by a simple deed of assignment.

[94] Three sets of interests needed to be satisfied with the terms of any "deed of assignment and consent in relation to" the 2007 Deed of Agreement. The first was the Trilogy interests, being CPL prior to Trilogy's replacement of it as responsible entity for the PFMF on 20 July 2009, and thereafter Trilogy. The Trilogy interests were entitled to protect their legitimate interests, subject to any contractual or other duties owed to the Kosho interests. The second interests were those of the State of Queensland, represented by DMR. It needed to be satisfied with the terms of the deed of assignment and consent. It was not obliged to accommodate the interests of the other parties to the deed and could pursue what it perceived to be its interests. It might delay in considering its position, prolong negotiations and insist on terms that suited it. Next, it fell to Kosho to cause Club Cavill to enter into the deed and to itself enter into the deed within two days of receiving it if it wished to satisfy Special Condition (s).

[95] The need for the Trilogy interests and DMR to agree on terms which satisfied each of them meant that satisfaction of Special Condition (s) did not lay entirely in the control of Trilogy. Depending upon the terms which each party sought, any deed may not be a simple one.

[96] The new agreement to be prepared by Trilogy and put to, amongst others, DMR was to be "in relation to" the 2007 Deed of Agreement between DMR, Kosho and Club Cavill. Whether or not proposed terms were "in relation to" the 2007 Deed of Agreement is to be determined by reference to the purpose of Special Condition (s) in its context. That context includes Special Condition (t). Special Condition (t) provides for Kosho to obtain a rebate of up to $2,800,000 as compensation for the transfer of rights and obligations to Sunrise Waters in accordance with Special Condition (s). These Special Conditions were included for the purpose of achieving what Mr Slijderink on 13 February 2009 had identified as "a commercially practical and equitable solution in regards to mitigating the PFMF financial exposure to Sunrise Waters", and so as to enhance the Fund's prospects of being able to maximise the development potential of the land and commence earthworks. The first and second dot points which I have quoted from his letter of 27 July 2009 in [75] accurately state that their purpose was to facilitate development approval of the Sunrise Waters land so the land could be sold.

[97] The Special Conditions which were negotiated created the possibility of reuniting soil rights and the owner of the land to which the preliminary approval applied and the execution of works contemplated by the Council approval. In negotiating the terms of the proposed deed of assignment and consent it was understandable that the Trilogy interests provide for the transfer of the soil rights specifically referred to in cl 4 of the 2007 Deed of Agreement and to ensure that the present approval and any future approval for the development not be jeopardised.

[98] The fact that an early draft of the deed in July 2009 did not seek the inclusion of certain rights did not make it illegitimate for Trilogy later to seek their inclusion in the deed. The evidence of Mr Wakerley was that rights over the resumed land for services and pedestrian access were needed for any owner to complete the development. The deed which Trilogy's lawyers drafted sought the inclusion of these rights. There was nothing unreasonable in Trilogy seeking to facilitate development of the land then owned by Sunrise Waters. This was the commercial objective for which it was prepared to grant a rebate of $2.8m. This rebate was compensation "for the transfer of the rights and obligations" to Sunrise Waters pursuant to the deed which it was to prepare, on terms satisfactory to it.

[99] If the rights to construct and maintain a services corridor and pedestrian access over the resumed land were already comprehended in cl 4 of the 2007 Deed of Agreement, then no question of Trilogy seeking to include "additional rights" in the new agreement arose. If, however, Trilogy sought the assignment of additional rights in this regard then it was understandable that it would do so. Any additional rights which Trilogy sought to be assigned were not inconsistent with the commercial objectives of Special Conditions (s) and (t). At the very least, it was not unreasonable or illegitimate of Trilogy to request their inclusion in the new deed. Requiring such terms to be included in a deed of assignment and consent involved a legitimate pursuit of Trilogy's interests, and something which was not extraneous to the purpose which Special Conditions (s) and (t) served.

[100] Trilogy was not obliged to prepare the simplest form of assignment. It might have done so, and if it had been satisfied with such a simple document then DMR might also have been satisfied. But, as matters developed, and having appointed lawyers to protect its interests, Trilogy sought to protect those interests by the inclusion of additional terms. An agreement containing terms which specifically addressed rights over the resumed land for services and pedestrian access would be "in relation to" the 2007 Deed of Agreement, which was concerned with, among other things, the development of the Sunrise Waters land in accordance with the Council's preliminary approval and any future approvals.

[101] DMR was subject to compensation claims which, according to DMR's records, Club Cavill claimed to be worth $70m. This seems to have been a grossly inflated claim, since Mr Slijderink told the 13 February 2009 meeting that he thought the claim was worth well in excess of $10m and might exceed

$20m. He was prepared to bargain it away for far less. Whatever the true value of Club Cavill's compensation claim, the 2007 Deed of Agreement had not waived it. Any waiver was conditional upon Club Cavill commencing development on the land. Club Cavill's lawyers had reminded DMR's lawyers in January 2008 after the land had been sold that there had been no waiver of the claim for compensation and that Club Cavill's claim to compensation subsisted. In the circumstances, it was in the interests of the State to negotiate an unconditional waiver of Club Cavill's rights. Mr Campbell from DMR wanted an unconditional waiver of compensation.

[102] DMR's requirement in this regard was communicated as early as Crown Law's letter of 22 July 2009. Its requirement in this regard was not in response to a request by Trilogy for additional rights in the form of an access corridor and pedestrian access over the resumed land. When those matters later arose in the course of negotiations, DMR reiterated its requirement for a complete waiver.

Was there an unreasonable delay by the Trilogy interests in respect of Special Condition (s)?

[103] The appointment of a new responsible entity to the Fund in July 2009 was apt to delay matters. Still, individuals such as Mr McCormick and Mr McCosh who had been involved in the matter on behalf of CPL were available if Trilogy required their input. The apparent delay in progressing matters in relation to Special Condition (s) in the second half of 2009 was not for want of urging by Mr Slijderink on behalf of the Kosho interests. He met with Trilogy staff on 1 September 2009 and confirmed Kosho's cashflow and finance requirements. Various emails in the following months reiterated the matter and disclosed Kosho's concern about delay. Negotiations between the Trilogy interests and DMR revived between December 2009 and March 2010. By March 2010 the parties may have reached a broad consensus about matters, but the terms of a deed were not finally negotiated and approved by the respective parties at that time. The matter then appears to have drifted for some months for reasons that were not fully explained.

[104] Trilogy makes the valid point that it did not control DMR's conduct in negotiating the deed and the fact that negotiations were never finalised cannot be attributed solely to it. The evidence shows periods of delay on the part of DMR and its legal advisers. Not being a party, DMR was not obliged to meet timelines required by the Trilogy interests or the Kosho interests.

[105] Trilogy had access to the Letter of Offer which contained a cashflow schedule. The cashflow schedule was in the form of Month 1, Month 2 etc., rather than specific dates. Discussion with Mr McCormick or Mr McCosh would have confirmed Kosho's finance requirements, particularly for construction activities during the first seven months of the 2009 Facility, and Mr Slijderink's communications with Trilogy staff reinforced the fact that Kosho was seeking funding as a matter of urgency. Special Condition (q) made the offer conditional upon the commercial property settling on or before 28 February 2010, and this required the commercial property to be constructed by then.

[106] The reasonableness or otherwise of Trilogy progressing and finalising an agreed deed of assignment and consent falls to be determined against that background. The slow progress in finalising negotiations about the document cannot be attributed entirely to Trilogy. Some substantial period of time would have been required in any event to negotiate mutually agreed terms with DMR before submitting a draft agreement to Kosho. However, negotiations were protracted and still had not been concluded more than 12 months after the 2009 Facility was agreed when its term expired on 30 June 2010. The periods of delay between July and December 2009 and between March and July 2010 are largely unexplained. I am not satisfied that DMR or any other party was solely or predominantly responsible for them. It appears those delays occurred much to the frustration of Mr Hinrichsen, who in March 2010 was exasperated by the delay and proposed a meeting to finalise the matter. The matters were not finalised. I conclude that delay by Trilogy in preparing a deed, the terms of which were satisfactory to it as lender and also might have satisfied DMR, was unreasonable.

Was the delay and Trilogy's conduct concerning Special Condition (s) illegitimate and part of a deliberate strategy?

[107] Kosho submits that the delay on the part of Trilogy to attend to satisfaction of the Special Conditions was not simply unreasonable. It submits that it was "cynical and inexcusable". Kosho went so far as to plead that the Court should infer that Trilogy's conduct was a "deliberate tactic to ensure that it did not have to provide the funds under the Finance Facility". Whilst I have found that Trilogy's conduct involved unreasonable delay on its part, the evidence does not satisfy me that its conduct was cynical, let alone a deliberate tactic of the kind pleaded.

[108] In various communications Trilogy attempted to expedite matters. It was not unreasonable for it to attempt to reach agreement with DMR over the terms of the deed before involving Kosho. Mr Slijderink on behalf of Kosho wished to be involved in the negotiations from an early stage. However, it appears that officers of DMR were reluctant to deal with him directly. It was logical to first agree terms with DMR before presenting them to Kosho for its consideration.

[109] The course of contemporaneous correspondence does not support the conclusion that Trilogy was deliberately slowing down the process.

[110] Kosho's "deliberate tactic" pleading relies in part upon a meeting that occurred in early 2010 between Trilogy's CEO and Mr Peter Madrers and Mr Paul Brinsmead. Whilst the "deliberate tactic" phrase is not deployed in Kosho's submissions, reference is made to the evidence of Mr Madrers and Mr Brinsmead in support of the submission that Trilogy sought to leverage "a simple assignment to negotiate additional benefits for the Sunrise Waters development" while, it can be inferred "obtusely ignoring its extant obligations under the Kosho loan facility".

[111] By early 2010 Mr Madrers and Mr Brinsmead, as joint Managing Directors of Pearls Australasia Pty Ltd, had been involved in discussions over the Sunrise Waters land. They had had an interest in the land for quite some time, having been introduced to it a few years earlier, and having discussed a possible joint venture with a Mr Mewett from Sunrise Waters. Mr Mewett suggested that they might form a joint venture and acquire the land fairly cheaply from CPL. Mr Madrers and

Mr Brinsmead investigated the land and decided not to pursue it. In early 2010 they were contacted by a real estate agent who advised that Sunrise Waters had gone into receivership and that they might wish to discuss any interest they had in the land with Trilogy. An initial meeting was held with a representative of Trilogy and a further meeting was organised with Mr Griffin. This meeting probably occurred around March or April 2010.

[112] Mr Madrers and Mr Brinsmead knew Mr Slijderink and conducted some preliminary due diligence about the property. They thought it "severely challenged" in terms of development costs, infrastructure and potential yield. When they went to see Mr Griffin they contemplated proposing a "workout" by which their company and Trilogy would make contributions and that Mr Slijderink would be engaged in the workout. They thought that Mr Slijderink would be able to "bring to the table" his knowledge of the land and solutions to fix some of the problems as well as injecting some capital into it. On the basis of what Mr Slijderink told them, they believed that he would be able to help them resolve issues with the Council and also with DMR. Mr Slijderink claimed to them that he had some way to resolve these issues. They expected Trilogy would contribute the land and possibly finance and that they would collectively achieve a mutually beneficial outcome.

[113] At the meeting with Mr Griffin, Mr Madrers and Mr Brinsmead raised

Mr Slijderink's name as someone who could assist in resolving issues. When they did, Mr Griffin made clear to them that he had little time for Mr Slijderink. According to Mr Madrers, Mr Griffin was focused on discrediting Mr Slijderink's claims that Mr Slijderink was able to resolve issues. Mr Griffin said that he

(Mr Griffin) had had significant meetings with DMR and had come to an agreement. Mr Madrers' recollection was that the issue related to an easement.

[114] Mr Brinsmead's evidence was to like effect, namely that Mr Griffin thought that

Mr Slijderink was of little value because Mr Griffin had already solved the problems. Mr Brinsmead recalled Mr Griffin making derogatory comments about Mr Slijderink and suggesting that he had somehow acted illegally. Mr Griffin rejected their suggestion that the land had big problems and was of little value. There was very little discussion after that. Mr Griffin asserted that the land had a substantial value and that if Mr Madrers and Mr Brinsmead's company was not prepared to pay substantial monies for it, then there was no opportunity.

Mr Brinsmead recalls that Mr Griffin suggested that Mr Slijderink and Kosho were "just a bunch of cowboys" and that he was going to take care of them.

[115] The evidence of Mr Madrers and Mr Brinsmead falls short of proving that Trilogy was intent on frustrating or delaying Kosho's loan facility. It proves that Mr Griffin had little regard for Mr Slijderink and rejected any suggestion that Mr Slijderink could form a useful part of any joint venture by contributing his knowledge and association with DMR and the Council to the resolution of issues. Mr Griffin's disparagement of Mr Slijderink was in conjunction with assertions that certain issues had been resolved and that the land had a substantial value. The evidence of Mr Griffin's low opinion of Mr Slijderink and abusive denigration of him does not prove, either alone or in conjunction with other evidence, that Trilogy was engaged in a deliberate tactic to ensure that it did not have to provide the funds under the 2009 Facility. Kosho has not proved that Trilogy was ignoring its obligations under the 2009 Facility. Other evidence, including contemporaneous documents, indicates that the officers of Trilogy with direct responsibility for addressing the loan conditions were progressing matters, including personal attendance upon officers of DMR.

[116] Moreover, it was not in Trilogy's interests to sacrifice Kosho's interests by frustrating satisfaction of the loan conditions or to place Kosho in a perilous position. The fund had a significant exposure of $12,610,000 at the time the 2009 Facility was negotiated. Further interest accrued after June 2009 and it was not in Trilogy's interests to jeopardise Kosho's prospects of being able to repay that sum.

[117] I decline to find that Trilogy's delay, though unreasonable, and its other conduct in respect of satisfaction of the loan conditions was illegitimate, cynical or part of the deliberate strategy alleged in Kosho's pleading.

[118] Kosho pleads that there were implied terms in the 2009 Facility that CPL and Trilogy:

"(a) would do all such things and take all such steps as may be necessary to enable Kosho to have the benefit of the finance facility;

(b) would act reasonably, and reasonably expeditiously, in their consideration of, and in determining issues of satisfaction in relation to, the conditions precedents under the finance facility;

(c) would in [sic] all times act in good faith in their dealings with Kosho in relation to their consideration of, and in determining issues of satisfaction in relation to, the conditions precedents under the finance facility;

(d) would not unreasonably delay, in its consideration and determination of Kosho's compliance with the requirements of the finance facility or, facilitating drawn [sic] down of the funds for the development so as to disable Kosho from complying with:

(ii) special condition (s) of the finance facility;

(e) alternatively, would not unreasonably delay the advance of funds so as to disable Kosho's compliance with the finance facility."

