Coomera Resort Pty Ltd v Kolback Securities Ltd & Ors [1998] QSC 20 [2004] 1 Qd R 1

IN THE SUPREME COURT OF QUEENSLAND Brisbane No.1321 of 1994 Before the Hon. Mr Justice Mackenzie [Coomera Resort Pty Ltd v. Kolback Securities Ltd & Ors] BETWEEN COOMERA RESORT PTY LTD (ACN 050 911 156) Plaintiff AND KOLBACK SECURITIES LIMITED (ACN 010 560 586) First Defendant AND KOLBACK GROUP LIMITED (ACN 003 190 501) Second Defendant AND PAUL LEVINSON BOND Third Defendant AND LANDBASE HOLDINGS LIMITED Fourth Defendant AND YUZO NAGANO Fifth Defendant AND ROBERT ADRIAN PITT Sixth Defendant AND PRD REALTY PTY LTD (ACN 009 954 956) Seventh Defendant AND DONALD DIETZ Eighth Defendant No. 1329 of 1994 [Kolback Securities Ltd & Anor v. Coomera Resort Pty Ltd] BETWEEN KOLBACK SECURITIES LIMITED (ACN 010 560 586) Plaintiff AND KOLBACK GROUP LIMITED (ACN 003 190 501) Second Plaintiff AND COOMERA RESORT PTY LTD (ACN 050 911 156) Defendant -- 1 of 209 -- JUDGMENT - MACKENZIE J. Judgment Delivered 20/02/1998 CATCHWORDS: AGENCY - real estate agent - whether breach of legal duty by reason of failure to conform with Code of Professional Conduct; Auctioneers and Agents Act CONTRACT • breach - cll 13, 12 & 24 and contractual duties of a fiduciary nature • condition and warranties • exclusion clause -construction of cl.25.1 -whether liability for misleading and deceptive representations is excluded • frustration - whether possibility that finance might not be obtained was an event that would radically alter the situation envisaged by the parties upon entry into the agreement • misrepresentation • repudiation - whether Kolback’s refusal to provide correspondence with Metway(cl.24.1), withdrawing the application for interest guarantee(cl.9.4) and failing to obtain conforming offer were instances of repudiation and accepted by Coomera, discharging it from further performance • whether issue of writ, in pursuance of its rights under the agreement, terminating on the grounds that the relationship had irretrievably broken down, was capable of acceptance by the other party • termination - contractual preconditions: finance to be obtained within 9 months - whether Coomera could terminate without giving reasonable notice because finance had not been obtained • uncertainty - whether content of golf course land and venture land resolved to sufficient certainty - whether the precise area which is to be excised from a larger parcel can be ascertained according to objective criteria to render it certain DAMAGES - quantum and remoteness • conspiracy - whether costs of unravelling conspiracy not recoverable as costs of the action, are recoverable as damages for conspiracy • equitable compensation for breach of fiduciary duty CRIMINAL LAW - soliciting and offering secret commission; s442B Criminal Code EQUITY- fidiciary duties • between joint venturers - whether owed during period prior to execution of venture agreement - character of obligations to be imposed by the agreement - whether relationship sufficiently developed / identifiable transactions related to furthering the proposed joint venture had taken place • between real estate agent and principal- conflict of interest and duty: arrangement to obtain secret commission - whether pleading of failure to disclose, as a breach of fiduciary duty is sufficient - whether allegation was essentially of prima facie disloyalty by agreeing to the arrangement, not rebutted by disclosure to and consent of principal - whether causal relationship between non-disclosure and entry into the venture agreement by Coomera - effect of breach of fiduciary duty on parties and factors influencing award of equitable compensation- -- 2 of 209 -- ESTOPPEL - by convention EVIDENCE - admissibility - co-conspirators rule INTERPRETATION - terms of venture agreement • ‘venture asset’ - ‘any compensation receivable by virtue of any resumption of any part of the land’- whether Railway Compensation Moneys venture asset - joint venturers post agreement course of conduct • ‘venture land’, cll 1.2, 2, 5, 9.1 and 21.1 - whether Kolback has a claim to 50% interest in the land • cl 25.1 - exclusion clause JOINT VENTURES - fiduciary duties between joint venturers PRACTICE - sufficiency of pleading • statement of claim - allegation of ‘unlawful means’ conspiracy - omission of specific allegation of intention to injure/ cause harm to plaintiff - whether this element had to be proved for this type of conspiracy • statement of claim - whether pleading of failure to disclose, as a breach of fiduciary duty is sufficient or known to Australian law PRINCIPAL AND AGENT - liability of agent - principal’s right to recovery of quantifiable undisclosed / secret commission and to rescind contract of agency TRADE AND COMMERCE -Trade Practices Act, s.52- misleading and deceptive conduct - representations concerning financial aspects of the affairs of one of