Rose v Manno Kingsway Pty Limited as trustee for the Manno Kingsway Unit Trust

NSWSC 5 Pao On v Lau You Long [1980] AC 614 Re Casey's Patents; Stewart v Casey [1892] 1 Ch 104 Re Douglas; Ex parte Starkey (1987) 15 FCR 475; (1987) 75 ALR 97 Retirement Services Australia (RSA) Pty Ltd v 3143 Victoria St Doncaster Pty Ltd (2012) 37 VR 486; [2012] VSCA 134 Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65 SAS Realty Developments v Kerr [2013] NSWCA 56 Taylor v Johnson (1983) 151 CLR 422; [1983] HCA 5 Thornton v Jenyns (1840) 1 M & G 166; 133 ER 291 Twenty Ninth Macorp Nominees Pty Ltd v Normal George [2017] VSC 136 Westminster City Council v Duke of Westminster [1991] 4 All ER 136 Texts Cited: E Peel, Treitel: The Law of Contract (13th ed, 2011, Street & Maxwell) H Beale, Chitty on Contracts (Vol 1, 35th ed, 2024, Street & Maxwell) JD Heydon, Heydon on Contract: The General Part (2019, Thomson Reuters) KR Handley, Estoppel by Conduct and Election (2006, Street & Maxwell) MJ Leeming, Common Law, Equity and Statute: A Complex Entangled System (2023, Federation Press) Category: Principal judgment Parties: Christopher Peter Rose (Appellant) Manno Kingsway Pty Limited ATF the Manno Kingsway Unit Trust (Respondent) Representation: Counsel:

D Parish (Appellant) T Boyle (Respondent)

Brown Ward King (Appellant) Dentons (Respondent) File Number(s): 2024/347150 Publication restriction: N/A Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Citation: [2024] NSWSC 1065 Date of Decision: 23 August 2024 Before: Campbell J File Number(s): 2023/120366

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] Mr Rose (the Appellant) and Mr Manassen were property developers who had pursued various projects together since 2014, including one known as the Wavelength Project. On 26 November 2021, near the completion of the project, Mr Manassen informed the Appellant that he would be unlikely to obtain a profit in the Wavelength Project, and suggested that he could pay the Appellant $150,000, or that the Appellant could propose a loan that they could discuss. By email on 13 December 2021, Mr Manassen sought to "confirm" the details of his meeting with the Appellant that day, including that "[w]e will lend $1m to [the Appellant] by 24th Dec for 1 year at 5% subject to" various conditions. The Appellant confirmed the summary, but added the following day that Mr Manassen had forgotten to include a payment made by the Appellant in the sum of $315,000. On 24 January 2022, Manassen Holdings Pty Ltd, a company related to Manno Kingsway Pty Ltd (the Respondent), advanced a sum of $1,300,000 to the Appellant. Mr Manassen is the sole shareholder and director of both companies. On 2 February 2022, the Respondent and Appellant entered a loan agreement as lender and borrower respectively (the Loan Agreement). The loan amount was $1,300,000, at an interest rate of 3.85% per annum. The Appellant made ten monthly interest payments corresponding to a loan amount of $1,300,000 with 3.85% interest. By email dated 27 December 2022, Mr Manassen contacted the Appellant concerning his intention to repay "the $1.3m loan". The Appellant stated that he would provide an answer by 10 January 2023, but he failed to do so, and did not respond to further enquiries from Mr Manassen after that date. The Respondent commenced proceedings against the Appellant in debt based on the Loan Agreement after issuing a formal letter of demand. The primary judge held that: (i) the emails exchanged on 13 December 2021 created a binding and enforceable agreement (the Email Agreement); (ii) the Loan Agreement was binding as the advance constituted good consideration even though made in advance of execution of the Loan Agreement; and (iii) rejected the Appellant's defences of promissory and conventional estoppel. The Appellant challenged each of these findings on appeal. The Court (Bell CJ, Mitchelmore JA and Adamson JA agreeing) held, dismissing the appeal: 1. The primary judge erred in finding that the Email Agreement formed a binding contract and fell within the "fourth category" of Masters v Cameron. The email exchanges of 13 December 2021 did not objectively manifest an intention to be immediately bound because Mr Manassen's email: (i) did not specify the identity of the contracting parties or date upon which moneys would be advanced; (ii) prefaced the description of the terms of the agreement with "[j]ust confirming our meeting"; (iii) none of the matters "confirmed" by the email was in fact implemented; and (iv) the Appellant failed to complain about the non-advance of $1,000,000 by 24 December 2021: [41]-[49] (Bell CJ); [82] (Mitchelmore JA); [83] (Adamson JA). Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72; Australian Broadcasting Company v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540; Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61, applied. 1. The primary judge did not err in finding that the advance constituted good consideration for the Loan Agreement even though made prior to execution of the Loan Agreement. The primary judge correctly characterised the advance, execution of the Loan Agreement and provision of Deeds of Release as one transaction. The advance was requested by the Appellant, formal executed documentation identified the same amount of the advance, no other pre-existing obligation was discharged by the advance and it was common ground that it was not a gift: [50]-[66] (Bell CJ); [82] (Mitchelmore JA); [83] (Adamson JA). Twenty Ninth Macorp Nominees Pty Ltd v Normal George [2017] VSC 136; Kestell v Davey (No 3) [2023] WASC 289; Pao On v Lau You Long [1980] AC 614, applied. Thornton v Jenyns (1840) 1 M & G 166; 133 ER 291; Classic Maritime Inc v Lion Diversified Holdings Berhad [2010] 1 Lloyd's Rep 59; [2009] EWHC 1142 (Comm); Forbes Engineering (Asia) Pte Limited v Forbes (No 4) [2009] FCA 675; Marsden v Barclays Bank plc [2016] 2 Lloyd's Rep 420; [2016] EWHC 1601 (QB); Gay Choon Ing v Loh Sze Ti Terence Peter [2009] 2 SLR(R) 332; Re Casey's Patents; Stewart v Casey [1892] 1 Ch 104; Lampleigh v Braithwaite (1615) Hob 105; 80 ER 255; Re Douglas; Ex parte Starkey (1987) 15 FCR 475; Bluebird Investments Pty Ltd v Graf (1994) 13 ACSR 271, cited. 1. The primary judge did not err in rejecting the Appellant's defence of conventional estoppel, as Mr Manassen's purported concession in cross-examination did not establish "mutually manifest conduct by the parties". While his Honour erred in stating that the Appellant's promissory estoppel claim had been abandoned, the Court rejected the claim on the basis that there was neither a communicated extra-contractual promise nor evidence of reliance: [67]-[80] (Bell CJ); [82] (Mitchelmore JA); [83] (Adamson JA). Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65; Johnson Matthey Ltd v A C Rochester Overseas Corporation (1990) 23 NSWLR 190; Kramer v Stone [2024] HCA 48; (2024) 99 ALJR 126, applied.

