The increase of $500,000 in Schypsl's overdraft facility
123 In April 2007 the respondent granted to Schypsl a $500,000 increase in its overdraft facility (see [16] - [17] above). The respondent's letter of 5 April 2007 advising of the grant of that facility stated that it was a condition of the increase that, to the extent that the $500,000 was drawn down, it be repaid after three months from the proceeds of sale of Schypsl's Hornsby child-care business. The judge implicitly found that Schypsl was obliged to repay the facility after three months notwithstanding that the Hornsby child-care centre had not by then been sold (Judgment [449], [452]). The appellants submitted on appeal that the primary judge however failed to take into account oral representations that were made to them as representatives of Schypsl concerning the term of this increase in the facility and its extension.
124 Mrs Serobian's affidavit evidence was that, prior to the grant of the increase in the facility, Mr Molenaar told her that the Credit Department of the respondent required a condition that the increase of $500,000, if drawn, be repaid within three months. Her evidence was that she said that she was not happy about that and that Mr Molenaar responded with words to the effect of:
"Do not worry about it. This is just to keep the credit guys happy and when it comes to repayment time, we will extend it and fix it up" (affidavit of 20 March 2008 [43]); see also affidavit of 31 July 2008 [10]).
125 Mrs Serobian also gave evidence by affidavit about a statement made to her by Mr Tannock on behalf of the respondent prior to the increase being agreed upon. During April 2007 Mr Tannock took over Mr Molenaar's role with the respondent (see [17] above). Mr Tannock met with the appellants and Patrick Serobian in that month to have them sign a document relating to the $500,000 overdraft facility increase. Mrs Serobian's evidence was that after Patrick queried the requirement to repay after three months and also a prohibition in the documentation against Schypsl borrowing more than $300,000, she complained about the two restrictions. She said that Mr Tannock responded with words to the effect:
"Do not worry about this, we can extend it later, this is just a formality" (affidavit of 20 March 2008 [44]).
126 Mr Molenaar denied the statement attributed to him (affidavit of December 2008 [82]). In response to the relevant part of Mrs Serobian's affidavit, Mr Tannock confirmed that what occurred when he met the appellants and Patrick Serobian was as he had described earlier in his affidavit (affidavit of 9 December 2008 [15] - [16]). That earlier evidence was that in response to a question from Mrs Serobian about what would happen "in three months time if we haven't sold Hornsby", he said words to the effect:
"Within three months I will have had time to complete the assessment of your group and understand the financials and cashflows. Assuming everything is satisfactory we can either extend the time to sell Hornsby or look to put further formal arrangements in place if need be. We will need to discuss this further" (affidavit of 9 December 2008 [13]).
127 After referring earlier to Mrs Serobian's evidence of the statements that Mr Molenaar and Mr Tannock made (Judgment [250] and [260]), the primary judge expressed the following conclusions relevant to the increase of $500,000 in the overdraft facility (doing so under the heading in his judgment of "Dealings up to the 21 May 2007 meeting including the temporary excess of $500,000"):
"449 I prefer the evidence of Chad Molenaar, Mark Hill and Paul Tannock to that of Mrs Serobian and Patrick with regard to the parties' dealings after the September 2006 facilities. Mark Hill and Paul Tannock were unshaken in cross examination .
…
452 Although I consider that it might be thought to have been true to form for Chad Molenaar to have told Mrs Serobian not to worry about the three months repayment condition of the temporary excess facility, his letter of 5 April 2007 clearly stipulated that it was a 90 day facility to be cleared through the sale of the Hornsby centre. This condition was further specified in his letter to Schypsl dated 10 April 2007".
128 With respect, I consider that there is a difficulty with this finding of his Honour concerning Mr Molenaar's alleged statement. His Honour did not find whether Mr Molenaar made the statement attributed to him, although it is plain that his Honour thought that it was possible that Mr Molenaar might have done so. The judge stopped short of making a finding about that because, as I interpret [452] of his judgment, he took the view that the clear stipulation in the letter of 5 April 2007 (reiterated in the letter from the respondent of 10 April 2007) as to the 90 day term of the facility (referred to in the letters as a 3 month term) and the requirement that it be cleared through the sale of the Hornsby child-care centre automatically negated the effect of any such statement made orally by Mr Molenaar. The judge seems to have reached this conclusion without considering the possibility that the oral and written statements could stand together or that when the relationship and communications between the appellants and the respondent were looked at as a whole, the oral statement should be regarded as taking precedence.
129 The statement that Mrs Serobian attributed to Mr Molenaar arguably represented that the respondent would later extend the time for repayment beyond three months. This was not necessarily inconsistent with the written condition that the facility be repaid after three months. In any event, the primary judge should have considered whether reasonable persons in the appellants' position would have been justified in relying upon any such oral assurance notwithstanding the existence of the written condition (see Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 at [39], [152]; Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [25] - [29] and Italform Pty Ltd v Sangain Pty Ltd [2009] NSWCA 427 at [30] - [37]).