the joint venturers • whether statement that Kolback could provide a guarantee of $12 million was an expression of judgment/ opinion or fact • Kolback- company of substance with assets and credibility and ... debt-free, capacity to introduce funds • false statement to ASX - whether awareness of the statement or any loss suffered TORT • unlawful means conspiracy - whether agreement for secret commission - whether unlawful means: commission of offence; s.442B Criminal Code - whether predominant purpose or pleading of intention required - proof of damages: whether costs of unravelling conspiracy quantifiable and possibly recoverable • whether conspiracy to cause someone to breach a fidiciary duty sustainable in law as an unlawful means conspiracy cf conspiracy to commit criminal offence, breach of contract or a tort • deceit - statements that Kolback was a company of substance with assets and credibility and ... hopefully debt-free by the end of 1992 WORDS AND PHRASES - construction of contract ‘golf course land’-‘indicative area and approximate location’- meaning of indicative Ahern v. The Queen (1988) 165 CLR 87 Ansett Transport Industries (Operations) v. Australian Federation of Air Pilots (1991) 1 VR 637 Beach Petroleum NL v. Johnson (1993) 43 FCR 1 Bill Acceptance Corporation Ltd. v. GWA Ltd (1983) 78 FLR 171 Briginshaw v Briginshaw (1938) 60 CLR 336 -- 3 of 209 -- Brisbane City Council v. Group Projects Pty Ltd (1979) 145 CLR 143 British Motor Trade Association v. Salvadori (1949) 1 Ch 556 Brown v. Gould (1972) Ch. 53 Canny Gabriel Castle Jackson Advertising Pty Ltd v. Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 Chettle v. Brown (1993) 2 Qd R 604 Codelfa Construction Pty Ltd v. State Rail Authority of NSW (1982) 149 CLR 337 Connell v. Bond (1992) 8 WAR 352 Demagogue Pty Ltd v. Ramensky (1992) 39 FCR 31, 33 Derry v. Peek (1889) 14 App Cas 337 F & G Sykes (Wessex) Ltd v. Fine Fare Ltd (1967) 1 Lloyds Rep. 53 Gemstone Corporation of Australia Limited v. Grasso (1994) 62 SASR 239 Global Sportsman Pty Ltd v. Mirror Newspapers Ltd (1984) 2 FCR 82 Godecke v. Kirwin (1973) 129 CLR 629 Goodchild Fuel Distributors Pty Ltd v. Holman (1992) 59 SASR 454 Gould v. Vaggelas (1983) 157 CLR 215 Havenbah Pty Ltd v. Butterfield (1974) 3 ALR 347 Heritage Properties (No. 3) Pty Ltd v. Coles Supermarkets Australia Pty Ltd (1993) Q Conv R 54-448 Hillas & Co Ltd v. Arcos Ltd (1932) 147 LT 503 James v. ANZ Banking Group Ltd (1986) 64 ALR 347 Kabwand Pty Ltd v. National Australia Bank Ltd (1989) ATPR 40-950 L.S. Harris Trustees Ltd v. Power Packing Services (Hermit Rd) Ltd (1970) 2 Lloyds LR 65 Lonrho Ltd v. Shell Petroleum Co. Ltd (No.2) (1982) AC173 Lonrho PLC v. Fayed (1992) 1 AC 448 Maguire v. Makaronis (1997) 144 ALR 729 May & Butcher Ltd v. The King (1934) 2 KB 17 McKernan v Fraser (1931) 46 CLR 343 Meehan v. Jones (1982) 149 CLR 571 Metall Und Rohstoff AG v. Donaldson Lufkin and Jenrette Inc. (1990) 1 QB 391 Northern Territory v. Mengel (1995) 185 CLR 307 Parkdale Custom Built Furniture Pty Ltd v. Puxu Pty Ltd (1980) 43 FLR 405 Permanent Building Society (in liq) v Wheeler (1993) 11 WAR 187 Prints for Pleasure Ltd v. Oswald-Sealy (Overseas) Ltd (1968) 3 NSWSR 761 Progressive Mailing House Pty Ltd v. Tabuli (1985) 157 CLR 17 Reading v. A.G (1951) AC 507 Roots v. Oentory Pty Ltd (1983) 2 Qd.R 745 Shevill v. Builders’ Licensing Board (1982) 149 CLR 620 Sutton v. A.J. Thompson Pty Ltd (In Liq) (1987) 73 ALR 233 Sutton v. Gundowda Pty Ltd (1950) 81 CLR 418 Thorby v. Goldberg (1964) 112 CLR 597 Tobacco Institute of Australia Ltd. v. Australian Federation of Consumer Organisations Inc (1993) 38 FCR 1 United Dominions Corporation Ltd v. Brian Pty Ltd (1984) 157 CLR 1 United Builders Pty Ltd v. Mutual Acceptance Ltd (1978-9) 144 CLR 673 Upper Hunter County District Council v. Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Wardley Australia Ltd v. Western Australia (1992) 175 CLR 514, 526 Williams v Hursey (1959) 103 CLR 30 Womboin Pty Ltd v. Reichelt (unreported, SCNSW, 5175/92 25 August 1995) Yenidje Tobacco Co Ltd (1916) 2 Ch 426 York Airconditioning and Refrigeration (A’Asia) Pty Ltd v. The Commonwealth (1949) 80 CLR 11 -- 4 of 209 -- Counsel: In No.1321 of 1994 Mr R.N. Chesterman QC, with him Mr M.K. Conrick and Mr L.F. Kelly for the plaintiff. Mr P.H. Morrison QC, with him Ms J.H. Dalton for the 1st, 2nd and 6th defendants. Mr R.V. Hanson QC, with him Mr J.C. Sheahan for the 7th and 8th defendants. (Mr Hanson QC appeared for the 7th and 8th defendants from the 19 September 1998) In No.1329 of 1994 Mr P.H. Morrison QC, with him Ms J.H. Dalton for the 1st and 2nd plaintiffs. Mr R.N. Chesterman QC, with him Mr M.K. Conrick and Mr L.F. Kelly for the defendant. Solicitors: In No.1321 of 1994 Clayton Utz for the plaintiff. Minter Ellison for the 1st, 2nd and 6th defendants. Thynne & Macartney for the 7th and 8th