BOQ Equipment Finance Ltd v Scott & Ors [2015] QSC 60

SUPREME COURT OF QUEENSLAND CITATION: BOQ Equipment Finance Ltd v Scott & Ors [2015] QSC 60 PARTIES: BOQ EQUIPMENT FINANCE LIMITED ABN 78 008 492 582 (plaintiff/second defendant by counterclaim) TRENT WILLIAMS (first defendant by counterclaim) v PETER DOUGLAS SCOTT (ALSO KNOWN AS PETER DOUGLASS SCOTT) (first defendant/first plaintiff by counterclaim) CATHERINE ANNE SCOTT (second defendant/second plaintiff by counterclaim) ACN 119 923 287 PTY LTD (DEREGISTERED) (FORMERLY GO BOATING PUBLICATIONS PTY LTD) ACN 119 923 287 (third defendant) FILE NO: SC No 4651 of 2011 DIVISION: Trial Division PROCEEDING: Trial ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 24 March 2015 DELIVERED AT: Brisbane HEARING DATE: 24 November 2014; 25 November 2014; 26 November 2014; 27 November 2014; 28 November 2014; 10 December 2014; 12 December 2014 JUDGE: Philip McMurdo J ORDER: 1. The defendants’ counterclaim is dismissed. 2. The first and second defendants are ordered to pay to the plaintiff an amount of $1,894,291.19. CATCHWORDS: BANKING AND FINANCE – INSTRUMENTS – where the plaintiff claimed payment of money lent to the defendants under a written agreement – where the subject agreement was a bill of sale whereby the first and second defendants assigned by way of security to the plaintiff, two printers that were used in a business conducted through the third defendant – where the defendants claimed they were induced to enter the agreement by misrepresentations made by the operator of a franchise of the plaintiff’s parent company, the -- 1 of 25 -- 2 Bank of Queensland – where the defendants claimed they should not have to repay the money they borrowed from the plaintiff CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – PERFORMANCE – where the plaintiff claimed payment of money lent to the defendants under a written agreement – where the agreement was a bill of sale whereby the first and second defendants assigned two printers by way of security to the plaintiff – where the printers were used in a business conducted through the third defendant – where the defendants claimed they were induced to enter the agreement by misrepresentations made by the operator of a franchise of the plaintiff’s parent company, the Bank of Queensland – where the alleged misrepresentations were that the defendants would not have to make any payment under the agreement unless and until there was a further agreement to extend credit to them by the bank and that the subject agreement was represented as an essential step towards obtaining a debtor finance facility – where the defendants claimed they should not have to repay the money they borrowed from the plaintiff EQUITY – GENERAL PRINCIPLES – FRAUDULENT AND INNOCENT MISREPRESENTATION – RELIANCE AND INDUCEMENT – where the plaintiff claimed payment of money lent to the defendants under a bill of sale whereby the first and second defendants assigned two printers by way of security to the plaintiff – where the defendants claimed that they were induced to enter the agreement by misrepresentations made by the operator of a franchise of the plaintiff’s parent company, the Bank of Queensland – where the alleged misrepresentations were that the defendants would not have to make any payment under the agreement unless and until there was a further agreement to extend credit to them by the bank and that the subject agreement was represented as an essential step towards obtaining a debtor finance facility – where the defendants claimed they should not have to repay the money they borrowed from the plaintiff TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – MISLEADING OR DECEPTIVE CONDUCT GENERALLY – where the plaintiff claimed payment of money lent to the defendants under a bill of sale whereby the first and second defendants assigned two printers to the plaintiff by way of security – where the defendants claimed that they were induced to enter the agreement by -- 2 of 25 -- 3 misrepresentations made by the operator of a franchise of the plaintiff’s parent company, the Bank of Queensland – where the defendants claimed relief under s 87 of the Trade Practices Act 1974 – where the alleged misrepresentations were that the defendants would not have to make any payment under the agreement unless and until there was a further agreement to extend credit to them by the bank and that the subject agreement was represented as an essential step towards obtaining a debtor finance facility – where the defendants claimed they should not have to repay the money they borrowed from the plaintiff TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS – FALSE REPRESENTATIONS GENERALLY – where the plaintiff claimed payment of money lent to the defendants under a bill of sale – where the defendants claimed that they were induced to enter the agreement by misrepresentations made by the operator of a franchise of the plaintiff’s parent company – where the defendants claimed relief under s 87 of the Trade Practices Act 1974 – where the alleged misrepresentations were that the defendants would not have to make any payment under the agreement unless and until there was a further agreement to extend credit to them by the bank and that the subject agreement was represented as an essential step towards obtaining a debtor finance facility Trade Practices Act 1974 (Qld), s 87 COUNSEL: P H O’Higgins for the plaintiff/second defendant by counterclaim and for the first defendant by counterclaim The first defendant/first plaintiff by counterclaim appeared on his own behalf No appearance for the second defendant/second plaintiff by counterclaim No appearance for the third defendant SOLICITORS: Dibbs Barker for the plaintiff/first defendant by counterclaim Dibbs Barker for the second defendant by counterclaim The first defendant/first plaintiff by counterclaim appeared on his own behalf No appearance for the second defendant/second plaintiff by counterclaim No appearance for the third defendant [1] The plaintiff’s claim is for the payment by the first and second defendants of money lent to them under a written agreement. The plaintiff had also claimed the same sum against -- 3 of 25 -- 4 the third defendant, which had guaranteed the payments by the first and second defendants. But the third defendant is now a deregistered company. [2] The defendants, Mr and Mrs Scott, counterclaim for relief to the effect that they should not be liable to the plaintiff at all. They do so upon the basis that the plaintiff’s representative Mr Williams, who is a defendant to their counterclaim, made certain misrepresentations by which they were induced to enter into the agreement. They claim relief under s 87 of the Trade Practices Act 1974. For the same conduct of Mr Williams and the plaintiff, they also claim that the plaintiff is estopped from enforcing its agreement with them. Alternatively, they say that Mr Williams’s representations were of a promissory nature so that they became part of the relevant contract between the parties and that the plaintiff’s failure to perform according to these promises has the effect of relieving them from performance of the agreement. [3] The defendants concede that absent the alleged representations or promises made by Mr Williams, they would be liable to the plaintiff. There was no challenge to the evidence which quantified the amount of the plaintiff’s claim. Therefore the issues are those raised by the counterclaim. [4] I have concluded that the defendants’ case should be rejected. I do not accept that Mr Williams made the statements which are alleged by the defendants. And if Mr Williams did make those statements, no resultant loss or damage has been or is likely to be suffered by the defendants. The relevant agreement: a Bill of Sale [5] The agreement was dated 26 February 2010. It was a bill of sale by which Mr and Mrs Scott assigned to the plaintiff, by way of security, two printers which were then being used in the business which they conducted through the third defendant. That business was the publication of magazines. One machine was described as a “six colour press” and the other a “five colour press”. [6] The agreement recorded that this chattel mortgage was given to secure a loan by the plaintiff to the defendants in the amount of $1,256,033.20. This was to be repaid with interest by 48 monthly instalments each of $16,744.36 and a final payment of $816,421.58. [7] Very little was paid under this agreement. There were two payments totalling $7,500 made in December 2010 and another two payments totalling $5,000 made in January 2011. The four year term of the loan having now expired, the unpaid principal together with interest is payable.1 [8] In the plaintiff’s case, there was evidence from Mr Outhwaite, who is employed by the plaintiff’s parent company, Bank of Queensland Ltd (“BOQ”). According to his affidavit of 24 November 2014, the total owing as at that date was $1,831,605.13. Mr