Brown v Ogle [2006] QSC 74

SUPREME COURT OF QUEENSLAND CITATION: Brown v Ogle [2006] QSC 074 PARTIES: WARREN THOMAS BROWN (plaintiff) v DONALD GORDON OGLE (defendant) FILE NO/S: BS10384 of 1999 DIVISION: Trial Division PROCEEDING: Trial DELIVERED ON: 12 April 2006 DELIVERED AT: Brisbane HEARING DATE: 30-31 August, 1 September and 25 October 2005 JUDGE: Mullins J ORDER: Adjourn the proceeding to a date to be fixed for submissions on the terms of orders to be made CATCHWORDS: CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – contract between two experienced businessmen prepared without assistance of lawyers – where words and figures added to end of last paragraph in handwriting before contract was signed – whether the contract was able to be given a more sensible construction which reflected the facts known mutually to the parties if the handwritten words and figures were treated as being added to end of the second last paragraph of the contract instead of the last paragraph – where payment of amount under the contract by owner of land to former business partner was conditional on sale of land for not less than a specified price “with the normal Pine Rivers Shire Council subdivisional approval” – whether in the circumstances the reference to “normal” subdivisional approval where land was zoned rural should be construed as a reference to a subdivision without obtaining any approval for a material change of use of the land – the words “with the normal Pine Rivers Shire Council subdivisional approval” construed as imposing an obligation on owner to take action towards obtaining subdivisional approval to enable sale of the land for the price specified in the condition – whether condition was satisfied if land sold for specified price before any subdivisional approval had been obtained – whether -- 1 of 31 -- 2 condition was satisfied if sale of land was by mortgagee exercising power of sale and not the owner - contract construed to promote its commercial purpose Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370 Gould v Vaggelas (1985) 157 CLR 215 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1967) 118 CLR 429 COUNSEL: R M Derrington SC and D de Jersey for the plaintiff P A Looney for the defendant SOLICITORS: Jones King Lawyers for the plaintiff Bennett & Philp for the defendant [1] MULLINS J: Between 1995 and 1998 the plaintiff and the defendant had business dealings in respect of land of which the plaintiff was the registered owner described as Lot 3 on RP 208443 in the County of Stanley Parish of Parker containing 440.768 hectares (“the Mt O’Reilly property”) and which was zoned rural under the town planning scheme for the Pine Rivers Shire. [2] On or about 5 August 1995 the parties signed a document entitled “agreement” relating to the proposed dealings in respect of the Mt O’Reilly property (“the first agreement”). The meaning and effect of the first agreement and whether it was enforceable are issues in this proceeding. [3] The parties signed another document entitled “agreement” on or about 10 September 1998 also relating to the Mt O’Reilly property (“the second agreement”). The meaning and effect of the second agreement and whether it is enforceable are also issues in this proceeding. [4] The plaintiff pursues the defendant in this proceeding on a number of alternative causes of action and different forms of relief including enforcement of the second agreement, a claim for damages for breach of the second agreement, a claim for damages as a result of misleading and deceptive conduct or misrepresentation in respect of the second agreement, or restitution on the basis of unjust enrichment of at least the sum of $162,122.58. Witnesses [5] Each of the plaintiff and defendant gave evidence. The credit of each of them is in issue. The plaintiff called Mr Harold Gaitor, an earthmoving contractor, and valuer Mr John Gillespie. [6] The plaintiff is a civil engineer and at all relevant times has conducted a civil engineering business through his company Warren Brown & Associates Pty Ltd and was in a reasonable financial position. -- 2 of 31 -- 3 [7] In his evidence the defendant described himself as an entrepreneur. At various times throughout the 1990’s, his only source of income was his veteran’s pension and he had no assets other than his interest in the Mt O’Reilly property. [8] At all relevant times the plaintiff and the defendant were experienced businessmen and each was looking to make a significant profit out of the Mt O’Reilly property. [9] Where the recollections of the plaintiff and the defendant differed, I make express findings in these reasons on the evidence which I accept. [10] As I listened to the defendant give his evidence, I considered that the description of “very shrewd” was apt to describe how he handled giving evidence, particularly the cross-examination. Re-reading the transcript of the defendant’s evidence confirmed that opinion. On many occasions the defendant picked up subtleties in the language of Mr Derrington SC who appeared with Mr de Jersey of counsel for the plaintiff in the course of cross-examination and endeavoured to confine his answers accordingly. The following exchanges took place at Transcript p170 and p171: “And your’re a businessman who’s been involved in land deals?-- In land deals. I don’t know what you mean about land deals. Land transactions?-- I don’t – I am an entrepreneur. Okay?-- That buys broad acre lands and value adds. … Yes. And since then you have been involved in lots and lots of business transactions, haven’t you?-- No. Not lots and lots and lots. I think, Mr Derrington, I would say nothing from then till Mt O’Reilly. I don’t think I – I can’t recollect being involved in any way. Were you not involved in the Caruso land?-- No, I never had any financial involvement. They asked me to help them. Basildene-----?-- Mr Brown and I looked at that property and we decided to buy it but it didn’t come to anything. I pulled out.” [11] The defendant was cross-examined on the facsimile letter of approval of finance sent by Boyce Garrick Lawyers to the defendant at the plaintiff’s facsimile on 14 October 1997 (Tab 6 of exhibit 32). The defendant stated that he had no recollection of receiving a copy of that letter from the plaintiff. The page of the defendant’s diary for 14 October 1997 (exhibit 18) was then produced in which was written: “BOYCE - BARRICK – MT O’R Rec approval by fax $900,000” The defendant then conceded that he had a verbal conversation with the plaintiff’s broker Mr Sedwell about the approval. [12] The defendant was cross-examined on alterations he made to the diary entries that he recorded in respect of various conversations and events around the time the second agreement was signed. He denied “altering” them, because he conceded that -- 3 of 31 -- 4 what he did was “add” to or “update” them and he did not consider adding to the entries was an alteration. [13] The defendant’s honesty and reliability were squarely in issue in his cross- examination about a number of matters including the diary entries for 8, 9 and 10 September 1998. Early in the proceeding the solicitors who were then acting for the defendant attended to disclosure including copies of the defendant’s diary notes. Copies of the pages for 8, 9 and 10 September 1998 were obtained by the plaintiff’s solicitors at that stage from the defendant’s solicitors. Later in the proceeding in 2005, the solicitors then acting for the defendant produced copies of the diary entries again for the plaintiff’s solicitors. It was patent from a comparison between the entries produced late in the proceeding for 8, 9 and 10 September 1998 with the copies of those same entries that were produced earlier in the proceeding that additions had been made for each date: see exhibits 28, 29 and 30. [14] The defendant stated in cross-examination that when he updated the entries for these dates what he added “was the truth” and “to reinforce what happened at the time” (see Transcript p235). The difficulties I had with the defendant’s explanations for the updating of the entries were that some of them were written in the present tense, which would suggest to the uninformed reader they had been written on or about the date shown on the relevant page of the diary and that some of the additions were inserted on the page in such a way, so as to appear part of the other entries for the same date. These additions to the diary entries reflected adversely on the defendant’s credit. [15] Although I have fewer reservations about the general reliability of the plaintiff’s evidence than I do for the defendant’s reliability, there were a few gaps in the plaintiff’s evidence that I have identified where it is relevant to the findings I make. This is not surprising as the oral evidence at this trial (which was given primarily by the plaintiff and the defendant) was given over 2 ½ days, but traversed events and conversations that took place over many years. The parties focussed mainly on the events and conversations that were raised directly by the pleadings which may explain to some extent why the evidence that was adduced does not always appear to be complete. Relevant background [16] The defendant became the owner of the Mt O’Reilly property in 1977. In 1977 the defendant mortgaged the Mt O’Reilly property under registered bills of mortgage F399654 and F441135 to secure advances made to him by WR Carpenter Australia Ltd (“Carpenter”). [17] By action commenced in 1985 Carpenter sought an order for foreclosure with respect to the Mt O’Reilly property. The defendant was defending that action, but upon his failure to take interlocutory steps in accordance with directions of the Court, his defence was struck out on 20 February 1991. An order nisi for foreclosure was made by the Court on 19 September 1991, after notice of the application had been given by fixing the documents to a notice board in the registry, as there was no address for service of the defendant. [18] The plaintiff and the defendant met in or about 1984 when the plaintiff’s company had a contract for supplying topsoil for what was then the new Brisbane Airport. The defendant approached the plaintiff and offered to supply topsoil for carrying out -- 4 of 31 -- 5 that contract and the plaintiff and the defendant entered into a contract for that purpose. [19] In about 1995 the defendant was involved in a subdivision at Bellbird Park and initially the plaintiff’s company was engaged as consulting engineers for the project, but subsequently the defendant and the plaintiff through a company Basildene Pty Ltd in which they both had interests acquired the land the subject of the project and developed it with the intention of selling house and land packages to buyers in Hong Kong. The first agreement [20] The defendant had talked to the plaintiff over the years about his problems with Carpenter and I find that in 1995 the defendant approached the plaintiff about whether the plaintiff would be prepared to finance his legal action in seeking to have the order nisi set aside. I find that the first agreement was drafted by the plaintiff and the defendant together at the plaintiff’s office. I reject the defendant’s evidence that the first agreement was prepared by the plaintiff and presented to the defendant for signature, as unlikely to have occurred, when it was the defendant who had the knowledge of his dealings with Carpenter and was keen to have the plaintiff involved in providing the funds for the legal action necessary to recover the Mt O’Reilly property from Carpenter. [21] The terms of the first agreement were: “D.G. Ogle and W.T. Brown have agreed to form a partnership to develop land being Lot 1 on registered plan No. 152762 containing 440.760 hectares exclusive of road reserve. D.G. Ogle is the registered proprietor of the land described above. W.R. Carpenter Australia Pty. Ltd. is currently mortgagee in possession of the land. There is evidence that WR Carpenter may be wrongly in possession of the land. D.G. Ogle agrees to transfer the land to the partnership for the sum of one million dollars ($1,000,000.00), free and unencumbered. The price of transfer will be reduced by the total of all expenditure by the partnership required to obtain free and