JUDGMENT

1. BELL CJ: Five matters are clear about this contractual dispute which comes to this Court by way of an appeal from the decision of Campbell J (the primary judge) of the Common Law Division of the Supreme Court: Manno Kingsway Pty Ltd as trustee for the Manno Kingsway Unit Trust v Rose [2024] NSWSC 1065 (primary judgment or PJ).
2. First, the parties entered into a written loan agreement on 2 February 2022 by which the Respondent agreed to advance to the Appellant the sum of $1.3 million for a term of 12 months at an interest rate of 3.85% per annum (the Loan Agreement).
3. Second, the loan was subject to the provision of executed copies of Deeds of Release relating to the parties' engagement with each other in respect of a development project being undertaken by them at Geralle Street, Cronulla and known as the Wavelength Project.
4. Third, the Deeds of Release as contemplated by the Loan Agreement were executed on 2 February 2022.
5. Fourth, the Appellant paid ten monthly instalments of interest in accordance with the contractual provisions in the Loan Agreement, calculated on a principal amount of $1.3 million and interest rate of 3.85%: PJ [38]-[39].
6. Fifth, the Respondent refused to repay the principal amount at the expiry of the term of the Loan Agreement notwithstanding demands for repayment.
7. So recited, one might legitimately wonder how this matter came to court. The answer to that question lies in the fact that $1.3 million (the amount specified in the Loan Agreement) was advanced to the Appellant on 24 January 2022 (nine days before execution of the Loan Agreement) and this advance was made by Manassen Holdings Pty Ltd, a party related to the Respondent, Manno Kingsway Pty Ltd. The Appellant admitted receiving that sum but denied that, upon a proper construction of the Loan Agreement, any money was owing and "by reason of that fact", denied that the Loan Agreement was supported by consideration. It submitted that, because the advance of $1.3 million chronologically predated execution of the Loan Agreement, it was "past consideration" which was incapable of supplying the "quid pro quo" to support the contractual bargain documented in the Loan Agreement. This argument was rejected by the primary judge but is re-agitated on appeal.
8. By a Further Amended Statement of Claim (the FASOC), dated 30 January 2024 which was the first day of the hearing, the Respondent amended its claim to plead, in addition to the claim under the Loan Agreement, that the parties reached an agreement "in respect of a loan on or around 14 December 2021 for a term of one year". The agreement was said to be in writing, recorded in two emails exchanged on 13 December and a further email of 14 December 2021.

