HEARD : 18-22 JULY, 25-28 JULY, 1-5 AUGUST, 8-12 AUGUST, 18-19 AUGUST, 22-23 AUGUST 2005

Contract - Oral contract of guarantee - Enforceability - Authority of servant or agent of State to enter into contract for State - Lack of note or memorandum - Whether negligent misrepresentations established - The application of promissory estoppel

Release - Agreement for - Deed of release executed - No economic duress - Implied term of good faith not breached - Rectification of deed granted

Defendant : Mr C L Zelestis QC, Mr K M Pettit SC & Mr A J Sefton

Defendant : State Solicitor for the State of Western Australia

Plaintiff (By Counterclaim) : Mr C L Zelestis QC, Mr K M Pettit SC & Mr A J Sefton

Defendant (By Counterclaim) : Mr B C Oslington QC & Mr J C Giles

Plaintiff (By Counterclaim) : State Solicitor for the State of Western Australia

Actionstrength Ltd v International Glass Engineering IN.GL.EN SpA [2003] UKHL 17; [2003] 2 AC 541

Attorney-General for Ceylon v Silva [1953] AC 461

Bell v Western Australia [2004] WASCA 205; (2004) 28 WAR 555

Bonython v The Commonwealth [1948] HCA 2; (1948) 75 CLR 589

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

Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40

Esanda Finance Corp Ltd v Peat Marwick Hungerfords [1997] HCA 8; (1997) 188 CLR 241

Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298

Kamleh v The Queen [2005] HCA 2; (2005) 79 ALJR 541

Mander Pty Ltd v Clements [2005] WASCA 67; (2005) 30 WAR 46

Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353

Moschi v Lep Air Services Ltd [1973] AC 331

Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74; (1968) 122 CLR 556

NSW v Bardolph [1934] HCA 74; (1934) 52 CLR 455

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

San Sebastian Pty Ltd v The Minister [1986] HCA 68; (1986) 162 CLR 340

Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] [1981] HCA 59; (1981) 150 CLR 225

Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245

Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1

Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186 CLR 574

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; (1988) 165 CLR 107

Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387

Western Australia v Watson [1990] WAR 248

Australian Securities & Investments Comissions v Rich [2005] NSWCA 152

Ballarat Brewing Co Ltd v Federal Commissioner of Taxation [1951] HCA 35; (1951) 82 CLR 364

Bank of NSW v The Commonwealth [1948] HCA 7; (1948) 76 CLR 1

British Russian Gazette and Trade Outlook Ltd v Associated Newspapers Ltd [1933] 2 KB 616

Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329

The Commonwealth v Western Australia [1999] HCA 5; (1999) 196 CLR 392

Cutts v O'Neil (1998) 72 SASR 56

Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317

Goodtitle d. Edwards v Bailey [1777] EngR 39; (1777) 2 Cowp. 597

Grundt v Great Boulder Proprietary Gold Mines Pty Ltd [1937] HCA 58; (1937) 59 CLR 641

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL 4; [1964] AC 465

Ibrahim v Pham [2005] NSWSC 246

J.J. Savage & Sons Pty Ltd v Blakney [1970] HCA 6; (1970) 119 CLR 435

Jones v Bartlett [2000] HCA 56; (2000) 205 CLR 166

Leroux v Brown [1852] EngR 966; (1852) 138 ER 1119

Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705

Maloney v Commissioner for Railways (NSW) (1978) 18 ALR 147

Maxwell v Murphy [1957] HCA 7; (1957) 96 CLR 261

McDermott v Black [1940] HCA 4; (1940) 63 CLR 161

New South Wales v Paige [2002] NSWCA 235

Northside Developments Pty Ltd v Registrar General [1990] HCA 32; (1990) 170 CLR 146

Pao On v Lau Yiu Long [1979] UKPC 2; [1980] AC 614

Powercell Pty Ltd v Cuzeno Pty Ltd [2004] NSWCA 51

Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370

Pukallus v Cameron [1982] HCA 63; (1982) 180 CLR 447

Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434

Ross v Allis-Chalmers Australia Pty Ltd (1980) 32 ALR 561

Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289

Russo-Chinese Bank v Li Yau Sam [1910] AC 174

Shire of Brookton v Water Corporation [2003] WASCA 240

Sue v Hill [1999] HCA 30; (1999) 199 CLR 462

Timms v Commonwealth Bank of Australia [2004] NSWSC 76

Town Investments Ltd v Department of the Environment [1977] UKHL 2; [1978] AC 359

1 MURRAY ACJ: This litigation has been a long time coming to trial. It is unnecessary for present purposes to do more than note that the first of the three actions brought by the plaintiff, Tipperary Developments Pty Ltd (TD) was launched in 1992. The other actions were instituted in 1994 and all were consolidated by orders made in that year. The case concerns events which occurred between October 1987 and the end of 1988. At the time of the delivery of these reasons, those events occurred over 17 years ago.

2 By notice dated 28 September 1990, given under cover of a letter of that date addressed to the then Deputy Premier, the Hon Ian Taylor MLA, under the hand of Mr Warren Anderson, the Chairman of Directors of TD, the plaintiff purported to comply with s 6 of the Crown Suits Act 1947 (WA). Of course, the notice was then out of time and the action had not been commenced before the expiration of a year from the date on which the cause of action accrued as required by the section. No point need be made about that because consent to pursue the action was given under s 6(2) of the Act.

3 I mention the process because the causes of action relied upon were then described in the most general of terms. Reliance was placed upon representations made in March 1988 on behalf of the defendant by which TD was caused to advance the sum of $50M to a merchant banking institution, Rothwells Ltd (Rothwells). The notice alleged that representations were made on behalf of the defendant to Mr Anderson on behalf of TD "that Rothwells was financially sound, that all its financial problems had been overcome and that therefore the deposit would be safe".

4 The notice asserted that, relying upon and induced by those representations, TD advanced $50M in March and April of 1988 and entered into a facility agreement with Rothwells for that sum to be repaid by October 1988 and for bills of exchange granted by debtors of Rothwells to be assigned to TD as security for the payment of the advance. However, it was asserted that the representations were untrue, made in breach of s 10 of the Fair Trading Act 1987 (WA) and made negligently. Those was the causes of action then relied upon in that notice given some 2½ years after the events in question.

5 Later, a Royal Commission was held, entitled the "Royal Commission into the Commercial Activities of Government and Other Matters". It had wide-ranging terms of reference. Almost all of the witnesses called before me gave evidence to that Royal Commission in late 1991 and early 1992, about 3½ years or more after the events with which this litigation is concerned. Their evidence then touched upon the factual matters relevant to this litigation, but, of course, the matters at issue before me were not the focus of the inquiry by the Royal Commission.

6 As is evident when regard is had to when this litigation was instituted, it has had a long and, I may say, at times painful, process to trial. But in May 2005 I made orders by way of directions for the final preparation for trial. In the usual way, those directions involved the exchange of witness statements, including statements responsive to those provided by the other party. In the ordinary way, those directions provided that, subject to proper objections, the statements so served might be ordered to stand as the evidence-in-chief of the witnesses in question, supplemented, by leave of the Court, by oral testimony. The statements of the witnesses who gave evidence before me and those whose evidence was adduced entirely in the form of a statement without cross-examination were generally made in the final process of preparation for trial.

7 Those statements therefore were concerned with events which had occurred about 17 years earlier. The process of cross-examination revealed that very often the statements were compiled by solicitors for the respective parties, drawing very substantially upon the evidence given by the witness before the Royal Commission.

8 There was nothing objectionable, per se, about that except that the statements often employed a form of legalese and were clearly not expressed in the words of the witness. For example, they very generally described statements made to the witness by asserting that the other person said "words to the effect of". There was no suggestion in the final preparation for trial that any of the witnesses should give their evidence-in-chief viva voce, but I make the general observation that in many respects the case turns on oral statements made about 17 years before the evidence was given.

9 Generally speaking, I found it difficult to draw the conclusion that the evidence of witnesses given in those circumstances was reliable. Many witnesses observed that they in fact had no present recollection of parts of the content of their statements, recording, as I have said, very often in important respects, what they said in evidence before the Royal Commission in late 1991 and early 1992 about events which occurred during 1988. I shall refer more particularly to such matters where the need arises. But I make the point at the outset that although there were masses of documents tendered in evidence, the matters upon which the case turns very substantially require decisions about oral statements and the reliability of evidence given in respect of such statements.

10 I commence with a broad overview of what the case is about. The story starts with a stock market crash which occurred on 22 October 1987. I have mentioned that Rothwells was a merchant bank. Primarily it operated in WA. It will be necessary later in these reasons to speak more particularly of its operations. But for present purposes it is sufficient to note that it was in the business of accepting deposits in various forms as investments from the depositors and from public and private lenders. In turn, Rothwells loaned the money deposited with it. Its financial health was therefore dependent on what are described as its receivables, the capacity of borrowers from Rothwells to service their loans by the payment of interest and to repay the capital sums when due.

11 Its success depended on its assessment of the financial viability of its borrowers and the worth of the security they provided for the loans made to them. Only in those circumstances would Rothwells have the capacity to meet its commitments to its depositors. In addition, it naturally needed to maintain a reputation sufficient to enable it to call upon the facilities to be provided by other financial institutions to meet any liquidity problem which arose.

12 It seems that Rothwells did not, in the latter part of 1987, maintain a profitable balance in its favour between its commitments in respect of its borrowing and the commitments to it due from those to whom it lent its funds. The problem was exacerbated, it would appear, because, as the saying was, it "borrowed short" and "lent long". By that I understand is meant that short-term borrowing left Rothwells unduly vulnerable to repay depositors at short term, particularly those who deposited moneys which were, or became, repayable at call. On the other hand, Rothwells' lending was not only at comparatively favourable interest rates, and not only often unsupported by adequate security, but also was over longer terms so that capital sums could not readily be called upon to meet any short-term liquidity problem.

13 It seems that a liquidity crisis of that kind occurred as a result of the stock market crash. 24 and 25 October 1987 were the following Saturday and Sunday. These days have come to be described as the "rescue weekend". It appears that a run being experienced by Rothwells on its funds was so severe that unless it was rescued from outside, it would have been forced to cease trading on Monday 26 October 1987. A number of depositors in Rothwells were State government instrumentalities and public institutions such as the Zoo. A number of local governments had funds on deposit with Rothwells, which also numbered among its depositors charitable institutions and private businesses.

14 Rothwells sought government assistance, including an immediate deposit of $5M from the Government Employees' Superannuation Board (GESB), a body corporate established under the Government Employees' Superannuation Act 1987 (WA), and of which a Mr Lloyd, an Assistant Under-Treasurer, was Chairman. It is convenient to note that Lloyd, who was an important witness before me, was also a director of the Western Australian Development Corporation (WADC), a body corporate established under the Western Australian Development Corporation Act 1986 (WA), a Director of Western Australian Government Holdings Ltd, and a Commissioner of the State Government Insurance Commission (SGIC), a body corporate established under the State Government Insurance Commission Act 1986 (WA). Following the rescue weekend, Lloyd was, at the request of the Premier, Mr Burke, appointed to the Board of Rothwells and became its Managing Director as from 1 January 1988. He is a central player in the matters at issue in this litigation.

15 A Mr Connell was at this time, Managing Director of Rothwells. He also controlled various corporate entities such as Austasia Finance Ltd, Dalleagles Ltd, Hannans Gold NL, Holidays Pty Ltd, Oakhill Pty Ltd, and Vital Technology World Ltd. Mr Connell also controlled the activities of a partnership with his wife, which traded under the name L R Connell & Partners.

16 The evidence suggests that the partnership owned an interest in property which was described in the evidence initially as the Perth Technical School site and which ultimately became Stage 1 of Westralia Square. It was agreed that the SGIC would purchase the interest of the partnership in this property, by which transaction the SGIC acquired a 25 per cent interest in the land for the sum of $30M, which the vendor was to deposit with Rothwells.

17 Another important witness before me, a Mr Edwards, was involved in the decision taken by the SGIC. Not only was Edwards Deputy Chairman of the SGIC, the Chairman being a Mr Rees, but Edwards was Chief Executive of the Department of the Cabinet. He had been recruited to that post by Mr Burke and he was clearly a most influential public servant, having a close relationship with the Premier, who apparently took the view that, having regard to the public nature of many of the depositors and investors in Rothwells, its activities were important to the State and it was highly desirable that the Government should do what it could to keep Rothwells afloat in the interests of public confidence and the economy of the State.

18 The measures taken to inject funds into Rothwells immediately following the stock market crash were clearly regarded as being stopgaps only, and on the rescue weekend a series of meetings of people concerned to devise a plan for the rescue of Rothwells were held. Apart from various Government representatives, different ministers from time to time, Lloyd, Edwards and others, there were representatives of Rothwells, including Connell, and representatives of powerful elements of the private sector, Bond Corporation Holdings Ltd, and the Bond Group of companies generally, principally represented by a Mr Beckwith, and the merchant bank Wardleys Australia Ltd, principally represented by a Mr Yonge.

19 An important aspect was an oral presentation about Rothwells by Mr Yonge. He discussed Rothwells' financial circumstances, saying that the banker was basically sound, but had liquidity problems. It was therefore proposed that those problems would be addressed by those having a principal interest in Rothwells in the private sector, but Government support was sought in the form of an indemnity or guarantee to be provided to the National Australia Bank Ltd (NAB) in respect of a drawdown facility to be granted to Rothwells by that Bank in the sum of $150M.

20 It was put and agreed that there would be a private sector capital raising in the sum of $150M, underwritten by Wardleys, which would involve various companies being asked to subscribe for preference shares in Rothwells. Connell was to give immediate assistance by providing a $20M contribution in the form of an equity subscription, and a subordinated loan of $50M. It was put and accepted that the NAB indemnity sought from the State was perfectly safe. It would only be called on if there were more than $300M in the way of bad debts, whereas, Mr Yonge said, a currently appropriate provision for the bad and doubtful debts of Rothwells was in the order of $30M.

21 Nonetheless, it was said that the Government indemnity was crucial to the success of the rescue plan because it would show Government confidence in and support of Rothwells, a reassurance to the market which, it was suggested, would secure the success of the equity raising. As indeed, it seems, it did. The argument must have been a powerful one, and the representatives of the State present, led by the Premier, agreed. On the Sunday Mr Burke issued a press release, making the points to which I have referred above.

22 Of course, the $150M preference share capital raising could not be achieved immediately. Wardleys therefore arranged a facility of $150M to be provided by NAB, guaranteed or to be indemnified by the Hong Kong & Shanghai Bank. The facility was to be repaid out of the capital raising, and was repaid in January 1988. On 26 October 1987 the NAB provided its $150M facility to Rothwells, supported by the indemnity given by the State to NAB under the hand of the Premier on that date.

23 The evidence does not allow me to reach a clear conclusion about the extent to which Mr Connell actually contributed his promised $70M. But at least it is clear that shortly after the rescue weekend Rothwells was provided with the sum of $300M. Those facilities were very rapidly drawn down by Rothwells and apparently consumed by very early in November 1987, revealing that the views about Rothwells upon which those involved in the rescue weekend had acted were substantially untenable. At least its liquidity crisis was not so easily solved.

24 In early November 1987 the SGIC purchased various properties in the Perth CBD from Bell Resources Ltd or Bell Group Ltd for $206M. Those properties included a further part of the Perth Technical School site and adjacent properties, the Parmelia Hotel and the Forrest Centre, thereby increasing, relevantly for present purposes, the SGIC holding of the Perth Tech site. In addition, a shareholding of the Bell Group in BHP was purchased by the SGIC and a condition of these transactions was that the vendor deposit $50M into Rothwells, providing it with a further injection of liquid funds. In addition, deposits of $50M each were made by the SGIC and GESB in January 1988. So by this time, as can be seen, the State and its instrumentalities had been involved, directly or indirectly, in providing very substantial support to the financial viability of Rothwells.

25 In late January 1988 the first contact was made with Mr Anderson by Mr Terry Burke, the brother of the Premier. He asked whether Mr Anderson was interested in purchasing the Perth Tech site, and an inspection was arranged. In the meantime, in February, Mr Burke, the Premier, resigned, and on 25 February 1988 Mr Dowding, a lawyer who was appointed Senior Counsel in 2002, again a witness in the trial before me, became Premier. He was also Treasurer, and the Minister to whom the administration of the SGIC was committed.

26 Shortly before Mr Dowding became Premier he was told by Burke and others, in general terms, that Rothwells continued to require Government support if it was to survive and, shortly after he became Premier, the evidence before me suggests that a decision was made at a meeting, which may have been of the Budget Management Committee of the Cabinet at which certainly Dowding, the then Attorney-General and Minister for Budget Management, Mr Berinson, Edwards and Rees were present. The decision taken, somewhat informally it would seem, was that the Government should continue its support for Rothwells.

27 It will be recalled that I have mentioned the acquisition by the SGIC of land in the Perth CBD which became known as the Perth Tech site. The GESB also owned land there and it had been decided, it appears, that they should quit the properties they owned which made up that site. A process of seeking offers to purchase the site was instituted. It will be remembered that Mr Terry Burke had mentioned the matter to Mr Anderson. Three prospective purchasers made bids. The WADC, on behalf of the SGIC and GESB, engaged Rothwells to assess the bids which were attracted. Rothwells, in turn, engaged a Mr Tucker, a property consultant. One of the tenderers was a consortium of TD and Consolidated Press Holdings Pty Ltd (CPH), a company controlled by Mr Kerry Packer, who did not give evidence and whose absence from the witness box was the subject of submissions with which I will need to deal in due course. This consortium became the preferred tenderer.

28 It is sufficient to note that this offer was made on 4 March 1988 under cover of a letter on CPH letterhead, signed by a Mr Don Bourke. Mr Bourke was the Chief Financial Officer of CPH, directly answerable to Mr Packer. The offer, which excluded the Parmelia Hotel, was to purchase the land for $270M, payable in three annual instalments, the first by 30 June 1988. There was to be a development plan, which actually involved potentially three buildings and stages of development. Part of the proposal was that the State would agree to underwrite the occupancy of the first office block tower to the extent of 32,000 m2 and involved the payment of what was described as "a commercial fee". As Mr Anderson explained, CPH and TD planned what was described as a property trust which would involve the acquisition and development of a number of properties in different capital cities in Australia.

29 The bid evaluation process having been concluded, the Premier, Mr Dowding, and the Minister for Budget Management, Mr Berinson, were briefed by Edwards and Rees, with Lloyd in attendance, no doubt because of the involvement of Rothwells in the evaluation process. Again, the process of decision-making appears to have been relatively informal, but I am satisfied that the recommendation that negotiations be undertaken with TD and CPH was accepted. Mr Dowding, however, I am satisfied, thought that an advantage might be obtained for Rothwells. His idea was that a separate condition of reaching agreement with the bidders should be that they would loan to or deposit with Rothwells, the sum of $50M.

30 The meeting was held on 13 March, only a couple of weeks after Rothwells' liquidity problems had been brought to the Premier's attention yet again. I think it is clear that Dowding had the position of Rothwells in his mind. Indeed, one got the impression that throughout the relevant period after he became Premier, Rothwells and its financial problems were something of a running sore. As Premier, Mr Dowding found himself to be, in his words, horrendously busy. The last thing he needed was for problems with Rothwells' liquidity to be regularly before him, and he complained, from time to time, that there seemed to be, in the minds of those for whom Rothwells was a more immediate concern, an immediate reaction when there was a problem to come to the Government for money. I accept that Mr Dowding had in his mind the desirability of extricating the Government from its involvement with Rothwells, to the extent that its problems could be dealt with otherwise by the private sector.

31 At this time there was a more particular matter related to Rothwells with which Dowding was concerned. The substantial funds which the GESB had placed with Rothwells were, of course, strictly speaking, the property of the Board to invest for the benefit of the superannuation fund. But in a real sense, Dowding thought, the moneys might arguably be regarded as the property of those civil servants who made contributions to the fund. They might not take kindly the placement of funds at such risk, and it was therefore desirable that their money be paid out and the link of the GESB with Rothwells severed before it became necessary, at the end of the financial year, to report the deposit in the published accounts of the GESB.

32 Mr Dowding's idea that the successful bidder, the consortium of TD and CPH, should be required to agree to lend $50M to Rothwells was to enable that money to be applied to repay the money deposited by the GESB, not to deal with any ongoing liquidity problem in Rothwells. It was on that basis that Edwards, Rees and Lloyd were despatched to Sydney to negotiate the sale.

33 A meeting was arranged and was held on 16 March 1988. For the prospective purchasers, Messrs Anderson and Bourke were present. A Mr Gianotti, a solicitor who was a partner in the firm Mallesons Stephen Jaques, and who was Mr Anderson's solicitor, was also present from time to time, but not during the crucial discussion upon which so much turns in this case. Nonetheless, it is convenient to mention at this point that Mr Gianotti was a trusted legal adviser of Mr Anderson. Indeed, so close did the association become that on 15 October 1988 Gianotti became a director of TD. In fact, he worked as the in-house solicitor for TD for a 10-year period between 1989 and 1999. But well prior to that, it is clear on the evidence, he was TD's foremost legal adviser and Mr Anderson's background was such that he took no interest in matters legal, all of which he left for the attention of his solicitors. Also in attendance was a Mr Ray Stone, who was an employee of CPH. But again, like Mr Gianotti, he was not present during any period relevant to these proceedings.

34 The evidence of Rees may be put to one side. He seems to have been present throughout, but to have recalled very little. His recollection was that a satisfactory agreement was made with Anderson. He does not recall the financial position of Rothwells being discussed at all. He recalled a telephone call between Edwards in Sydney and, as he understood it, Mr Dowding, after which Edwards said it was all concluded and they were to leave, which they did. Later, he was in his hotel room when Mr Anderson came looking for Edwards. He pointed him to Edwards' room.

35 That leaves Anderson and Bourke, Edwards and Lloyd. The defendant makes a determined attack upon the credibility of Anderson and Edwards. Separate submissions were made, putting together all the various points made in respect of the credibility of these witnesses. I have had regard to them all, and to the arguments and submissions presented in support of credibility on behalf of the plaintiff. I do not find it useful to discuss these matters at this stage. While there are some features of the evidence of these and other witnesses which have an impact in determining what findings of fact I am prepared to make on the balance of probabilities, I am certainly unable to conclude generally, as I think the defendant's submissions invite me to infer, that Anderson's case is throughout a fabrication and that his evidence was deliberately tailored after the events in question to support his claims. Nor was I persuaded that Edwards was established to have such an association with Anderson that I should conclude that he was effectively a co-conspirator, tailoring his evidence to suit Anderson's case. In my opinion, the evidence of these men may not be so easily disposed of.

36 As to the meeting on 16 March, before it occurred Anderson had been told by Packer that Packer regretted having contributed $10M to the Rothwells rescue because he did not trust Connell and thought the money would be lost. Anderson had heard rumours about Connell which had caused him to have reservations about his honesty and he knew, of course, of Connell's central association with Rothwells. Anderson says that when Terry Burke asked if he was interested in the purchase of the Westralia Square site he was not, in fact, particularly interested because he was heavily committed elsewhere. But I think the fact that Anderson caused the proposal to be evaluated, that the report he got was favourable, and that he was ultimately able to interest Packer through CPH in the project, led Anderson to seek to acquire an interest.

37 I accept that he thought the price of $270M was too high, but he was attracted by the Government's sweetener, conveyed by Edwards, of a guaranteed rental return in relation to the first tower, and the ability he perceived that the site had to provide good security to obtain project finance. He and Don Bourke had both inspected the site and the result was the offer to which I have referred. For Anderson, the meeting in Sydney on 16 March 1988 was clearly for the purpose of finalising an agreement to purchase. That is why he asked Gianotti to come to Sydney. Gianotti was working, for the better part of the time in question, on the terms of the proposed contract.

38 Anderson said that this was his first introduction to Lloyd, who, he was told, had been appointed by the Government to run Rothwells. There was lengthy discussion of the terms of the agreement, but towards the end of the afternoon the deal was closed. Whereupon Edwards said there was, however, a condition essential to the agreement which Dowding had imposed. The purchasers had to put $50M into Rothwells.

39 I accept that Anderson was genuinely surprised when this was said, and I accept that when asked why they had to make this contribution, Edwards explained that it was to enable the repayment of $50M loaned to Rothwells by the GESB, which was said to be a political embarrassment. That, of course, would not suggest any financial difficulty in Rothwells, but Edwards went on to explain that the deposit need only be for a short time to deal with temporary liquidity problems in Rothwells which, however, Edwards, with the support of Lloyd, said was basically sound, a point demonstrated by Lloyd producing a set of accounts for Rothwells. I accept that these were a set of half-year, audited financial statements for Rothwells as at 31 January 1988. These were discussed with Bourke, because Anderson took very little interest in them. There was no qualification to the accounts or their reliability. They were the work of a well-known firm of auditors.

40 According to Mr Anderson, Edwards described the State's support by reference to deposits made by the GESB and the SGIC. He referred to the Government indemnity provided for the advance of $150M to Rothwells by the NAB. I am satisfied that Lloyd gave backing by agreeing with the statements made by Edwards, but it is important to understand Mr Anderson's evidence as to how those statements were expressed.

41 Anderson's statement has it that Edwards said that, "The State backing of Rothwells means that we would be repaid and there was no risk." He said that their deposit in Rothwells would be in commercial bills of exchange accepted by Rothwells and discounted to them. The securities given by the borrowers from Rothwells would be "gilt edged". Essentially then, what is being said was that Mr Edwards made representations of continuing Government support for Rothwells, its essential financial soundness, and the quality of the securities which would be given for the advance sought.

42 However, Anderson and Bourke both said that TD and CPH would not make that contribution to Rothwells. Edwards then went to a telephone in the room and made a call, which it is accepted was to the Premier, Mr Dowding. Edwards told him that the prospective purchasers would not agree to deposit $50M into Rothwells. Dowding did in fact say that they should terminate the negotiations. Edwards relayed that to those at the meeting. He said they had been told they should go, and after repeating the substance of the representations made, Edwards, Lloyd and Rees did leave.

43 In his evidence-in-chief, Anderson did not purport to recall the precise words used by Edwards. But Edwards did say, as Anderson understood him, that the State backing of Rothwells would ensure repayment of the $50M which was therefore not at risk. And it is upon that assurance that TD's case is essentially based in relation to this part of the action.

44 Anderson elaborated upon the exchange that he and Bourke had with Edwards and the others, when he was cross-examined. He repeated that they had been given the assurances which were described in the evidence-in-chief. He said that when Edwards offered those assurances, Bourke asked him whether he would give a written guarantee of repayment of the loan. He said that Edwards declined. He said he could not do that. But Anderson made it perfectly clear that he understood that what was being said by Edwards amounted to a guarantee.