These terms are said to be implied in order to give business efficacy to the transaction embodied in the 2009 Facility or, alternatively, are implied by law. Trilogy denied in its pleading that there were such implied terms. It pleaded that the terms were not required to give business efficacy to the 2009 Facility and that the terms sought to be implied contradicted the express terms of the Facility. Trilogy's submissions acknowledged that the 2009 Facility contained an implied duty of cooperation. This was based upon the general rule stated by Griffith CJ in

Butt v M'Donald applicable to every contract "that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract." [6] Trilogy submitted that an implied duty of cooperation did not cast any positive obligation on Trilogy to actively assist Kosho to achieve the conditions set out in the 2009 Facility.

[119] As to the other allegedly implied terms, Trilogy submitted that such terms should not be implied since Kosho did not plead a basis for them to be implied and no basis existed since they were not necessary to give business efficacy to the agreement, which was effective without them.

[120] Kosho's submissions did not meet this point, and instead simply summarised principles concerning the implication of contractual terms, as stated in

Questband Pty Ltd v Macquarie Bank Ltd.[7] Kosho's submissions focused upon the implied duty to cooperate in the performance of contractual obligations, and the principle that each party agrees to do all such things as are necessary on its part to enable the other party to have the benefit of the contract. In addition, Kosho's submissions addressed what was said to be an obligation to act in good faith "in the timeous satisfaction of the Special Conditions".

[121] Kosho did not develop its argument as to why the terms which it contended were implied as a matter of fact satisfied the five conditions (which may overlap) that must be satisfied for a term to be implied.[8] One of the conditions is that the term is necessary to give business efficacy to the agreement. Such a term will be implied if the term is so obvious as to go without saying. The implied terms for which Kosho contends in subparagraphs 17(b), (d) and (e) involve obligations to act "reasonably", "reasonably expeditiously" and to "not unreasonably delay". Obligations to act reasonably or "not unreasonably" involve obligations of indeterminate reference and such indeterminate obligations beg the question of by whose standards the reasonableness or otherwise of the lender's conduct is to be judged. Such obligations are uncertain in their practical operation and one would not lightly conclude that a financier was prepared to assume a legal liability to act reasonably in their consideration of whether conditions had been satisfied, and thereby expose itself to potential litigation for an alleged failure to act reasonably. Such implied terms are not so obvious that they go without saying. The 2009 Facility is efficacious or workable without such implied terms, given the term, implied by law, to cooperate in ensuring that the other party has the benefit of the contract. Kosho has not satisfied me that the terms pleaded in subparagraphs 17(b), (d) and (e) were necessary in order to give business efficacy to the 2009 Facility and were implied in fact.

[122] There was, however, a term implied by law which required each party to do all such things as were necessary on its part to enable the other party to have the benefit of the contract. This accords with the implied term pleaded in paragraph 17(a) of Kosho's pleading.

[123] The remaining contentious implied term, pleaded in subparagraph 17(c), related to an alleged implied term to act in good faith. Kosho submits that Trilogy was obliged to act in good faith and relies upon New South Wales Court of Appeal authority and single judge decisions in which good faith has been recognised as implied in a variety of contracts. The High Court has yet to authoritatively rule about the nature and content of an obligation to act in good faith in such cases. On one view, an obligation to act in good faith may mean no more than that neither party may do anything to impede the performance of the agreement or to injure the right of the other party to receive the proposed benefit.[9] However, recent Australian authorities support the proposition that a contractual obligation of good faith embraces at least:

• an obligation on the parties to cooperate in achieving the contractual objects;

• compliance with honest standards of conduct; and

• compliance with standards of conduct that are reasonable having regard to the interests of the parties.[10]

Due regard must be had to the legitimate interests of both parties. However, a contractual obligation of good faith does not require a party to act in the interests of the other party or to subordinate its own legitimate interest in the interests of the other party.[11]

[124] On one view, a duty of good faith does not arise by way of an implied term. Instead, good faith is reflected in other principles of contract law, including principles of construction.[12] Still, there is authority for the proposition that, at least in respect of certain types of contract, a term of good faith is implied as a matter of law.[13] A contract between a borrower and a lender has not been firmly established as a category of contract in which an obligation to act in good faith is implied as a matter of law. If, however, there is such a duty of good faith it may relate to the exercise of powers and discretions under the loan agreement.[14] In such a context, a power such as the power of termination might not be exercised for an improper purpose or for a purpose which is extraneous to the contract. If, however, a party acts in the honest pursuit of a legitimate interest, and not for a purpose which is extraneous, dishonest, capricious or arbitrary, a breach of good faith will not be established.[15]

[125] Given the uncertain state of the law concerning the implication of a duty of good faith in a commercial contract of the present kind I shall make findings on the assumption that, contrary to its submissions, Trilogy was obliged to act in good faith in its consideration of, and in determining satisfaction of the Special Conditions, including whether the terms of the deed of assignment and consent were satisfactory to it. However, any obligation to act in good faith cannot be equated with a free-standing duty to act reasonably.[16] Instead, any duty to act reasonably having regard to the legitimate interests of the parties may be subsumed in the duty to act in good faith.

[126] Kosho submits that Trilogy breached the alleged implied terms, including its obligation of good faith by:

"(a) failing to do all such things and take all such steps necessary to enable Kosho to have the benefit of the finance facility;

(b) unreasonably delaying in its consideration and determination of Kosho's compliance with the requirements of the finance facility, and in particular the draft assignment deed;

(c) failing, and unreasonably refusing, to advance funds under the finance facility;

(d) failing to advance funds under the finance facility by (at the latest) end October to early November 2009, so as to enable Kosho to commence development or construction of the project;

(e) alternatively, delaying arbitrarily and capriciously in its consideration and determination of Kosho's compliance and satisfaction with the requirements necessary to comply with the conditions imposed by CPL in the finance facility;

(f) by reason of the above, disabling Kosho from complying with special conditions (q) and (s) of the finance facility."

These submissions assumed the existence of each of the implied terms for which Kosho contended. I have found that the only implied terms were:

(a) an obligation to do all such things as were necessary on its part to enable Kosho to have the benefit of the 2009 Facility; and

(b) arguably, a duty to act in good faith in relation to Trilogy's consideration of, and in determining satisfaction of, the conditions precedent under the 2009 Facility.

[127] It is convenient to address the allegations of breach summarised above in reverse order, commencing with subparagraph (e). I am not satisfied that Trilogy delayed "arbitrarily and capriciously" in its consideration of Kosho's compliance with the conditions precedent. I have found that Trilogy's delay in respect of Special Condition (s) was unreasonable. It was not arbitrary or capricious. Any delay was not motivated by an extraneous purpose or motive and did not constitute a breach of any obligation of good faith.

[128] As to subparagraphs (c) and (d) there was no failure to advance funds since unless and until Special Condition (p) was satisfied no obligation to advance funds arose. For the reason that I have given in connection with Special Condition (p) Trilogy was not obliged to advance the funds.

[129] As to subparagraph (b) I have found that Trilogy unreasonably delayed in its determination of Special Condition (s), in particular its delay in proffering to Kosho a draft deed of assignment and consent which was satisfactory to Trilogy and DMR. However, its unreasonable delay in this regard cannot be equated with a breach of any implied duty of good faith. Trilogy unreasonably delayed but its conduct was not dishonest, undertaken for an improper purpose or undertaken in disregard of Kosho's legitimate interests. Trilogy had regard to Kosho's legitimate interests in obtaining funding, but also was entitled to have regard to its own legitimate interests in negotiating a deed that was satisfactory to it. The trouble is that Trilogy took an unreasonable time to negotiate such a deed with DMR.

[130] The issue, then, is whether in acting as it did, and in failing to negotiate a satisfactory deed within a reasonable time, Trilogy breached the duty implied by law to do all such things as were necessary on its part to enable Kosho to have the benefit of the contract.

[131] The statement in Butt v M'Donald which I have earlier quoted at [119] has been approved in subsequent cases.[17] In Secured Income Real Estate (Australia) Ltd

"It is easy to imply a duty to co-operate in the doing of acts which are necessary to the performance by the parties or by one of the parties of fundamental obligations under the contract. It is not quite so easy to make the implication when the acts in question are necessary to entitle the other contracting party to a benefit under the contract but are not essential to the performance of that party's obligations and are not fundamental to the contract. Then the question arises whether the contract imposes a duty to co-operate on the first party or whether it leaves him at liberty to decide for himself whether the acts shall be done, even if the consequence of his decision is to disentitle the other party to a benefit. In such a case, the correct interpretation of the contract depends, as it seems to me, not so much on the application of the general rule of construction as on the intention of the parties as manifested by the contract itself."[18]

[132] In Jackson Nominees Pty Ltd v Hanson Building Products Pty Ltd, McMurdo J (with whom Jerrard JA agreed) observed:

"Mason J thereby distinguished between acts according to whether they are necessary to the performance of a party's fundamental obligations under the contract. There is a duty to co-operate in the doing of acts which are necessary to the performance of such obligations. But a duty to co-operate in the doing of acts which are not necessary to the performance of fundamental obligations has to be found in 'the intention of the parties as manifested by the contract itself', that is by a term implied in fact.

In the same way, the duty to do what is necessary to enable the other party to have the benefit of the contract is limited to acts which are necessary to the performance of obligations under the contract. To assess the scope of the duty in a particular case, it is first necessary to define the relevant obligations, and in particular, to define the circumstances in which the parties have agreed that a certain obligation must be performed. It is not a duty upon one party to act so as to enhance the commercial value to the other party of the contract."[19] (emphasis added)

[133] The principle stated by Griffith CJ in Butt v M'Donald may apply to a benefit of the contract that was promised, whether the contractual benefit was fundamental or not.[20] I shall assume that it does.

[134] The implication of a term as a matter of law depends upon the demonstration of "necessity". In that context, the New South Wales Court of Appeal has observed that "there cannot be a duty to co-operate in bringing about something which the contract does not require to happen."[21] The Court emphasised that the implication of a term implied by law depends upon the demonstration of "necessity" and that it would be wrong to replace "necessity" with "desirability". Their Honours continued:

"A contract may 'contemplate' many benefits for the respective parties, but each can only call on the other to provide, or co-operate in the providing of, benefits promised by that party. For example, in the absence of an express covenant, a landlord is not bound in contract to repair the demised premises."[22]

The principle that each party is taken to have agreed to do all such things as are necessary on its part to enable the other party to have the benefit of the contract was more recently considered in Secure Parking (WA) Pty Ltd v Wilson.[23]

[135] The relevant principle in this case requires:

(a) the identification of "the benefit of the contract" that was promised by

the lender to Kosho in order to ascertain the acts that are necessary to enable Kosho to have that benefit; and

(b) consideration of whether Trilogy failed to do all things necessary on its part to enable Kosho to have that benefit.

[136] In general terms, the "benefit of the contract" that was promised by the lender was the promise to advance certain funds for a particular purpose, subject to certain conditions including each of the Special Conditions. The promise was qualified, and the lender reserved the right to withdraw or amend the loan approval at any time without liability and at its "absolute discretion" if, in its opinion or in the opinion of its solicitors, there arose any matter "which may adversely affect the proposed loan". However, the lender did not withdraw or amend its loan approval.

[137] Funds would only be advanced if, among other things, Special Condition (s) was satisfied and it would only be satisfied if the lender prepared a deed that was satisfactory to it and also satisfactory to DMR. Although DMR might refuse to agree to a deed that was on terms satisfactory to Trilogy, it remained within the control of Trilogy to advance negotiations of a deed that was satisfactory to both it and DMR. I have found that it did not do so in a timely way. In this regard, performance of the contract was to some degree within the control of the lender, and the lender had an obligation to do all that was reasonable to prepare a deed that was satisfactory to it and DMR. Trilogy's implied duty to do all that was reasonably necessary to secure performance of the contract arose in the context of a facility that was due to expire on 30 June 2010. Although the Letter of Offer contemplated that the lender might approve an extension and the expressed intention of the PFMF was to finance the entire project, whether or not it did so depended upon a decision in June 2010, and the letter stated in clear terms that any extension would be "at the sole discretion of the City Pacific First Mortgage Fund". In short, the benefit under the contract was the provision of funding until 30 June 2010. Trilogy had a duty to cooperate in respect of acts which were necessary to the performance of its obligations under the contract. This did not oblige it to provide funding by any particular date, for example to provide funding in accordance with the spreadsheet, or so as to enable the commercial property to be completed and its sale completed by February 2010. It remained Kosho's obligation to satisfy other conditions such as Special Conditions (p) and (q) unless the lender waived them, dispensed with their performance or disabled Kosho from satisfying them. The relevant obligation on Trilogy was to do all that was reasonably necessary on its part to satisfy Special Condition (s) and thereby secure performance of the contract.

[138] Trilogy's unreasonable delay in preparing a deed, the terms of which were satisfactory to it as lender and which might also have satisfied DMR amounted to a failure by it to do all things necessary on its part to enable Kosho to have the benefit of the contract. It thereby breached a term implied by law.

[139] Trilogy did not otherwise breach that term, and did not breach any implied duty of good faith either by its unreasonable delay or otherwise.

[140] This issue was not included amongst the list prepared by Counsel of proposed issues for written submissions. Still, it was addressed in Kosho's written submissions and pleaded by Kosho. So it remains a live issue.

[141] Kosho claims that Trilogy is liable to Kosho for loss and damage suffered by reason of the making of certain representations, which were relied upon by Kosho and was conduct which was misleading or deceptive in contravention of s 52 of the

Trade Practices Act 1974 (Cth) ("TPA"), or alternatively s 12DA of the

Australian Securities and Investments Commission Act 2001 (Cth) ("ASIC Act").

[142] Kosho alleges three misleading and deceptive representations by CPL's and Trilogy's representatives, namely that:

(a) on or about 24 June 2009 CPL (by McCormick and McCosh) represented orally to Kosho (by Slijderink) that funding would be available within 30 days, in accordance with the cashflows provided in January 2009

(b) on or about 21 August 2009 Kosho (by Slijderink) telephoned Minter Ellison, then Trilogy's lawyers, and was informed by Anthony Perich that Trilogy's funds had been frozen until the Commonwealth Bank of Australia ("CBA") had completed a review of proposed Trilogy cashflows ("CBA frozen funds representation"); and

(c) on 1 September 2009 at a meeting with Neil Hinrichsen and Michael Vella and another representative of Trilogy, Kosho (by Slijderink, Rieko Fujino and Brian Scott) was informed:

(i) cashflow issues between Trilogy and CBA were likely to be resolved within one to two weeks; and

(ii) shortly thereafter funds would be available to Kosho to enable it to advance the project through Trilogy either from the CBA or other funds

[143] Trilogy responds that Kosho has failed to prove that any of the representations (assuming they were made) were false in a material respect. It also submits that there is a more fundamental difficulty in respect to this part of Kosho's claim, namely reliance and proof that Kosho would have acted differently, and not incurred the loss which it claims, if the alleged representations had not been made.