unencumbered title and all monies advanced to D.G. Ogle for what ever purpose. D.G. Ogle further agrees to allow the partnership to mortgage the land, by way of first mortgage, to obtain finance to develop the property and to subdivide it. This finance will include payments for survey, engineering construction, marketing, Local Authority fees and charges, legal costs, finance charges, etc. Payment of the principal amount will be from profit from sale of land after subdivision and after repayment of all monies advanced to obtain free and unencumbered title. W.T. Brown agrees to provide funds to the partnership to mount a legal challenge to the current status of the mortgage in possession -- 5 of 31 -- 6 and to obtain free and unencumbered title to the property. W.T. Brown further agrees to guarantee lenders to the partnership who advance monies for the development of the property. W.T. Brown may at his sole discretion withdraw from this agreement at any time and if so all obligations between the parties shall cease.” [22] After the first agreement was signed on or about 5 August 1995, the plaintiff commenced paying legal expenses incurred in respect of the steps taken in the name of the defendant to regain the property from Carpenter. The defendant had engaged solicitor Mr Wesley Wong to act on his behalf. An application was brought on 29 May 1996 seeking to have the order nisi for foreclosure set aside. The application was dismissed on the basis that the court had no jurisdiction to make such an order. An appeal was filed. The plaintiff and the defendant decided to change the solicitors who were representing the defendant in respect of the foreclosure order. In June 1997 the firm of Kinneally Mahoney was engaged to act on behalf of the defendant on the appeal. [23] The plaintiff introduced surveyor Mr Warren Huston to the defendant. Mr Huston provided advice to the plaintiff and the defendant on subdivision proposals for the Mt O’Reilly property. In late August 1997 Mr Huston had prepared a plan of subdivision for the Mt O’Reilly property dividing it into 27 lots each with a minimum area of 16 hectares (exhibit 4). That plan had a reference to Mr Huston’s job number 11031 and was described as plan 022/1A. The defendant never made any application to subdivide the Mt O’Reilly property in accordance with this plan. [24] On 2 September 1997 the plaintiff prepared for the defendant an estimate of the cost of construction of roads to provide access to proposed lots created by the subdivision of the Mt O’Reilly property into 27 lots. The estimated cost was $670,000 (exhibit 3). [25] Hyder Consulting prepared a report dated 5 September 1997 for the defendant the purpose of which was described as “in order to assess from a town planning point of view, the land development opportunities that existed in 1991, and also today for the Mt O’Reilly property”. The report was amended by Hyder Consulting and an amended report issued on 9 September 1997. The conclusion set out in the report stated: “The subject site is contained within the Rural Zone. There is the opportunity to subdivide the land into 16 hectare rural allotments producing a yield of approximately 27 allotments. The Council’s Strategic Plan also provides a limited opportunity to rezone part of the land into the Special Residential Zone. There is no guarantee that the Council would approve any rezoning application. The subject site is contained within the Conservation area of the Pine Rivers West Guidelines Map but this does not restrict the clearing of vegetation especially for building platform purposes and Council’s consent approval is not required for some.” [26] Kinneally Mahoney obtained a valuation of the Mt O’Reilly property from valuers Taylor Byrne as at 15 September 1997 (exhibit 6). Those valuers assessed the fair market value of the property at 15 September 1997 as $2,300,000. The valuers had -- 6 of 31 -- 7 been provided with a copy of Mr Huston’s plan of proposed subdivision creating the 27 lots. The valuers valued the Mt O’Reilly property on the basis that its highest and best use was subdividing it into 27 rural homesite blocks. Both the plaintiff and the defendant were aware of the contents of this valuation when it was obtained. Kinneally Mahoney had also instructed Jorgensens to do a valuation of the Mt O’Reilly property as at 13 August 1997. The report from Jorgensens was received by Kinneally Mahoney after that date, as it refers to investigations undertaken by Jorgensens with the Council on 11 September 1997. Jorgensens were also provided with a copy of the August 1997 proposed plan of subdivision prepared by Mr Huston. Jorgensens also valued the Mt O’Reilly property on the basis that the highest and best use was for rural residential subdivision and assessed the value at $2,300,000 (exhibit 7). The plaintiff and the defendant were also aware of the contents of this valuation around the time that it was obtained. [27] The valuation from Taylor Byrne was used by the plaintiff and the defendant to source finance for paying out Carpenter and providing some funds for the development of the Mt O’Reilly property. The plaintiff approached a broker Mr Sedwell who obtained an offer of a private loan of $900,000 from Boyce Garrick Lawyers dated 14 October 1997 and a letter dated 16 October 1997 from the Virginia Branch of the National Australia Bank Limited (“the NAB”) (which was the branch of the NAB at which the plaintiff banked) confirming “in principle finance to $900,000” in respect of the Mt O’Reilly property. Both letters were sent to the defendant at the plaintiff’s office, and the plaintiff either passed on copies or conveyed the contents of the letters to the defendant. [28] The plaintiff and the defendant had many discussions throughout this period when they were working together on recovering the Mt O’Reilly property from Carpenter about the preferred method of subdividing the Mt O’Reilly property. It was common ground between them that there was the possibility of an “as-of-right” subdivision into 27 lots of 16 hectares each in area, but they both believed that the highest use of the land and the most profitable subdivision would be achieved by having it rezoned as special residential which could allow the creation of about 200 lots. Both the plaintiff and the defendant also were aware that there were risks in whether the requisite rezoning would be achieved. [29] The appeal from the dismissal of the application to set aside the order nisi was heard on 20 October 1997 and was allowed in a judgment delivered on 28 October 1997 on the basis that the question of jurisdiction depended on a factual matter of whether the defendant could satisfy the court that his non-appearance when the foreclosure order was made was not due to any fault on his part. The application to set aside the foreclosure order was remitted to the Chamber Judge for further consideration. The judgment on the appeal is reported as WR Carpenter Australia Limited v Ogle [1999] 2 Qd R 327. [30] The plaintiff and the defendant then changed solicitors again. They consulted the firm of Clarke and Kann on 2 February 1998. [31] The plaintiff paid an account of Kinneally Mahoney for $7,607.74 on 19 February 1998. The plaintiff noted that from about March 1998 the defendant did not telephone him or forward documents to him about the litigation with Carpenter with the same frequency that he had previously. The plaintiff stated (at Transcript p111) -- 7 of 31 -- 8 that “the quality and frankness of the information in my view deteriorated significantly” in respect of what was happening with the Mt O’Reilly property. The plaintiff also noted that there was a lengthy period when he was not asked to pay legal fees, although the plaintiff did attribute that in part to Clarke and Kann using the amount on account of costs that was recovered by the defendant from Carpenter and paid to Clarke and Kann (which reflected what had happened – exhibit 19). After paying the account of Kinneally Mahoney on 19 February 1998, the next payments that the plaintiff made were both on 15 June 1998 to Hyder Consulting which were for the reports done in September 1997. The plaintiff then paid an account of Clarke and Kann on 5 August 1998 for $7,787.25 and two further accounts from Clarke and Kann on 3 September 1998 for $216 and $1,800 respectively. [32] The defendant gave evidence that he telephoned the plaintiff about April 1998 and asked him to contribute to the costs of the mediation and that the plaintiff’s response was that he would not. It was put to the plaintiff in cross-examination that, after the meeting with Clarke and Kann in February 1998 and before the second agreement was signed, the plaintiff had told the defendant that he would not fund any further legal costs. The plaintiff’s emphatic answer was (at Transcript p110): “I did no such thing, I paid every legal account that I was asked to pay, every one that was transmitted to me I paid promptly or promptly after it was transmitted to me. I never said to Mr Ogle that I would not pay legal fees and, in fact, I paid legal fees to Clarke and Kann as I recall in August of ’98.” I accept the plaintiff’s evidence on this aspect (and therefore reject the defendant’s evidence), as the plaintiff’s evidence is borne out by the payments that were made by him in August and September 1998 of Clarke and Kann’s fees and is consistent with his evidence of fewer requests in this period made by the defendant of him to pay fees. [33] On 26 March 1998 a subdivision proposal plan application was lodged on behalf of the defendant with Pine Rivers Shire Council (“the Council”) in respect of the Mt O’Reilly property which sought to divide one allotment from the Mt O’Reilly property and that was followed by a staged subdivision application lodged at the same time to subdivide the balance of the Mt O’Reilly property into seven allotments (exhibits 12A and 26). These applications did not involve any application for rezoning. The applications included a number of plans prepared by Mr Huston including the plans which had a reference to Mr Huston’s job number 11031 and were described respectively as plans 022/1C and 022/1D, copies of which were separately marked as exhibits 13 and 14, in addition to being incorporated in exhibit 26. The applications for the proposed subdivision and staged subdivision were signed by the defendant as the owner and the applicant and the defendant’s address for notification was shown as Mr Huston’s firm. The plaintiff could not recall having seen these subdivision applications or the specific plans that were incorporated in them, although he did recall that there had been proposals discussed between the defendant and him about subdividing some saleable blocks from the bottom end of the Mt O’Reilly property. [34] On 9 March 1998 Mr Huston had prepared another proposed plan of subdivision for the Mt O’Reilly property that was for the same job number of 11031 and was designated plan 022/1F. This subdivided the Mt O’Reilly property into 155 lots, -- 8 of 31 -- 9 mostly designated for housing. A copy of that plan was included in Tab 4 of exhibit 32 and another copy was made exhibit 11. That plan was not part of the staged subdivision application lodged with the Council on 26 March 1998. The defendant stated that he did not give instructions to Mr Huston to prepare this plan. The plaintiff acknowledged that he had seen the plan at or around the time it was prepared. [35] The cheque for the fees of $2,200 paid in respect of the subdivision applications lodged on 26 March 1998 with the Council was drawn on the account of Warren Brown & Associates Pty Ltd. The day following the lodgment of these applications the defendant gave telephone instructions to the Council that the applications were to be withdrawn and the Council processed a cheque by way of refund in favour of Warren Brown & Associates Pty Ltd and sent it to the defendant. [36] The evidence of both parties was curious about the subdivision applications lodged with the Council on 26 March 1998. The plaintiff could recall writing the cheque for the application fees and handing it to the defendant, but the plaintiff then said he knew nothing about the withdrawal of the applications and the plaintiff