Court of Appeal (WA)|2009-07-22|Before: Wheeler JA

TIPPERARY DEVELOPMENTS PTY LTD -v- THE STATE OF WESTERN AUSTRALIA [2009] WASCA 126 (22 July 2009)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : TIPPERARY DEVELOPMENTS PTY LTD -v- THE STATE OF WESTERN AUSTRALIA [2009] WASCA 126

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Citation : TIPPERARY DEVELOPMENTS PTY LTD -v- THE STATE OF WESTERN AUSTRALIA [2006] WASC 137

File No : CIV 2490 of 1992, CIV 1473 of 1994, CIV 1878 of 1994

Contract - Oral agreement - Scope and content - s 4 Statute of Frauds - Whether 'guarantee' - Proper law of the contract - Authority of agent of State to enter contract - Intention to create legal relations

Estoppel - Whether s 4 Statute of Frauds impediment to estoppel claim - Whether 'something more' than oral promise required

Negligent misrepresentation - Whether trial judge determined all of appellant's case - Authority of agent of State to make representations - Falsity of representations - Whether reasonable grounds to make representations - Whether breach of continuing duty to disclose

Release - Whether oral release agreement open on evidence - Whether oral agreement releases respondent - Deed of release - Whether deed enforceable by respondent - Construction of deed - Whether deed releases respondent - Rectification or specific performance of deed

Costs - Notice to admit facts - Where no positive finding made - Turns on own facts

Rules of the Supreme Court 1971 (WA), O 66 r 1(1), O 66 r 3(2)

Statute of Fraud 1677 (Imp), s 4

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

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

Agius v Sage [1999] VSC 100

Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309

Akai Pty Ltd v The Peoples Insurance Company Ltd (1996) 188 CLR 418

Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365

Attorney-General (Ceylon) v AD Silva [1953] AC 461

Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540

Australian Securities Commission v Malborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485

Buckland v Buckland [1900] 2 Ch 534

Butler v Powis (1845) 2 Collyer 156; 63 ER 679

CH Giles & Co Ltd v Morris [1972] 1 WLR 307

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

Cropper v Smith (1884) 26 Ch D 700

Dawes v Tredwell (1881) LR 18; Ch D 354

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

Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95

Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; (2007) 230 CLR 89

Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480

Friend v Brooker [2009] HCA 21

Frontier Petroleum NL v Anzoil NL (Unreported, WASC, Library No 970286, 4 June 1997)

Giumelli v Giumelli (1996) 17 WAR 159

Hansen Beverage Co v Bickfords (Australia) Pty Ltd [No 2] [2008] FCA 601

Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896

John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503

Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563

Kyra Nominees Pty Ltd (in liq) v National Australia Bank Ltd (1986) 4 ACLC 400

Maralinga v Major Enterprises Pty Ltd [1973] HCA 23; (1973) 128 CLR 336

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

Meadow Gem Pty Ltd v ANZ Executors & Trustees (Unreported, VSC, 11 June 1996)

Middleton v Aon Risk Services Australia Ltd [2008] WASCA 239

Mincode Pty Ltd v Isa Pty Ltd (1996) 17 WAR 245

Minister for Youth & Community Services v Health & Research Employees Association of Australia (1987) 10 NSWLR 543

Monarch Petroleum NL v Citco Australia Petroleum Ltd (1986) WAR 310

Moschi v Lep Air Services Ltd [1973] AC 331

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

New South Wales v Bardolph [1934] HCA 74; (1934) 52 CLR 455

NMFM Property Pty Ltd v Citibank Ltd [No 11] [2001] FCA 480; (2001) 187 ALR 654

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

Otway v Braithwaite (1678) Finch 405; [1673] EngR 72; 23 ER 221

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

Pape v Commissioner of Taxation [2009] HCA 23

Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221

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

Prestige Residential Marketing Pty Ltd v Depune Pty Ltd [No 2] [2008] NSWCA 341

Quick v Stoland Pty Ltd [1998] FCA 1200; (1998) 29 ACSR 130

Re A & K Holdings Pty Ltd [1964] VicRp 36; [1964] VR 257

Re Sugden's Trusts; Sugden v Walker [1917] 2 Ch 92

Riches v Hogben [1986] 1 Qd R 315

Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 76 ALJR 436

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

Scook v Premier Building Solutions Pty Ltd [2003] WASCA 263; (2003) 28 WAR 124

Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation (2001) 53 NSWLR 213

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

Sunderland Marine Insurance Co v Kearney [1851] EngR 411; (1851) 16 QB 925

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

The Bell Group Ltd v Westpac Banking Corporation [No 9] [2008] WASC 239

Tipperary Developments Pty Ltd v The State of Western Australia [2006] WASC 237

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

Townsend v Collova [2005] WASC 4

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

Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491

Winks v WH Heck & Sons Pty Ltd [1986] 1 Qd R 226

1 WHEELER JA: I have read in draft the reasons for decision of McLure JA. I agree with her Honour's ultimate conclusion that the appellant's claim against the State must fail and the appeal be dismissed. So far as the specific grounds of appeal, the notice of contention, and the cross-appeal are concerned, I agree with her Honour's conclusions, save that I would not decide grounds 3(b), 3(d), 4(b) and 4(e) of the cross-appeal, concerning the question of whether the giving of a guarantee to the appellant was outside the ordinary activities or functions of a government, and the question of intention to create legal relations. I also reach a somewhat different conclusion from her Honour concerning the estoppel ground, ground 4 of the grounds of appeal.

2 Save as mentioned above, I agree with her Honour's reasons and have nothing to add. I set out my own reasons in relation to those issues in respect of which I take a different view below.

Ordinary activities or functions of government

3 Although there is academic commentary which strongly argues for a different view, neither party in the present case challenged the correctness of the proposition which emerges from New South Wales v Bardolph [1934] HCA 74; (1934) 52 CLR 455, that a State Premier has authority to enter into contracts, in the absence of specific statutory authority, in respect of matters which are within or incidental to the ordinary and well recognised functions of government. I therefore deal with this issue on the basis that no broader authority to enter into contracts exists. The controversy in this case, then, is a factual one concerning the trial judge's finding that the provision of the guarantee was part of the ordinary activity of government.

