Promoseven Pty Ltd v Markey, in the matter of Bluechip Development Corporation

Federal Court of Australia (Full Court)|2015-02-13|Before: Mr J, Rangiah JJ

Counsel for the Appellant: Mr PA Hastie QC with Ms JSB Payne

Solicitor for the Appellant: Synkronos Legal

Counsel for the First Respondent: Mr D Kelly QC with Mr MO Jones

Counsel for the Third Respondent: The third respondent did not appear

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 835 of 2013

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA IN THE MATTER OF BLUECHIP DEVELOPMENT CORPORATION (CAIRNS) PTY LTD ACN 117 021 566 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED) BETWEEN: PROMOSEVEN PTY LTD ACN 102 606 324

AND: NIGEL ROBERT MARKEY AND BRADLEY VINCENT HELLEN IN THEIR CAPACITY AS RECEIVERS AND MANAGERS AND LIQUIDATORS OF BLUECHIP DEVELOPMENT CORPORATION (CAIRNS) PTY LTD ACN 117 021 566

PRIME PROJECT DEVELOPMENT (CAIRNS) PTY LTD ACN 109 685 332

JUDGES: DOWSETT, COLLIER AND RANGIAH JJ DATE OF ORDER: 13 FEBRUARY 2015 WHERE MADE: BRISBANE

The appeal be allowed.
The orders made by the primary Judge on 28 November 2013 be set aside.
The matter is remitted to the primary Judge for further hearing.
The further hearing is to be on the basis of the evidence already adduced in the proceeding, unless the primary Judge orders otherwise.
Within 14 days of the publication of the Court's reasons for judgment, the parties exchange submissions as to the costs of the appeal and, within a further period of 7 days, file such submissions, together with any submissions in reply.
There be liberty to apply. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 835 of 2013

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA IN THE MATTER OF BLUECHIP DEVELOPMENT CORPORATION (CAIRNS) PTY LTD ACN 117 021 566 (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)

AND: NIGEL ROBERT MARKEY AND BRADLEY VINCENT HELLEN IN THEIR CAPACITY AS RECEIVERS AND MANAGERS AND LIQUIDATORS OF BLUECHIP DEVELOPMENT CORPORATION (CAIRNS) PTY LTD ACN 117 021 566

PRIME PROJECT DEVELOPMENT (CAIRNS) PTY LTD ACN 109 685 332

JUDGES: DOWSETT, COLLIER AND RANGIAH JJ DATE: 13 february 2015 PLACE: BRISBANE

REASONS FOR JUDGMENT DOWSETT J 1 I have read the draft reasons prepared by Collier and Rangiah JJ. I generally adopt their Honours' recital of the facts and the history of the matter at [120] - [140] of those reasons. 2 In these reasons I shall refer to the parties to the appeal and other parties as follows: the appellants … "Promoseven"; the first respondents … the "liquidators"; the company in liquidation … "Bluechip"; the other party to the joint venture agreement … "Prime"; and Refund Property Fees Pty Ltd (being, in effect, the assignee of Prime's claims against Bluechip) … "Refund". I shall refer to relevant documents as follows: the mortgage granted by Bluechip to Prime and Promoseven … the "2009 mortgage"; the loan agreement executed after the 2009 mortgage … the "2009 loan agreement"; the draft mortgage circulated in 2007 … the "2007 draft mortgage"; the draft loan agreement, dated 2006, but circulated in 2007 … the "2006 draft loan agreement"; the joint venture agreement between Prime and Promoseven (including the attached "statement of intent") … the "JVA"; and the liquidators' adjudication … the "adjudication". I shall refer to the advances identified in the primary Judge's reasons at [13] as the "relevant advances", and to the joint venture project undertaken by Prime and Promoseven, using Bluechip, as the "Cairns project".

SOME PRELIMINARY COMMENTS 3 Before giving my detailed reasons, I should give a brief summary of the proceedings with which we are presently concerned. 4 Promoseven asserts that it is a secured creditor of Bluechip upon the basis that the 2009 mortgage secured repayment of the amounts of the relevant advances. For reasons which are not immediately clear, on 2 February 2012, the primary Judge made orders requiring Prime, Promoseven and Refund formally to prove any debts, the payment of which they claimed was secured by the 2009 mortgage. This process was said to be, "without prejudice to [the liquidators'] right as liquidators to investigate the validity of [the 2009 mortgage]". Prime, Promoseven and Refund (as assignee of Prime's rights) were the only creditors whose debts could be secured by the 2009 mortgage. Following the submission of such proofs, the liquidators were to: … rule on such proofs of debt and ascertain the amount or amounts secured by [the 2009 mortgage], the identity of the secured creditor or creditors, the value of the security and the priority or proportions in which the secured debts are to be paid from any amount secured by or realised from [the 2009 mortgage]. 5 The liquidators were to provide Prime, Promoseven and Refund with copies of each determination. Save to the extent that the orders otherwise required, the provisions for the proof of debts in the Corporations Act 2001 (Cth) (the "Corporations Act") and the Corporations Regulations 2001 (the "Regulations") were to apply. 6 Promoseven lodged a proof of debt dated 18 May 2012. It claimed that on 9 December 2011, and thereafter, Bluechip was indebted to it in the sum of $11,280,330.36 and provided particulars of that amount. However Mr Litster, Promoseven's solicitor, said in his affidavit that the proof was in the amount of $11,277,661 and was lodged on 11 May 2012. These discrepancies are not presently relevant. The proof further declared that Promoseven had received no satisfaction or security for that sum, or any part thereof, except for the 2009 mortgage and the "loan agreement January 2009". In a column headed "Due Date", the word "Immediately" appears. I infer that the intention was to claim that the allegedly secured debts were presently due and payable. The "loan agreement January 2009" is, of course, the 2009 loan agreement which was dated January 2009 but executed in April 2009. 7 This "proof" seems not to comply with the requirements of s 554E of the Corporations Act. That section provides that a secured creditor may only prove in one of three ways, namely: by surrendering the security and proving for the whole debt; by realizing the security and proving for the balance, subject to the liquidators being satisfied as to the circumstances of the realization; or by estimating the value of the security and proving for the balance. 8 Promoseven adopted none of these options. It is difficult to know whether the "proof" should be interpreted as claiming the whole debt as fully secured or fully unsecured. If the latter, then Promoseven may have surrendered its security. See Moor v Anglo-Italian Bank (1879) 10 Ch D 681 at 689 - 690. However the circumstances may demonstrate that such was not the creditor's intention. See Re Douglas Homes Qld Pty Ltd (in liquidation) [1980] Qd R 528, and Surfers Paradise Investments Pty Ltd (in liquidation) v Davoren Nominees Pty Ltd [2004] 1 Qd R 567 at [2] - [7] and [27]. Promoseven may simply have wished to keep its options open, a course which is not contemplated by s 554E. In his Honour's reasons at [6] he concluded, having regard to s 588D of the Corporations Act, that Promoseven had not surrendered its security. That section provides that: For the purposes of this Part, a secured debt becomes an unsecured debt to the extent that the creditor proves for the debt as an unsecured creditor. Thus his Honour seems to have concluded that Promoseven had not proven as an unsecured creditor. Indeed, it is difficult to see how it could be said that Promoseven had (for the purposes of the Corporations Act) proven at all, given the mandatory language of s 554E. The orders made on 2 February 2012 seem to have been designed to identify the extent of any claim by Prime, Promoseven or Refund to be secured creditors of Bluechip pursuant to the 2009 mortgage, adopting the language of Div 6 of Pt 5.6 of the Corporations Act. 9 In support of its claim, Promoseven submitted to the liquidators that relevant agreements for the purposes of the definition of the term "Secured Obligations" in the 2009 mortgage were: the JVA; the 2009 loan agreement; and "[q]uite possibly every email or letter to Mr Burt, Mr Miknas or Promoseven calling for funds to be advanced to [Bluechip]." 10 In their adjudication at paras 2.2.1.4 and 2.2.1.5, the liquidators rejected Promoseven's claim to security for repayment of the relevant advances (other than advance 22) upon the basis that the liabilities were incurred prior to execution of the 2009 loan agreement, thus leaving unresolved Promoseven's claim to rely on the JVA and the emails and letters. In Pt 8 of the adjudication the liquidators further considered the relevant advances. After recording Promoseven's claim to be a secured creditor, they observed, at para 8.2.2, that: Receipt of the above contributions from Promoseven save for [advances] No. 21 and 22 have been confirmed to Bluechip's NAB and HSBC bank accounts. The funds have also been traced to Promoseven's bank account. Thus the liquidators accepted that, other than for advances 21 and 22, the relevant advances had originated in Promoseven's account and passed to Bluechip's account. They were also satisfied that advance 21 had been paid by Promoseven. However they were not satisfied that such payment was in discharge of a debt owed by Bluechip. Advance 22 was actually a transfer of funds by Bluechip to Promoseven. The liquidators accepted that the relevant amount had originated in Bluechip's account and ended up in Promoseven's account. However they rejected, "this claim as a deduction against Promoseven's secured claim". This seems to have meant that the liquidators did not recognize it as having been applied in reduction of any debt owed by Bluechip to Promoseven. 11 Although the liquidators accepted that the relevant advances (other than advance 22) came from Promoseven and eventually ended up with Bluechip, they nonetheless observed at 2.3 that: The liquidators make no determination as to whether any or all of the rejected claims may be admitted by Promoseven as an unsecured claim in the liquidation of Bluechip. 12 In the conduct of these proceedings, at first instance and on appeal, the parties and the primary Judge have frequently used language which may have implied that the liquidators had accepted that there were loan agreements between Promoseven and Bluechip, and loans by Promoseven to Bluechip. However it is quite clear that the liquidators do not accept that Bluechip is under any legal obligation to repay the amounts advanced. That position is clearly inconsistent with there having been such loans or loan agreements. Although the matter is somewhat unclear, my understanding of the liquidators' position is that: Promoseven made advances; the amounts of such advances ended up in Bluechip's account; whether or not there were contractual relations between Promoseven and Bluechip, Bluechip incurred no obligation to repay the amounts of the advances to Promoseven; and the common intention and understanding of all parties was that Promoseven would recoup the amounts of the advances pursuant to the provisions of the JVA. 13 I should make a number of further points which are relevant to my understanding of the liquidators' case. First, in oral submissions, counsel for the liquidators clearly asserted that they did not accept that Bluechip had incurred any obligation to repay the advances, and that they had not made any concession to that effect. See ts 47, ll 22-26; ts 50, l 43 to ts 51, l 6; ts 53, l 46 to ts 55, l 21; ts 56, l 31 to ts 58, l 34; and ts 62, ll 13-20. The liquidators' written submissions refer to advances to Bluechip (para 2), but their subsequent submissions effectively assert that Bluechip incurred no obligation to repay the advances. Overall, the written submissions suggest that the advances were made pursuant to the JVA, to which Bluechip was not a party. See paras 15 - 24. 14 I make this point because, as I have said, some of the language used in these proceedings by the primary Judge, the liquidators and Promoseven implies a loan and/or a debtor/creditor relationship. See, for example, his Honour's observations at [13], [14], [15] and [43]. The language used in those paragraphs seems to be inconsistent with his Honour's formulation of the liquidators' case at [34] and [38]. Promoseven uses similar language in its written submissions, particularly at paras 2 and 7. At para 7 Promoseven asserts that the advances were loans, referring to the fact that they were recorded as such in Bluechip's books, to the fact that according to his Honour, the liquidators did not cavil with the characterization of the advances as loans and to his Honour's use of the language of offer and acceptance at [43]. As to Bluechip's records, it must be kept in mind that Messrs Knell and Burt had overall responsibility for them. The liquidators challenge the characterization of the transactions as loans which Bluechip had promised to repay. I have already explained the apparent ambiguity in his Honour's language concerning the "loans" and "agreements for loan". As to the language of offer and acceptance, it is not clear whether his Honour was adopting the language of the liquidators' submissions or making his own comments. 15 I should also say that there was a tendency, on appeal, to deal with the relevant advances collectively rather than individually. However it is clear that at first instance, his Honour understood that if the liquidators were wrong in their submissions, it would be necessary to consider, in detail, the circumstances surrounding the advances. See the reasons at [41]. In Promoseven's written submissions on appeal at para 20 it accepted that his Honour should have done so. It is true that in oral submissions at ts 20, ll 13-15, counsel suggested that, "it can all be dealt with globally". However, at ts 21, ll 37-38, counsel accepted that any agreement (other than the JVA) would have to be established on a "case by case" basis. 16 Finally, I point out that the liquidators' case is primarily that the 2009 mortgage and the relevant advances must be considered in light of the JVA. On appeal, Promoseven conceded that the JVA was one of the surrounding circumstances in which the 2009 mortgage was granted. See ts 8, l 31 to ts 9, l 21. 17 The liquidators do not accept that Bluechip incurred any obligation to repay the advances. They submit that Bluechip, Prime and Promoseven agreed that Promoseven would recoup its advances in the winding up of the joint venture business, whether as repayments or as profits. I use the expression "joint venture business" to describe the whole of the joint venture undertaking, including, but not limited to Bluechip's affairs. 18 In Chitty on Contracts (31st ed) vol II at 38 - 258, the authors opine that, "it is perfectly possible to have a contract of loan in which the borrower is under no personal liability". At 38 - 258 they cite two cases as authority for that proposition. The first is the decision of the Exchequer Chamber in Mathew v Blackmore (1857) 1 H & N 762 (156 ER 1409). The second is the decision of Michael Burton QC, sitting as a deputy High Court Judge in Levett v Barclays Bank PLC [1995] 1 WLR 1260 at 1271, in which he effectively applied the decision in Mathew v Blackmore. Those cases support the proposition that where an advance is made upon the basis that it will be repaid from a particular source, the borrower does not incur any further personal liability to repay. The facts of those cases are, in many respects, similar to those of this case. 19 At first instance Promoseven sought the reversal or modification of the liquidators' decision, in which they rejected Promoseven's claim to be a secured creditor pursuant to the 2009 mortgage. In its originating process, Promoseven asserted that the liquidators: failed to recognize that the 2009 mortgage secured past, as well as future advances; failed to consider whether there were agreements other than the 2009 loan agreement, which "fell within the definition of 'Agreements' in cl 1.1 of the [2009 mortgage]"; failed to find that " 'the Agreements' for the purposes of the [2009 mortgage] included all written or oral agreements between Bluechip and Promoseven under which Promoseven agreed to provide funding to Bluechip"; failed "to find that there were such agreements, including (but not limited to) a request for funding of at least $2,250,000 and a loan agreement and draft mortgage exchanged between Promoseven and Bluechip in February 2007, and other emails, correspondence, minutes, memoranda or other written or oral evidence of such agreements"; and "erred in rejecting an amount of at least $5,427,000, (including a deduction of $400,000) plus any interest payable thereon, as being secured under the [2009 mortgage] in favour of Promoseven." 20 In effect, Promoseven abandoned reliance on the JVA and the 2009 loan agreement. Rather it relied solely upon oral or written agreements between Promoseven and Bluechip, (not including the 2009 loan agreement) in order to demonstrate that: Bluechip has received the advances in circumstances which created an obligation to repay them; and that such obligation arose under an agreement as that term is defined in the 2009 mortgage. 21 In support of such reliance, Promoseven read a lengthy affidavit, sworn by Mr Burt on 17 July 2013, in which he attempted to explain most of the relevant advances and exhibited documentation. Promoseven also read an affidavit by their solicitor, sworn on 9 May 2013, which affidavit also exhibited relevant documents. No doubt at least some of this evidence was available to the liquidators prior to their adjudication. 22 Clearly, Promoseven was asserting the existence of numerous agreements, only one of which was identified in any detail, namely that referred to in the fourth of the assertions set out above. Such assertion implicitly accepted that Promoseven might succeed in respect of some advances and not others. Hence it was inviting the Court to consider the various advances separately. 23 The primary Judge considered that if the liquidators' submissions were accepted, it would not be necessary to examine the evidence concerning the circumstances in which each of the relevant advances was made. On the other hand, if those submissions were rejected, it would be necessary to consider that evidence in detail. As his Honour accepted the liquidators' submissions, he did not go on to consider the evidence. With all respect, in my view, the better approach would have been to identify the circumstances surrounding each of the relevant advances, then to decide whether, in each case, Bluechip had incurred an obligation to repay it and then, whether the 2009 mortgage secured the performance of any such obligation.