did not suggest that he ever made inquiries of the defendant about the applications. The defendant stated that he signed these applications on the instructions of either Mr Huston or Mr Brown and that he withdrew the applications the following day under instructions from one or other of them. Ultimately neither the plaintiff nor the defendant dealt in evidence with why the subdivision applications were withdrawn. Although the plaintiff suggested in evidence that he did not receive the refund from the Council for the application fee, the documents at Tab 23 of exhibit 32 show that the refund cheque was drawn in favour of Warren Brown & Associates Pty Ltd and that is consistent with the fact that the amount of those fees is not included in the plaintiff’s calculation of the fees that he paid pursuant to the first agreement. [37] In 1998 Warren Brown & Associates Pty Ltd was doing engineering work for clients called Caruso. Those clients were looking for someone to join them in a joint venture to subdivide their property and the plaintiff introduced them to the defendant. In the latter half of 1998 (but before the second agreement was signed) the plaintiff found out from the defendant that the engineering work on the project was going to be given by the Carusos to a firm known as Baseline and that the plaintiff’s firm was no longer to be engaged. The plaintiff described in his evidence that the defendant came to him “with a cock-and-bull story” (at Transcript p53). The plaintiff explained that the defendant told him the story that the financiers had a list of consulting engineers and that the plaintiff’s firm was not on that list and that the defendant was going to transfer the work to Baseline because they were on the list. [38] The following exchange took place in cross-examination on this episode (at Transcript p111): “The Caruso matter that you spoke about yesterday – and I don’t mean to re-state your evidence to you exactly right – but your perception that Mr Ogle had sought to move the Caruso client from you to Baseline; do you recall your evidence about that?-- Yes. In terms of the timing of that, that was mid to later 1998, wasn’t it?-- Yes. -- 9 of 31 -- 10 Prior to entering into the second agreement?-- Yes. That was a cause of quite some concern to you?-- Well, it was the last straw that broke the camel’s back, I guess, to some extent, and the instance that occurred there was things that I was being told was simply unbelievable and on that basis you’d begin to question a lot of other things. So your evidence is that that plus other matters had led you to doubt what Mr Ogle was telling you?-- Well, more than doubt it, to believe it, it was simply a load of cock and bull.” [39] In paragraph 30(b)(iii) of the defendant’s written submissions (exhibit 33), the defendant relies on the evidence set out immediately above to assert that at the time of the entry into the second agreement, the plaintiff no longer believed what the defendant was telling him. That passage of evidence was concerned with the Caruso episode and the reference in it to “a load of cock-and-bull” was a reference to the story which the plaintiff described in evidence-in-chief that the defendant told him to justify giving the engineering work to Baseline. Although the last question in that exchange set out above about the Caruso episode was broader in its terms than what the plaintiff was told in respect of the Caruso episode, it was clear at the time the plaintiff gave the answer and in the context of his evidence that he was referring to the Caruso episode when he was referring again to “a load of cock-and- bull”. [40] In relation to the project being conducted by Basildene Pty Ltd by August 1998 the plaintiff had funded a number of trips for the defendant to Hong Kong to facilitate the selling of house and land packages for this project. The defendant did not succeed in selling any of the house and land packages and sold only 1 block of land in this project. By August 1998 the plaintiff had doubts about the defendant’s capacity to make the sales in relation to this project because of the defendant’s lack of performance, but the plaintiff had not formed a final view as to what action he would take in relation to this project. The second agreement [41] On 24 July 1998 Clarke and Kann sent an account rendered to the defendant for the sum of $7,787.25. The only detail on that account rendered was that the sum of $5,347.80 related to the file for tax and subdivision advice in respect of the Mt O’Reilly land and the sum of $2,439.45 related to the file in respect of Carpenter. A copy of that account rendered was included in Tab 9 of exhibit 32. That account was paid by the plaintiff on 5 August 1998. Neither the plaintiff nor the defendant gave any evidence of how the request was made by the defendant of the plaintiff for that payment or the content of the discussions (if any) that took place between them at the time. Similarly, neither the plaintiff nor the defendant gave any specific evidence of how the plaintiff came to pay two amounts of $216 and $1,800 to Clarke and Kann on 3 September 1998 or of any discussions that took place between the plaintiff and the defendant at that time. [42] The mediation between the defendant and Carpenter took place on 8 September 1998. The plaintiff did not attend the mediation. The mediation was successful and -- 10 of 31 -- 11 the dispute between the defendant and Carpenter was settled, subject to a deed of settlement being executed. [43] The plaintiff stated in evidence that in September 1998 the defendant telephoned him and asked if he “would be prepared to get out of Mt O’Reilly with a clear $2 million” (Transcript p53) . The plaintiff stated that he responded affirmatively to that invitation and said that the defendant told him that he had two buyers (which he named but whose names the plaintiff did not note at the time and could not recall at the trial although the plaintiff could recall other details that the defendant had provided him about one of the prospective buyers who came from Rockhampton) and who were both prepared to pay in excess of $5,000,000 for the property and that the defendant would pay the plaintiff $2,000,000 plus reimbursement of the legal expenses the plaintiff had paid and that the balance would belong to the defendant. The plaintiff stated that he agreed to that proposition and that he was not aware at that time that a settlement had been reached between the defendant and Carpenter. In fact, the plaintiff stated that he was unaware that the mediation with Carpenter had been arranged. The plaintiff conceded in cross-examination (at Transcript p112) (and I accept) that by August 1998 he had formed an intention to sever his ties with the defendant. The plaintiff stated that he believed what the defendant had told him about having purchasers for the Mt O’Reilly property and then the following exchange took place when the plaintiff was giving evidence-in-chief (at Transcript p54): “If … he hadn’t told you that there were purchasers ready and willing to buy the land for in excess of $5 million, what would you have done?-- I certainly wouldn’t have entered into the agreement that I did. At that stage, relationships were souring with Ogle and particularly in relation to the Caruso matter and the Basildene matter and I had really made up my mind to sever my connections, and I would have taken some steps immediately we could get rid of Carpenters to break the partnership and sell the property and get out with whatever I could get out.” [44] The plaintiff stated that the next day (which had to be 10 September 1998) the defendant arrived at his office with a draft of the second agreement already typed. The plaintiff stated that he and the defendant had a conversation in similar terms to that which had taken place the previous day over the telephone. The plaintiff stated in cross-examination that he “specifically asked the defendant when this settlement would take place and he said it would be all finished by Christmas” (at Transcript p117). The plaintiff stated that he did not recall any discussion about what was meant by “normal Pine Rivers Shire Council subdivisional approval”. The plaintiff noted that the draft agreement did not provide for reimbursement of the amount that had been spent by the plaintiff on expenses and the defendant agreed to add some words to the draft to reflect that. The plaintiff stated that the defendant then wrote in the words “PLUS LEGAL COSTS ALREADY PAID UP TO $160,000” and they initialled that change and signed and dated the second agreement. [45] The defendant’s evidence was to the effect that the typed draft of the second agreement came into existence, as a result of the defendant having his son-in-law Mr Thomas type up what the plaintiff dictated to him over the telephone about one month prior to the signing of the second agreement. The defendant stated that he redirected the draft to Mr Thomas during the telephone call and that was how Mr Thomas typed it up. The defendant stated that the next day he sent the typed draft -- 11 of 31 -- 12 of the second agreement to the plaintiff by facsimile. The defendant stated that there was no further discussion between the plaintiff and himself after sending that facsimile. He stated that he had a telephone call with the plaintiff a couple of days before the mediation with Carpenter in which the defendant informed the plaintiff that the mediation was to take place. In evidence-in-chief, the defendant was asked whether he spoke to the plaintiff after the mediation and responded “no” (at Transcript p150). In cross-examination, when the defendant was asked whether he told the plaintiff of the outcome of the mediation with Carpenter, he responded “yes” and that “I told him by telephone on the afternoon of the mediation” (at Transcript p227). The defendant stated that he could recall the plaintiff in a telephone call before the second agreement was signed making “it clear to me if I didn’t sign this he would just sit on 50 percent of the property” (at Transcript p150). The defendant also stated that the plaintiff asked him to add the words that were handwritten on the second agreement and stated (at Transcript p 151): “He used the words to induce me to sign it that he was owed a lot of money from the litigation that happened previous to this and that he wanted to be well protected for his two – his legal costs, plus the two million.” The defendant also stated (at Transcript p152) that he did not have any discussion with the plaintiff about potential buyers or offers for the property at a price over $5,000,000 or about the timing in which the property might be sold for $5,000,000. In cross-examination (at Transcript p225), the defendant claimed the plaintiff had lied in attributing the defendant with making statements about prospective buyers at a price in excess of $5,000,000. The defendant stated that he never had a buyer at that stage and if he did “I’d have taken the money and run”. The defendant also stated that he did not have any discussion with the plaintiff about the meaning of the words “with the normal Pine Rivers Shire Council subdivisional approval” before the signing of the second agreement. [46] The terms of the second agreement were: “This agreement relates to the property at Mt O’Reilly (Area 1089 acres). This agreement cancels all other agreements made between Ogle and Brown concerning the Mt O’Reilly property, and this agreement is enforceable from this date. Ogle agrees to pay Brown the sum of 2 Million Australian dollars (A$2,000,000.00) in full settlement of any claims Brown may have against the Mt O’Reilly property. Terms of Settlement The settlement is subject to Ogle selling the property with the normal Pine Rivers Shire Council subdivisional approval for not less than 5 Million Australia dollars (A$5,000,000.00) PLUS LEGAL COSTS ALREADY PAID UP TO $160,000.” [47] The words and figures that appear on the second agreement in handwriting are capitalised in the above quote. -- 12 of 31 -- 13 [48] The plaintiff and the defendant each gave a distinctly different version of the conversations and events that preceded the signing of the second agreement. Although Mr Thomas’ evidence was opened on behalf