4 His Honour's findings in relation to this matter are set out (Tipperary Developments Pty Ltd v The State of Western Australia [2006] WASC 237) at [313] and [314]:

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 [the appellant] 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.

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.

5 His Honour's findings in these paragraphs appear to me to equate the transaction concerning the $50 million deposited into Rothwells to enable withdrawal of the GESB money with the grant of the $150 million NAB indemnity which had been given earlier. A financial crisis is capable of constituting an emergency which will enliven the exercise of executive power: Pape v Commissioner of Taxation [2009] HCA 23. It may be accepted that where a financial institution is capable of being seen as one important to the economy of a State, and where the survival of that institution is threatened, with potentially serious consequences for the State's economy, it is an "accepted" function of government to endeavour to provide financial support to that institution, to persuade others to do so, and to commit State funds for that purpose. Although one would expect the occasions on which a State would be required to use the power to be rare, it may well be appropriate to regard a function of providing financial support in this way as being an ordinary function, albeit one the exercise of which will rarely be required.

6 However, the alleged guarantee in the present case was given in very different circumstances. His Honour's findings about those circumstances were as follows.

7 The process which initiated the transactions the subject of this appeal began with a decision that the State Government Insurance Commission (SGIC) and the Government Employees Superannuation Board (GESB) should sell the Perth Technical School (Perth Tech) site. Three prospective purchasers made bids, and the preferred tenderer was a consortium which included the appellant ([27]). In a decision which appears to have had no commercial connection with the process of selling the Perth Tech site, Dowding considered that an advantage might be obtained "for Rothwells" by requiring the successful tenderer to deposit the sum of $50 million with Rothwells ([29] - [30]).

8 The purpose of requiring that $50 million deposit was in order to extricate a deposit of that amount which GESB had, at some earlier time, made with Rothwells (the GESB deposit). The desire to extricate those moneys arose because Dowding thought that they might arguably be regarded as the property of those civil servants who made contributions to the superannuation fund, who might not take kindly to the placement of their funds with Rothwells, at a time when it was known that Rothwells had problems of some kind. It was therefore desirable that GESB be able to withdraw the money before the end of the financial year, when it would become necessary to report the deposit in the published accounts of GESB ([30] - [31]).

9 It was represented to the tenderers that the deposit of $50 million with Rothwells was an essential condition of an agreement to sell the Perth Tech site and negotiations were terminated at a point when the tenderers expressed their unwillingness to do so and were only restarted once Anderson, on behalf of the appellant, had indicated that he was prepared to accede to that condition ([38], [42], [77]). Those representing the State at the time explained to those representing the appellant that the purpose of the $50 million deposit was to enable GESB funds to be extricated, that the government would have been happy to put in moneys to replace those funds, but could not do so through SGIC or other instrumentalities, and that the reason for seeking to retire the GESB deposit was a political one ([55], [61]). As his Honour found, those representing the State declined to put any of their assurances in writing ([67]).

10 The transaction which emerges from the evidence which his Honour recited and accepted, in the paragraphs to which I have referred, was not a commercial one, however broadly that term is understood, but a narrowly political one in that it was intended to serve the interest of a particular ministry, rather than the interest of the public or any section of the public. The requirement for the deposit of $50 million had no rational connection with the commercial transaction involving the sale of the Perth Tech site. While, in other circumstances, a request that a party deposit a sum into Rothwells might (as with the NAB guarantee discussed by McLure JA at [34]) be seen as part of a process of ensuring support for a troubled institution of importance to the State, and therefore part of the accepted functions of government, this was not a transaction which was, as originally conceived, intended to provide any additional support to Rothwells. Rather, it was intended to replace one deposit in Rothwells with an identical sum from a different source, so that the original depositor's funds (the GESB deposit) could be withdrawn in order to avoid political embarrassment. In the end, of course, the transaction did involve the provision of additional support to Rothwells, since its deteriorating financial position meant that the GESB deposit could not be withdrawn as anticipated, but that circumstance cannot be used in order to recast the original transaction.

11 The respondent's pleading was in the following terms. The State had denied that it had sought the deposit of moneys into Rothwells for the reasons ultimately found by his Honour, and had denied that there had been any assurances that the State would see that the appellant was repaid. The pleading in the alternative, in par 33(b) of the second further reamended defence and counterclaim of 6 July 2005, was baldly that the alleged guarantee was not made in the ordinary course of administering a recognised part of the government of the State. The particulars of that pleading, found in the answers to amended request for further and better particulars of defence dated 25 August 1996 were as follows:

3.2 & It is not within the ordinary course of administering a recognised 3.3 part of the Government to:

(a) purport to give a guarantee for the repayment of $50 million to be deposited in a private merchant bank, namely Rothwells;

(b) purport to give an assurance that the Government would see the plaintiff's money was safe in Rothwells; or

(c) purport to give a government guarantee or assurance of repayment in those circumstances,

and it is not within the ordinary course of administering a recognised part of the Government that:

(d) the Government provide financial support to Rothwells such as to enable Rothwells to repay the Tipperary advance;

(e) the Government provide financial support to Rothwells such that Tipperary would not suffer loss in respect of the Tipperary advance; or

(f) the Government indemnify Tipperary in respect of any loss suffered by Tipperary by reason of Rothwells' failure to repay any part of the Tipperary advance,

for the reasons that:

(g) there was no practice within government of entering such contracts and the alleged contract was not pursuant to any established service of government;

(h) the alleged contract was not necessary for the proper functioning of government;

(i) the alleged contract concerned a large amount of money;

(j) the practice of government was for the Treasurer to issue a written guarantee or indemnity;

(k) the alleged contract was concerned with the provision of funds by a private company to another private company neither of which was related to government;

(l) there was no recognised office, department or organisation involved in the alleged contract on behalf of the government;

(m) the alleged contract did not have a commercial character for the State and was not incidental to any State industrial or commercial undertaking.

12 Although they are put negatively, pars (g), (h), (k) and (m) appear to have the effect of denying, in my view correctly, any rational connection between the deposit of $50 million in Rothwells by the appellant and the sale of the Perth Tech site to the appellant, and of denying, at least, that the contract of guarantee was necessary for the proper functioning of the State. No further particulars of those denials were sought.