[144] As to the first alleged representation, Mr Slijderink gave evidence that on

23 June 2009 he telephoned Mr McCormick of CPL and that in the course of that conversation Mr McCormick said there had been some issues with slight delays in making payments and that there might be a delay of a week or two from time to time to cater for cashflow needs. Mr Slijderink says that Mr McCormick assured him that CPL understood that Kosho's program was tight and understood that any significant delays in commencement and timing of payments would impact on its program. Mr McCormick is said to have told Mr Slijderink that CPL was "working to end of July payments as per Letter of Offer cashflow and would work with us if any delay in payments was required." Mr Slijderink says that contractors were lined up and he needed confidence that the monies would be there and that he was counting on money at the end of July, to which Mr McCormick is said to have responded:

"Adam this is a long term deal and some give and take by both parties will be required from time to time. We have been doing this a long time and you are not the first developer to say this to us. We know the impact delays in payments have and we have every intention to work with you. We expect to start giving you money end of July and regularly thereafter. You and Alastair can sit down next week and work through program and cash requirements and work it out."

I do not accept that this evidence supports the conclusion that Mr McCormick represented "that funding would be available within 30 days". Mr Slijderink's evidence about what Mr McCormick said relates to when CPL expected to start providing money.

[145] Kosho submits that Mr McCormick's evidence proved that the 24 June 2009 representation was made. However, the evidence to which it points concerns a different, but related topic. Mr McCormick recalled a meeting at Trilogy's Sydney office in early August 2009 when, according to Mr McCormick, there "was certainly no question as to where - where the loan was at and how close it was to need to happen." Mr McCormick also gave evidence of discussions with Minter Ellison about the need to have the draft deed of assignment concluded as soon as possible. In that context he remarked that "the intention was always for the

draw-downs to occur as soon as possible" and that in CPL's cashflows it was always July for the first draw-down. This evidence does not prove the alleged representation given in Mr Slijderink's evidence or that the representation pleaded in paragraph 55(a) of Kosho's pleading was made on 24 June 2009.

[146] Trilogy did not cross-examine Mr Slijderink about his conversation with

Mr McCormick on 23 June 2009, and in the absence of cross-examination I would need good reason to not accept Mr Slijderink's evidence. I should mention that

Mr Slijderink's first affidavit consisted of 455 paragraphs and 2,204 pages of exhibits and that his further affidavits were also very substantial. The efficient conduct of the trial and the just and expeditious resolution of the real issues in the proceeding may explain the absence of cross-examination. In determining whether I should accept Mr Slijderink's recollection of the 23 June 2009 conversation with Mr McCormick I am conscious of what was said by McClelland CJ in Equity in Watson v Foxman about cases of alleged misleading and deceptive conduct:

"Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing form the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience." [24]

I am not generally satisfied about the reliability of Mr Slijderink's recollection of contentious conversations. I am not completely satisfied that Mr McCormick said the words attributed to him in paragraphs 134 and 135 of Mr Slijderink's first affidavit. But if he did, they do not prove the representation pleaded in paragraph 55(a) of Kosho's pleading.

[147] This is the only alleged misleading and deceptive representation which preceded entry into the 2009 Facility by Kosho on 24 June 2009 when it accepted and executed the terms of the Letter of Offer. Therefore, Kosho has not proven that it entered into the 2009 Facility, agreed to its Special Conditions and granted or extended securities in reliance upon a representation that was made in contravention of s 52 of the TPA or s 12DA of the ASIC Act. In addition, it has not proved what it would have done if the alleged representation had not been made.

[148] The "CBA frozen funds representation" of 21 August 2009 was proven by

Mr Slijderink's affidavit evidence, and was not contested by any evidence called by Trilogy. I accept that Mr Perich of Minter Ellison told Mr Slijderink that he understood that Trilogy needed to have the group cashflows revised and approved by CBA before it could issue funds. There is no evidence that this representation was false. Trilogy's case is that the "CBA frozen funds representation" was not withdrawn or qualified and that Trilogy did not otherwise disabuse Kosho of it, notwithstanding that CBA had lifted a hold over Trilogy's facilities and PFMF by 10 August 2009. I accept Trilogy's submission that this part of Kosho's case involves "a timing issue" in that the matter was overtaken by a further conversation that occurred on 1 September 2009 about the availability of funds. If, however, Kosho is correct and the "CBA frozen funds representation" contravened the TPA because it was made without reasonable grounds, then any reliance by Kosho upon it was for a relatively short period and Kosho has failed to prove what it would have done if the representation had not been made.

[149] As to the "funds availability representation" alleged to have been made at a meeting on 1 September 2009, Mr Slijderink's evidence is that he was told that delay had arisen from CBA requirements and that these matters "should be resolved within weeks and payments could advance." Notwithstanding my reservations about the reliability of Mr Slijderink's evidence about such conversations I am prepared to accept that words to this effect were said. Mr Slijderink cannot recall which of the representatives of Trilogy said this. In any event, his evidence does not prove the pleaded representation that cashflow issues between Trilogy and CBA were likely to be resolved "within one to two weeks". His evidence goes no higher than a reference to "within weeks". In addition, any statement to the effect that once funds were available to Trilogy "payments could advance" would need to be understood in the context of the terms of the 2009 Facility, which made payment conditional upon satisfaction of numerous conditions, and also reserved to the lender an absolute discretion to withdraw or amend the loan approval. The "funds availability representation" in its context did not convey a representation that funds would actually be advanced through Trilogy within a few weeks or even within several weeks. At their highest, the words proven by Mr Slijderink's evidence, represented that issues between CBA and Trilogy were expected to be resolved within weeks and that, upon resolution, funds would be available to Trilogy to permit it to advance monies to Kosho in accordance with the Letter of Offer.

[150] The "funds availability representation" has not been proven.

[151] Further, the representation about resolution of matters between Trilogy and CBA has not been shown to be false. There is no evidence that the CBA approval of Trilogy's cashflows had not been resolved within the weeks that followed the meeting on 1 September 2009, and paragraph 381 of Mr Slijderink's affidavit recounts a telephone conversation with Mr Hinrichsen from Trilogy on

28 September 2009 in which Mr Slijderink said that he had heard that CBA approval of the cashflows had been received. Mr Slijderink does not say that

Mr Hinrichsen or anyone else disputed this matter, and I infer that CBA funds were available to Trilogy by late September 2009, as had been predicted at the meeting on 1 September 2009.

[152] Kosho submits that the funds availability representation, being a representation as to a future matter is taken to be misleading and deceptive unless Trilogy adduces evidence to rebut that presumption. I accept that s 51A(2) of the TPA is to be interpreted in the manner explained by Emmett and Allsop JJ in

McGrath v Australia Naturalcare Products Pty Ltd. [25] Trilogy did not address this point in its submissions in reply. Accordingly, I shall proceed on the basis that if the funds availability representation had been proven it would have been taken to be misleading, notwithstanding my view that it was not misleading in fact and reasonable grounds apparently existed to make it.

[153] I turn to the issue of reliance and whether the allegedly misleading and deceptive conduct constituted by the CBA frozen funds representation and the funds availability representation caused Kosho to suffer the loss and damage claimed. I have earlier concluded that Kosho has failed to prove that it would not have entered into the 2009 Facility if the representation pleaded in paragraph 55(a) had not been made. The present issues of reliance and causation relate to the post 2009 Facility representations. Kosho pleads that it relied on the CBA frozen funds representation and the funds availability representation in continuing with the 2009 Facility and in failing to take, or not taking, steps to seek or obtain alternate construction finance. Kosho submits that reliance on each representation in the manner pleaded by it is proved by Mr Slijderink's primary affidavit. However, Mr Slijderink did not give evidence that Kosho failed to take steps to seek or obtain alternate construction finance because it relied upon the alleged representations. If the representations had been proven then reliance upon them might be inferred. In the absence of specific evidence from Mr Slijderink about the respects in which he relied upon the CBA frozen funds representation and the funds availability representation I am disinclined to conclude that Kosho relied upon them in continuing with the 2009 Facility. It seems likely that it continued with the 2009 Facility because it was the only available source of finance to refinance the 2007 Facility which expired in 2009 and which then stood at about $12.61m. Any reliance upon the alleged representation would not have lasted forever. It became apparent to Kosho, and

Mr Slijderink in particular, that, notwithstanding the resolution of any cashflow issues between Trilogy and CBA in September 2009, funds had not been advanced to Kosho and that the advancing of funds depended upon resolution of matters, including satisfaction of Special Condition (s). I am not satisfied that Kosho failed to take steps to obtain alternate finance because of the alleged representations.

Mr Slijderink's evidence is that he did seek further funding in November 2009, February 2010 and April 2010. A lack of funds did not prevent him from approaching other financiers.

[154] Finally, I conclude that Kosho would have continued with the 2009 Facility in the hope or expectation of obtaining funds pursuant to it, if the alleged CBA frozen funds representation and the funds availability representations had not been made.

[155] I conclude that if Kosho had proven the misleading and deceptive conduct pleaded by it then it would not have proven that any reliance upon those representations caused it to suffer the loss and damage alleged by it. The course of events would have been essentially the same, including attempts by Kosho to obtain funds from other sources when funds were not advanced to it in late 2009.

[156] Kosho also claims that Trilogy engaged in unconscionable conduct in breach of

s 51AC(2) of the TPA, and further or in the alternative s 52 of the TPA. Remedies for contravention of these provisions are conferred by the Competition and Consumer Act 2010 (Cth). The relevant conduct is pleaded in paragraphs 60 to 97 and paragraphs 101 and 104 respectively of the second further amended statement of claim.

[157] These paragraphs canvass events from 13 February 2009 leading up to entry into the 2009 Facility including representations as early as 26 March 2009 about when payments under the proposed Facility were expected to commence, statements made shortly prior to entry into the 2009 Facility and conduct that followed entry into it up to and including Mr Griffin's meeting with Mr Madrers and Mr Brinsmead on

20 April 2010. Many of the matters are relied upon in support of the contention that from June 2009 to June 2010 Trilogy unreasonably delayed in its consideration of compliance with Special Conditions, particularly satisfaction of Special Condition (s). I have previously canvassed many of the matters pleaded in paragraphs 60 to 97 of the second further amended statement of claim. Not all of them are proven, including the precise words pleaded in paragraph 96 in relation to what was said at the meeting with Mr Griffin. Many of the allegations in these paragraphs concern matters which are proven such as communications concerning the progress of the draft assignment deed. Rather than catalogue each of the matters pleaded in paragraphs 60 to 97 and 101 and 104 of Kosho's pleading, I shall quote paragraph 149 of its written submissions which seeks to summarise the respects in which Trilogy's alleged conduct was unconscionable:

"Trilogy delayed egregiously (even intentionally were one to believe the Pearls Australasia witnesses) to the economic harm of Kosho; it actively excluded Mr Slijderink from anything to do with the finalisation of the Deed of Assignment; it made promises and gave assurances of imminent funding with no suggestion that funding would not be forthcoming; it knew (because it was being told by Mr Slijderink) of the perilous financial predicament and jeopardy the delay was directly causing Kosho and the project; it failed to take advantage (active or at all) of the knowledge and experience reposed in McCormick and McCosh despite Trilogy hiring them for that very purpose; it delayed unduly (by its lawyers) in chasing down issues more concerned with Sunrise Waters' interests and which had already been dealt with in the Letter of Offer (Club Cavill waiver of compensation) and the 2007 Deed of Agreement (access to resumed land for pedestrian pathway and services corridor)."

[158] As to the meaning of unconscionable conduct in the present context, Trilogy cites leading authorities to the effect that for conduct to be regarded as unconscionable, there must exist misconduct which gives rise to a finding of "moral obloquy". Spigelman CJ in Attorney-General (NSW) v World Best Holdings Ltd stated that unconscionability is a concept which requires "a high level of moral obloquy."[26] It has also been observed that the language of these provisions should be given their ordinary meaning and not all judges who have considered similar provisions find resort to "moral obloquy" useful.[27] Still, the remarks of Spigelman CJ have been followed in later cases. It is unnecessary to survey the authorities concerning the interpretation of statutory provisions which prohibit unconscionable conduct in commercial business relationships.[28] Kosho's submissions do not contest a requirement to prove moral obloquy or turpitude and state that a finding in that regard is "a value judgment for the Court on the whole of the facts and circumstances of the particular case."

[159] I have earlier found that Trilogy's delay in connection with Special Condition (s) was unreasonable. I do not consider that its unreasonable conduct in that respect or its delay in other respects in communicating its position as to whether other Special Conditions were satisfied was so egregious or involved conduct that was so unreasonable as to import a pejorative moral judgment. Kosho has not proven that any delay was intentional so as to inflict economic harm on Kosho.

[160] The effective exclusion of Mr Slijderink from the process of negotiation between Trilogy and DMR was not unconscionable. It was not necessarily unreasonable for Trilogy to take the approach of attempting to resolve issues with DMR before presenting the agreed form of agreement to Kosho for its consideration. The possibility that tripartite negotiation of the deed may have resolved matters sooner does not make Trilogy's approach unreasonable, let alone unconscionable.

[161] I decline to find that indications given by officers of CPL and officers of Trilogy from time to time about the status of the matter, or their predictions about future matters, were unconscionable.

[162] Kosho submits that Trilogy served "its own ulterior and extraneous interests opportunistically to improve Trilogy's financial position". I decline to find that efforts to improve Trilogy's financial position, including by negotiating terms of a deed of assignment which enhanced the development potential of the Sunrise Waters land, were illegitimate. Trilogy pursued its legitimate interests and did so for a purpose which was not ulterior or extraneous to its commercial objective of granting the 2009 Facility on terms which included Special Conditions (s) and (t).

[163] I conclude that Kosho has failed to prove unconscionable conduct on the part of Trilogy or unconscionable conduct on the part of CPL giving rise to a liability for which Trilogy is responsible pursuant to statute.

[164] Paragraphs 101 and 104 of Kosho's second further amended statement of claim relate to alleged conduct by which CPL is said to have represented that:

"(a) CPL would take all necessary steps to progress the provision of funds in a timely manner, and in any event in accordance with the schedule attached to the finance facility document;

(b) funds would be provided in a timely manner and in any event in accordance with the schedule attached to the finance facility document;

(c) CPL was in a position to do the matters pleaded in subparagraphs (a) and (b) above, and/or bring those matters to pass."