of the defendant, Mr Thomas ultimately was not called to give evidence in the defendant’s case. The plaintiff seeks to rely on an inference under the rule in Jones v Dunkel (1959) 101 CLR 298 that Mr Thomas was not able to give evidence that would assist the defendant. It is not necessary for the plaintiff to rely on such an inference, as I found the defendant’s evidence unconvincing and implausible as to the timing and manner of the production of the typed draft of the second agreement that was presented by the defendant to the plaintiff for signature on 10 September 1998. I therefore reject the defendant’s evidence on these aspects. [49] I am satisfied that it is more likely than not that the plaintiff who considered by early September 1998 that his relationship with the defendant had deteriorated correctly recalled the position when he stated that he was unaware that the mediation between the defendant and Carpenter was due to take place on 8 September 1998 and that he was not informed by the defendant before he signed the second agreement that settlement had been reached with Carpenter at the mediation. The timing of the successful mediation explains the timing of the defendant’s telephone call to the plaintiff on 9 September 1998 and the urgency with which I find the preparation of the second agreement was undertaken by the defendant on or about 9 September 1998 and the presentation of it by the defendant to the plaintiff for signature occurred on 10 September 1998. I find that the defendant was highly motivated upon reaching settlement in principle with Carpenter on 8 September 1998 to take steps to terminate the plaintiff’s interest in the Mt O’Reilly property. The willingness of the plaintiff pursuant to the first agreement to provide the funds to enable the defendant to pursue the litigation with Carpenter had been essential to the defendant’s plans for the Mt O’Reilly property, but the defendant did not need the financial assistance of the plaintiff when the dispute with Carpenter had been resolved and the defendant was able to raise funds himself on the security on the Mt O’Reilly property to pay out Carpenter. [50] On the defendant’s diary page for 9 September 1998 (exhibit 28), two of the additional insertions after the diary was originally disclosed to the plaintiff are: “WB – agreement must be sgd or he stays refer notes”. “WB – I ph earlier he made reference to our agreement by advising I now have 50% – No more money if you do not sign.” These entries suggest that it was the plaintiff who was putting pressure on the defendant to sign the second agreement. At that stage the plaintiff had not even seen the draft of the second agreement. Those entries that were clearly added to the diary at a later time (after disclosure of the diary pages was made for the first time to the plaintiff’s solicitors) were inserted by the defendant to provide support for the defendant’s contention that the plaintiff had induced him to sign the second agreement by stating that he would sit on 50% of the Mt O’Reilly property if the defendant did not sign. I reject the defendant’s evidence that the plaintiff made any such statement on 9 or 10 September 1998. There is no doubt that the terms of the typed draft of the second agreement were the work of the defendant. It is nonsense for the defendant to suggest that on the day prior to the presentation of the draft of the second agreement by him to the plaintiff that the plaintiff was making -- 13 of 31 -- 14 statements to the effect that he would stay involved in the Mt O’Reilly property, if the defendant did not sign that agreement. [51] There is one aspect of the plaintiff’s evidence about the discussions which he had with the defendant on 9 and 10 September 1998 about which I have difficulty. Although I accept that the defendant did not inform the plaintiff about the mediation with Carpenter and that it had been successful, the plaintiff did not give evidence of making any inquiries of the defendant on 9 or 10 September 1998 about the progress of the defendant’s dispute with Carpenter. In view of the fact that it was the plaintiff who had been funding the litigation with Carpenter for 3 years at that stage and that the draft of the second agreement made no reference to paying out Carpenter, I find it surprising that before signing the second agreement the plaintiff did not ask the defendant what was happening with Carpenter. I am not troubled sufficiently by this aspect of the evidence, however, that it affects my acceptance of the plaintiff’s evidence that he was not aware at the time that he signed the second agreement that a settlement had been reached between the defendant and Carpenter. Where I consider it may have some relevance is in determining why the plaintiff signed the second agreement. [52] Because the defendant knew on 8 September 1998 that he had settled his dispute with Carpenter, but the plaintiff did not, the defendant prepared the draft of the second agreement on terms which he was prepared to accept in order to terminate the partnership, but which obviously would have some attraction to the plaintiff. That explains why the defendant asked the plaintiff if he would be prepared “to get out of Mt O’Reilly with a clear $2,000,000”. Any such sum of money could not be paid by the defendant unless he sold the Mt O’Reilly property or found another party prepared to lend him funds or finance the development of the Mt O’Reilly property. The plaintiff’s evidence about the making of the statements to him by the defendant about the prospective buyers of the Mt O’Reilly property was convincing. It was consistent with the defendant’s urgent desire on 9 and 10 September 1998 to terminate the interest of the plaintiff in the Mt O’Reilly property pursuant to the terms of the first agreement that he would make statements about such prospective buyers (even if there was no basis for making them). It is therefore more likely than not that the defendant did make the statements (which were not true) to the plaintiff, before the second agreement was signed, about the prospective buyers who would be prepared to pay in excess of $5,000,000 for the property. The minimum purchase price which the defendant attributed to the prospective buyers was consistent with the amount that was inserted in the second agreement as the price for which the Mt O’Reilly property had to be sold in order for the plaintiff to be paid the amount that was due to him under the second agreement. [53] There was no evidence given by the plaintiff that the defendant had conveyed that the prospective buyers were proposing to pay in excess of $5,000,000 on condition that subdivisional approval for the Mt O’Reilly property was obtained, but the settlement under the second agreement was conditional on a sale of the Mt O’Reilly property “with the normal Pine Rivers Shire Council subdivisional approval” for not less than $5,000,000. This curiosity in the evidence again does not affect my acceptance of the plaintiff’s evidence as to the statements that he does recall the defendant making about the existence of the prospective purchasers, but suggests, and I find, that the plaintiff was not too concerned about the detail of the offers from the prospective purchasers. -- 14 of 31 -- 15 [54] In making submissions as to why the plaintiff’s evidence about the representations made by the defendant as to the prospective buyers should not be accepted, it was put on behalf of the defendant that neither the plaintiff nor the defendant would expect an offer at that stage from a buyer to buy the Mt O’Reilly property for $5,000,000 in the light of the valuations obtained in September 1997 that valued the property at $2,300,000 on the basis that its highest and best use was for rural residential subdivision. The problem with that submission is that it ignores that while their partnership subsisted both the plaintiff and the defendant believed that the value of the Mt O’Reilly property was in its potential to be rezoned as special residential. The plaintiff’s answer during the following exchange in cross- examination was credible (at Transcript p115): “I’d suggest to you that there was no reasonable basis at that time, September ’98, for thinking that anyone would pay $5 million for that land without rezoning?-- Well, there is a very reasonable basis for believing that: one is that I was told that in very straightforward terms that there were two buyers willing to pay it; and secondly, that people will pay on the basis of what they believe they can do, and it is not unreasonable for somebody to believe that they could rezone the land and sell a couple of hundred lots and have a yield of $20 or $30 million and on that basis, it is not unreasonable to pay $5 million.” It is clear what the defendant’s view of the value of the Mt O’Reilly property was at the date of the second agreement, as I find that he would not have committed to paying the plaintiff $2,000,000 plus reimbursement of legal costs of $160,000, unless he expected to sell the Mt O’Reilly property for more than $5,000,000. Events subsequent to signing of the second agreement [55] On 21 September 1998 the defendant entered into a deed of settlement with Carpenter. In summary, the deed provided for the defendant to pay to Carpenter the sum of $750,000 upon the making of a consent order that provided for the order nisi made on 19 September 1991 to be set aside and for the caveat and mortgages to be removed from the title of the Mt O’Reilly property. There were default provisions if the defendant did not pay the sum of $750,000 which would have resulted in the transfer of the Mt O’Reilly property to Carpenter. [56] The defendant borrowed the sum of $900,000 from the NAB in order to pay out the settlement amount to Carpenter. In order to obtain that loan the NAB obtained a valuation of the Mt O’Reilly property as at 1 October 1998 from Taylor Byrne (exhibit 27). The valuation was done on the basis that the highest and best use of the property was a rural subdivision into 27 blocks and the amount of the valuation was $2,000,000. The releases of the mortgages held by Carpenter over the Mt O’Reilly property were lodged for registration on 26 October 1998, as was the new mortgage granted by the defendant to the NAB. [57] It was not until April or May 1999 that the plaintiff managed to sort out his relationship with the defendant in respect of the project being conducted by Basildene Pty Ltd. Both the plaintiff and the defendant were sued by the mortgagee for $950,000 and the plaintiff paid out that debt on the basis that the defendant sold him his share in Basildene Pty Ltd for $1. -- 15 of 31 -- 16 [58] The plaintiff sent a letter to the defendant dated 30 July 1999 which sought a progress report on the steps taken to sell the Mt O’Reilly property and any application made to the Council for subdivisional approval. The letter referred to a statement that the plaintiff recorded the defendant as having been made at the time of signing the second agreement “that you had been contacted by two buyers for the Mt. O’Reilly property each willing to pay more than $5,000,000.00 for the property”. The specific questions posed in that letter were: “Would you please advise me of the following: 1. The names of the buyers who have indicated a willingness to pay $5,000,000.00 for the property. 2. Have you entered into any contract for the sale of the property (conditional or unconditional) and if so provide me with a copy of each contract. If no copy of the contract is available then supply me with the date of each contract, the name of the purchaser, the purchase price, details of any condition and the date of settlement of each contract. 