13 If it were simply a matter of referring to the pleadings and to the findings of fact made by the learned trial judge, which I have outlined above, I would have concluded that, having regard to the facts which his Honour plainly accepted, he was in error in characterising the transaction in question here as a commercial transaction which might reasonably be supposed to be for the benefit of the State. That conclusion would have consequences for the question not only of whether the transaction was part of the ordinary and accepted functions of government (which it plainly would not be), but also for the question of whether there was an intention to create legal relations. That is because the fact that the transaction cannot be characterised as one related to ordinary and proper governmental purposes would be capable of giving rise to an inference that the parties must rationally have understood that the transaction would be advantageous to those acting on behalf of government only to the extent that it was not publicly disclosed; that, in turn, would lead to a conclusion that it was unlikely that they would have expected that it was intended that the agreement be enforceable, if breached, by litigation.

14 The difficulty with reaching the conclusions which I have foreshadowed above, in relation to these grounds of cross-appeal, is that, notwithstanding the facts which his Honour found and notwithstanding the state of the pleadings, during the course of the appeal both parties avoided any suggestion that the transaction was in any way an abnormal or improper one. The respondent, in its submissions, was concerned not with the substance of the transaction, but with the procedures leading up to it. The heart of the respondent's written submissions on this point appears to be contained in par 211 of its written submissions which reads:

Any further financial support to be provided by the respondent to Rothwells required a decision of Cabinet, at the very least. Any decision made would go no further than its terms allowed. It would not add a new dimension, of unlimited breadth, to the concept of the ordinary or recognised functions of government.

15 That is, it was not contended that it was outside the ordinary and accepted functions of government to engage in a transaction of this kind, but only that it was not within the ordinary and accepted functions of government to give an effectively open-ended guarantee of financial support in the course of engaging in such a transaction.

16 The broader issues were raised from time to time with the parties by the court. For example, at page 106 of the transcript, McLure JA put to counsel for the appellant that one might regard the whole exercise (that is, the transaction I have described) as "very tawdry". The response was that that was not a claim made by the respondent. Similarly, at page 288, McLure JA put to counsel for the respondent the following proposition:

But, see, the point is, everybody knows, you would think, that the state is proceeding in a way that you might raise your eyebrows about. He [Anderson] knows that. I was talking earlier about the whiff test. I mean, everybody knows this is very odd. Anderson knows he's getting oral assurances, he doesn't want to put anything in writing because he knows the state is not going to, he's been told that by [Edwards], and there are obvious reasons why the state is not going to anyway. They would have to explain it to their constituents.

17 The only response made by counsel for the respondent was, "Well, the inference is that it's not to be put in writing because it's going to be denied that it's legally binding."

18 The attitude of the parties no doubt serves to explain the way in which his Honour came to make the findings which he did in [313] and [314]. It raises yet again the question of the proper approach for an appellate court to take when the parties conduct their case on a basis inconsistent with what appears to the court to be the correct approach. This case is unusual, in that it is not a case of a party failing to raise a factual issue; all the facts which appear to me to be relevant are contained in the findings of the trial judge, and no party complained that those findings were not open to him. Nor is it a case of the court taking a view of the law which is different from the view upon which the parties appear to have proceeded: cf Friend v Brooker [2009] HCA 21 at [111] - [118] per Heydon J.

19 Having closely considered the transcript of the appeal in the light of the considerations I have discussed above, it seems to me that, notwithstanding that the court drew attention to the apparent lack of propriety of the transaction on more than one occasion, it was never squarely put to the parties that they should address argument directed to a possible conclusion that the transaction was outside the ordinary and accepted functions of government, not because it involved the guarantee of a large amount of money, but because of the features to which I have referred to at [6] - [12]. Natural justice would therefore require that the parties should have an opportunity to address that question.

20 However, as appears from the reasons of reasons of McLure JA, with which I agree, it is not necessary to determine grounds 3(b), 3(d), 4(b) and 4(e) of the cross-appeal in order to determine this appeal. In those circumstances, it appears to me pointless to delay the matter further or to cause extra expense to the parties by inviting further submissions (see Spring v Guardian Assurance Plc [1995] 2 AC 296 at 316 per Lord Goff of Chieveley). In those circumstances, notwithstanding that it is normally the duty of an intermediate appellate court to deal fully with the issues raised by the grounds, both of an appeal and of a cross-appeal, I do not determine those grounds of the cross-appeal.

21 Again, my conclusions in relation to this matter would have been affected by the factual analysis set out above, if it had been open to me, in the absence of further submissions from the parties, to give effect to it. That is because it is unlikely that Edwards would have represented that the promises he made were enforceable, in circumstances where those promises formed part of a transaction which it was most unlikely that those acting on behalf of government would have wished to see made public. If no such representation was made, then the "something more" than an oral substantive promise, required by the reasoning in Actionstrength Ltd v International Glass Engineering IN GL EN SpA [2003] UKHL 17; [2003] 2 AC 541, and at least by Mason CJ and Wilson J in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 (at 406) could not be found.

22 I would add that it appears to me that, although Waltons Stores contains observations which could support a different conclusion, the narrow basis upon which it appears to me that s 54A of the Conveyancing Act 1919 (NSW) was held inapplicable in that case was as follows.

23 Mason CJ and Wilson J simply concluded that there was no substance in an argument based on s 54A for the reasons given by the other judges (at 408). That leads one to examine those reasons. Brennan J clearly took the view that, because it is the equity which is enforced and not the contract, s 54A has no application (at 433). However, Deane J had concluded that there was an assumption that there was a binding agreement in existence (that is, that the relevant formalities including therefore s 54A had been complied with) (at 444). He considered that s 54A did not apply, because there had been part performance (at 445). He accepted that s 54A might operate in some circumstances to render unenforceable an agreement which was the product the operation of an estoppel, giving an example. In Waltons Stores, however, because of the nature of the assumption (that is, that there was a binding agreement), the estoppel precluded denial of a binding agreement and there was no scope for the operation of s 54A to render that assumed agreement unenforceable (at 446). His Honour noted, but left open, the possibility that it could be held that s 54A "applies only to real contracts and agreements and does not apply to an assumed agreement". While his Honour's reasons would provide some support for a broader principle then, it seems to me that Deane J's conclusion concerning s 54A was directly related to the assumption which he found to exist, which assumption would necessarily have involved an assumption that s 54A had been complied with. Gaudron J expressly found that the assumption was that an exchange of parts had taken place and there was therefore necessarily an assumption that the agreement was duly executed so that "the question of compliance with s 54A ... becomes irrelevant" (at 464).