THE REASONS AT FIRST INSTANCE 24 At [13] his Honour identified the relevant advances as having been made by Promoseven to Bluechip. At [15] his Honour observed that the liquidators did not, "cavil with the characterisation of these advances as 'loans' ". However at [15] his Honour also observed that the, "moot point is whether they were made pursuant to the JVA". As Bluechip was not a party to the JVA, his Honour was necessarily raising a question as to whether Bluechip had incurred any obligation to repay the relevant advances. At [43] his Honour observed that the liquidators did not "cavil with" the characterization of such advances as "loans" or "loan agreements". Similar comments apply. As I have observed, taken at face value his Honour's language is inconsistent with his understanding of the liquidators' case which effectively denies that Bluechip incurred any obligation to repay the advances. 25 At [19] - [21] the primary Judge discussed the allegation that a draft loan agreement and draft mortgage had been executed in 2007. Those draft documents (the 2007 draft mortgage and the 2006 draft loan agreement) are exhibited to Mr Burt's affidavit. His Honour accepted that they were circulated in 2007 but was not satisfied that they were executed by all proposed parties. This finding was based largely upon his Honour's assessment of Mr Burt's evidence. It has not been challenged on appeal. Nonetheless, as I shall demonstrate later in these reasons, in arranging advances 5, 6, 7 and 8, the parties seem to have proceeded as if they were acting pursuant to the 2006 draft loan agreement, or some similar agreement or understanding. This possibility is raised in Promoseven's originating process. 26 At [24] - [25] his Honour referred to a statement, said to appear in the 2009 mortgage, that its purpose was, "[t]o capture and formalise all loan funds by Members to the Borrower". Although his Honour said that these words appeared in the 2009 mortgage, as far as I can see they were in the 2009 loan agreement, under the heading "Facility" on p 1. Given that the 2009 loan agreement was executed some months after the 2009 mortgage, it is difficult to see any valid basis for using the former in construing the latter. In the circumstances, it may not matter, but His Honour considered that the, "absence of the word 'Member' in the Mortgage" caused "vagueness", so that the statement offered little assistance in determining the purpose of the mortgage. For what it is worth, it seems probable that the "Members" who had advanced funds were the joint venturers who were also the mortgagees. The word "Member" may not be defined, but in the context of a joint venture, its meaning is fairly clear. In any event, I understand Promoseven to accept that the 2009 loan agreement was not an agreement under, or in connection with which the relevant advances were made. 27 The definition of the term "Agreements" in the 2009 mortgage refers to the, "Loan Agreement constituted dated 1 July 2006". His Honour considered this to be a reference to the "HSBC loan". On appeal, the parties did not challenge this proposition, but it is inconsistent with the way in which Mr Burt dealt with the matter in his submissions to the liquidators. He said that there was no such agreement, presumably meaning no such agreement as between Bluechip and Promoseven. See para 4.4 of the adjudication. However Mr Burt had forwarded to Mr Miknas, under cover of an email dated 20 February 2007, the 2006 draft loan agreement and the 2007 draft mortgage. They appear to have been prepared in anticipation of the provision of funds by Promoseven to Bluechip. The 2007 draft mortgage was dated 2007, but the 2006 draft loan agreement was dated 2006. As I have observed, in the originating process, Promoseven particularized these documents as relevant agreements or as evidence of such agreements. 28 The 2006 draft loan agreement provided for total advances by Promoseven to Bluechip of $2.25 m in tranches of $250,000, $500,000 and $1.5 m on 1 March 2007, 1 April 2007 and 1 June 2007 respectively. The evidence shows that the parties understood that such advances were to be made, and that they were, in fact made, although the timetable was varied to some extent. At a later stage I shall refer to this evidence in more detail. In my view it is quite likely that the reference, in the definition of the word "Agreements", to a loan agreement dated 1 July 2006 reflected an understanding or assertion that advances had been made by Promoseven to Bluechip pursuant to such an agreement or some similar understanding. Although his Honour found that the 2006 draft loan agreement was not executed by all parties, that finding did not exclude the possibility that the parties had acted upon its terms. Such conduct, in that context may have resulted in the formation of a contract. Whether or not such a contract arose is a question of fact. 29 With all respect, his Honour's view, that the reference is to an agreement with the HSBC Bank ("HSBC") seems somewhat unlikely. HSBC certainly advanced funds to both Bluechip and Promoseven. In the material, there is reference to a facility agreement between Bluechip and HSBC. It is possible that Promoseven and Prime were parties to it, perhaps as guarantors. In those circumstances Bluechip may have incurred obligations to them as guarantors. However there is no evidence that they were parties to it. In any event the definition in the table is primarily concerned with agreements between the joint venturers and Bluechip. It seems odd that an agreement, primarily between HSBC and Bluechip, should have been given special mention. To my mind the reference to the 2006 loan agreement is more likely to have been a reference to the 2006 draft loan agreement than to any agreement with HSBC. The matter is probably of little importance. 30 At [34] the primary Judge characterized the relevant question as being, "whether the liability referred to in the proof of debt is a true liability of [Bluechip] enforceable against it". I agree that the first step, in deciding whether or not Promoseven was a secured creditor in respect of the relevant advances, was to answer that question. To do so would involve examination of the facts surrounding each advance. His Honour recognized as much at [41] - [42] of his reasons but, because he accepted the liquidators' argument, he did not conduct such examination. As I have already said, the circumstances of each advance ought to have been identified and considered in order to determine whether Bluechip had incurred any obligation under, or in connection with each agreement, and whether each agreement was an "Agreement" of the kind contemplated in the definition of the term "Secured Obligations". 31 At [38] his Honour identified four issues for his determination as follows: (a) Whether a loan agreement and mortgage were entered into between Promoseven and Bluechip in 2007; (b) Whether the 2009 Mortgage, on its proper construction, secures only money advanced pursuant to "Agreements", as that term is defined in the Mortgage; (c) Whether the Promoseven 2009 Loan Agreement operates only prospectively, or whether it operates so as to cover prior advances; (d) Whether the conduct of the parties in arranging further drawdowns to fund the joint venture constituted an "Agreement" within the meaning of the 2009 Mortgage, and related to this, whether the various further drawdowns were made pursuant to the JVA or whether those drawdowns formed part of or evidenced further agreements. 32 I accept that issues (a), (b) and (c) fell for determination by the primary Judge. However they are no longer relevant. As to issue (d), I consider that the relevant questions were: whether Bluechip was obliged to repay to Promoseven any of the identified advances; if so, whether such obligation arose under, or in connection with any agreement between Promoseven and Bluechip; and if so, whether the agreement was of the kind contemplated in the 2009 mortgage. 33 In order to answer those questions, his Honour should have considered the meaning of the term "the Agreements" in the 2009 mortgage. It is at this point that the inter-relationship between the JVA and the 2009 mortgage becomes relevant, as does the multi-faceted involvement of both Mr Knell and Mr Burt in the affairs of the joint venture, Prime, Promoseven and Bluechip. Although the liquidators submit that the 2009 mortgage should be seen in light of the terms of the JVA, they have said little about how or why such an approach should have been adopted, nor about its significance for present purposes. As I have said, Promoseven also accepts that the JVA was part of the circumstances in which the 2009 mortgage was granted. I shall return to these matters. 34 At [40] the primary Judge identified the liquidators' case as being that: … the various loans fall outside the definition of 'Agreements' in the 2009 Mortgage because such loans were made in furtherance of the JVA, but - critically - Bluechip is not a party to the JVA; Promoseven and Prime are. Because the JVA does not fit within the 2009 Mortgage definition of "Agreements", the applicant must be able to point to another binding and concluded agreement which explains the advances, but it cannot do so. Thus, it submits that Promoseven's case is an attempt to imply terms (the various loan contracts) in the face of express terms (in the JVA). 35 This passage implies that although Bluechip received the advances, it did so pursuant to the JVA, and without the formation of any loan agreement between it and Promoseven, or at least without incurring any obligation to repay Promoseven. The liquidators advanced that proposition as an explanation of the various advances made by Promoseven and received by Bluechip. However the liquidators did not have to prove it. The real issue was whether Promoseven could demonstrate agreements under, or in connection with which Bluechip incurred obligations to repay the advances. The liquidators' theory was only an alternative explanation of the facts. 36 I cannot say that I fully understand the suggestion that Promoseven was seeking to imply terms into the JVA, which terms were inconsistent with express terms. Another, admittedly minor difficulty with this passage is that it qualifies the word "Agreements" in the 2009 mortgage by use of the words "binding and concluded". Having regard to the use of the words "obligations" and "liability" in the definition of the term "Secured Obligations", it is likely that the qualification is justified. However the construction exercise should probably not have commenced with that assumption. Parties may not always use language in accordance with legal usage. 37 At [42] - [45] his Honour summarized the parties' submissions as follows: 42 In short, [Promoseven's] contention is that taking into account the surrounding circumstances and making commercial sense of the mortgage leads to only one conclusion: the 2009 Mortgage was objectively intended to, and did, secure all moneys advanced under and by the agreements which occurred from time to time which related to those advances. 43 The [liquidators] accept that proposition with qualification, namely to the extent it properly identifies the need for an "Agreement" as defined in the Mortgage as a basis for security … . The [liquidators] do not cavil with the characterisation of the various advances made during the relevant period as "loans" or "loan agreements". On each occasion, the agreement consisted of an offer by Bluechip to Promoseven that if Promoseven lent it funds, Bluechip would repay the funds with interest, and an acceptance of that offer by Promoseven in lending the funds - or alternatively put - Bluechip's requests for funds were invitations to treat, with the lending of funds by Promoseven amounting to an offer, and acceptance taking place in Bluechip receiving and using the funds. 44 Crucially, however, the point made for the [liquidators] is that each of these loan agreements was in fact made pursuant to the umbrella agreement of the JVA but it - the JVA - falls outside the definition of agreements in the 2009 Mortgage, because it was not an agreement to which Bluechip was a party. The result, the [liquidators] submit, is that the first "Agreement" covered as that term is defined in the 2009 Mortgage, was the Promoseven 2009 Loan Agreement. 45 … [T]he first respondents' submission that the various loans are not secured in Promoseven's favour, as they were advanced pursuant to the JVA, of which Bluechip was not a party, has considerable attraction. [Promoseven] made a three-fold riposte to it: (a) First, Bluechip was at least a beneficiary of the JVA and entitled to enforce it or have it enforced against it as a contract on the authority of s 55(1) and s 55(3) of the Property Law Act 1974 (Qld) (Property Law Act) and Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 (Trident General Insurance v McNiece Bros); and/or (b) Second, Bluechip became a party to each transaction by its acceptance and use of the funds; and/or (c) Third, there was an agreement, by conduct if nothing else, between Prime and Promoseven on the one hand and Bluechip on the other hand, that Prime and Promoseven would fund the JVA or part fund it, which in turn gave rise to a further multi-partite agreement between Bluechip and Promoseven relating to any funds so loaned. Raguz v Sullivan & Ors (2000) 50 NSWLR 236 at 250-1 (Raguz v Sullivan) was relied upon in this regard. 38 I have already dealt with the language used by his Honour at [43]. As to the language of offer and acceptance, it is not clear whether his Honour was adopting the language used in the submissions made by one party or the other, or whether he was expanding upon his understanding that the liquidators did not cavil with the characterization of the transactions. In either event, the language is inconsistent with the liquidators' case which was that Bluechip did not incur liability to repay the relevant advances. Further, had his Honour been proceeding upon the basis that there were agreements between Bluechip and Promoseven, he would surely have addressed the possibility that such agreements were agreements under, or in connection with which an obligation to repay arose. Finally, at [44] the primary Judge understood the liquidators to submit that moneys were advanced pursuant to the JVA, implying that such advances were not made pursuant to any agreement with Bluechip, and/or that it had incurred no obligation to repay the advances. 39 At [48] his Honour said that he was not satisfied that the 2007 draft mortgage and the 2006 draft loan agreement had been executed by all parties. Nonetheless, I have referred to evidence which suggests that the parties acted as if they were bound by some such agreement. Despite the reference to these documents in the originating process, the parties seem not to have addressed that possibility. 40 At [51] his Honour rejected the proposition that the relevant advances were made pursuant to the mezzanine arrangements in the JVA to which arrangements I shall later refer. This conclusion seems not to be challenged on appeal. Nonetheless, in my view, at least some of the advances probably were made pursuant to those arrangements. I shall, at a later stage, give my reasons for that view. His Honour's conclusion seems to be inconsistent with his finding at [52] that the "further advances", "evidence[d] advances pursuant to and as contemplated by the JVA". As I read the JVA, it provided for further loans by the joint venturers pursuant to cl 7, or by Promoseven or some other lender pursuant to the mezzanine funding arrangements at paras 36 - 40 of the statement of intent. It seems that on at least two occasions, further funds were advanced pursuant to cl 7. They were the advances of $77,000 on 6 November 2007 (advance 9) and of $300,000 on 5 September 2008 (advance 10). As I have already suggested, the advances totalling $2.25 m made on 21 March 2007, 1 May 2007, 27 June 2007 and 23 July 2007 (advances 5, 6, 7 and 8) were arguably made pursuant to the terms of the 2006 draft loan agreement, and perhaps pursuant to the mezzanine funding arrangements in the statement of intent. Other advances may have been made pursuant to those provisions, although some provisions may not have been strictly observed. I shall shortly refer to the relevant evidence. At [52] his Honour also rejected Promoseven's submission that there may have been tripartite agreements to which Prime, Promoseven and Bluechip were parties, and under, or in connection with which Bluechip may have incurred an obligation to repay the advances. 41 At [53] his Honour concluded that the relevant advances did not bear interest because interest was not provided for in the JVA. However cl 7.6 provided for interest on loans made pursuant to cl 7.5. Whilst the mezzanine funding arrangements did not expressly deal with interest, it was obviously intended that a potential financier, whether it was Promoseven or another lender, would offer and/or negotiate an interest rate. 42 At [54] the primary Judge rejected the proposition that Bluechip was a party to, or could otherwise enforce any of the terms of the JVA. In particular, his Honour rejected any claim pursuant to s 55 of the Property Law Act 1974 (Qld) (the "Property Law Act"). 43 At [55] his Honour addressed a particular argument concerning cl 1.1(28)(f) of the mortgage. He concluded that such provision provided that the repayment by Bluechip to Promoseven of moneys paid or payable by Promoseven on account of Bluechip (in other words, to a third party) was secured by the 2009 mortgage.