Notice of Appeal

1. The Appellant raises the following eight grounds of appeal, noting that grounds 1(b) and 2 were not pressed: "1 The primary judge erred in finding that a liability to repay the respondent arose from a contract that was created between the parties on 13 December 2021 (the purported 13 December 2021 agreement) in circumstances where: (a) it was not open to find that the parties intended to be immediately bound. (b) to the extent there was an agreement between the parties on 13 December 2021, the terms were not sufficiently certain; (c) to the extent there was an agreement between the parties on 13 December 2021, neither party performed its terms. 2 In the alternative to ground 1, if the parties did intend to be immediately bound to terms with sufficient certainty, the primary judge erred in failing to find that it was a term of the purported 13 December 2021 agreement that any money advanced would not be payable until the reconciliation of the Wavelength Project. 3 The primary judge erred in finding that the purported 13 December 2021 agreement was varied between that time and 2 February 2022 written loan agreement in circumstances where: (a) it was not open for the primary judge to infer on the available evidence that such variations took place; and (b) there was no finding of the terms of the variations or the consideration that supported them. 4 The primary judge erred in holding that the purported 13 December 2021 agreement came within the fourth category of Masters v Cameron and that the 2 February 2022 written loan agreement was a formalisation of the purported 13 December 2021 agreement. 5 The primary judge erred in holding that, if the 2 February 2022 written loan agreement was not a formalisation of the purported 13 December 2021, it was nevertheless supported by consideration passing from the respondent to the appellant in the form of the advance made on 24 January 2022. 6 The primary judge erred in finding that there was no evidence that the parties adopted the appellant's characterisation of the advance (such that it be repayable after reconciliation at the completion of the Wavelength Project) as the conventional basis of the relationship. 7 The primary judge erred in: (a) failing to find contrary to compelling evidence that there was a mutual understanding that the 2 February 2022 written loan agreement repayment term would not be strictly enforced and that instead the money advanced on 24 January 2022 would be repayable upon reconciliation of the Wavelength Project; and (b) holding that that the respondent was not estopped from resiling from the said mutual understanding. 8 The primary judge erred in failing to consider the appellant's promissory estoppel contentions in circumstances where it appears his Honour misconstrued the contention as having been abandoned when it was not."

Further background

1. Mr Rose was an experienced property developer, who had undertaken developments since the mid-1990s: PJ [2]. Mr Manassen was the sole director and shareholder of Manno Kingsway, and is a company director of various entities known as the "Manassen Group": PJ [2].
2. Mr Rose and Mr Manassen had pursued numerous development projects in New South Wales since 2014. One such project, known as the Wavelength Project, involved the construction of apartment and commercial premises in Cronulla: PJ [2]. Mr Rose and Mr Manassen engaged in projects according to a developer-investor relationship, where Mr Rose would identify sites suitable for development, procure a feasibility study, and, if feasible, would negotiate option agreements with landowners before bringing the opportunity to Mr Manassen's attention for the purpose of obtaining funding: PJ [3]. Mr Manassen would subsequently conduct his own analysis of the project's prospects, and determine whether to invest and how such investments should be structured: PJ [3].
3. On 15 December 2016, Mr Rose and Mr Manassen entered into an investor's agreement (through their respective corporate entities) to establish the funding structure for the Wavelength Project (Investors Agreement). The final amended deed for the Investors Agreement was executed on 26 November 2019. The primary judge summarised the Investors Agreement and the pertinent facts relating to the agreement at PJ [4] as follows: "(1) the acquisition and development of the project was to be undertaken by the newly incorporated special purpose vehicle (SPV), Iridium Developments Pty Ltd ("Iridium") as trustee for Iridium Development Trust ("Iridium Trust"); (2) Mr Rose would be Iridium's sole director; (3) Mr Rose and Mr Manassen would each hold 50% shares in Iridium and 50% of the ordinary units in the Iridium Trust; (4) Mr Manassen's investments would be preference equity in that the preference units in Iridium Trust subscribed for and issued to Mr Manassen's entity would be paid ahead of ordinary units; (5) Mr Manassen as a preference unit holder would receive 30% per annum return on his preference units. That is, upon completion of the project he would have a priority return on his initial investment plus 30% per annum, compounding up to the date for distribution of profits; (6) the remaining profits would be distributed among the ordinary unit holders on a 50/50 basis; and (7) Mr Manassen would fund the acquisition of the land, while Iridium would obtain funding from a third-party lender for construction costs."