45 Mr Anderson said that he understood that a guarantee was given when the guarantor promised that if the principal debtor did not pay then the guarantor would, or that if the person principally responsible to do something did not do it, the guarantor would see that it was done. He said he understood that a guarantee could take one of those two forms. Anderson said that Edwards "assured us that the State would repay us if Rothwells fell over." He understood that was a promise, given orally, but Edwards said he was not authorised to commit that promise to writing.

46 Mr Anderson was taken back to this topic much later in his cross-examination. He repeated, in substance, what he had said before about the assurances he was given, and he added that in addition to the guarantee there was effectively a promise that the State would provide, on one way or another, sufficient money to Rothwells so that it could repay the $50M.

47 I turn next to the evidence of Mr Bourke, who was called by the plaintiff. He was asked some questions to establish that he was paid for his time while giving evidence. But nothing emerged which, in my opinion, cast an adverse light upon the witness's credibility. He repeated the substance of the assurances given by Edwards, that the Government would continue to "underwrite" Rothwells, which was generally sound. Lloyd supported this by reference to the company's audited accounts. Mr Bourke did not specifically refer to the provision of "gilt-edged" securities for the $50M. Bourke was given to understand that what was sought was a short-term loan for about six months because Rothwells had short-term funding requirements, a current short-term liquidity problem. He also said that he was told that the Government did not have the capacity to provide additional Government backing, and that they wanted to get the GESB $50M out of Rothwells.

48 I understood from Bourke's evidence that because he was made aware of the reason why the $50M was sought and because he was told in general terms that there was a liquidity problem, he asked whether the Government was prepared to "guarantee" repayment of the loan. Edwards said that was not possible, but he repeated an assurance that if the $50M were provided, the Government would continue to support Rothwells. Mr Bourke said that he understood that the Government was giving a legally-binding promise that the State would repay the money if Rothwells did not do so.

49 Mr Bourke told me that it was Edwards who said that the Government would continue to "underwrite" Rothwells. He said he understood by that that the Government would ensure that Rothwells would meet an obligation to repay. He said he used the word "guarantee" in asking his question. He did so deliberately, to convey the idea that he was asking would the Government repay if Rothwells didn't, or would the Government see to it that the debt was paid by Rothwells.

50 I pause to observe that although Mr Bourke is, by profession, an accountant and not a lawyer, he seemed to have a very fair idea of the meaning of the term "guarantee". He thought that if that could be provided by the Government or a reputable bank, that is "sort of the ultimate security that you can have". He did not, at the time, provide any explanation to Edwards, who was a lawyer, of what he meant when he used the word "guarantee", but Edwards immediately said that a written guarantee was not available and then he and Lloyd repeated the assurance that they would continue to support Rothwells.

"So did you understand at that point that what he was saying was, although it wasn't possible, for the reasons that they gave, for the Government to assure or guarantee repayment by its own efforts if Rothwells failed, nonetheless they were standing behind Rothwells and would ensure that Rothwells repaid?---Yes."

52 Nonetheless, what was said orally did not impress Mr Bourke. He left the room and telephoned Packer to obtain instructions that having had the bad experience to which I have referred in relation to the earlier contribution to the rescue of Rothwells, CPH would not be involved in any additional loan to Rothwells, particularly when, as Bourke told Packer, the Government would not give a written guarantee of repayment. Mr Bourke's evidence was that when he returned to the meeting and told those present of his instructions, Edwards said he would telephone the Premier, and he made a telephone call. Bourke could hear, from the other end of the line, words spoken with some heat, although he could not tell what they were.

53 Dowding's evidence about this call was that when he received it he thought he was being used as a bargaining chip, so to speak, and he played along with the idea by telling Edwards that if he could not get agreement for the deposit of the $50M he should not finalise the property agreement but should come back to WA.

54 Bourke said that following this call, Edwards and Lloyd repeated the assurance of continued Government support for Rothwells, and Edwards said that "he could assure us" that the $50M would be repaid, with interest, within 12 months. Nonetheless, Bourke could not move from the position he was instructed to adopt, and the meeting broke up.

55 Edwards' evidence was to the same effect. He said that when he put the Premier's requirement that a condition of the sale was that the purchasers should deposit $50M with Rothwells, he explained that they wanted to get the GESB funds out of Rothwells and this money would replace those funds. His evidence was that the Government would be happy to put in the money to replace those funds, but could not do so through the SGIC or other instrumentalities. Nonetheless, he said, he explained that the money was there as part of the rescue package for Rothwells. There were no concerns about its financial stability, as demonstrated by the half-yearly accounts produced and discussed by Mr Lloyd, but the money needed to be replaced and therefore the Government was prepared to "accept the obligation to repay the money".

56 Bourke asked if that could be put in writing, and Edwards said that although that could not be done, "You can rest assured the Government will ensure that the money is repaid." He said that he explained that the Government's commitment to Rothwells, its backing of Rothwells, continued. During the discussion Edwards said that he confirmed that although there were ongoing liquidity problems in Rothwells, fundamentally it was secure. He confirmed the tenor of his conversation on the telephone with Dowding, and the evidence to which I have referred about the manner in which the meeting broke up.

57 Under cross-examination, Edwards did not resile from this version of what was said. Edwards insisted that he had been instructed at the meeting with Dowding and Berinson, to which I have referred, to require the deposit of the $50M. He said he was authorised to give the assurances because it had been accepted, not by the Cabinet, but at the meeting at the end of February, that the Government had to support Rothwells. The Government had provided support, and that support would remain and, if necessary, additional financial support for Rothwells would have to be organised by the Government. That, he said, was the "party line" which he was authorised to put to the meeting in Sydney, and he did so. As he put it, he gave them "the whole spiel" by giving them the assurances of continuing and additional Government support. That, he said, was the Premier's decision.

"You didn't on behalf of the State promise Mr Anderson that the State would repay the $50 million, did you?---No. No, not in those words. It would be that the State would ensure Rothwells was repaid.

So are you saying that you said that the State would ensure that Rothwells would repay it?---I'm sure I would have said that.

Meaning that if Rothwells didn't repay, the State would?---No. The State would ensure Rothwells would repay.

Yes, meaning that if Rothwells couldn't or wouldn't, the State would?---No.

Did you not mean that?---No, I didn't mean that. That's not what I said. I said the State would ensure that Rothwells would repay."

59 Those are the words of guarantee. But Edwards said that as a lawyer he understood that such a guarantee to be enforceable had to be in writing. And he said when he was asked to put it in writing he declined to do so. He gave the guarantee but not in writing, and explained that he refused to put it in writing because to have a written guarantee by the Government of repayment of a deposit "raises a spectre that it wasn't actually very sound which wasn't our view at the time".

60 I next turn to the evidence of Mr Lloyd, whose evidence is to be considered upon the basis that he is also a lawyer. He confirmed the evidence to which I have referred, about the meeting with Dowding and Berinson, Rees and Edwards, where it was resolved to seek $50M for Rothwells from the successful tenderer. Lloyd agrees that the sum of $50M was directly related to the amount required to repay the deposit of the GESB, although, of course, he accepts that in fact upon its receipt there was a further liquidity crisis which meant that the money was not used to retire the GESB debt. This occurred, he said, without advice to Anderson. Lloyd said, however, that he was comfortable with the proposal at the time it was made because he did not regard the GESB funds as being at risk. He thought that Rothwells had a very substantial surplus of assets over liabilities and therefore those funds were safe and so would be the funds obtained to replace those moneys.

61 Lloyd confirms the tenor of the discussion about the requirement to deposit $50M. He agrees that Anderson and Bourke were told about the extent of existing Government support for Rothwells. He says that he added that Rothwells had suffered a continuing outflow of deposits and withdrawal of banking lines of support after the rescue. He said he told the meeting that Rothwells was a basically sound company, as demonstrated by the audited statements which showed that it had substantial net assets. He agreed that he had these accounts with him, and he discussed them. He agreed that it was put that the reason for seeking to retire the GESB funds was a political one. His function, therefore, he says, was to assist with observations about his impression of the financial soundness of Rothwells.

62 In his statement, Lloyd says, "I think that Edwards said that there would be continuing Government support for Rothwells." I think this is significant evidence because Lloyd was called by the defendant. But Lloyd's evidence was that he did not say, and he did not hear Edwards say, that that support would be given "to the extent necessary to ensure that the advance was repaid". He agreed that no guarantee that the advance would be repaid, or that the Government would itself repay the advance, was expressly provided. But it must be remembered that that was no concern of Lloyd. He was there for Rothwells and, in my view, he accepted that his job was to provide the assurance that Rothwells was sound and that the money deposited would be repaid.

63 When Lloyd was cross-examined he was reminded of the evidence that he gave at the Royal Commission. Importantly, it was put to him that there he had conceded that both he and Edwards gave Anderson an assurance about continuing Government support for Rothwells, whereas that was not the evidence provided by his statement. Lloyd said that he thought that the version given in his evidence before the Royal Commission was more likely to be correct. But it was clear to me that he actually had no recollection of these facts. The witness's honesty was made manifest, but so was the limitation upon the reliability of his evidence in this regard.

64 Lloyd denied that Edwards said the securities that would be given by Rothwells would be "gilt edged", and I note that Edwards gave no evidence that he made any such statement. Lloyd simply did not recall any discussion between Edwards and Bourke about whether the Government was prepared to guarantee repayment of the loan. He was cross-examined about Anderson's evidence that he was told by Edwards that the securities that would be provided for the proposed loan would be "gilt edged". Lloyd said that Edwards made no such statement, and I gathered that he was saying he would have remembered such a statement because the securities to be offered were bills accepted by Rothwells, and they could hardly be described in that way.

65 In Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245, Mason CJ spoke with the agreement of Deane, Dawson and Toohey JJ, and without dissent by Gaudron J in separately delivered reasons, when, at 254-7, his Honour discussed the forms which may be taken by a contract of guarantee. In doing so, his Honour referred to the decision of the House of Lords in Moschi v Lep Air Services Ltd [1973] AC 331. At 256 of Sunbird, Mason CJ summarised his view by observing that he considered there was no common rule applicable to all guarantees and by acknowledging that the parties are at liberty to make such agreements as they choose. His Honour continued:

"There are, however, two common classes of guarantee of the payment of instalments by the principal debtor. The first is an undertaking by the guarantor that if the debtor fails to pay an instalment he will pay. This is a conditional agreement. The guarantor's obligation to pay arises on the debtor's failure to pay. The second is an undertaking by the guarantor that the debtor will carry out his contract. Then a failure by the debtor to perform his contract puts the guarantor in breach of his."

66 I take it, therefore, that a promise by a guarantor to pay the debt owed by a debtor if that party fails to repay it, and the promise by a guarantor to be answerable for the failure by another to perform a contract will equally, in law, constitute contracts of guarantee. On the other hand, a promise given to a third party to support another by putting that person in funds so that the other person will have the capacity to perform a contractual obligation or to pay a debt would not constitute a contract of guarantee because, in that form of agreement, the promisor is not undertaking to the promisee to be answerable in any way for the debt or default of another, but is making a separate contractual agreement, with its own obligations, upon the breach of which the promisee may sue directly. For reasons to which I shall later refer, that is a distinction relied upon by the plaintiff in this case. TD asserts that on 16 March, Edwards, for the State, made an offer which Anderson, for TD, accepted, which was not an offer to guarantee the repayment of the $50M, but resulted in the formation of a contract of the latter kind discussed above.

67 In my opinion, however, that is not a distinction which can be maintained in this case. I do not accept that Mr Anderson misunderstood what he was told, so as to characterise the effect of it as a guarantee when that was not what was being given. Anderson's evidence, which I accept, was that Edwards merely declined to provide the guarantee in writing: not that he declined to provide the guarantee orally, but he did not want it to be available as a matter of record.

68 Although the witnesses were speaking of what was said in a conversation which occurred over 17 years ago, it was a crucial conversation in the context of this litigation, and it was a conversation which the witnesses had been asked about much earlier in time. What was said about the deposit of $50M and a guarantee to be provided by the Government was a surprising thing. It had no relationship to the agreement for the purchase and development of the Westralia Square site. There was a dramatic turn of events when the requirement for the $50M deposit was introduced. Further, the drama was enhanced by the telephone call to Dowding and by his angry response when told that TD and CPH would not make the contribution of $50M sought.

69 The preponderance of evidence which I accept, clearly supports the conclusion that Edwards, purporting to speak for the Government of the State, promised that if the prospective purchasers of the Westralia Square site deposited, in some form, $50M into Rothwells for a relatively limited period of 6 or 12 months, then the depositors could be assured that the Government would continue to support Rothwells, which was represented to be an institution which was financially sound, although suffering from temporary liquidity problems, and the Government would ensure that Rothwells would repay the loan when it became due or would undertake the obligation of repayment itself.

70 I am not prepared to find, on the basis of Anderson's evidence alone, that Edwards represented that the securities which would be provided for the deposit to be made would be of the highest quality, "gilt edged". It seems to me that Mr Anderson genuinely believes those words were used, but in my opinion it is more probable that in so thinking he has reconstructed a view about the tenor of the conversation which is illusory. In my view, outside of the operative terms of the assurances, in the form of oral guarantees, there is nothing independently of those promises which might itself constitute a contractual promise. What was said otherwise about the Government "standing behind" Rothwells, "being in for the long haul", "seeing it through to the end", and the like was mere puffery, uncertain of meaning, not intended to create binding contractual relations and, in short, devoid of any contractual content.

71 Of course, no agreement was purportedly formed at the meeting of 16 March. It broke up in disagreement. But Mr Anderson did not give up on the possibility of making a deal. He must have been keen to pursue the acquisition and development of Westralia Square, although in evidence he said he was not worried about the possible loss of the deal, and he referred to projects in which he was involved on the eastern seaboard, particularly in Melbourne.

72 However, following the break-up of the meeting, Anderson says he telephoned Packer and asked him to agree to the $50M deposit, but Mr Packer refused. Later that evening, Mr Anderson went to the hotel in Sydney where Edwards, Lloyd and Rees were staying. He met with at least Edwards and Lloyd, and discussed whether further negotiations in respect of the $50M sought might be fruitful. He would have left that meeting with little cause for optimism.

73 Still Mr Anderson did not give up. I think it is clear that he thought there was value in the opportunity to pursue the acquisition of Westralia Square and to proceed with its development. And I think that, to Anderson's mind, the assurances he had been given at the meeting of 16 March translated into a Government promise that it would see the $50M deposit repaid with interest, or it would assume that obligation itself. His evidence establishes that he considered that the money would be safe, and if that was the price for making the property deal, the demand could be met without concern.

74 I think it was probably on 17 March that Anderson therefore approached Packer for the money, which Anderson did not then have. Packer maintained his refusal to have CPH directly contribute money to Rothwells, but ultimately he agreed to lend $50M to TD to put it in funds so that it could make the deposit.

75 Anderson then had to make the decision whether TD would borrow that money from CPH and make the deposit, which was the condition precedent to making the agreement for the acquisition and development of Westralia Square. I accept his evidence that he was concerned to get confirmation of the undertakings which he believed he had received from Edwards on Dowding's instructions. Anderson wanted to speak to Dowding.

76 There is a dispute in the evidence between Anderson and Edwards as to what happened next. Anderson said that on 18 March he telephoned Edwards, told him of the present state of play, that he was in a position to make the deposit sought, but said that he needed verification by Dowding of the assurances given. Anderson said that Edwards supplied him with Mr Dowding's telephone number. Edwards denies all that. In the end, I cannot say how Anderson got Dowding's number, but I think it matters not.

77 Anderson's evidence was that he rang Dowding on 18 March and spoke with him, telling him that he believed he could organise the deposit of $50M into Rothwells, but because the money was being lent to him by Packer, "and he is putting it squarely on my shoulders", he needed to know that his money was safe and that he could get it back. He therefore wanted Dowding's assurance that the State would continue to back Rothwells.

"Dowding replied in words to the effect that 'Don't worry about that, your money is safe. The State is running Rothwells and is standing behind it and will make sure you get your money back.'"

79 This is another point where I find myself uncertain about the probative power of evidence given in that form, in quotes, as if the witness recollects the words used, but qualified by the phrase that "words to the effect" of those quoted were used. I cannot conclude that Anderson recalls with any precision what Dowding said to him.

80 Anderson repeated this evidence when cross-examined. He said he understood that Dowding was saying to him that the Government would ensure that Rothwells repaid the advance or would do so itself if Rothwells did not.

81 Mr Dowding's evidence was that he did not remember whether or not Anderson telephoned him on 18 March 1988. Hardly surprising, it may be thought. But his evidence was firmly that he would not have given an oral guarantee that the Government would ensure that Rothwells repaid the deposit or that it would itself pay if Rothwells did not. As he says, he knew, of course, that it had taken a lot of work, meetings of the Cabinet Budget Sub-Committee and endorsement by the full Cabinet, to authorise the NAB indemnity. His evidence was:

"The idea that the Premier or a public servant could orally guarantee $50M is and was then absurd to me. I am certain that I neither gave any such assurance nor endorsed any assurance said to have been given by Edwards."

82 He conceded in cross-examination, that if Anderson had asked him if his money would be safe, he might have spoken about the State's indemnity provided to the NAB and that the Government had supported Rothwells. It is put to me for the plaintiff that on the balance of probabilities I should find that Dowding gave Anderson the assurances he sought. I observe about that that if he did so they were, as when Edwards spoke on 16 March, in the form of an oral guarantee.

83 I am unable to find that the conversation was as Mr Anderson recollects. I have no doubt that the conversation occurred on 18 March. This was the time at which Mr Anderson was making his decision. He was doing so in the context of the advance by Packer to him being put squarely upon the basis that Packer would hold him accountable. He believed that Packer would require his personal guarantee and would not hesitate to pursue whatever remedies were available to him to secure repayment of the moneys advanced by CPH to TD. It was a very large sum of money. Anderson did not have it, personally or within any corporate vehicle available to him. I think he rang Dowding to seek his reassurance.

84 As a result of what was said, I accept that Mr Anderson believed that he had that reassurance. But I am simply unable, on the available evidence, to determine precisely what was said. I accept that Dowding would have spoken in encouraging terms. It was Dowding's idea that the $50M deposit should be made to enable the GESB to be repaid. He was keen that that should occur. But I doubt that he would have firmly committed the Government to a guarantee of repayment. I think he would have spoken words of encouragement and I think that Mr Anderson interpreted those words as confirmation of what I have found Edwards said to him on 16 March. Anderson was, I think, willing to be persuaded that all would be well. I am not able to find that the words spoken by Dowding were, in substance, those attributed to him by Anderson.

Packer and Anderson meet with Dowding at his home

85 This meeting and what Mr Dowding is alleged to have said when it took place, is not relied upon by TD as the source of any particular cause of action. But it was the subject of some considerable controversy between the parties at trial. As I understand it, the argument for the plaintiff is that the meeting occurred on 23 March 1988 when Mr Anderson flew Mr Packer across to Perth for the express purpose of meeting Mr Dowding and satisfying himself of the assurances or promises made by the State in respect of the repayment of the loan which it was then proposed should be made by TD using the funds loaned by CPH.

86 The plaintiff submits that I should find that Mr Dowding repeated the assurances which had been made by Edwards, with the support of Lloyd, on 16 March, and by Dowding on 18 March. It was not put to me specifically in this way, but as I understand the argument, it is submitted that if I should so find, that makes it more probable than not that the evidence given for the plaintiff in relation to 16 and 18 March is accurate and reliable, and that conclusion will, of course, support a finding as to what was said on those occasions. On the other hand, the State, while agreeing that the meeting occurred, says it was not on 23 March but later in the year, probably in May, for a quite different purpose.

87 As I say, the matter was the subject of some controversy at trial. The evidence about this meeting was given by Anderson, Edwards and Dowding. As to Edwards, I have already touched upon the submission for the defendants that his evidence should be regarded as generally unreliable. It is suggested that he had a drinking problem, as indeed it appears he did. But I saw nothing in the evidence about this which persuaded me to the view that his recollection of events was rendered unreliable in relation to any matter as a result of his drinking, rather than, to the extent that his memory failed him, that the failure was attributable to the passage of time.

88 Then it is asserted that Dowding had what was effectively a loss of confidence in Edwards, causing him to be moved from his office and to resign from the Public Service in August 1988. Mr Edwards said that his employment was terminated "largely for political reasons". It was put, however, that Edwards continued an association with Anderson, being involved with him in a venture in Vietnam where, as I understand it, Edwards was employed in the 1990s. A proposed joint venture did not proceed. Mr Edwards was paid, effectively to wind it up. Some of that money was no doubt provided by Mr Anderson. For myself, I thought that these matters offered, at best, a tenuous basis upon which to take an adverse view of Edwards's honesty as a witness and of his credibility generally. Further, though it was put to me that Edwards, at a number of points, displayed a willingness to tailor his evidence to suit Anderson's case, I did not find the examples proffered to be convincing of that point of view. As I have indicated previously, I thought Edwards was a generally honest witness, doing his best with a limited recollection.

89 It was put to me that the absence of Mr Packer from the witness box ought to cause me to take the view that had he been called, his evidence would not have assisted the plaintiff: Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 308, 312, 320-1. I agree that, were Mr Packer to be called, one would have expected it to be by TD. Mr Anderson was cross-examined about this. He said he had no contact with Mr Packer for some 12 years, although he supposed that he lived in Sydney. I gathered that there had been a falling out between the two men over difficulties in respect of the repayment of the $50M loaned by CPH to TD, the advance being supported by the personal guarantee of Mr Anderson and what I understood to be the corporate vehicle housing much of his personal wealth, Owston Nominees No 2 Pty Ltd.

90 It matters not, I suppose, why Anderson thought that Packer would not be prepared to co-operate with a request that he give evidence, either here or by video-link. But I see no reason to suppose that Mr Anderson's evidence in that regard should not be accepted. The inference known as the rule in Jones v Dunkel may be drawn where the absence of the witness from the witness box is unexplained. To my mind, the explanation given by Mr Anderson is sufficient to account for the witness's absence and, in any event, although the inference may be drawn, it is not required to be drawn in the case of an insufficiently explained absence. In this case I am not prepared to draw that inference against the plaintiff.

91 I understood from Anderson's evidence that he flew to Perth because he knew that Packer wanted reassurance from Dowding that any deposit that TD made with Rothwells would be repaid before he was prepared to loan the money to TD. Anderson says that he therefore came to Perth and telephoned Edwards to ask him to arrange the meeting. Anderson said that he did that on 21 March. Edwards said that he recalled a telephone call from Anderson on the afternoon of the day when the meeting was held.

92 The flight details provided for Anderson's private aircraft, a Lear jet, show that the aircraft travelled from Sydney to his property Tipperary, in the Northern Territory, on 21 March. Mr Anderson is shown as the client for whom that flight was made. Then there is an entry which shows a flight by the aircraft on 23 March from Tipperary to Perth. Finally, there is an entry on 24 March 1988 for a flight from Perth, ultimately to Sydney. Truly this was a flying visit of obviously short duration, and it is the only occasion when that occurred before the advance by TD to Rothwells commenced to be made on 31 March. If the meeting occurred in an evening before those deposits were made, it has to be on 23 March 1988.

93 It does not seem to me to matter much when precisely Anderson made contact with Edwards. Edwards confirms that he did so. He said that he was told by Anderson that Packer wanted to meet with Dowding. He went to the Parmelia Hotel and met Anderson. As a result of their conversation, he telephoned Dowding at his home and asked him to receive Packer, Anderson and Edwards that evening. Packer arrived at the hotel shortly afterwards. He checked in, and Anderson and Edwards gave evidence that they drove to Dowding's home, arriving in the early evening, Edwards said at about 6.30 pm.

94 According to those witnesses, the meeting was relatively brief. Packer, they say, told Dowding that having already put money into Rothwells which he did not think he would recover, he wanted Dowding's assurance on behalf of the Government that any further contribution would be safe, would be repaid. According to Anderson, Dowding said that Packer should understand that the State was running Rothwells. It had itself invested hundreds of millions of dollars. It was going to see it through to the end, and would support the securities that would be given by Rothwells for the loan which was sought. He assured Packer that the money would be repaid.

95 Edwards, it should be said, did not purport to recall upon what date the meeting occurred. But his evidence generally supported that given by Anderson as to how the meeting was arranged and what was said. He thought the meeting was not held in late May 1988, but was earlier, shortly after the meeting which had settled the terms of the acquisition of the Westralia Square site.

96 As I have mentioned, Mr Dowding, on the other hand, thought the meeting was in May 1988. It was put that his evidence is unreliable because there are changes made in the account of the subject matter of the meeting in different statements made by Dowding. Different language is used, but in my opinion the changes are not significant in their substance. Dowding said that the meeting occurred at about the time that the NCSC announced an inquiry into an acquisition of shares from the Bell Group.

97 The SGIC had purchased shares in Bell Resources Ltd in late April 1988 as part of a process by which funds were to be injected into Rothwells. Dowding's evidence was that Anderson or Packer offered to help the Government with the Rothwells problem and it was suggested that Packer might be prepared to purchase the Bell shares from the SGIC, although Packer spoke in disparaging terms about Alan Bond and the Bond Corporation, and suggested that Bond should not be allowed to renege on his obligations with respect to Rothwells. He said Bond should be approached to fix the problem. On this version of what was said and when the meeting occurred, there is no particularly satisfactory explanation as to why Anderson and Packer should themselves initiate such a meeting at that time for the purpose of expressing a desire to be of assistance to the Government in relation to Rothwells.

98 As to when the meeting occurred, it was possible to test the evidence given by both Edwards and Dowding in cross-examination by reference to contemporaneous documents.

99 So far as Edwards is concerned, it was put that he was on leave in Busselton. Indeed, there is an application for annual leave made out by a member of his staff and dated 4 March 1988, which sought leave initially from 18 March 1988, but was amended to 21 March 1988, a Monday, to 31 March 1988, the Thursday before Easter. The application is signed by Mr Edwards, and on 7 March 1988 he has endorsed his approval of the application as the permanent head of the relevant department.

100 Edwards' evidence was that when he went on leave, his leave was not interrupted. He remained on leave until he returned to work, with a side trip to Narrogin to see his parents, on probably the Tuesday after Easter, 5 April. Edwards said that the fact that he applied for leave and that his personal file recorded the leave commencing on 21 March 1988, did not necessarily mean that he actually got away and took leave as from that Monday.