[165] CPL's alleged conduct in that regard is pleaded to have contravened s 52 of the TPA. This part of its case was not specifically addressed in Kosho's written submissions or previewed in the list of issues for written submissions. Accordingly, it has not been addressed by Trilogy in its submissions in reply. Nevertheless, I will deal briefly with it. Kosho alleges that the alleged representations were misleading because there was no reasonable basis for making them in the light of notice given on 20 May 2009 for an extraordinary general meeting of members of the PFMF for the purpose of removing CPL as the responsible entity. Apart from denying that the representations were made, Trilogy submits that there were reasonable grounds for Mr McCormick and Mr McCosh to make them in that:

(a) replacement of CPL as responsible entity of the fund could not reasonably have been expected to cause any change in the arrangements which then existed between CPL (as responsible entity) and borrowers or prospective borrowers from the fund; and

(b) Section 601FS of the Corporations Act 2001 (Cth) then provided that if the responsible entity for the fund changed, the obligations and liabilities of the former responsible entity became the obligations and liabilities of the new responsible entity. Kosho did not plead any response to these allegations save for re-pleading the matters earlier pleaded in its statement of claim.

[166] I am not persuaded that the conduct referred to conveyed each of the representations pleaded in paragraph 101. The conduct included provision of the Letter of Offer which made clear that the provision of funds depended upon satisfaction of terms and conditions. The schedule attached to the 2009 Facility document did not specify particular dates. It related to cashflow over a period of months. There may have been an implicit representation that, once Kosho was entitled to draw-down funds then funds would be in accordance with the schedule, subject to compliance with the terms and conditions of the 2009 Facility, including CPL's unfettered discretion to amend the terms of its approval. Accordingly, I am not persuaded that a representation was made that the funds "would be provided in a timely manner and in any event in accordance with the schedule attached to the Finance Facility document".

[167] Any representation about the provision of funds was made in the context of the Letter of Offer itself and I am not persuaded that any representation as to future matters was misleading or deceptive because of the possibility that CPL might be removed as responsible entity of the fund. Any obligation to provide funds would continue. The issue remained as to whether CPL or any successor as responsible entity was obliged to provide funds.

[168] In conclusion, Kosho has not established its claim of unconscionable conduct or the additional conduct alleged to contravene s 52 of the TPA.

[169] Issues of causation arise in respect of Kosho's claim for breach of contract (upon which it has succeeded on only one basis), and contravention of statute (upon which it has failed).

[170] On the issue of causation, Kosho submits that "[w]hether cast in contract (being in the position as if the promise(s) had been performed) or remediation of misleading and deceptive conduct and/or unconscionability (to be put in the position that would have obtained but for such conduct) the result here is effectively the same." Trilogy did not submit to the contrary. However, different causal inquiries are involved even if the same practical result is reached.

[171] Kosho's submission emphasised the fact that the Abadi project was time-sensitive, as was City Co's hotel project. Such debt funded property development may suffer due to unreasonable delay in the provision of funds. Kosho argues that Trilogy's conduct crippled what should have been the foundation year of the Abadi project, and the result was that City Co was unable to pursue its project with its land available as primary security for the hotel development. Kosho's submissions are premised upon the contention that the Letter of Offer of 24 June 2009 contained a promise to advance funds "appropriately promptly to meet timeframes" which CPL had accepted. Trilogy responds that this is incorrect and amounts to an assertion that a contractual term about agreed timeframes was breached. Trilogy's response is correct. The relevant causal inquiry in contract is directed to the term of the contract which was breached, and the position in which Kosho would have been if, instead, the contract had been performed in accordance with its terms.

[172] The relevant causal inquiry in relation to the alleged representations and the alleged unconscionability concerns the position that Kosho would have been in had the representations not been made.

[173] Both inquiries direct attention to whether, in the absence of a breach of contract or breach of statute, funding would have been given, by whom and when.

[174] The breach of contract which I have found did not occur at the inception of the 2009 Facility. It occurred due to a period of unreasonable delay. If Trilogy had not breached any implied term in this regard and had addressed Special Condition (s) in a more timely way, then it is possible that agreement would have been reached between it and DMR about the terms of a deed of assignment. As matters transpired, there seemed to be no insurmountable obstacle and the broad terms of an agreement had been reached by March 2010. The negotiation and finalisation of a deed of assignment which satisfied both Trilogy and DMR, and also was in a form to which Club Cavill and Kosho would have agreed, probably would have taken some months. Delays in DMR seeking and obtaining legal advice might have been expected even if Trilogy had acted promptly in the weeks and months following its appointment and had its solicitors address at that time the issues that came to be raised in late 2009 and early 2010. In oral submissions Kosho's counsel submitted that matters could have been resolved within a month. I think this to be most unlikely. Kosho's written submissions in relation to breach of implied terms complained of a failure to advance funds under the 2009 Facility by at the latest the end of October to early November 2009. Given the potential complexity of negotiations and inevitable delay, I think it unlikely that a deed of assignment would have been agreed and executed prior to the end of October 2009.

[175] At that time, assuming Special Condition (s) was satisfied, Trilogy would have been required to consider whether other conditions had been satisfied. Its position in late October 2009 was that Special Condition (p) had not been satisfied. There is no reason to suppose that it would have resiled from that position. As matters transpired, it did not.

[176] The issue of satisfaction of Special Condition (p) would have been an issue. If Trilogy maintained its position, Kosho would have been required to decide whether to persist with its position that the Put and Call Option Deed satisfied the condition or instead enter into an actual sale contract. The evidence does not disclose or prove that it would have done the latter. Kosho persisted with its stance that Special Condition (p) had been satisfied and has not proven that it would have adopted a different stance had Trilogy acted differently in respect of Special Condition (s).

[177] In summary, a breach of an implied term of the contract in respect of satisfaction of Special Condition (s) disabled Trilogy from relying upon that Special Condition, and entitles Kosho to damages for breach of contract. It did not disentitle Trilogy from relying upon Special Condition (p) and Special Condition (q). Special Condition (p) had yet to be satisfied. Any breach of an implied term in respect of Special Condition (s) did not prevent Kosho from accessing funds to which it was entitled under the 2009 Facility. Non-satisfaction of Special Condition (p) disentitled it to access funds under that Facility. Any breach of contract did not prevent Kosho from obtaining funds to which it otherwise would have been entitled had the breach not occurred.

[178] Kosho fails to establish an entitlement to any part of the substantial damages claimed by it for breach of contract. Had the breach not occurred it would not have obtained funds from Trilogy in late 2009 or early 2010. There is no satisfactory evidence that it would have entered into an unconditional contract for the sale of Stage 1A during the term of the 2009 Facility so as to satisfy Special Condition (p).

[179] Kosho has failed to prove that any breach of contract by Trilogy caused it substantial loss and damage, let alone loss and damage in the quantum alleged.

[180] Because Kosho has not proved its case on causation, its remedy for breach of contract is nominal damages.

[181] Kosho has not proven the contraventions of statute alleged by it. But if it had, I am not satisfied that the end result would have been different if the alleged representations had not been made and the alleged conduct not occurred. Kosho probably would have agreed to the 2009 Facility, and the course of events after that would have been essentially the same.

[182] Kosho seeks damages for loss of the opportunity to profit from the development of the Carrara land. City Co seeks damages for loss of the opportunity to profit from the development of the Surfers Paradise land. Kosho and City Co also claim to have lost the equity which each had in the Carrara land and the Surfers Paradise land respectively.

[183] The quantification of their damages claims is based on the report of Mr Lytras.

Mr Lytras in his report and in his oral evidence emphasised that his calculations were based on assumptions he was instructed to make and the validity of those assumptions was for the Court to decide.

(1) In the absence of Trilogy's alleged breaches, all conditions required to enable funding under the 2009 Facility to be advanced would have been satisfied.

(2) The 2009 Facility that expired on 30 June 2010 would have been renewed on similar terms until the Abadi development was self-funding.

(3) The funds should reasonably have been advanced to Kosho during July 2009 or by no later than 30 June 2010, the expiry date of the 2009 Facility.

(4) As at July 2009, other than serving as collateral for the loan owed by Kosho to CPL, there was no other debt over the Surfers Paradise land.

(5) The plaintiffs' residual equity in the Carrara land and the Surfers Paradise land on an undeveloped, "as is" basis, as at the current date, is $nil.

(6) The "as is" values of the Carrara land and Surfers Paradise land as at

30 June 2010 are the same as their respective "as is" values as at July 2009.

(7) Kosho's cashflow model should be used as a basis for determining Kosho's loss of the opportunity to earn a development profit from the Carrara land.

(8) Mr Kogler's valuation reports dated 13 July 2009 and compiled 15 June 2012, should be used as a basis for determining City Co's loss of opportunity to earn a development profit.

(9) The $2.8m interest rebate to Kosho associated with the assignment of the Deed of Agreement should be excluded from the damages assessment.

(10) The benefit, if any, received by Club Cavill, as a consequence of:

(b) Club Cavill's rights and interests under the Deed of Agreement not being assigned to Sunrise Waters; and

(c) the associated compensation rights not being waived by Club Cavill,

is not relevant to the assessment of Kosho's and City Co's losses.

[185] On the basis of those assumptions Mr Lytras calculated the potential losses as:

(1) Loss of equity in the properties assessed at July 2009 of $8,767,410 consisting of:

(a) $4,767,410 to Kosho in relation to the Carrrara land; and

(b) $4m to City Co in relation to the Surfers Paradise land.

(2) Loss of equity in the properties assessed at 30 June 2010 of $7,329,574 consisting of:

(a) $3,329,574 to Kosho in relation to the Carrara land; and

(b) $4m to City Co in relation to the Surfers Paradise land.

(3) Loss of opportunity to earn development profits from the properties assessed as at July 2009 of $40,760,620 consisting of:

(a) $30,010,620 to Kosho in relation to the Carrara land; and

(b) $10.75m to City Co in relation to the Surfers Paradise land.

(4) Loss of opportunity to earn development profits from the properties assessed as at July 2010 of $39,240,194 consisting of:

(a) $28,490,194 to Kosho in relation to the Carrara land; and

(b) $10.75m to City Co in relation to the Surfers Paradise land.

(5) Costs not otherwise incurred. Mr Lytras' report provides two scenarios in relation to this head of damage:

(a) If the plaintiffs would have undertaken the proposed development then the plaintiffs have not incurred any costs that would not otherwise have been incurred had the alleged breaches not occurred. This excludes any costs associated with this litigation and any penalty interest and costs charged by Trilogy in relation to Kosho's loan.

(b) If the plaintiffs would not have undertaken the proposed developments, that is, absent the alleged breaches the plaintiffs would have effectively sought to realise the existing equity in the properties. On this scenario all the costs incurred after the date of the alleged breaches are costs not otherwise incurred.

On the basis that the alleged breaches occurred in or around July 2009 the costs not otherwise incurred are assessed at $5,632,505, comprising Kosho - $5,551,327 (plus any penalty interest and/or additional costs charged by Trilogy) and City Co - $81,178.

On the basis that the alleged breaches occurred around 30 June 2010 the costs not otherwise incurred are assessed at $3,726,655, comprising Kosho - $3,686,155 (plus any penalty interest and/or additional costs charged by Trilogy) and City Co - $40,500.

[186] Mr Lytras' calculations were said to provide a framework for calculating the loss of opportunity to earn development profits by applying a percentage to each calculated figure to reflect "various discounts and/or contingent factors". A different and higher probability might apply to the loss of equity and cost calculations, since the loss of opportunity to earn a profit was said by Mr Lytras to possess "a greater level of inherent uncertainty than the other two heads."

[187] There is no contest about the principle that a claimant in a case such as this can be awarded compensation for deprivation of a commercial opportunity.[29] The value of the lost opportunity must be assessed. The general principle governing all claims for recovery of loss or damage was stated by Bowen LJ in Ratcliffe v Evans:

"As much certainty and particularity must be insisted on ... in... proof of damage as is reasonable having regard to the circumstances and the nature of the acts themselves by which the damage is done."[30]

McPherson J (as his Honour then was) observed that the "degree of precision with which damages are to be proved is proportionate to the proof reasonably available."[31] Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat an award of damages.[32] The claimant must prove on the balance of probabilities that he or she has sustained some loss or damage.[33] The claimant does so by proving the loss of an opportunity which had some value. The claimant is required to demonstrate by evidence that the opportunity had a real value.[34]

[188] Depending upon the circumstances, the chance of obtaining a particular benefit may be expressed as a percentage of the profit which the developer hoped to derive at the end of a lengthy period. However, that percentage may need to reflect a series of contingencies and, in principle, would be a cumulative percentage.[35]

[189] Where the chance of a particular loss occurring, such as an eventual large profit from the development of land over a number of years, is "merely speculative"[36] or the Court cannot select a percentage figure which reflects the chance of obtaining the benefit, damages for loss of a chance cannot be awarded as a percentage of the claimed lost profit.

[190] In some cases curial procedures or inadequate proof do not permit a court to determine whether there was "any real or significant chance that an alleged benefit would actually have been obtained".[37] As Deane J observed in the

"The profit which one experienced commercial person may see as lying at the end of some commercial undertaking might be seen as an inevitable and disastrous loss by another. What seems to one person to be a benefit may be thought by other and wiser people to be valueless or even a detriment. The nature of what would have been obtained if the contract had been performed may be so completely speculative that 'it is quite impossible to place any value' upon it." [38]

[191] The chance of pursuing a business opportunity, such as the chance to develop a property, may be expressed in terms of a percentage. The chance of developing the property at a profit may be a smaller percentage, and the chance of developing the property so as to earn a very large profit may be even smaller, or so small that it is not appropriate to assign a percentage chance to it. The chance to earn such a large profit may have been negligible. Any percentage arrived at by the Court is done on the basis of imprecise evidence. The figure to which the percentage is applied also must be the subject of adequate proof.

[192] If the Court rejects the evidence put forward as proof of the measure of the possible benefit, it will be impermissible, or at least inappropriate, to apply a percentage to the suggested figure. The claim for substantial damages will fail even though the plaintiff may have suffered the loss of a commercial opportunity that had some value. Deficiency in proof of the chance of obtaining a different, smaller and unquantified benefit may preclude the valuation of the lost commercial opportunity.

[193] In their written submissions the parties joined issue about:

(a) the value of the Surfers Paradise land;

(b) assumed sales rates and prices of the Abadi residential units;

(c) the profitability or otherwise of the developments;

(d) the availability and conditions of further finance at and after June 2010;

(e) the effect of the Global Financial Crisis ("GFC");

(f) the reliability of the expert valuation opinions upon which Mr Lytras' calculations were based; and

(g) the remoteness of development profit from Trilogy's alleged breaches.