THE BASIS OF THE DECISION AT FIRST INSTANCE 44 The primary Judge understood Promoseven to have submitted that each advance was made pursuant to a separate agreement between it and Bluechip. His Honour also understood that the liquidators had submitted that the advances were simply made pursuant to the terms of the JVA, without Bluechip's incurring any obligation to repay. The proffered explanation for the absence of any such obligation was the shared expectation (on the parts of Mr Knell, Mr Burt, Prime, Promoseven and Bluechip) that Promoseven would recoup the advances pursuant to the JVA, probably in the ultimate resolution of the joint venture's affairs, necessarily involving Prime, Promoseven and Bluechip. These conflicting submissions identified the outcomes for which the parties contended, but said nothing about the principles or facts upon which they were based. His Honour resolved the dispute at [52] as follows: The further advances do not evidence further agreements; neither do they evidence a tripartite agreement by conduct as between the joint venturers and Bluechip (Raguz v Sullivan has no application); all that they do is to evidence advances pursuant to and as contemplated by the JVA. It is to be remembered that Bluechip was a 50-50, Steering Committee controlled joint venture vehicle, not amenable to either Promoseven or Prime unilaterally (for example, via Mr Knell) causing it to make agreements or to request funding. On the whole of Mr Burt's evidence, all that occurred is that, once the HSBC funds were fully drawn down, further funds were advanced, ad hoc as required, as the JVA contemplated that they might be. 45 It is a little difficult to understand the basis for this conclusion. His Honour seems to have found as a fact that the relevant advances did not evidence agreements between Promoseven and Bluechip. Rather, they were advances, "pursuant to and as contemplated by the JVA". In my view, that conclusion could only emerge from an examination of the circumstances in which each advance was made. Although there was evidence of those circumstances, there is no reference to it in the reasons. As I have pointed out, his Honour observed at [41] that acceptance of the liquidators' case would mean that any examination of the content of any "contentious agreements" was "somewhat academic". Thus it seems that his Honour accepted the liquidators' argument as offering an inherently more probable explanation of the advances than that proffered by Promoseven, without having regard to the "contentious agreements". Evidence of the circumstances of each advance may have supported either the liquidators' case, Promoseven's case, or both, but such evidence seems not to have been taken into account. There was also documentary evidence which may have been relevant. Clearly, the JVA contemplated advances to Bluechip by the joint venturers and/or other parties. The 2007 draft mortgage, the 2006 draft loan agreement, the 2009 mortgage and the 2009 loan agreement all suggested that the joint venturers contemplated the possibility that Bluechip would borrow funds and thereby incur an obligation to repay such borrowings. This documentary evidence may well support Promoseven's case.

GROUNDS OF APPEAL 46 On appeal Promoseven asserts that the primary Judge ought to have concluded that repayment of the relevant advances by Bluechip was secured by the 2009 mortgage. Four discrete grounds are advanced. The first ground appears in grounds 2 and 3 of the notice of appeal. In effect Promoseven submits that his Honour ought not to have enquired as to whether the advances were made pursuant to the JVA, but rather found that the "loans" or "loan agreements" between Bluechip and Promoseven were "Agreements" as that term is used in the definition of the term "Secured Obligations" in the 2009 mortgage. The second ground appears in ground 4. It is with respect, incomprehensible. Promoseven would probably attribute this fact to difficulties inherent in the liquidators' argument. Such a view may not be entirely unfair. In effect, Promoseven asserts that if "loan agreements" (whatever they are) were made pursuant to the JVA, "and did not have an independent existence", (whatever that means) his Honour ought to have found that Bluechip became a party to each loan transaction (whatever they are) by its acceptance and use of the loan funds (presumably the relevant advances). Further, his Honour should have found an implied "obligation" to repay them, and that such obligation was secured by the 2009 mortgage. 47 The third and fourth grounds appear in ground 5 and are alternative to the last-mentioned ground. Promoseven submits that if the "loan agreements" were made pursuant to the JVA, his Honour ought to have found that they were, " 'Agreements' within the meaning of the Mortgage because they formed part of a tripartite agreement or because they were enforceable under s 55 of the Property Law Act or the common law equivalent".

SOME GENERAL OBSERVATIONS 48 Three aspects of the case require especial consideration. First, as I have previously observed, the liquidators put great weight upon the proposition that the relevant advances were made pursuant to the JVA. As Promoseven points out, that fact does not necessarily exclude the possibility that the relevant advances were also made pursuant to an agreement or agreements between Bluechip and Promoseven. However, as I understand the liquidators' argument in its final form, they submit that any advance made by Promoseven was probably made pursuant to the JVA, and on terms which were consistent with it. In particular, they assert that Bluechip incurred no obligation to repay such advances. The liquidators' case seems to assume that Mr Knell, Mr Burt, Prime, Promoseven and Bluechip would all have understood that to have been the case. This approach appears in the liquidators' oral submissions on appeal at ts 56, ll 31-38 as follows: MR KELLY: It was a "loan" in inverted commas, and a loan for the purpose of the joint venture agreement, which I said is uncontroversial. But whether it involves, I don't accept that - what I've said to the court from the outset is that if it was a loan in this sense, it was created by the joint venture agreement and it was money advanced on terms that it could only be returned to the joint venturers consistently with the joint venturer clauses. And if a joint venture party wished to enforce that, they would have to sue their joint venture partner; that's my analysis. Now, whether that reasoning infected the judgment, one needs to go to paragraph - page 16. 49 Secondly, it is important to keep in mind that, through the mechanism of the steering committee, Bluechip was controlled by Messrs Knell and Burt as representatives of Prime and Promoseven respectively. They were also directors of Bluechip. Mr Knell was a director of Prime. Mr Burt was a director (and managing director) of Promoseven. Clause 7.4 of the JVA and cl 37 of the statement of intent made it clear that the steering committee had to approve borrowings pursuant to those clauses. See also cll 9 and 14 of the JVA. This multiplicity of functions is of particular importance in analysing the circumstances surrounding each advance. Thirdly, the case depends very much upon the meanings of the terms "Secured Obligations" and "Agreements" in the 2009 mortgage, the terms of the JVA and the circumstances surrounding each advance. 50 The first and second aspects are closely related. One might conclude that the management arrangements added nothing to Messrs Knell and Burt's duties as directors of Bluechip. Alternatively, one might conclude that such arrangements were at least potentially inconsistent with those duties. In any event it is plain that steering committee decisions concerning Bluechip represented agreed positions as between Prime and Promoseven, and that Messrs Knell and Burt, as Bluechip's directors, would cause it to act in accordance with those agreed positions. It also seems to follow that for all relevant purposes, Bluechip should be treated as having been privy to all dealings concerning its affairs between Prime and Promoseven, and between Mr Knell and Mr Burt. In particular, Bluechip was aware of the terms of the JVA and the dealings which led to each relevant advance.