101 Entries in Mr Edwards' diary for March 1988 were put to him. His evidence was that the diary was kept by his secretary. Edwards' evidence was that the diary was intended to record events which had been arranged in advance, rather than things which happened without pre-arrangement. The extract from the diary was in photocopied form. There is nothing entered for 21 March. For 22 March, and indeed on later pages for subsequent days, I think there is faintly discernible a line through the date, as if to indicate that nothing was to be arranged for that date. However, on 23 March there are appointments shown, a meeting described as being that of an industrial relations committee at 8.30 am, a meeting later in the morning with Mr Parker, described as a "Funds Corp" meeting. Funds Corp was a division of the WADC and a commitment relevant to Mr Edwards' departmental responsibilities.

102 Further, there are two entries, one for 12.15 and one for 12.30, presumably pm in each case, against which is the entry, "decision-makers' lunch, Sheraton, with Bernie Fraser". Mr Edwards explained that the decision-makers' lunches were regular affairs at which senior bureaucrats in Government service and senior management personnel in private enterprise got together for an exchange of views over luncheon. In each case there would be an address on a topic of current interest by an invited speaker. Bernie Fraser was a Commonwealth Under-Treasurer. Mr Edwards said he recalled an occasion when Fraser addressed such a luncheon meeting. There was only one such occasion, he said, when he attended.

103 Edwards said that he had no recollection of that occasion being on 23 March 1988, but as I have said, there was only one such occasion and if it was on 23 March then that would put him in Perth rather than Busselton at that time, and so it would be possible that he would be contacted by telephone by Anderson and that the arrangement to meet with Dowding at his home that evening might be made. Of course, there are no entries in relation to that in the diary. But I think that evidence tends to support the view that the meeting and the discussion was held in March 1988, and if that was so, then it would follow that Mr Dowding's recollection of the timing of the meeting and the subject matter discussed is at fault.

104 On the other hand, as to Dowding's evidence, there is the evidence of his day sheet for 23 March 1988. For the plaintiff it is put to me that I should be suspicious of the document because it was not referred to in Dowding's statement by way of evidence-in-chief and only emerged after Dowding had been cross-examined, without referring to the document, when he was asked about it in re-examination. It was brought forward late, but I need not discuss the circumstances. It seems to me that I may not overlook Dowding's evidence in relation to the content of that document.

105 It is a typewritten document, setting out his daily appointments. For Wednesday 23 March 1988, it is a detailed record commencing at 7 am. Dowding's evidence was that it was prepared by his staff and was made available to all those who would need to know of the Premier's movements and commitments for the day. He said if there were changes to that program, ideally those changes would be made in a document such as this and it would be redistributed. The point is that the document would be made or changed when an arrangement was made. It does not record what Dowding, as Premier, did, necessarily, but what he was supposed to do.

106 It shows, relevantly for present purposes, that it was planned that he would leave his office in the Capita Centre at 6.30 pm for a function at the Maylands Bowling Club which involved a trophy presentation. The recipient was to be a young person who was named, and this function was to be attended from 7 pm to 7.30 pm. The recipient of the trophy's father is referred to. Dowding's evidence was that he knew this person and he remembered the occasion.

107 The day sheet then shows that a vehicle was to collect Mr Dowding's wife from his home, and pick him up at the Maylands Bowling Centre at 7.30 pm to take him to His Majesty's Theatre where, at 8 pm, he was to attend, with His Excellency the Governor and Mrs Reid, a black-tie event, a ballet by the WA Ballet Company. Dowding's evidence was again that, reminded by the day sheet, he recalled the event in question. He said he did so because he knew one of the dancers who was to perform a leading role in the ballet. That performance was to commence at 8 pm. He recalled, he said, changing into the appropriate clothes in the back seat of the car as he drove from Maylands to the theatre.

108 It may be, I suppose, that what Mr Dowding remembers are the plans for these events rather than the events themselves. But if Mr Anderson is right about the meeting, the date upon which it occurred, and the time at which it occurred, Dowding could not have attended either of the functions described, and he would have been prevented from doing so because Edwards had prevailed upon him to be at home to receive Messrs Packer, Anderson and Edwards, rather than to attend the functions in question. For myself, I doubt that Dowding would have been so persuaded.

109 In the end, I am left with a body of evidence which points quite convincingly both to the fact that the meeting did occur on 23 March 1988, and to the fact that it did not. I can find nothing in the evidence which tips the balance either way. In the end, then, I am not prepared to find that the recollection of Mr Anderson, in particular, and Mr Edwards, to a lesser extent, is more reliable so as to establish that the meeting did occur on 23 March 1988 and therefore that in all probability the purpose of the meeting and what was discussed was as Anderson and Edwards described. I am not assisted in the fact-finding process by consideration of this matter.

110 Before leaving this topic, I should comment on some evidence which was led, without objection as I recall,, from Mr Bourke, upon which TD relies in support of Anderson and Edwards' version of the timing and content of the meeting at Dowding's home. As I have mentioned, Mr Bourke's evidence was that very shortly after the meeting in Sydney on 16 March 1988 he was required to travel overseas. There appears to be some uncertainty as to how long he was away, but he was certainly back by about 28 March. And he said that on the Monday or Tuesday of the first week in April 1988 he had a conversation with Mr Packer.

111 He had already been told, second-hand, while he was overseas, that Mr Packer had agreed to lend Anderson $50M so that he, Anderson, could provide the funds to Rothwells. That was a change from what he understood the position to be when he went away, which was that Mr Packer said he would support a borrowing by one of Anderson's companies by the provision of a guarantee to be given by one of his companies. In any event, on either version it would seem that Mr Packer had committed himself to financial support for Anderson so as to enable the $50M to be deposited with Rothwells. It seems odd to me, in those circumstances, that he might have wanted to meet with Dowding to receive assurance from him. But that, of course, is the scenario presented by the evidence of Anderson and Edwards.

112 Bourke said that this was among the matters that he discussed with Packer on his return from overseas. Bourke said he told Packer that he was surprised at the change of tack from the position about which he had been advised to a position where the money to be deposited in Rothwells by TD would be provided by CPH on loan to TD. Bourke said that Packer replied:

"... that he had visited Western Australia and Premier Dowding with Warren Anderson and that he had been given assurances or, more correctly, they had been given assurances that Rothwells would continue to be supported by the Government."

113 As to whether there was a meeting and certainly as to what was said at the meeting, this evidence would appear to bear the character of hearsay. But I have concluded that it was admissible for a limited purpose. The recently reported decision of the High Court in Kamleh v The Queen [2005] HCA 2; (2005) 79 ALJR 541 appears to assist. That was a murder case, tried by Judge alone. The appellant and a co-offender were tried separately. Neither gave evidence at the appellant's trial. An important element of the Crown case related to the time that the appellant and co-offender had spent in each other's company in the days prior to the murders and that they had been in the unit where the victims' bodies were subsequently found. Witnesses at the trial of the appellant were permitted to give evidence of statements made to them by the co-offender, which statements tended to prove the fact in issue, whether the co-offender was present in the unit at the time when murders were believed to have been committed.

114 Used in that way, where the relevant fact was the making of the statement which revealed the presence of the co-offender at the unit rather than relying upon what was said by the co-offender for the truth of those statements, it was held by the High Court that the evidence was not hearsay, was properly admitted, and could be relied upon to prove the fact of the presence of the co-offender contemporaneously with the commission of the murders. The co-offender said that while at the unit he turned up the volume on the television set to cover sounds of conflict. When the bodies of the victims were discovered in the unit, the television was operating at full volume.

115 So the fact that was sought to be proved was that the co-offender was there, and because there was independent evidence that, when at the unit, he was in the company of the appellant, that evidence was available to prove that the appellant was there at the time when murders were committed. The evidence was not used to prove that the appellant turned up the volume of the television. (To so direct a jury would appear to present something of a challenge to a trial judge.)

116 The point is a fine one, in my respectful opinion, but it has a relevance to the evidence of Bourke presently under discussion. The point of principle was clearly stated by Gleeson CJ in Kamleh at 544[12]:

"Whether evidence of a statement made out of court by a person who is not called as a witness at a trial is hearsay depends upon the use that is sought to be made of that evidence. If what is relevant is the fact that the statement was made, rather than the truth of what was said, so that the statement is not relied upon to prove the facts narrated in the statement, then what is involved is not hearsay."

117 In this case then, it seems to me that Bourke's evidence was admissible as evidence of the fact that at some time during the period between about 18 March and the first week of April 1988, Mr Packer and Mr Anderson, together, met with Dowding in some circumstance. That is the fact which the making of Packer's statement to Bourke tends to establish. The evidence may not, in my opinion, be used to establish that at that meeting the discussion was as Mr Packer related to Bourke, and that Mr Dowding gave the assurance related. To use it in that way is to rely upon the evidence in its hearsay character.

118 Having regard to the limited character of the admissible evidence, it seems to me that it does not carry the matter sufficiently far to take me beyond the point of an incapacity to find the material facts that the meeting took place on the evening of 23 March at Dowding's home and that at that meeting Dowding made statements in terms broadly related by Anderson and Edwards.

The $50M is deposited and more is learned about Rothwells

119 I have mentioned briefly the manner in which TD obtained the $50M which was ultimately deposited in Rothwells. I need not describe with particular precision how that process of deposit was accomplished. Suffice it to say that the facility made available by CPH was drawn periodically and deposited in Rothwells by a process whereby TD purchased bills of exchange accepted by Rothwells by a bill discount process, whereby a reduced rate of interest applicable for the period until maturity of the security was payable upon the endorsement of the bills in favour of TD. The securities endorsed in favour of TD were short-term and therefore would need to be "rolled over" for further periods to comply with the agreement for the provision of funds.

120 But on their maturity, at any time that occurred, they could in fact be presented and payment by Rothwells of the amount of the bills would be required. It will be evident from that description that the securities were constituted by bills accepted by Rothwells from borrowers from it. Such bills then become a security in the hands of Rothwells, supporting its borrowing from TD. But, of course, the value of the security is not enhanced by that process, but may indeed be adversely affected by events occurring since the security was first provided. The discounting process provided TD with the interest component of the return on its investment in Rothwells.

121 In addition, the sum of $250,000 was agreed by way of an establishment fee. Of that sum, the agreement between CPH and TD was that $200,000 would be paid to CPH and $50,000 retained by TD. The process of the provision of funds was therefore one accomplished by the exchange of cheques, one for the face value of the discounted bills paid by TD to Rothwells, and one for the interest component paid in advance by the discounting process by Rothwells to TD.

122 By that means, TD provided Rothwells with the following amounts on the dates shown:

31 March 1988 $15M

6 April 1988 $10M

11 April 1988 $5M

12 April 1988 $10M

13 April 1988 $10M

TOTAL: $50M

123 For TD, it is contended that before and during that period the State came into possession of information which invalidated the accuracy of the representations made on 16 March, particularly that concerning Rothwells' basic financial soundness. It is alleged is that, had that information been passed on to TD, it would not have embarked upon or continued the process of making its deposit in the light of information which should have been provided to it which would demonstrate that it was a deposit at risk, rather than one which it was guaranteed to recover with the support promised to be provided to Rothwells by the State. At this stage, I make no comment on the soundness of the cause of action which is said to flow from those considerations, but I am invited to examine the State's knowledge about Rothwells acquired before and during the relevant period in which the deposits were made between 31 March and 13 April 1988.

124 I mentioned, when discussing the rescue weekend and its aftermath, that a very large sum of money was at that time, in one way or another, injected into Rothwells and rapidly consumed by it. At the same time Mr Lloyd was appointed to the Rothwells board and, as I have said, from the beginning of 1988 he resigned his government posts and became the managing director of Rothwells. I have mentioned that the initial contribution of $300M was drawn by Rothwells very quickly. There were, of course, the $50M contributions by the SGIC and GESB, and it was well known to those in Government that apart from the direct funding contributions by the State, other large sums had been injected into Rothwells. The $50M from Bell Resources in mid November 1987 is an example. So the picture which was presented to Government was that Rothwells was in receipt of substantial support and funding, but its need for funds continued.

125 There can be no doubt, in my opinion, that what had been presented at the rescue weekend as a liquidity problem was known to the Government to be continuing through the latter part of 1987 and early in 1988, at least to the extent that from time to time a crisis arose which drove Rothwells, principally to the Government, to seek assistance by the injection of further funds. The question posed to me by the plaintiff is whether, in addition, it was conveyed to the Government or those who were acting for it that Rothwells also had an asset deficiency.

126 Certainly Lloyd soon became aware that Rothwells' record-keeping was extremely poor. Many of the loan transactions were unsupported by appropriate documentation in relation to securities. Not unnaturally that led to the conclusion that particular elements of the loan portfolio were unsecured.

127 The expression of a conclusion of that kind exemplifies a feature of much of the evidence in relation to what was learned or not learned about Rothwells in Government circles during the period following the rescue weekend up until the completion of the making of TD's deposit on 13 April 1988. If one was concerned to find whether or not the views expressed were accurate, the Court would be in difficulty. The largely hearsay character of the evidence would at least rob it of much of its probative value. But I have taken the view that the relevant question concerns what the Government was told, what it learned, not whether the information which it was given was accurate.

128 At the time of the rescue weekend Rothwells had on its board a Mr Hurley, who was a banker. In fact, Mr Hurley had been asked by another director of Rothwells, a Mr Lucas, to investigate and resolve Rothwells' liquidity problems shortly before the rescue weekend. He prepared and presented to the Board, including Lloyd, on 13 November 1987, a paper entitled "Talking Paper - Conceptual 12-month Corporate Plan - November 1987/November 1988". Hurley had conducted an extensive examination of the loan portfolio. It seems that he took the view that a very large proportion of the loans, about two-thirds, were in fact non-performing, in the sense that they were often made to related corporate entities associated with Connell or his interests which were either unable or unwilling to pay interest as it fell due, or to repay the capital sums. The interest component of these loans was often simply capitalised as it fell due. So the loan increased in size, as did Rothwells' exposure, while at the same time Rothwells was foregoing substantial cash flow of, at that time, about $7M per month, and increasing.

129 On the other hand, Rothwells' deposits were substantially on 24-hour call. This was representative of the mismatch between Rothwells' deposits and loans, upon which I have previously commented. Hurley thought that there would probably be a net cash outflow from the date of his report, 13 November 1987, to the end of the calendar year of about $82M. He bluntly observed that unless something was done, Rothwells could not continue to function after the end of the calendar year 1987.

130 He had proposed that the 16 major borrowers should be pursued to make their loans effective, with a view to raising some $200M in the short term. But he concluded that there was an incapacity to pursue that line because these were Connell-related loans, and Hurley thought them to be irrecoverable. He prepared what is known as a "mud map" to demonstrate the relationships between the various corporate entities involved. All this he reported to Lloyd, whose evidence was that he understood it to be a cash flow or liquidity problem because there was not information as to the underlying value of the loans made by Rothwells. However, that Hurley was gravely concerned must have been clear. He told Lloyd that he wanted to resign his position on the Board and he was of that view because he thought Rothwells' negative cash flow could not be sufficiently remedied to enable it to continue to trade and to do so profitably.

131 I am satisfied that Lloyd reported these matters to Burke, the Premier. And about the end of November or early December 1987 a meeting was arranged between Mr Burke, Lloyd and Hurley at Parliament House. Hurley was prevailed upon not to resign. Burke said that Hurley's fears were unfounded. They did not take into account the commitment of the State to support Rothwells. In any event, Mr Hurley said, Burke promised that in the event that Rothwells was to be wound up, his career was safe because the Premier would organise another job for him with a State instrumentality. In the meantime, as a director of Rothwells, Hurley undertook responsibility for new business. It should be said that in neither the evidence of Hurley nor Lloyd is there a great deal of precision as to what was conveyed to Mr Burke, or what were the precise terms of the discussion at the meeting referred to above.

132 Although in de facto terms Mr Lloyd was involved with the decisions of the Board from at least November 1987, his formal appointment as a director was not made until a meeting of the Board held on 2 December 1987. Thereafter, as I have mentioned, Mr Lloyd was appointed Managing Director of Rothwells with effect from 1 January 1988.

133 During December, indeed on 22 December 1987, two officers of Rothwells, a Mr Hare, the Manager of Corporate Finance, and a Mr Selwood, an accountant who appears to have been employed there, produced a report which went to the Board of Rothwells. It gave potentially valuable information concerning loans made to a group of companies owned, wholly or in part, or associated with, Mr Connell and his associates. All these companies had registered offices at a firm of accountants, P G Hugall & Associates, which was located in Pier Street, Perth. Mr Hugall was himself an associate of Mr Connell and was Rothwells' company secretary in 1987. The associations were all therefore rather incestuous and the links were recognised and expressed by describing these companies in the context of the loans made to them by Rothwells as the Pier Street Group.

134 I need not mention the detail of the report by Messrs Hare and Selwood, but it focused upon those borrowings, amounting then in total to approximately $265M. The report assessed the net tangible assets of the borrowers at a total of $128M. There was therefore a net asset deficiency in respect of these loans of about $137M. This grave circumstance was reported to have been substantially produced by the fact that these were non-performing loans. Interest was not being paid, but was regularly capitalised. It seems that the report was available to Mr Lloyd early in 1988.

135 At about the same time, on 8 January 1988, the Board, including Mr Lloyd, gave consideration to a report by two R and I Bank officers, Messrs Hurst and Roberts. They had been engaged to review the loan portfolio amounting to over $880M. They noted, as I have already mentioned, that Rothwells' record-keeping was exceedingly poor and there was, in many cases, inadequate documentation of securities allegedly provided to support the borrowings. On this basis they concluded that most of the loans were either unsecured or substantially unsecured, if one accepted that the documentation provided adequate reference to what security was in fact available. 29 borrowers were identified as being responsible for the major part, about 80 per cent, of the total loan portfolio. Hurst and Roberts thought that 14 of the 29 loans, amounting in total to about $160M, were unsecured and that in the remaining 15 loans the evidence of the security available was generally inadequate. They made assessments of the individual worth of the loans.

136 It is clear, on the basis of the evidence of Lloyd and Hurley, and having regard to the evidence in the form of the statement of a Mr Hilton, originally a corporate finance executive with Rothwells and then, from October 1986, a director of Rothwells, that the report was subject to general criticism, various members of the Board asserting that in significant respects the conclusions reached in the report were based on errors in relation to particular loans. There was debate about the terms in which the criticism should be recorded, but not about the view that the report was generally unreliable. Mr Lloyd, therefore, did not report the conclusions reached by the two R and I Bank officers to any member of the Government.

137 Early in 1988 there was an investigation of a covert nature being conducted by the then corporate regulator, the National Companies and Securities Commission, into the management processes of Rothwells and particular members of its Board. It concluded without the expression of any view as to the soundness of Rothwells from the point of view of the asset backing available to support its indebtedness and, of course, as I have already noted, there were the January 1988 half-yearly audited accounts for Rothwells which were produced and available.

138 I need not here discuss the terms of those accounts. They expressed the position of Rothwells as at 31 January 1988. They were presented and signed by both Mr Lloyd and Mr Connell by 11 March 1988, just prior to the meeting on 13 March when the decision was taken to make it a condition of agreement in relation to the sale of the Perth Tech site that the successful tenderers should deposit $50M into Rothwells.

139 It is sufficient for present purposes that I should say that in my view there was nothing at that time to suggest that the accounts presented a picture which was inaccurate or that they were in any way unreliable in respect of the judgment expressed about such things as the provision for bad and doubtful debts and matters of that kind. Those accounts confirmed or presented a view that Rothwells was in a sound financial position overall. At least there was nothing to indicate that the contrary was the case, despite the continuing demands for Government assistance to resolve Rothwells' ongoing liquidity problems.

140 The accounts were adopted by the Board of Rothwells before they were signed off in the ordinary way. No director expressed concern or reservations about the accounts or dissented from their adoption. In particular, Mr Hurley, whose criticism had thus far been the most trenchant, was at the meeting of the Board and did not express concern even about the adequacy of the provision for bad and doubtful debts.

141 For the plaintiff it is put that shortly after the meeting of 16 March 1988 it became evident to Lloyd, who told Edwards, that the $50M agreed to be deposited by TD could not, as had been said at the meeting of 16 March, be used to retire the debt owed to the GESB, but was required to alleviate Rothwells' ongoing liquidity problems. It is said that to discharge its duty of care to TD, the State was obliged to inform Mr Anderson that that was the case, a fact which, it is put, was known to Lloyd, Edwards and Dowding, at least, and possibly others in Government, before TD commenced to make its deposit.

142 For the defendant it is put that to make a case of that kind involves the plaintiff in an impermissible shift from the pleaded case, but the issue was certainly ventilated in the evidence by both sides. At this stage it is useful to concentrate on the evidence as to what was known by those in Government. In that context, no doubt it may be put for the plaintiff that it was a relevant aspect of Rothwells' financial position from its point of view that the asserted purpose for which the $50M was required could no longer be met because of a more pressing financial need again to shore up Rothwells' ongoing need for liquid funds.

143 The problem in this area is the wooliness of the evidence upon which the contention for TD depends. There is no contemporary documentary evidence as to when Lloyd learned that it would be necessary to use the $50M deposited by TD for purposes other than that put at the meeting of 16 March when the deposit had been sought. Lloyd's evidence was in vague terms, that he thought that he may have known of this before the deposit commenced to be made, on 31 March. But there appears to be no evidence as to what the nature of the particular liquidity problem in Rothwells was, when it was discovered in relation to the time when the problem had to be dealt with, and there is no evidence as to how precisely the funds provided by TD were in fact used and when. All that is clear is that the GESB debt was not in fact retired at about this time.

144 Lloyd thought that he first informed the Government of the need for this change of plan by telling Edwards. But he had no recollection of the conversation or in what form it was held. Edwards, on the other hand, recollected no such conversation. He says that he was on leave in Busselton prior to Easter. I have discussed this already. At the latest, he would have commenced his leave on 24 March 1988. And there is nothing to suggest that Lloyd told him anything of the kind under discussion before then.

145 Edwards says his leave was uninterrupted until he returned, probably on the Tuesday after Easter, which was 5 April. It is to be recalled that Mr Dowding only formally authorised the GESB deposit of $50M into Rothwells on 18 March, although it had been approved earlier by Mr Burke when he was Premier. In light of the evidence it is understandable, I think, that in the closing submissions for TD (para 215) it is accepted that "Lloyd may not have reported the information to Edwards, because Edwards was holidaying in Busselton after 24 March 1988."

146 I accept Lloyd's recollection and his evidence that at some time about the time of the receipt of the $50M it became apparent to him that the funds could not be used to retire the GEST debt. Why that was so does not seem to be clear and when that occurred is even less clear. I accept that Mr Lloyd, when he came to that conclusion, thought that it was appropriate that someone in Government should be informed. Lloyd said that he met with Mr Dowding and told him. I accept that he did so because Lloyd was of the view, not that Mr Anderson should be told of the changed circumstance, but that the Government should be told that it did not appear to be possible to pursue the original plan and should provide its agreement that the funds should be used otherwise.

147 Mr Dowding had a recollection that he was told, he could only say some time before June 1988, that Rothwells was unable to use the TD deposit to repay the deposit by the GESB. So it seems that that event at least must have occurred. But again there is no contemporary document to record what was said and when any such meeting occurred. Lloyd's evidence was typically vague and Mr Dowding could not even remember who had given him the information and in what circumstances that had occurred. I find it quite impossible to make a firm finding that anything of this nature occurred at any time before TD made its last deposit of the sum of $10M to make up the $50M on 13 April 1988.

148 In that event it is unnecessary to consider what might have been the reaction of Mr Anderson as the driving mind and will of TD, had he been told before or during the making of the deposits which went to make up the $50M. But I may say that it is by no means clear to me that had Mr Anderson been told that Rothwells' liquidity problems, of which he was already aware, meant that the $50M would not be used to repay the GESB, but to repay some other commitment of Rothwells, that would have had the result that all or part of the $50M deposit would not have been made.

149 As to the question of an asset deficiency in Rothwells, a matter which would, of course, directly attack the validity of the representation made on 16 March that Rothwells was basically financially sound, albeit with liquidity problems, the evidence as to what the Government was told and when, again lacks any precision or the support of contemporaneous documentation.

150 As I understood Edwards' evidence, it was that while holidaying in Busselton during the period to which I have referred, Lloyd telephoned him and said that work that Mr Hilton had been performing on Rothwells' records had revealed an asset deficiency. The precise magnitude of it had not been ascertained, but it was serious in that it would almost certainly exceed Rothwells' capital. Edwards said that when he returned to work on 5 April 1988 Lloyd confirmed that the deficiency could amount to as much as several hundred million dollars. Edwards said that he telephoned Dowding shortly afterwards, over the next day or so, and passed on the information which he had been given by Lloyd. Mr Dowding said not to bother him with it, but to get Bond to fix it.

151 Lloyd certainly concedes, and I accept, that he learned of real doubts about the soundness of Rothwells, and it seems to be clear that he learned of this from Hilton. But his evidence and the statements of Hilton which were admitted in evidence tend to suggest that this knowledge was acquired over a period of time and the position was probably not completely clear until about June 1988, far too late to be relevant to the making of the deposit by TD into Rothwells.

152 The plaintiff's case relies entirely on the evidence of Mr Edwards. Lloyd conceded that he may well have telephoned Edwards in Busselton about a problem in Rothwells and that he would not have done so unless it was serious. But he said he could not have told Edwards about a suspected asset deficiency because he was not then aware of any such thing. It was not until April and probably in the latter half of April that he understood from Hilton that there were potential difficulties in the recovery of loans made by Rothwells to Connell-related entities. He said he would have passed that information on to Dowding and Edwards.

153 Indeed, there was a Cabinet meeting held on 26 April 1988. The record shows that there was discussion of a proposal by the SGIC to purchase shares in Bell Resources. Mr Edwards said that he was asked to attend and address the meeting. He said he did so, and there was no evidence to the contrary. Edwards says that apart from the proposal by the SGIC, he told Cabinet that Rothwells had a serious asset deficiency. He recalled the event, he said, because one of the Ministers, a Mr Hodge, was so upset and cross at the depth of Government involvement in Rothwells that he walked out of the meeting.

154 However, Mr Dowding, who was at the meeting, had no recollection of that, and the evidence of Mr Hodge and another Minister who was said to be there, Mr Pearce, contradicted Edwards' evidence. Hodge said that the events he described occurred at a meeting of Cabinet in July 1988 when Mr Dowding invited Mr Parker to address the meeting on Rothwells. The evidence was that Parker said the government had been deceived. It was not just a liquidity problem. He said that it was understood by then that there was a "black hole" in Rothwells in the form of an asset deficiency of some $300-400M. Parker gave them to understand that the problem was so serious that Rothwells was probably doomed to liquidation. I accept that evidence which at least introduces considerable doubt in relation to Edwards' evidence as to the time when he was informed of the discovery of the financial unsoundness of Rothwells and when he gave that information to Dowding.