defendants. In No.1329 of 1994 Minter Ellison for the 1st and 2nd plaintiffs. Clayton Utz for the defendant. Date of hearing: 18 August 1998 to 26 September 1998 (excluding 25 August 1998) and 1 and 2 October 1998. -- 5 of 209 -- 6 IN THE SUPREME COURT OF QUEENSLAND Brisbane No.1321 of 1994 Before the Hon. Mr Justice Mackenzie [Coomera Resort Pty Ltd v. Kolback Securities Ltd & Ors] BETWEEN COOMERA RESORT PTY LTD (ACN 050 911 156) Plaintiff AND KOLBACK SECURITIES LIMITED (ACN 010 560 586) First Defendant AND KOLBACK GROUP LIMITED (ACN 003 190 501) Second Defendant AND PAUL LEVINSON BOND Third Defendant AND LANDBASE HOLDINGS LIMITED Fourth Defendant AND YUZO NAGANO Fifth Defendant AND ROBERT ADRIAN PITT Sixth Defendant AND PRD REALTY PTY LTD (ACN 009 954 956) Seventh Defendant AND DONALD DIETZ Eighth Defendant No. 1329 of 1994 [Kolback Securities Ltd & Anor v. Coomera Resort Pty Ltd] BETWEEN KOLBACK SECURITIES LIMITED (ACN 010 560 586) Plaintiff AND KOLBACK GROUP LIMITED (ACN 003 190 501) Second Plaintiff AND COOMERA RESORT PTY LTD (ACN 050 911 156) Defendant -- 6 of 209 -- 7 JUDGMENT - MACKENZIE J. Judgment delivered 20 February 1998 INDEX 1. The Action and the Parties..................................................................................................... 1 2. Other Witnesses Cross-Examined ......................................................................................... 3 3. Other Evidence ...................................................................................................................... 4 4. Complaints about cross-examination of witnesses ................................................................ 5 5. Bond’s prior acquaintanceships ............................................................................................. 5 6. The Issues .............................................................................................................................. 6 7. Relief Sought ......................................................................................................................... 8 8. Explanation of Methodology ............................................................................................... 11 9. History of Hoko’s connection with Coomera Land ............................................................. 12 10. Dealings between Douglas and Bond in relation to fees ..................................................... 12 11. Instructions to PRD to seek joint venturer (August-October 1991) .................................... 16 12. PRD’s activities after Omura’s decision to sell (October 1991-July 1992)......................... 17 13. Other offers prior to execution of venture agreement.......................................................... 18 14. The venture agreement......................................................................................................... 18 (a) Constitution of venture and interest of the venturers. ............................................... 19 (b) Management Committee ........................................................................................... 19 (c) Dealings with the land (cl.5) .................................................................................... 19 (d) Kolback’s obligations with regard to finance (cl.9) .................................................. 20 (e) Relationship between the parties............................................................................... 21 (f) Events of default and consequences. ......................................................................... 21 (g) Golf course land ...................................................................................................... 22 (h) Commission............................................................................................................... 22 15. Events concerning liability for commission ........................................................................ 23 16. Initial Funding (August-October 1992) ............................................................................... 24 17. Proposals to Fund Golf Course (October 1992-June 1993)................................................. 25 18. “Decision” to Proceed under Original Agreement (June-August 1993).............................. 25 -- 7 of 209 -- 8 19. Further Proposal to Fund Golf Course through Metway (August 1993-February 1994)..... 26 20. Other Proposals - Interest Subsidy (February-March 1994) ................................................ 26 21. Concurrent Discussions about Metway Funding (March-April 1994) ................................ 26 22. Separation of Golf Course and the Venture Development (April 1994) ............................. 27 23. Complaints about Form and Implementation of Agreement (May-July 1994).................... 