The value of the Surfers Paradise land and its possible profitable development

[194] Mr Lytras' calculation of a loss of equity of $4m to City Co in relation to the Surfers Paradise property, and a figure of $10.75m in relation to City Co's loss of opportunity to earn development profits from that property is based on, among other things, valuation reports prepared by Mr Kogler, whose 15 June 2012 report for the purpose of this litigation assessed the value of the Surfers Paradise land as at

13 July 2009. His valuation of $4m reflected the value which he had given to the land in a 13 July 2009 valuation report prepared for CPL. Mr Kogler's 2012 report also calculated the expected "Developer's Profit" from a proposed development of the land for a 19 storey boutique hotel. Mr Lytras was instructed to use that valuation report to assess the expected financial outcomes of the hotel development and to determine City Co's loss of the opportunity to earn a development profit in the Surfers Paradise land.

[195] Mr Kogler's retrospective valuation arrived at a "site value plus loss of development profit" figure of $14.75m as at 13 July 2009. In doing so he adopted an "as if complete" valuation with a discounted cashflow valuation, using figures provided by a hospitality consultant about the expected trading performance of the proposed hotel. This included assessments of opening years' occupancy, average daily rates, revenue per room and expected trends. On that basis, a profit and loss analysis for five years trading, commencing from an opening month of January 2011 was prepared. From this, Mr Kogler assessed the capital value of the hotel "as if complete" on the basis of those projections and adopted a "Year 3 Stabilised EBITDA[39]" as the basis for the capitalisation of annual income. He adopted this capital value on the basis of an assumed sale in April 2011, being three months past the earliest date for the completion of the project. He deducted the proposed hotel's predicted construction and financing costs to derive a development profit after interest. He also adopted a notional gross sales proceeds value for the strata title nightclub of $1.5m. The peak funding required for the hotel development was $26,400,709 in March 2011.

[196] Mr Kogler adopted a net sales figure of $41,763,636, producing a development profit of approximately $14.75m. On this basis, Mr Lytras deducted the value of the Surfers Paradise land as at July 2009 ($4m) to arrive at a potential loss of opportunity to earn development profits in respect to the Surfers Paradise land of $10.75m. This figure was the starting point from which the Court was invited to arrive at an assessment of City Co's loss based upon a range of probable outcomes from nil to 100 per cent.

[197] City Co's claim for loss of the opportunity to earn development profits and its claim for loss of equity in the Surfers Paradise land are based upon a number of assumptions or contingencies including:

(a) its ability to develop the site as a boutique hotel;

(b) the timeframe for such a development and an assumption that the development would be complete and the hotel opened in January 2011;

(c) that there would be a sale of the hotel within three months of opening;

(d) that City Co would be able to borrow the funds necessary to develop the hotel and operate it until it was sold;

(e) that construction costs would be as estimated; and

(f) that the hotel would achieve the predicted income and that its income would trend upwards at the rate suggested by the hospitality consultant for a five year trading period.

[198] The proposed development was approved on 28 May 2004, and in May 2008 the Gold Coast City Council extended it until 15 July 2010. Mr Kogler's contemporaneous valuation identified, in his SWOT[40] analysis, the limited time to develop the site before the approval expired as a threat. There is no suggestion that CPL or Trilogy were prepared to finance the development. Another lender would have required security over the subject site, but City Co had offered the site as security for the 2009 Facility to Kosho, and any release of the encumbrance held over the Surfers Paradise land depended on provision of a $3m cash payment or achieving the loan to value ratios referred to in Special Condition (k) of the 2009 Facility. It is unlikely that Special Condition (k) would have been satisfied. Kosho did not advance any real argument as to how or why it would have been satisfied during the term of the 2009 Facility.

[199] The prospects of City Co obtaining a financier which would commit to the proposed development was poor. The evidence about the impact of the GFC makes it extremely unlikely that a private lender, let alone a bank or other financial institution, would finance the development of the proposed boutique hotel on the subject site. The site had limitations including one street frontage, a small area and no scope for onsite parking. A nightclub was to be built in the hotel's basement, but with hotel guests and nightclub patrons using a common entrance. Mr Kogler confirmed this in his evidence but Kosho's submissions point to a plan that indicates separate nightclub and hotel entries on the ground floor. I conclude that the entrances were to be in close proximity on the property's narrow frontage.

[200] The concept of a boutique hotel was new to the Gold Coast. Under

cross-examination Mr Kogler accepted that the concept was "unique". His view about the development's prospects was based upon the existence of a boutique hotel industry around the world. However, he acknowledged that a boutique hotel had yet to be built on the Gold Coast, even at the time he gave his evidence in these proceedings. He described this as a "market maturity" issue. However, the absence of a boutique hotel, even now, on the Gold Coast calls into question Mr Kogler's opinion about the market for such a hotel, particularly one located in the nightclub district of Surfers Paradise and having a nightclub in its basement. It suggests that there has not been finance available after the GFC for such a development to be completed. Based on the evidence about the impact of the GFC on lending, and the fact that the proposed development was unique for the Gold Coast, I think it unlikely that City Co would have obtained finance to undertake it in recent years. Under cross-examination Mr Kogler acknowledged that banks withdrew from lending in 2009 and thereafter and, as a result, there were very few transactions. Notwithstanding this, there was some capacity to obtain finance, provided the borrower did not have a high exposure to debt, had a reasonably "solid balance sheet" and the advantage of cashflow outside of the particular project to support the loan. Finance was available but there were quite significant hurdles in obtaining it. Mr Kogler accepted that the need for a developer to obtain funding to develop the hotel was a hurdle and problematic unless it had "an end takeout in place", namely that the developer could obtain a buyer of the boutique hotel. This was only a possibility. Any potential buyer would be basing a decision to buy upon anticipated, not proven, revenues.

[201] Mr Kogler's figures were based upon proposed room rates which, according to

Mr Norling, were too high and greater than the average achieved by all five star hotels in Queensland and in Brisbane in the same year (2011). Although

Mr Norling is not a valuer, his expertise extends to project feasibility studies in the tourism sector. I am not satisfied that the room rates and revenue streams adopted by Mr Kogler would have been achieved by the proposed hotel. Also, I accept

Mr Norling's comment that the projected growth of room rates of 5.4 per cent per annum in the period 2011 to 2015 is in excess of the current inflationary trend. It is also substantially in excess of the rates achieved by Gold Coast hotels in the 2004 to 2011 period.

[202] Mr Kogler's assessment of the developer's profit is based upon a number of assumptions concerning the market for such a hotel and the availability of finance to develop it. Even assuming that the hotel could have been constructed for its estimated price and with the finance costs that Mr Kogler estimated, I am not persuaded that it could have been sold for anywhere near a price that would yield net sale proceeds of in excess of $41m in early 2011. In general, I found

Mr Kogler's evidence about the prospects of this development unpersuasive. The assumptions upon which his opinions were based were not firmly established in other evidence.

[203] Even on the assumption that CPL or Trilogy would have been prepared to release the encumbrance over the Surfers Paradise land to enable another lender to advance finance to City Co to develop the boutique hotel, it is highly unlikely that any lender would have been prepared to advance the funds required to commence construction of the hotel before its development approval expired and to complete its construction and thereafter fund the operation of the hotel until it could be sold. If, in the unlikely event that City Co was able to obtain funds to develop the hotel, and could do so within the timeframes assumed by Mr Kogler, it is unlikely that the hotel would have achieved the revenue streams which he assumed. The sale price which he calculated on the basis of expected earnings was unrealistic in April 2011 or at any relevant time thereafter. The probability of City Co making a development profit of $10.75m is practically nil. City Co was more likely to suffer a loss than make a profit on the development. A loss on the development would have reduced and probably eliminated its equity in the Surfers Paradise land.

[204] Mr Lytras was instructed to assume that the residual equity in the Surfers Paradise land and the Carrara land was nil, based upon instructions given to him by

Mr Slijderink. In August 2012 Mr Slijderink instructed Mr Lytras that the current market value of the Surfers Paradise land was $2m. By that time the site had lost the hotel development approval. The Valuer-General's valuation of the site as at

30 June 2012 was said to be $2m. Other evidence before me revealed that a bid of $1.8m was received at auction on 9 June 2011 and the property was passed in on a vendor bid of $1.9m. The land remains unsold. I find that its present value is approximately $2m.

[205] I find that the value of the land in July 2009 was substantially less than the $4m which Mr Kogler arrived at, even with its development approval. City Co has not proven by satisfactory evidence its market value in July 2009 or July 2010.

[206] Whatever the value of the land was at those dates, City Co did not lose the value of its equity in that land as a result of Trilogy's proven breach of contract or any of the other breaches of contract alleged by Kosho. Despite its breach of contract, Trilogy was not obliged to advance additional funds to Kosho during the term of the 2009 Facility. The Surfers Paradise land was offered as security for an extension of the 2007 Facility and as a term of the 2009 Facility. Even if Trilogy had advanced funds during the term of the 2009 Facility, the Surfers Paradise land probably would have remained encumbered and not available as first mortgage security to a financier of the boutique hotel development.

[207] I should add that I am not persuaded that City Co satisfied Special Condition (j) of the 2007 Facility at the time it requested a release of the Surfers Paradise land on

8 April 2009. However, Kosho and City Co agreed that the Surfers Paradise land should remain as security and the request to release it was overtaken by events. In the end result, the Surfers Paradise land remained encumbered as security for the Kosho loan. City Co has not proven that it would have become entitled to a release of that security during the term of the 2009 Facility. It has not proven that it suffered a loss in respect of its equity in the Surfers Paradise land as a result of Trilogy's breach of contract. Kosho retained the opportunity to find a buyer for the Surfers Paradise land and it might have been in a position to negotiate a release of the encumbrance, depending upon the price which it could negotiate with a buyer. The expiry of the development approval may have diminished the value of the land, but the expiry of that development approval before construction of the boutique hotel is not attributable to Trilogy.

[208] In summary, City Co has not proven the probability that it would have made a development profit or the value of the loss of the opportunity to make the development profit claimed by it. The value of the loss of an opportunity to make a development profit has not been satisfactorily proven. No loss of equity has been proven. The site was unlikely to be developed as a boutique hotel, let alone developed and quickly sold at a substantial profit. City Co would have been left with the site which it still owns.

[209] I should add for completeness that I have proceeded on the basis that City Co was a party to the 2009 Facility and entitled to sue for breach of contract. This is despite the fact that the Letter of Offer was directed to Kosho, and that the form of acknowledgment which was signed by Ms Fujino as director of Kosho and as director of City Co indicated that Kosho (and City Co as third party mortgagor) wished to proceed with the application for a mortgage loan. The borrower was identified as Kosho. Trilogy appears to accept that City Co was a party to the contract and entitled to sue for breach of it.

Possible development profit from the Carrara land - overview

[210] Kosho's claim for damages for loss of the opportunity to profit from the development of the Carrara land assumes that it would have obtained funding from Trilogy or other lenders and completed the multi-stage development of the Abadi Residential Village over a number of years at a substantial profit. Trilogy contests this claim and the various assumptions upon which it (and Mr Lytras' calculations) are based. It points out that Trilogy was obliged, at most, to provide the Stage 1A funding of some $2.2m for construction/consultants' costs and a contingency amount of approximately $336,000. The development profit assessments are based upon the entire development being completed, and this necessitates an inquiry about how the development would have proceeded, and whether it would have done so at a profit. Leaving aside issues of remoteness of damage, Trilogy argues that Kosho's calculation of damages and Kosho's cashflow model ignore the effects of the GFC and the state of the Gold Coast property market at the relevant time, and wrongly assumes that Kosho would have obtained funding on an ongoing basis.

[211] Any further funding would have been dependant upon Kosho achieving a high percentage of pre-sales. The claimed development profit assumes a certain sales rate and sale prices for the Abadi residential units which would have enabled further funding to be obtained, the development to become self-funding at a certain point and for Kosho to derive a substantial development profit from the completion and sale of all stages over a 74 month construction program. The initial stages would have required a very large commitment from a lender.

[212] Kosho's claim for loss of the opportunity to make a development profit is based upon a cashflow model prepared by Mr Slijderink in March 2009. Trilogy submits that the model does not provide a basis for the calculation of profit which the development might have derived, since it does not make allowance for the reduction in sales rates and significant reduction in price that occurred as a result of the continuing effect of the GFC. The model anticipated 57 per cent of pre-sales would be required in order to obtain funding, but the evidence suggests that a much higher percentage would have been required as at June 2010.

[213] The topics of sales rates and prices, the availability and conditions of further finance at and after June 2010, the effect of the GFC and the profitability or otherwise of the proposed development are interrelated. A large amount of evidence was given about these topics. It would be possible to write a book about the effect of the GFC on the Gold Coast property market and on this proposed development in particular. By way of overview, although the GFC had an adverse impact upon sales rates and prices on the Gold Coast, its effect differed in different markets. The

"sub-$500,000 market" better weathered the storm than higher priced, high-rise units. But it still was adversely affected by the GFC. Queensland was more adversely affected by the GFC than many other States, having experienced two technical recessions and negative growth in its Gross State Product. According to economic evidence in the proceedings, the Gold Coast economy remains in a parlous state.

[214] One impact of the GFC was the large-scale withdrawal of credit for property developments, particularly pioneering developments of the kind represented by the Abadi Residential Village. Lenders withdrew from the market or imposed more onerous conditions, including the percentage of pre-sales required.

[215] Although the topics addressed by the parties in their submissions are interrelated it is convenient to first consider the issue of assumed sales rates and prices of the Abadi residential units.

Assumed sales rates and prices of Abadi residential units

[216] This issue bears upon whether further finance would have been available in

June 2010 (or prior to that date in the event that funding was not available under the 2009 Facility for one reason or another), whether the development would have proceeded to completion and whether it would have yielded a development profit. Critical assumptions contained in the Abadi cashflow model included:

(a) average sale prices per residential unit of $462,000 (inclusive of GST); and

(b) an average sales rate of 4.75 units per month over a selling period of more than six years involving a seven year construction program.[41]

Kosho submits that it required 4.75 sales per month to achieve 100 per cent of

pre-sales in 12 months, but only required sales equivalent to 100 per cent of debt coverage which equated to 70 per cent pre-sales or 47 units (four per month). It submits that this sales rate could have been achieved. It had formulated a marketing strategy as part of its funding proposal to CPL. A key part of its strategy was to construct the commercial building in Stage 1A known as the Pavilion, which it hoped to construct in late 2009 and complete in early 2010 with money advanced under the 2009 Facility. It was to be used as a sales office.