155 Dowding's evidence itself is rather unsatisfactory in this regard. He says he was only told of a serious problem with Rothwells in about June or early July of 1988. He accepts that that may have been a report orally given to him by Edwards. But he did not accept that if he was told about an asset deficiency he would have made the remark to Edwards about getting Bond to fix it. I find myself quite unable to say where the truth lies in that regard, and certainly my consideration of the evidence given by Dowding is coloured by the questioning in cross-examination, when there was a discussion whether Mr Dowding had a full understanding of the difference between a liquidity problem and a deficiency in the assets available to back Rothwells' liabilities, at least having regard to the assets of others on which Rothwells could call to support the recoverability of moneys advanced.

156 In the end, however, it is unnecessary to consider further whether Mr Dowding, because of his busy schedule as Premier, simply did not absorb what he was told, or whether he misunderstood what he was told, or whether he is right, that he was never told of anything more than substantial ongoing problems arising out of the lack of liquid funds to meet Rothwells' daily commitments. Of importance in this area of the case is that having regard to the evidence to which I have referred above, I am again unable to conclude that Edwards was told, or that Dowding and others in Government knew, that the picture of basic soundness of Rothwells emerging from the January 1988 audited accounts was no longer correct, and that there were serious problems in that regard, at any time at which those acting for TD might have been told of the difficulty before the $50M was fully deposited in Rothwells.

157 For the plaintiff it is made clear that the case is that a warning of that kind, if given, "would have resulted in part of the loan not having been made in the first place". My incapacity to make the relevant findings of fact means that, so far as the case is mounted in that way, it cannot succeed.

158 It is unnecessary, therefore, to consider further the defendant's submission that the pleadings were insufficiently wide to enable the plaintiff to mount a case, so far as it was based on the proposition that the representatives of the State should have informed the representatives of TD that it was proposed that the $50M would not be used to repay the GESB deposit, but would be used to meet Rothwells' liquidity problem in other areas. All I will say as to that is, whatever view one might take of the sufficiency of the pleading, it is not the case, as asserted for the State, that for the plaintiff this aspect of this case was raised for the first time in counsel's closing address. It was indeed adverted to at some length when counsel opened the plaintiff's case, particularly in par 62 of the written outline, and the question was canvassed when the evidence was led.

159 There is one further small matter which I should mention. It bears upon what occurred at the meeting of 16 March and on 17 and 18 March. Although I have not found it necessary to rely upon this material in relation to my findings about those events, I consider that the evidence to which I am about to refer is consistent with my findings, put shortly, that Anderson was given assurance of repayment in the form of an oral guarantee on behalf of the State which he understood removed any risk associated otherwise with making a deposit into a merchant bank suffering liquidity problems.

160 I have mentioned that it was necessary to "roll over" the securities endorsed by Rothwells from time to time. The arrangement was that the process of substitution of bills of exchange was to be with the consent of CPH and the person in that organisation who was to attend to that was Mr Stone. In July 1988 this process occurred and, for TD, its solicitor, Mr Gianotti, became involved. Mr Stone's consent could not be obtained to the substitution of particular bills, I think because he was away. Gianotti was doubtful about the value of some of the securities proposed. There was a series of telephone calls during which Mr Anderson's instructions were sought. Mr Gianotti, as was his habit, noted what was said. His note of a conversation on 27 July 1988 records Anderson as instructing that he should "accept any shit as security is suitably guaranteed".

161 Gianotti's evidence was that he did not understand that to be a reference to a guarantee, in legal terms. He said he was never informed of such a thing, nor consulted about the legal efficacy of any guarantee given by the State for the repayment of the $50M. For the State it is therefore submitted that I should construe that note as being a reference by Mr Anderson to the fact that he had been required to provide personal guarantees for the repayment to CPH of the loan of $50M made to TD.

162 But to my mind that is not the proper interpretation of what was said in the course of a conversation which was concerned with the process of obtaining approval for the substitution of securities supporting the money advanced by TD to Rothwells. I think the simple explanation for the note is that Anderson used those words in some frustration at having to deal with the issue raised with him by Gianotti. What he meant was, as he said, that he understood that repayment of the money advanced was guaranteed by the State, and so the worth of the securities provided by Rothwells became irrelevant.

163 Following the provision of $50M by TD to Rothwells, the Westralia Square purchase was still proceeding towards settlement. For reasons which are presently immaterial, TD and CPH sought and were granted permission to substitute new joint purchasers, Sharland Pty Ltd and Skeat Pty Ltd. As I understand it, these companies were owned in some fashion by TD and CPH, and so, for example, Mr Anderson remained involved in the process of achieving final agreement in relation to the terms of their acquisition of the Westralia Square site.

164 A particular problem in relation to Stage 1 concerned the precise ambit of the rental guarantee or underwriting process in relation to the occupation of the building which was proposed. The nature of the dispute does not really matter so far as this case is concerned. As I understand it, it was principally about the terms of the so-called rental guarantee provided by the State instrumentalities who were the vendors. Could it be discharged, at least in part, by Government agencies taking space in the building themselves, or was there a different and wider obligation to guarantee occupancy of a portion, and if so, what portion, of the building? It does not sound like a matter which would be enormously difficult to resolve and yet, on the evidence, the dispute seems to have dragged on until about December 1988.

165 In the meantime, the Armstrong Jones Property Group were exhibiting interest in purchasing a half-interest in Westralia Square and so they became involved in the broader negotiations. The matter is of some interest because of the involvement of the managing director of Armstrong Jones, a Mr Newby, and the property acquisitions director of Armstrong Jones, Mr Sukys (who gave evidence before me) in the trip to Derby by Mr Anderson in October 1988.

166 Meanwhile, Rothwells' troubles continued and were worsening. More was learned about its non-performing loans, particularly to Connell-related entities. I should think that by June it was becoming clear that there was an asset deficiency of monumental proportions in the order of $3-400M. As I have noted, Parker told the Cabinet in July.

167 I have already mentioned that Bell Resources Ltd was in some financial difficulty. Both the SGIC and Bond Corporation had been progressively acquiring shares in that company. By June 1988 both owned 19.9 per cent of the issued shares in Bell Resources, each stopping short of the acquisition of 20 per cent of the shares which would require a formal takeover offer. The activity had attracted the interest of the NCSC. There was an inquiry. It was settled on the basis that Bond Corporation would make a full takeover bid for Bell Resources Ltd. That presented the difficulty that the SGIC might accept the takeover offer, thereby requiring considerable expenditure by Bond Corporation to acquire its shareholding.

168 The SGIC and Bond Corporation made an agreement that the SGIC would not accept the takeover offer on condition that Bond Corporation deposited $100M in Rothwells. $50M was deposited on 3 June 1988. It was immediately used to repay the GESB. Although, as I understand it, it was intended that the other $50M was to be used to discharge the deposit into Rothwells by the SGIC, I cannot see the evidence that that occurred. Indeed, if I interpret the evidence correctly, it may be that some part of the balance of this deposit was used to pay Bond Corporation the sum of $16M which was the fee agreed in October 1987 for Bond arranging the rescue package, thereby almost completely nullifying the Bond Corporation contribution to that rescue of $17.5M.

169 I have referred to an exchange between Anderson and Gianotti in connection with bill rollovers in support of TD's investment in Rothwells, which occurred at the end of July 1988. It is clear, I think, that by this time Anderson knew that Rothwells was in difficulty honouring the bills endorsed to TD, and into August and September 1988 he was becoming particularly concerned about Rothwells' inability to pay because he was being placed under pressure by CPH to have TD repay its debt to that company. TD, according to Mr Anderson's evidence, had fallen behind in its payment of interest. Mr Packer pressed him repeatedly, expressing concern about the performance of TD and the worth of the securities being offered by Rothwells (to which, it will be recalled, TD and CPH had to agree before their acceptance).

170 Anderson certainly approached Lloyd and I accept that he was told Rothwells could not pay out the $50M and any demand that it do so would, in all probability, force it into liquidation. Nonetheless, for TD it was made clear that, at least so far as it was concerned, Rothwells was in default in relation to the loan and something must be done. Anderson approached Edwards and I think it is right to say that Edwards fobbed him off, repeating the assurance that the State continued to support Rothwells and was pursuing a solution to its problems. He did not say what that was but it soon emerged that it was the transaction which became known as the PICL deal. The acronym PICL stands for Petrochemical Industries Company Ltd, an entity at that time effectively owned and controlled by Connell and a Mr Dempster, who was the chairman of the board of PICL, as well as a beneficial owner of it, as I understand, through his company Dempster Nominees Pty Ltd.

171 Again, the details of the transaction do not matter greatly. As I understand it, it was a genuine proposal that the State and Bond Corporation should purchase PICL and its ownership of a proposal to establish a petrochemical industry and plant, but the proposal was to have a benefit for Rothwells. I do not understand quite how it was supposed to work, but although the Connell interests and the Dempster interests were joint owners of PICL in equal shares, the purchase price, which was agreed to be $400M, was to be split between those interests in the ratio of $350M to the Connell interests and $50M to Dempster.

172 Connell was to use all of the money flowing to interests associated with him for the benefit of Rothwells by enabling it to pay $150M to the NAB to discharge the indemnity that had been provided through that entity by the State, and out of the balance, money was to be paid to Bell Resources Ltd to discharge a deposit of $50M which it had made, and interest, and $107M was to be paid to Bond Corporation to repay the deposit it had made in connection with the Bell Resources transaction, together with interest. I think there was a proposal also for the purchase of some Connell-related non-performing loans. And so it can be seen that while the indebtedness of Rothwells would be substantially reduced by the PICL transaction, there would be little to be gained in respect of its liquidity.

173 But for present purposes, the precise terms of the transaction which was in the process of negotiation and ultimately agreed are of no moment. The point is that Mr Anderson learned of this proposal in early September 1988 and, in particular, he learned that a major part of the deal was the repayment of the NAB loan and the consequent release of the State from its obligation of indemnity associated with that loan. On the other hand, TD was to receive no direct benefit, although Rothwells was considered to be in default to it, and it is clear that Mr Anderson saw the proposal as being one involving the State extricating itself from its commitment to Rothwells, a circumstance which he clearly believed exposed TD to the loss of its $50M deposit in Rothwells which, he had been told by Lloyd, could not at that time, unaided, repay the loan.

174 Initially, that understanding came to Anderson when he saw a letter from Rothwells dated 6 September 1988, advising Gianotti of its current financial position and referring to the proposed PICL deal. He saw it at about that time. Anderson arranged a meeting with Dowding. It took place at Mr Dowding's office at the Capita Centre, to the best of Anderson's recollection, somewhere between 16 and 18 September 1988. Again, there is no record of it, but Anderson says that Dowding effectively repeated the assurances that he had been given in March, by saying that while admittedly Rothwells had liquidity problems, they were temporary, and Rothwells still enjoyed the backing of the State which, with the assistance of Bond Corporation, would see Rothwells through the difficulty. He suggested that Anderson could be repaid in part out of the proceeds of the PICL deal and that he would receive the rest of his deposit by the end of March 1989.

175 That proposal appears to have been followed up, or perhaps it was that there was simply an effort on behalf of Rothwells to negotiate an agreement with TD in the context of its allegations that Rothwells was in default in respect of the facility agreement. There were discussions. By letter of 8 October 1988, under the hand of Mr Lloyd as Managing Director, Rothwells wrote to TD by its solicitor, Mr Gianotti, referring to the commercial bill discount facility granted by TD to Rothwells in March 1988 and proposing that, "the facility be reduced from $50M to $30.5M with effect no later than 28th October 1988." Mr Lloyd confirmed that Rothwells would be in a position to meet its obligations to TD in full in March 1989. What was being proposed, Mr Lloyd explained, was that borrowings by Paragon and Katanning Holdings Ltd, secured by bills accepted by Rothwells to an aggregate face value of $19.5M, those being bills discounted to TD, would be refinanced with a different lender, thereby making the money available to Rothwells which could, in turn, pay out the debt owed to TD, at least to that extent.

176 Anderson's evidence was that he wished to accept the proposal to vary the facility agreement in that way. Gianotti advised him that he should insist on written documentation, a deed of variation conditioned upon the provision of satisfactory written assurances of repayment to be given by a "third party", by which I accept was clearly meant the State, thus reinforcing the assurances Anderson believed he had been given orally. In addition, a resolution of solvency was to be required from Rothwells' board, and that indeed was provided. It was made clear in discussions between Anderson and Lloyd that this proposal was related to the PICL transaction. And Anderson's evidence was that Lloyd said that in the circumstances he would not sign a deed of variation on behalf of Rothwells without instructions from the Premier, Mr Dowding.

177 Anderson said that he therefore sought to confirm that with Dowding. He sought a meeting with him. It would have been, he though, a short time after seeing the letter written to Gianotti. His evidence was that he went with Lloyd and Edwards to Parliament House. He said they first met with Parker, and Parker took Anderson into Dowding's office, where Dowding told him that the variation to the agreement with TD would go ahead, so that TD would be repaid part of its loan after the PICL transaction settled. Dowding said he would tell Lloyd that it was in order to execute the deed.

178 Dowding says that he does not recall meeting with Anderson at about this time or in these circumstances. But he did recall generally that Anderson raised with him, more than once, the question of the repayment of the advance made by TD. However, although Dowding's evidence was that he could not recall meeting with Anderson and Parker at Parliament House, his evidence was that if there was such a meeting he did not say that the Government was still supporting Rothwells; he did not say that the Government would see TD repaid; he did not say that TD would get about half its money out of the PICL deal and the balance in March 1989, and he did not say that he would instruct Lloyd to execute a deed to give effect to such an arrangement. He said he knew nothing of any such deed.

179 Edwards gave evidence that there was considerable discussion at this time involving him, Lloyd, Dowding and Parker, including, he said, a visit by Lloyd and him to Parliament House to see Parker, who separately involved Dowding. Lloyd and Edwards were expressing concerns about the beneficial effect of the PICL transaction so far as Rothwells was concerned. An audit report, a relatively short document, had been prepared by the accounting firm, Arthur Young & Co, and was available in October 1988, prior to the PICL transaction being settled. Concern had been expressed about what, in real money terms, would be the net benefit to Rothwells. I accept that Edwards and Lloyd were intent on conveying these concerns to the Government. But so far as I can see, Edwards did not give evidence of accompanying Anderson to a meeting at Parliament House.

180 Lloyd also gave evidence about the events during this period and his evidence confirmed that out of the $350M which was ostensibly for the benefit of Rothwells, about $175M went to Bond Corporation and related entities, and $150M went to the NAB to settle that commitment. The payments involved were complex, but in the final analysis the net increase in Rothwells' liquidity as a result of the PICL settlement was about $1M.

181 Lloyd's evidence dealt with the visit made by Edwards and him to see Parker at Parliament House. He said that was on 12 or 13 October 1988. His evidence was very much along the lines of that given by Edwards, but again there was no mention of Anderson being taken to such a meeting, at his request. Lloyd did, however, confirm that in the circumstances as they applied at the time, and because of the potential prejudice to the PICL deal which might flow from the dealings with TD, he would have felt that the approval of the Government, particularly Parker, was necessary if there was to be an agreed variation.

182 While Lloyd said that Anderson had sought assurances from him on behalf of the Government, that Rothwells would meet its liabilities to TD, he said to Anderson that he could not give such an assurance on behalf of the Government, only Dowding or Parker could do that.

183 I think it is likely that such a meeting occurred. It is, I believe, the sort of thing that Anderson did if he was dealing with somebody. He would go and seek to satisfy himself that his position was secured. He would discuss it. But he is not the sort of person who then would formally record what had been said so that he might later have contemporaneous evidence of it. I cannot say precisely what was said by Dowding to him, but it does seem clear that Anderson regarded the variation to the facility agreement as being a means by which, ultimately, there could be full recovery of TD's $50M, and ultimately satisfaction by TD of its obligations to CPH, upon which Anderson was being pressed by Packer.

184 I am satisfied that Anderson was assured that Rothwells would enter into the deed of variation, that Dowding would instruct Lloyd accordingly, so that TD might be repaid $19.5M upon the settlement of the PICL deal, expected to occur in October, with the balance being paid by March 1989. I do not think it is probable that Dowding would give any more sweeping assurances of Government support for Rothwells, or that the Government would ensure that TD was paid. Indeed, I think, in view of what Dowding by then knew about the parlous financial circumstances besetting Rothwells, that it is highly unlikely that he would give such assurances. I think, again, as I thought in respect of the assurances given in March, that it is probable that Mr Anderson's evidence reconstructs a general recollection into a firm commitment given by Dowding on behalf of the Government. I am not prepared, in this fact-finding exercise, to go so far.

185 Within Mallesons, Bolto, instructed generally by Gianotti, was preparing the necessary documentation to record the variation agreement. The drafting process occurred, with changes being made to the documents from time to time, in the period 11 to 15 October 1988. I accept that Anderson was consulted about the documents, but there is evidence to suggest that Anderson's understanding of what was to be achieved was less than perfect, and that beyond knowing that these were documents designed to secure for TD the repayments proposed in Lloyd's letter, Anderson took little interest in the contents of the letters and the precise terminology used.

186 Again, this was typical of him. He left what he described and saw as legal documents to his lawyers, whom he considered would know what ought to be in them. He understood what the variation agreement was, and he expected that to be given effect. At that point, the assurance that he required from the Government was that the deed of variation would be signed by Lloyd.

187 Typical of the process, I believe, was the attendance on Anderson by Gianotti on 12 October 1988, which is noted by Gianotti as having occurred at 6 pm. The notes are brief, but much appears to have been discussed, including matters concerning the purchase of Westralia Square. That appears to have occupied the bulk of the time. The last item refers to the loan by TD to Rothwells. It says, simply, "$19.5 28/10/88 balance on terms of deed". Gianotti then notes that he telephoned Edwards to discuss the result of this meeting at 6.10 pm. It is apparent that whatever the instructions were from Anderson, they were perfunctory, at best.

188 As I have said, originally the letter expressing the variation agreement in support of the deed made the agreement conditional upon "TD receiving satisfactory assurances" in respect of central elements of the agreement. This draft envisaged an agreement between TD and Rothwells "and with the parties giving the assurances". The term "satisfactory assurances" was defined as written assurances, undertakings or indemnities "from such parties, and in such form, as may be acceptable to TD in its absolute discretion". It is a two-page letter expressed in legal terminology.

189 By 15 October the final form of the letter agreement, upon which stamp duty was paid and which bears Mr Lloyd's signature on behalf of Rothwells, appended on 17 October 1988, had grown to nearly three pages in length. It was signed by Anderson for TD. There are amendments to the document which complete the process of deleting the requirement for satisfactory assurances for the agreement to be entered into, not only between TD and Rothwells, but also with the parties giving the assurances. Perhaps therein lies the reason for the evident abandonment of the requirement, originally thought to be appropriate, for third party assurances, which I accept were intended, at least by the lawyers, to be provided by the State.

190 By this time Anderson and those acting for him knew that the PICL settlement was to take place on 17 October. Perhaps they wanted Rothwells committed to their agreement by then. Perhaps the lawyers thought that it was too difficult, by then, to put the agreement together in a form which required participation by the Government. Mr Anderson had the assurance from Dowding that the deed of variation would be signed. Perhaps that was why a commitment to additional written assurances was dropped. Everything seems to have been done in haste. Neither Gianotti nor Bolto gave any clear evidence as to how this change in the documentation came about. Anderson's evidence when he was cross-examined on the question was redolent of a lack of understanding of the issues being raised with him. I do not think this was feigned.

191 I appreciate that much of what I have written about this question is speculative. The point is that I am invited by the State to conclude that, in the light of the changes made to these documents, Anderson went to Derby, a trip which I am about to discuss, for purposes other than stated by him. It will be apparent from what I have written on this point that I do not think that I am entitled to come to that conclusion.

192 I accept that Anderson was concerned that Lloyd appeared to have no instructions to enter into the variation agreement. Lloyd apparently, according to Gianotti, told him and he told Anderson, that he would not execute the deed until he was instructed to do so by the Government, and was satisfied that there would be sufficient funds in Rothwells to pay the $19.5M following the PICL deal.

193 Anderson and Gianotti learned that Dowding, Parker and other Ministers were in Derby on 15 and 16 October 1988 for a regional Cabinet meeting. Anderson decided to go there, speak to Dowding, and get him to instruct Lloyd to proceed with the variation agreement with TD. Gianotti was not to proceed until instructed by Anderson. Anderson proposed to fly to Derby to speak to Dowding.

194 This was not the sole matter which he wanted to discuss. I am not sure quite how it came about, but he took with him on the flight to Derby, Messrs Newby and Sukys of Armstrong Jones. It will be recalled that they were negotiating to buy an interest in the Westralia Square site, and so they had become involved in the ongoing negotiations as to the terms on which the sale of that site was to be made, and they were concerned at this time particularly with the terms and effect of the rental guarantee given by the SGIC, because they were trying to secure management rights over the SGIC's investment.

195 However, I do not accept that this was the principal purpose for Anderson's flight from Sydney to Derby. Sukys gave evidence before me. He did not recall how it came about that he and Newby accompanied Anderson to Derby. But they went at Anderson's invitation, and I do not think there is anything in the evidence to suggest that it was their idea that the flight should be undertaken. I think it more probable that they learned that Anderson was going, that he suggested they might like to accompany him to discuss matters of relevance to Armstrong Jones with the Premier, or that they asked to come for that purpose.

196 The significant point is that I am satisfied that it was Anderson's idea to go to Derby and the thing uppermost in his mind was the pursuit of the variation agreement and the execution of the relevant deed. The interests of Armstrong Jones in Westralia Square were at that time subsidiary matters so far as Anderson was concerned.

197 There is a trip record for Anderson's aircraft for 16 October 1988 in evidence. It was apparently filled in contemporaneously by the pilot or co-pilot. Its accuracy is accepted by the parties. The times given are Greenwich Mean Time, but they make it clear that the aircraft arrived in Derby at 6.30 pm on 16 October, and that it departed at 11.15 pm, flying directly back to Sydney, where it arrived at 3.25 am the following morning, after a flight of just over 4 hours and 10 minutes. On the basis of that record, Anderson and his party were in Derby for just under 5 hours.

198 It was estimated that it would take them 10 minutes or so by taxi from the airport to the Overlander Hotel, where, on that Saturday and Sunday, 15 and 16 October, the Cabinet Meeting was being held and where the Ministers and their support staff were accommodated. Anderson said he knew they would be there, because Edwards had told him. When he arrived they were dining. He sent a message to Dowding that he was there and wanted to talk to him. Dowding declined. So Anderson sent the message that he demanded to see Dowding or he would instruct his solicitors to take whatever steps were available to him to protect his interests in relation to the $50M.

199 Anderson says that ultimately Dowding and Parker agreed to see him in Dowding's suite. His evidence was that they said that the $350M which would be credited to Rothwells as a result of the PICL deal would solve the problem, and that Dowding said to him that if he was to "pull the rug" the money would be lost. He said that Parker confirmed that view and added, "You're between a rock and a hard place." Anderson said that Dowding said he appreciated that it was for him to see that TD got its money back, and he would see that it happened by the payment of $19.5M out of the surplus of the PICL deal 10 days after the settlement of that transaction which was arranged for 17 October, ie, on 28 October, with the balance being paid in March 1989. Dowding said that he would instruct Lloyd to sign the deed giving effect to that arrangement. And so it was agreed.

200 Anderson's evidence was that these assurances were effectively a guarantee given on behalf of the Government.

201 Prior to that exchange, it appears that there was, according to the evidence adduced for the plaintiff, a brief conversation about Westralia Square and the proportion of the first office tower which was to be the subject of the written commitment by Government to lease the space or to ensure that the space was the subject of a long-term lease or leases. I have mentioned that Sukys gave evidence. He was called on behalf of TD. He said that he and Newby were only able to have a relatively short conversation before Dowding put to them that they had no idea what the meeting was about. Sukys' evidence was that he said they were only interested in the property trust and the interests of Armstrong Jones in relation to Westralia Square. He and Newby were then asked to leave the room and they waited in the corridor outside, from where they could hear what was obviously a heated exchange.

202 Sukys said that he thought that he could hear Anderson shouting. He thought they waited outside the room for something less than an hour. He said that they were asked to return to the room, which they did, and they were there briefly before Anderson, Newby and he returned to the airport by taxi and took the flight back to Sydney. He had no recollection of any particular incidents when the aircraft took off, or during the flight. I accept that evidence so far as it goes, but it does suggest to me that Newby and Sukys were ejected from the room because the matter to be discussed concerned Rothwells and TD's $50M deposit, a subject in which the gentlemen from Armstrong Jones had no interest and about which they knew nothing.

203 I have mentioned that Newby was not called, and nor was Parker. There was no evidence as to why Parker was not called, and the circumstances are not such as to permit me to consider drawing an inference adverse to TD by reason of Parker's absence from the witness box by reference to what is known as the rule in Jones v Dunkel.

204 Peter Wiese is a lawyer. He was a partner in the legal firm Robinson Cox until it was absorbed into the national firm known as Clayton Utz. Robinson Cox, and Wiese in particular, acted for the SGIC and, I think, the GESB in relation to Westralia Square, and he acted in relation to the PICL transaction, the attempts to rescue Rothwells after the PICL settlement, and in relation to the indemnity granted to the NAB by the State, as well as in respect of related matters. He was aware of and became involved in the negotiations in relation to Westralia Square, particularly those involving the Armstrong Jones Group.

205 Wiese's evidence was that he was at work, particularly in relation to the PICL deal, over the weekend of 15 and 16 October 1988, and he was aware that Anderson might act in relation to his $50M investment by demanding repayment. He was aware that Bond required assurance that Anderson would not cause trouble, in relation to Westralia Square or otherwise, before Bond would commit to the PICL settlement. He said that Edwards had told him that the Westralia Square negotiations were a potential problem area, as was Anderson's threat to demand that TD's $50M be repaid by Rothwells. He accepted that had that demand been made, that would have ended Rothwells' capacity to continue trading, and would have derailed the PICL settlement.

206 It seems he was working on a letter of intention in relation to the negotiations which were going on about Westralia Square. The documentation was not in fact settled until during that night of 16 October, just in time to permit the document to be signed in the early hours of the morning of Monday 17 October, to clear the way for the PICL settlement to proceed later that day. Wiese said that Gianotti and Bolto from Mallesons, who acted for TD and Anderson, were there at his office on the night of 16/17 October.

207 Anderson's evidence was that he had arranged for Gianotti, at least, to be there, obviously upon the basis that he could contact them there and instruct them to proceed with the deed of variation, or alternatively, he said, if Dowding was not prepared to provide the commitment of the Government to the variation and the altered terms of repayment, he would instruct Gianotti to immediately take procedures to place Rothwells in liquidation by presenting the bills and taking the necessary winding up proceedings.