3. Would you please indicate whether any other offers have been made to purchase the property and if so, on what date such offers were made, who made the offers and what was the amount of each offer.” The letter also sought confirmation that the present indebtedness to the NAB was no greater than $900,000. There was no explanation given in the evidence as to how the plaintiff knew the defendant had borrowed from the NAB to the extent of $900,000. [59] The defendant did not respond in writing to that letter. The plaintiff and the defendant had a telephone conversation on 2 August 1999. The plaintiff could not recall what that conversation was about. The plaintiff sent a letter to the defendant dated 24 August 1999 in which reference was made to the telephone call from the defendant to the plaintiff on 2 August 1999 and requested answers to the inquiries made in the letter of 30 July 1999. [60] The request for the information sought by the plaintiff was repeated in his solicitors’ letter to the defendant dated 16 September 1999. The defendant had solicitors Lethbridge & Hogan write a response to the plaintiff’s solicitors dated 7 October 1999 in which it was stated: “Based on the instructions received from our client we consider the agreement to which your client refers appears to have been abandoned by him by his failure to perform his obligations under it. Our client has been forced to deal with the land independently of the agreement given your client’s failure to comply with it. The conclusion which seems appropriate in those circumstances is that the agreement has been abandoned. Alternatively our client is entitled to treat the agreement as at an end given your client’s continued failure to perform and accordingly we are instructed to rescind the agreement.” [61] This proceeding was commenced by the plaintiff against the defendant on 22 November 1999. -- 16 of 31 -- 17 [62] The mortgage over the Mt O’Reilly property in favour of the NAB was released in June 2000 when the defendant re-financed with Suncorp-Metway Limited which registered a mortgage over the property. [63] Mr Gaitor gave evidence of being engaged to do light clearing on the Mt O’Reilly property with a tractor from the end of 1998 for a period of about 2 years. He was given a letter from Pacific Investments Pty Ltd dated 1 June 2000 (exhibit 2) to pass onto the defendant which Mr Gaitor confirmed that he did. The letter contained an offer to sign an option agreement to purchase the property including payment to the defendant of an amount on the sale of each block that was sold on an estimated 200 block subdivision and a consultancy fee payable to the defendant. The letter stated that the offer was valued in total at $6,074,000. It is clear from the face of the letter that any contract which eventuated was conditional upon the Mt O’Reilly property being able to be subdivided into 200 lots. The defendant admitted to receiving a copy of the letter, but considered it was an offer that was impossible to negotiate on, because it involved a rezoning to produce 200 lots. It was not suggested that Pacific Investments Pty Ltd proceeded to the next stage of preparing an option agreement that embodied the offer described in the letter dated 1 June 2000. Mr Gaitor also referred to being present with the defendant when Mr Alzino and Mr Halpin made an oral offer to purchase the Mt O’Reilly property in the vicinity of $8,000,000 to $10,000,000. There was no evidence, however, of any written offer or a signed contract from Mr Alzino and Mr Halpin. [64] The defendant entered into an option agreement with Campbell F McAuley Pty Ltd dated 7 March 2001 to sell the land for $20,000,000, but the option period was 2 years from the date of the agreement or 120 days after the Council had agreed to approve a rezoning application made by the defendant in respect of the Mt O’Reilly property. The option was not exercised. [65] In or about December 2001 the defendant borrowed funds under a facility for $3,500,000 from Elliott & Harvey Mortgage Securities Limited (“Elliott Harvey”) that was secured by mortgage granted over the Mt O’Reilly property. The mortgage over the property in favour of Suncorp-Metway Limited was released at this time. Some of these funds were used to prepare the studies for a Material Change of Use application in respect of the Mt O’Reilly property. [66] On 28 June 2002 Keilar Fox & McGhie lodged a Material Change of Use application with the Council for part of the Mt O’Reilly property from the rural designation to special residential. It was accompanied by a planning report which included a traffic study, environmental management study, bushfire management study, slope stability report and effluent report. That application was refused by the Council and the defendant appealed to the Planning and Environment Court. [67] On or about 30 April 2003 Elliott Harvey served notice of exercise of power of sale on the defendant. The accompanying letter referred to the principal sum under the mortgage then being in the amount of $4,000,000. [68] Baseline Consulting Pty Ltd sent a letter to Brenjess Pty Ltd dated 16 February 2004 in which it stated that either it or one of its subsidiaries had made an unconditional offer to the defendant for the purchase of the Mt O’Reilly property for $11,000,000 and advising that it had instructed solicitors to prepare the contract with a proposed settlement date one year from the date of the contract. A copy of -- 17 of 31 -- 18 that letter together with a PAMD Form 30c dated 27 February 2004 signed by Baseline Consulting Pty Ltd was exhibit 20. The defendant stated that he never received an offer from Baseline Consulting Pty Ltd as foreshadowed in that letter. [69] Ipro Developments Pty Ltd (“Ipro”) signed a contract dated 26 March 2004 to purchase the Mt O’Reilly property for $9,800,000. The contract was subject to special conditions. The pages of the contract that went into evidence (exhibit 21) did not include the special conditions. It appears that they were dependent upon an appeal against the Council’s refusal of the Material Change of Use application. The defendant stated that Elliott Harvey refused to enter into a contract with Ipro. [70] On 31 March 2004 the defendant swore an affidavit in this proceeding in which he exhibited a copy of the draft contract that had been prepared by Clarke and Kann for a proposed sale of the Mt O’Reilly property to Samford Nominees Pty Ltd for the sale price of $15,000,000 and subject to special conditions in relation to the outcome of the appeal to the Planning and Environment Court in respect of the Material Change of Use application. The defendant was cross-examined on the basis that Samford Nominees Pty Ltd was not incorporated until 6 April 2004 and therefore was not in existence at the date that the defendant swore his affidavit. The draft contract exhibited to that affidavit, however, was a draft that required completion and the affidavit did not suggest that a contract had been entered into. The search of Samford Nominees Pty Ltd (exhibit 17) shows that one of the shareholders of that company was Campbell F McAuley Pty Ltd to which the defendant had previously granted an option agreement over the Mt O’Reilly property. [71] On 15 April 2004 Elliott Harvey as mortgagee exercising power of sale entered into a contract to sell the Mt O’Reilly property to Tendiris Pty Ltd for $5,000,000. At the date of that contract the appeal against the Council’s refusal of the Material Change of Use application had still not been resolved. That contract settled on 11 June 2004. Ipro had also signed another conditional contract for the purchase of the Mt O’Reilly property on 11 June 2004. Mr Gillespie’s valuation [72] In July 2004 Mr Gillespie prepared a retrospective valuation of the Mt O’Reilly property at the request of the plaintiff’s solicitors (exhibit 5). At that stage the Mt O’Reilly property was still zoned rural and remained vacant land. Mr Gillespie was instructed to value the Mt O’Reilly property as at 1 December 1998, 1 July 1999 and 1 December 1999 at three different stages of development on the basis of a hypothetical development of a rural subdivision of a maximum of 27 blocks each 16 hectares in size. Mr Gillespie was provided with a copy of Mr Huston’s proposed plan of subdivision 022/1A (exhibit 4). [73] At each date, Mr Gillespie valued the Mt O’Reilly property on an “as is” basis where the property had no approvals and no applications for approvals had been prepared. The second stage of development for the purpose of the valuation at each date was the “reconfiguration of lots” approval stage on the basis that the Council had issued a development permit with the conditions of subdivision and had approved a plan indicating the lots to which it may be subdivided, but no development works had commenced on the property at that stage. The third stage of development at which Mr Gillespie valued the Mt O’Reilly property at each date -- 18 of 31 -- 19 was the sealed plan stage on the basis that the Council had sealed the survey plans after all construction works (which Mr Gillespie estimated to cost $1,215,000) had been completed, but before the sale of the lots. [74] Mr Gillespie described the property market applicable to the three valuation dates as flat and that sales evidence indicated no movement either up or down during that period. Mr Gillespie therefore concluded that at each of the three dates at which he undertook his retrospective valuations, the valuations were as follows: “As is” value $2,600,000 Reconfiguration approval stage value $3,000,000 Sealed plan stage value $4,500,000 [75] Mr Gillespie provided a supplementary statement (exhibit 9) which expressed his opinion that the values of the Mt O’Reilly property that he had assessed in respect of each of the different stages of development would not have changed in the period from 3 months prior to 1 December 1998 to 3 months after 1 December 1999. [76] Although Mr Gillespie had been asked to assume that the Mt O’Reilly property could be subdivided into 27 rural homesites, he considered that was achievable at the time and had taken into account the risks associated with obtaining approval of such subdivision (at Transcript p85). Issues [77] The plaintiff’s claim against the defendant is formulated on a number of alternative bases which are dependent on the construction of the first agreement and the second agreement and the characterisation of the dealings between the parties. [78] The main issues which have to be determined in this proceeding can be summarised as follows: (a) what is the meaning of the first agreement? (b) was the first agreement performed by the parties? (c) was the first agreement still in force at the time the parties signed the second agreement? (d) was the second agreement supported by consideration moving from the plaintiff to the defendant? (e) what is the meaning of the second agreement? (f) was the plaintiff induced to enter into the second agreement by a misrepresentation made by the defendant? (g) did the defendant breach the second agreement? Meaning of the first agreement [79] The plaintiff pleaded that the effect of the first agreement was that the plaintiff and the defendant agreed to develop the Mt O’Reilly property in partnership and the defendant agreed to transfer a moiety of the fee simple in the Mt O’Reilly property to the plaintiff in consideration of the plaintiff agreeing to meet legal costs to mount a legal challenge to obtain free and unencumbered title to the property as against Carpenter. In the alternative to the partnership that is pleaded, the plaintiff pleads that the plaintiff and the defendant agreed to develop the Mt O’Reilly property pursuant to a joint venture in accordance with the terms of the first agreement. See paragraph 2 of the fourth further amended statement of claim (“the statement of claim”). -- 19 of 31 -- 20 [80] The defendant alleged that the plaintiff had paraphrased the first agreement in its pleading in a way that did not accurately reflect the terms of the first agreement. The other issues raised by the defendant in paragraph 2 of the fourth further amended defence (“the defence”) that challenged whether or not the first agreement was a concluded contract were: “(c) The consideration to be provided by the Plaintiff pursuant to thereto was illusory because of the discretionary right of the Plaintiff to withdraw from the agreement at any time including at a time when no consideration had been provided; (d) The agreement was void for uncertainty because of the discretionary entitlement of the Plaintiff to withdraw with no further obligations; (e) There was no concluded agreement in circumstances where the Plaintiff was entitled, prior to the agreement taking effect in any way, to withdraw, there