Outhwaite was cross-examined by Mr Scott, who argued his own case and that of Mrs Scott. The cross-examination was directed to things other than the calculation of the debt and in his submissions, Mr Scott confirmed that the amount of the debt was not 1 Quite apart from the operation of provisions for the acceleration of the due date for payment on default by the defendants. -- 4 of 25 -- 5 disputed (subject of course to the counterclaim).2 I see no reason not to accept Mr Outhwaite’s evidence in proving the amount of the debt. Subject to the counterclaim, the plaintiff has established its entitlement against Mr and Mrs Scott for that sum together with further interest from 24 November 2014. The defendants’ case [9] Their pleaded case is that there were representations made by Mr Williams “in or about early 2010” to the effect that they would not have to make any payment under the agreement unless and until there was a further agreement between them and the plaintiff (or between them and BOQ) under which further credit would be extended to them. This further finance was to be by what their pleading describes as “the Proposed DFF Agreement” which would encompass a factoring arrangement, whereby the plaintiff or a related entity would purchase the trade debts owing to their business at a discount of 20 per cent and also “the provision of other finance for the operation of the third defendant’s business”. [10] They allege that they were induced to enter into the subject agreement by that representation because, absent the provision of such further credit, they were unable to make the payments which this agreement required. No such further credit was extended to them (or to the third defendant). In the circumstances, they say they should not have to repay the money which they did borrow from the plaintiff. [11] They allege that at the same time, Mr Williams told them that BOQ or the plaintiff would only offer a “DFF” to the third defendant if the defendants entered into the subject agreement. As pleaded, that case was that the subject agreement was represented as an essential step towards obtaining a debtor finance facility, as distinct from a representation to the effect that there would be a debtor finance facility offered to the third defendant if the subject agreement was made. Nevertheless, there was evidence for the defendants which, if accepted, would have proved a representation by Mr Williams that if the subject agreement was signed, a debtor finance facility would be offered. [12] Their pleading also complained of a representation which they say was made to them in or about November 2010, which is also said to have been made by Mr Williams, to the effect that they should ignore the plaintiff’s written demands for payment because the plaintiff would take no action upon them. However, no evidence was offered in support of that case. The defendants’ case is confined to the representations alleged to have been made by Mr Williams shortly prior to the making of the agreement. Circumstances of the agreement [13] Prior to the agreement, it was the plaintiff which owned the two printers. They had been leased to the defendants under two chattel leases, each for a period of three years and which had expired in 2009, after which the printers remained in the possession of the defendants. For some months prior to the expiration of the lease terms, the defendants had failed to pay the rental payments which the leases had required and those amounts remained unpaid at the date of the subject agreement. 2 T 7-48, 7-49. -- 5 of 25 -- 6 [14] One printer was leased under an agreement dated 26 June 2006. It required 36 monthly instalments of $9,791.98. The residual value on the termination of the lease was $693,440. The other printer was leased under an agreement dated 27 September 2006. It provided for 36 monthly instalments of $9,546.45 with a residual value of $481,250. [15] The lease agreements were in identical terms. By cl 12(2) they required the defendants to return the equipment to the plaintiff upon expiry of the lease and by cl 12(6), if the equipment was not received by the plaintiff within seven days of a notice to return it on expiry of the lease, the defendants were obliged to pay to the plaintiff the residual value. By cl 13, upon expiry of the lease and if and when the equipment came into the plaintiff’s possession, it was entitled to dispose of it and the defendants would be obliged to pay the amount by which the residual value exceeded the price for which it was disposed. Alternatively, the plaintiff might then obtain a valuation of the equipment, and recover the amount by which the residual value exceeded that valuation. [16] There is no evidence from which the values of these two printers, as at 26 February 2010 (the date of the subject agreement), could be assessed. Mr Scott maintained that they could have been re-sold to their original supplier under some “buy back” arrangement, which he asserted was evidenced by some letters from the supplier or its agent. But that correspondence does not at all indicate that the supplier would have been prepared to repurchase these items by February 2010. One document is a letter dated as early as 6 August 2003.3 It indicates that the supplier was then offering to pay 80 per cent of the price at which the defendants had acquired the five colour printer, but only if it was traded in for another item and within the following two years. The other document was dated 15 June 2006.4 It also referred to a trade-in price of 80 per cent of the original purchase price for the six colour printer, but again only within a period of two years. [17] There was no prospect of the printers being traded for newer models as at February 2010. The financial position of the defendants’ business was then very poor, as the defendants’ own case emphasises. In any case, those letters were too old to provide any indication of a trade-in price as at February 2010. And Mr Scott asserted that those letters were probative of a market value, because it should be inferred that any equipment would always be worth more than an offered trade in price. The basis for that assertion was not revealed. [18] The plaintiff had not given a notice demanding the return of either printer by February 2010. However, it was then entitled to do so. Upon any realistic view, the defendants were likely to become liable for the residual value under each lease, less whatever was the then value of the printers. And they were already liable for unpaid instalments under each lease. [19] From Mr Outhwaite’s evidence, it appears that the total of the arrears of lease payments and the residual value on one of the printers was $724,569.74 and the total of those amounts for the other printer was $531,463.46. This explains the amount of the loan recorded by the subject agreement: $1,256,033.20. The subject transaction was thereby a refinance of the two equipment leases. It did not involve, in any real sense, the provision of further finance to the defendants. The printers became the property of the defendants (before being mortgaged by the bill of sale). In effect the printers were sold 3 Exhibit 3. 4 Exhibit 4. -- 6 of 25 -- 7 to them for whatever was their value, requiring the defendants to pay that amount and the balance of the residual value. [20] The defendants do not suggest that the terms and conditions of this refinance were disadvantageous in comparison with those of the leases. Consequently there was no apparent detriment to the defendants from the subject transaction. [21] It is necessary to discuss the course of dealings between the defendants and the plaintiff from the beginning of 2009 in order to explain the position between them at the time of the agreement. [22] Mr Williams was not an employee of the plaintiff or BOQ. He operated a franchised branch of the bank at the Gold Coast. The defendants had been his customers for some years. But their business also had credit facilities with the National Australia Bank (“NAB”). [23] At the beginning of 2009 there was a debtor factoring facility for the defendants’ business, described by the defendants as a debtor finance agreement or DFA, with the NAB. The NAB facility had expired in October 2008 but it had granted some short extensions. The defendants were asking Mr Williams to provide such a facility in substitution for the NAB facility which was about to expire. On 5 January 2009, Mr Scott emailed Mr Williams to say that the NAB facility, which had a “temporary limit of $450,000”, would expire on 15 January and the defendants required a replacement facility from the BOQ in an amount of $600,000 to $700,000. He also suggested that other credit facilities which the defendants had with the NAB, such as a loan facility and an overdraft facility, be transferred to BOQ. [24] Mr Williams referred Mr Scott’s proposals to BOQ. Mr Wood, a “Manager Risk Assessment – Debtor Finance”, wrote to Mr Scott on 28 