[217] Kosho relies upon what it described in its submissions as "pre-sales" that it had achieved at the time of its funding submission in March 2009, including two offshore sales and five expressions of interest. The documentation of the alleged offshore sales is incomplete and the "expressions of interest" came from individuals or entities associated with Ms Fujino and Mr Slijderink. There were no executed contracts by these people. Mr Slijderink was relying on oral expressions of interest to assert at one point that Kosho could have achieved 100 per cent of pre-sales.

[218] In mid-2009 Mr Slijderink had been in contact with Mr Michael Gore who specialised in project/investment marketing, and who was prepared to undertake a sales campaign for the project. Mr Gore gave evidence which promoted the prospect that his company could have achieved a large number of sales. I found his evidence unpersuasive and unreliable. I do not doubt Mr Gore's sincerity or his belief that he could have achieved a substantial number of sales despite what he described as "the negative wealth effects of the Global Financial Crisis and related stock market crashes." I did not discount Mr Gore's evidence simply because he and Mr Slijderink had worked together at the Atkinson Gore Group and his support in giving evidence was enlisted by Mr Slijderink late in the proceedings. Instead, I had trouble in accepting Mr Gore's rejection of the proposition that his ability to achieve sales was determined by what the market was doing. He stated his company was "very much insulated from the market". Whilst not doubting

Mr Gore's experience and skills in selling real estate to investors, and his belief that the Abadi residential units would have been attractive to a variety of buyers, including investors, he had not marketed a retirement village near the Gold Coast, and his evidence did not make appropriate concessions about the likely effect of the GFC on the rate of sales and the prices that could be achieved. I decline to act on his evidence.

[219] I have had regard to the large volume of valuation evidence which outlines the strengths and weaknesses of the Abadi project, and the evidence about the post-GFC market into which the units would have been advertised in late 2009, the first half of 2010 and possibly beyond.

[220] Two valuations, one by CB Richard Ellis Valuation ("CBRE") dated 24 October 2008 and another from LandMark White dated 28 February 2009, formed part of the evidence although the author of each valuation was not called as a witness. Each valuation was prepared for Kosho, with the latter having been prepared "for internal purposes." In addition, Mr Kogler prepared an opinion dated 15 June 2012 for the purpose of these proceedings in which he was asked to consider the likely sales rates for the Abadi project. Mr Kogler gave oral evidence on behalf of Kosho which tended to accentuate the positives of the Abadi project. I consider that his retrospective opinion dated 15 June 2012 and his oral evidence was excessively optimistic about the long term sales rates for the life of the project, and the sales rates in the year 2009-2010. His evidence tended to disregard or downplay unattractive features of the development.

[221] CBRE accurately noted that the development was not in an established residential precinct, that the project was "pioneering in nature within an unknown market" and the immediate area was one of "traditional apartments/unit blocks of a much lower quality." Its weaknesses included its proximity to a crematorium, and its distance from shopping centres and certain other services. It had mixed blessings. Although it was close to the Nerang railway station and the busy Nerang-Broadbeach Road, these features might generate noise. The project site had elevated views and was located within the suburb of Nerang although its outlook was towards Carrara. Nerang's industrial area was to the south-west of the property. Other residences in the vicinity and just over the rise were less salubrious than competing developments at Emerald Lakes. Mr Kogler compared the proposed Abadi project with other developments, including Riverwalk at Robina. These developments were assessed by CBRE to be in a superior location and to consist of larger units. They were close to the Robina Town Centre and its shopping precinct.

[222] Any comparison between the sales rates achieved at what Mr Kogler described as comparable projects at the Riverwalk Precinct at Robina and Sphere at Southport comes with its complexities. The sales rates achieved in those other developments and reported upon by Mr Kogler relate to sales that were completed during various periods in 2009 and 2010. They possibly included contracts that were entered into before the GFC or before the full impact of the GFC was felt on sales activity and prices. The prices that were achieved on sales that were completed in mid to late 2009 cannot be equated with the price that may have been negotiated at that time in the same project (assuming units remained to be sold). An analysis of sales rates and average prices in respect of Riverwalk and Sphere tends to suggest that sales rates slowed and that there was downward pressure on prices after 1 July 2009.

[223] The Abadi project would have been launched into a different, and more depressed market than most of the sales at Riverwalk and Sphere that were considered by

Mr Kogler, CBRE and Landmark White. Whilst, as noted, the sub-$500,000 market weathered the storm better than higher priced sections of the market, particularly high-rise units, it was still affected adversely by the GFC. Median prices of units in the vicinity of the Carrara land, both at Nerang and Carrara fell from their 2008 peak. There was also a fall in sales volume.

[224] The GFC adversely affected savings, including the value of investments in superannuation and shares, and was apt to delay the retirement plans of many individuals whose investments had been substantially reduced in value. Although it is true that many potential retirees whose savings were reduced might seek out a cheaper property to purchase for their retirement, and this might favour the Abadi development over more expensive units, the fact remains that its location was less attractive than other locations including comparable units at Robina and Emerald Lakes. It might be that in general terms there is and was an under-supply of retirement village stock that is appropriately priced for retirees. This is not to say that the Abadi project would have achieved sales or average sale prices predicted in the cashflows upon which Mr Lytras relied in performing his calculations and upon which Kosho relies in its submissions.

[225] Mr Kogler professed not to know when the impact of the GFC on superannuation funds was first experienced and whether there were large decreases in the value of superannuation funds in the relevant period. This reduced my confidence in his opinions about the effect of the GFC on demand for units in the Abadi project and the opinions which he expressed about likely sales rates.

[226] I do not accept Mr Kogler's opinion dated 15 June 2012 that a long term sales rate average in the vicinity of five to six sales per month could have been achieved for the Abadi project with an average price of $440,000 to $460,000 in line with the Sphere and Riverwalk precinct projects. I also do not accept his conclusion that there would have been in the order of 50 to 53 sales at such an average price for the period 1 July 2009 to 30 June 2010. The fact that most of the sales in relation to Sphere and Riverwalk had been achieved by June 2009 with little stock remaining has implications for market demand, as Mr Kogler explained in a further report provided to Mr Slijderink dated 13 August 2012. Most of the sales in Sphere and Riverwalk had been completed by 1 July 2009. This tends to suggest that the rate of sales and prices that were achieved for those projects cannot be translated to presumed sales rates and prices for the Abadi project after 1 July 2009, or, more precisely, when funds became available some time after that date to market the Abadi project.

[227] The Landmark White report of 28 February 2009 did not specifically address the rate of sales in 2009-2010. Instead, in arriving at an opinion about the value of the Carrara land for internal purposes, namely its "as is" site value with the benefit of its development approval, the valuer expressed the opinion that an average "blended" long term sales rate in the order of 4.5 to 5 units per month should be achievable, and adopted a sales rate of approximately 4.75 units per month over the life of the project. This involved a total of 361 units to be sold over a total sales program of 74 months, with a total construction timeframe of 60 months undertaken on a rolling basis. Such a prediction made in February 2009 of long term sales rates provides a limited basis upon which to make a conclusion about the rate of sales that would have been achieved during the period of the 2009 Facility.

[228] The more conservative CBRE prediction of a sales rate of three to four units per month, provided a professional marketing and promotional campaign was undertaken, was additionally qualified in the body of the CBRE report. CBRE noted that any further softening of economic conditions would be detrimental to property values and that it was impossible to predict them and their potential for a reduction in the value of the property. Development sites such as the subject property were described as "high risk in the current market and are more susceptible to market fluctuations than other forms of real estate." Cautious lending practices were recommended. CBRE remarked that the lack of liquidity in capital markets required valuations to be kept under regular review. Its opinion about the lack of liquidity in capital markets and that the property types that were most at risk were "non-prime/secondary assets, passive investments reliant solely upon market growth and non-income producing development sites" is relevant to the preparedness of lenders to provide finance when the 2009 Facility expired on 30 June 2010.

[229] CBRE's estimate of a sales rate of three to four units per month was made in a report dated 24 October 2008. There is no satisfactory basis to conclude that several months later, as the effect of the GFC on sales activity and prices became more apparent, particularly on the Gold Coast, CBRE would have upgraded its predicted rate of sales. If anything, it probably would have provided a more pessimistic assessment of expected rates of sale. In any event, based upon the evidence given about the effect of the GFC, I conclude that between late 2009 and

1 July 2010, the Abadi project was likely to achieve less than the three to four sales per month that CBRE had predicted in October 2008 and less than the 4.75 units per month that Landmark White predicted on a long term basis. This assumes that funds would have been advanced for marketing and construction purposes and that such a marketing program would have been underway in late 2009 and early 2010.

[230] I consider that the CBRE report provided a more realistic assessment of the strengths and weaknesses of the subject property than Mr Kogler's opinion. CBRE identified the competing development at the multi-staged Emerald Lakes development located about one kilometre to the east. CBRE regarded it as superior to the Abadi project but noted that the two developments might complement each other. Other developments at Robina and Varsity Lakes were of comparable quality to the proposed Abadi development but had the advantage of close proximity to extensive retail and educational facilities including Bond University and Robina Town Centre.

[231] On the assumption that all conditions required to enable funding under the 2009 Facility to be advanced had been satisfied by late 2009, entitling Kosho to a release of funds to market the development and build the Pavilion, it is unlikely that Kosho would have achieved four or more pre-sales per month whilst achieving the average price contained in its cashflow model.

[232] This cashflow model was not updated. The fact that Trilogy did not request an updated cashflow does not mean that it was satisfied that the cashflow model was appropriate to the changed circumstances which prevailed in late 2009 and 2010. Mr Slijderink acknowledged under cross-examination that revised cashflows would have been required to obtain further finance on 30 June 2010.

[233] The cashflow model prepared for the purpose of obtaining finance made optimistic predictions about sales rates and expected profits. Mr Slijderink is experienced in property development. However, he did not impress me as a reliable witness in relation to the rate of sales that were likely to be achieved, the impact of the GFC on the project or more generally. Although I permitted him to give evidence on such matters, given his experience and detailed knowledge of the project, his evidence lacked independence and he, perhaps understandably, had an excessively optimistic view about the project, its prospects and its profitability.

[234] Kosho has not proven that the cashflow which Mr Lytras was instructed to use as a basis for determining its loss of opportunity to earn a development profit from the Carrara land, and which he relied upon in doing so, should be used for that purpose. Kosho's failure to prove the sales rates, prices and other elements contained in that cashflow undermines one of the important assumptions upon which the calculation of its loss of opportunity claim was based.

[235] No other evidence was given of a cashflow based upon reduced rates of sale, or for that matter reduced average prices.

[236] Kosho's failure to prove its cashflow model as a reliable basis to calculate its development profit has implications for its damages claim. Kosho has failed to prove that it would have achieved the number of pre-sales that Mr Slijderink predicted in the cashflow model, and this has implications concerning the availability of finance in July 2010, and whether it would have earned a development profit even if such finance had been available.

[237] Kosho's case is that it would have obtained funding to complete the various stages of the Abadi development. Trilogy disputes this and submits that it had no obligation to provide further finance after 30 June 2010, and that the GFC meant that it was becoming harder to obtain finance. Any finance that might be obtained was likely to cost more and be more heavily conditioned, particularly by a requirement of pre-sales. The starting point for consideration of this issue depends upon whether any part of Stage 1A would have been completed by 30 June 2010, assuming that Kosho satisfied all the conditions of the 2009 Facility and funds were advanced for the initial stage of construction. Assuming the completion of Stage 1A (at which point funding of about $13m would have been required), according to the cashflow Stage 1B required total funding of $28,891,621 including residual debt from Stage 1A, leaving aside any interest offset of up to $2.8m.[42] Mr Slijderink's affidavit sworn 2 October 2012 (Exhibit 33) refers to a finance facility limit of $34m being required to undertake stages B1 and B2, with a peak debt forecast of $30m.

[238] Even before the GFC, Kosho had not been able to obtain bank finance for the acquisition of the Carrara land. Funding for the acquisition was provided by CPL in 2004. In mid-2006 refinance was obtained from MFS Pacific Finance Limited and Perpetual Nominees for 12 months. In 2007 finance was sought from different lenders to obtain development approval for Stage 1. No formal approval was obtained from a bank and the 2007 Facility that eventually was obtained from CPL in October 2007 was in the expectation that it might provide for project funding over the life of the project. In the meantime, Ms Fujino on behalf of Kosho obtained a short-term loan facility after approaching Mr Jimmy Goh. A short-term loan facility which ended in October 2007 was arranged from private financiers, Apiang Woong and International Mezzanine Funds Management (Australia) Pty Ltd. The fact that Kosho was dependent upon obtaining finance from such private lenders in 2007 makes it highly improbable that it would have obtained bank finance after the GFC.

[239] Mr Kogler observed that September 2008 was a watershed, and that many lenders in the marketplace, particularly banks, did not know what they were doing or where they should be going. Some individuals and businesses were able to obtain finance, but the type of borrower typically was one which did not have exposure to high debt. It became more difficult to obtain finance in 2008, 2009 and into 2010.

[240] The impact of the GFC on the availability of credit also was addressed by an economist, Mr Norling, whose evidence on that topic I accept. As a result of the GFC, finance for development projects contracted, and offers of finance were conditioned, requiring a high percentage, sometimes 100 per cent, of pre-sales.

[241] Mr Norling acknowledged that even after the GFC, projects on the Gold Coast had been funded by banks on a case-by-case basis. He also acknowledged that funding was available from non-traditional lenders. However, the presence of second tier financiers and private lenders in the market, which were prepared to consider loans on a case-by-case basis, does not provide acceptable evidence that financiers would have funded Kosho after 30 June 2010 upon the expiry of the 2009 Facility.

[242] The evidence of Mr Norling and Mr Kogler about the impact of the GFC, the "pioneering" nature of the Abadi development and the fact that Kosho required large amounts of funding to continue with the staged development lead me to conclude that it would not have been able to obtain finance as at 30 June 2010 to undertake the Abadi development. By that time CPL, which apparently had a high number of non-performing loans, had been replaced by Trilogy. Trilogy would not have provided additional finance in June 2010 to embark on further stages of the Abadi development.

[243] Incidentally, Mr Slijderink was attempting to obtain finance from alternative sources in late 2009 and early 2010, without success. Under cross-examination,

Mr Slijderink acknowledged that the "credit crunch" which happened in 2008 and 2009 continued. Neither Mr Kogler's evidence nor Mr Slijderink's evidence persuades me that Kosho would have obtained finance following the expiry of the 2009 Facility, even assuming the completion of Stage 1A. Mr Slijderlink's affidavit sworn 2 October 2012 refers to alternative finance options, but his evidence about possible sources of finance proved very little. Mr Slijderink and Kosho may have had relationships with investors, but his evidence does not establish that alternative finance options would have been available. No reliable independent witness who attempted to obtain finance for developers gave evidence about the availability of finance for the Abadi development in July 2010, assuming Stage 1A had been completed.