24 On that analysis, it appears to me that, applying by analogy the reasoning in Waltons Stores, an equitable estoppel of a kind which would preclude reliance on s 4 of the Statute of Frauds is established only if there is a representation which includes or involves a representation that an enforceable guarantee will be, or has been, given.

25 McLURE JA: This is an appeal from the decision of Murray ACJ dismissing the appellant's action against the State of Western Australia (the State) relating to a $50 million commercial bill discount facility

provided by the appellant to Rothwells Ltd (Rothwells) in March 1988 (the facility).

26 The facility was solicited by the State. Before any part of the moneys the subject of the facility were repaid to the appellant, Rothwells was placed in provisional liquidation. That occurred on 3 November 1988. Sometime later Rothwells went into liquidation. The appellant suffered a significant loss as a result of providing the facility to Rothwells.

27 The appellant claimed against the State for breach of contract, negligent misrepresentation and in estoppel. The State denied those claims and pleaded a positive case to the effect that the State and the appellant had entered into an oral agreement whereby the appellant agreed to release the State from all claims relating to the facility (the oral release agreement) which agreement was reflected in a formal deed of release dated 30 December 1989 (Deed of Release). In the alternative, the State applied to rectify the Deed of Release to conform with the oral release agreement.

28 The trial judge dismissed the appellant's claims in contract, estoppel and negligent misrepresentation. In particular the trial judge held that (1) in March 1988 the State orally agreed with the appellant to guarantee Rothwells' obligations to the appellant arising under the proposed facility (the March oral agreement); (2) the March oral agreement was unenforceable under s 4 of the Statute of Frauds which applied because the proper law of the agreement was the law of Western Australia; (3) the doctrine of estoppel had no application because it would have defeated the operation of s 4 of the Statute of Frauds; (4) although the State, by its duly authorised agents, had made a representation that Rothwells was basically sound with temporary liquidity problems, the representation was made on reasonable grounds and thus was not false or misleading; and (5) there was no breach by the State of any continuing duty to advise of developments in Rothwells' financial position.

29 The State was largely successful in its release defences. The trial judge held that the appellant had released the State from all relevant claims pursuant to the oral release agreement, which agreement was specifically enforceable, and that although the Deed of Release did not release the State, it should be rectified so as to do so.

30 The State filed a notice of contention and a cross-appeal. A large number of issues arise for determination in the appeal. They include what the trial judge found to be the scope and content of the oral promise(s) the subject of the March oral agreement; were the agents who acted for the State duly authorised to enter into the March oral agreement on behalf of the State; did the parties have an intention to create legal relations; is the March oral agreement within s 4 of the Statute of Frauds; is the proper law of the contract that of Western Australia or New South Wales (which has no equivalent to s 4 of the Statute of Frauds); is s 4 of the Statute of Frauds an impediment to the appellant's estoppel claim; did the trial judge fail to determine all of the appellant's misrepresentation case, and if so, was there a breach of a representation that the State would continue to financially support Rothwells; did the State's agents have authority to make the representations complained of; did the trial judge err in finding that there were reasonable grounds to represent that Rothwells was basically sound; did the State became aware of information concerning Rothwells' financial situation which it was under a continuing duty to disclose to the appellant; was it open on the evidence to find an oral release agreement; is the oral release agreement specifically enforceable; on its proper construction does the Deed of Release apply to the State and if not did the trial judge err in ordering rectification of the deed.

31 The events in question took place against the backdrop of the stock market crash that occurred in the week commencing 19 October 1987. Rothwells was a listed public company carrying on business as a merchant bank primarily in Western Australia under the chairmanship of Mr Laurie Connell. Rothwells accepted deposits in various forms from public and private investors, paying comparatively favourable interest rates, and loaned money to borrowers. Its major asset was its 'receivables' that is, debts owed to it by borrowers.

32 As a consequence of the stock market crash, a run on Rothwells commenced around 22 October 1987 with depositors demanding the return of their funds. That caused very significant liquidity problems which would have required Rothwells to cease trading on Monday 26 October 1987. A rescue package was swiftly organised over the weekend of 24 and 25 October 1987 (commonly known as 'the rescue weekend').

33 The principal organisers of the rescue package were Peter Beckwith and Alan Bond, directors of Bond Corporation Holdings Ltd (BCH) assisted by James Yonge and others from Wardleys Australia Ltd (Wardleys). If the rescue was to succeed it had to be in place by 26 October 1987. This timeframe did not permit a proper review of Rothwells' financial position. Assurances were given to those asked to participate in the rescue, including the State, that Rothwells was basically sound but had liquidity problems. The assurances were fortified by the Annual Report and Audited Accounts of Rothwells for the year ending 31 July 1987 which were published in September 1987.

34 The weekend rescue package comprised three major elements. First, a private sector capital raising of $150 million underwritten by Wardleys. As that would take some time to arrange, Wardleys organised a $150 million facility provided to Rothwells by the National Australia Bank (NAB) guaranteed by the Hong Kong and Shanghai Bank. That facility was provided by NAB on 26 October 1987 and repaid from the proceeds of the capital raising. Secondly, there was a further $150 million facility provided to Rothwells by NAB supported by an indemnity in writing from the State. This facility was also provided on 26 October 1987. Thirdly, there was to be an injection of $70 million by Connell, $20 million in the form of equity and the balance in the form of a subordinated loan. The trial judge was unable to reach a conclusion about the extent to which Connell complied with his undertaking [23]. On 25 October 1987 details of the weekend rescue package were publicly announced by the then Premier of Western Australia, Mr Brian Burke.

35 Government instrumentalities had been involved in providing liquidity to Rothwells in the days prior to the rescue weekend. Two government instrumentalities that prominently figure in the Rothwells saga are the State Government Insurance Commission (SGIC) a body corporate established under the State Government Insurance Commission Act 1986 (WA) and the Government Employees Superannuation Board (GESB) a body corporate established under the Government Employees Superannuation Act 1987 (WA). Mr Tony Lloyd, an Assistant Under-Treasurer, was Chairman of the GESB. Lloyd was appointed the Managing Director of Rothwells with effect from 1 January 1988. Mr Kevin Edwards was at the material time the Executive Director of the Department of Premier and Cabinet and Deputy Chairman of the SGIC. Mr Wyvern Rees was the Chairman of the SGIC.