January 2009 about his forthcoming visit to the defendants’ premises at Chermside. He detailed the information which he would require from the defendants at that visit, such as a listing of the debtors of the business and the ageing of those debts. Mr Wood visited the premises on 2 February 2009 after which he emailed people within BOQ as well as Mr Williams. He there made a number of observations which were unfavourable to the defendants’ prospects of obtaining the facilities which they were proposing. A large proportion of the debtors were significantly in arrears and the defendants’ business had “significant tax arrears”. [25] On 4 February 2009, Mr Rhys Scott emailed Mr Williams. He is the son of the defendants and was a director of the third defendant. He asked if there was “any news on the DFA audit” (Mr Wood’s assessment). After Rhys spoke to his father (the first defendant), the latter emailed Mr Williams emphasising the urgency of the defendants’ financial position, saying that they needed to get a further extension from the NAB, for which they needed a letter from the BOQ to the effect that it would grant a debtor finance facility. He wrote that if the letter was not forthcoming on that day “we will run out of funds”. On the same day Mr Williams replied: “As discussed kindly note that your application for debtor finance is being progressed through our credit department. We hope to be in a position to formalise in a few days.” -- 7 of 25 -- 8 As that email and other dealings consistently made clear to the defendants, the decision as to the provision of finance for the defendants was not that of Mr Williams: it was to be made by BOQ’s credit department. [26] The defendants’ application for further finance and in particular the DFA was unsuccessful. By 18 February 2009, the defendants had approached Westpac to seek a DFA. Rhys Scott emailed Mr Williams on 19 February 2009 referring to his recent discussions with someone from Westpac on that subject and inquiring whether the Bank of Queensland would consider releasing some of its security to make way for Westpac. [27] On 23 February 2009, (the defendant) Mr Scott emailed Mr Williams as follows: “Rhys has kept me posted in regard to BOQ and their reluctance to do business. I must say we were quite disappointed as we really thought it was a ‘done deal’. Anyway, because we didn’t talk to any other financial institutions until your into [sic] to Westpac last week (and thank you for that contact), we are now caught between a rock and a hard place without a DFA facility as we virtually have no income stream. Therefore, I was rather hoping that you might have the lending authority to be able to approve a couple of personal loans for us so we can continue to fund our operations until we have a new DFA facility in place with Westpac or BOQ if they change their minds. …”5 [28] Subsequently the defendants went to another financier, called Liberty Financial, where a debtor finance facility was obtained. But by June 2009, the defendants were again seeking a debtor finance facility from BOQ. This is recorded in a document within the bank described as “Commercial Submission” dated 12 June 2009. It records the defendants seeking $250,000 from BOQ to replace the “DF facility held with Liberty Financial” as well as an amount of $1,200,000 “[t]o refinance the existing facilities from NAB into one facility and consolidation of current ATO commitment.” It records Mr Williams’s support of these proposals. In response, BOQ advanced $250,000 to pay out Liberty Financial, on a short term loan and upon the provision of additional security by a mortgage over a rural property owned by the defendants. Otherwise the defendants’ application for further finance (including a debtor finance facility) was unsuccessful. [29] The defendants’ position remained precarious, in the view of decision-makers within the bank, notwithstanding the fact that Mr Williams continued to promote the defendants’ cause. On 26 August 2009, Mr Williams emailed Mr Hawken and others within the bank saying that he understood their concerns but that the defendants had “seen the worst of this position”. In response, Mr Hawken emailed Mr Williams expressing scepticism and concluding that he was not confident “that if we provide the assistance here we are not simply delaying the inevitable”. [30] By the end of September 2009, the equipment leases had expired and with the support of Mr Williams, the defendants asked for a “rewrite” of the “residual amount” in each case for a further 36 months. At the same time, again the defendants sought to refinance the NAB facility and to establish a debtor finance facility. These proposals 5 Exhibit 1, doc 23. -- 8 of 25 -- 9 were the subject of another “Commercial Submission” within the bank on 4 November 2009. Within a fortnight those proposals had been declined. BOQ’s Mr White then wrote to Mr Williams, following a meeting between them and others within the bank, explaining the decision as follows: “The business needs to be re-capitalised. Sale/leaseback of the business premises, introduction of an equity partner or injection of cash from other sources may be options. Refinancing NAB and providing further funding and clear substantial tax arrears is not an attractive option. There is a need to regularise the EF facility [a reference to the 2 equipment leases]. Suggestion made to provide a second mortgage over the business premises and/or residence and look to rewrite the existing EF facilities. The equipment is obviously essential to the business. The position has deteriorated significantly in the last year or so and it is difficult to see the business being in a position to trade out of the current situation without a significant injection of cash equity.” Of course that was what was written to Mr Williams and it cannot be supposed that it was conveyed to the defendants, at least in precisely the same terms. However, they must have learnt that their proposals had been rejected. [31] One of their proposals then was for the “rewrite” of the two leases. Mr Scott says that Mr Williams had agreed, at some point during 2009, that the defendants could stop paying rental under the leases until a debtor finance facility was granted to them. There is no document which evidences that assurance. On the other hand, the defendants did not make several monthly payments under each lease prior to its expiry and there is no evidence that any action was taken to enforce the leases. I have referred already to the extent of the arrears by the expiry of the leases. I accept that Mr Williams led the defendants to believe that strict compliance with the leases, towards their expiry dates, would not be required. I do not accept that he went so far as to assure them that they need not make any payment, before or after the expiry of the leases, unless and until the bank provided a debtor finance facility. [32] The first of those leases expired in June 2009, at about the time when, for the second time in that calendar year, the defendants were refused a debtor finance facility from the bank. And one of the proposals put forward in November 2009 was for the refinance of these two printers by a so-called rewrite of the leases in that proposal. It cannot be concluded that in some way Mr Williams caused the defendants to believe at that time that their obligations under the leases, including their potential obligations to pay the residual values, had become qualified by a condition that a debtor finance facility be granted to them when BOQ had yet again declined to provide such a facility. [33] Discussions between Mr Scott, his son Rhys and Mr Williams continued in relation to the refinance of the two printers. Mr Williams was given assurances that there were “buy back” agreements which were then or could be put in place for the printers in an amount of “80% of the residual amounts” so that, as Rhys Scott emailed Mr Williams on 27 November 2009, “there is no possibly (sic) way BOQ could lose money.” He then advised Mr Williams that the party which would undertake to buy back the equipment was “to update the agreement” and send it to Rhys Scott. Mr Williams emailed in response on the same day: -- 9 of 25 -- 10 “Thanks for that… If I can have it buy (sic) Monday that would be great …” Rhys Scott says that it was then left on the basis that it was Mr Williams who would speak to the third party which was to agree to the buy back. That is denied by Mr Williams and is inconsistent with the emails to which I have just referred. It is also inconsistent with an email from Mr Williams to Rhys Scott on 3 December 2009 on the subject of “buy back” in which Mr Williams simply asked: “any news?”