1. By email dated 27 December 2022 at 3.06pm, Mr Manassen contacted Mr Rose concerning Mr Rose's "intentions regarding repayment of the $1.3m loan".
2. By email on the same day at 7.42pm, Mr Rose responded to Mr Manassen, saying that he would provide an answer by 10 January 2023.
3. By email dated 10 January 2023 at 2.39pm, Mr Manassen sought Mr Rose's advice concerning his repayment plans. This email was followed by a further email on 12 January 2023, whereby Mr Manassen again sought to understand Mr Rose's plan to make repayments.
4. By email dated 6 February 2023, Ms Bianca Williamson (representing Manno Kingsway) attached a letter addressed to Mr Rose notifying him of his default under the Loan Agreement. The letter advised Mr Rose that he could remedy the default by 7 March 2023.
5. By email dated 8 March 2023, Ms Williamson attached a letter of demand addressed to Mr Rose for the sum of $1,315,213.29. The letter advised Mr Rose that Manno Kingsway may commence proceedings against him if the total amount owing was not paid by 15 March 2023.

The Email Agreement - grounds 1-4

1. As already noted, the primary judge held that the exchange of emails on 13 December 2021 (set out at [9] above) gave rise to a binding agreement and fell within what has become known as the fourth category of Masters v Cameron. As explained by JD Heydon in Heydon on Contract: The General Part (2019, Thomson Reuters) at [3.110] (Heydon on Contract): "Though its origins are older, modern recognition of the fourth class began with Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628; see also Tern Minerals NL v Kalbara Mining NL (1990) 3 WAR 486 at 494-495; Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101; [2000] WASCA 27 at [24]-[25]. There McLelland J quoted the dicta of Knox CJ, Rich and Dixon JJ in Sinclair, Scott & Co v Naughton (1929) 43 CLR 310; [1929] HCA 34 at 317, relying on Love and Stewart Ltd v S Instone & Co (Ltd) (1917) 33 TLR 475 at 476. They identified a class 'in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms'. The reasoning of McLelland J was upheld by the New South Wales Court of Appeal on appeal: GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 635-636. There is a clear distinction between the second class and the fourth class. The second class comprises cases where the parties "intend no departure from or addition to that which their agreed terms express or imply". The fourth class comprises cases where the parties are "expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms". An intention not to do something is different from an expectation that one will do it."
2. The primary judge's conclusion that the Email Agreement fell within the fourth class of Masters v Cameron necessarily entailed the conclusion that the parties, by their conduct, manifested an intention immediately to be bound and create contractual relations. Such an issue is to be determined consistently with the objective theory of contract: Masters v Cameron; Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548‑549. As the plurality said in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95; [2002] HCA 8 at [25], the word "intention" in this context is used in the same sense as in other contractual contexts, namely it: "describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties."

The Loan Agreement and past consideration - ground 5

1. There was no contest that the Loan Agreement was executed by the Appellant nor that, after its entry, interest had been paid at the rate specified in it, as detailed in the Table at [35] above.
2. Significantly, the first of those interest payments encompassed not only monthly interest but an amount calculated at the contractual rate for the 9 day period between the advance of $1.3 million on 24 January 2022 and the execution of the Loan Agreement.
3. This conduct was consistent with the Appellant and the Respondent treating the advance and the Loan Agreement as part and parcel of a single transaction. The Appellant, however, by ground 5, challenges this characterisation and the application by the primary judge of the decisions of the Victorian and Western Australian Supreme Courts in Macorp and Kestell respectively to the facts of the present case.
4. At one point in his submissions, Mr Parish submitted that these cases and the principle for which they stand do not represent the law in New South Wales. So much cannot be accepted. First, they are decisions relating to the common law of contract, and there is only one common law of Australia: Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 563-4; [1997] HCA 25; John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503; [2000] HCA 36; Lipohar v The Queen (1999) 200 CLR 485; [1999] HCA 65 at [51]-[53]; see also MJ Leeming, Common Law, Equity and Statute: A Complex Entangled System (2023, Federation Press) ch 6. Secondly, it was accepted in SAS Realty Developments v Kerr [2013] NSWCA 56 at [66] (SAS Realty) that, in certain circumstances, "an advance payment would be capable of constituting good consideration."
5. In Macorp, Almond J said (at [231]-[232]): "In my view, a functional test should be applied in this case. I have already found that a head agreement was reached... It is plain that this head agreement, the advance of funds by [the lender] on 2 May 2012 (pursuant to [the borrower's] urgent request), the documentation of the transaction on the same day and the execution of the transaction documents by 6 May 2012 form part of a single transaction, with the execution of the transaction documents reflecting the fact of the earlier agreement." In Kestell, Smith J said (at [453]): "Although it is established that the time of assessment with respect to which consideration is to be assessed is the time at which the contract is made, consideration will not be past consideration even if it was provided before the making of the promise for which it is alleged to be consideration, where the making of the promise and the provision of the consideration are part of the same transaction. When, by reason of their genesis, background, negotiation and terms, multiple agreements can in substance be viewed as part of a single transaction, then the courts are not bound to apply a strictly chronological test, such that, where the giving of consideration and the making of the promise are substantially one transaction, the exact order of events is not decisive."