[244] Apart from general evidence about the presence of non-bank lenders in the market, Kosho's case concerning the possibility of obtaining finance rested principally upon the suggestion that it would have obtained finance from a private investor, and from entities associated with Mr Goh in particular. Kosho submits that obtaining funding from Mr Goh was a real and tangible prospect. Mr Goh's affidavit evidence about his preparedness to advance sufficient cash resources to provide a refinance for each of Stages 1B, 1C and 1D subject to meeting a pre-condition of pre-sales of 70 to 100 per cent prior to draw-down was qualified by his oral evidence. He said that he definitely would have required a lot more information from Kosho before deciding whether to provide funding. Mr Goh had not formed a view about whether he would have funded the Abadi project as it was at a very "premature stage" and he needed more information. Although he had funds available, any offer of funds would have been subject to many pre-conditions. Mr Goh's evidence related to a theoretical refinance as at July 2010 of approximately $34m for Stages 1, B1 and B2 for a period of 15 months. Mr Goh would have required a loan to value ratio not exceeding 75 per cent and further stages would have been subject to similar lending terms. I am not satisfied that the further information which Mr Goh required and the pre-conditions which he would have imposed upon any offer of finance would have led to the provision of the kind of finance which Kosho would have required as at July 2010. Kosho has not proven that it was likely to have achieved the percentage of pre-sales required to satisfy Mr Goh or any other lender in July 2010.

[245] Trilogy was not obliged to provide funding due to the non-satisfaction of Special Condition (p). When it did not provide funds in late 2009 Kosho experienced difficulty in obtaining alternative finance. Kosho has not established that a different course of events would have followed had there not been a breach and Special Condition (s) been satisfied. It would have been required to satisfy Special Condition (p) and obtain funds under the 2009 Facility in late 2009 (at the earliest) or in 2010. It is unlikely that it would have completed Stage 1A by 30 June 2010. If, instead, it did not avail itself of any funds from Trilogy, due to the imminent expiry of the 2009 Facility, it would have had difficulty in obtaining finance from any other source to undertake Stage 1A and the subsequent stages.

[246] If one assumes in Kosho's favour that funding would have been available from Trilogy had there been no breach of contract, and Stage 1A would have been completed at about the time of the expiry of the 2009 Facility, then there is no evidence that Trilogy would have been prepared to advance the very substantial amounts required to complete later stages. There is no acceptable evidence that finance could have been obtained from other sources to undertake further stages of the development. As a result, the claimed development profit that Kosho contends would have been derived by it from the completion of the development over a number of years would not have eventuated. Kosho's development would not have proceeded beyond Stage 1A.

[247] The development profit calculated by Mr Lytras assumes that funding would have been available after 30 June 2010 until the Abadi development was self-funding, and that Kosho would have derived a development profit upon the eventual completion of the development in accordance with the March 2009 cashflow model. For the reasons given, Kosho has not proven these assumptions. It would not have obtained the additional finance required after 30 June 2010 to undertake the development in accordance with the timeframe contained in the cashflow.

[248] If, however, later stages of the development had been completed then it is most unlikely that the cashflows would have been in accordance with the March 2009 cashflow model. Even assuming, contrary to my earlier findings, the achievement of a level of pre-sales necessary to satisfy a lender, and the existence of a lender which was prepared to advance the large amounts required to undertake further stages, Kosho has not established that the conditions imposed by such a lender, including the interest rates that would have been demanded, would have permitted the development to proceed through subsequent stages. If the sales rate was less than predicted by Kosho then any such lender may not have been obliged to advance further funds, or if it was prepared to do so, to do so on terms that would permit the development to be self-funding at a certain point and produce a substantial profit. The 2009 cashflow model contains numerous assumptions, including costs of construction and finance over the life of the project. It was based upon sales rates that Kosho was unlikely to achieve, with the result that actual revenue would have been reduced and the length of the project (and the cost of finance) would have increased.

[249] I conclude that it is highly unlikely that Kosho would have derived the development profit contained in Mr Lytras' calculations. His calculations were based upon a number of assumptions. Mr Lytras was prepared to accept the 2009 cashflows after a discussion about them with Mr Slijderink. This is not to say that he was in a position to verify or professed to have the expertise to verify, the assumptions upon which they were based. The fact that CPL in early 2009 was prepared to offer finance on the basis of a submission that included the 2009 cashflows does not prove they were accurate and reliable at the time they were made. It certainly does not prove that the 2009 cashflows accurately predicted what would have come to pass in late 2009 and early 2010, let alone thereafter, if Trilogy had advanced the requested funds under the 2009 Facility.

[250] Kosho did not present any alternative cashflow models, for example one based upon a reduced number of sales of say two or three sales per month in the 2009-2010 period. It did not present alternative scenarios such as the development not continuing beyond a particular stage, with the balance of the land being sold, if possible.

[251] In the absence of alternative, more realistic cashflows, Kosho has not proven that it would have obtained the required finance, completed the project and derived a profit from it. It has not provided a reliable basis to calculate the profit, if any, it would have derived from the completed development or to make a realistic assessment of the chance that such a profit would have been obtained.

[252] The chance of Kosho deriving the development profit claimed by it is so low as to be regarded as speculative in the extreme, and is not one to which a percentage can be assigned.

[253] I have concluded that Kosho has not proven that it lost the opportunity to derive a development profit by evidence which permits such a development profit to be calculated and an appropriate percentage selected so as to arrive at the value of the loss of the chance to derive such a profit. This makes it unnecessary to determine whether such a development profit is too remote from Trilogy's alleged breaches.

[254] Trilogy argues that Kosho's assertion that it is entitled to damages in respect to the failure of the development as a whole ignores entirely the remoteness of that damage from the conduct of Trilogy which is alleged to have constituted a breach of contract or breach of statute.

[255] Assuming in Kosho's favour that it was entitled to have funds advanced to it under the 2009 Facility, that it would have entered into an unconditional contract for the sale of the commercial property and completed the construction of Stage 1A by mid-2010, and that Trilogy's breach of contract or contravention of statute prevented it from doing so, Trilogy would be liable for certain consequences that flowed from Kosho not being in that position. This might include an inability to obtain funding after 30 June 2010 if such funding would have been available.

[256] Different rules governing remoteness apply in contract to those governing recovery of compensation for contravention of statute. Concepts like remoteness are embedded in statutory terms that require loss or damage to have been suffered by a contravention of statute. It is unnecessary to explore these issues. Trilogy is only responsible for certain consequences that would flow from its failure to provide funding under the 2009 Facility. It is not responsible for consequences which would have befallen Kosho in any event, including an inability to obtain further funding for later stages, or to complete the development and to sell the units in it at a profit.

[257] Kosho has failed to establish the foundations upon which its claimed development profit is calculated. These include its cashflow model, which did not reflect the likely sales rates and prices that would have been obtained for the Abadi residential units in 2009-2010 and beyond (assuming the availability of further finance at and after 30 June 2010). Although the 2009 cashflow model was prepared after the commencement of the GFC, it was too optimistic in its predictions.

[258] Mr Lytras' calculations were based upon assumptions he was instructed to make. They were not based upon any expert assessment by him of the impact of the GFC on sales rates, prices and the availability of finance. Mr Lytras disclaimed any expertise in those fields. I found his report and oral evidence helpful and professional. However, the conclusions he reached and the framework he presented as a basis upon which I might proceed to assess loss were only as good as the assumptions upon which his calculations were based. These include the opinions of Mr Kogler about expected sales rates in 2009-2010 and beyond which I have declined to accept.

[259] In the circumstances, Mr Lytras' calculations do not provide a proper basis upon which to assess Kosho's claimed loss.

[260] Kosho argues that assumptions made by Mr Lytras about the availability of development finance and other matters that involved the risk that the projected profit would not be obtained should be reflected in a discount, not rejection of the plaintiffs' claims. The risks included an increase in costs, higher interest rates on future finance and the risk that sales would not be obtained or completed in accordance with the cashflow.

[261] The multiplicity of assumptions made by Mr Lytras, based upon his instructions, and the unsubstantiated nature of many of those assumptions, disincline me to adopt the hypothetical development profit of approximately $30m (as at July 2009) or approximately $28.5m (as at 30 June 2010) as a starting point against which to apply a percentage figure. The development profit calculated by him is based upon the accuracy of the inputs and assumptions underlying the cashflows, including the availability of further finance, and a number of other assumptions.

[262] In theory at least, it is possible that the inputs and assumptions in the cashflow might have been achieved, permitting the Abadi development to continue after

June 2010 with the substantial additional funding it required, to become self-funding and to yield a profit in accordance with the cashflow. In theory this is possible, just as it might be said that anything is possible in a big country.

[263] It is possible to conceive the possibility that, by not obtaining funding of about $2.5m pursuant to the 2009 Facility, and not being able to obtain similar funding from another source, Kosho lost the chance to undertake Stage 1A, market the development, borrow very substantial funds for later stages and see the development through to a very profitable conclusion. Such a theoretical development profit involves numerous contingencies. This is not a simple loss of opportunity case, such as one whereby a plaintiff was unable to complete the purchase of an existing building or vacant site which would have appreciated in value, and thereby lost the opportunity to derive a profit. It does not involve the loss of a chance, albeit a very small chance, to obtain a prize, the monetary value of which is easily proven. Here, the lost opportunity is to derive a development profit at the end of many years from the successful development of the Abadi Residential Village. Even if one was to adopt the $30m figure as the starting point to apply a discount, the discount would be the product of numerous separate contingencies, and result in a tiny percentage figure.

[264] The choice of such a small percentage, or the rejection of Kosho's claim as altogether too speculative, would have been assisted by alternative cashflows which might have indicated whether the development as a whole, or any stage of it, was likely to generate a profit under different scenarios. The different scenarios would have included reduced sales rates, increased construction costs, higher finance costs and the termination of the project at various stages.

[265] The cashflow model upon which Kosho's claim is based is so unreliable as a basis upon which to assess the claimed loss of opportunity, even by the application of a small percentage figure to it, that I conclude that Kosho has not satisfactorily proved the value of the loss of the opportunity to develop the Carrara land at a profit. The cashflow model is based upon a number of assumptions which have not been established by evidence. In the circumstances, it is inappropriate to use it as a starting point to which a percentage figure, even a small one, is to be applied.

[266] The value of Kosho's loss of opportunity for a development profit has not been satisfactorily proven. If, however, I had adopted Mr Lytras' calculation and applied a percentage figure to it, the percentage would have been very small and very close to nil.

[267] Mr Lytras calculated the loss of equity in the properties owned by Kosho and City Co as at July 2009 and as at 30 June 2010, depending upon a range of possible outcomes, and based upon certain assumptions. These include the accuracy of the "as is" land valuations and whether the inherent equity in the properties would have been realised during the course of development. I leave aside the issue of whether the valuations of $4m in relation to the Surfers Paradise and $17.5m in respect of the Carrara land incorporated the value of the opportunity to earn development profits, such as to disentitle Kosho or City Co from adding together the value of its loss of equity and the loss of the opportunity to earn development profits.

[268] As to the residual equity in the properties, Mr Lytras was instructed to assume that, as a consequence of the alleged breaches, the plaintiffs' residual equity in the Carrara land and the Surfers Paradise property on an undeveloped "as is" basis is nil. This was based upon an instruction given to him by Mr Slijderink to:

• adopt a current market value as at August 2012 of $2m in respect to the Surfers Paradise land, due to the loss of the hotel development approval;

• adopt a figure of between $5.3m and $12.25m for the Carrara land, with

Mr Slijderink noting that "General market activity for masterplanned development sites show ongoing decline in values where such developments do not demonstrate market acceptance through sales."

[269] Mr Slijderink's instruction to Mr Lytras of 16 August 2012 that the land is worth between $5.3m and $12.25m is illuminating. The figure of $12.25m was said to reflect a 30 per cent reduction in value, and to represent the "upper value" in the current market, whereas the figure of $5.3m was the market value placed on the site by the Valuer-General. Mr Slijderink's comments tend to highlight the risks which a pioneering development such as the Abadi project would have encountered even if funds had been released to Kosho in late 2009 or early 2010 by Trilogy to enable Kosho to construct the Pavilion and commence a marketing campaign.

[270] On the basis of Mr Slijderink's instruction about the Carrara land value the present equity position, taking account of the amount of the loan facility as at 30 July 2012 was negative. On a best case scenario it was approximately -$3.75m. On a worst case scenario it was approximately -$10.7m.

[271] Mr Lytras' calculations of loss of equity in the properties arrive at a figure before any appropriate Court discount. For reasons previously given, I do not accept that the Surfers Paradise land had a market value of $4m. Although the Carrara land was valued by Landmark White at $17.5m in its report dated 16 March 2009, I am not persuaded that it had that value as at July 2009 or 30 June 2010.

[272] Kosho has not proved that it had an equity of $4.76m as at July 2009 in the Carrara land and an equity of $3.33m in that same land as at 30 June 2010. These figures are based upon a value of $17.5m as at each date. I am disinclined to adopt these figures and apply a probability percentage of between zero per cent and 100 per cent to them to arrive at the value of the claimed loss of equity.

[273] Kosho has experienced a loss of equity in the properties because of the increase in the amount owed to the fund. But it is likely to have suffered such a reduction in its equity in any event. It retains the land in its undeveloped state, and I am not persuaded that its net equity in that land is any less than it would have been had Stage 1A been completed, assuming the provision of funds under the 2009 Facility. Its net equity position simply would have been different, with an increased loan amount together with the unknown value associated with the construction of the Pavilion and other improvements at the end of Stage 1A.

[274] If, contrary to my earlier findings, Kosho had received the large amount of funding required for later stages of the development, and embarked upon such a development there is every prospect that it would have been unable to make a profit. It probably would have made a loss on the development, and, given the scale of borrowings, the loss probably would have been large enough to eliminate, not simply reduce, its equity.

[275] In summary, Kosho has not provided a satisfactory basis to assess any claim for loss of equity in the Carrara land.

[276] Incidentally, any loss incurred in developing the Carrara land also had the potential to reduce, if not eliminate, City Co's equity in the Surfers Paradise land for so long as the Surfers Paradise land was used to secure Kosho's borrowings.