130 The primary judge also did not make any express finding as to whether Mr Tannock made the statement that Mrs Serobian attributed to him, although the judge did say, as he did in connection with Mr Molenaar's evidence, that he preferred Mr Tannock's evidence to that of Mrs Serobian and Patrick in relation to the parties' dealings in the period in which the statement was alleged to have been made (see [127] above). As with the statement attributed to Mr Molenaar, the primary judge in my view needed to find whether Mr Tannock made the statement that Mrs Serobian attributed to him, whether that statement, if made, amounted to a representation by the respondent that the facility would be extended after three months and whether reasonable people in the position of the appellants would have been justified in relying upon the statement notwithstanding what the respondent communicated to them in writing.
131 It could be argued that the primary judge's expressed general preference for the evidence of Mr Molenaar and Mr Tannock over that of Mrs Serobian (see Judgment [449] quoted in [127] above) should be treated as a finding that Mr Molenaar and Mr Tannock did not make the particular statements which were attributed to them by Mrs Serobian and that are now under consideration.
132 For two reasons I would not accept this argument. First, the primary judge's expressed general preference related to a number of dealings over a period of more than eight months and did not involve any specific consideration of whether the particular statements in question were made. Secondly, the opening words of paragraph [452] of the Judgment (see [127] above) suggest that, if the judge had considered it necessary to consider the question, he might have concluded that Mr Molenaar made the relevant statement.
133 Other findings that would have become necessary to be made if the issues referred to in [128] - [129] above had been resolved favourably to the appellants, would have been whether the appellants in fact relied upon the oral statements and what difference, if any, any such reliance made to the events that occurred.
134 A complication from the appellants' point of view is that the respondent made the alleged representations to the appellants as representatives of Schypsl and in relation to a facility to be granted to Schypsl, yet Schypsl is not a party to the proceedings. This may not have been a fatal problem for the appellants' case if they had been able to lead evidence that they personally relied upon the alleged representations, and were prejudiced by so doing. After all, they had guaranteed Schypsl's obligations to the respondent.
135 Another possible difficulty for the appellants would have been that, unlike the representation attributed to Mr Molenaar, the representation attributed to Mr Tannock was not pleaded in the appellants' Cross Summons. Again this difficulty would not necessarily have been fatal to the appellants' case as the relevant issue may have been litigated, notwithstanding that it was not pleaded. I note in this respect that the respondent did not contend in its Written Submissions that it was not open to the appellants to rely upon that alleged statement.
136 This Court is not in a position itself to determine whether the alleged representations were made, as that issue turns very much upon the credibility of the witnesses who gave evidence concerning them.
137 In these circumstances, the question arises of whether this Court should order a retrial in relation to the appellants' case concerning the statements attributed by Mrs Serobian to Mr Molenaar and Mr Tannock. The Court may only order a new trial if it appears to the Court that "some substantial wrong or miscarriage" has been occasioned by an error that it has identified (Uniform Civil Procedure Rules r 51.53(1)).
138 This condition is not in my view satisfied here as the appellants did not refer this Court to any evidence that was before the primary judge indicating that the appellants acted to their detriment in, or suffered any loss or damage as a result of their, reliance upon the alleged representations.
139 In its Further Written Submissions dated 19 March 2010 the respondent, in dealing with the alleged representations presently under consideration, contended that the appellants did not lead any evidence of, or prove any, loss or damage (expressed as "no loss of damage was led or proved" [sic]: at [16.12]). The appellants did not in their written response to these submissions (or elsewhere) refer the Court to any evidence to this effect.
140 Evidence of this character is essential in a case such as the present where conduct is alleged to have been misleading or deceptive and to entitle the claimant to relief under the Trade Practices Act or Fair Trading Act. As McHugh, Hayne and Callinan JJ observed in Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 474 at 514 [48]:
"A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted".
141 In these circumstances it cannot be concluded that the appellants have suffered any "substantial wrong or miscarriage" (see [137] above) as a result of the errors that I have identified above (see [128] - [130]) because, even if the primary judge had found that Mr Molenaar and Mr Tannock made the statements attributed to them by Mrs Serobian, the appellants' case based upon those statements would have failed.
142 I should add that in her affidavit of 20 March 2008 Mrs Serobian said that "had [the respondent's representatives] told us three months ago that we were not being approved for … these excess funds" [apparently a reference to the respondent failing to indicate in April 2007 that the three month term for the additional $500,000 overdraft for Schypsl would not be extended] "we could have approached alternative lenders for the funds for use in our business" ([58]).
143 The primary judge rejected this evidence (Transcript p 9) and the appellants do not challenge that rejection. However, even if the evidence had been admitted, it would not in my view have assisted the appellants as it did not say anything as to what the appellants would, as opposed to could, have done in the eventuality referred to, nor did it provide any basis for a conclusion that steps to obtain alternative finance would, or even might, have been successful.