from.” During oral submissions Mr Looney of counsel on behalf of the defendant expressly abandoned the defence that the first agreement was void. [81] Although not a pleaded allegation, the defendant expressed the opinion when giving evidence that the partnership was never formed under the first agreement (at Transcript pp179, 184, 207 and 226). That opinion does not reflect the terms of the first agreement. The first agreement amounted to a contract of partnership. Although the first agreement was drafted by the parties themselves, they created a partnership to develop the Mt O’Reilly property and the Mt O’Reilly property became partnership property upon the making of the agreement and the defendant’s capital account was credited with the sum of $1,000,000 that was to be reduced to the extent of the amount required to pay out Carpenter to remove the mortgages granted to Carpenter from the title of the Mt O’Reilly property. The consideration that moved from the plaintiff to the defendant in order to obtain the interest in the partnership property was the agreement by the plaintiff to provide the funds for the litigation with Carpenter. [82] The last paragraph of the first agreement conferred a right on the plaintiff to withdraw from the partnership at any time at his discretion, but specified that, if that occurred, all obligations between the parties would cease. This meant that the plaintiff at any time could stop contributing to the legal costs of the litigation between the defendant and Carpenter, but if he did, the partnership would terminate so he would no longer have an interest under the partnership agreement in the Mt O’Reilly property and had no contractual right under the first agreement to recover the monies paid on account of the legal costs relating to Carpenter. Performance of the first agreement [83] It was not in issue at the trial that the plaintiff had paid legal and related fees as requested by the defendant in respect of the dispute with Carpenter and relating to the Mt O’Reilly property. The defendant did not concede the exact amount that had been paid by the plaintiff. The plaintiff’s claim is that the total amount paid by him for legal fees is the sum of $162,122.58, as particularised at Tab 9 of exhibit 32 which is supported by copies of the various accounts that were paid, bank statements or cheque butts. Some of the amounts were paid by cheques drawn on -- 20 of 31 -- 21 Basildene Pty Ltd or Warren Brown & Associates Pty Ltd, but those amounts were treated by those companies as loans to the plaintiff. I am therefore satisfied that between 16 November 1995 and 3 September 1998 the plaintiff paid the total sum of $162,122.58 for legal and related fees, as contemplated by the first agreement. [84] It is alleged in paragraph 4(d)(ii)(A) of the defence that the plaintiff had failed to perform his obligation under the first agreement to pay the sum of $750,000 to Carpenter. Under the terms of the first agreement the Plaintiff was not required to provide the funds to pay out the debt owed to Carpenter. That was conceded in evidence by the defendant (at Transcript p187). Was the first agreement abandoned by the plaintiff? [85] Although by August 1998 the plaintiff was considering how to sever his relationship with the defendant in respect of the Mt O’Reilly property, I am satisfied that the plaintiff at no stage prior to entering into the second agreement conveyed to the defendant that he was withdrawing from the first agreement or refusing to perform his obligations under the first agreement. Was there consideration for the second agreement? [86] Immediately prior to the signing of the second agreement by the parties, the first agreement remained in existence under which the plaintiff had performed his obligations and was entitled to the benefits that flowed from the partnership that was created as a result of the first agreement. There was no doubt that the relationship between the parties had deteriorated by that time and the plaintiff was disillusioned about the defendant’s ability to perform his obligations, but the first agreement remained of value to the plaintiff. Although he had expended about $162,000 on legal fees and anticipated that about $700,000 would need to be paid to Carpenter, the plaintiff was aware that finance could be obtained to the extent of $900,000 in order to pay out Carpenter and that the valuation of the Mt O’Reilly property as at September 1997 was $2,300,000. As one of the consequences of the second agreement was that it brought the first agreement to an end, the giving up by the plaintiff of his rights under the first agreement was good consideration moving from the plaintiff to the defendant to support the promises of the defendant under the second agreement. Meaning of the second agreement [87] In paragraph 3 of the statement of claim the effect of the express terms of the second agreement were pleaded by the plaintiff as follows: “(a) the Plaintiff and the Defendant agreed to cancel all other agreements made between them concerning the Mt O’Reilly property with effect from 10 September 1998; (b) the Defendant agreed to pay the Plaintiff the sum of $2,000,000.00 in full settlement of any claims the Plaintiff may have against the Mt O’Reilly property, subject to: (i) the Defendant selling the Mt O’Reilly property with “as of right” subdivisional approval from the Pine Rivers Shire Council in respect of it for not less that $5,000,000.00; and -- 21 of 31 -- 22 (iii) payment by the Defendant to the Plaintiff of legal costs already paid by the Plaintiff up to $160,000.00; (c) there were no other express obligations which were required to be performed on the Plaintiff’s part.” [88] The plaintiff pleaded that there were a number of implied terms of the second agreement which are set out in paragraph 4 of the statement of claim: “(a) the Defendant would do all that is reasonably necessary to sell the Mt O’Reilly property for not less than $5,000,000.00 with “as of right” subdivisional approval; (b) the Plaintiff would not prevent the fulfilment of, or put it outside of his power to perform, the contingent condition to which his obligation to pay the $2,000,000.00 was subject; (c) the Defendant would act promptly and within a reasonable period of time to obtain “as of right” subdivisional approval; (d) the Defendant would not attempt to sell the Mt O’Reilly property with any type of subdivisional approval other than “as of right” subdivisional approval; (e) the Defendant would undertake no development work on the land, other than as required to obtain “as of right” subdivision approval; (f) the Defendant would not further encumber the Mt O’Reilly property, other than to raise money to obtain “as of right” subdivision approval; (g) the Defendant would act in good faith towards and in the interests of the Plaintiff in attempting to obtain a purchaser for the Mt O’Reilly property for not less than $5,000,000.00; and (h) the Defendant would accept any reasonable offer equal to or in excess of $5,000,000.00 for the Mt O’Reilly property.” [89] The defendant takes issue with what he describes as the “paraphrase” of the second agreement that is set out in paragraphs 3(a) and (b) of the statement of claim. The defendant pleaded in paragraph 4(b)(A) of the defence that “the expression ‘normal Pine Rivers Shire Council’s sub divisional approval’ in the Second Agreement means and refers to Pine Rivers Shire Council sub divisional approval after or in conjunction with the rezoning of the Mt O’Reilly Land from “Rural” to ‘Special Residential’”. [90] The defendant pleaded in paragraph 4(d) of the defence that the second agreement “is unenforceable and is not supported by consideration” because of the following: “(i) The First Agreement relied upon by the Plaintiff was unenforceable; (ii) As at 10th September 1998, performance of the First Agreement by the Plaintiff required him to provide funds: (A) to pay to W R Carpenter Australia Pty Ltd (“Carpenter”) the mortgagee of the property, the sum of $750,000; (B) to pay to the Defendant the further amount of $250,000 being the balance of the transfer price of -- 22 of 31 -- 23 $1,000,000 to obtain free and unencumbered title to the property; and (C) to pay the costs of the legal challenge against Carpenter. (iii) The Plaintiff had refused to perform his obligations pursuant to the First Agreement, and/or was not ready, willing and able to perform such obligations; (iv) The Plaintiff withdrew from and abandoned the First Agreement; (v) In the premises the provision in the First Agreement allowing the Plaintiff to withdraw with the consequence that “….all obligations between the parties shall cease” took effect; (vi) Further and alternatively, at the time when the Second Agreement was executed the Plaintiff had no bona fide belief that he had any lawful claim under the First Agreement and/or no intention of performing any obligations there under.” [91] In relation to the implied terms of the second agreement pleaded in subparagraphs (b) to (h) of paragraph 4 of the statement of claim, the defendant denied that such terms should be implied (see paragraph 5(b) of the defence). The defendant pleaded in paragraphs 5(c), (d) and (e) of the defence that there was an implied term of the second agreement that was not satisfied: “(c) Further or alternatively says that it was an implied term of the Second Agreement that the Defendant’s obligation to pay to the Plaintiff the sum of $2,000,000 thereunder was conditional upon the Mt O’Reilly property being able to be sold upon the terms set out in the condition subsequent within the reasonable time of entering into the Second Agreement; (d) Says that, more than 3 years having now passed, a reasonable time, as aforesaid, has now elapsed; (e) Says that the condition subsequent was never satisfied.” [92] The plaintiff in paragraph 4 of his further amended reply (“the reply”) denied paragraphs 5(c) and (d) of the defence. The plaintiff then alleged in paragraph 4A of the reply that if the term sought to be implied by the defendant was a term of the second agreement, than the defendant was estopped from asserting and relying upon the operation of the implied term. The plaintiff also pleaded in paragraph 5 of the reply that, in relation to paragraph 5(e) of the defence, as a matter of law the defendant was unable to take the benefit of the condition subsequent in circumstances where his conduct had caused the condition subsequent not to be performed. [93] The plaintiff has construed the second agreement, so that the handwritten words “PLUS LEGAL COSTS ALREADY PAID UP TO $160,000” are read as an addition to the third paragraph of the second agreement, rather than the last paragraph. It is therefore alleged by the plaintiff that the obligation assumed by the defendant under the second agreement was to pay the plaintiff the sum of $2,000,000 and legal costs of $160,000, but that the condition in the second agreement required the defendant to sell the property for not less than $5,000,000. -- 23 of 31 -- 24 In contrast the defendant’s defence treated the handwritten words as intending to qualify the price at which the defendant was to sell the Mt O’Reilly property. See paragraphs 6(a)(ii) and 8C(b) of the defence. The submission was therefore made on behalf of the defendant that the price at which the Mt O’Reilly property had to be sold before any obligation arose under the second agreement to account to the plaintiff was the sum of $5,160,000. [94] It was common ground between the plaintiff and the defendant at the time the second agreement was signed that the plaintiff had spent significant funds on legal costs in relation to the defendant’s dispute with Carpenter relating to the Mt O’Reilly property. Even if the defendant did not admit the amount which the plaintiff had spent, the defendant was aware that the plaintiff claimed he had spent about $160,000 and was keen to be reimbursed. The handwritten words and figures were inserted in the second agreement in the light of that mutual knowledge of the plaintiff and the defendant about the claim that those funds had been expended by the plaintiff for which the plaintiff was seeking reimbursement which was admissible evidence for the purpose of construing the