. In truth there was no further buy back which was proposed, let alone agreed, in the defendants’ favour. I have referred already to the documentary evidence of buy back offers, which were offers made many years previously. [34] What next happened was that Mr Williams was told by Mr Scott that the defendants had all but concluded a contract for sale of their business. The business was to be sold for approximately $5.5 million which would easily allow for the payment of their debts including those to the plaintiff and BOQ. This information was provided in response to the following email from Mr Williams to Mr Scott of 9 December 2009: “Just to keep you in the loop I thought I would let you know where we are at the moment. … [A]s you can see the facilities are in substantial arrears which is why I am getting heat from H/o … It appears to me that no payments have been made for a while as the Periodical Payment would have ceased when the facilities expired … or have just been cancelled because they were not getting through. Will talk soon but really I need a fairly big chunck to be cleared to show good faith to credit dept to roll facilities through on top of ‘buyback’ arrangements …” The “facilities” to which Mr Williams referred were undoubtedly the two leases. On the following day Mr Scott emailed Mr Williams as follows: “I guess it is my turn to ‘keep you in the loop’. As you know we have been waiting on some form of confirmation from Bank of Queensland since last year and, to be honest, needed to have an alternate strategy because of the length of time the process of refinancing with BOQ has or is taking. As a consequence, since August this year, we have been negotiating the sale of our businesses and commercial buildings as a going concern. We have agreed a price of $7.35 million, made up of $1.85 million for the buildings and $5.5 million for the businesses. Contracts have now been drawn and submitted to the prospective purchaser and once the non-refundable deposit of $735,000 is paid, we will be looking to, initially, pay out the loan on my farming property [apparent reference to the $250,000 which the bank had advanced in June 2009] and the Yearbook overdraft facility as well as the arrears on the presses [the printers]. Once the completion date is known, we will be seeking a payout figure on all leases so we can discharge our liabilities to Bank of Queensland, in full. -- 10 of 25 -- 11 … It will be sad to let our businesses and magazines go but without banking facilities in these tough times, it is unbearably difficult to run a small business. Had we been able to get a DFA facility and roll-over leases in place, we would have continued but the uncertainty made us look at other options. … I expect we will know more before Christmas as I am pushing for an end of January 2010 settlement date but that might extend out to February. … You can tell your credit people we are no risk as once the sale is completed, we will pay out every cent we owe to BOQ.” [35] On 14 December 2009, Mr Williams emailed relevant officers within BOQ, that the defendants were selling their business and property and were “currently engaging (sic) contracts”. He added that “[f]rom discussion with customer this morning deposit is due to be made on 5th Jan 2010 with settlement date currently the 24th Feb”. [36] Mr Scott provided Mr Williams with a copy of a proposed contract. It was in the REIQ form of a contract for the sale of a business. There were many particulars which were left blank, most notably the identity of the buyer. [37] On 6 January 2010 Mr Williams emailed Mr Scott: “If you can can you update me on the sale of the business and how the possibility of obtaining deposit funds to clear some accounts that would be great. Also, if your (sic) a chance can you pop some funds into the $250k loan which is currently $3,395 in arrears.” [38] The response to that email came from Rhys Scott, who emailed Mr Williams on the same day. He said that the defendants were away on holiday and that he would “organise to transfer funds to l/o account”. His email continued: “Once the deposit money and contracts are finalized we will address the press [printer] leases as all our other boq accounts I believe are in order. In the short term Peter [the first defendant] and I have no problem in redoing leases if you prefer and implementing complete changeover as we would continue to bank with BOQ once the sale has gone through. Or discuss a couple of iterim (sic) payments on leases if this assists? …” [39] On 20 January 2010, Mr Williams emailed Rhys Scott asking how the sale was “progressing” and for “a copy of the contract just to appease any concerns”. Rhys replied by email on 28 January: “Yes sale is still progressing, amendments to the contract and also restraint of trades (sic) being negotiated. Also transferred $1500 to account today for GBP l/o loan, not sure when that monthly payment is due but wanted to make sure up to date.” [40] On 2 February 2010, Mr Williams emailed Rhys Scott asking: -- 11 of 25 -- 12 “[A]ny chance of getting email from you pronto as I have a phone conference at 10 am re arrears on loans.” By 10.00 am that day, Mr Williams received a response from Rhys Scott which contained information under the heading “update on the sale”, which Mr Williams passed on to officers of the bank on the same day. Their response was to consider an extension of the “facilities to the expected settlement date (plus say a month to allow for slippage) to regularise”, as one officer put it to another in his email of 3 February 2010. That email also noted that “we’re coming up to the half year and should be looking at all opportunities to regularise accounts > 90 days, especially when its in our control and we have a sort-of ‘firm’ take out identified”. This was a reference to an impending deadline for the remedy of the defaults on the two leases, which was the end of February 2010. Absent the defaults being remedied by then, the leases would fall into a category requiring special reporting by the plaintiff and some recovery action. With that deadline in mind, Ms O’Brien of BOQ, emailed Mr Williams on 3 February 2010: “[W]e are seeking approval from Head of EF [Equipment Finance] to roll the 2 outstandings until settlement, we need to do this prior to 28th Feb in order to get the arrears & outstanding RV ($1,174,690) off the book, to achieve this I need to know asap what the settlement date will be.” [41] On 4 February 2010, Mr Hawken from BOQ emailed Mr Williams: “I am aware that something was happening here. A sale of the business appears to be a major positive for us (and the customer) and that is great (fingers crossed). A few things to note …  You will need to update and provide a full Commercial Long Form Submission, including supporting Schedules inclusive of Group Facilities Schedule for us to consider the below payment holiday  A Re Write Proposal should also be completed …” [42] On 8 February 2010, Mr Williams emailed Rhys Scott asking for a payment to be made to BOQ of an amount of $40,000 which had been advanced in the first half of 2009. He added, “I realise this will be cleared when sale funds come through but I need some monies to be credited to show ‘good faith’ from your part that the account will be cleared”. [43] On 18 February 2010, Mr Williams submitted the requested Commercial Submission. The proposal was there summarised as follows: “To rewrite residual amount from expired EF facilities currently held with [the plaintiff]. First Facility sought for (sic) is a further period until end of July 2010 i.e. 5 month term for the 6 colour printer which expired on the 29/6/09. Second rewrite refers to the expiry of the 5 colour printer (29/9/09) for a further 5 months. Facility to be cleared from pending sale of business.” In the same document, under the heading “New information” Mr Williams wrote: -- 12 of 25 -- 13 “Application forwarded to credit on 4th Nov 2009 for various facilities was subsequently declined ... however for continuation of EF facility we required an update on sale/leaseback from supplier … Several emails/updates have been provided but in the end with business being sold this option has not been persued (sic) by applicants. We are now seeking approval to roll over facility – inclusive of arrears until end of July 2010 to allow for complete sale of business and property. Copy of sale contract pending.” In the same document, under the heading “New commentary”, Mr Williams wrote: “Have not sought for (sic) added financial information given pending sale. Note short term facility rpm [rate per month] being $15k (approx) which is lower than current commitments.” [44] That application was made in the name of the third defendant company, rather than the defendants, as the proposed borrower. It provided for guarantees from the third defendant’s directors. It noted (correctly) that it was a refinance of the leases in favour of the defendants. [45] However, on 23 February 2010, Mr Williams amended that application when he emailed Mr Hawken and others within BOQ asking for the facility to be in the names of the defendants. He explained that this had been “a ‘last minute’ change from the advice of accountant to keep