Conventional estoppel - grounds 6-7

1. The Appellant, in his amended defence to the FASOC, pleaded that: "26 In or about December 2021, Manassen made the following representations to Rose: (a) he would no longer continue marketing units or apartments within the project for sale until market conditions improved and higher prices than that available at the time could be achieved for the remaining stock in the constructed project; (b) no accounting could therefore take place in relation to the rights and interests of the parties; (c) he would provide a short-term loan to Rose or the Rose interests to allow him or them to meet liabilities in relation to the Wavelength project and generally in anticipation of final accounting as to the respective returns of the parties. 27 In reliance on these representations, Rose executed the loan agreement. 28 There has been no accounting provided to Rose so as to allow him to determine his or his interests' entitlement to any return from the project."
2. In oral submissions at first instance, the estoppel argument was articulated in terms of both conventional estoppel and promissory estoppel (although not pleaded as such).
3. The manner in which the primary judge dealt with the conventional estoppel argument has been noted in short form at [14]-[16] above. It was more fully dealt with at PJ [46]-[54].
4. Mr Parish, who appeared for the Appellant, candidly accepted that the (sophisticated) parties' entry into a formal written contract in the form of the Loan Agreement erected a formidable hurdle for the conventional estoppel argument. So much may be seen in the following exchange in the course of argument: "PARISH: …. we say that that payment or detriment was made without any thinking of Mr Manassen's part that it was going to be [a] formal repayable loan, but rather working capital for‑‑ BELL CJ: Well, why did the parties enter into a detailed formal written contract within days of the moneys being advanced? PARISH: Our position on that is that it was done because Mr Manassen asked for it to be done and it was entered into by Mr Rose because he understood that notwithstanding that in strict legal terms that it was a loan to be repaid within 12 months. His view of it was that it was money to be paid and applied towards the project and repayable at the conclusion of the project. BELL CJ: Do you accept that the loan agreement is inconsistent with that estoppel case? PARISH: Yes. BELL CJ: Doesn't that tell you something about your client's reliance on any representation or assumption? PARISH: Yes. We accept that the entering into the written loan agreement is a considerable hurdle to us, submitting to this Court that he relied on what he understood the state of affairs was to be when a strict legal agreement was entered into in due course."

Promissory estoppel - ground 8

1. By ground 8 of his Notice of Appeal, the Appellant complains of the primary judge's rejection of the promissory estoppel argument and, in particular, his Honour's statement that reliance upon this argument was effectively abandoned. A review of the transcript does not support His Honour's conclusion and Mr Boyle, who appeared for the Respondent, very fairly conceded that he did not understand it to have been abandoned. He submitted, however, and with considerable force, that the promissory estoppel argument could not possibly succeed because no representation made on behalf of the Respondent to the Appellant was established.
2. As submitted, there was no evidence of any conduct on the part of the Respondent which encouraged the Appellant to adopt the claimed assumption as to the basis of their relationship and, in fact, all the evidence was inconsistent with the claimed assumption. I agree. It is an essential element of promissory estoppel that a "clear and unequivocal" promise be made by the party estopped to the party who relied upon the promise: Kramer v Stone [2024] HCA 48 [37]; (2024) 99 ALJR 126 (Kramer), citing Legione v Hateley (1983) 152 CLR 406 at 440, 435-437, 439; [1983] HCA 11; Foran v Wight (1989) 168 CLR 385 at 410-411, 435-436; [1989] HCA 51. It is also essential that "a reasonable person in the promisor's position must have expected or intended (or the promisor actually did expect or intend) that the promisee would rely upon the promise by some action, omission or course of conduct": Kramer at [38].
3. In the present case, there was neither a communicated extra-contractual promise, let alone one conveyed with the clarity required by the authorities, nor was there evidence of reliance. Rather, the Respondent's conduct was entirely in keeping with the formal contractual obligations entered into under the Loan Agreement.

Conclusion

1. For the foregoing reasons the appeal must be dismissed with costs
2. MITCHELMORE JA: I agree with the Chief Justice.
3. ADAMSON JA: I agree with Bell CJ.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 February 2025