second agreement: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352 (“Codelfa”). Literally, meaning can be given to the second agreement by construing the second agreement in the light of where those handwritten words and figures were placed. To do so against the background that was known by both parties would result in a nonsensical interpretation. The second agreement is given a sensible construction that conforms with the mutually known facts, if the handwritten words and figures “PLUS LEGAL COSTS ALREADY PAID UP TO $160,000” are treated as an addition to the third paragraph of the second agreement. That makes the obligation that the defendant undertook under the third paragraph of the second agreement to pay to the plaintiff the sum of $2,000,000 plus an additional sum of $160,000 to reimburse the plaintiff for the legal costs that he had already paid. [95] The last paragraph of the second agreement must therefore be construed as if the handwritten words were not there. That makes the obligation of the defendant to pay to the plaintiff the sum of $2,000,000 and to reimburse the plaintiff for legal costs of $160,000 dependent conditional upon the defendant selling the Mt O’Reilly property “with the normal Pine Rivers Shire Council subdivisional approval” for not less than $5,000,000. Three issues arise from this condition: what is the effect of the inclusion of the words “with the normal Pine Rivers Shire Council subdivisional approval”; whether the condition imported any time period for the sale to be effected; and whether the condition could be fulfilled if it were the defendant’s mortgagee exercising power of sale that sold the Mt O’Reilly property. [96] It is relevant in construing the condition contained in the last paragraph of the second agreement that it was included in a commercial contract between two experienced businessmen who intended that the second agreement be carried into effect. The condition should be given a commonsense, rather than any narrow or pedantic, construction that achieves the purpose of the parties revealed by the terms of the second agreement: Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1967) 118 CLR 429, 437 and Corumo Holdings Pty Ltd v C Itoh Ltd (1991) 24 NSWLR 370, 378-379. In construing the second agreement, it is permissible to have regard to the circumstances surrounding the entry by the parties into the second agreement which were known to both parties: Codelfa at 352. -- 24 of 31 -- 25 [97] The plaintiff contended that the reference in the last paragraph of the second agreement to subdivisional approval could be only a reference to subdivision effected without change of zoning which meant that the defendant had to take steps to have the Mt O’Reilly property subdivided for rural residential homesites in reliance on its existing rural zoning. The defendant contended that, having regard to the prior discussions that had taken place between the parties as to the preferred course for developing the property in order to realise its true value which was to have it rezoned as special residential, the condition in the second agreement must refer to subdivisional approval after or in conjunction with the rezoning of the property from rural to special residential. [98] The plaintiff was asked in evidence-in-chief, what he meant by “normal” in respect of the description “normal subdivisional approval” and his response was (at Transcript p55): “Well, normal subdivision approval – and it was always regarded that we had an as-of-right subdivision approval. ‘Normal’ is as-of- right subdivisional approval, and the as-of-right subdivisional approval was into 40 acre or 16 hectare lots, which was the minimum without rezoning – minimum rural subdivision.” In reliance on this evidence the submission was made on behalf of the plaintiff that “normal” subdivisional approval equates to the “as-of-right” subdivision which the parties had discussed. The above passage from the plaintiff’s evidence indicates what he understood by “normal”, but if the submission is intended to convey that the parties had previously discussed what was meant by “normal” subdivisional approval, the above passage of evidence does not support that submission. [99] It was clear to both parties at the time of entering into the second agreement that the attraction of the second agreement for the plaintiff was that it gave him the opportunity for recovering the moneys that he had already spent on legal fees of about $160,000 plus a share of the profit from the sale of the Mt O’Reilly property fixed at $2,000,000, provided the agreed minimum sale price of $5,000,000 was achieved by the defendant and, further, that the second agreement enabled the plaintiff to withdraw from the continuing obligations under the first agreement, such as providing a guarantee in respect of any borrowings by the partnership to pay out Carpenter and develop the Mt O’Reilly property. [100] The risk that the plaintiff took in entering into the second agreement was whether the sale price of $5,000,000 would be able to be achieved by the defendant. That risk was addressed to some degree by the acknowledgment in the last paragraph of the second agreement that the sale of the Mt O’Reilly property by the defendant would be with the normal Council subdivisional approval. At the time the parties entered into the second agreement, both parties knew that the Mt O’Reilly property had potential for development, but the way of achieving a sale price that gave the defendant some benefit of that potential value was to take steps to obtain or towards obtaining requisite approvals from the Council. [101] The main purpose of this condition in the second agreement was about setting the minimum sale price that had to be achieved before the plaintiff would be entitled to receive any payment from the defendant under the second agreement. It was immaterial to the plaintiff whether or not the defendant actually obtained Council approval whether for a rural residential subdivision or for a special residential -- 25 of 31 -- 26 subdivision, except to the extent that either the taking of steps by the defendant towards obtaining subdivisional approval or the obtaining of the approval by the defendant would enable a sale price of at least $5,000,000 to be achieved. Although the parties had engaged previously in extensive discussions of their preference for the development of the Mt O’Reilly property to proceed by way of rezoning to special residential before seeking to obtain approval for a subdivision for about 200 homesites, the condition in the second agreement did not expressly specify what type of subdivisional approval was to be obtained. No assistance of lawyers was obtained by the parties in the preparation of the second agreement. The parties used a minimum of words in the second agreement to cover significant obligations. [102] When consideration is given to the main purpose of this condition in the second agreement, the inclusion of the words “with the normal Pine Rivers Shire Council subdivisional approval” should be construed as imposing an obligation on the defendant to take action towards obtaining that approval, in order to achieve the sale at the minimum price which would give the plaintiff the entitlement to payment under the second agreement. In view of the fact that no subdivisional approval of any sort was actually obtained before the Mt O’Reilly property was sold in 2004, it is not now necessary to determine what type of subdivisional approval the defendant was to endeavour to obtain. If I had to determine what type of subdivisional approval the defendant was required to seek, I would find that these words were not prescriptive of the type of subdivisional approval, but required the defendant to apply for subdivisional approval that was attainable, and that would assist in achieving a sale of the Mt O’Reilly property for at least $5,000,000. The condition was capable of certainty in its operation, as the existing zoning of the Mt O’Reilly property and the need to take steps to achieve a sale price of $5,000,000 provided the parameters for the implementation of the steps to obtain the subdivisional approval. [103] The next issue that arises from the inclusion of the words “with the normal Pine Rivers Shire Council subdivisional approval” is whether the condition could be fulfilled only if the sale was effected after the defendant had obtained subdivisional approval for the Mt O’Reilly property from the Council. [104] The way the condition reads literally is that the obligation of the defendant to pay the sum of $2,000,000 and a further sum of $160,000 on account of legal costs to the plaintiff is dependent not only upon the defendant selling the Mt O’Reilly property for not less than $5,000,000, but selling it with the normal Council subdivisional approval. On that literal reading, if the defendant sold the property for more than $5,000,000, but without having achieved Council subdivisional approval, the defendant would not have to account to the plaintiff for the sums that the defendant agreed to pay to the plaintiff under the second agreement. That result does not reflect the intention of the parties, as otherwise revealed by the second agreement. On the basis that the inclusion of the word “with the normal Pine Rivers Shire Council subdivisional approval” reflected the parties’ intention of what the defendant had to do in order to achieve a sale price of the Mt O’Reilly property of a minimum of $5,000,000, those words should not be construed as restricting the plaintiff’s right to recover and the defendant’s obligation to pay under the second agreement to a sale that proceeded only after the normal Council subdivisional approval had been obtained. -- 26 of 31 -- 27 [105] The ambiguity that exists if a literal construction were given to the words “with the normal Pine Rivers Shire Council’s subdivisional approval” in the condition in the last paragraph of the second agreement is therefore resolved by construing the condition so that the payment of $2,000,000 plus reimbursement of legal expenses of $160,000 is conditional only on the sale by the defendant of the Mt O’Reilly property for not less than $5,000,000 (and not on the sale taking place after subdivisional approval was obtained), but as otherwise imposing an obligation on the defendant to take steps to obtain subdivisional approval of the Mt O’Reilly property to assist in achieving a sale price of at least $5,000,000. [106] The parties did not express any time period for the fulfilment of the condition contained in the last paragraph of the second agreement. In the usual case where a contract is silent on the time for performance of an obligation, it will be implied that the obligation must be performed within a reasonable time (unless there are contrary indications in the contract): Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537, 543, 554, 560, 567 (“Perri”). [107] There is nothing in the second agreement which would preclude the implication of a reasonable time for the performance by the defendant of the obligation to sell the Mt O’Reilly property for at least $5,000,000. What is a reasonable time is a question of fact and depends upon the circumstances: Perri at 567-568. The circumstances in this matter include the fact that was known to the parties that the valuations last obtained before they entered into the second agreement valued the Mt O’Reilly property at $2,300,000. The circumstances were also ruled by the express contemplation of the parties that the defendant would take steps to obtain subdivisional approval from the Council to assist in achieving the minimum sale price that was required to be obtained, before the plaintiff was entitled to any payment under the second agreement. It may be that a reasonable time in the circumstances was measurable in years, rather than months. [108] Ultimately it is not necessary to determine what was a reasonable time for the performance of the condition imposed on the defendant to sell the Mt O’Reilly property for at least $5,000,000, as the second agreement remained on foot at the time of the sale of the Mt O’Reilly property by Elliott Harvey as mortgagee exercising power of sale. Although the defendant pleaded in paragraphs 