assets separate to business name”. That was immediately approved by Mr Hawken by an email to Mr Williams. This is likely to be the change which resulted in the “amended documents” to which Mr Williams referred in his email to Rhys Scott on 24 February 2010 which was as follows: “… [H]opefully today I will have amended documents for your folks plus you to sign. I will call you when I get them. Also, we will need to debit the amount of $2,734.29 for missed payment (26th Nov) for the folding/guillotine machine for the rollover of the presses to go through … can we debit your account for that? For the new facility for the 2 printers we won’t pass through the entries until late next week as discussed so we don’t smash your cash flow. … and one last thing if you can pop some funds into the loan we gave you for Sanct Cove … the original amount was $40k and balance is now $42k … anything would help … sorry one more thing … loan for $250k is over $2,322.70 and another payment is due tomorrow of $1807.76 would be grateful if you could put some into that as well.” [46] On the afternoon of 24 February 2010, Mr Williams emailed to Mr Scott: “Here are the new docs … please print off and it would be great if you could sign tonight and drop them into our [C]hermside branch tomorrow. …” -- 13 of 25 -- 14 There were several attachments to that email, one being a form by which the defendants would authorise the direct debiting of their bank account for the payment of the monthly instalments under the proposed bill of sale. Another attachment was the draft bill of sale itself. The draft included details of the amount of the monthly instalments and of the final payment. But there were blanks under the headings “First loan instalment due” and “Last loan instalment due”, as well as next to the words “Final date for repayment of loan”. What happened on 26 February 2010? [47] The subject agreement (the bill of sale) is dated 26 February 2010. The defendants say that it was signed by them on that day. But they claim that they did so in the presence of Mr Williams at their Chermside premises, whilst Mr Williams denies that he was there or was otherwise present when they signed it. [48] His denial is supported by documentary evidence showing that he flew from Coolangatta to Sydney on that day and shopped and stayed the night there. I am satisfied that he did those things, evidenced as they are by contemporaneous documentary records. The defendants effectively suggested that Mr Williams drove from the Gold Coast to Chermside and procured their signature upon the agreement before returning to the Gold Coast and flying to Sydney on that day. It is possible but unlikely that he did so. [49] The agreement, as signed, contains handwritten insertions specifying the dates of the payment of the first and last instalments and the final date for repayment. The due date of the first instalment was inserted as 26 February 2010. The defendants deny that those dates were completed by their handwriting. I accept that evidence because it is improbable that as non-lawyers, they would have been careful enough to do so. Mr Williams denies that the handwriting is his. He said he was unable to explain by whom and when it was inserted, consistently with his evidence that he was not present when this document was signed. But if the defendants did not insert those dates, it does not follow that Mr Williams did so and in their presence. It is not unlikely that the dates were completed by someone within BOQ when the document came to be signed for the plaintiff. [50] On the defendants’ case, the representations upon which they rely were made by Mr Williams to them in person at their premises at Chermside on Friday, 26 February 2010. At this point, it is necessary to detail the evidence of each of them as to this meeting. [51] The evidence of (the defendant) Mr Scott is that following the email from Mr Williams of 24 February (which had attached the “amended” documents for signature), he was uneasy about the proposed transaction. He said that he and his son then had a “very robust conversation” on 25 February in which he came to the view that the documents should not be signed. One reason for that view was that the documents were prepared in the names of the defendants and not their company. His “second bone of contention” was that they were being asked to “sign up for something to suit Bank of Queensland Equipment Finance’s reporting cycle”. He says that Rhys Scott then rang Mr Williams -- 14 of 25 -- 15 and told him “that Dad’s a bit uneasy about this”. In consequence, Mr Williams came to their Chermside office “late on the 26th of February”.6 [52] Mr Scott gave this recollection of the meeting on that day: “… I said to him, mate, we can’t sign these things because we can’t pay. It’s as simple as that. And he said, look, we need to get this tidied up. It’s important that we get it off our books so that it’s not a reportable item. But it is the first step to you getting your debtor finance facility because credit have recognised that you need the facility to service the press loans and that was pretty obvious because nothing had been paid since February 2009. And he said, look - he said this is the first step. You know, you will get your debtor finance facility. Sign this and you’ll get it. And I said to him are you sure? And he said sign this and you’ll get it.”7 [53] Mr Scott said that he then telephoned Mrs Scott (who was at home) and asked her to come to the office, which she did. He described how the meeting continued: “Trent laid the documents out on the table. … I explained to [Mrs Scott] what we were going to sign. I had told her about the representations that Trent had made to us that this was the first step to establishing a debtor finance facility, that he was saying that the bank needed it tidied up because - keep it off their reporting period and I just said to him, Trent, can you just re-assure Anne that this [is] what will happen and he repeated those representations to her and he said, look, in any event, you won’t need to pay anything until the debtor finance facility is established and I then said to him all right. We will sign the agreement but we will not sign your direct debit authority because we can’t pay. It is as simple as that. And Anne also told him that, you know, she wasn’t prepared to pay, wasn’t prepared to sign because that was it. I said to him, look, you’ll want the first payment today, which was represented to us in the documents at 16-odd thousand dollars and, surprisingly, despite the discussions that we’d had in early February about re-writing the leases based on, you know, a quick six-month term - the business got sold. We’d have it paid out. So one of the surprises that we’d received when Mr Williams turned upon the 26th was that the bill of sale was drawn up for 48 months, which didn’t quite fit in terms of our expectations, and the term was 16,000. I said to him Trent, we can’t pay that today and neither can we pay the normal application fees. He said don’t worry. That’s not important today. It’s important to get this document signed. Once we get the debtor finance facility set up, then we’ll worry about it.”8 [54] The evidence of Rhys Scott was to the effect that in a meeting which he had with Mr Williams at the beginning of the week (ending 26 February), he told Mr Williams that the proposed payments under the bill of sale could not be made because of insufficient funds in the absence of a debtor finance facility. He said that he was told by 6 T 2-48. 7 Ibid. 8 T 2-48, 2-49. -- 15 of 25 -- 16 Mr Williams that “a debtor finance facility was coming”.9 But it appears to have been the suggested meeting of 26 February about which he gave this evidence: “Did Mr Williams raise anything about the sale of the business or the proposed sale of the business that day?---No. This man was all about getting the leases or the bill of sale executed so the Bank could get it off their reporting period. There wasn’t a conversation about the sale of the e business. It was a very brief perhaps a little bit tense because we said Trent, without a debtor finance facility this won’t happen. And he said it’s coming. This will be the facility. You will be able to pay your leases. As I said, I wasn’t going to sign up my company to $1.2 million worth of debt, and I didn’t have certainty that I was going to get a debtor financial facility. You know, this is 2009 all the way to 2010. Nothing had changed. Did Mr Williams at the signing of those documents on the 26th of February make any comment about repossession of the assets?---He just resigned the bill of sale. He wasn’t repossessing anything.”10 [55] Mrs Scott’s evidence was that she was at home on Friday, 26 February 2010 when she was telephoned by Rhys, asking her to come to the office and sign the documents. She went to the office where, according to her evidence, this occurred: “When I arrived, I said hello to - well, I went into Rhys’ office, and then we went into the meeting room. There was Rhys and yourself and Trent and myself. So what happened next?