208 Anderson's evidence was that from Dowding's hotel room a telephone call was made by Dowding to the office of Robinson Cox. He heard Dowding say, "Hello, Peter," and give instructions to proceed with the deed of variation. Edwards was to arrange for it to be signed. In his statement, Anderson says that the telephone was then handed to him by Dowding and he spoke to Edwards and asked to speak to Gianotti. He told Gianotti that the deal was confirmed as Lloyd had proposed, and he should obtain Lloyd's signature on the deed and send it by facsimile to his office in Sydney for execution the following morning.

209 He said that Gianotti asked him to give the instructions to Bolto, and Bolto was put on the line. Bolto queried whether he really wanted to proceed with the variation, whether he could trust those with whom he was dealing, and Anderson said that the deal had been done with Dowding and Parker, the Premier and Deputy Premier of the State, and therefore people to be trusted.

210 Anderson's statement said merely that after this telephone conversation he left, took a taxi back to the airport, and flew straight back to Sydney. He could not remember whether Newby accompanied him. Early on the morning of 17 October he went to the office of TD and executed a letter agreement dated 15 October 1988 varying the facility deed, to which letter I have previously referred, the deed itself, which was dated 17 October, and a letter dated 15 October on Mallesons letterhead which was directed to the SGIC and GESB. This was a long letter, dealing with the variations made to the Westralia Square project, but affirming "rental support arrangements" given by the SGIC and the GESB to Sharland and Skeat to remain in the form of a rental guarantee and indemnity against receipt by the purchasers of net rental equal to a guaranteed rate on 32,000 m² net lettable area of office space in the first office tower to be erected on the land, for the first five years.

211 When cross-examined about this process of phone calls, Anderson maintained that Dowding made the call from his room and apparently spoke directly to Wiese without going through a switchboard. So it was a direct line. Anderson said he did not know Wiese's direct line. He said that he spoke to Gianotti from the hotel room. He did not know the time when the call was made. When he was asked on how many occasions that evening he spoke to Gianotti by telephone he answered, "I rang him from the plane going over, once in the hotel and I'm fairly sure once going back." He said he rang him on the trip back because Gianotti was his lawyer. He said, "As soon as I left there I would be on the phone to him to make sure that he was getting all the documentation into place, and it's perfectly natural for me to do that."

212 I must say that for Anderson to behave like that would be what I would expect from him on the basis of the impression I have formed of his character. He agreed that he may have discussed with Gianotti the issue of the rental guarantee which was important to Armstrong Jones, but he insisted that for him at the time that was a minor issue and his main focus was on the repayment of the $50M. He put it this way, "The main item to me was that Packer was about to beat me to death over the $50M and that was the main thing I wanted to get resolved." I accept that. I interpret Anderson's evidence as being that he had the offer from Lloyd, he agreed to it, but the agreement had not been formalised and documented, and he was still afraid that the Government might not go through with it. That was the assurance that he flew to Derby to obtain.

213 Mr Dowding, in evidence, accepted that Anderson, Newby and Sukys had arrived at the Overlander Hotel that evening unexpectedly, and that he initially told his staff that he would not see Anderson. He said he was tired and he wanted to use the time to set the program for the next day. But his secretarial staff, including a press secretary, said that Anderson had come a long way and they recommended that Dowding should see him. They did not tell him that Anderson was threatening to present his bills and take action to wind up Rothwells and destroy the PICL settlement which was to take place the next day. He understood that Anderson wanted to talk about the negotiations which were going on in relation to Westralia Square, and so Parker was present throughout. He recalled that Newby was present for only part of the time. He did not recollect Sukys being present at all. He did not know him.

214 Although he could recall no discussion at that time about Anderson's deposit into Rothwells, and the prospects for TD to recover that money, he did recall that he did not say to Anderson that the Government would ensure that Tipperary was paid out of the PICL transaction, and he did not say that the Government would guarantee or ensure the payment of $19.5M at that time, with the balance being paid in March 1989. In fact, he did not know, he said, that Rothwells had made an offer to TD in those terms. His recollection was that the entire conversation concerned the rental guarantee for Westralia Square, and he said he made no oral promise that the Government would guarantee repayment of the $50M.

215 Mr Dowding did, however, give evidence that Parker said to Anderson that he was between a rock and a hard place. Parker said, "If you pull your money out and Rothwells goes down, everyone will suffer, including yourself." He said in evidence that he could not put a context to this conversation. It may have happened during this meeting at Derby, on some other occasion, or on two such occasions. But the only other evidence about this is that given by Anderson. Sukys, it will be recalled, gave evidence that he and Newby were ejected from the room after a brief discussion and that they remained outside the room for some considerable period while a heated discussion was going on inside. It is clear, I think, that the bulk of the conversation occurred after he left the room.

216 I think Parker said the words that both Anderson and Dowding recall, and he said them in Derby at this meeting. There is no evidence to suggest that he did so on any other occasion, and the fact that these words were said provides clear support for the view that the bulk of the discussion which occurred in Derby was in relation to TD's $50M and their prospects of recovering the money. To my mind, it is too subtle a proposition to suggest that Anderson, recalling, as does Dowding, that the words were spoken by Parker, transposed the occasion to Derby so as to provide support for his evidence about what was discussed at that meeting.

217 As to telephone calls, Mr Dowding's evidence was that he did not know that Wiese was working that night to finalise the PICL deal. He made no phone call to Wiese that night. In fact, he made no phone call to anyone in Anderson's presence. No such telephone call occurred.

"I do not recall receiving any phone calls from Derby that Sunday. I did not speak to Anderson. I do not recall speaking to Dowding that weekend and definitely did not speak to him about anything relating to the repayment by Rothwells of the money to Tipperary."

219 However, ultimately he said there was a phone call to his office. He picked up the phone, but he did not recall who he spoke to. However, he did give the phone to Bolto or Gianotti, and so it is evident, it seems to me, that he did so because he was asked. I cannot think who else would have known that Bolto and Gianotti would probably be in Wiese's office, or who else would want to speak to them, but Anderson. Nonetheless, Wiese maintained that he doubted that it was Dowding to whom he spoke, as would have been the case if Anderson's evidence is correct.

220 In the end Wiese doubted that Dowding told him the matter had been settled with Anderson, although it seems clear that at some stage during that evening he was told that the Westralia Square negotiations had been finalised, and he proceeded to get those who were to sign for the SGIC and the GESB to do so. As I have mentioned, that was a matter of urgency. It was done that night, in the early hours of the morning of 17 October, so as to clear the way for the PICL settlement which was to take place later that day.

221 Gianotti's evidence is of interest in relation to these matters. He had been pressing Lloyd for repayment of TD's loan to Rothwells. He had discussions himself with Lloyd about the proposal which was ultimately put in written form by the letter of 8 October. But all of that was in the context of the PICL settlement, as I have already noted, and it is clear that Lloyd was not prepared to commit Rothwells to the proposed variation of the original loan agreement unless he had the instructions of the Government and its assurance that there would be sufficient funds in Rothwells after the PICL settlement to pay the $19.5M. At the same time, Gianotti said, the negotiations in relation to Westralia Square were proceeding and they were related matters, because the rental guarantee issue had not been finally resolved. And so the context of the matters that were being dealt with between TD, Rothwells and the State immediately before the PICL settlement of 17 October were the same for Gianotti as for other actors in the events.

222 Gianotti's evidence was that he knew of the Cabinet meeting to be held in Derby over the weekend of 15 and 16 October, because he had been pressing Lloyd and Edwards repeatedly to know if they had obtained the assurance of the State that the variation agreement could be entered into. Neither man was in that position and that was the state of affairs on 15 October. Gianotti told Anderson that the matter was still not satisfactorily resolved, and Anderson said that he was going to fly to Derby to speak with the Premier. Gianotti confirmed that he and Bolto were to be present at Wiese's office, as was Edwards, on the evening of Sunday 16 October. They went there and they waited. Some work was done on the draft documents, but principally they simply waited to see what developed.

223 Gianotti's evidence presented some difficulties in the fact-finding process, having regard to the way in which it developed and the process of cross-examination. His main statement of evidence dated 23 April 2005 refers to Wiese receiving a telephone call and giving the telephone to Gianotti. Ultimately, he made clear that he and Bolto were in the lobby at the Robinson Cox office and Wiese called them in to his office to the phone. Wiese said that Anderson wanted to speak to him and when he took the telephone Anderson was there. He said, Gianotti recalled, "I have been with Dowding and Parker ... ". The implication is that he was no longer with them, but perhaps that reads too much into the words used.

224 In any event, he told Gianotti that Dowding and Parker had confirmed that the arrangement would be as Lloyd had offered, that $19.5M would be paid on 28 October 1988, with the balance of $30.5M paid by the end of March 1989. He accepted, Anderson said, that that would be made good, because that is what he had been told by Dowding and Parker. In this call he did not mention the rental guarantee, but he gave instructions to proceed with the variation agreement and he would execute the deed.

225 Gianotti confirms Anderson's evidence that he said to Anderson that he wanted him to give those instructions to Bolto personally. He handed the telephone to Bolto and Bolto spoke to Anderson. Gianotti told Edwards, who was present, what his instructions were, and he then discussed the process to be adopted with Wiese. There was just the one call while he was at the office of Robinson Cox.

226 When that statement of evidence was made but not, of course, when it was elaborated upon as I have mentioned above, the State's solicitors had not obtained and therefore had not disclosed the air charter company's trip record showing take-off at 11.15 pm local time. Of course, as I have indicated, Anderson gave evidence and was cross-examined in relation to the question currently under consideration by reference to the trip record. Gianotti did not give evidence until 27 July.

227 By that time, and during the course of the trial, the plaintiff proposed to add to his evidence, to be led by way of the tender of his original statement, a supplementary statement. There was considerable argument about the question whether it should be admitted into evidence. It was substantially concerned to refer to various file notes made by Gianotti. I have referred to his habit to do so, but such notes had generally not been referred to in the original statement. I do not wish here to rehearse the argument about admissibility of the supplementary statement. I simply want to note the circumstances in which it came into existence. The timing makes it clear that by then Mr Gianotti was aware of the trip record, of which he had not been aware when he made his original statement.

228 I first need to refer to a brief note which bears the date 14 October 1988. It records a telephone conversation which Gianotti had with Anderson. Four points are made under the general heading "Must Have". The fourth point is "Rothwells Deed". Gianotti's evidence was that he told Anderson that he must obtain the Premier's approval of the terms of the deed of variation, and, of course, as is clear, that had not been provided by the weekend of 15/16 October.

229 As to the telephone conversation said to have occurred at the office of Robinson Cox, Gianotti said there was no note made. After he had spoken to Wiese about the process in relation to the signature of documents concerned with Westralia Square and the Rothwells deed of variation was given to Edwards to obtain the signature of Lloyd, Gianotti and Bolto returned to their office at Mallesons. He transmitted to Anderson by facsimile, the various documents which required his signature, in their final form. As I have noted, Anderson performed that task, as required, in Sydney early on 17 October.

230 Gianotti's evidence was that there were telephone conversations with Anderson that night which he did note. In his supplementary statement, Gianotti said that reading the file note reminded him of the circumstances. In other words, he employed, within the context of the procedural variation involved, a form of the process of refreshing his memory from the contemporary documents. In each case, the note made by Gianotti bears the date "16/10/88". The notes are as follows:

- AJ's have agreed 60/40

- give letter to KJE

I explained KJ may come down to 35%.

TA WPA 11.23 pm

- AJ agreed to 60/40

- give letter to KJE

- AJ's will do deal to come into JV

- Will sign Rothwells Deed tomorrow morning

- told him 37.5% is now KJ position.

TA KJ 11.25 pm.

- Can only allow 60/40 as Premier agreed with AJ's"

231 Gianotti explained that TA was short for "telephone attendance". The initials identified the other party. WPA was Anderson, and KJ or KJE was Edwards. AJ was Armstrong Jones. The initials JV were short for joint venture. Gianotti said that the first call noted was from Anderson at 11.05 pm. Given the time of the take-off of the aircraft, it seems almost certain that this must have been a telephone call from the aircraft while it was on the ground preparing to take off. So this would appear to be a call following up what was said to have been the earlier call from the hotel.

232 The topic discussed was the negotiations in relation to Westralia Square. The split of 60/40 was a reference to the so-called rental guarantee being provided by the Government instrumentalities in relation to 40 per cent of the first office tower when built. The letter referred to was one concerning the acquisition of Westralia Square by a joint venture of which each of Sharland and Skeat were to have a 25 per cent interest, and Armstrong Jones was to have a 50 per cent interest. The terms of the letter do not matter. The reference to Edwards coming down to 35 per cent was a reference to what the Government demand might be, whereas the joint venturers would want to hold to the 40 per cent.

233 Gianotti says that he must have spoken to Edwards about this between 11.05 pm and 11.23 pm, when the second call was received from Anderson, now clearly after the aircraft had completed its take-off and was in the air. In this telephone call, Gianotti says he was told that Armstrong Jones had confirmed that their requirement was a 60/40 rental split. They were committed to the joint venture on that basis, and, for his part, Gianotti told Anderson that Edwards had indicated the Government position was that they might accept a rental guarantee in relation to 37.5 per cent of the lettable area of the first office tower. During this conversation, there was a reference to signing the deed of variation in relation to the loan of $50M. The note confirms, Gianotti said, that Anderson told him he would sign the deed in the morning in Sydney.

234 Finally, the note of the telephone call at 11.25 pm records that Edwards rang Gianotti to say that, as the Premier had agreed with Armstrong Jones' representatives (ie in Derby) the 60/40 rental split, that could not now be changed and the Government would commit to that.

235 As to the number of calls and where they were from, it will be recalled that Anderson said in evidence that he may have called Gianotti from the aircraft. In fact, if Gianotti's notes are accurate, there were two such calls, presumably interrupted by take-off, but that that occurred appears not to have been recalled by Anderson. Nonetheless, whether or not there was an earlier call from the hotel, during the conversation over the telephone while the aircraft was in flight at 11.23 pm, there was a reference to the repayment of the $50M, and I accept that Anderson said, in effect, that Gianotti was to send the documents to Sydney by facsimile, and he would execute the deed of variation on behalf of TD. This alone adds support to the view that it was a topic of conversation between Dowding and Anderson in Derby.

236 I consider that Gianotti's evidence does not cause me to conclude that Anderson's recollection of what occurred at the hotel in Derby is unreliable, although I acknowledge that, when pressed vigorously in cross-examination, Gianotti accepted that the fact that he had made no note of the call said to have been received in Wiese's office at Robinson Cox was a telling factor against the view that it occurred. Nonetheless, it should not be lost sight of that that call was said to have been taken in Wiese's office, whereas the later calls appear to have been made to Gianotti in his office, although Anderson made no particular point of that.

237 Bolto gave evidence which was a variation on the theme. He was caused to go to the offices of Robinson Cox by Gianotti, who told him that Anderson was flying to Derby with Newby, from Armstrong Jones, to meet Dowding. They went to wait for instructions specifically as to whether TD would accept the proposal by Rothwells to vary the terms of repayment of the $50M. Bolto confirms that a telephone call came to Wiese. They were all in Wiese's office. Wiese said that this was the call they were waiting for, and he wished to speak privately. Gianotti and Bolto left and waited outside in the lobby. They were there for about ten minutes. Wiese then called them back and said that Anderson wanted to speak to them.

238 Bolto says that when he spoke to Anderson, Anderson confirmed that he had "agreed to extend" the loan, and that the documentation to that effect could now be completed. He agrees that he queried whether this was wise, and he agrees that he was assured by Anderson that he was happy with the variation and the lawyers should proceed with the documentation. He and Gianotti then left Robinson Cox's offices, but his evidence was that on the way to Mallesons' office they met Lloyd in the street. Lloyd took him, at least, to Rothwells' offices where other people were present. There was some negotiation about changes to the deed of variation. When that was completed, Bolto returned to his office at Mallesons. It does not, of course, follow that Gianotti was in his company for the whole of this time.

239 There was one further piece of evidence upon which I should comment, and that was the evidence which was permitted to be given by Mr Bourke. He said that Anderson told him that he was going to Derby to meet with the Premier to get the repayment of the $50M settled, and after the weekend he told Bourke that he had met with Dowding, been told that it was anticipated that there would be funds available in Rothwells as a result of the PICL settlement and that he had been assured that he would receive from those funds a fraction under $20M with the balance being paid in March 1989. This evidence goes beyond the proposition that the relevant fact was the statements made by Anderson. The plaintiff seeks to rely upon it as proof of the truth of what Anderson told Bourke. It is hearsay, and I pay no regard to it.

240 I summarise my conclusions about these matters as follows. When Anderson became worried about the PICL transaction and the effect it might have upon the Government's commitment to support Rothwells, it was in the context of the pressure being put upon TD by CPH, particularly by Packer and Stone. Anderson therefore sought a commitment to repayment from Rothwells. In early October Lloyd made an offer in the terms discussed above for a variation of the original facility agreement. Anderson was minded to accept, but he became ever more worried and impatient as time went by and the variation agreement was not made in a formal sense.

241 Lloyd said he could not sign without Government approval, but in everybody's mind, particularly in Anderson's mind having regard to the advice he was obtaining from Gianotti, the matter had to be settled before the PICL settlement on 17 October, and yet, by the previous weekend of 15/16 October it had still not been done. In some desperation, Anderson flew to Derby. He took Newby and Sukys with him, I think at their request, so that the related matter of the negotiations for the Westralia Square joint venture agreement could also be completed.

242 He was on the ground in Derby for just under five hours. He was delayed in getting Dowding to see him, but eventually Dowding agreed and there was a meeting, at which Parker was also present, together, initially, with other persons on the Government side. Newby and Sukys were ejected from the meeting relatively quickly, and spent nearly an hour waiting outside for it to be completed. During that hour the major topic of discussion, which became heated at times, was the variation agreement in relation to repayment of the $50M.

243 It seems to me that both sides originally felt that their position had some strength. Anderson was threatening to bring down Rothwells and the PICL transaction by making a demand for repayment of TD's loan, which it was conceded Rothwells could not pay, and by causing Rothwells to be wound up. Bond Corporation and the Government were the major beneficiaries of the PICL transaction. The Government wanted it to proceed, but at the same time Parker and Dowding put to Anderson that if he took the threatened action he would likely get nothing out of it. He was between a rock and a hard place. Nonetheless, finally, Dowding gave an assurance that the deed of variation would be signed and that transaction would proceed.

244 On that basis, Anderson was prepared to withhold his hand and he said so. It will be evident that I think, in relation to this discussion, the evidence of Anderson is the more reliable. While Mr Dowding was firm about what he would not have said, he gave that evidence while otherwise saying he did not recall various aspects of the conversation or the events of the night. For example, he could not even recall the presence of Sukys. I think that is natural enough, having regard to the lapse of time, and also the fact that he was at the end of a long weekend, was admittedly tired, and was busy and still had matters to attend to in planning for the events of the following day.

245 At the end of the meeting, Dowding called Wiese to say that it was in order for the final processes of documentation to be completed to clear the way for the PICL settlement. He put Anderson on the phone and Anderson spoke to Gianotti and Bolto while they were at the offices of Robinson Cox. Gianotti did not note this conversation which was in terms generally consistent with Anderson's evidence about what occurred in Derby. Gianotti did not note the conversation because it occurred in Wiese's office, and immediately he handed the phone to Bolto he became involved in conversation with Wiese about the execution of relevant documents.

246 Gianotti then returned to his office at Robinson Cox, where almost immediately he received a further telephone call from Anderson while his plane was preparing to take off. That call was interrupted by that process, but was resumed when the aircraft was in the air. At that time there was also mention of the agreement to vary the terms of repayment of the $50M. Again, that was generally consistent with Anderson's purpose in flying to Derby. These exchanges generated the transmission of the documents by facsimile by Gianotti to Anderson's office in Sydney, where the documents, including the deed of variation, were executed by Anderson.

247 However, as to what was said by Dowding to Anderson in Derby, there is only Anderson's evidence of what occurred during what was obviously at times a heated exchange. I have set out the substance of Mr Anderson's evidence-in-chief taken from his statement. He was cross-examined at length with respect to these matters, generally from the springboard of putting to him that he was consciously involved in the abandonment of the quest for written assurances by the time the documents in question achieved their final form on 15 October. He said that his understanding was, "that I was to fly to Derby and see Mr Dowding to get him to tell Mr Lloyd to sign the deed of variation, and Mr Lloyd wouldn't sign the deed of variation because he couldn't pay the 19½ unless it came from the PICL deal." (T841). He insisted that was why he flew to Derby, and it was on that note that a week of hearing ended.

248 Mr Anderson's cross-examination resumed on the following Monday, which was in fact 25 July. Again, Mr Anderson insisted that he went to Derby to see Dowding, "to get him to give Tony Lloyd the okay to sign the deed of variation to the loan and that would produce $19½ million to us." When he was cross-examined about what was actually said by Dowding and Parker to him, it was put to him that they said they would not give him any assurance, but if he pulled the PICL settlement down he would be in a worse position - the comment about being between a rock and a hard place. Anderson replied (T856):

"No, they didn't say they weren't giving me any assurance. They said, 'Don't rock the boat at this time because we've got the PICL project proceeding and there would be surplus money' and that I would get paid my 19 ½ million."

249 That, I think, marks the extent to which Mr Anderson's recollection would take him at this time. He had a particular purpose in mind when he went to Derby, and to his mind he achieved it. He was assured the deed of variation would be executed and it was expected that following the PICL settlement Rothwells would be sufficiently in funds to make the $19.5M payment on 28 October.

250 The PICL settlement took place on 17 October 1988. The deed of variation was executed by Mr Anderson and Mr Lloyd on behalf of TD and Rothwells, respectively, on the same date. By it, Rothwells undertook to pay TD the sum of $19.5M, the face value of expired bills granted by Paragon Resources and Katanning Holdings, on 28 October 1988. The deed recited that TD agreed to accept repayment of that sum from Rothwells in full satisfaction of the expired bills, with the effect that the facility would be reduced to $30.5M, which Rothwells agreed to repay on 31 March 1989. The deed provided that Rothwells was solvent and would so resolve. It did so, in fact, at a meeting of its board on the same day. There were some subsidiary provisions, but essentially, apart from those variations, the original facility agreement was ratified in accordance with its terms.

251 Rothwells did not pay the $19.5M on 28 October. Edwards told Gianotti that Rothwells would be putting an alternative proposal, which it did on 31 October by a letter signed by Lloyd. The proposal was that Rothwells would pay TD the sum of $2M per business day plus interest until the $19.5M was repaid. Three cheques were sent to TD on that date, one for $2M and two for interest. All three cheques were dishonoured on presentation. On 3 November 1988, Rothwells was placed into provisional liquidation.

252 On 28 October, at just before 6 pm, and so when it was clear that Rothwells would breach the deed of variation, a member of the Government, a Mr Julian Grill, the Minister for Minerals and Energy, telephoned Gianotti to discuss what was to be done about Rothwells. He also told Gianotti that an alternative proposal would be put. Gianotti asked if the Government would make a commitment to perform any program of repayment which was proposed. Grill said that could not be done, an observation which Gianotti noted as follows, "Can't get any commitment from Govt now." As I say, it soon became apparent that Rothwells could not pay and it became inevitable that the only course to be taken was to wind Rothwells up. According to Dowding's evidence, the Government had been involved in desperate attempts to ensure Rothwells continued trading. I need not discuss those matters here. Finally, it became clear that Rothwells was insolvent and should be wound up.

253 Although Robinson Cox and, in particular, Wiese, were acting for the Government, Dowding considered that the Government needed some independent advice on its relationships with Rothwells and related matters. In November 1988, at the suggestion of Mr Neville Wran, a former Premier of NSW and a director of Whitlam Turnbull & Co, a consultancy company, that company was retained by the Government to advise generally. That brought to the Government access to the services of Mr Turnbull, the Managing Director of Whitlam Turnbull & Co. The retainer was effected by a letter dated 25 November 1988 to Robinson Cox from Whitlam Turnbull, offering their services to provide advice on financial matters so as to enable Robinson Cox to provide legal advice to the Government. The letter noted that the State, in respect of Rothwells, was seeking to ensure "that the returns to the Government and its agencies and instrumentalities are maximised." And consistently with that objective, to ensure that small depositers were provided with the highest possible immediate return of funds from Rothwells Limited. By letter dated 29 November 1988 directed to Robinson Cox, Mr Dowding, as Premier, confirmed that the Government agreed to the terms of the retainer and understood that as part of the arrangement the consultants would advise both the Government and the SGIC, who would share payment of Whitlam Turnbull's fees and expenses.

254 I accept that Dowding left those matters in the hands of Robinson Cox and Whitlam Turnbull. He learned of ongoing threats by Anderson that TD would sue, if not repaid its $50M. He reported that to Wran and Turnbull and also to Wiese. And ultimately, in December, he learned that Whitlam Turnbull were proposing to negotiate with Anderson in an endeavour to settle all outstanding matters at issue between the Government and its instrumentalities and TD. I accept that although Anderson attempted to approach Dowding and deal with him in relation to such matters during December 1988, Dowding referred him to Turnbull.

255 One matter of dispute was between TD and the Joondalup Development Corporation. The evidence of Mr Hatt, the Chairman of the corporation, explains what the dispute was about. It concerned a proposed sale of land to TD for the development of the Joondalup Shopping Centre.

256 I need not discuss the nature of the dispute here. It is sufficient for present purposes to note that it ended when, on 30 December 1988, TD and Anderson, personally, entered into a deed of release, abandoning all claims and interests that they may have had against Joondalup Development Corporation "and any other instrumentalities, authorities or persons" in respect of the purchase and development of land at Joondalup. The document is executed by Anderson and Gianotti for TD, and Anderson's signature on his own behalf is witnessed by Bolto.

257 In October 1988 there were, despite the completion of the renegotiation process to which I have previously referred, still unresolved problems in the joint venture which was the Westralia Square development. The difficulties continued to manifest themselves in respect of the rental guarantee process, which had built into it an escalation of the commitment by the SGIC and the GESB, and the part of the agreement which required those agencies to contribute independently to the property trust constituted by the companies Sharland Skeat for CPH and TD. An offer was made for the SGIC, or for it and the GESB, to purchase the interest of Sharland and Skeat in the proposed development. Anderson met with Mr Rees of the SGIC. A firm offer was made to purchase the site for $255M. Anderson put that proposal to Packer, who instructed acceptance. Anderson said he agreed because of the pressure exerted upon him by Packer. He thought it was worth $280M.