27 24. “Termination” and subsequent events (August 1994) ......................................................... 29 25. Credibility - Omura.............................................................................................................. 31 26. Credibility - Pitt ................................................................................................................... 32 27. Events of Default by Kolback? ............................................................................................ 32 28. Conspiracy as Pleaded ......................................................................................................... 34 29. Conspiracy - Kolback, KGL and Pitt .................................................................................. 36 30. Conspiracy - Dietz and PRD................................................................................................ 45 31. Conspiracy - what has to be proved and pleaded................................................................. 48 32. Can Conspiracy be Based on Breach of Fiduciary Duty? .................................................... 56 33. Was there a fiduciary relationship between Kolback and Coomera before the joint venture? ....................................................................................................................... 57 34. Breach of fiduciary duty - PRD ........................................................................................... 58 35. Submissions about the representations ................................................................................ 62 36. Representations Concerning Guarantee............................................................................... 74 37. Debt Reduction .................................................................................................................... 74 38. Was the Company one of substance and credibility? .......................................................... 75 39. Representation of capacity to introduce funds..................................................................... 78 40. Reliance ............................................................................................................................... 80 -- 8 of 209 -- 9 41. Contravention of Section 52 of Trade Practices Act ........................................................... 82 42. Deceit ................................................................................................................................... 82 43. Repudiation by Refusing to Provide Correspondence with Metway................................... 84 44. Repudiation by Withdrawing Application for Interest Guarantee ....................................... 85 45. Repudiation by Failing to Obtain Conforming Offer .......................................................... 87 46. Breach of fiduciary duty/contract - Kolback, KGL, Pitt ...................................................... 90 47. Alleged false statement by Kolback to Australian Stock Exchange.................................... 95 48. Uncertainty........................................................................................................................... 97 49. Frustration.......................................................................................................................... 108 50. Repudiation by Issue of Writ ............................................................................................. 109 51. Termination Without Breach ............................................................................................. 111 52. Has Kolback an interest in the land? ................................................................................. 113 53. Exclusion Clause ............................................................................................................... 114 54. Railway Compensation Moneys ........................................................................................ 115 55. Would the Agreement Have Proceeded? ........................................................................... 116 56. How should the matter be resolved?.................................................................................. 118 57. Summary of Findings, Orders and Declarations................................................................ 