36 On 22 October 1987 the GESB deposited $5 million in Rothwells. On the same day the SGIC acquired from the partnership of LR Connell & Partners (comprising Connell and his wife) for the sum of $30 million a 50% interest in a property trust which had an interest in the Perth Technical School site. The proceeds were to be deposited in Rothwells. That transaction was settled on 23 October 1987.

37 Rothwells' liquidity problems continued after the rescue weekend. Rothwells had 'lent long' against short term deposits. It had facilities with banks and other financial institutions to enable it to fund its obligations to depositors. These facilities began to be withdrawn in the aftermath of the crash.

38 In early November 1987 the SGIC and the GESB purchased a number of CBD properties from companies in the Bell Group, including a further part of the Perth Technical School site and adjacent properties (the Parmelia Hotel and the Forrest Centre). In addition, the SGIC purchased the Bell Group Ltd's shareholding in BHP. It was a condition of these Bell transactions that the vendors deposit $50 million in Rothwells. That payment was made by Bell Resources Ltd (BRL).

39 In addition, deposits of $50 million were each made by the SGIC and the GESB in January 1998 [24].

40 In January 1988 the SGIC and the GESB placed the Perth Technical School site on the market. Tenders were called. The preferred tenderer was a consortium comprising the appellant, a company controlled by Mr Warren Anderson, and Consolidated Press Holdings Ltd (CPH), a company controlled by Mr Kerry Packer. The State imposed a separate condition on the sale being that the successful purchaser deposit $50 million in Rothwells.

41 The condition was imposed at a meeting on 16 March 1988 at the appellant's Sydney office attended by (inter alia) Anderson, Mr Don Bourke representing CPH, Edwards, Lloyd and Rees. The State's contractual offer of a guarantee was found to have been made at this meeting. Lloyd had with him at the meeting the audited financial statements of Rothwells for the half-year ended 31 January 1988 (the January audited accounts). They were signed on 11 March 1988 and disclosed net assets of around $261.5 million.

42 As a result of the March oral agreement found by the trial judge, the appellant entered into the facility with Rothwells, the terms of which are recorded in a letter from Rothwells dated 18 March 1988 (the facility agreement). The term of the facility was 12 months. Pursuant to the facility agreement, the appellant made the following payments for the purchase of commercial bills accepted by Rothwells:

43 The money to purchase the commercial bills was borrowed by the appellant from CPH. The parties and the trial judge in his reasons variously describe the moneys paid for the commercial bills under the facility agreement as a deposit in, or loan to, Rothwells. Although not technically correct, I will continue that practice.

44 The State's stated purpose in requiring the purchaser to deposit $50 million in Rothwells was to enable Rothwells to repay to the GESB the $50 million it had deposited at the end of January 1988. However, continuing liquidity problems prevented the appellant's funds from being used for that purpose.

45 The appellant and CPH entered into a contract in writing dated 18 March 1988 to purchase the Perth Technical School site which became known as Stage 1 of 'Westralia Square' (Westralia Square) which purchase was settled in the names of nominee companies, Sharland Pty Ltd (Sharland) and Skeat Pty Ltd (Skeat) in June 1988. Under the contract (as varied) the SGIC and the GESB provided a rental guarantee and were required to contribute to a property trust.

46 By June 1988 the SGIC and BCH had each acquired 19.9% of the issued shares in BRL. Like Rothwells, BRL was in financial difficulty. The acquisition was investigated by the then corporate affairs regulator, the National Companies and Securities Commission. The investigation was settled on the basis that BCH would make a full takeover bid for BRL. The SGIC and BCH agreed that the SGIC would not accept the takeover offer on condition that BCH deposit $100 million in Rothwells. Fifty million dollars was deposited on 3 June 1988 and was immediately used to repay the GESB.

47 In July 1988 State Cabinet was advised that Rothwells' financial problems were not confined to liquidity. It also had an asset deficiency of some $300 million - $400 million. In that knowledge, the State embarked on yet a further attempt to rescue Rothwells from its dire financial situation culminating in the notorious PICL transaction. PICL stands for Petrochemical Industries Company Ltd, a company that was effectively owned and controlled by Connell and Mr Dallas Dempster. Under the PICL transaction, which settled on 17 October 1988, the State and BCH purchased PICL and its ownership of a proposal to establish a petrochemical industry and plant. The purchase price was $400 million of which $350 million was payable to Connell's company Dalleagles Pty Ltd. Dalleagles/Connell was required to use the proceeds to purchase $350 million of bad debts owed to Rothwells by Connell-related entities. This is what would be described in the current global financial crisis as the removal of toxic assets from Rothwells' balance sheet.

48 In July 1988 the appellant and Rothwells entered into a further (and fuller) agreement in writing setting out the terms and conditions of the facility agreement. By the end of July 1988 Anderson was aware that Rothwells was in difficulty honouring the bills endorsed to the appellant. Anderson pressed for and eventually succeeded in obtaining a formal deed of variation of the facility agreement which was dated 17 October 1988. It provided that the facility be reduced by $19.5 million to $30.5 million by 28 October 1988 with the balance to be paid by the end of March 1989. There was a suggestion that the payment by Rothwells due on 28 October 1988 might be funded from moneys received by Rothwells as a result of the PICL transaction. The appellant's legal adviser, Mr Bert Gianotti, a partner in the Perth office of Mallesons Stephen Jaques, was advising in relation to the proposed variation. Gianotti advised Anderson that he should insist on a deed of variation and condition it upon the provision of satisfactory written assurances of repayment to be given by a 'third party' by which the trial judge found he clearly meant the State [176]. That requirement was not pursued by the appellant.

49 Rothwells failed to pay the sum of $19.5 million on 28 October 1988. On 3 November 1988 Rothwells was placed in provisional liquidation. The State, through its solicitors Robinson Cox, retained the services of Whitlam Turnbull & Co to provide services to the State and the SGIC concerning Rothwells-related matters.