258 Before the parties were formally committed to this agreement, Wran and Turnbull had been appointed. It will be recalled that they were to settle all issues as between the Government, the SGIC, the GESB and TD, or Anderson himself. In early December 1988 Turnbull met Anderson, introduced himself, said what his interest was, and renegotiated the purchase of Westralia Square by the SGIC and GESB. Ultimately, those negotiations produced an offer to purchase for $239M. Anderson said he would have to speak to Packer. He did so. Packer said to accept that offer.

259 At this time, Anderson was threatening to sue in respect of the dispute with the Joondalup Development Corporation and the repayment of TD's $50M loan to Rothwells. As Anderson put it, he continued to "hound" Dowding, demanding repayment. Anderson said that on one occasion he met Dowding in the lift lobby of the Capita Centre, when Dowding told him that he would make sure that the $50M was repaid and he asked Anderson not to go ahead with the threatened legal action against the State and Dowding personally. According to Anderson's evidence, Dowding said the Government would be in a stronger position to "deal with" the matter after the election in March 1989.

260 Dowding's evidence was that he recalled no such exchange. But however that might be he said that he would certainly not have given the assurances orally and without Cabinet support in the terms given by Anderson in evidence. He said that it was clear there would be losses arising out of the collapse of Rothwells, and he had no mandate to promise Anderson that the Government would make his position good. He said he was not at all confident that the Government would be returned in March and that he would be Premier, and for my part that is sensible.

261 I do not doubt that there were, from time to time, casual meetings between Anderson and Dowding at this time. I do not doubt that Anderson threatened to sue both the Government and Dowding, although Dowding says that he first heard this from a friend to whom Anderson had spoken at a dinner party. Again, however, as to what Dowding said to Anderson at any such meetings, I am unable to find on the balance of probabilities that the statements attributed to Dowding were made. I think, again, that there is an element of reconstruction unconsciously going on in Mr Anderson's mind to allow him to interpret Dowding's reaction to his threats as a promise that the Government would see that TD recovered its $50M.

262 A strong reason why that would not be said was that Whitlam Turnbull had been engaged and were, to Dowding's knowledge, actively at work to achieve a settlement of the issues between the Government, its instrumentalities, Anderson and the interests he represented. Dowding was aware that it was hoped that the price for a favourable outcome for Sharland and Skeat in respect to Westralia Square and another large development in which Anderson's interests were involved in the city, would be the negotiation of a release from all liability in respect to Westralia Square and the Joondalup Development Corporation. Dowding's day sheet records meetings with Anderson on 13 and 21 December. He recalled that Anderson was endeavouring to deal with him directly rather than dealing with Turnbull. But Dowding said that he declined to deal with Anderson. He "fobbed him off", preferring to leave the negotiations to Turnbull.

263 Anderson gave evidence that on 21 December 1988, Wran telephoned him, introduced himself and said that he was acting for Dowding to ensure that he remained clear of any political or financial taint going into the next election because he was relied upon by the Labor Party to secure a win at that election. Wran said that he understood that Anderson had threatened to sue Dowding and "they could not have that". Anderson responded that he needed the $50M loan repaid so that he could repay Packer and Dowding had promised that he would get it. Wran said to him that if Dowding and his associates were sued and lost the election, Anderson would never get his money.

264 Anderson said that he accepted that he would not sue Dowding and the others individually, but, "I'm not letting the State off the hook." According to Anderson, Wran accepted that, but he would not leave it at an oral undertaking over the telephone. It was to be put in writing. A release would be drawn up. If Anderson did not sign it, the purchase of Westralia Square would not go ahead.

265 Anderson said that after speaking to Wran he telephoned Dowding. It will be recalled that Dowding's day sheet refers to a meeting, not a telephone call, on 21 December 1988. Anderson's evidence was that he complained to Dowding about the way he was being treated and he said he would not sign the deed of release without an assurance from Dowding that he would be repaid. He says that he told Dowding that he reserved his rights to sue the State. But Dowding told him that he would make sure the $50M was repaid.

266 Anderson said he would sign the deed, but not date it, and he would only hand it over if, in the new year, Dowding put forward an acceptable proposal for the repayment of the $50M. Only then would he hand over the deed and allow it to become effective. He says that Dowding said that was agreed. The clear inference, it is suggested, is that in so saying, Dowding, as in the case of Wran before him, was speaking for the State, Wran because he acted for the Government, and Dowding as Premier.

267 Anderson says that he saw a draft of the deed of release when he was shown it by Gianotti and Bolto on 23 December 1988. He said that he signed a deed of release, but did not date it, on 23 December 1988, in the office of Robinson Cox in the presence of Gianotti and Bolto. He says he told Gianotti, "to do his best to avoid handing over the deed of release unless an acceptable proposal for repayment of the Rothwells loan was received." Oddly, to my mind, Anderson says he gave that instruction because that was consistent with the agreement he had made with Dowding, but he added:

"Nevertheless, I realised that Gianotti would probably have to hand over the executed deed of release, otherwise the sale of Stage 1 of Westralia Square would not go ahead."

That strikes me as a strange thing to say if Anderson really believed that he had an agreement with the State, through Dowding, and I note that he did not give evidence that he told Gianotti what that agreement was.

268 He says he reminded Dowding of it in the new year, and Dowding said he should pursue recovery from Rothwells, but after that process was exhausted the State would make arrangements to pay the balance. He says that his attempts to get the Government to repay fell apart when, in June 1990, Dowding resigned as Premier and Carmen Lawrence took over. He said that she would not see him, but he met with the Deputy Premier, Mr Taylor, on 10 September 1990. Taylor told him that the State would not accept any liability to repay any portion of the debt. It was then that he gave instructions to issue a notice under the Crown Suits Act, leading to the present litigation.

269 Dowding denies the accuracy of this evidence. He says that he gave no such assurances and made no such agreement. So far as the exchange between Anderson and Wran on 21 December is concerned, Wran recalled no such conversation. He said he was acting for the State and not Dowding and he would not have said that a release of Dowding and his associates, but not of the State, from liability was acceptable. It is unnecessary for me to discuss the exchange which occurred on 3 December 1995 between Anderson and Wran. I accept Mr Wran's evidence, as I do Dowding's, on this point. I do not think that I may find, on the balance of probabilities, that the agreement about which Mr Anderson spoke, qualified in the way that he mentioned, was made.

270 However, there was clearly an agreement, which I think was between TD, Anderson on his own behalf, and the State, that a release would be given. It was negotiated in an informal sort of way between Wran, acting for the State as the Chairman of Whitlam Turnbull, and Anderson, acting on his own behalf, and as Managing Director of TD. I form that view having regard to the evidence which I have discussed above and my views about the conclusions of fact which that evidence will support. The straightforward nature of that agreement was, I think, understood by Wran and also, I think, in truth, by Anderson, having regard to his evidence about his instructions to Gianotti and his understanding that the deed would not only have to be executed by him and on behalf of TD, but also would, when required, have to be delivered and put into effect.

271 His understanding is perhaps encapsulated in the answer he gave to a question in cross-examination. It was put to him that he had a conversation with Mr Wran, and Mr Anderson said that was on 21 December when Wran telephoned him. He was asked:

"What did he say?---He said that he had been appointed political adviser for Dowding and it was his job to guide him through to the next election and keep him as clean as he could, and that it was his understanding that I had threatened to sue Peter Dowding and the Government and he said we couldn't have that."

Anderson immediately sought to retract the reference to the threat to sue the Government and change his answer to have Wran say that he had heard that Anderson had threatened to sue Dowding. But the first answer he gave was unsolicited by direct questioning and I think it was true.

272 The matter put in train by instructions to Robinson Cox was the formal documentation of the transaction for the sale of Westralia Square, and the instruction was that that transaction would not proceed to settlement until a deed of release was entered into by TD and Anderson in relation to the advance of $50M to Rothwells. There was also, of course, the deed of release required in relation to the dispute with the Joondalup Development Corporation. Wiese was aware of those matters, but he was not the solicitor in Robinson Cox who was involved in drawing the necessary documents. Nonetheless, matters did proceed in that way, and settlement of the transactions in relation to Westralia Square and the other city property, known as Central Park, occurred on 30 December, on which date the two deeds of release were lodged for the payment of stamp duty.

273 A Mr Hager was the solicitor in Robinson Cox who had the carriage of those processes. He had been involved and acted for the SGIC and GESB in relation to the original transaction in respect of Westralia Square in March 1988. He was involved in restructuring that original contract so that TD and CPH were replaced as purchasers by Sharland and Skeat. He was involved in the discussions and negotiations which occurred when difficulties emerged in respect of the interpretation of the rent guarantee provisions and the obligations which they imposed. Hager was involved in implementing the agreement made in early December 1988 which involved the SGIC and GESB acquiring part of the Westralia Square project, engaging TD to construct the Stage 1 office building and the GESB acquiring Mr Anderson's 50 per cent interest in Central Park. That process would extinguish the ongoing difficulties in relation to the rental guarantee obligations of the SGIC and GESB in Westralia Square, and the obligation to participate in the property trust.

274 Hager was instructed that the transactions agreed upon could not be completed before the execution of a deed of release by TD and Anderson. He received those instructions from Mr Rees, the Chairman of the SGIC. He passed that requirement on to Gianotti and Bolto at Mallesons, who were acting for Anderson and TD. He had those discussions on 21 and 22 December 1988, during which days extensive discussions as to the drafting of the necessary documents were held. Anderson was involved, and Hager's evidence was that on the evening of 22 December he emphasised to Mr Anderson that the settlement would not occur under the heads of agreement in relation to the other transactions to which I have referred, without the execution of the deed of release. It was never suggested to him by Anderson, Gianotti or Bolto, that the State should be excluded from the benefit of the deed of release.

275 Because Hager knew that Whitlam Turnbull were acting for the Government, he sent a draft of the deed of release to Mr Turnbull in Sydney on 22 December 1988. On 23 December Mr Turnbull returned the draft by facsimile, with some suggested additions. On 23 December, the deed of release with which this case is concerned, and the other documents, were presented to Anderson and Gianotti for signature. Hager's evidence was that Gianotti appeared to check the documents, but there was no discussion about the terms of the deed of release. It was executed, and the heads of agreement and deed of release were then to be held in escrow, pending execution of the heads of agreement by other parties. All was in readiness by 30 December 1988, when settlement occurred.

276 Mr Hager said that his instructions throughout his involvement, given by Mr Rees, were that the transactions within the heads of agreement document and the deed of release were to be in final settlement of any claims that TD or Anderson had with respect to Rothwells. He said he drafted the deed of release accordingly.

277 When Turnbull gave evidence he was not, in the end, cross-examined at all, but his evidence, as I understood it, was simply that he saw a first draft of the deed of release which had been prepared by Hager, which appeared to him to accord with his instructions from the Government conveyed to him by Mr Dowding or by a Mr Taylor, one of his officers, on Mr Dowding's behalf, that a settlement of all outstanding matters should be achieved.

278 As I have said, Hager dealt with Gianotti and Bolto, the solicitors at Mallesons who acted for TD and Anderson. They appear to have become involved first on 21 December 1988. That afternoon, a draft document was presented to them by Robinson Cox. It had been drawn by Mr Hager. In the first place, it dealt with Central Park and Westralia Square, setting out the existing position and what was proposed in relation to those places. Then, under the heading, "Government Instrumentalities", appeared the words, "TD, WPA [Anderson] and all associated entities relinquish all claims against Government instrumentalities". Following that, under the heading, "Documents Required", appears an item in relation to a deed of release in respect of Central Park, and after referring to various contractual documents associated with Westralia Square there is another item which simply says, "Deed of Release: Government Instrumentalities". There appears at this meeting to have been very little discussion, if any at all, about what was proposed on the Government side in respect of deeds of release. What those items referred to remains unclear to me.

279 Bolto says he recollects a telephone conversation with Wran. He made a file note and used it to refresh his memory. It shows that the call occurred at 7.20 pm on 21 December. The first item noted is, "Release: Rothwells + Joondalup." And at the foot of the note, under the general heading, "3 Issues", the third noted is, "Release via Joondalup". Mr Bolto was not able to add to the bare recollection prompted by the note.

280 Also on that night, Turnbull rang. Gianotti took the call, and Turnbull told him to be at a meeting at the offices of Robinson Cox the following morning at 7 am. Gianotti and Bolto went together. They arrived at about 6.45 am. Hager and the Premier's adviser, Tucker, were present. The meeting was held in the boardroom of Robinson Cox, and at 7 am local time Turnbull rang and spoke on a speaker phone. It seems that Turnbull spoke about what was required to be documented. He was not putting a proposal and asking for a response. He was putting something about which he had already spoken to Anderson, and which had been settled previously with him. Turnbull was unable to recall this event or what he said. Nor could Hager remember this occasion.

281 Gianotti and Bolto made notes of the event and what was said. Each agreed that they noted as accurately as possible the essence of what Turnbull was saying. He put what was required and the documentation was to be prepared by Hager. Both witnesses refer to this in their statements of evidence-in-chief, and both were cross-examined. The final outcome of that process made it clear to me that their evidence was that they noted accurately what was said, albeit in note form only. I am left with a clear impression that these witnesses did accurately note the essence of what was to be provided for.

282 Gianotti's note records firstly who was present, and he notes that there were three issues to be discussed. The first was noted as, "Release Joondalup/Rothwells". The other matters noted concerned the timing of the settlement and the documents required. Then there is a note which shows that Turnbull came on the phone. Gianotti said he knew that Turnbull was acting for the Government. The second matter noted, as being what Turnbull said was required, concerned what Gianotti said were the releases to be provided in respect of both Joondalup and Rothwells, although only Joondalup is referred to in the note. The note continues:

"Deed of release reqd [required]

Wran spoke to WPA [Anderson] this morn. & agreed to withdraw.

Acknowledge that TD has not made

(i) deposits due to representations from SGIC etc &

(ii) release Govt from any liab [liability] & loss sustained therefrom.

Reqd. as matter of prudence.

* Deeds reqd."

Gianotti accepted that by "Govt" he meant "Government" and that he used that abbreviation because the word Government was used by Turnbull. There was no discussion, he agreed, about the State not being released from any liability it may have had.

283 Bolto's note also commences by recording who was present, and again the second item referred to by Turnbull on the telephone was noted by Mr Bolto in the following terms:

"Joondalup release NW [Wran] WPA [Anderson] accepts he must back off from Joondalup - maybe in the future.

Rothwells TD acknowledges that deposits made with Rothwells not in reliance upon any representation/warranty of Govt SGIC any other instrumentality - on his own judgment.

TD releases Govt/SGIC etc from any liability etc in respect of deposits made with Rothwells.

'Keep confidential'."

It seems to me that in this note Bolto, who was, he says, accurately recording the same statements by Turnbull as noted by Gianotti, has noted in relation to Rothwells, in rough outline, the essential terms of the required deed of release. I am left in no doubt that this does accurately reflect the agreement to which Anderson, for TD, and Wran, for the State, came

284 There were, I think, a number of drafts of the deed of release. The first was sent to Turnbull on 23 December. He amended it, not substantially, but to make it align more closely with the way in which he apparently conceived the deed would be expressed, according to the note made by Mr Bolto on 22 December. A further draft was prepared by Hager, again in a somewhat more expanded form, to include some changes made by Mr Wiese. It was in that form that the document was executed on 23 December, although the document bears the date 30 December 1988, the date when settlement of the other transactions occurred and the period of escrow ended.

TIPPERARY DEVELOPMENTS PTY. LTD. of 12th Floor, Cullwulla Chambers, 67 Castlereagh Street, Sydney, New South Wales ("TD")

WARREN PERRY ANDERSON of 42 Billyard Avenue, Elizabeth Bay, New South Wales ("WPA")

1. That TD and WPA acknowledge that no representations, inducements, solicitations, or requests of any kind have been made to them by any Minister of the Government of Western Australia, any officer or employee of the Government of Western Australia, or any instrumentality of the Government of Western Australia (including but not limited to State Government Insurance Commission) concerning the solvency of Rothwells Limited, or otherwise in relation to the deposit of monies by TD and WPA or any of them or their associates with Rothwells Limited, of 22nd Floor, Allendale Square, 77 St George's Terrace, Perth, Western Australia.

2. That without prejudice to the foregoing, TD and WPA acknowledge that in depositing monies with Rothwells Limited, they have neither relied nor acted upon any representations, inducements, solicitations, or requests of any kind made by any Minister of the Government of Western Australia, any officer or employee of the Government of Western Australia or any instrumentality of the Government of Western Australia (including but not limited to State Government Insurance Commission) concerning the solvency of Rothwells Limited or otherwise in relation to the said deposit of monies by them.

3. That TD and WPA abandon, release and relinquish any legal or equitable rights or claims TD or WPA may have against any of the persons or institutions mentioned in Clauses 1 and 2 above in relation to the deposit of monies by TD and WPA with Rothwells Limited.

4. The releases herein given are absolute final and unconditional.

5. Each of the persons and institutions named herein shall be entitled to claim the benefit of this Deed as a covenant in his and its favour and plead this Deed in bar to any proceedings brought against it or them or in which it or them may be joined by TD or WPA in connection with any of the matters herein referred to.

286 On 23 December that final draft of the deed was shown to Anderson by Gianotti, who instructed Gianotti that there was no need for the deed to be amended to make some changes which Gianotti had proposed to include. And so later that day the deed was executed.

287 I have mentioned that provisional liquidators of Rothwells were appointed on 3 December 1988. Of course, by the end of 1988, as will be apparent from these reasons, TD had recovered no portion of its $50M deposit in Rothwells. It had lodged a proof of debt with the liquidators and there was some recovery as a result of the liquidation process and otherwise during 1989. Evidence was led before me in relation to the loss and damage sustained in relation to the plaintiff's various heads of claim.

288 In the end, the only evidence was effectively that of the plaintiff's expert accounting witness, Mr Smith. His evidence was thoroughly tested by cross-examination and various matters concerning his opinion were put in issue. I need not deal with them now, but may confine my attention to questions of liability. If it should be my view that the plaintiff is entitled to judgment, then I will need to consider if and to what extent the plaintiff has established compensable loss and damage. I will also deal later, if need be, with the question of Rothwells' insolvency in March and up to 13 April 1988, on which date TD completed the process of making its advance to Rothwells. Subject to that, in relation to the issues of liability which arise, questions of damages will be left until later.

289 The parties have agreed, subject to my accepting the proposition, that the appropriate course is to deal now with questions of liability, enter an interim judgment, if that should be appropriate, for the amount in which the damages are undisputed, and then resolve the outstanding questions by way of a later assessment of damages. I have been provided, in that regard, with a book of schedules of damages which show that in relation to what is described as the March contract claim, if breach is established the loss might amount to at least $30M. On the other hand, if a claim for negligence may be made out and compensable loss or damage established, the schedules put the total loss at no less than slightly under $33M. However, as I say, the resolution of questions arising in relation to the assessment or damages, either in contract or tort, may await my coming to the conclusion that the plaintiff is entitled to judgment in respect of one or more of its heads of claim. I turn then to questions of liability. They are not without complexity.

290 I return the discussion to the events of 16 March 1998 in Sydney. I have made the relevant findings of fact and I do not need to canvass them again.

291 It is convenient to deal first with the question whether Edwards, with the support of Lloyd, in Sydney on 16 March, had actual or apparent authority to speak for the defendant in making promises which were intended to create contractual relations between TD and the State. In my opinion, the question is not critical in relation to Lloyd who, I think, made no representations of a promissory character beyond those which I have found were made by Edwards. The same question arises in relation to the formation of a contract in respect of anything of a promissory character which may have been said by Dowding in Perth on 18 March 1988. But here again, the question is not critical, in my opinion, because I have been unable to find that on 18 March 1988 Dowding repeated the promises made by Edwards on 16 March.

292 The State's approach is firstly to deny that any representations or statements were made at all. I have found that Edwards effectively promised TD that if it deposited $50M into Rothwells for a relatively short period, then the Government would continue to support Rothwells financially and would ensure that either Rothwells would repay the loan when it became due, or would undertake the repayment of the loan itself.

293 In that event, the State denies that Edwards had actual or apparent authority to make those promises on behalf of the State. It is pleaded that such statements were not made in the ordinary course of administering a recognised part of the Government of the State and, in the absence of statutory authority for them, they were incapable of giving rise to any enforceable legal obligation on the part of the State. It is said that because Edwards held the positions to which I have referred with the SGIC and GESB, his statements could only be regarded as having been made upon their behalf.

294 For TD, it is put that Edwards, as Chief Executive Officer of the Department of Premier and Cabinet, had a wider authority. He had a business card and otherwise purported to act on behalf of the State; his office was in the Capita Centre where the Premier was located; he took his instructions from Dowding, as Premier; he purported to speak on behalf of the State, and he involved Dowding directly by the telephone call he made from Sydney on 16 March. All of those facts were proved before me.

295 Similarly, so far as Dowding was concerned, it is put to me that the State clothed him with the power and authority to speak on its behalf and commit it by contractual promise. The contact he had with Anderson, for TD, at this time was as Premier, as head of the Government, speaking for the Government.

296 For the State, reliance is placed on Attorney-General for Ceylon v Silva [1953] AC 461, which case may be taken to express the law in relation to the authority of a public servant, whether the Premier, as a Minister of the State and the head of the Government, or the head of a department of the Government, to act for the State.

297 There are two aspects of the matter which may need to be considered. In the first place, there is the question of actual authority to be considered, but if that is lacking then, as I understand the law, the State may be committed to the actions of its servant or agent if it represents to the person dealing with the State that the individual has the authority to commit the State. Silva was a case which was concerned with the authority of the Principal Collector of Customs of Ceylon to sell goods held in bond for their owner. At 479 of the opinion of the Privy Council, the law is stated generally, as follows:

"It is a simple and clear proposition that a public officer has not, by reason of the fact that he is in the service of the Crown, the right to act for and on behalf of the Crown in all matters which concern the Crown. The right to act for the Crown in any particular matter must be established by reference to statute or otherwise."

298 It was held that in fact in that case actual authority had not been established. But it is noteworthy that while directly conferred authority under a statute will, of course, suffice, so may the actual conferral of authority by the State or by another official who was shown to have authority to commit the State. In Silva, the sale of the goods was authorised by the Chief Secretary, but he was not shown to have had any such authority. Of course, one bears in mind that in that case the goods to be sold were not the property of the State, but of the person for whom they were held.

299 In this case, I think Dowding was clothed with the authority of the State, as Premier, to direct the terms upon which the property known as the Perth Tech site might be purchased. There had been an informal decision-making process, involving not only the Premier, but the Minister for Budget Management, Mr Berinson, at which it was agreed that a loan to or deposit with Rothwells in the sum of $50M would be required of the successful tenderer before a contract would be entered into. Edwards was authorised to put this requirement, and he was authorised, I think, to offer the assurance that the money would be safe because Rothwells had the backing of the State financially and the State would ensure that Rothwells repaid the loan when it became due, or would undertake that obligation itself. These are the things that I have found that Edwards said in Sydney on 16 March. In my opinion, he had the actual authority of the State to give those undertakings. He had that authority because he had been given it by the Premier who was, himself, in fact, clothed with the authority to commit the State in that way.

300 In Silva it was held that not only was there a lack of actual authority, but there was no ostensible authority so as to bind the State. At 479 of the report their Lordships say:

"All 'ostensible' authority involves a representation by the principal as to the extent of the agent's authority. No representation by the agent as to the extent of his authority can amount to a 'holding out' by the principal. No public officer, unless he possesses some special power, can hold out on behalf of the Crown that he or some other public officer has the right to enter into a contract in respect of the property of the Crown when in fact no such right exists."

301 I think there was a holding out here, particularly so far as Edwards was concerned. I think Dowding was, as Premier and Treasurer, in a position to represent, on behalf of the State, that Edwards was empowered to put the requirement and give the undertakings to which I have referred. That was reinforced by Edwards' very position, and by Dowding's participation in the events which occurred on 16 March when he participated in the telephone conversation. Further reinforcement occurred on 18 March when, whatever precisely was said, Dowding did not resile from the commitments made by Edwards.

302 On this question of the validity of any contract made in March 1988 between Edwards for the State and Anderson for TD, I was referred by both parties to the decision of the High Court in NSW v Bardolph [1934] HCA 74; (1934) 52 CLR 455. The case concerned the validity and enforceability of a contract made by an officer of the Premier's Department, on the authority of the Premier of the State, with Mr Bardolph, a resident of South Australia, for the insertion of advertisements which were related to the activities of the Tourist Bureau of NSW, a department of the public service, in his newspaper . After a change of government, the State declined to be bound by the contract. Mr Bardolph sued.

303 The facts in Bardolph are not without their parallels to this case, where the contention is that the State entered into a contract, related to but not part of other contractual arrangements, for the sale of the Perth Tech site, for the deposit of $50M into Rothwells. There is a contention in par 57 of the statement of claim that the arrangements were linked and part of the one interrelated set of contractual agreements. But in my opinion that could not be made out and the case was not, indeed, presented in that way.

304 What was asserted was that an express oral agreement was made between the State, as I would find acting through Edwards, and TD, acting through Anderson, the terms of which were that if TD deposited $50M into Rothwells, then the State would continue to support Rothwells financially, to the extent necessary to ensure that Rothwells would repay the loan or, failing that, the State would accept the obligation of repayment. That offer was one, I think, established on the facts as I find them to be, and it was an offer made on 16 March 1988, although I am unable to find that it was repeated on 18 March 1988 by the Premier, Mr Dowding himself.

305 Nonetheless, it is clear that having obtained the funds from CPH, TD was prepared to accept what had been put and the contract was made, I find, when Anderson accepted the terms as between TD and the State for the deposit of the money, a process which commenced on 31 March 1988 and was completed by 13 April 1988, in reliance, as seems clear to me, upon the undertakings given which would secure the repayment of the funds. It follows that, a contract having been made in those terms by Edwards (with the support of Lloyd) with the authority, both actual and ostensible, provided by the instructions of Dowding, I reject the proposition advanced by the State that there was no intention to create a legal relationship or to impose or accept any legal responsibility so as to make those statements enforceable or actionable at law.

306 I have already held that Edwards and Dowding were, in my opinion, both acting with actual and ostensible authority. I need not here again elaborate on the reasons for that view, but in essence they are those expressed by the full High Court in Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, at 466 - 7 [36], where the Court made the point that the notion of apparent or ostensible authority of an agent, in that case an officer of a company, to deal with a third party depended upon the principal holding out the officer as having the necessary authority. Their Honours said:

"It is not enough that the representation should come from the officer alone. Whether the representation is general, or related specifically to the particular transaction, it must come from the principal, the company. That does not mean that the conduct of the officer is irrelevant to the representation, but the company's conduct must be the source of the representation. In many cases the representational conduct commonly takes the form of the setting up of an organisational structure consistent with the company's constitution. That structure presents to outsiders a complex of appearances as to authority. The assurance with which outsiders deal with a company is more often than not based, not upon inquiry, or positive statement, but upon an assumption that company officers have the authority that people in their respective positions would ordinarily be expected to have. In the ordinary case, however, it is necessary, in order to decide whether there has been a holding out by a principal, to consider the principal's conduct as a whole."