120 -- 9 of 209 -- -- 10 of 209 -- 1. The Action and the Parties The proceedings in both actions arise from the failure of a business relationship the object of which was to develop land at Coomera as a residential development surrounding a resort golf course. The circumstances in which the venture was entered into, the reasons why it came to a premature end and which of the parties bears responsibility are at the heart of both actions. The land to be developed had been purchased in 1989 by Hokojitsugyo (Hoko) a Japanese investment company of which Mr Omura (Omura) was the president. The plaintiff in No 1321 of 1994 and defendant in No 1329 of 1994 Coomera Resort Pty Ltd (Coomera) was a wholly owned subsidiary, incorporated in Australia, of Hoko and was the corporate vehicle for the project. The first and second defendants in No 1321 of 1994 and plaintiffs in No 1329 of 1994, Kolback Securities Limited (Kolback) and Kolback Group Limited (KGL), are related companies. Kolback was the joint venturer with Coomera and is a wholly owned subsidiary of KGL. At all material times the 6th defendant Robert Adrian Pitt (Pitt) was chairman of directors of both. Under a venture agreement signed on 9 July 1992, of which more will be said later, Kolback was to be the venturer and KGL a guarantor of its obligations. The 3rd defendant Paul Levinson Bond (Bond) was engaged as a consultant to Hoko in relation to the project. He was appointed a director of Coomera, but was dismissed by Omura in November 1992. Judgment for damages to be assessed was obtained on 15 May 1996 against him. He has also been declared bankrupt, but leave to proceed against him was given in the Federal Court on 8 August 1997. He was out of Australia at the time of trial. Pitt and Bond were actively involved in Australia in the negotiation of commercial arrangements between Hoko and Kolback, although Omura as President of Hoko was acknowledged to have the final say in relation to Hoko’s interests. -- 11 of 209 -- 2 The 5th defendant Yuzo Nagano (Nagano) was a Japan based English speaking employee of Hoko or its subsidiaries in Japan. He was also appointed a director of Coomera and acted as a channel of communication with Omura whose English was taken to be for practical purposes non- existent. I should record that from my observations during the trial, Omura was apparently aware of some English words, but gave no indication of greater fluency than that. Omura gave evidence at the trial through an interpreter and relied on Japanese translations or explanations of English documents being prepared for him throughout the whole period of the relevant events. Nagano came under suspicion by Omura and was dismissed in July 1993. Judgment for damages to be assessed was obtained against him on 26 February 1996. The 4th defendant Landbase Holdings Limited (Landbase) is a company incorporated in Liberia and is alleged to be the means by which a secret commission was to be secured. No other details about it or the person said to be its President, Mr Choi (Choi), could be discovered. Telephone calls by a private investigator posing as an investor to the number on Landbase’s letterhead were answered by a secretarial company, the employees of which would not divulge any helpful information. Measures designed to get Choi to contact the “investor” remained unanswered. The address for Landbase on the letterhead was that of the secretarial company. Enquiries there about Bond produced no positive response. The only documents purporting to be from Landbase are photocopies. No originals have ever been discovered and the only source from which Landbase communications were received was Bond. One of the issues in the trial is the identification of who were involved in the procuring of the secret commission if one was in contemplation. Final judgment was obtained against it pursuant to an order of Thomas J on 1 July 1996. The 7th defendant PRD Realty Pty Ltd (PRD) is a real estate agent on the Gold Coast and the 8th defendant Donald Dietz (Dietz) was director of its Special Projects Division. It is alleged that -- 12 of 209 -- 3 Dietz was a party to an arrangement to have a secret commission paid to Landbase and that PRD is liable for his actions. 2. Other Witnesses Cross-Examined A number of witnesses swore affidavits and were cross-examined on them. There will be a more comprehensive analysis of their evidence in the judgment and in the attached appendix. What follows is identification of them and the principal issues to which their evidence related. Paul Stewart Hewson (Hewson) was a director of Kolback who gave evidence of his interaction with Pitt and evidence concerning the state of the company at relevant times. Terrence George Salotti (Salotti) was also a director of Kolback and gave evidence of correspondence with Pitt shortly before and after the venture was entered into. Gordon Douglas (Douglas), a director of PRD, gave evidence principally of a previous occasion upon which Bond had been paid a share of PRD’s commission at Bond’s request. William Karel Ludwig Rameau (Rameau), a subordinate of Dietz’s, gave evidence principally relating to an allegation made by Pitt that a secret commission was being paid to Bond by PRD. Mark Odgers- Jewell (Jewell), financial controller of PRD at the relevant time, gave evidence of the accounting system. Brian James Conrick (Conrick), a solicitor, and Douglas Gordon Robbie (Robbie), a