THE JOINT VENTURE AGREEMENT 51 The JVA dealt expressly with the funding of the joint venture. There was to be a principal financier. The HSBC Bank fulfilled this role. See Sch 2 of the JVA at items 21 and 23. The joint venturers were also to provide both capital and loan funds pursuant to cl 7 of the JVA. By way of capital contribution each joint venturer was to subscribe for 100 "A" class shares in the capital of Bluechip at $1 each. Each joint venturer was also obliged to contribute capital and/or loans in the amount of $1.2 m each or possibly, $1.5 m each. 52 Clauses 7.2 - 7.7 are somewhat confusing. Without going into any detailed explanation of my reasons, I consider that cll 7.2 and 7.3 dealt with funds which the joint venturers were obliged to provide, up to the amounts specified above. Clauses 7.4 - 7.7 dealt with additional funding which might be provided by the joint venturers, but which they were not obliged to provide. Funds advanced pursuant to cll 7.2 and 7.3 were to be contributed in equal shares. Funds contributed pursuant to cl 7.4 might be contributed by both joint venturers equally or, pursuant to cl 7.5, by one joint venturer on behalf of both. That situation would arise if one joint venturer, but not the other was willing to advance funds required for joint venture purposes. If the joint venturers disagreed as to the need for such funds, the dispute resolution provisions in cll 22 and 23 would be engaged. That process might have resulted in a decision in favour of further funding, notwithstanding the opposition of one joint venturer and/or a joint venturer's unwillingness to contribute. Clause 7.6 set out the terms of any such loan. Clause 7.7 provided that a loan pursuant to cl 7.5 would not result in any change in the shareholdings in Bluechip. On appeal it was submitted that cl 7 made no provision for security for the repayment of any loan pursuant to cl 7.5. Whilst that may be so, there was no bar to the giving of such security. 53 The liquidators submit that cl 12.1 is also relevant for present purposes. It provided that: Subject to clause 12.2, the net profits (including, without limitation, Net Proceeds) and losses (whether income or capital and whether realised or unrealised) are to be shared or borne by the Joint Venturers equally. 54 Clause 12.2 dealt with dishonesty and is not presently relevant. The term "Net Proceeds" was defined to mean: in relation to the Project: (a) the Sales Proceeds less the Selling Expenses; and (b) the Leasing Proceeds less the Leasing Expenses; and (c) any other income received by the Joint-Venture less any other liabilities of the Joint-Venture, after payment of the Management Fee to the Development Manager. 55 The liquidators' submission in this regard appears at ts 41, l 12 et seq. It is a little confusing in that, in order to make the point, counsel used, as examples, the joint venturers' initial advances pursuant to cll 7.2 and 7.3 of the JVA. Those advances are not presently relevant. In effect the submission is that it cannot have been contemplated that such advances would be returned to the joint venturers other than as provided in the JVA. The liquidators also seem to submit that the advances were only repayable when there were funds from which repayment could be made and ultimately, prior to any distribution pursuant to cl 12.1. It is said to follow that if the initial advances were only repayable in those circumstances, then nothing in the JVA suggested that other advances, whether pursuant to cll 7.4 and/or 7.5, or pursuant to the mezzanine funding provisions, were to be treated differently. As I shall later demonstrate, the JVA certainly regulated priorities as between advances made pursuant to cl 7 of the JVA, and mezzanine advances made pursuant to the statement of intent. 56 The liquidators submit that any attempt to recover advances on a basis other than that contemplated in the JVA, would be in breach of Promoseven's obligations to Prime pursuant to the JVA. See ts 42, ll 9-14; ts 43, ll 21-24; ts 44, ll 3-10; ts 45, ll 21-33; ts 47, ll 22-26 and ts 51, ll 1-15. This submission implies that, at least as between Prime and Promoseven, there was an agreement that Promoseven would not seek to recoup advances other than pursuant to the JVA. Given the way in which Mr Knell and Mr Burt conducted Bluechip's affairs, it is quite possible that Bluechip would also have been a party to any such agreement, or at least have had knowledge of it. An alternative view might be that Promoseven did not bargain for the imposition upon Bluechip of any obligation to repay, simply because it expected to recoup its advances in the winding up of the joint venture's affairs. The nub of the liquidators' submissions appears at ts 55, ll 7-21 as follows: MR KELLY: Yes. So I think for the purposes of the discussion, I was focusing on the initial contribution - - - RANGIAH J: Yes. MR KELLY: - - - perhaps for dramatic effect just to show what an uncommercial outcome that is to suggest that in a joint venture agreement where the parties are agreeing to only get back their contributions or their advances when they're able to and also to share losses - - - RANGIAH J: Well, there - - - MR KELLY: - - - that suddenly in 2009 when the agreement - when the venture has gone pear-shaped - so to speak - that suddenly that initial contribution could attach a secured value - a secured characteristic. 57 I have previously referred to the mezzanine funding provisions. Schedule 1 to the JVA, the statement of intent, formed part of the JVA. Paragraphs 33 and 35 - 40, dealt with the question of "mezzanine funding". The evidence demonstrates that such funding was, "funding sought or provided by another lender when the funding provided by the principal lender [is] insufficient, and which funding is to be repaid after the principal lender but in priority to other creditors". Clause 38.2 of the statement of intent provided that a mezzanine lender would take a second mortgage, presumably over the land and improvements comprising the Cairns project, ranking in priority after HSBC. 58 Clause 33.1 provided that mezzanine funding was to be effected through a unit trust, being a "separate entity" from Bluechip. Clause 35 provided that Promoseven was not to be required to contribute any further funding, other than pursuant to cl 7.3. However cl 36 conferred upon Promoseven the right of first refusal to "take up" (presumably meaning "provide") mezzanine funding. The conditions of any such funding were prescribed in cl 38. 59 I should say something about the differences between funding pursuant to cl 7 and mezzanine funding pursuant to cll 36 - 40 of the statement of intent. No provision was made for repayment of funds advanced by the joint venturers pursuant to cll 7.2 or 7.3. There was also no such provision concerning funds advanced pursuant to cl 7.4, save for such advances as were made pursuant to cl 7.5. Promoseven's contribution pursuant to cl 7.2 was to be primarily in the form of land to be transferred to Bluechip. Prime's contribution was to be wholly in cash. Given that Promoseven had made a contribution of land (some of which was to be sold rather than developed), and that the funds were for the purposes of the Cairns project, it seems unlikely that the parties contemplated any return of such contributions prior to the completion of that project, or, at least, the point at which it commenced to generate revenue. It is therefore unlikely that any such advances were repayable on demand. Further, any disbursement of Bluechip's funds had necessarily to be agreed between Messrs Knell and Burt as representatives of Prime and Promoseven respectively. See cl 8.3. 60 Where advances were made pursuant to cl 7.5, they were to be repaid in priority to all other loans made by the joint venturers, as soon as the HSBC facility agreement permitted and, in any event, before any distribution to the joint venturers. See cl 7.6. The reference to the facility agreement "permitting" repayment meant, I infer, that amounts currently due and payable to HSBC under that agreement were to be paid before repayment of any advance pursuant to cl 7.5. This clause reinforces my view that other advances made under cll 7.2, 7.3 or 7.4 were not repayable on demand. For present purposes, the question of time for repayment is not directly relevant. I shall discuss its incidental relevance at a later stage. 61 The mezzanine funding provisions in the statement of intent also dealt with the question of priority. Clause 38 effectively provided that if Promoseven advanced mezzanine funds, it would be a secured creditor, ranking after HSBC, assuming that the former had been granted the second mortgage contemplated by that clause. No doubt the facility agreement between HSBC and Bluechip made provision for repayment of advanced funds, possibly in stages as outgoings were recouped through sales and other revenue. 62 Thus the JVA contemplated that advances would be repaid in the following order: firstly, HSBC's secured advances, as repayment fell due; secondly, Promoseven's secured mezzanine advances; thirdly, advances pursuant to cl 7.5; and fourthly, other advances by the joint venturers. 63 Other unsecured creditors would not be affected by arrangements between the joint venturers inter se, save to the extent that joint venturers' debts were secured. If debts owed to the joint venturers were repaid before any winding-up, the unsecured creditors would only have recourse to the amounts paid if such payments were void or otherwise liable to be set aside on the application of a liquidator. 64 I have previously pointed out that cl 7 of the JVA contemplated Bluechip borrowing funds, as did cll 22, 23 and 33 of the statement of intent, the 2006 draft loan agreement, the 2007 draft mortgage, the 2009 mortgage and the 2009 loan agreement.

THE ADVANCES 65 As I have observed, the primary Judge appears to have simply concluded that all advances were made pursuant to the JVA, without any detailed examination of the circumstances surrounding each advance. However the parties understood that a detailed examination of the evidence was necessary. Promoseven's affidavits were relied upon for that purpose. His Honour understood that Promoseven's case depended upon that evidence. See the reasons at [41]. I have previously referred to Promoseven's oral submissions concerning this matter. 66 The relevant advances were made between 21 March 2007 and 14 April 2009. As listed in the reasons at [13], they are numbered 5 - 14, 17, 19 and 20 - 25. I should say something about the evidence concerning each of them. In so doing I shall comment upon any possible interaction between the circumstances of each advance and the JVA. However I do not propose to make any findings concerning those matters. On appeal the Court has not had the benefit of submissions concerning them. I do not wish to prejudge any matter which may have to be considered in the event that the matter is remitted to the primary Judge, as I consider that it must be.

Advances 5, 6, 7 and 8 67 On 16 February 2007, Mr Knell wrote to Mr Miknas under the heading "Cairns Mezzanine Fund" as follows: Thank you for your continuing support for this project. We are now at the point of finalising the conditions precedent to have the construction loan drawn down and finalising the building price. We hope and expect to be able to start stage II on or about 1st May, 2007. In any case, with the mobilisation of stage II right after the end of March. I have provided a copy of the latest monthly report to Steve [Burt]. He is giving us excellent support and is very easy to work with. We are very comfortable with him as your representative, and he has developed a very good rapport with Greg Campbell. I am also happy to spend any time necessary that you require, so please don't hesitate to contact me if I can be of further assistance on any matter. Funds We now require your funds and request that you make them available as follows. 1. $250,000 by 1st March 2. a further $500,000 by 1st April, and 3. the balance of $1,500,000 about 1 month after the commencement of stage II around 1st June. I am also hoping to be able to provide some funds, but due to delays in our Perth project, which is now nearly 1 year behind schedule, we do not anticipate settlements (and therefore inflow of funds) until about 1st August. Mr Knell then discussed other projects and continued: Mezzanine Now, turning to the question of mezzanine funds, I have prepared for you a spreadsheet, demonstrating that interest on monthly rests at 15% or 18% at the end is similar in effect. It has always been envisaged that one or other of these methods would be utilised and that is the way that we operate. Either system is fair in the Australian environment. We suggest that you consider the option of 15% at monthly rests. On that basis, you would be able to take your money out at any time, and I can then replace it with my own investors, as necessary. In that regard, I may have surplus funds from time to time that I would want to invest. Assumptions The simplest process is a loan agreement, supported by a second ranking mortgage that is capable of registration. This would be held by you in escrow. However, I would propose that it be supported by a Unit Trust, which then enables other investors to enter and exit the investment from time to time, if you are inclined to take your funds out at an earlier stage. Please let us know if that is something that you would be considering. If the mechanism of a trust is to be used, we will arrange to incorporate a shell company as trustee and would suggest that Steve Burt be the director of the trustee. 68 Mr Knell obviously understood that Mr Miknas (probably through Promoseven) was committed to the provision of mezzanine funding for the Cairns project in the amount of $2.25 m. That amount, and the schedule of individual instalments were in accordance with the 2006 draft loan agreement, which document Mr Burt had received from Prime's solicitor, Mr Gates. Mr Burt forwarded it to Mr Miknas on 20 February 2007, accompanied by the 2007 draft mortgage, also received from Mr Gates. Mr Knell's letter contemplated that repayment would be secured by a second mortgage, presumably ranking after HSBC's security, as contemplated in cl 38.2 of the statement of intent. Further, Mr Knell suggested the use of a unit trust as prescribed in cl 33.1 of the statement of intent. The stipulated amounts were subsequently advanced, although the instalment amounts and dates were varied to some extent. As far as I can see, the unit trust structure was not adopted. Whilst there is no appeal against the primary Judge's conclusion that the 2007 draft mortgage and the 2006 draft loan agreement were not executed by all parties, it seems clear that the parties' conduct was consistent with the terms of the 2006 draft loan agreement. The circumstances surrounding the advances might suggest that they were by way of mezzanine funding. In the original process, Promoseven identified the 2006 draft loan agreement and the 2007 draft mortgage as comprising or evidencing an agreement or agreements for the purposes of the definition of the term "Secured Obligations".

Advances 9 and 10 69 In a report dated 2 November 2007 from Mr Burt to Mr Miknas, Mr Burt indicated that: Sid [Knell] has requested if we could balance up the Equity in the Joint Venture funding. His projects in both Perth and Toowoomba have not settled as yet and probably won't until the New Year and so his cash flow is a bit tight. The shortfall from our side is $77,000. Could you please issue a transfer for these funds at your convenience … 70 Promoseven was being asked to advance a further amount of $77,000. Mr Burt understood that the "shortfall" was in Promoseven's contributions as compared to those of Prime. Hence this advance (advance 9) may have been pursuant to cll 7.2 - 7.3 or cl 7.4 of the JVA. 71 In an email dated 5 July 2008, Mr Burt advised Mr Miknas that "he" (presumably Mr Knell) was seeking another $1 m from Promoseven, of which $600,000 was to go towards the Cairns project. It seems that Mr Miknas was a little unwilling to oblige. In a report for the period ending 10 July 2008 Mr Burt indicated to Mr Miknas that: If you do not wish to take up the Mezzanine funding of $1.0 m (it will be difficult to find an outside Mezz. Financier for only a 5 month term) and so $300,000 of further equity from both sides would need to be invested in the project ideally before the end of July or in early August. Given our current cash flow position I would propose that we increase our Credit facility by $300,000 rather than take these monies out of the present funds that we have in the account. This further investment will need to be in place within the next few weeks and so your earliest determination will be appreciated. 72 The report suggests that Promoseven expected that the required funds would be provided by both joint venturers equally, pursuant to cl 7 of the JVA. In a report for the week ending 31 July 2008 Mr Burt said: Therefore, for the additional $300,000 investment required for the project next month, I propose that we draw down $170,000 from the Loan Account and take $130,000 from our Operating Account. I will send you tomorrow the Drawdown Notice from the Bank for depositing these Loan funds into our Operating Account and also give you the details of Bluechip Cairns Account so that you can make a direct transfer through the HSBC Net for this $300,000 to go into the Bluechip account. 73 On 2 September 2008 in document BDC 464, Mr Knell wrote to Mr Miknas as follows: Steve [Burt] and I are working closely on the cash flow side and will making do with the extra $300K you have provided and matched by my $300K (less expenses) It may be that the advance of $300,000 (advance 10) was made as part of a total advance of $600,000, or at least, that was the intention. It may follow that such advance was made pursuant to cl 7.4 of the JVA.