50 Continuing disputes relating to the rental guarantee and property trust undertaking resulted in the SGIC and the GESB offering to purchase the interest of Sharland and Skeat in Westralia Square. Whitlam Turnbull was appointed before the parties had formally committed themselves to the transaction. Mr Neville Wran and Mr Malcolm Turnbull provided the services on behalf of Whitlam Turnbull. In early December 1988 Turnbull met with Anderson and re-negotiated the purchase of Sharland and Skeat's interest in Westralia Square. It was common cause that a State-imposed condition of the purchase of Sharland and Skeat's interest in Westralia Square was that the appellant and Anderson provide a release. Wran had a telephone conversation with Anderson on 21 December 1988. The trial judge found that the oral release agreement was made during that telephone conversation [270]. The Deed of Release was prepared by Robinson Cox. The appellant and Anderson did not seek any amendments to the deed presented to them for execution. They signed it on 23 December 1988 although the document bears the date 30 December 1988. The deed was held in escrow until that date being the date of settlement of the sale of Sharland and Skeat's interest in Westralia Square to the SGIC and the GESB.

The appellant's contract issues (ground of appeal 1)

51 The appellant contends in ground of appeal 1 that the trial judge should have held that the March oral agreement was not a contract of guarantee or alternatively, that the law of Western Australia was not, or not proven to be, the proper law of the contract. The first issue is the scope and effect of the contractual promises.

The scope and effect of the contractual promises (ground of appeal 1(a))

52 The parties disagree on the scope and effect of the findings made by the trial judge as to the terms of the March oral agreement. The appellant contends the trial judge found that the State made two promises in the following terms:

If the appellant deposited $50 million into Rothwells then the State would continue to support Rothwells financially to the extent necessary to ensure that Rothwells would repay the loan (the first contractual promise);
If the State failed to perform the first contractual promise, the State would accept the obligation of repayment.

53 The State contends the trial judge found that it agreed to ensure that Rothwells would repay the loan when it became due or undertake the obligation of repayment itself. For their respective positions, the appellant relies on [69] and [304] of the trial judge's reasons and the State relies primarily on [65] - [70], [318] and [319].

54 In [65] the trial judge refers to Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; (1988) 166 CLR 245 and cites the following passage from the judgment of Mason CJ:

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 [256].

55 In [66], the trial judge compares the two classes of guarantee identified in Sunbird and contrasts them with a third category on which the appellant was said to rely. The trial judge said:

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. [The appellant] asserts that on 16 March, Edwards, for the State, made an offer which Anderson, for [the appellant], 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 [66].

56 Before making a factual finding as to the terms of the March oral agreement, the trial judge rejected the appellant's contention. He said:

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 [67].

57 Anderson's evidence to which the trial judge refers in [67] is summarised by the trial judge in [44]. According to the trial judge, Anderson made it perfectly clear that he understood what was being said by Edwards amounted to a guarantee. Anderson's evidence was 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.

58 After rejecting the appellant's contention, the trial judge set out his findings as to what was promised. He said:

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.

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 [69] - [70].

59 After making the relevant factual findings, the trial judge turned his attention to the determination of the issues by the application of the law to the facts. In the course of considering whether Premier Dowding (who replaced Brian Burke in February 1989) and Edwards had authority to enter into a contract of guarantee on behalf of the State, the trial judge restated his contract finding in slightly different terms. He said:

What was asserted was that an express oral agreement was made between the State, as I would find acting through Edwards, and [the appellant], acting through Anderson, the terms of which were that if [the appellant] 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 [304].

60 The trial judge returned to the issue of the terms of the March oral agreement in the course of his consideration of whether it fell within s 4 of the Statute of Frauds. In that context he said:

[If s 4 of the Statute of Frauds] 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 [the appellant] 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.

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 [the appellant] was repaid. It did not undertake simply to indemnify [the appellant] 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 [318] - [319].

61 The trial judge approached his fact-finding against the backdrop of the relevant legal principles. It is to those principles that I now turn. Section 4 of the Statute of Frauds 1677 (Imp) applies in Western Australia but not in New South Wales. Section 4 relevantly provides:

No action shall be brought ... whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person; ... unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised.

62 The term 'guarantee' does not appear in the statute. A number of conditions must be met in order to fall within s 4. First, there must be three parties involved who for convenience I will refer to as the debtor, the creditor and the guarantor. Secondly, the debtor must be and continue to be liable to the creditor for the debt, default or miscarriage in question. Thirdly, there must be no liability on the guarantor unless and until the debtor has failed in its duty to the creditor. That is, in order to fall within the statute, the liability of the guarantor to pay the creditor must be conditional upon the debtor's default. In this sense, it is said that the debtor's liability is primary (which is why the debtor is commonly described as the principal debtor) and the liability of the guarantor is collateral or subsidiary. Upon the debtor's default, both the principal debtor and the guarantor are liable to the creditor in respect of the amount owing. However, the fact that the debtor is primarily liable does not mean the creditor must first exhaust its rights against the principal debtor before seeking recovery from the guarantor.

63 In essence, if the 'guarantor' would be liable to the creditor irrespective of whether the principal debtor is liable or has made default, the contract falls outside the Statute of Frauds.

64 Whether or not the State provided an oral guarantee within s 4 of the Statute of Frauds depends upon the proper construction of the March oral agreement. The task is to objectively determine the common intention of the contracting parties having regard to the language used, the surrounding circumstances known to the parties and the purpose of the transaction: Toll (FGCT) Pty Ltd v Alphapharm [2004] HCA 52; (2004) 219 CLR 165 [40].

65 In order to determine the intended scope of the trial judge's finding, it is necessary to put the two categories of guarantee identified by Mason CJ in Sunbird in their proper context. Mason CJ was considering the view of Lord Diplock in Moschi v Lep Air Services Ltd [1973] AC 331 that the nature of a guarantor's obligation was 'to see to it that the debtor performed his own obligations to the creditor' not to himself pay a sum of money to the creditor. It followed that a creditor's remedy lay only in damages for breach of the contract of guarantee.