5(d) and (e) of the defence that the condition was not satisfied after more than 3 years (which was alleged by the defendant to be a reasonable time) had passed since the making of the second agreement, there was no action taken by either party to bring the second agreement to an end. (If the defendant had been in breach, the defendant would not have been entitled to terminate the second agreement after the effluxion of a reasonable time for the performance of the condition.) [109] It was submitted on behalf of the plaintiff that where the defendant is referred to in the condition in the last paragraph of the second agreement, his name should be construed as including any entity whom he put in a position to sell the Mt O’Reilly property, as that would promote the commercial purpose of the second agreement. It was submitted that otherwise the defendant would have been able to frustrate the commercial purpose of the second agreement by failing to make repayments in respect of the loan secured on the Mt O’Reilly property and thereby allowing the mortgagee to sell the property. The submission was made on behalf of the defendant that the sale that settled in June 2004 occurred after the defendant had lost control of the Mt O’Reilly property to Elliott Harvey. It was not surprising that -- 27 of 31 -- 28 neither party could refer to authority to support the respective submissions, as ultimately the submissions depend on the construction that is given to the condition in the second agreement. [110] The construction contended for by the plaintiff is consistent with the main purpose of this condition and promotes the commercial nature of the second agreement. The power of sale exercised by Elliott Harvey was conferred on Elliott Harvey by the defendant in dealing with the Mt O’Reilly property as registered proprietor. The defendant was entitled to the proceeds of sale remaining after payment of the amount owed by the defendant to Elliott Harvey, the costs of the sale and any other amounts secured by any of the mortgages subsequent to the mortgage held by Elliott Harvey. I therefore find that the sale by Elliott Harvey as mortgagee exercising power of sale under the mortgage granted over the Mt O’Reilly property by the defendant was a sale by the defendant for the purpose of the condition contained in the last paragraph of the second agreement. [111] I accept the defendant’s submission that the sale of the Mt O’Reilly property by Elliott Harvey was achieved after significant steps had been taken by the defendant towards achieving a material change of use, even though the sale took place without any subdivisional approval. On the proper construction of the second agreement, the sale of the Mt O’Reilly property for $5,000,000 by Elliott Harvey as mortgagee exercising power of sale without any subdivisional approval was a sale that fulfilled the condition of settlement under the second agreement. The plaintiff has therefore established its entitlement to payment of the sum of $2,160,000 by the defendant on the basis of the claim pleaded in paragraphs 6A, 6B and 6C of the statement of claim, although that entitlement arose only on 11 June 2004.. Was second agreement induced by misrepresentations? [112] It is therefore not necessary to deal with the claim for damages as a result of misleading and deceptive conduct or misrepresentation which the plaintiff alleges induced the second agreement. I will, however, state my findings in relation to the issue of the plaintiff’s reliance on the untrue statements made to him by the defendant as to the existence of prospective buyers for the Mt O’Reilly property for more than $5,000,000. [113] It is a question of fact whether a person has been induced by a misrepresentation to enter into a contract. If the misrepresentation was one which by its nature was calculated to induce the person to whom the misrepresentation was made to enter into the contract, it usually will be inferred that the misrepresentation did, in fact, induce entry into the contract, but that inference may be rebutted if it is shown that the person to whom the misrepresentation was made did not rely on the misrepresentation: Gould v Vaggelas (1985) 157 CLR 215, 236 (“Gould”). The misrepresentation need play only a minor part in contributing to the formation of the contract in order to be treated as inducing the contract: Gould at 236. [114] The starting point is that the inference has to be drawn in the plaintiff’s favour that the misrepresentation which I have found was made by the defendant to the plaintiff about the prospective buyers who would be prepared to pay in excess of $5,000,000 for the Mt O’Reilly property induced the plaintiff to enter into the second agreement. That inference has to be considered, however, with other evidence that is relevant to this issue of reliance. That evidence includes the finding that I have -- 28 of 31 -- 29 made earlier in these reasons that the plaintiff was not too concerned about ascertaining from the defendant at the time the misrepresentation was made details of these offers from the prospective buyers. That was also reflected by the plaintiff’s subsequent conduct in failing to follow up the defendant about those offers until July 1999, when the plaintiff had stated that he was told by the defendant that settlement under the second agreement would take place by Christmas 1998. I have also expressed earlier in these reasons that the plaintiff’s lack of inquiry of the defendant immediately prior to entering into the second agreement about what was happening with Carpenter was relevant to determining why the plaintiff signed the agreement. In similar vein, there was the lack of discussion between the parties about what was intended by the inclusion of the words “with the normal Pine River Shire Council subdivisional approval” in the second agreement. It is very relevant to the plaintiff’s state of mind at the time he entered the second agreement that he had, by August 1998, formed the intention to sever his ties with the defendant, because the plaintiff was becoming disillusioned with the defendant over the Basildene project and the Caruso episode and his perception of the defendant’s lack of frankness in providing information about what was happening with the Mt O’Reilly property. That intention was confirmed by the lack of interest that the plaintiff showed in making the inquiries about the Carpenter litigation, prospective buyers and the meaning of the critical condition in the second agreement. [115] I find that by 9 September 1998 the plaintiff wanted to withdraw from the partnership, but preferably in such a way that gave the plaintiff the possibility of recovering from the defendant the amount paid on account of legal costs and some proportion of the profit that the parties anticipated would eventually be made from the Mt O’Reilly property. I find that the plaintiff was keen to avoid the continuing obligations arising from the partnership, and particularly the requirement to provide a guarantee in relation to future borrowings which would need to be undertaken by the partnership to develop the Mt O’Reilly property. I therefore find that the plaintiff was keen to accept the defendant’s offer that was embodied in the draft of the second agreement that was foreshadowed by the defendant on 9 September 1998 and presented to the plaintiff on 10 September 1998. [116] Despite my acceptance of the plaintiff’s evidence that the defendant did make the statement to him prior to entering into the second agreement about the prospective buyers for the Mt O’Reilly property, I reject the plaintiff’s evidence that he would not have entered into the second agreement, if that statement had not been made to him. The plaintiff’s evidence about his reliance on the misrepresentation is consistent with the inference that usually follows from the making of a statement by a party to induce the other to enter into a contract, but is inconsistent with all the other signs in the plaintiff’s evidence that support the conclusion which I reach that the plaintiff signed the second agreement, without reliance on the statement made to him by the defendant about the existence of prospective buyers for the Mt O’Reilly property. The inference of inducement that usually follows from the making of a statement calculated to induce the making of a contract has been rebutted by the evidence that shows the plaintiff’s lack of reliance on that statement. Breach of the second agreement [117] It is not necessary to deal with the claim for damages for breach of the second agreement in view of my finding that the plaintiff has established his claim for debt -- 29 of 31 -- 30 against the defendant, based on satisfaction of the condition of the settlement under the second agreement. I will, however, note a significant difficulty which I found in respect of the plaintiff’s case for breach of the second agreement based on the failure of the defendant to sell the Mt O’Reilly property earlier than April 2004. [118] In order to prove that the defendant breached the second agreement, the plaintiff had to prove when the Mt O’Reilly property was saleable for at least $5,000,000. The submission was made on behalf of the plaintiff that at the date of entry into the second agreement the value of the Mt O’Reilly property was somewhere in excess of $4,500,000 (on the basis of Mr Gillespie’s report). The valuation of Mr Gillespie does not support that submission. Analysis of his valuation shows that he valued the property at $4,500,000 only if the steps had been taken to expend the construction costs and make all the applications necessary to the Council, so that the property had been developed to the stage that the Council would seal the survey plan for the reconfiguration of the Mt O’Reilly property into 27 rural homesite lots to enable immediate sale of those lots. [119] Although the evidence traversed the various offers to purchase, the option agreements and the offers to enter into option agreements that were directed to the defendant after the second agreement was entered into, there was no evidence of any purchaser signing any contract for a sale price of at least $5,000,000 that was likely to be able to proceed to settlement. When the defendant was challenged in cross-examination (at Transcript p163), as to why he had not entered into a contract before 2004 to sell the Mt O’Reilly property, he stated: “… I would have taken $7 or $8 million and run. I couldn’t do it because they wouldn’t pay over the money until such time it was approved. Now, it was never approved.” I accept that evidence which was borne out by the conditions of the written offers and the option that were put into evidence. Mr Gillespie’s valuation was applicable until 1 March 2000. The plaintiff did not adduce any evidence to show that a sale of the Mt O’Reilly property for $5,000,000 would have been completed earlier than June 2004 even on the assumption that the steps had been taken to obtain approval for a subdivision into 27 rural homesites. I am therefore not satisfied that the plaintiff has established that the Mt O’Reilly property was able to be sold for $5,000,000, before it was sold to Tendiris Pty Ltd for that amount. Orders [120] The plaintiff is entitled to judgment against the defendant for the amount of $2,160,000. The plaintiff claims interest on that amount pursuant to s 47 of the Supreme Court Act 1995. As the entitlement to receive the payment under the second agreement did not arise until 11 June 2004, that should be the date from which interest is calculated. I invite submissions from the parties as to the interest rate which should be applied and the calculation of the amount of interest for which judgment should be entered. [121] This proceeding was commenced prior to the accrual of the cause of action in respect of which the plaintiff has established his claim. That is relevant to a consideration of what should be the appropriate order for costs. I invite the parties to make submissions on costs. -- 30 of 31 -- 31 [122] As further submissions will be necessary, before final orders can be made, I make the following order: Adjourn the proceeding to a date to be fixed for submissions on the terms of orders to be made. -- 31 of 31 --