---Trent explained that these were the bill of - the bill of sale documents to tidy up the press leases, and then would we sign them. So amongst the documents that we were requested to sign was a direct debit authority. Did you sign that direct debit authority?---No. I didn’t sign the direct debit authority. What did Mr Williams say when you and, as has been tendered in evidence, I didn’t sign that direct debit authority?---He just said that’ll be sorted out when the debtor finance comes through. He wasn’t cross or anything like that. He wasn’t miffed that I hadn’t signed it. So he said to you, as you just said, that that’d all be sorted out when the debtor finance facility was established, or words to that effect?---That’s right. … On that day, the 26th of February, when you signed that bill of sale but not the direct debit authority, was anything mentioned in relation to the proposed bill of sale - sorry - proposed sale of the business?---Nothing - not when I was there. Nothing.”11 9 T 5-18. 10 T 5-20. 11 T 4-25. -- 16 of 25 -- 17 For the plaintiff it was submitted that there is a marked difference between that evidence of Mrs Scott and the evidence of her husband and son. I shall return to that submission. [56] The evidence of these three witnesses was given prior to that of Mr Williams. They were not to know he would say that he went to Sydney on that day and that he would have documentary evidence to prove it. It is to be noted that the defendants’ pleaded case was not so particular as to have the relevant representation or representations made by Mr Williams on 26 February 2010. During Mr Scott’s cross-examination of Mr Williams, there was some retreat from the suggestion that the representations were made on that day. Mr Williams was cross-examined on the basis that the representations were made on the Monday of that week or in other words on 22 February.12 Mr Williams then gave this evidence: “DEFENDANT P.SCOTT: So you came to our offices that day and you told us that those leases had to be written by the end of the reporting period, did you not?---I was instructed to, yes. Yes. And what did we say to that, Mr Williams?---I can’t recall, Mr Scott. Did we not say, “We’re not signing those documents because we can’t pay”, Mr Williams?---I can’t recall, sorry. You can’t recall that important piece of information?---No, I can’t. Your customer is saying to you, “Sorry, we can’t sign that document. We can’t pay”?---I can’t recall, I’m sorry. The provision then, “We can pay if we debtor finance facility”. And you said, “Sign these and you’ll get your debtor finance facility”, didn’t you, Mr Williams?---No, I wouldn’t have said that, Mr Scott.”13 [57] Mr Williams did not dispute that he had been to the defendants’ offices earlier in that week ended 26 February, although he did deny that he gave the assurances which Mr Scott attributed to him. Several things point to the likelihood that Mr Williams did go to the defendants’ premises earlier in that week. One is that the documents originally prepared by the plaintiff had to be amended. In his email of 24 February to Rhys Scott, Mr Williams said that he hoped to have “amended documents for your folks plus you to sign”. This suggests that an earlier set of documents had already been provided to the defendants. Similarly, there is Mr Williams’s email to Mr Scott on the afternoon of 24 February 2010 referring to the “new docs” which he there attached. Also in Mr Williams’s email to Rhys Scott was the statement “thanks for your time yesterday …”, indicating that at least the two of them had met on Tuesday, 23 February. [58] The Commercial Submission of February 2010 records a handwritten approval of the application dated 17 February and has a fax imprint indicating that it was sent by BOQ to Mr Williams on the following day. It thereby appears that this transaction was approved by BOQ in sufficient time for Mr Williams to have been at the defendants’ premises on, say, 23 February with documents for the defendants’ signature. 12 T 6-85. 13 T 6-85. -- 17 of 25 -- 18 [59] Mr Scott cross-examined Mr Williams about his email to Mr Hawken and others of 23 February, when he asked for the facility to be in the names of the defendants upon the basis of an advice from their accountant. Mr Scott suggested that this must be untrue, because Mr Williams had said in evidence that the accountant was Mr Pollock but that Mr Pollock had ceased to be the defendants’ accountant by that time.14 But there is no evidence that Mr Pollock was not then the defendants’ accountant and what was suggested by Mr Scott about that need not be true. By 23 February, Mr Williams had secured the approval from BOQ for this new facility. In my view, it is unlikely that Mr Williams would have then sought this urgent amendment of the approval for some (unidentified) purpose of his own, rather than acting as requested by the defendants or their adviser. [60] Although the defendants’ evidence (and that of their son) was that the relevant representations were made on 26 February, the evidence as a whole raises the possibility (not inconsistently with their pleaded case) that such representations were made at a meeting earlier that week. Conceivably, the defendants and their son have come to believe that it was on 26 February that they had the critical meeting with Mr Williams, having seen that this is the date of the agreement upon which they are sued. More probably than not, there was no meeting between them on 26 February, having regard to the evidence of Mr Williams’s trip to Sydney. But in my view there is a real likelihood that there was a meeting between these four persons earlier in that week when the Scotts were asked to sign the original drafts. Therefore, it is necessary to consider whether, more probably than not, the alleged representations were made at such an earlier meeting. [61] Mr Williams’s evidence is that he did not make any representation as alleged. Indeed he seemed to say that he was satisfied that the re-written facility could be serviced by regular payments. In cross-examination, he disputed the proposition that he was unconcerned about “serviceability” because he thought that the debt would be discharged from the proceeds of the anticipated sale of the business.15 He said that his “job is to demonstrate there is serviceability” which he believed he did on this occasion.16 He added that he referred to a “serviceability worksheet” in the application which he presented in February 2010. [62] The Commercial Submission did refer to a “servicing spreadsheet” and “two spreadsheets accompanying [this] application which highlight the capacity to demonstrate based on historical financials and projections for the remainder of this financial year”.17 However, he later agreed that it was likely that there were no such spreadsheets which were presented in February 2010.18 The explanation is that the Commercial Submission document was one which was not entirely re-written for each occasion on which some facility was being sought. Instead it was an aggregate of what had been written on previous occasions together with some additions for the current application. The only relevant addition on this subject was what appeared under the heading “New Commentary” which I have set out above at [43]. It therefore plainly appears that Mr Williams believed that the imminent sale of the business made it 14 T 6-84. 15 T 7-5. 16 T 7-6. 17 Exhibit 1, vol 2, p 438. 18 T 6-92. -- 18 of 25 -- 19 unnecessary to consider the defendants’ ability to service the loan from the ongoing conduct of that business. [63] Before explaining my findings as to what happened in the week ending 26 February 2010, it is necessary to discuss what happened after then to the extent that it could be relevant to that question. After the agreement [64] On 12 March 2010, Mr Pavlik, from the Commercial Collections and Recoveries section of BOQ, emailed Rhys Scott to complain that two accounts were “in an unsatisfactory position”. But it appears that they did not include the loan under the subject agreement. Mr Pavlik wrote that “while there’s talk of a sales contract we understand it’s not unconditional and settlement isn’t pending [and that] BOQ requires you to maintain your liabilities to the bank and bring the below accounts up to date immediately”.19 [65] On 6 April 2010, the first defendant Mr Scott emailed Mr Williams saying, amongst other things, the following: “As to the sale of our businesses, I would confirm that last week I again received an update from ChinaBiz Partners, the agency handling the sale, to say that the prospective buyer had not yet been granted an interview with the Australian Embassy in Shanghai and that they would keep me updated. Apparently the Australian Embassy is receiving 13,000 applications for Business Visas each day and are approving only 500 per year. Also, please send me the lease account for the presses so we can start paying as we have funds available.”20 Notably that email made no reference to the alleged representation that no payment was to be made for the “presses” until the debtor finance facility had been provided. On the same day, Mr Williams replied, asking whether the defendants were “in a position to pop some funds in immediately … and if so how much?”