307 The echo back to the judgments in Bardolph is clear. The authority which will bind the principal is that actually or ostensibly conferred, and in a case such as this, without the necessity for an express representation by or on behalf of the State, but by the way in which the person with whom, on behalf of the State, the third party is dealing, is presented. In that regard, I have held that Edwards and Dowding had the trappings of the necessary authority adhering to them. The question was whether their ordinary authority would be expected to extend to a commercial transaction of the kind at issue here.

308 The next question therefore, I think, is that discussed in Bardolph, the validity of the contract, having regard to its subject matter and terms, and the question whether they fell within an ordinary part of the function of government so as to provide authority for those who purported to act for the State, absent any Cabinet approval (such as was employed to endorse the October 1987 rescue package), much less any statutory authority or Parliamentary approval. It is clear from the decision in Bardolph that the absence of such express authority will not necessarily be fatal to the validity of an agreement made in such circumstances as these, and it is clear also that the lack of a constitutional appropriation of funds to meet the liability being undertaken will not, of itself, be fatal.

309 Bardolph was, as has been seen, a case between a resident of one State and the government of another. It was, therefore, tried in the High Court. At first instance, Evatt J, at 474 of the report, said:

"I am satisfied that, in the absence of some controlling statutory provision, contracts are enforceable against the Crown if (a) the contract is entered into in the ordinary or necessary course of Government administration, (b) it is authorised by the responsible Ministers of the Crown, and (c) the payments which the contractor is seeking to recover are covered by or referable to a parliamentary grant for the class of service to which the contract relates. In my opinion, moreover, the failure of the plaintiff to prove (c) does not affect the validity of the contract in the sense that the Crown is regarded as stripped of its authority or capacity to enter into the contract."

I have referred to the last-mentioned aspect. In essence, the State does not have to have the money on hand to meet its contractual commitments when they are made if it can meet its contractual commitments as they fall due.

310 From Evatt J, the matter went on appeal where the approach taken by his Honour was endorsed by the full High Court. Rich J, speaking of the case before him where contractual capacity was not regulated by statute, said, at 495:

"A proper officer of the Premier's department receives from his permanent head, whom he is bound to obey, instructions to carry into effect such orders as he receives from the Premier's secretary as on the Premier's behalf. When he acts on an order so given through what is thus established to be a regular channel of communication, it must be assumed, until the contrary is shown, that he acted with the Premier's actual authority. In the next place, the Premier's position is such that a transaction otherwise within the competence of the Crown which he carries through and which is not disowned by his administration, particularly when it pertains to his own department, must be treated as the transaction of the Crown. The conduct of government business would otherwise be impossible."

311 The key, of course, is not only that the responsible minister in fact authorised the transaction, as in this case, but that, as Evatt J put it, "the contract is entered into in the ordinary or necessary course of government administration" or, as Rich J put it, the transaction is "otherwise within the competence of the Crown". The same points, precisely, were made by Starke J, at 502 - 3.

312 Dixon J, at 507, again pronounced the advertising contract valid and enforceable against the State despite the absence of parliamentary appropriation of funds and express statutory authority. His Honour said that, "It is a matter of primary importance that the subject matter of the contract, notwithstanding its commercial character, concerned a recognised and regular activity of Government in New South Wales." At 508 his Honour concluded:

"No statutory power to make a contract in the ordinary course of administering a recognised part of the government of the State appears to me to be necessary in order that, if made by the appropriate servant of the Crown, it should become the contract of the Crown, and, subject to the provision of funds to answer it, binding upon the Crown."

313 It is asserted by the defendant that it could not be regarded as part of the ordinary functions of officials such as Dowding and Edwards to commit the State potentially to pay $50M to TD on the basis of oral assurances and a telephone discussion, when the $50M was not being provided to the State but to a private merchant bank with liquidity problems, which the State was endeavouring to support. However, to my mind that misses the point. The history of the matter, I think, establishes that the State had made a commitment, for reasons concerned with the State's economic wellbeing, to the support of Rothwells. At the time in question, then, it had, as a commercial activity of government, committed very substantial funds, in one way or another, to Rothwells and had undertaken a very substantial liability, potentially at least, in relation to those public moneys.

314 I see no reason to hold that in 1988, as much as today, it was not part of the ordinary activity of government to enter into commercial transactions, at least those which may, as I think this was, reasonably be supposed to be for the benefit of the State. The contract was made in the terms that I have described. It was valid and enforceable, subject to one consideration raised by way of defence.

315 The defendant relies on s 4 of the Statute of Frauds 1677 (Imp) and asserts that if, contrary to its other contentions, a contract such as I have found was made, then it is unenforceable because it was oral and there is no memorandum or note recording its terms. It is, as I have found, a contract which was entirely oral. The Statute of Frauds was part of the law inherited on the establishment of the colony of Western Australia. It remains part of the law of this State.

316 No doubt the rationale is clear enough. Contracts of guarantee are often required by the stronger of two bargaining parties, such as commercial financiers, who may require collateral security by way of guarantee when advancing funds, particularly in a business context. It is arguably right that the law should only allow such agreements to be enforceable where there is abundant clarity as to their terms. When oral agreements of this kind are made, as in this case, it is often difficult to discern precisely what is the nature of the agreement and when it may be enforced, although here, I hasten to add, it was established that initially there was a complete failure by Rothwells to comply with its obligations to repay the moneys advanced as they fell due.

317 So far as material, s 4 provides:

"And ... noe action shall be brought ... whereby to charge the defendant upon any speciall promise to answere for the debt default or miscarriages of another person ... unlesse the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writeing and signed by the partie to be charged therewith or some other person thereunto by him lawfully authorized."

318 If the section applies, it is obviously fatal to this head of claim, not by making the contract void or invalid, but by making it unenforceable against the State, which declines to be bound. The plaintiff makes a number of answers to the application of the section. In the first place, as I have mentioned, it asserts that the contract made was not a contract of guarantee. Properly construed, it says the contract was not one to answer for the debt or default of another, but a separate contractual agreement with its own obligation. It describes it as an agreement by the State to indemnify TD against loss arising out of its loan to Rothwells. It says that that is of a different character and the obligation to indemnify arose once loss was occasioned by the making of the loan, regardless of any continuing liability on the part of Rothwells to repay the debt.

319 I accept that such a distinction may be drawn but not, in my opinion, in this case. The contract made was, so far as the State is concerned, a promise that it would ensure that Rothwells repaid the loan when it became due, or, failing that, it would undertake the obligation of repayment itself. Both terms constitute a guarantee to support the primary liability of Rothwells to repay. Only if Rothwells failed to do so would the State's liability arise. The State did not assume the primary liability to see that TD was repaid. It did not undertake simply to indemnify TD against any loss it might suffer as a primary liability it assumed for itself, in parallel with the primary liability of Rothwells. On the contrary, the State undertook to support the primary liability of Rothwells.

320 In that event, TD asserts that because it relied upon the assurances given in making the advance to Rothwells, the State is estopped from relying on the Statute of Frauds. I confess that I do not understand the proposition. This is not a form of estoppel for which I can find any support in the decided authorities.

321 Finally, for TD it is put that the proper law of the contract was the law of New South Wales, in which state the Statute of Frauds no longer applies. Again, on both sides the proposition was referred to merely in passing, and the argument was not developed to any extent.

322 The question of the proper law of the contract of guarantee is one which, in my opinion, may be readily resolved by the application of the ordinary principles by which the proper law of the contract will be determined. The question is, in this case, uninformed by any express agreement by the parties, what law they intended should govern the contract. The proper law of the contract will generally be the law of the place with which the contract has the closest connection, either because it was made there or because it is to be performed there: Bonython v The Commonwealth [1948] HCA 2; (1948) 75 CLR 589 per Latham CJ at 601 - 2.

323 It is unclear to me where the contract was finally made by the final formation of the agreement between the parties that the State would guarantee repayment of the debt by Rothwells. Certainly that contract was not made in NSW on 16 March 1988. I have held that there was a telephone conversation with Dowding, who was here in Perth, on 18 March, but there does not appear to have been any direct communication of the fact of agreement on that day. Contracts were signed by Anderson, on behalf of TD, and by Lloyd, on behalf of Rothwells, by which TD agreed to make available to Rothwells, for a period of 12 months, a commercial bill discount facility in the sum of $50M.

324 But that is not the contract with which we are here concerned. As to that agreement, there does not appear to be any clear evidence as to when it was made or where the final agreement occurred. I have said that the agreement must have been made by 31 March 1988 when the first instalment of the deposit into Rothwells was made.

325 There is, I think, clear evidence that the guarantee, if called upon, would be honoured in WA, either by the State ensuring that Rothwells had the funds to enable it to repay the $50M, or by directly making that payment itself. I am satisfied, in those circumstances, that the correct conclusion is that the proper law of the contract of guarantee is the law of WA. That, I think, is the intention to be attributed to the parties. It follows that the Statute of Frauds is applicable and the plaintiff's claim to enforce the contract made in March 1988 and to recover an award of damages for its breach cannot succeed.

326 The plaintiff puts a case separately from the contractual claim, relying on the statements made by Edwards and supported by reference to Rothwells' half-yearly audited accounts by Lloyd, that Rothwells would provide a safe investment for the requested $50M because it was basically sound and merely suffering from temporary liquidity problems, hence the State's willingness to stand behind and financially support Rothwells through its current difficulties. I have found that that was the general tenor and effect of the statements made on behalf of the State at that time. Reliance was also placed on the statements allegedly made by Dowding on 18 March, but of course I have been unable to make findings with any precision as to what was said on that occasion.

327 It is argued for the plaintiff that these statements were false because Rothwells did not then have the capacity and has not since had the capacity to repay the advance made by TD. Further it is asserted that the audited accounts for the half year period ending on 31 January 1988, upon which it is clear Edwards and Lloyd relied, did not show the true position. The bad and doubtful debts of Rothwells it is said, well and truly exceeded those listed in the accounts and when added to the problems and lack of appropriate documentation of the receivables, the true consequence was that at that time Rothwells had an incapacity to meet its debts as they fell due and was insolvent.

328 It is asserted that a duty of care arose in all the circumstances and was breached by the State, which is liable for the conduct of both Edwards and Lloyd. In respect of the latter it is said that it matters not that at that time he was not formally a civil servant but was committed essentially to his role as Managing Director of Rothwells. I think, in passing, that the latter contention is right in the context of a claim for damages for negligent misstatement, given the role of the Premier in particular in the process by which Lloyd came to go with Edwards to Sydney.

329 If the State is to be held liable for the negligent misstatements of these individuals, it will of course be a vicarious liability. In the circumstances I am satisfied that it is right to regard Dowding, Edwards and Lloyd as the instruments or agents of the State in relation to this cause of action, for whose tortious actions and statements the State may be rendered vicariously liable: Western Australia v Watson [1990] WAR 248.

330 It is now abundantly clear that liability can be imposed for economic loss in negligence and that negligent misstatements which cause such loss may be regarded as a category of negligence giving rise to liability in the ordinary way of that tort. In other words, the circumstances which give rise to a duty of care in relation to the making of statements and the circumstances which will lead to the conclusion of breach may be identified. They were comprehensively discussed by Barwick CJ in Mutual Life & Citizens' Assurance Co Ltd v Evatt [1968] HCA 74; (1968) 122 CLR 556, particularly at 569 - 574. What was said there has been endorsed in a series of cases in the High Court since then. One may refer to such cases as Shaddock & Associates Pty Ltd v Parramatta City Council [No 1] [1981] HCA 59; (1981) 150 CLR 225; San Sebastian Pty Ltd v The Minister [1986] HCA 68; (1986) 162 CLR 340; Esanda Finance Corp Ltd v Peat Marwick Hungerfords [1997] HCA 8; (1997) 188 CLR 241 and Tepko Pty Ltd v Water Board [2001] HCA 19; (2001) 206 CLR 1.

331 In my opinion those cases establish, relative to the circumstances of this case, that the cause of action for negligence occasioning economic loss as a result of a negligent misstatement, may be maintained where the plaintiff establishes that the defendant knew or ought reasonably to have known that the information being provided or the statements being made were of a kind which would be likely to lead the plaintiff to enter into the transaction contemplated by the parties and which was in fact entered into, and that the plaintiff would likely make that commitment wholly or in part in reliance upon the advice given or statements made, thereby incurring the risk of economic loss if the statements should be untrue or the advice unreliable.

332 In my opinion, given that the State may be vicariously liable for the conduct and statements of Edwards and Lloyd on 16 March 1988 and of Dowding on 18 March 1988 to the extent, limited though I find it to be, that he reiterated or did not resile from what Edwards and Lloyd had earlier said, the relevant duty of care did arise in this case.

333 The statements about the worth and soundness of Rothwells were clearly a part of the inducement to obtain the agreement of TD to deposit the $50M in that merchant bank and they were intended as such. It is clear that Edwards and Lloyd understood that those acting for TD were understandably interested in the underlying soundness of Rothwells despite its liquidity problems. They were assured of its soundness and that was shored up by what I have found to be the unenforceable guarantee which was provided by the State. In those circumstances I hold that the duty arose because those acting for the defendant assumed the responsibility to take reasonable steps to ensure the reliability of the information provided.

334 The burning question in this case, I think, is not whether there was in the circumstances a duty resting on the defendant, but whether it was breached, and that is not established merely by proving that the speakers misrepresented the position about Rothwells. In fact as Barwick CJ put it in Evatt at 573:

"But, it should be emphasised, the obligation of the speaker is no more than to use reasonable care in the circumstances. He is not in breach merely because his communicated information is incorrect or his proffered advice erroneous. Speaking in the relationship whose elements I have indicated does not mean that he warrants the accuracy of his utterance. He is merely required to exercise reasonable care in preparing himself to speak, in conveying information, in the exercise of his judgment and in expressing the information or advice which he chooses to convey."

335 I have discussed the evidence in relation to what was learned of Rothwells, and when, by Lloyd and by Edwards at some length in that section of the judgment dealing with the deposit of the $50M and what was learned about Rothwells by those representing the State between the rescue weekend and the completion of the deposit on 13 April 1988. I have expressed an incapacity to make detailed findings against the State as to the knowledge possessed by those of its servants and agents for whose conduct and utterances it may be held vicariously liable.

336 In the final analysis, in my opinion, it cannot be said that the reliance at the material time upon the half-yearly audited accounts for Rothwells was unreasonable, or that the information those accounts contained should reasonably have been considered to be unreliable or incomplete. There is no evidence sufficient to satisfy me to the required standard that at the material time Edwards and Lloyd ought to have known, if it was then the case, that Rothwells had more than what as been described as a liquidity problem, but that it had a substantial asset deficiency, or generally that it was insolvent, and that investment in it was unsafe or unduly risky. In my opinion the breach of duty is not established and this head of claim may not succeed.

Statute of Frauds Amendment Act 1828 (Imp)

337 It is convenient in any event now to deal with the defendant's plea that the representations relied upon by the plaintiff were "of a nature concerning the character, credit, ability, trade or dealings of Rothwells" and therefore unenforceable unless in writing, signed on behalf of the defendant as required by the Statute of Frauds Amendment Act 1828 (Imp), s 6. TD admits that the representations concerning the financial soundness of Rothwells bore the character pleaded. It asserts that the section provides no defence to the negligent misrepresentation claim, relying upon passages from the judgments in Evatt by Barwick CJ at 580, Taylor J at 603 and Menzies J at 618. Their Honours all referred to a line of earlier English decisions to the effect that the Act was confined to fraudulent misrepresentations or deceit.

338 Apart from the defendant's assertion that the section defeated the negligent misrepresentation claim and the respondent's assertion, which I understand to be that it should be read down so as not to apply when the cause of action relied upon is the tort of negligence, albeit by a false representation, rather than a cause of action in deceit or fraudulent misrepresentation the parties advanced little argument upon the question of the application of s 6.

"VI. And be it further enacted, That no Action shall be brought whereby to charge any Person upon or by reason of any Representation or Assurance made or given concerning or relating to the Character, Conduct, Credit, Ability, Trade, or Dealings of any other Person, to the Intent or Purpose that such other Person may obtain Credit, Money, or Goods upon [sic], unless such Representation or Assurance be made in Writing, signed by the Party to be charged therewith."

340 In the circumstances I have not gone back into the history of the legislation, but I suppose the policy behind it to be similar to that which appears clearly to have been given effect in the original Statute of Frauds 1677, the desire to prevent action and dispute in circumstances which may be productive of great contention between the parties, unless the matter relied upon can be established with clarity. The section is of course an enactment independent of the other provisions of the 1828 Act in which it stands apparently alone. Certainly much of the Act is concerned with the enforcement of contracts or their breach, but there is nothing in s 6 to indicate that it is so confined by reference to the cause of action. The term "to charge any Person" is in my opinion apt to refer simply to an action against a person from whom a remedy is sought. I see no reason why the cause of action should not be the tort of negligence.

341 There are however, difficulties in applying the section to such a tort. In the first place a "Representation or Assurance" within the meaning of the section must, I would have thought, be oral because under the section it will be actionable if in writing. A negligent misrepresentation may of course be made wholly or in part by conduct and so if it applies to this tort at all, the section would not appear capable of application in a case where that was so. Further, the action which is barred is that which seeks to charge another upon or by reason of a representation of the character described, "to the Intent or Purpose that such other Person may obtain Credit, Money, or Goods upon". Nothing follows the word "upon" in the section, but I think it must mean "upon the strength of the representation or assurance". It does seem to me to be possible to describe a representation of the kind pleaded here as being a representation made with the intent of obtaining money (the $50M obtained in the sense that it was caused to be paid to Rothwells) by relying upon or by the use of the representation.

342 In my view the cause of action for negligent misrepresentation might, in the circumstances raised here, subject only to the question whether the Act is to be confined to actions for deceit or fraudulent misrepresentation, be barred by the operation of s 6 of the 1828 Act. But, the cause of action pleaded is simply not maintainable in my opinion because the duty of care which I have found rests upon the defendant, was not breached by the representations which I have found were made by those for whom I would hold the State vicariously liable. I prefer not to reach a final conclusion on the 1828 Act because it was not fully argued.

343 Before finally departing from this particular head of claim, I should refer briefly to an argument which developed between the parties as a result of observations made for TD in closing. For the State it is asserted that the plaintiff sought to go outside its pleaded case in negligence, but I do not think it did so, having regard to the way I have understood the plaintiff's case was presented and fought at trial. To the extent that there is a point to be made, it seems to me to flow rather from a somewhat convoluted pleading style adopted in the statement of claim, than to reflect any substantive attempt by the plaintiff to ambush the defendant by seeking to make a new case in closing.

344 I have found it sufficient to describe broadly the allegations of misrepresentation relied upon as being concerned with the soundness financially of Rothwells despite its perceived liquidity problems, a soundness reflected in the half-yearly independently audited accounts. Part of that soundness might also be said to have been related to the State's prior financial support for Rothwells and its ongoing commitment to the bank in that way. The defendant argues that the plaintiff's pleading only taxes the defendant with responsibility for unqualified representations in respect of the defendant's commitment to Rothwells, but not in relation to Rothwells' financial position.

345 In my view the point is without substance. The case pleaded by TD was always that the statements negligently made were that Rothwells was basically a financially sound institution which would have the capacity to repay the $50M which it was requested should be deposited in the bank by TD. That position, it was represented, was reflected in the half-yearly accounts which were independently audited by a leading firm of auditors and could be relied upon. Hence, it was asserted, the government had and was financially supporting Rothwells and was prepared to continue to do so. No injustice was done to the State by my consideration of the case expressed in those terms.

346 There is an extension of the plaintiff's claim in negligence. It is put that if the representations made in March were not false and negligently made at the time when they were made, it became clear to those for whose negligence the State is vicariously liable that the representations about the financial worth of Rothwells and about the fact that the $50M was sought to retire the GESB commitment, soon became false, certainly before 13 April, by which time the whole of the money had been advanced to Rothwells by TD. The contention is that the State came under a duty to warn TD that the basis upon which it was proposed that TD should advance the money to Rothwells no longer held good, to the knowledge of those whose knowledge was attributable to the State. That duty of care was breached because none of Lloyd, Edwards or Dowding told TD that the representations made in March were or had become false. It is asserted that TD suffered loss because it made all, or some part of, the $50M available to Rothwells when it would not have otherwise done so had the true position been known.

347 For the State it is put, as I understand the submissions, that it may be accepted that those in government concerned with the $50M deposit and the circumstances in which it was being made, would have a continuing duty to advise TD of any reliable information which would suggest that the financial soundness of Rothwells was not as it had originally appeared and that the money may not be able to be used for the purpose for which it was originally sought. But, it is submitted, that could only be a duty to provide information relevant to the circumstances under which the $50M was to be deposited, which actually came to them in a reliable form. I think this must be right.

348 It is not put for the plaintiff that the defendant owed a duty by its servants or agents to undertake its own inquiries and investigations. I think also that Lloyd's position was similar to that described above. He could have no more than a duty to pass on information which came to him. It is unnecessary, if the duty is put no higher than that, to consider whether the proper view ought to be that the information acquired by Lloyd would be in his capacity as Managing Director of Rothwells and not as an agent of the State, a point firmly made by the defendant.

349 I have discussed the available evidence in the section of the reasons concerned with the period up to and indeed beyond 13 April 1988 under the heading "The $50M is deposited and more is learned about Rothwells". It will be evident from what I have written there that I have been unable to find the existence of facts which would demonstrate a breach of the duty formulated above. In short, the State is not established to have been negligent in this regard.

350 TD contends that in the circumstances of default by Rothwells in repaying any portion of the $50M which I have discussed generally in the section of the judgment dealing with the events after April 1988 and the PICL deal, Anderson, for TD, sought and obtained the assurance of Dowding by late September 1988 that the State would see to it that TD was repaid in part out of the proceeds of the PICL deal (to the extent of $19.5M) and that the balance of $30.5M would be repaid by 31 March 1989. For TD it is contended that such assurances were made, not only in September 1988, but also by Dowding in Derby when Anderson met with him there on 16 October 1988.

351 The way in which this claim is formulated is that a separate oral contract embodying these promises, for the consideration that TD would not make a formal demand for repayment upon Rothwells, thereby jeopardising the PICL deal, was made between TD and the State quite apart from and independently of the deed of variation, embodying in substance those terms of repayment, which was executed by Anderson for TD and Lloyd for Rothwells on 17 October 1988.

352 To the extent that such promises were made by Dowding, I would have no doubt that, generally for the reasons given in relation to statements made in March 1988, Dowding had as Premier been clothed by the State with actual authority, or at least ostensible authority, to make such statements on its behalf. The State was interested in closing the PICL deal, which had an obvious financial benefit in connection with the State's exposure to Rothwells. It was keen therefore to see that that deal was not jeopardised and it was perceived that if Anderson made formal demands upon Rothwells for repayment of its indebtedness to TD, the PICL transaction would in all probability not proceed. Dowding was, as Premier, in my opinion, actually invested with the authority to do what could be done to advance the State's financial interests in that way.

353 In any event, I think, for reasons similar to those already given in relation to the events of March 1988, Dowding had the ostensible authority to make statements of the kind alleged. The State represented that he had that authority because it allowed him to speak about these matters as Premier, as the head of the Government. I do not propose to add to the discussion of the authorities such as D.A. Silva, Bardolph and Pacific Carriers. The conclusion to which I come is that Dowding had the necessary authority to speak for the State and to commit it contractually in a matter connected with the commercial and financial interests of the State in October 1988, as in March 1988.

354 As to what was said and whether a contract was made, while Dowding assured Anderson that he would instruct Rothwells to enter into the deed of variation, I am not satisfied on the balance of probabilities that leading up to the meeting in Derby, Dowding promised that the Government would continue to support Rothwells financially and, importantly, that it would ensure that TD was repaid the money it had advanced to Rothwells. In fact, in my opinion, all the evidence points to the view that when there was an abandonment on behalf of TD, effectively on Anderson's instructions, of the proposal that satisfactory assurances would be obtained from the State, the focus for the plaintiff was directed to obtaining execution of the deed of variation. Dowding provided the assurance that the Deed would be entered into, but I am unable to find that he went further.

355 As to the meeting in Derby, I have discussed the evidence in detail and again I have been unable to find that Dowding's assurances for the State went beyond the provision of assistance to obtain the execution of the deed of variation. Indeed, as I have observed, Mr Anderson's evidence went reliably no further. A contract of the kind relied upon, one independently of the deed of variation, by which the State in return for TD's forbearance to claim immediate repayment of the $50M, would ensure that Rothwells honoured its commitment under the deed of variation in full, was not made.

356 Had I been of the contrary view, I must say that I would have found it difficult to properly categorise the nature of the agreement. As pleaded, it was said to have involved a promise that the State would "ensure" that the moneys were paid by Rothwells, as would be required under the deed of variation. It is not contended that the promise of the State was to put Rothwells in funds to enable that to occur. It is said that the PICL deal, in which the State was involved as a contracting party, would provide funds which would be injected by Connell into Rothwells, thus enabling it to repay the money owed to TD.

357 I can see nothing in those contentions which sounds like the assumption by the State of the primary liability to indemnify TD should it be caused loss arising out of the new relationship with Rothwells under the deed of variation. It seems that, without there being in any way a specific undertaking, the contention for TD is that the primary liability would remain with Rothwells, the State was independently undertaking an obligation to "ensure" that Rothwells performed. To my mind that is the language of guarantee.

358 In that event, there being no note or memorandum recording the terms of the agreement, it would if made, have fallen foul of the Statute of Frauds 1677 (Imp) s 4 and would, for that reason, have been unenforceable.

359 The defendant pleads that if the contract relied upon by the plaintiff was made in October 1988, its terms would be such that it should be taken to have replaced the contractual obligation undertaken in March, thereby discharging the former agreement. It is unnecessary for me to deal with this contention, but I do observe that the March contract was simply one which broadly guaranteed the repayment to TD of the $50M injected into Rothwells. I see no reason why that could not be relied upon, were it enforceable, together with the contract which allegedly contained more specific obligations in respect of the obligation of payment under the deed of variation, were that contract made and enforceable.

360 Of course, as I have found, Rothwells did not meet its obligations under the deed of variation and loss was occasioned to TD thereby. Having regard to the fact that this judgment is concerned with liability, were my view about that different from the conclusions which I have thus far expressed, I would not in any event at this juncture, endeavour to quantify the plaintiff's loss.