Advances 11 - 14 74 From about 27 November 2008, Mr Burt and Mr Miknas seem to have accepted that the latter and/or his companies would have to inject a further $700,000 into the Cairns project. They knew that Prime was unable to make any further advances. On 21 November 2008, Mr Burt asked Mr Miknas to provide $50,000. On 2 December 2008, Mr Burt wrote, confirming that such sum had been transferred to Bluechip (advance 11). Mr Burt indicated that he could provide a further $150,000 from "our" (presumably Promoseven's) cash reserves. It seems that this advance was made on 4 December 2008 (advance 12). He also referred to a further bank advance of $500,000, possibly the balance of the sum of $700,000. However those funds were to go to a person described as "Mohammed". Reading between the lines, one might infer that the funds to be borrowed by Mohammed were to be used to repay an advance, previously made to him by Mr Miknas or Promoseven, for the purchase of a home unit. Again, reading between the lines, one might infer that such repayment was to be applied to the Cairns project. 75 On 11 December 2008, Mr Burt asked Mr Miknas to approve a further advance of $200,000 (advance 13). According to Mr Burt that amount was advanced on 4 February 2009, but in the primary Judge's reasons at [13], it was treated as having been advanced on 22 December 2008. 76 On 2 February 2009, Mr Knell advised that completion of the Cairns project would require a minimum of $830,000 and preferably, $1.36 m. There was no suggestion that Prime could provide any of this further financial accommodation. It is unclear whether this figure included the balance of $300,000, being the unadvanced part of the earlier estimated completion cost of $700,000. 77 In a letter to Mr Damien Hill at HSBC dated 5 February 2009, Mr Burt said that Promoseven was providing mezzanine funding to the Cairns project, and that Prime could make no further contributions. On 6 February 2009, Mr Burt acknowledged that Mr Miknas had sent a further $300,000 and asked him to authorize the advance of that sum to Bluechip. Mr Miknas had, by this time, become disillusioned with Mr Knell, and indicated that he would advance further funds only if Promoseven's profit share were increased. Negotiation and correspondence ensued. Mr Knell did not accept the proposal. At [13] in the primary Judge's reasons, his Honour said that the sum of $300,000 (advance 14) was advanced on 9 February 2009, but neither the documentary evidence nor Mr Burt's affidavit demonstrates such advance. The documents referred to in paras 107 and 108 of Mr Burt's affidavit relate to a $2.0 m loan facility granted to Promoseven by HSBC but say nothing about the application of such funds. However I do not understand the parties to dispute the fact that such advance was made.

Advance 17 78 On 13 March 2009 Mr Burt informed Mr Miknas that in the following week, Bluechip would require a further advance of $420,000. On 16 March 2009, Mr Burt told Mr Miknas that he proposed to transfer $400,000 (not $420,000) to Bluechip, presumably from Promoseven, on the basis that such amount would be returned to Promoseven when a further loan was approved by HSBC. At para 111 of his affidavit, Mr Burt refers to a bank transfer of $400,000 to Bluechip (advance 17). In the transfer document there is a reference to "Mezz Fund Cairns", suggesting that any such advance was made pursuant to the mezzanine funding arrangements in the statement of intent.

Advances 19 and 20 79 These amounts may relate to a dispute with "Sunstruct", apparently a building contractor. On 4 March 2009, Mr Burt told Mr Miknas that "we" had agreed to pay Sunstruct $50,000 immediately and a further sum of $50,000, "when the funding comes through". Mr Burt suggested (at paras 114 - 120 of his affidavit) that two payments, each of $50,000 were made on 2 April 2009 pursuant to the agreement with Sunstruct. In para 118, Mr Burt asserted that Mr Miknas approved the payment of $50,000 but in para 119, he said that he had made two payments of $50,000. On that day Mr Burt advised Mr Knell that Promoseven had made a "mezzanine payment of $100,000 to Bluechip". 80 The matter is further complicated by the documents. Documents dated 4 March 2009, seem to refer to the settlement with Sunstruct. However there are also documents referring to a dispute with Flea Concreting. On 31 March 2009 Mr Burt told Mr Miknas of more general financial problems, suggesting that an advance of $50,000 was to be made, "to catch up on contractors that we only partially paid mid this month". There is then an indication that $100,000 was paid on 2 April 2009. The documents might suggest that during March - April 2009, two sums of $100,000 were being discussed. Alternatively, it may be that the moneys to be paid to Sunstruct were simply treated as an aspect of Bluechip's overall indebtedness. It seems that at least one amount of $100,000 was to be advanced by way of mezzanine funding.

Advances 21 - 24 81 In his affidavit Mr Burt said nothing about an advance of $15,000 (advance 21). In his Honour's reasons at [13], it is shown as a payment made to HSBC on 9 April 2009, the same day on which advances 22, 23 and 24 were made. In their adjudication, the liquidators considered the sum of $15,000 to have been a "borrowing cost", allegedly paid by Promoseven on behalf of Bluechip (at 8.2.4 - 8.2.6). They were not satisfied that the payment was in discharge of a debt owed by Bluechip. It may be that at first instance, the liquidators conceded that it was such a payment, but it is difficult to be sure. 82 Concerning advances 22, 23 and 24, Mr Burt, in his affidavit, referred to documents BDC 494 and BDC 498, to which documents I have indirectly referred in earlier parts of this discussion. Document 494 is a letter from Mr Burt to Mr Miknas dated 17 March 2009. With it the former forwarded various documents, apparently dealing with a proposed further advance to Promoseven by HSBC. From the proposed advance, $400,000 (advance 22) was to reimburse Promoseven for the amount advanced to Bluechip on 17 March 2009. Further sums of $250,000 and $100,000 were to be advanced to Bluechip. Document 498 is a drawdown notice signed by Mr Burt and Mr Miknas. It appears to have effected the three payments mentioned above. 83 These transactions are difficult to understand. The figures shown in the table are misleading. The figures of $500,000 and $400,000 seem to reflect the $400,000 to be refunded to Promoseven and the sum of $100,000 to be advanced to Bluechip. It may be that these items, to some extent, reflect book entries rather than outright payments or advances. The liquidators seem to have accepted them as having been made, although the overall effect is unclear. See the adjudication at 8.2.6 - 8.2.8.

Advance 25 84 This advance, in the amount of $1.25 m, was requested by Mr Burt in order to enable Bluechip to pay $780,000 to contractors and $439,000 to the local authority. It may have been mezzanine funding.

Summary concerning advances 85 As can be seen, the circumstances surrounding individual advances varied. In my view, Promoseven had to satisfy the liquidators, and then the primary Judge that Bluechip had incurred obligations under, or in connection with agreements between it and Promoseven, to repay the advances. In order to determine whether Bluechip incurred any such obligation, it was necessary to examine discretely the circumstances surrounding each advance.

"SECURED OBLIGATIONS" 86 The 2009 mortgage purports to secure performance of the, "Secured Obligations as defined in the attached schedule". Thus the case, to some extent, turns on the proper construction of that term. The construction exercise is rendered more than usually difficult by the diffuse nature of the provisions dealing with that question. In the schedule to the mortgage cl 1.1(28) provides: "Secured Obligations" means and includes: (a) all obligations and money which the Mortgagor or any Surety (whether alone or not) is or at any time may become actually or contingently liable to perform or pay to or for the account of the Mortgagee for any reason whatever and in any capacity under or in connection with the Agreements. It includes all interest, fees, costs, indemnities, charges, duties and expenses and the payment of liquidated or unliquidated damages in connection with the obligations or the breach of the obligations of the Mortgagor or any Surety to the Mortgagee under or in respect of the Agreements; (b) all money payable by the Mortgagee under any indemnity given by the Mortgagee to a Receiver appointed by the Mortgagee under this Mortgage or a Collateral Security; (c) all money that the Mortgagee pays, or a Receiver or attorney appointed under this Mortgage or a Collateral Security pays in exercising (or in defence of) its powers under this Mortgage or a Collateral Security; (d) all costs and expenses that the Mortgagee incurs in connection with this Mortgage or a Collateral Security; (e) the remuneration of any Receiver appointed under this Mortgage or a Collateral Security; (f) all money paid or payable by the Mortgagee on account of the Mortgagor, whether directly or indirectly, in respect of the Property; (g) all money that the Mortgagor is liable to pay to the Mortgagee by way of damages arising out of this Mortgage or a Collateral Security; and (h) all money owing by the Mortgagor to the Mortgagee under any judgment, order, deed or other thing into which a present or future obligation of the Mortgagor to the Mortgagee becomes merged; 87 The definition of the term "Agreements" appears in two places. Clause 1.1 provides: "Agreements" means every agreement (whether written or otherwise) or deed (excluding this Mortgage) made between the Mortgagor or any Surety and the Mortgagee, whether or not any other person is a party to it and includes any Agreements described in the table at the beginning of this Schedule; 88 In that "table" the word "Agreements" is said to mean: The Loan Agreement constituted dated 1 July 2006 and each and every written agreement, memorandum or minute of or between the Mortgagor and the Mortgagee from time to time. 89 Other relevant definition provisions include cl 1.1(22) which provides that: "mortgagee" means the person named in Item 4 of the Form 2 that forms part of this Mortgage … ; and cl 1.2(2) which provides that: The singular includes the plural and the plural includes the singular. 90 Clause 2 of the schedule to the mortgage provides: Interpretation of Secured Obligations 2.1 No part of the definition of "Secured Obligations" is to be limited or restricted by reference to another part or by reference to another clause. 2.2 Where the context permits, each reference in the definition of "Secured Obligations" to the Mortgagor includes a reference to any other person whose indebtedness or liability to the Mortgagee is intended to be secured by this Mortgage. 2.3 In determining whether money or obligations falls within the definition of Secured Obligations at any time, events occurring up to that time and all reasonably foreseeable events must be taken into account and the definition of Secured Obligations applies irrespective of the capacity of the Mortgagor and whether: (1) the Mortgagor is liable as principal debtor or surety or otherwise; (2) the Mortgagor is liable alone or jointly or jointly and severally with another person; or (3) the Mortgagee is the original obligee or lender or an assignee of the Secured Obligations and whether or not: (a) the assignment took place before or after the delivery of this Mortgage; (b) the Mortgagor consented to or was aware of the assignment; or (c) the assigned obligation was secured. 91 These, and perhaps other provisions may suggest the adoption of a broad approach to the construction of the mortgage, or even an approach which is favourable to the mortgagees. However it is a little difficult to give meaning to provisions such as cl 2.3. In any event, I do not understand either party to rely particularly upon such provisions. 92 The definition of the term "Secured Obligations" has eight sub-paragraphs. However only subpara (a) is presently relevant. Deleting irrelevant alternatives, the term seems to mean, for present purposes: all … money which [Bluechip] is or at any time may become actually or contingently liable to … pay to or for the account of [Prime or Promoseven] for any reason whatever and in any capacity under or in connection with the Agreements. The parties accept that the 2009 mortgage would secure amounts due to either Prime or Promoseven separately. It has not been submitted that any significance should be attached to the use of the definite article before the word "Agreements" in the definition. I shall return to that matter. 93 Concerning the definition of the term "Agreements" in the table, his Honour considered that the reference to, "The Loan Agreement constituted dated 1 July 2006", referred to an agreement between HSBC and Bluechip. I have suggested that the reference might rather reflect the drafter's belief or assertion that moneys had been advanced pursuant to the 2006 draft loan agreement. Although his Honour was not satisfied that such draft and the 2007 draft mortgage had been executed, and the parties accept that conclusion, that finding did not preclude the possibility that the parties acted upon the basis that there was such an agreement and, possibly, that there was an equitable mortgage. Their conduct may have evidenced an unwritten agreement. These are questions of fact which have not been addressed. 94 The reference in the table to, "each and every written agreement, memorandum or minute of or between the Mortgagor and the Mortgagee from time to time", no doubt led Promoseven to submit to the liquidators that the agreements giving rise to the relevant secured obligations were: the JVA; the 2009 loan agreement; and "[q]uite possibly every email or letter to Mr Burt, Mr Miknas or Promoseven calling for funds to be advanced to [Bluechip]." See the adjudication at para 4.6. 95 At first instance in this Court Promoseven submitted that the definition of "Agreements" included, "all written and oral agreements (however entered or evidenced) between Promoseven and Bluechip". See his Honour's reasons at [39]. 96 The various aspects of the definitions of both the term "Secured Obligations" and the term "Agreements" must be considered together. The former definition uses the words "obligations" and "liable", indicating that only the discharge of legally enforceable liabilities is secured. This limitation should be kept in mind when considering the balance of the construction question. Thus I dismiss any submission by Promoseven that performance of a non-contractual promise was secured. It is not entirely clear that any such submission was made. The only written agreements, memoranda or minutes included in the definition were those, "of or between the Mortgagor and the Mortgagee". Documents which were not "between" those parties or "of" them both were not included. Thus, for example, communications between Mr Burt and Mr Knell as members of the steering committee, or between Mr Burt and Mr Miknas were not included. 97 Prima facie, it is the 2009 mortgage which must be construed. The liquidators' attempts to construe it in the context of the JVA can only be justified upon the basis that such approach may assist in the construction exercise. The liquidators' reliance on the inter-relationship between the mortgage and the JVA must be so understood. Further, as I have said, in oral submissions on appeal, Promoseven conceded that the JVA was, "part of the surrounding circumstances". See ts 8, l 42 to ts 9, l 21. Of course, the existence of the JVA and its terms may also be relevant in considering whether Promoseven and Bluechip entered into any agreements for loan and in identifying the terms of any such agreements. 98 In Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at p 352 the High Court dealt with both implied terms and the use of surrounding circumstances as aids to construction. In the present case, the primary Judge referred to Codelfa as it related to implied terms, but did not refer to it in relation to construction, no doubt because the question was not at the forefront of the parties' submissions. In Codelfa at p 352, Mason J (as his Honour then was) said: The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed. It is here that a difficulty arises with respect to the evidence of prior negotiations. Obviously the prior negotiations will tend to establish objective background facts which were known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself. The object of the parol evidence rule is to exclude them, the prior oral agreement of the parties being inadmissible in aid of construction, though admissible in an action for rectification. Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties' presumed intention in this setting. We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract. 99 I have little difficulty in concluding that the definition of the terms "Secured Obligations" and "Agreements" are ambiguous and capable of more than one meaning, particularly having regard to the reference to various wide classes of documents and, I would have thought, use of the definite article before the word "Agreements" in the definition of the term "Secured Obligations". Such usage may suggest that the drafter understood them to be an identifiable body of agreements in respect of which the 2009 mortgage was to operate. As Promoseven submitted in its outline of submissions in reply at para 3, it is now unnecessary that there be ambiguity in order that there should be recourse to surrounding circumstances. See Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461 - 462 [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 176 [40]; and Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at 656 - 657 [35]. In the last mentioned case, French CJ, Hayne, Crennan and Kiefel JJ said: Both [parties] recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean … . That approach is not unfamiliar … . As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract … . Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating" … . As Arden LJ observed in Re Golden Key Ltd … , unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience" … . 100 Bluechip's affairs were controlled by Messrs Burt and Knell, both as the only members of the steering committee and as its directors. This was particularly the case with borrowings. See cl 7.4 of the JVA and cl 37 of the statement of intent. Mr Burt was a director (and the managing director) of Promoseven, and Mr Knell was a director of Prime. It follows that all three companies knew of the content of the JVA, including the statement of intent. Clause 14 of the JVA clearly provided that generally, Bluechip's affairs were to be conducted by agreement between Mr Knell and Mr Burt, acting on behalf of Prime and Promoseven respectively. No doubt they would, as directors of Bluechip then give effect to any agreement. The evidence generally supports this proposition. In this way the interests of each joint venturer were protected against self-interested conduct by the other. In the event of disagreement, there was a dispute resolution procedure, but the evidence does not suggest that such procedure was ever utilized. 101 One might infer that when the 2009 mortgage was executed, Prime, Promoseven and Bluechip, through their representatives, Messrs Knell and Burt, understood that any earlier loan agreements entered into by Bluechip with Prime or Promoseven would have been approved by both Prime and Promoseven (or Messrs Knell and Burt) pursuant to the JVA. Similarly, those companies would all have understood that later loan agreements would be so approved. They also understood that, at least as between the joint venturers, the JVA did not permit any agreement between Bluechip and either Prime or Promoseven, which agreement was not so approved. The term "Agreements" in the 2009 mortgage meant agreements so made. It may be that the steering committee could agree to waive compliance with a JVA term, but agreement remained essential to the conduct of Bluechip's affairs. 102 This approach to the meaning of the word "Agreements" is consistent with my suspicion that the reference in the definition of "Agreements" to "the Loan Agreement constituted dated 1 July 2006" was to an agreement which the parties believed to have existed or so asserted, and not to any loan agreement with HSBC. However my conclusion as to the construction question is not in any way based upon that suspicion. 103 I should add that other aspects of the JVA may also be relevant to the construction of the 2009 mortgage, but it is not presently necessary that I consider that possibility.