.21 [66] It appears that there was then some correspondence from BOQ’s lawyers to the defendants to which Mr Scott referred in this email to Mr Williams on 11 May 2010:22 “As you probably know, we have received and exchanged correspondence with the Bank’s legal representatives threatening action against us because of our arrears on the $250,000 loan and the $40,000 facility with you. I don’t really want to have a legal wrangle with BOQ or at worst, refer the matter to the Financial Ombudsman Service and as such, wish to propose a solution. 19 Exhibit 4, doc 478. 20 Exhibit 1, vol 2, 478. 21 Exhibit 1, vol 2, 483. 22 Exhibit 1, vol 2, 487-488. -- 19 of 25 -- 20 When we negotiated the $250,000 loan to pay out Liberty Financial, it was our clear understanding that the loan was a precursor to a debtor finance facility with BOQ. As you know, subsequently, we had several meetings with Bob with regard to the establishment of such a facility but much the same occurred as when we first discussed that facility with BOQ in late 2008, early 2009 - nothing! Since June last year, we have continued to take hits to clean up our ledger and at the moment, suffice to say, it is almost a model ledger with very little in our 60, 90 and 90 + days column - mostly current and 30 days. Our ledger is now returning to a state of some strength and we would now wish to again raise the matter of a debtor finance facility with BOQ. The immediate advantages are that, because of the depth in our ledger, we would immediately be able to correct the $250,000 loan arrears, bring the press leases up to date and pay down the $40,000 facility over two months and we would still [have] sufficient operating funds. … From our perspective, a debtor finance facility represents a workable solution while we progress the sale of our business and assets and allows us to immediately correct our arrears with BOQ and from that point, continue to service those commitments. The press leases also worry me as while we agreed to the re-lease of the presses at a time to suit BOQ because of its reporting period, I did indicate to you at the time that without a DFA or an overdraft facility we would struggle to meet those restructured lease payments and that has proven to be the case. So too is the current timing of the lease payment debit from our accounts. Much the same as with the growth in our sales ledger, we have also been building our newsagency sales revenue and at the end of this month, we should receive close to sufficient funds to cover the press leases. [H]owever we don’t receive those funds into our account until 27th of each month. Is it possible to have the date of the lease periodical payment altered to after 27th of each month? I would appreciate if you could approach BOQ management in regard to our proposals. if they refuse, we will have little alternative but to refer the dispute to the Financial Ombudsman Service on the basis of mis- representation.” (emphasis added) Mr Scott there alleged a “mis-representation”. However, it does not appear to have been one of the misrepresentations which are alleged in the counterclaim. In the passage I have highlighted, Mr Scott referred to what was said at the time of the subject agreement and notably, he did not allege there that Mr Williams said that the monthly payments under the subject agreement would not have to be paid until a debtor finance facility or some other facility was in place. Nor did he there contend that Mr Williams had said that there would be a debtor finance facility if the subject agreement was signed. Instead, he argued that such facility should be provided without saying that the -- 20 of 25 -- 21 defendants had expected it as a result of anything Mr Williams had said around the time the subject agreement was made. [67] On the following day Mr Williams replied to Mr Scott: “Have spoken with Bob Ada this morning to discuss the possibility of whether we can once again re-visit your request. … Initial thoughts from Bob is that we will need to build a strong case to overcome the following: - Arrears position of current BOQ loans - Updated arrears position with ATO and what arrangements are in place. Pete, I am also assuming from discussions with Bob that IF a facility was forthcoming it would more than likely be a fully disclosed one. If that is an issue please let me know. …”23 [68] Mr Scott responded on the same day: “… 1. I cannot see the need for a disclosed facility and would not be agreeable to such an arrangement. BOQ would have full security over our ledger anyway. 2. The strong case is that once we have access to the funds in our ledger, the matter of arrears on our accounts is immediately resolved. … 4. We are proposing that any facility offered by BOQ could be or would be on our new company structure. Can you please ask BOQ to call off their legal people until we resolve this matter otherwise we will lodge a dispute with FOS because we were of the view that the $250,000 loan was a precursor to a DFA and we agreed to release the presses on BOQ terms because of your reporting period and I did make you aware that without a DFA or Overdraft facility, we would struggle with the lease payments. …” Again, there was no suggestion there that immediately preceding the signing of the subject agreement Mr Williams had made the representations which are alleged in this case. Mr Scott there said that the “$250,000 loan had been a precursor to a DFA”, indicating that it was then that the defendants believed that a debtor finance facility would be forthcoming rather than having that belief because of something said by Mr Williams at or about the time of the subject agreement. [69] On 20 May 2010, Ms O’Brien from BOQ emailed Mr Scott to enquire whether the sale of the business was proceeding. He replied on 27 May 2010 as follows: “… I can only re-assert the advice we provided to Trent when the press leases were presented to us for signing in that we would struggle to meet the monthly commitments without a Debtor Finance facility. I must also point 23 Exhibit 1, vol 2, 486. -- 21 of 25 -- 22 out that the press leases were re-written in a time frame to suit Bank of Queensland, because of your end of year reporting period. This was rushed to suit BOQ without any real consideration or further discussion as to our ability to service these monthly payments. In fact, we were not consulted on the level and extent of the lease payments or term of the lease - these were presented as a fait accompli and we were expected to sign. … A DFA facility has been a point of constant discussion with your people since June last year when BOQ offered us a short term loan on one of my properties as a forerunner to a DFA. The fact that BOQ have taken SO LONG to put this facility in place has caused us some considerable difficulty - not the least being the payment of your leases. … We have advised Trent Williams and Bob Ada of the renewed strength in our ledgers and have also said that once a DFA is in place, we can address the outstanding lease payments. We will not be able to meet the press lease payments again this month but will be correcting some of the lease arrears on the guillotine and folder in the next week once so promised major payments are received. In any event, we NEVER signed a direct debit authority for the press leases so I am at a loss as to how BOQ is debiting our account for these payments. …”24 Again, this email is inconsistent with the defendants’ present case, in that Mr Scott did not say that the subject agreement had been effectively suspended until further finance was provided to the defendants. [70] Shortly afterwards, Mr Scott became very ill and the dealings with the plaintiff and BOQ were then conducted by Rhys Scott. On 9 September 2010, he emailed an officer at BOQ, again seeking a debtor finance facility. By this stage, the defendants had referred their dispute with BOQ to the Financial Ombudsman. [71] In December 2010, Rhys Scott said that some payments would be made to BOQ but it then complained that all which had been promised in that respect had not been paid.25 It is unnecessary to consider the events beyond 2010. [72] In summary, the relevant events after the agreement was made do not favour the defendants’ case. There was no contention made by the defendants or their son, throughout 2010, to the effect of representations which became the basis of their counterclaim. They did complain of the absence of a debtor finance facility. But they did not go as far as asserting that they had been told they would not have to perform the agreement until such a facility was provided. Nor did they then complain that they had signed the subject agreement on the inducement of a statement made at that time by Mr Williams that a debtor finance facility would be offered. What was represented to the defendants? 