66 In Moschi the guarantor 'personally guaranteed the performance by [the debtor] of its obligations' to make instalment payments under a contract for the sale of goods. The debtor committed a repudiatory breach of the contract which was terminated by the creditor with the consequence that the creditor became entitled to loss of bargain damages from the debtor. The question in issue was whether the creditor could recover loss of bargain damages from the guarantor. That in turn depended on whether the guarantor's obligation was confined to the payment of instalments or whether the guarantor had in effect undertaken that the principal will carry out his contract. Lord Diplock, adopting a rule applicable to all guarantees, held it was the latter. Lord Reid rejected any common rule, but came to the same conclusion based on the construction of the contract of guarantee in question.

67 Mason CJ in Sunbird agreed with Lord Reid's approach. However, it is apparent from his reasons in Sunbird that in both categories of guarantee identified by Mason CJ, the guarantor's liability to the creditor only arises upon the debtor's failure to perform his obligations owed to the creditor.

68 The appellant claimed the trial judge found that the State's promise was that if the appellant deposited $50 million in Rothwells, the State would continue to support Rothwells financially to the extent necessary to ensure that Rothwells would repay the loan. The appellant claims the trial judge found in effect that the State had agreed to take positive steps to ensure that Rothwells had the financial standing and capacity to repay the loan to the appellant when it became due and payable in March 1989. That is, the State's obligation was to take positive steps directly (by itself) or indirectly (by placing obligations on third parties) to provide Rothwells with funds to enable it to continue to trade until it had satisfied its indebtedness to the appellant by a payment that was not a voidable preference under the insolvency laws. Accordingly, the appellant contends the State was in breach of its promise when Rothwells went into provisional liquidation in November 1998. That is, the State's liability to the appellant does not arise upon Rothwells' failure to perform its obligations to the appellant. It is clear from the trial judge's reasons as a whole that he did not make, or intend to make, a finding to that effect. In [66] the trial judge contrasted the two Sunbird categories of guarantee with the nature of the State's obligation for which the appellant contended below and in the appeal. In [67], [318] and [319] he expressly rejects the appellant's formulation and characterisation of the State's obligations. Paragraphs [69] and [304] have to be construed in that context together with [70] in which the trial judge makes his intention unequivocally clear. What was said about 'standing behind' Rothwells and other similar expressions was mere puffery not intended to have contractual effect. The operative terms of the finding in [69] are confined to the oral guarantees that 'the Government would ensure that Rothwells would repay the loan when it became due or would undertake the obligation of repayment itself'.

69 In summary, the trial judge intended the first limb of the contractual promise to be that the government would ensure Rothwells would repay the loan when it became due (being a promise which gave rise to a claim for damages for breach of the contract of guarantee upon Rothwells' default) and the second limb to be a promise to itself answer for the default by Rothwells in the payment of its debt to the appellant (thus entitling the creditor to sue the guarantor for the debt or liquidated demand). The appellant does not challenge the correctness of the finding. Both limbs found by the trial judge fall within s 4 of the Statute of Frauds.

The proper law - Western Australia or New South Wales (ground of appeal 1(b))

70 The proper law of a contract is the system of law by reference to which the contract was made or that with which the transaction has its closest and the most real connection: Akai Pty Ltd v The Peoples Insurance Company Ltd (1996) 188 CLR 418, 440 - 441. If it is apparent from the terms of the contract that the parties intended a particular system of law to apply, their intention will prevail: Akai (441). In determining the parties' intention, the ordinary common law rules of construction apply. However, it is not a question of implying a term as to choice of law. The High Court said:

There is, in truth, only one question here, and that is whether, upon the proper construction of the contract (which may include an expression of choice in direct language), the court properly may conclude that the parties exercised liberty given by the common law to choose a governing law for their contract. If the answer to this is in the negative, then the law itself will select a proper law (442).

71 Applying the ordinary rules of the common law relating to the construction of contracts, this court is unable to infer that the parties intended their contract to be governed by reference to a particular system of law.

72 The appellant placed particular reliance on the principle of validation which is to the effect that the parties would have intended that their agreement be binding and enforceable. If that factor is to have any weight, it could only be so in the context of inferring the parties' intention. It would have no relevance where as here, the proper law is that with which the March oral agreement has its closest and most real connection. Relevant factors in that assessment ordinarily include the place where the contract was made, the place of performance of the contract, the place of residence or business of the parties and the nature of the transaction or subject matter of the contract.

73 The trial judge said he was unable to make a finding as to when, how and to whom the appellant accepted the State's offer which became the March oral agreement. The appellant contends the trial judge should have made the following factual findings. First, the March oral agreement was made no later than 18 March 1988 because that was the date of the contract of sale of Westralia Square to the appellant and CPH. It was also the date of the facility agreement. Secondly, that Anderson accepted the oral March offer in a telephone conversation with Dowding on 18 March 1988. Thirdly, Anderson made the telephone call to Dowding from Sydney.

74 Neither Anderson nor Dowding gave evidence that Anderson, on behalf of the appellant, informed Dowding in the telephone conversation on 18 March 1988 that it accepted the State's offer. There is no proper evidentiary basis for a finding to that effect. In any event, even if all the findings sought by the appellant were open on the evidence, it would not result in a finding that the proper law was the law of New South Wales. The evidence establishes that Anderson's phone call on 18 March 1988 was made to Dowding in Perth. I will assume without deciding that the law relating to the formation of a contract is the same in Western Australia and New South Wales. A contract is made at the place where the last act necessary to make the contract binding is performed. A contract is not formed until there is acceptance and that acceptance has been communicated to the offeror. The general rule is that a contract is made at the place where the communication is received (cf the postal rule). As the communication was received by Dowding in Perth, the March oral agreement would have been made in Western Australia.

75 The trial judge found that the guarantee if called upon would be honoured in Western Australia either by the State ensuring that Rothwells had the funds to enable it to repay the $50 million, or by directly making that payment itself [325]. The appellant challenges the second limb of the finding, contending there is no cogent evidence establishing that the State would itself directly make the payment to the appellant in Western Australia.

76 The evidence established that the appellant was incorporated, and had its business premises, in New South Wales. The meeting on 16 March 1988 in which Edwards was found to have made the contractual offer took place at the appellant's New South Wales office. Anderson lived in New South Wales. There was no evidence that the appellant conducted any business from any office in Western Australia or that it banked in Western Australia. However, at the time of the commercial dealings involving the State and the appellant, the appellant was and continued to be represented by the Perth office of the law firm Mallesons Stephen Jaques. The finding made by the trial judge was open.