REPAYMENT PURSUANT TO THE JVA 104 As I have previously demonstrated, the JVA is not only relevant to construction of the 2009 mortgage, but also to an understanding of the circumstances in which the relevant advances were made. The liquidators assert that funds advanced for the purposes of the joint venture were repayable in accordance with the JVA. This proposition assumes the absence of any contractual relationship between Promoseven and Bluechip, or at least of any obligation upon Bluechip to repay them. The liquidators submit that however the advances were made, all of the parties must have understood and agreed that repayments were to be made pursuant to the JVA, and that repayment would not be possible until the Cairns project was generating revenue, and current obligations to HSBC had been met. 105 In this context it is worth noting that the 2006 draft loan agreement provided for the repayment of the proposed advances, "on the date of settlement of the sale of the last Constructed Unit built on the Land required to discharge the first and second mortgages", or 30 months from the date of the advance, whichever was the earlier. The first mortgage was that in favour of HSBC. The second mortgage was to be in favour of Promoseven. The 2009 loan agreement (at cl 5) provided for repayment of advances on the "Maturity Date" which was to be the tenth anniversary of the date of that agreement. It seems that at some stage, Mr Burt challenged the drafting of this aspect of the repayment clause, but that matter cannot conveniently be addressed in these proceedings. The alternative possibility seems to have been that the advances were to be repayable on the first anniversary of the drawdown of the loan facility established by the 2009 loan agreement. These documents may not be relevant to the construction of the 2009 mortgage. Nonetheless they underline the fact that to the parties' knowledge, advances were unlikely to be repaid (or repayable) on demand. 106 As I have said, repayment dates are not immediately relevant for present purposes. However consideration of that question highlights the importance of care in identifying any agreement under, or in connection with which any obligation to repay may have arisen. If Prime, Promoseven and Bluechip must have known that the advances could not be repaid until the Cairns project had reached a certain point, then it is quite unlikely that they would have ordered their affairs in a way which was inconsistent with that understanding. In that context, it may well be that Messrs Knell and Burt were not greatly concerned about how the funds were made available for use in connection with the Cairns project, or by whom the advances were nominally repayable. 107 The JVA prescribed the relative priorities for repayment of advances. It also provided that the repayment of mezzanine advances was to be secured, but made no provision for securing repayment of advances made by joint venturers pursuant to cl 7. It may be arguable that the term "Secured Obligations" should be construed, in light of the JVA, as applying only to a liability, the performance of which, pursuant to the JVA, was to be secured. In other words, the 2009 mortgage should be understood as a document giving effect to cl 38.2 of the statement of intent. I consider that such a construction would be too narrow, having regard to the wording of the 2009 mortgage. A further construction problem might arise out of the different priorities conferred upon mezzanine advances by the joint venturers, advances pursuant to cl 7.5 and other advances by the joint venturers. Although repayment of all of those classes of advance were secured, were they to retain their respective priorities inter se to which I have referred? This problem may not presently arise, but it may be of some importance in the liquidation.

THE RELEVANT ERROR 108 In my view the primary Judge erred in concluding that, because the relevant advances were contemplated by the JVA, they were necessarily made under, or in connection with it, and not under, or in connection with any other agreement between Bluechip and Promoseven. The error lay in assuming that the liquidators' submission, if correct, provided some sort of legal answer to Promoseven's claims. In fact, it was simply an alternative explanation of the circumstances in which the relevant advances were made, an explanation which did not involve the incurrence by Bluechip of any obligation to repay such advances. 109 As a result of that error, his Honour did not seek to identify other specific agreements between Bluechip and Promoseven under, or in connection with which such advances might have been made. Promoseven had led evidence concerning that question. The liquidators invited his Honour to consider that evidence. See the reasons at [40]. In its written submissions on appeal at para 20, and in its oral submissions, Promoseven submitted that such course was necessary. In my view it was essential to the process of identifying the obligations, performance of which was secured by the 2009 mortgage. It follows that his Honour's order, dismissing Promoseven's application, was made in error. The appeal must be allowed and the orders below, set aside.

THE OUTSTANDING ISSUE 110 Three questions arise in determining whether the 2009 mortgage secured repayment of any of the relevant advances. They are: whether Bluechip incurred any obligation to repay such advance to Promoseven; whether any such obligation arose under an agreement with Promoseven; and whether any such agreement was an "Agreement" for the purposes of the 2009 mortgage. The first and second questions are primarily factual. The answer to the third question depends upon the proper construction of the terms "Secured Obligations" and "the Agreements", having regard to the other terms of the 2009 mortgage, construed in light of relevant surrounding circumstances, including the JVA. 111 The parties have unsuccessfully attempted to identify simple solutions to a potentially complex problem. Such complexity is largely attributable to the various roles played by Mr Burt and Mr Knell in the negotiations leading up to the making of each advance, together with the complexity of the definition of the term "Secured Obligations". The matter has been further complicated by the failure to consider discretely the factual situation in which each relevant advance was made. Another problem has been the liquidators' attempt to "incorporate" the 2009 mortgage into the JVA without any real explanation of the basis for so doing. Promoseven has further complicated matters by urging that the "error" made by the primary Judge was simply to cast the case as a "choice" between two possible views: that each advance was made pursuant to the JVA; or that each was made pursuant to a separate agreement or agreements. The case was always more complex than the parties apparently understood. 112 Both parties submit that his Honour ought to have sought to identify any agreement under, or in connection with which each of the relevant advances was made. That task remains to be performed. If it were possible for this Court effectively to perform it, it would be appropriate that we do so. However I consider that we cannot do so effectively, primarily because the parties have not made relevant submissions, either as to the facts surrounding each advance, or as to the effect of the JVA on the construction of the 2009 mortgage. Further, it is not clear that all relevant evidence has been provided to us. 113 In order to resolve the matter, each advance must be considered separately. It is not appropriate to generalize about the whole range of transactions. In particular, the problem cannot be resolved by the general application of broad statements about offer and acceptance. Nor can it be resolved by a similarly general application of broad statements about implied terms. Quite apart from anything else, once it is accepted that the liquidators have put Promoseven to proof of the circumstances in which the alleged obligations arose, there can be no justification for simply asserting an implied promise to repay. As I understand the liquidators' case, they challenge the characterization of the advances as loans to Bluechip, or at least the assertion that Bluechip incurred any obligation to repay them. It is for Promoseven to establish that Bluechip was obliged to repay the advances. That task necessarily involves an examination of the circumstances in which each advance was made. 114 These proceedings are between the liquidators of an insolvent company and a former controller of that company who claims to be a secured creditor. There is, in my view, a particular public interest in ensuring that issues arising out of those circumstances are fully addressed. The matter must be remitted for further consideration. 115 It will be for the liquidators to decide whether to continue to challenge all or any of the advances, having regard to the matters canvassed on appeal. It will be for the primary Judge to consider any application to lead further evidence.

OTHER SUBMISSIONS 116 Promoseven made two other submissions. The first was that there may have been a "tripartite" agreement or agreements to which Bluechip and both joint venturers were parties. However it has not identified the terms of any such agreement. In one form, the submission seems to have been advanced as an answer to any finding that the advances were made pursuant to the JVA. Promoseven submits that if that be so, Bluechip should be seen as having become a party to that agreement. I presently see no basis for such a finding, but a detailed analysis of the facts surrounding each advance may produce that result. 117 The other submission concerns the third party benefit provisions of the Property Law Act. That submission also necessitates identification of the agreement or agreements in question. If Promoseven submits that there were relevant agreements pursuant to which Bluechip derived a benefit, then those agreements must be found in the evidence. Neither issue has been properly ventilated. Both may be considered by the primary Judge, once any relevant agreements have been identified.

THE FORM OF THE PROCEEDINGS 118 I have expressed doubts as to the way in which these proceedings have been constituted. However the Court has not had the benefit of submissions concerning that matter. I am confident that there is a justiciable dispute between the parties, which dispute arises under the Corporations Act. Any problem is merely as to form. The parties should consider the matter.

ORDERS 119 I would order that: the appeal be allowed; the order of Logan J, made on 28 November 2013, be set aside; the matter be remitted to Logan J for reconsideration; within 14 days of the publication of this Court's reasons for judgment, the parties exchange submissions as to the costs of this appeal and, within a further period of seven days, file such submissions, together with any submissions in reply; and the parties have liberty to apply. I certify that the preceding one hundred and nineteen (119) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

Associate: Dated: 13 February 2015 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 835 of 2013

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA IN THE MATTER OF BLUECHIP DEVELOPMENT CORPORATION (CAIRNS) PTY LTD ACN 117 021 566 (IN LIQUIDATION) (RECEIVERS AND MANAGERS APPOINTED)

AND: NIGEL ROBERT MARKEY AND BRADLEY VINCENT HELLEN IN THEIR CAPACITY AS RECEIVERS AND MANAGERS AND LIQUIDATORS OF BLUECHIP DEVELOPMENT CORPORATION (CAIRNS) PTY LTD ACN 117 021 566

PRIME PROJECT DEVELOPMENT (CAIRNS) PTY LTD ACN 109 685 332

JUDGES: DOWSETT, COLLIER AND RANGIAH JJ DATE: 13 FEBRUARY 2015 PLACE: BRISBANE

COLLIER AND RANGIAH JJ: 120 This is an appeal from a judgment of a Judge of this Court, in turn dismissing an "appeal" against a decision of the Court-appointed liquidators and receivers and managers ("the first respondents") of Bluechip Development Corporation (Cairns) Pty Ltd ("Bluechip"). 121 The proceedings below were commenced pursuant to s 1321 of the Corporations Act 2001 (Cth) and reg 14.4 of the Federal Court (Corporations) Rules 2000 (Cth). The first respondents had rejected, in part, the debt claimed by the appellant ("Promoseven") against Bluechip. 122 Promoseven claims, in summary, that his Honour erred in failing to find that loans made by Promoseven to Bluechip were secured by a mortgage granted by Bluechip to Promoseven, or that the loans were otherwise secured by that mortgage. Promoseven seeks orders including that the appeal against the decision of his Honour be allowed, declarations that relevant loan agreements were secured by the mortgage, and that this Court uphold its appeal against aspects of the adjudications of the first respondents.