24 Exhibit 1, vol 2, 491-492. 25 Exhibit 1, vol 2, 536, 537. -- 22 of 25 -- 23 [73] In my conclusion, Mr Williams did not go so far as to represent that the defendants need make no payment under the agreement unless and until a debtor finance facility or some other further credit was extended to them. More probably than not, Mr Williams did say to them something to the effect he did not expect that they would pay what was immediately required by the agreement. But that is a different thing from the alleged representation that they need not make a payment until yet further credit was provided to them. I also conclude that Mr Williams did not represent the debtor finance facility could or would be offered if the subject agreement was signed. My principal reasons for those conclusions are as follows. [74] As the end of February 2010 approached, each side had its own interest in effecting a refinance of the two leases. Had the agreement not been made by the end of February, the leases would have been passed to BOQ’s collections department. BOQ’s internal documents show that a number of its officers, as well as Mr Williams, were concerned to avoid that event. I infer that one concern of at least those officers was the prospect that this might have affected the conclusion of a sale of the defendants’ business with the likelihood from that sale of a discharge of all of the defendants’ debts to the plaintiff. [75] The refinance of the leases was at the initiative of the plaintiff. However, the defendants (and their company) had every reason to agree to it. If there was a sale in the offing, the possibility that they would be sued or otherwise subjected to recovery procedures would have been concerning to them. Although payment of outstanding lease instalments had not been pursued for nearly 12 months, the defendants could not have thought that this “holiday” (as Mr Scott described it) could have continued indefinitely. BOQ and Mr Williams had made it clear that the position with these leases needed to be regularised. Because it was plain that the defendants could not afford to pay the residual values and had no apparent means of borrowing for that purpose from any other financier, the only alternative was to refinance the existing facilities. Although they were unlikely to be able to pay the monthly instalments required by the subject agreement, it improved the defendants’ position by at least extending the time before some recovery action could be taken. [76] As I have discussed, the amount which they borrowed was the total of residual values and the outstanding lease payments. In no real sense were they worse off by the making of this agreement. It is not said that the interest rate or rates payable under the agreement were less favourable than those which would have applied under the leases. The effect of the agreement was to allow the defendants four years in which to pay amounts which were either then overdue (the lease instalments) or which could have become immediately due by the actions of BOQ’s collections department (the residual values). [77] The defendants had unsuccessfully sought a debtor finance facility from BOQ for more than a year. It was not as if they had simply asked for such a facility and had been waiting for an answer. On three occasions during 2009, they had been refused such a facility. It may be accepted that Mr Williams had not passed on to the defendants everything which BOQ’s credit department had said in explaining the rejection of their applications. But it must have been clear to them that BOQ had decided not to grant such a facility or indeed any further substantial credit without some marked change in their circumstances. -- 23 of 25 -- 24 [78] In the context of that history of unsuccessful applications for a debtor finance facility, the defendants could not have had any genuine expectation that they would be offered such a facility when they made the subject agreement. To expect that the agreement would not be enforced at all and at any time, absent the provision of a debtor finance facility, or that such a facility would be offered to them would have defied logic and the defendants’ own experience. [79] From late 2009 the defendants were encouraging the plaintiff and Mr Williams to expect that there would be a sale of their business which would see the plaintiff and BOQ fully repaid. Whether in truth such a sale was imminent at the time of the subject agreement, the much discussed prospect of a sale made it even more unlikely that the parties would have been considering a debtor finance facility as something which was likely to be offered by BOQ to the defendants. [80] Then there is the conduct of the defendants after the agreement. As I have discussed, there was no clear protest which corresponded with the pleaded case. Instead, the defendants complained that the plaintiff well knew at the time of the agreement that the defendants would be unlikely to be able to perform it. The complaint was that they had reached that financial position due to BOQ’s failure to provide sufficient credit, including by a debtor finance facility, at an earlier stage. [81] A telling document is the email from Mr Williams to Rhys Scott of 24 February 2010 to which I have set out at [45]. Mr Williams there wrote that “we won’t pass through the entries until late next week as discussed so we don’t smash your cashflow”. Notably, there was no response to the effect that this statement was inconsistent with an assurance given to the defendants that they need not make any payment until a debtor finance facility was provided. Of course the defendants said that this representation was made two days later, on 26 February 2010. But I have found that more probably than not, the parties did not then meet. More probably than not, they met on Tuesday, 23 February. [82] The difference between the evidence of Mrs Scott on the one hand and that of Mr Scott and Rhys Scott on the other is significant. Mrs Scott’s evidence, as set out above at [55], did not relate a representation to the effect that no payment need be made until a debtor finance facility was provided and that such a facility would be provided. She explained why the direct debit authority was not signed. The effect of her evidence is that Mr Williams said that the matter of that authority could be “sorted out when the debtor finance comes through”. In my view, it is very unlikely that Mr Williams did refer to the possibility of “debtor finance coming through” in his discussions with the defendants or Rhys Scott in the week ending 26 February. As I have said, Mr Williams had three times during the preceding 12 months conveyed to the defendants the news that BOQ had declined to provide that facility and all that had changed was that the business was now to be sold. Perhaps Mrs Scott has come to believe, in the years which have passed since these events and with the likelihood of frequent discussions with her husband and son about this matter, that Mr Williams referred to “this debtor finance”. [83] It is significant that, it would appear, no direct debit authority was provided by the defendants. But that does not provide any significant support for the defendants’ case. There were circumstances which would explain why a direct debit authority and the immediate payment of fees and the first instalment was not required in this case, irrespective of whether the alleged representations were made. I infer that Mr Williams -- 24 of 25 -- 25 knew that the defendants could not immediately make those payments, which is indicated particularly by his email to Rhys Scott of 24 February 2010. And this agreement was made in the circumstance of the expected completion of a sale of the business within a few months. Orders [84] The defendants have failed to prove the statements upon which their counterclaim is based, therefore the counterclaim must be dismissed. [85] On the plaintiff’s claim, the first and second defendants will be ordered to pay to the plaintiff an amount of $1,894,291.19. This consists of $1,831,605.13 owing as at 24 November 2014 together with interest on that sum of $62,686.05, calculated at the rate of 10.41 per cent per annum over 120 days. Mr Outhwaite’s evidence shows that the “contract rate” as that term was defined in the agreement was 8.41 per cent. The contract rate applied only in so far as payments were made on time. Otherwise interest was payable at the “Default Rate”26 which was defined to mean the rate which was the contract rate plus two per cent.27 26 Clause 2.1 of the Subject Agreement. 27 Clause 39.1 of the Subject Agreement. -- 25 of 25 --