77 Moreover, there are other connections with Western Australia. First, the State of Western Australia was a party to the March oral agreement. Secondly, the debtor was carrying on business primarily in Western Australia. Thirdly, the March oral agreement was collateral to the contract of sale of Westralia Square to the appellant (and CPH). The making of the March oral agreement was a condition precedent to the sale of Westralia Square [71] - [75], [299]. Fourthly, the purpose of the March oral agreement was to facilitate the repayment of a State instrumentality, the GESB. The evidence establishes that the transaction did indeed have its closest and most real connection with Western Australia. The trial judge was correct to conclude that Western Australia was the proper law of the March oral agreement.

78 The State in its cross-appeal contended that s 4 of the Statute of Frauds applies even if the law of New South Wales is the proper law of the March oral agreement, relying on Leroux v Brown [1852] EngR 966; (1852) 138 ER 1119. By an oral agreement between the plaintiff and the defendant made in France the plaintiff agreed to enter into the service of the defendant. Section 4 of the Statute of Frauds (UK) rendered an oral agreement of that type unenforceable. However, the agreement was enforceable by the law of France. The plaintiff commenced proceedings in England. The court held that s 4 of the Statute of Frauds is a matter of procedure and therefore the contract could not be sued upon in England.

79 Matters of substance are governed by the lex causae (the law of the cause of action) and matters of procedure are governed by the lex fori (the law of the forum). The appellant says the decision of the High Court in John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; (2000) 203 CLR 503 applies by parity of reasoning to render s 4 of the Statute of Frauds a matter of substance rather than procedure for the purpose of determining whether the matter is governed by the proper law of the contract or the law of the forum (if that is different).

80 In John Pfeiffer the plaintiff sued in the Supreme Court of the Australian Capital Territory for damages in tort for personal injury suffered in New South Wales. New South Wales legislation limited the amount of damages that could be awarded to the plaintiff for non-economic loss. The law of the Australian Capital Territory imposed no relevant limit. The court held that the limitation on damages, not being directed to governing or regulating the mode or conduct of court proceedings, was a matter of substance rather than procedure and was therefore governed by the lex loci delicti (the law of the place where the tort was committed) not the lex fori. The High Court said:

[M]atters that affect the existence, extent or enforceability of the rights or duties of the parties to an action are matters that, on their face, appear to be concerned with issues of substance, not with issues of procedure. Or to adopt the formulation put forward by Mason CJ in McKain [v RW Miller and Company (SA) Pty Ltd [1991] HCA 56; (1991) 174 CLR 1] 'rules which are directed to governing or regulating the mode or conduct of court proceedings' are procedural and all other provisions or rules are to be classified as substantive (543 - 544).

81 Applying the reasoning of the High Court in John Pfeiffer, s 4 of the Statute of Frauds would be characterised as substantive not procedural for the purpose of the conflict of laws. Accordingly, the section only applies because the proper law is that of Western Australia.

Authority of Premier and Edwards to give guarantee

82 The trial judge found that (1) Dowding as Premier had actual authority to enter into the contract of guarantee on behalf of the State [299]; (2) as a result of being so authorised by Dowding, Edwards had actual authority to enter into the contract of guarantee on behalf of the State [299]; (3) alternatively, Edwards had ostensible authority to do so [301].

83 In all the authority issues that arise, the State relies on Edwards' refusal at the meeting on 16 March 1988 to give a guarantee in writing. For convenience I deal here with the relevant findings and evidence on that subject.

84 The evidence of Anderson and Bourke accepted by the trial judge was that at the meeting on 16 March 1988 Bourke asked Edwards whether he would give a written guarantee of repayment by Rothwells of the $50 million loan. Edwards refused, saying he could not do that ([44], [56]). Edwards' evidence in cross-examination is as follows:

I'm suggesting to you that [Mr Bourke] asked whether the government was prepared to guarantee the loan?---I don't know. You would have to ask Mr Bourke.

That you responded that you were not able to do this?---Well, I certainly declined an invitation to put it in writing, yes.

I'm suggesting you declined an invitation to give a guarantee?---Well, if I put it in writing, it potentially would become a guarantee, yes.

I'm suggesting he asked you if you were prepared to give a guarantee and you said you weren't able to?---Well, I certainly wasn't able to (ts 997).

85 Although Edwards knew an oral guarantee was unenforceable, he did not communicate that to Anderson whose evidence was that he did not know that to be the case (ts 708). The trial judge said:

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 [67].

Actual authority (cross-appeal grounds 3(a) and 4(a))

86 The position of the parties to the appeal is that there is no relevant Western Australian legislation relating to the authority of members of the executive arm of the State Government to bind the State. I will proceed on that basis. The position in Western Australia is to be contrasted with that of the Commonwealth.

87 The authority of members of the executive arm of the Commonwealth Government to enter into contracts on behalf of the Commonwealth involving the committal of public money is regulated by the Financial Management and Accountability Act 1997 (Cth), the Financial Management and Accountability Regulations 1997 (Cth) and Chief Executive's instructions made thereunder.

88 The general principles concerning the liability of the Crown for contracts made by its ministers and officers were explained by Starke J in New South Wales v Bardolph [1934] HCA 74; (1934) 52 CLR 455:

TIPPERARY DEVELOPMENTS PTY LTD -v- THE STATE OF WESTERN AUSTRALIA [2009] WASCA 126 (22 July 2009)

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (496 paragraphs)

TIPPERARY DEVELOPMENTS PTY LTD -v- THE STATE OF WESTERN AUSTRALIA [2009] WASCA 126 (22 July 2009)

The scope and effect of the contractual promises (ground of appeal 1(a))

The proper law - Western Australia or New South Wales (ground of appeal 1(b))

Actual authority (cross-appeal grounds 3(a) and 4(a))

Notice of limited actual authority (cross-appeal ground 4(c))

Ostensible authority (cross-appeal ground 3(c) and 4(d))

Whether the support representation considered and determined (ground of appeal 2(a))

The soundness representation (ground of appeal 2(b))

Evidence as to Rothwells' financial position in March 1988

Whether the State can enforce cl 1 and cl 2 (grounds of appeal 1(a) and (b))

Whether deed releases the State (ground of appeal 1(c))

Legislation Cited (11)

Cases Cited (38)