361 Again TD advances a claim for negligent misrepresentation in relation to the statements made by Dowding on behalf of the State for which the State is alleged to be vicariously liable. I would accept, as I think I have already indicated, that in relation to Dowding's statements in October in Derby particularly, the State would be liable for his negligence, and I do not need to restate my understanding of the relevant law as to when such a cause of action will be maintainable.

362 The representations relied upon are that "the Government was committed" to ensure that the deed of variation to be entered into by TD with Rothwells would be honoured in its terms, ie, the Government was committed to ensure that Rothwells would pay TD the sum of $19.5M by 28 October 1988 and a further $30.5M by 31 March 1989. It is asserted that further representations were implied that there were reasonable grounds to believe that those payments would be made. So far as the plaintiff's case relies upon implied representations, I think it is more accurate to put it that these constitute the asserted negligence when read together with the assertion of breach of duty, because it is contended that Dowding failed to made any adequate inquiry as to whether Rothwells had or would have the capacity to pay TD the sums agreed upon in terms of the deed of variation.

363 I accept that the State would owe TD a duty of care in the circumstances pleaded, because it would be apparent that in holding his hand and entering into the deed of variation, Anderson, for TD, was relying upon this as being TD's best opportunity to be repaid.

364 The difficulty for TD in relation to this head of claim is basically my incapacity to find that Dowding said that the Government was committed to ensuring that the payments required by the deed of variation would be made by Rothwells. I am simply unable to find that any such representation was made, nor is there any reason to suppose that Dowding might not reasonably have thought that sufficient funds could be made available out of the PICL deal by Rothwells to enable the terms of the deed of variation to be met, particularly as the $30.5M was not to be repaid until 31 March 1989, with Rothwells being supposed to have the advantage of trading in the meantime. This cause of action is, in my opinion, not made out.

365 Before leaving it, I should say that, in any event, it seems to me that on the basis of the evidence which I have discussed, having regard to the events which occurred after the middle of October 1988, it is not at all clear to me that had TD not proceeded with the deed of variation, but had it, in October 1988, forced the liquidation of Rothwells, and pursued its claim in that context, it would have recovered more from Rothwells than was eventually recovered in the course of the liquidation which ultimately occurred. In that event, it is not clear to me what loss the plaintiff might establish in relation to the representations of October 1988 upon which it relies.

366 Finally, I note also that in relation to the claim based upon the representations allegedly made in October 1988, the defendant pleads that they are not actionable having regard to s 6 of the Statute of Frauds Amendments Act 1828 (Imp). I should say that, having regard to the reasons previously given in relation to that contention made in respect of the representations made in March 1988, I would be inclined to hold that the section is not applicable to the representations pleaded, because, even if of the kind described in s 6, the representations relied upon were not made for the purpose of the State obtaining (even in a wide sense) credit or money.

367 The plaintiff advances, separately, claims in estoppel based on the representations allegedly made in March, and September and October 1988. I need not further consider this claim so far as it is based on the representations alleged for September and October of 1988 because, as I have discussed above, I have been unpersuaded on the balance of probabilities that the representations were made. However, I have found that in March it was promised on behalf of the State that if TD deposited $50M for a period of six or twelve months into Rothwells, the Government would provide financial support to Rothwells so as to ensure that Rothwells would repay the loan when it became due, or the State would undertake the repayment of the loan itself. I have found that a contract was orally made in those terms, a contract of guarantee, unenforceable against the State because of the operation of s 4 of the Statute of Frauds 1677 (Imp) and the lack of a note or memorandum recording the terms of the contract.

368 At this point, TD asserts that those representations having been made, and that TD having relied upon them in making the deposit of $50M from 31 March 1988 to 13 April 1988 inclusive, to its detriment in that the assurances were not fulfilled, causing TD to suffer financial loss, the State is estopped from denying the obligations represented by the assurances it gave to ensure that Rothwells had the capacity to repay TD or to undertake that task itself.

369 I think, in relation to promissory estoppel, Australian law has not progressed beyond what I think is the classic statement of the content of the cause of action in the judgment of Brennan J in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387, at 428 - 9, where his Honour said:

"In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff's reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs."

370 At first blush, that sounds like this case. TD, in the person of Anderson, was led by those acting for the State to assume that the State, in one form or the other, would guarantee the discharge of the debt to Rothwells upon the deposit of the $50M. That was represented to be the position of the State, and TD made its deposit in reliance on that being the position. The exchange that occurred between those representing the parties made it clear to those whose knowledge was the knowledge of the State that the assurance that the money would be repaid was an important consideration upon which TD made its deposit. The promise is unfulfilled, to the obvious detriment of TD, which now claims relief in the form of a declaration that the State is estopped from resiling from the assurances which I have found were given.

371 In truth, however, the plaintiff's claim is for damages for the breach of the contract of guarantee, an outcome which I have held to be unavailable because of the operation of s 4 of the Statute of Frauds 1677 and the lack of writing which, it will be recalled, at the time was sought for TD, but expressly refused.

372 The plaintiff does not, I think, grapple with the point that the consequence of upholding the plea of estoppel would seem to me to be tantamount to a declaration that there is an enforceable contract of guarantee despite the operation of the Statute of Frauds. If the only relief available is the simple declaration that the State is estopped from resiling from the assurances given by way of guarantee, then it would remain the case that the assurances, upon their acceptance and undertaking by TD of the process of deposit of the $50M, would still constitute an oral contract of guarantee unenforceable at law.

373 In the defence and counterclaim, par 48A, the defendant makes a plea to that effect, asserting that "accordingly, no action can be brought in respect of either alleged estopped because there is no note or memorandum sufficient to satisfy the Statute of Frauds 1677".

374 The plaintiff replies to that pleading, effectively by asserting that because Edwards, for the State, maintained the promise by way of guarantee, merely declining to put it in writing, and because TD relied, to its detriment, upon that representation, "the defendant is estopped from relying on the Statute of Frauds 1677. In addition, there is a plea that the proper law governing the transaction is that of New South Wales, but I have already expressed the view that in my opinion the proper law governing the transaction was the law of this State. It cannot be an effective plea that a party is estopped from relying upon the statute law which would otherwise govern the enforceability of the contracts said to have been made. But the plea certainly crystallises the point that this is the effect of what, under the heading of estoppel, TD seeks should be the result.

375 In Waltons Stores the case turned upon certain negotiations for a lease of land to the defendant by the plaintiff, who was to demolish a building and construct a new one to the defendant's requirements. The plaintiff, who was the owner of the land, made known to the defendant, through its solicitor, that it did not wish to demolish the building and arrange reconstruction until it was clear that the lease would go ahead. By way of conclusion to the negotiations as to the terms of the lease, the plaintiff's solicitor forwarded to the defendant's solicitor an executed lease, and the plaintiff began to demolish the building. However, the defendant had second thoughts, and although it was aware that demolition was proceeding and that building work would then commence, it did not execute the lease, but on the contrary finally advised that it did not propose to proceed to lease the land.

376 It was held, at first instance and on appeal ultimately to the High Court, that although there was no lease and no agreement for a lease, the defendant was estopped from denying that it was bound to take and execute the lease.

377 By s 43A(1) of the Conveyancing Act 1919 (NSW), the owners of the land could not sue upon the agreement for the lease because such a contract was unenforceable unless in writing or evidenced by a signed note or memorandum. That was held to provide no impediment to reliance upon the equitable estoppel, which, it was held, was not directly a process by which, in that case, a contract was created and held to be enforceable, although otherwise unenforceable at law: see per Brennan J at 432 - 3, Deane J at 445 - 6, and Gaudron J at 464. With those judgments, the other members of the Court, Mason CJ and Wilson J, expressed their agreement at 408.

378 However, the assumption which founded the application of the doctrine of estoppel was that there was or would be an executed lease, thus satisfying the requirements of the Conveyancing Act. As Brennan J put it at 432:

"If the true inference to be drawn from the facts is that Waltons induced the Mahers to assume that a binding contract had come into existence, the assumed contract was a written contract."

Deane J said, at 446, that the assumption upon which the estoppel operated was that there was a binding, in the sense of valid and enforceable, agreement to lease, and, at 464, Gaudron J made the same point by saying that the assumption was that the agreement was duly executed by the proposed lessee.

379 I think, in truth, that is quite a different situation from that which is relied upon by the plaintiff here, in circumstances where the assurance in the nature of a guarantee was expressly oral and expressly not to be recorded in writing. In that circumstance, as was held in the House of Lords in Actionstrength Ltd v International Glass Engineering IN.GL.EN SpA [2003] UKHL 17; [2003] 2 AC 541, the doctrine of estoppel cannot be applied so as to defeat the operation of s 4 of the Statute of Frauds, rendering unenforceable a promise by way of guarantee made orally, if, as in this case, there is no other element to the estoppel claimed than that the creditor has acted to its detriment on the basis of the guarantor's oral promise. In my opinion, the plaintiff cannot rely upon promissory estoppel in this case.

380 I have discussed the events after Derby and up till the end of 1988 in some detail. I have not found it necessary to deal with evidence about a conversation between Dowding and Anderson alleged to have occurred in April 1989. The plaintiff originally pursued claims arising out of these events, but they have been abandoned and the present relevance of the events after Derby and up to the execution of the deed of release dated 30 December 1988 arises out of the pleading by way of defence.

381 The defendant relies on the deed in both its operative aspects. It relies on the acknowledgment that no representations were made concerning the solvency of Rothwells or otherwise in relation to the deposit by TD of money with Rothwells by the agents of the State, and that in making that deposit TD did not rely upon any such representation. Further, the State relies upon the release, which it contends, on the proper construction of the deed, was provided in relation to any claim against the State arising out of the deposit of the $50M, whether the liability asserted be directly that of the State or a vicarious liability arising out of the conduct of the agents of the State expressly released.

382 It is also alleged that the events and exchanges, particularly between Wran, acting for the State, and Anderson, acting for TD, resulted in an agreement between the parties that, in consideration of the completion of the Westralia Square transaction, TD promised not to sue the defendant in respect of any alleged liability arising out of the deposit into Rothwells of the $50M. The deed of release was, it is asserted, entered into pursuant to the release agreement so made. It is therefore contended that the plaintiff is barred from pursuing any cause of action by proceedings against the State, regardless of the proper construction of the deed.

383 The defendant counterclaims for the rectification of the deed by the insertion of the phrase "State of Western Australia or" between the words "against" and "any" in the second line of cl 3 of the deed, and by the insertion of the phrase "including the State of Western Australia" between the words "herein" and "shall" in the first line of cl 5 of the deed. That claim is made if the Court does not agree that, on a proper construction of the deed, TD is estopped from pursuing any cause of action against the State.

384 There is a further counterclaim for the specific performance of the release agreement which, it is contended, contained an implied term breached by TD requiring it to act in good faith to ensure that the agreement to release the State was carried into effect in the deed of release. By the pursuit of this action, it is contended that the implied term of good faith was breached, causing loss and damage to the defendant incurring the costs of its defence of the action and the costs of its counterclaim for rectification of the deed, all of which are claimed.

385 Of course, I have found only one cause of action made out, that for breach of the contract made in March 1988. But I have also found that that contract is unenforceable, pursuant to s 4 of the Statute of Frauds 1677 (Imp) because it is a contract by way of oral guarantee. It is therefore strictly unnecessary that I should consider whether, by way of defence, TD is estopped and barred from pursuing any cause of action against the State. However, the counterclaim relies on the deed, aided by the claim for rectification required, together with a breach of the oral lease agreement in the claim for damages which is made. So the issues raised by this pleading must be dealt with.

386 The plaintiff, by way of reply, asserts that the true nature of the release agreement was that Anderson and TD agreed to release the Ministers and instrumentalities of the State, but not to release the State itself. That was agreed, it is asserted, because Wran threatened that if that agreement was not made, the Government would stop the SGIC and GESB from completing the purchase of Westralia Square Stage 1 from Sharland and Skeat. So it is pleaded that a more limited form of agreement was made, which is reflected precisely in the terms of the deed of release, which was only to become effective when Dowding provided Mr Anderson with an acceptable proposal for repaying the advance made by TD.

387 In any event, the plaintiff pleads that the threat made by Wran constituted illegitimate pressure to make the agreement because Dowding was proposing to use, improperly, his authority as Premier and Treasurer, to prevent the Westralia Square transaction being completed unless the agreement was made. This was illegitimate pressure and, the contract having been made under duress or as a result of the pleaded unconscionable conduct on the part of Dowding and the State, it is asserted that the contract is illegal and unenforceable.

388 By way of defence to the counterclaim, those contentions are repeated, effectively denying, on the true construction of the deed of release, that it has the effect contended for by the State, denying the entitlement to rectification, denying the enforceability of the release agreement, and denying the implied term of good faith. Finally, it is pleaded that the counterclaim, insofar as it relies upon the release agreement and does not solely rely upon the deed of release as drawn or as rectified, is statute barred by s 38(1)(c)(v) of the Limitation Act 1935 (WA) or, by analogy to that provision, in equity, and it is pleaded that, in any event, the claim for specific performance should be refused on discretionary grounds by reason of what is described as gross delay in bringing the claim. The defendant joins issue in relation to those issues and finally pleads that the Limitation Act has no application to it.

389 As to the release agreement, I note that both sides assert that one was made. I have discussed the evidence in some detail. I have found that further to the Government's desire to settle all outstanding matters concerning TD, its $50M deposited in Rothwells, the disputation about the Westralia Square transaction, and the disputation about the sale of land in Joondalup, Whitlam Turnbull were engaged to act for the Government. I have found that Turnbull was involved with Anderson in early December 1988, renegotiating the purchase of Westralia Square, and there were discussions, not only about the $50M, but about the dispute with the Joondalup Development Corporation. I have found that Dowding left these matters to Whitlam Turnbull, and I am not satisfied, on the balance of probabilities, that he made any promise that the Government would see that TD recovered its $50M.

390 I am not persuaded to accept Anderson's version of the exchanges he had with Wran and Dowding on 21 December 1988. I do not find that Wran exerted undue or improper pressure on Anderson, which Anderson said, in any event, produced an agreement that he would give a release, but would only deliver it and cause it to be made operative upon receipt of the State's acceptable proposals for the repayment of the $50M. I do not accept that it was agreed that the release should only be of Dowding and the other Ministers of the Crown and State instrumentalities, but not of the State itself.

391 So far as the $50M deposited in Rothwells was concerned, the agreement was that those involved for the State and the State itself were to be released from all liability and the agreement was to be reflected in a deed. The deed was to be executed by Anderson and TD. Until that was done, the Westralia Square transaction would not be completed. The transactions were thus closely linked. I accept that the matter was dealt with upon the basis that if Anderson and TD and the other corporate entities with which he was associated were to have the benefit of the Westralia Square and Central Park transactions, that would only be upon the settlement of all outstanding matters at issue between those interests and the State, and a principal element of that was the execution of a deed of release. The position, I think, was that all outstanding issues were to be dealt with together, or at least that was the desire of the State, and they were the instructions given to Whitlam Turnbull.

392 The resolution of those outstanding matters involved the making of agreements which Anderson, for TD, was interested in pursuing because they were beneficial. The price was the release from liability of all involved in the Rothwells matter, the Ministers and persons involved for the State, the Government instrumentalities and the State itself, described by Anderson and those involved in the process of making an agreement as the Government. There was no express qualification to the agreement which excluded the Government.

393 Nor, in my opinion, is there any evidence, from Anderson or anyone else, capable of establishing that the agreement so made was illegal and unenforceable on the ground that TD was caused to enter into it by improper duress or unconscionable conduct. For the plaintiff, reliance was placed on Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40, in which case McHugh JA, as he then was, with the agreement of Samuels and Mahoney JJA, at 46 said, of the subject of duress which might result in an incapacity in the other party to enforce a contract:

"The proper approach, in my opinion, is to ask whether any applied pressure induced the victim to enter into the contract and then ask if that pressure went beyond what the law is prepared to countenance as legitimate. Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress."

394 In that case, the question was whether a mortgage was entered into because of illegitimate economic duress exerted by a bank who held some proceeds of sale of a property belonging to the party with whom the bank was dealing. The bank declined to make the funds available until the mortgage documents were executed. Not surprisingly, the view is expressed that that constituted an unlawful detention of those moneys, although ultimately the agreements were upheld because it was found that they had not been caused to be entered into by the duress involved.

395 However, that case is far from this. There can be nothing unlawful or improper in one party requiring that a number of transactions, some beneficial to one party and some to the other, are to be entered into together, or none at all. Nor do I see anything unconscionable in taking such a stance and in making an agreement in those terms.

396 In short, it was agreed, relevantly between TD and the State, that in consideration of the State supporting and not preventing the transactions between the interests associated with Anderson and the SGIC and the GESB in relation to Westralia Square and Central Park, TD would release from any liability the Ministers and other persons, Government agencies and the State in relation to their involvement with TD in the circumstances concerning its deposit of $50M into Rothwells, and the question of the repayment of that sum.

397 It follows that there is no reason why the release agreement may not be enforced by the State as an agreement to release the State, which agreement was intended to be reduced to the formal terms of the deed of release. Another way of putting that, I think, is that this would be, in my opinion, a proper case in which to imply, in the oral release agreement, the term of good faith sought by the State. It was a term of the agreement that the State have the benefit of the agreement recorded in a deed of release which accurately reflected the terms of the agreement.

398 This was, I think, a case where the release agreement was of the first kind described by the High Court in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360. In other words, the agreement was:

"... one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect."

399 The enforcement of that contract pursuant to the counterclaim is, of course, subject to the plaintiff's contention that the claim is statute barred or that there is a discretionary ground for the refusal of relief. The plaintiff relies upon the Limitation Act 1935 (WA) s 38(1)(c)(v), which provides that actions founded on any simple contract must be commenced within six years after the cause of action arose. As I understand it, this aspect of the counterclaim was not instituted until early July 2005. Regardless of when precisely the cause of action arose, it would be statute-barred if governed by that section. However, by s 48 of the Act, its provisions do not bind or affect the Crown, except as expressly provided in them. That is not the case with respect to s 38. It does not apply here to bar this aspect of the counterclaim and it follows, in my opinion, that if it might otherwise be possible to apply equitable doctrine to bar the claim for specific performance of the release agreement by analogy to the provisions of s 38 of the Limitation Act, it would not be appropriate to do so.

400 Finally, it seems to me that the delay in making the claim for specific performance of the release agreement itself may not, in the circumstances of this case, given its history and the many changes made to the pleaded cases over time, provide any discretionary ground to refuse the relief of specific performance.

401 I note that in seeking an order for specific performance of the release agreement, the State particularises that form of relief as an order for the execution by Anderson and the plaintiff of a deed in the form it would take after its rectification in the manner pleaded in the counterclaim. No other form of specific performance is sought in relation to the release agreement and it may be that it adds little, other than in evidentiary terms, to the claim made to enforce the deed of release.

402 I should not overlook that the State pursues a claim for damages arising out of the loss said to have been caused by the breach of the implied term of the release agreement to which I have referred. The pleading in this regard is rather confusing. In the defence, par 49I, it is pleaded that it was a term of the release agreement to be implied therein that the release of liability included the defendant, ie, as it is pleaded, that the defendant was to be a beneficiary of the release. It will be apparent from what I have written that I think that was an express term of the agreement.

403 However, in the counterclaim, the matter is put rather differently. There, as I have indicated, it is pleaded in par 54B, that it was an implied term of the release agreement that Anderson, TD and the State should each do, in good faith, all that was necessary to be done for the carrying out of the release agreement. But when that is boiled down, the relevant assertion is to give the defendant the benefit contracted by the release agreement, the deed of release was to be drafted in a form which reflected the terms of the release agreement. This, it is pleaded, TD failed to do, and it is alleged TD failed to draw to the attention of the State that the deed did not expressly reflect the release agreement. By that failure, and by issuing the writ and prosecuting the action against the State, it is said that TD has breached the implied term of good faith, causing loss and damage to the State in the form of the costs incurred in defending the action, and in having to counterclaim for rectification of the deed.

404 It will be recalled that both parties were represented by solicitors, and that so far as Anderson was concerned (although relief is not now sought against him) he relied upon legal advice. There was an exchange of drafts and changes were made. In its final form as executed, I have no doubt that the deed was thought to reflect the terms of the release agreement. Of course, for TD it is said that in that view they were right, and the deed precisely reflects exactly what it was supposed to say, but whether it accurately reflects the terms of the release agreement is another question.

405 At this stage, it is sufficient for me to say that the evidence as to the creation of the deed and its execution does not persuade me that the implied term of good faith which I would find existed was breached by TD or anyone else. I would not, by way of an award of damages, indemnify the State against all costs incurred in the litigation.

406 As I understand the defendant's case, it is that the State may rely on and enforce the deed, either because, on its proper construction, the State was released from all claims in respect of the deposit of the $50M or, alternatively, by releasing the Ministers of the Crown and instrumentalities of the Government of Western Australia, the State was necessarily released from liability. Alternatively, it is contended that the deed should be rectified in the manner set out above, so as to expressly release the State from liability.

407 In either event it is argued that, although not a party to the deed, the State would be expressly a party for whose benefit the deed was made, and therefore a party who might rely upon it and enforce it: Property Law Act 1969 (WA), s 11(2); Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; (1988) 165 CLR 107.

408 I accept that these matters are to be dealt with by interpretation of the deed, and in that regard, as Mason J held in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352:

"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."

409 If it is permissible to have regard to the surrounding circumstances, the principal such circumstance is, of course, the negotiation towards and the content of the agreement which I have found was made, which has been termed the release agreement. It was not an agreement in the qualified terms asserted by the plaintiff, but simply an agreement to release those persons, instrumentalities and the Government, by which I think was meant the State, from all liability arising out of the deposit of $50M by TD into Rothwells. To my mind, that would provide clear evidence that the intention of the parties was that the State should be released from all such liability.

410 However, one starts with the terms of the deed of release themselves, and when they are analysed I am unable to accept the submission for the State that the deed, read in its entirety, manifests an intention to release the State from all claims and liability in respect of the deposit. Nor am I attracted by the argument that the objective intention to release the State may be discerned from the fact that the potential liability would include tortious liability and the release of all those for whose tortious conduct the State would be vicariously liable, manifests an intention to release the State of all liability across the board, so to speak. The outcome which is at the heart of that submission would, in my opinion, be simply an effect of relieving the State from vicarious liability by the release of those for whose torts the State would be vicariously liable: Bell v Western Australia [2004] WASCA 205; (2004) 28 WAR 555.

411 Even less attractive, I think, is the argument in the case where the alleged liability of the State in tort was joint or joint and several, with one or more of the Ministers of the Crown and the servants or agents of the State, that the release of those persons manifests an intention to release the State from all liability. There is no reason why even the release of a joint tortfeasor from claim or liability should release another joint tortfeasor: Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA), s 7(1)(a); Thompson v Australian Capital Television Pty Ltd [1996] HCA 38; (1996) 186 CLR 574.

412 In my opinion, the terms of the deed are clear. It refers throughout, in cls 1 and 2, to the "Government of Western Australia". It is, of course, the case that the defendant is a legal person which, under s 5 of the Crown Suits Act 1947 (WA), may sue and be sued in the same manner as a subject. It is the Crown which is the description of that legal entity, proceedings being taken by or against the Crown under the title "State of Western Australia". By s 3 of the Crown Suits Act, in that Act the term "Crown" means the Crown in right of the Government of Western Australia: Western Australia v Watson [1990] WAR 248, 266.

413 But the persons referred to in those clauses are the Ministers of the Government, officers or employees of the Government, or any instrumentality of the Government. It is understandable that those natural persons or legal entities are those whom TD and Anderson acknowledge made no representations or inducements concerning the solvency of Rothwells and acknowledge that no such representations or inducements were relied upon as to the solvency of Rothwells otherwise in relation to the deposit made. But the operative clause of the deed, cl 3, provides the release in favour of "any of the persons or institutions mentioned in Clauses 1 and 2". It does not seem to me to be at all apt to say that by the word "institutions" the State, described as the Government of Western Australia, is included as a beneficiary of the release granted by cl 3. To my mind, the persons mentioned in cls 1 and 2 are the Ministers, officers and employees of the Government, and the institutions mentioned in cls 1 and 2 are the instrumentalities of the Government.

414 It is those persons who, under cl 5, as "the persons and institutions named herein", are entitled to claim the benefit of the deed and plead it in bar to any proceedings brought against them by TD or Anderson in connection with the deposit of moneys with Rothwells. To my mind, that reinforces the conclusion to which I have come. The State is not mentioned or named in cls 1 and 2 as an entity which, of itself, may claim the benefit of the release. It is merely referred to by way of a description of the persons and institutions who are mentioned or named in the deed.

415 In leaving this point I should, I think, make it clear that I do not accept an argument presented by the defendant, which was a variant to other arguments to which I have referred. It was put that the Ministers of the Government comprised the Executive Government, and their release releases the Government, a term synonymous with the entity which may be sued as the State of Western Australia. But of course, it is each Minister acting individually who is released, not the Ministers of the Government acting collectively as the Executive Council to advise the Governor, the entity which constitutes the Executive arm of Government under our law. I observe, in passing, that it was not put to me for TD that the State could not enforce the deed without the Ministers of the Crown being parties to the litigation in their official capacities. The defendant's application to join all those Ministers need not, in my opinion, be dealt with.

416 It follows from what I have written above, that the capacity of the State to enforce the deed, to rely on it as barring the plaintiff's action and the claims it makes, will depend upon the success of the counterclaim for rectification of the deed. In Mander Pty Ltd v Clements [2005] WASCA 67; (2005) 30 WAR 46, 50-51 [11] - [14], 57 [49] - [53], 62 [84] - [87]; the Full Court reviewed earlier authorities and held that rectification of a written instrument is available where it is established, by clear or convincing proof, that the written instrument does not embody what was in fact the final intention of those who made it.

417 The Court will not rewrite the instrument and so rectification will not be available where the mistake is as to the terms of an agreement, rather than that the instrument embodies those terms. As it is sometimes put, the mistake must produce a disconformity between the intention and the written instrument.

418 In this case, the intention of the parties who executed the deed of release was the intention of Mr Anderson, and I have found that he, in common with those with whom he dealt who acted for the State, intended there to be a release of the State from all liability arising out of the deposit into Rothwells. He did not, in my view, make the reservation which he professes, that he was prepared to release the individuals but reserved his rights to sue the State. Mr Anderson accepted, I think, that those acting for the State sought a complete release of all liability potentially borne by the State or any person or entity acting for the State. All involved mistakenly thought that the deed achieved that outcome. The deed may be rectified accordingly.

419 It follows from what I have written above that the plaintiff's claim is dismissed. I give judgment for the defendant on its counterclaim and would order rectification of the deed of release dated 30 December 1988 in the terms sought in par 3 of the prayer for relief. I will hear the parties as to what further orders should be made.