Background facts 123 On 16 November 2005, Promoseven and the third respondent ("Prime") entered into a joint venture agreement in relation to a property development in Cairns known as "Cairns Central". The joint venturers planned that Cairns Central would comprise commercial premises, retail business premises and residential apartments on the corner of McLeod and Alpin Streets in Cairns. The joint venture agreement was intended to govern the relationship between the two joint venturers for the duration of the Cairns Central project. 124 The corporate vehicle of the joint venture was Bluechip. Promoseven and Prime were equal shareholders in Bluechip. The directors of Bluechip were Mr Stephen Burt (who was also a director of Promoseven) and Mr Sidney Knell (who was also a director of Prime). 125 Under the joint venture agreement Promoseven agreed to provide land for the project, while Prime agreed to fund the development. While the joint venture agreement contemplated each party making financial contributions to the project, the majority of project funding took the form of loans from Hong Kong & Shanghai Banking Corporation ("HSBC Bank") in the amount of approximately $18 million. The loans from HSBC Bank were secured by a registered mortgage over the land the subject of the project. That mortgage is not relevant to the current proceedings. 126 In the judgment below at [13] his Honour details a number of advances totalling $5.442 million made by Promoseven to Bluechip between 21 March 2007 and 14 April 2009 due to "cost overruns" of the project. At [15] his Honour observed that there was no doubt that those advances were made or that they were in fact loans. 127 Promoseven alleged that a draft loan agreement and mortgage agreement were circulated in 2007 which had the effect of securing those advances in its favour ("2007 mortgage and loan agreement"). 128 On 23 January 2009, a mortgage ("2009 mortgage") was executed by Bluechip as mortgagor, and Prime and Promoseven as joint mortgagees. The mortgage was expressed to have been provided as security for funds advanced by the joint mortgagees to Bluechip under any "agreement" between them. Two separate loan agreements were entered into by Bluechip with each of Prime and Promoseven in April 2009, although they were both dated 22 January 2009 (it is convenient to refer to the loan agreement entered between Bluechip and Promoseven as the "Promoseven 2009 loan agreement"). 129 The purpose of the mortgage stated in the document itself was of little assistance. His Honour said at [22] that the construction of the 2009 mortgage was the focal point of the application before him because most components of the total debt claim rejected by the first respondents in their adjudication decision related to liabilities incurred prior to the execution of the 2009 mortgage and the Promoseven 2009 loan agreement. His Honour further posited as a key issue for decision the identification of loans secured by the 2009 mortgage. 130 In considering the terms of the 2009 mortgage his Honour observed that clause 3.1 set out the "undertaking" of the mortgagor, namely: The Mortgagor must satisfy or pay the Secured Obligations to the Mortgagee, or as the Mortgagee directs, immediately on demand by the Mortgagee unless otherwise agreed in writing by the Mortgagee in this Mortgage, the Agreements or any other Collateral Security. 131 Clause 1.1(28)(a) and (f) of the 2009 mortgage relevantly defined "Secured Obligations" as follows: (a) all obligations and money which the Mortgagor or any Surety (whether alone or not) is or at any time may become actually or contingently liable to perform or pay to or for the account of the Mortgagee for any reason whatever and in any capacity under or in connection with the Agreements. It includes all interest, fees, costs, indemnities, charges, duties and expenses and the payment of liquidated or unliquidated damages in connection with the obligations or the breach of the obligations of the Mortgagor or any Surety to the Mortgagee under or in respect of the Agreements; … (f) all money paid or payable by the Mortgagee on account of the Mortgagor, whether directly or indirectly, in respect of the Property. 132 "Property" as appeared in clause 1.1(28)(f) includes a reference to the mortgaged land. 133 "Agreements" as appeared in clause 1.1(28)(a) was defined in clause 1.1(1) as follows: (1) … every agreement (whether written or otherwise) or deed (excluding this Mortgage) made between [Bluechip] and the Mortgagee, whether or not any other person is a party to it and includes any Agreements described in the table at the beginning of this Schedule. 134 In the table at the beginning of the Schedule, "agreements" was stated to mean: The Loan Agreement constituted dated [sic] 1 July 2006 and each and every written agreement, memorandum or minute of or between the Mortgagor and the Mortgagee from time to time. 135 Clause 7.6 of the joint venture agreement provided that where one party, but not the other, made further advances, those further advances would be repaid in priority to all other loans made by the joint venturers.

The application before the primary judge 136 In the amended originating process filed 19 August 2013, Promoseven sought orders reversing or modifying the decision of the liquidators in respect of certain formal proofs of debt, on the following grounds: 1. The Liquidators erred in concluding that any amounts advanced by Promoseven to Bluechip between August 2006 to 21 April 2009 were not secured by the Mortgage - because pursuant to the operation of clause 3.1 of the Mortgage (by reference to the definition of Secured Obligations in clause 1.1(28) of the Mortgage and "Agreements" in clauses 1.1(1) and in the table at page 2 of the Mortgage), the Mortgage given by Bluechip to Promoseven on 23 January 2009, secured money already owing by Bluechip to Promoseven, as well as future advances. 2. The Liquidators erred (at paragraph 8.2.3 of the Adjudication) in considering only whether the loan agreement between Bluechip and Promoseven dated 22 January but signed on or about 23 April 2009 (the Promoseven Loan Agreement) fell within the definition of "Agreements" in clause 1.1 of the Mortgage. 3. The Liquidators erred (at Parts 4 and 8 of the Adjudication): (a) in failing to find that the "Agreements" for the purposes of the Mortgage included all written or oral agreements between Bluechip and Promoseven under which Promoseven agreed to or provided funding to Bluechip; (b) in failing to find that there were such Agreements between Promoseven and Bluechip, including (but not limited to) a request for funding of at least $2,250,000 and a loan agreement and draft mortgage exchanged between Promoseven and Bluechip in February 2007, and other emails, correspondence, minutes, memoranda or other written or oral evidence of such Agreements. 4. The Liquidators erred in rejecting an amount of at least $7,202,000 (including a deduction of $400,000) plus any interest payable thereon, as being secured under the Mortgage in favour of Promoseven.

Decision of primary Judge 137 At [38] the primary Judge said that there were four issues for determination by him: (a) Whether a loan agreement and mortgage were entered into between Promoseven and Bluechip in 2007; (b) Whether the 2009 Mortgage, on its proper construction, secured only money advanced pursuant to "Agreements", as that term was defined in the Mortgage; (c) Whether the Promoseven 2009 Loan Agreement operated only prospectively, or whether it operated so as to cover prior advances; (d) Whether the conduct of the parties in arranging further drawdowns to fund the joint venture constituted an "Agreement" within the meaning of the 2009 Mortgage, and related to this, whether the various further drawdowns were made pursuant to the JVA or whether those drawdowns formed part of or evidenced further agreements. 138 His Honour noted at [43] of the primary judgment that the first respondents did not cavil with the characterisation of the relevant advances from Promoseven to Bluechip as "loans" or "loan agreements". In respect of the relevant advances, his Honour observed: On each occasion, the agreement consisted of an offer by Bluechip to Promoseven that if Promoseven lent it funds, Bluechip would repay the funds with interest, and an acceptance of that offer by Promoseven in lending the funds - or alternatively put - Bluechip's request for funds were invitations to treat, with the lending of funds by Promoseven amounting to an offer, and acceptance taking place in Bluechip receiving and using the funds. (at [43]) 139 A key understanding to his Honour's decision is his observation at [44]: Crucially, however, the point made for the first respondents is that each of these loan agreements was in fact made pursuant to the umbrella agreement of the JVA but it - the JVA - falls outside the definition of agreements in the 2009 Mortgage, because it was not an agreement to which Bluechip was a party. The result, the first respondents submit, is that the first "Agreement" covered as that term is defined in the 2009 Mortgage, was the Promoseven 2009 Loan Agreement. 140 In considering the matter before him his Honour concluded, in summary: Although the 2007 mortgage and loan agreement were apparently signed by Mr Burt on behalf of Promoseven, they were not executed by all named parties, and accordingly could not and did not secure advances made during the relevant period ([48]). The Promoseven 2009 loan agreement did not have retrospective operation ([49]). The 2009 mortgage did secure moneys owing under past "Agreements" as defined. However "Agreements" within the meaning of that instrument applied only to agreements between Bluechip and Promoseven (or Bluechip and Prime) and the advances in question were not secured by the 2009 mortgage ([50]). (Although in the judgment his Honour at [50] refers to agreements between "Prime and Promoseven" it was common ground at the hearing of this Appeal that this reference was an error.) The further advances did not evidence further agreements, nor did they evidence a tripartite agreement by conduct as between the joint venturers and Bluechip. His Honour considered that the further advances were merely made pursuant to and as contemplated by the joint venture agreement ([52]). His Honour observed at [52]: The further advances do not evidence further agreements; neither do they evidence a tripartite agreement by conduct as between the joint venturers and Bluechip (Raguz v Sullivan has no application); all that they do is to evidence advances pursuant to and as contemplated by the JVA. It is to be remembered that Bluechip was a 50-50, Steering Committee controlled joint venture vehicle, not amenable to either Promoseven or Prime unilaterally (for example, via Mr Knell) causing it to make agreements or to request funding. On the whole of Mr Burt's evidence, all that occurred is that, once the HSBC funds were fully drawn down, further funds were advanced, ad hoc as required, as the JVA contemplated that they might be. The advances carried no entitlement to repayment with interest, as there was no such provision in the joint venture agreement and no basis for implying it ([53]). Bluechip was a vehicle of the joint venture agreement. There is nothing in the joint venture agreement to indicate any intention by Promoseven and Prime that Bluechip should be able to insist on the performance of any of the terms of the joint venture agreement. Neither s 55 of the Property Law Act 1974 (Qld) ("Property Law Act") nor Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 had any application to the facts of the case ([54]). 141 Accordingly, his Honour concluded that none of the advances mentioned in the Amended Notice of Appeal in the Court below were secured by the 2009 mortgage.

Appeal to the Full Court 142 The grounds of appeal to this Court from the decision below were as follows: 1. The learned primary court judge erred in failing to find that the loans made by Promoseven to Bluechip between August 2006 to 21 April 2009 were secured by a mortgage granted by Bluechip to Promoseven. 2. The learned primary judge erred in asking pursuant to what were the loans made, rather than simply characterising the loans as agreements between Promoseven and Bluechip within the meaning of clause 1.1(1) and the Schedule to the Mortgage. 3. Having found that the various advances made by Promoseven to Bluechip were "loans" or "loan agreements" between Bluechip and Promoseven, the learned primary judge ought have found that the loan agreements fell within the definition of "Agreements" secured by the Mortgage. 4. Alternatively, if the loan agreements were made pursuant to the joint venture agreement and did not have an independent existence, the learned primary judge erred in failing to find that Bluechip became a party to each of the loan transactions by its acceptance and use of the loan funds and an implied obligation to repay them, and that the loans were accordingly secured by the Mortgage. 5. Further or alternatively, if the loan agreements were made pursuant to the joint venture agreement, the learned primary judge should have found that they were "Agreements" within the meaning of the Mortgage because they formed part of a tripartite agreement or because they were enforceable under section 55 of the Property Law Act 1974 (Qld) or the common law equivalent. 143 The first respondents did not file any notice of contention and did not seek to argue that the primary Judge had made any errors of fact or law. Nor did the first respondents at first instance or on appeal, agitate any issue concerning the validity of the 2009 mortgage.

Submissions of the parties 144 In summary, the case of the appellant is as follows: Although the primary Judge found that the loans or advances made by Promoseven to Bluechip were made "pursuant to and as contemplated by" the joint venture agreement and hence not caught by the terms of the 2009 mortgage, in reality it does not matter why the advances were made. The key question is whether the advances were moneys Bluechip was liable to re-pay to Promoseven under and in connection with an agreement between Bluechip and Promoseven. If they were, the moneys were secured under the mortgage. In stating at [15] that "the moot point is whether they were made pursuant to the JVA" his Honour asked the wrong question. The correct question ought to have been whether the loans fell within the definition of "Agreements" secured by the mortgage. As soon as the moneys paid were characterised as loans, they were necessarily moneys which the mortgagor - Bluechip - was liable to repay under an agreement between the provider of the loan and the recipient. It follows that the moneys were secured under the 2009 mortgage. The primary judge (incorrectly) placed undue emphasis on the motivation for the payments and gave insufficient attention to the whole of the facts. The joint venture agreement was not a sufficient explanation for the payments, as it did not require the parties to make additional funding. The funds were not provided in accordance with the requirements of "mezzanine funding" as prescribed by the joint venture agreement. The requests were for payment to be made to Bluechip, and the only legal entity to benefit from the request was Bluechip. Alternatively, relevant events could be understood as occurring in the context of a multi-partite agreements as in authorities such as Raguz v Sullivan (2000) 50 NSWLR 236 at 250-251. Bluechip was a beneficiary of each arrangement and entitled to enforce it or have it enforced against it as a contract under s 55 of the Property Law Act. 145 The first respondents submit that the asserted errors in his Honour's reasoning do not withstand a proper analysis of those reasons. In summary: The 2009 mortgage must be considered in context of its date and its relevance to the various other "Agreements". His Honour at [38] properly and logically considered it. The 2009 mortgage secured advances made pursuant to an "Agreement". The issue was to identify any agreement that would satisfy that definition. The 2009 mortgage did not by its terms secure any advances made by the appellant. The appellant does not challenge his Honour's finding that the Promoseven 2009 loan agreement was prospective in its terms, and was not an "agreement" with respect to advances made prior to its execution. The ultimate issue was whether the advances made by Promoseven were made under the umbrella of the joint venture agreement or whether the conduct of the parties in making the loans constituted or evidenced some other agreement which was within the meaning of an "Agreement" as defined by the 2009 mortgage. As his Honour found at [11], numerous provisions of the joint venture agreement, read together, demonstrated the intention of the appellant and Prime to regulate their relationship for the entire duration of the project by the joint venture agreement, with Bluechip as the vehicle through which they would carry out the project. Adopting a common sense and businesslike approach, it would strain credulity for parties to a venture of this nature to have made the relevant advances in the absence of a written agreement. It would similarly strain credulity to expect such parties to have entered into the joint venture agreement only to make substantial financial payments in furtherance of the project which were outside its purview, and not governed by any other express agreement. Although the joint venture agreement prescribed certain procedures concerning the provision of financial information to be followed in connection with the provision of mezzanine funding to Bluechip by either Promoseven or Prime, the joint venture agreement did not so limit the provision of mezzanine funding. Clause 7.3 provided a mechanism for additional funding up to the "Maximum Contribution Amount" of $2.4 million, and clause 7.4 contemplated even further additional funding if approved by the Steering Committee. Further, clauses 7.5 and 7.6 contemplated circumstances where one joint venturer contributed funds but the other did not - in those circumstances no security was provided. That funding was received and deployed towards the project demonstrates the Steering Committee's approval of the additional funding. That the funding was provided following requests by Mr Knell - who was one member of the Steering Committee - to Mr Burt - who was the other member - reinforces that view. Although Promoseven complains that the primary Judge did not analyse the actual events and the language of the mortgage, in fact his Honour did just that. Properly examined, neither the terms of the joint venture agreement, nor the conduct of the parties evidenced any tripartite agreement or multi-partite agreement by which Bluechip became a party to a fresh agreement with the joint venturers each time an advance was made. Section 55 of the Property Law Act is not applicable. Bluechip lacked authority to enter into a binding agreement with Promoseven. Its management control was entirely in the hands of the Steering Committee, particularly on the question of further contributions to the capital of the joint venture.