[277] This aspect of Mr Lytras' report was not addressed in submissions. Mr Lytras explains that his assessment of the value of "costs not otherwise incurred" depends upon whether or not the plaintiffs, in the absence of alleged actions, would have:

(a) undertaken the proposed developments (and pursued the opportunity to earn development profits); or

(b) sold the properties on or about the dates of the alleged actions.

I think it likely that Kosho would have retained the Carrara land, and that City Co would also have retained the Surfers Paradise property. There is no satisfactory evidence that they would have sought to realise their existing equity. If they had done so there is no evidence that they would have quickly sold the properties. It is likely that they would have incurred interest and other holding costs and that these costs would have been incurred in any event.

[278] Kosho and City Co seek awards of damages based on an assessment of percentages to be applied to certain amounts, as calculated by Mr Lytras. Although separate percentage figures might be applied to each amount and the case of each plaintiff would require different percentages under each head, the separate claims by City Co and Kosho for loss of equity and for loss of the opportunity to earn the asserted profit are inevitably linked.

[279] The development, successful or otherwise, of the Surfers Paradise land into a boutique hotel, depended upon the land being released from the security granted to CPL/Trilogy as a condition of the 2007 Facility and then the 2009 Facility. If the Abadi development did not proceed, did not proceed beyond Stage 1A, failed to obtain a certain percentage of pre-sales or did not proceed profitably, the Surfers Paradise land would have remained as security for Kosho's indebtedness to the Trilogy interests and not been developed. Even if Trilogy had advanced funds to Kosho under the 2009 Facility, the Surfers Paradise land would not have been developed because the land would have remained as security for the debt owed to Trilogy and would not have been released pursuant to Special Condition (k).

City Co would have been essentially in the position it presently is. In fact, if an additional $2.5m had been advanced to Kosho, City Co's equity position would have been diminished.

[280] In the unlikely event that the Surfers Paradise land became available as security and there was a lender prepared to advance the large amount required to finance the development of a unique boutique hotel on the site, the conditions of finance for such a development during the GFC and its continuing aftermath would have meant the development was unlikely to achieve the financial returns contained in

Mr Kogler's retrospective valuation. There is a very high probability that such a development, if undertaken, could not have been completed and sold within the time frames assumed in that valuation, so as to achieve a development profit of $10.75m, or, indeed, any substantial profit. If the site could not be profitably developed, due to the unavailability of finance, the cost of such finance, the other costs associated with such a development, the inability to earn the income projected in the valuation, the inability to sell it at the kind of price suggested by Mr Kogler shortly after the hotel opened or for some other reason, then any development loss would erode the relatively small equity that City Co held in the site. A development loss of a few million dollars on such a risky and unique project would eliminate City Co's equity.

[281] If the development profit loss claimed by City Co is not too remote in point of law to be recovered, then the claim for the loss of the opportunity to earn such a development profit is subject to numerous contingencies, including the release of the security, the availability of finance to commence and complete such a unique development, achieving the financial results projected over five years by certain hospitality consultants, an early sale of the to-be-completed or newly-completed hotel before these projections could be tested and a sale at a price that would enable City Co to derive a substantial profit. The opportunity to earn such a profit is subject to so many contingencies that the claimed profit is speculative in the extreme. These compounding contingencies do not permit even a small percentage to be fairly attributed to the chance of City Co earning a profit of $10.75m, or any other profit.

[282] Kosho has failed to prove that the Carrara land had a value of $17.5m as at

July 2009 or July 2010, being the value which CBRE and Landmark White attributed to the land in late 2008 and early 2009 respectively. It was probably worth less than $17.5m in July 2009 and July 2010. It is unlikely Kosho could have achieved the pre-sales and satisfied the other conditions required by a financier, assuming one could be found. In all likelihood, Kosho would have been left with a stalled development.

[283] The quantum of Kosho's loss of equity in the Carrara land is also unproven. Whatever Kosho's equity in the land was in July 2009 or July 2010, it has been reduced as the debt it owes Trilogy has increased. Any loss of equity, if proven, would need to be discounted for certain contingencies, including the contingency of Kosho suffering a loss on any development it undertook. The loss might have been sustained upon the completion of Stage 1A, or during later stages, when Kosho would have had a very large debt to service. The risk of suffering a loss on the development was significant, even if Trilogy had advanced an additional $2.5m during the term of the 2009 Facility. Such a loss would have reduced or eliminated Kosho's equity in the Carrara land.

[284] In summary, neither Kosho nor City Co has satisfactorily proven the quantum of its claimed losses. The state of the evidence, the existence of multiple contingencies affecting the successful and profitable development of the Carrara land and the Surfers Paradise land, and the absence of an alternative alleged benefit do not permit the value of the chance to obtain the benefits claimed by the plaintiffs (or any alternative benefit) to be fairly assessed, even on the basis of rough estimates and guesswork. The value of the benefits to which the plaintiffs seeks a percentage to be applied have not been satisfactorily proven.

[285] Kosho was not entitled to have funds advanced to it under the 2009 Facility because Special Condition (p) was not satisfied. Therefore, Trilogy did not breach a term of the 2009 Facility in not advancing the funds.

[286] Trilogy was obliged, by virtue of a term implied by law, to do all such things and take all such steps as may be necessary to enable Kosho to have the benefit of the 2009 Facility. This obliged it to take certain steps in relation to Special Condition (s). Trilogy's delay in preparing a deed, the terms of which were satisfactory to it as lender and which also might have satisfied DMR, was unreasonable. It thereby breached the implied term and disabled Kosho from complying with Special Condition (s). But this breach of contract did not cause Kosho to lose the opportunity to develop the Carrara land with the benefit of funds advanced under the 2009 Facility. Satisfaction of Special Condition (s) would not have entitled it to have funds advanced to it because it had not complied with Special Condition (p), and Kosho has not proven that it have complied with Special Condition (p) if there had been no breach by Trilogy. Had Trilogy acted reasonably in negotiating terms of the deed contemplated by Special Condition (s), being terms which satisfied all parties, including DMR, then Special Condition (s) would not have been satisfied until late 2009 or early 2010. It is unlikely that a deed of assignment would have been agreed and executed prior to the end of October 2009. There is no satisfactory evidence that "an unconditional contract for the commercial property" of the kind required by Special Condition (p) would have been entered into by the time Special Condition (s) was satisfied or during the remaining term of the 2009 Facility so as to satisfy Special Condition (p).

[287] Kosho and City Co have failed to prove that any breach of contract by Trilogy caused them substantial loss and damage, let alone loss and damage in the quantum alleged. Its remedy for breach of contract is nominal damages.

[288] Kosho and City Co have not established their claims of misleading and deceptive conduct and unconscionable conduct in contravention of statute, or that any such conduct was productive of the loss and damage claimed. Had such alleged conduct not occurred Kosho probably would have agreed to the 2009 Facility, and the course of events after that would have been essentially the same.

[289] Kosho and City Co have failed to prove their claims for substantial damages. The breach of contract proven by them entitles them to only nominal damages. Had the breach of contract not occurred then Kosho still would not have had an entitlement to have funds advanced to it under the 2009 Facility. Its financial position would have been the same.

[290] City Co offered the Surfers Paradise land as security for the 2009 Facility. In the absence of the breach of contract that I have found, its Surfers Paradise land would have remained as security. Its financial position would have been the same.

[291] Neither Kosho nor City Co has satisfactorily proven the quantum of its claimed losses.

[292] In the Kosho proceedings there will be judgment for each plaintiff for nominal damages, namely $10.00, for breach of contract. Otherwise their claims will be dismissed.

[293] Because Kosho has not established its claim for damages (other than nominal damages) there is no substantial set-off which reduces the amount owing under the 2007 Facility which Ms Fujino guaranteed. Only $10.00 will be set off. Accordingly, there will be judgment in the Fujino proceedings for the plaintiffs.

[294] Trilogy should submit draft minutes of judgment in each proceeding. I will hear the parties, if necessary, in relation to costs.

[295] I consider that the plaintiffs in the Fujino proceeding should have their costs of that proceeding assessed on the indemnity basis, for the reasons advanced in paragraphs 49, 50 and 52 of Trilogy's submissions in reply. Ms Fujino submitted that standard costs would be a sufficient response. I do not agree. Ms Fujino prosecuted her unconscionability case when she should have appreciated that it had no worthwhile prospects of success. The unconscionability case was hopeless for the reasons submitted in paragraph 17-24 of Trilogy's original submissions. There was no response to these submissions. By the time it was abandoned Trilogy had been put to great expense in responding to an unconscionability case that should have been abandoned much earlier. The prosecution of such a hopeless case was irresponsible and justifies costs being assessed on the indemnity basis.

[296] Next Ms Fujino contested that the unconscionability case accounted for 40 per cent of the combined proceedings. I would have thought that the figure of 40 per cent was too high. Senior Counsel for Ms Fujino submitted that the figure was a matter for my discretion. I assess it to be 25 per cent of the total proceedings.

[297] Subject to further submissions about the making of a single costs order to avoid the separate assessment of costs in each proceeding, I propose to order Ms Fujino to pay the plaintiffs' costs of and incidental to the Fujino proceeding to be assessed on an indemnity basis.

[298] My provisional view is that the very limited success of the plaintiffs in the Kosho proceedings should be reflected in an order that the plaintiffs pay 85 per cent of the defendants' costs of and incidental to the Kosho proceeding, to be assessed on the standard basis.

[299] I will hear the parties, if necessary, about an appropriate costs order in each proceeding, or the making of a single costs order to avoid separate assessments in each proceeding.

[1] Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; (2004) 218 CLR 471 at 483 [34]; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at 461 - 462 [22].

[2] Toll (FGCT) Pty Limited v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at 179 [40].

[3] Rainy Sky S.A. and Ors v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900 at 2911, [29] - [30].

[4] McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 at 589 [22].

[5] Peter Turnbull & Co Pty Ltd v Mundus Trading Co (Australasia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235 at 246-247, cited in K & K Real Estate Pty Ltd v Adellos Pty Ltd [2010] NSWCA 302 at [92] - [93]; Mullins v Kelly-Corbett [2010] QCA 354; (2011) Q ConvR 54-748 at 63,523 [18] - [20].

[7] [2009] QSC 7 at [102]; affirmed on appeal in Questband Pty Ltd v Macquarie Bank Ltd [2009] QCA 266.

[8] BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 347.

[9] Hospital Products Ltd v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41 at 137-138.

[10] Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service [2010] NSWCA 268 at [146] citing earlier New South Wales Court of Appeal authority.

[11] Ibid_; Laurelmont Pty Ltd v Stockdale & Leggo (Queensland) Pty Ltd_ [2001] QCA 212 at [45].

[12] Carter JW, Contract Law in Australia 6th ed, LexisNexis, Chatswood, 2012 at [2.01]-[2.03].

[13] Burger King Corporation v Hungry Jack's Pty Ltd [2001] NSWCA 187; (2001) 69 NSWLR 558 at 569 - 570 [163] - [168].

[14] cf Commonwealth Bank of Australia v Renstel Nominees Pty Ltd [2001] VSC 167 at [47].

[15] South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; (2000) 177 ALR 611 at 696 [394]; see also at 703-4 [426]-[427]; Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] FCA 903; [1999] ATPR 41-703; Burger King Corporation v Hungry Jack's Pty Ltd (supra) at 573-574 [185] - [187]; see generally Seddon NC & Bigwood RA & Ellinghaus MP, Cheshire & Fifoot Law of Contract 10th Australian ed, LexisNexis, Chatswood, 2012 at [10.45]-[10.46].

[16] cf Renard Constructions (ME) v Minister for Public Works (1992) 26 NSWLR 234 at 263. As to the difference between good faith and reasonableness see Stapleton J, "Good Faith in Private Law" (1999) 52 CLP 1 at 8; Carter J & Peden E, "Good Faith in Australian Contract Law" (2003) 19 JCL 155; Carter JW (supra) [2-13]; Horrigan B, "New Directions in How Legislators, Courts, and Legal Practitioners Approach Unconscionable Conduct and Good Faith," (paper presented at the Current Legal Issues Seminar, Brisbane, 18 October 2012) at 25-26.

[17] Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 607-608; Peters (WA) Ltd v Petersville Ltd [2001] HCA 45; (2001) 205 CLR 126 at 142 [36].

[19] [2006] QCA 126 at [50] - [51].

[20] See the extra-curial observations of Allsop J, "Good Faith and Australian Contract Law: A Practical Issue and a Question of Theory and Principle" (2011) 85 ALJ 341 at 349.

[21] Australis Media Holdings Pty Ltd v Telstra Corporation Ltd (1998) 43 NSWLR 104 at 124 (original emphasis).

[23] [2008] WASCA 268; (2008) 38 WAR 350 at 374-375 [88] - [92] per Buss JA with whom Martin CJ and Murray AJA agreed.

[24] (1995) 49 NSWLR 315 at 318-319.

[25] [2008] FCAFC 2; (2008) 165 FCR 230 at 242 [44].

[26] [2005] NSWCA 261; (2005) 63 NSWLR 557 at 583 [120] - [121].

[27] Canon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) 244 ALR 759 at 761 [4].

[28] Similar provisions were considered in PSAL Ltd v Kellas-Sharpe [2012] QSC 31 at [84] - [88]; an appeal on other grounds was dismissed in Kellas-Sharpe v PSAL Ltd [2012] QCA 371.

[29] The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64; Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 348, 355, 364-5.

[30] [1892] 2 QB 524 at 532-533.

[31] Nilon v Bezzina [1988] 2 Qd R 420 at 424.

[32] The Commonwealth v Amann Aviation Pty Ltd (supra) at 83, 102, 125-126.

[33] Sellars v Adelaide Petroleum NL (supra) at 355.

[34] Higgins and Fidge v Drysdale [1996] VicRp 22; [1996] 1 VR 346 at 354-5_; Lewis v Hillhouse_ [2005] QCA 316 at [22] - [26].

[35] Ministry of Defence v Wheeler [1997] EWCA Civ 2647; [1998] 1 All ER 790 at 803-804.

[36] Sellars v Adelaide Petroleum NL (supra) at 364.

[37] Commonwealth v Amann Aviation Pty Ltd (supra) at 125-126.

[38] Ibid at 126 citing McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377 at 411; Fink v Fink [1946] HCA 54; (1946) 74 CLR 127 at 134-135, 143.

[39] Earnings before interest, taxes, depreciation and amortisation.

[40] Strengths, weaknesses, opportunities and threats.

[41] Taken from Mr Norling's report and Trilogy's submissions. Kosho did not contest these figures. See Mr Lytras' report for slightly different average sale prices and rates.

[42] Compare the affidavit of Mr Goh, which was premised upon Kosho seeking a facility limit of $34,089,615 for Stages B1 and B2 for a refinance as at July 2010.