Consideration 146 There was no dispute before the primary Judge that moneys had been advanced by Promoseven to Bluechip as detailed by his Honour at [13]. The key question was whether the terms of the 2009 mortgage secured those advances. The answer depended on whether the advances were moneys that Bluechip was liable to pay to Promoseven under or in connection with an "Agreement" within clause 1.1(28)(a) of the 2009 mortgage. That involved, first, the issue of whether the moneys advanced were loans made under agreements between Promoseven and Bluechip by which Bluechip was liable to repay the moneys to Promoseven. A second issue was whether any such agreements answered the description "Agreements" as defined in clause 1.1(1) of the schedule to the 2009 mortgage. 147 The appellant's submissions proceeded on the basis that in respect of the first issue his Honour had decided, in the appellant's favour, that the advances were loans made under agreements between Promoseven and Bluechip which Bluechip was liable to repay. However, it is unclear that this is what his Honour decided. At [43] of his reasons, his Honour stated that "the first respondents do not cavil with the characterisation of the various advances made during the relevant period as 'loans' or 'loan agreements'". The first respondents do not accept that they made the concession attributed to them by his Honour. His Honour then appeared to make a finding in [43] that each of the advances was a loan that Bluechip was liable to repay to Promoseven, stating "the agreement consisted of an offer by Bluechip to Promoseven that if Promoseven lent it funds, Bluechip would repay the funds with interest, and an acceptance of that offer by Promoseven in lending the funds…". In contrast, his Honour later said at [52], "the further advances do not evidence further agreements…". His Honour did not set out his reasoning for that conclusion. 148 The finding his Honour apparently made at [43] is not readily reconcilable with the finding made at [52]. It is understandable that the premise of the appellant's submissions is that his Honour decided that the advances were loans that Bluechip was liable to repay to Promoseven; but it is by no means clear whether his Honour ultimately made such a finding. Despite the contradictory findings, the appeal should be allowed only if, on an assumption in favour of the appellant that the advances were loans that Bluechip was liable to repay to Promoseven under agreements between Promoseven and Bluechip, it can be concluded, contrary to his Honour's finding, that such loans were made pursuant to "Agreements" as defined in clause 1.1(1) of the Schedule to the 2009 mortgage. We turn to that question. 149 In deciding that the advances made by Promoseven to Bluechip were not made pursuant to "agreements" as defined in the 2009 mortgage, we understand his Honour to have engaged in the following process of reasoning: 1. His Honour considered that the 2009 mortgage was to be construed in light of the terms of the joint venture agreement, which was executed only by Promoseven and Prime. 2. His Honour interpreted "Agreements" in the 2009 mortgage as meaning only agreements between Bluechip and either Promoseven or Prime. 3. The relevant advances were made by Promoseven to Bluechip pursuant to the joint venture agreement, to which Bluechip was not a party. 4. Under his Honour's construction of "Agreements" within the meaning of the 2009 mortgage, loans (if that is what they were) made by Promoseven to Bluechip pursuant to the joint venture agreement were not loans made under or in connection with "Agreements" contemplated by the 2009 mortgage. Such advances were, accordingly, not secured by the 2009 mortgage. 150 The facts of this case reveal a slapdash approach by the joint venturers and Bluechip inter se in respect of provision of funds by the joint venturers to fund the project. Indeed, the tenor of his Honour's judgment was to seek to reconcile advances of funds by Promoseven to Bluechip with such documentation as there was between any or all of the relevant parties. However, we respectfully take a different view to that of his Honour in respect of the fourth stage of his Honour's reasoning which we described in the previous paragraph of this judgment for the reasons that follow. 151 We consider that "Agreements" in clause 1.1(28)(a) has a broad meaning. If the advances were loans that Bluechip was liable to repay to Promoseven under the terms of loan agreements between Bluechip and Promoseven, they are aptly described, in terms of clause 1.1(28)(a) of the Schedule to the 2009 mortgage, as "money which [Bluechip] is…liable to…pay to…[Promoseven] for any reason whatsoever and in any capacity under or in connection with the Agreements…made between [Bluechip] and [Promoseven]…". 152 We do not accept that the advance of moneys by way of loan from Promoseven to Bluechip could not be pursuant to "agreements" as defined in clause 1.1(1) of the 2009 mortgage simply because the advances were also made under or in connection with the joint venture agreement between Promoseven and Prime. As was clear from clause 1.1(28)(a), obligations secured by the 2009 mortgage included all obligations and money Bluechip owed "in any capacity under or in connection with the Agreements". In addition, clause 1.1(28)(a) defined "Secured Obligations" under the 2009 mortgage to mean (inter alia) all obligations and money Bluechip was at any time actually or contingently liable to pay to the mortgagee for the account of the mortgagees any reason whatever under or in connection with "the Agreements". 153 The expression "Agreements" was defined by the 2009 mortgage to mean every agreement whether written or otherwise between Bluechip and Promoseven or Prime. The definition of "Agreements" as every agreement between Bluechip and the mortgagees - whether written or otherwise - supports a broad interpretation in the context of the 2009 mortgage rather than the narrow interpretation adopted by his Honour. 154 The joint venture agreement itself does not provide support for a narrow interpretation of "Agreements" in the 2009 mortgage. We note that clause 7 of the joint venture agreement deals with the capitalisation of the project and loans by the joint venturers to Bluechip. In summary, this clause contemplates that each joint venturer would contribute $1.2 million (clause 7.2(a)), and if necessary contribute additional capital or make loans in an agreed proportion such that the total value of capital contributions and loans to Bluechip increases to a maximum of $3 million (clause 7.2(b)). Clauses 7.3-7.6 however contemplates additional funding in the following terms: 7.3 Additional funding The Joint-Venturers agree that if BDCC requires additional funds from time to time to ensure that: (a) a loan to security value ratio as agreed with the lender under the Facility Agreement is maintained; (b) the maximum aggregate amount owing under the Facility Agreement at any time does not exceed $3,000,000; and (c) cost overruns in relation to the Project are funded, it will contribute those funds, provided that the obligation to contribute additional capital or make loans to BDCC in the Agreed Proportions does not exceed the Maximum Contribution Amount. 7.4 Contributions in excess of Maximum Contribution Amount The Joint-Venturers agree that if the Project requires additional funds in excess of the Maximum Contribution Amount, if the Steering Committee approves the additional funding, each party may, but is not obliged to, either contribute additional capital or lend money to BDCC in the Agreed Proportions. 7.5 Failure to fund If the Steering Committee resolves, or an Expert decides pursuant to clause 23, in favour of providing funds to BDCC in excess of the Maximum contribution Amount, and one Joint-Venturer ("Non Contributing Joint Venturer") chooses not to either contribute its Agreed Proportion of the additional capital or make a loan to BDCC, as the case may be, then the other Joint-Venturer will not provide funds as approved by the Steering Committee pursuant to clause 7.4, but may either: (a) also choose to take no action; or (b) provide funds on behalf of itself and the Non Contributing Joint-Venturer in the form of a loan on terms set out in clause 7.6; or (c) issue a notice to the Non Contributing Joint Venturer pursuant to clause 17.4. For the purposes of this clause, clauses 17.4 to 17.6 will apply as if the Joint-Venturer which has chosen not to provide additional funding was the Defaulting Joint-Venturer. 7.6 Terms of loan If a Joint-Venturer makes a loan pursuant to clause 7.5, the loan will: (a) incur interest at a rate equal to the current mezzanine rate (15%), at monthly rests or 16% on an annual basis; (b) rank in priority to all other loans made by the Joint-Venturers; and (c) be repaid as soon as the Facility Agreement permits amounts of this nature to be repaid and in any event before any distributions are made to the Joint-Venturers. 155 "Maximum Contribution Amount" is defined at clause 1.1 as "$2,400,000.00 to be contributed by the Joint-Venturers in the Agreed Proportions." The "Agreed Proportions" are 50% by each joint venturer as may be varied by deed. 156 A number of points may be made in respect of these provisions. 157 First, the joint venture agreement was between Promoseven and Prime. Clause 7 provided for funding of the joint venture project, and arrangements between the two parties in respect of, inter alia, loans to Bluechip. Bluechip was not a party to the joint venture agreement. The 2009 mortgage - which was executed by all three parties sometime after the joint venture agreement was entered by Promoseven and Prime - makes no reference to the terms of the joint venture agreement. The provisions of the joint venture agreement, including clause 7, are relevant in the interpretation of the 2009 mortgage, but there is no reason to limit the terms or application of the 2009 mortgage concerning the secured obligations by reference to the joint venture agreement, particularly in the face of the broad and clear definitions of "Secured Obligations" and "Agreements" in the 2009 mortgage. 158 Second, clause 7.3 of the joint venture agreement contemplated the provision of additional funds by the joint venturers to Bluechip up to a Maximum Contribution Amount, but there is no reference to the terms upon which any such advance would be made. Clause 7.4 of the joint venture agreement contemplated the provision of additional funds to Bluechip by either Promoseven or Prime in accordance with a procedure prescribed by clause 7.4, namely the approval by the Steering Committee of Bluechip. Clause 7.6, which sets out terms of a "loan" by either joint venturer to Bluechip, relates only to loans made in accordance with clause 7.5. Similarly, clauses 33 and 36-38 of Schedule 1 to the joint venture agreement prescribed a procedure in accordance with which Promoseven could contribute additional funding to the joint venture by way of "mezzanine funding". In respect of these clauses: It may be inferred that the terms of any loan of additional funds up to the Maximum Contribution Amount as envisaged by clause 7.3 would be found in a separate loan agreement between the joint venture party and Bluechip. This inference may be drawn in light of the comparable provisions of clauses 7.4 and 7.6 which specifically set out the terms of a loan made in excess of the Maximum Contribution Amount. Indeed, the three parties have at various stages entered into separate formal loan agreements (for example, the Promoseven 2009 loan agreement). Further, there is no reason to conclude that no sums could be lent by the joint venture parties to Bluechip outside the procedures prescribed by clause 7 of the joint venture agreement. 159 In our view, these matters support a broad interpretation of "Agreements" within the 2009 mortgage. If the advances were loans made under agreements between Promoseven and Bluechip by which Bluechip was liable to repay Promoseven, they were secured under the 2009 mortgage; even if advances were also made under or in connection with the joint venture agreement between Promoseven and Prime.

Conclusion 160 In our respectful opinion, the primary Judge erred in two respects. First, his Honour's reasons contained contradictory findings concerning the issue of whether the advances were loans made under agreements between Promoseven and Bluechip by which Bluechip was liable to repay Promoseven. Second, if it is assumed that the advances were such loans, they were moneys that Bluechip was liable to pay to Promoseven under "Agreements" as defined in clause 1.1(28)(a) of the 2009 mortgage, and his Honour erred in finding to the contrary. 161 That leaves the question of the disposition of the appeal. Not all of the affidavit evidence that was before the primary Judge was provided to the Court for the hearing of the appeal. Nor have we been provided with a transcript of the oral evidence and submissions before his Honour. We are therefore unable to make findings as to whether the relevant advances detailed by his Honour, or any of them, were loans made under loan agreements between Promoseven and Bluechip by which Bluechip was liable to repay Promoseven. That makes it necessary to remit the matter to the primary Judge for a further hearing. 162 Our conclusions make it unnecessary to consider the fifth ground in the notice of appeal, except to say that his Honour's findings upon conducting the further hearing concerning any agreements between the parties that led to the advances may affect the questions of whether there was any tripartite agreement for the repayment of the advances and the applicability of s 55 of the Property Law Act. 163 We consider that orders should be made allowing the appeal, setting aside the orders of the primary Judge and remitting the matter to the primary judge for reconsideration. The further hearing should be conducted on the basis of the evidence already adduced in the proceeding, unless the primary Judge orders otherwise. The parties should be given an opportunity to make submissions as to the costs of the appeal. 164 We have read the reasons of Dowsett J and respectfully agree with the additional matters noted by his Honour. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Collier and Rangiah.

Corporations Act 2001(Cth)ss 554E, 588D, 1321

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