consultant retained by Omura, gave evidence of visiting the site office and speaking to a member of the project team James Lawrence Forsyth (Forsyth), and each gave his recollection of the conversation. George William Asbey-Palmer (Palmer) was involved in assisting Kolback in the joint venture negotiations and in the early stages of its implementation. He gave evidence, denied by Pitt, that Pitt and he had a conversation showing that Pitt had knowledge at an early stage of an arrangement under which Bond and Nagano were sharing half of PRD’s commission. Masaaki Ikeda (Ikeda), an architect fluent in Japanese and English and resident in Sydney who was the nominee of Coomera under the venture agreement after Bond was dismissed, gave evidence of his dealings with -- 13 of 209 -- 4 Hoko and Kolback in that capacity. Graeme William Stanley Brown (Brown), the officer of Metway who was negotiating for finance with Pitt, gave evidence in connection with those negotiations. Peter Athol Wise (Wise) gave evidence concerning telephone calls made from a hotel room rented on behalf of Nagano following a meeting on 26 November 1992 to which some attention was given in the evidence without anything of significance emerging. There were also a number of expert witnesses. Since the worth of Kolback was in issue there was evidence from accountants Marian Micalizzi and David John Van Homrigh. Since the value of a land fill site in Western Sydney was relevant to the question there was evidence from valuers John Steven Howes, William Hershall McRae and Wayne Richard Retallick. One of the issues concerning the value of the land was the cost of remediation of the site to enable it to be used for industrial purposes. Several witnesses who fit the general description of environmental engineers, Anthony Colenbrander, Richard Robert Ryall, Phillip James Mulvey and Robert Henry Amaral gave evidence as to these matters. Klaus Kerzinger, an officer of the relevant local authority in New South Wales at the time at which certain remedial works were agreed on gave evidence as to the negotiations in that regard. 3. Other Evidence A number of other affidavits were tendered the deponents of which were not required for cross-examination. Most of this evidence will not require detailed elaboration. Where the affidavits contribute to the resolution of the matter their substance will be referred to in the appropriate section of the judgment or Appendix. Amongst the large mass of documentary evidence is correspondence generated during the period with which the proceedings are concerned. Most of it is between persons and corporations already mentioned. Some relevant correspondence was to and from Mr Katsu Tokita (Tokita). He is not a defendant. He is an English speaking Japanese citizen who was involved in assisting in relation to -- 14 of 209 -- 5 the project and advising Omura in relation to it. He ceased to be employed by Hoko in about February 1992 and did not give evidence. It can be mentioned conveniently at this point that both Tokita and Nagano frequently used the acronym FO in correspondence to refer to Mr Omura. It is common ground that it stands for “Fucking Omura”. In the later stages of the relevant period, a Japanese lawyer Shiro Kuniya (Kuniya) was involved on behalf of Coomera. He did not give oral evidence for health reasons. 4. Complaints about cross-examination of witnesses Complaint is made in the written submissions about the manner in which Mr Pitt on the one hand and Mr Omura on the other were cross-examined. The cross-examination did not exceed proper or acceptable limits. Indeed, given the nature of the issues raised with respect to the conduct of each, it fell noticeably short of the robustness which is seen as a matter of course in the jurisdiction in which such allegations are more commonly in issue. In any event, the mere fact that the jurisdiction in which this matter was heard is the civil jurisdiction does not mean that cross-examination cannot be robust if the occasion warrants it. No valid complaint can be made in this regard. 5. Bond’s prior acquaintanceships In 1991, Dietz had known Bond for about 10 years. For some of that time they were associated in a real estate business in which each had an interest. This business association ended about the end of 1986 but they and their respective families remained close friends. Douglas had known Bond for about 12 years, firstly as a competent competitor in the real estate industry, then as PRD’s employee in the mid-1980's and then as a developers’ representative. In 1991-2, Bond was allowed to use space in PRD’s office because of the time he was spending there in connection with Hoko’s affairs. Rameau had known him for about 20 years, firstly as a “Swipe” distributor and later as an agent engaged by Rameau to sell business premises owned by Rameau’s advertising company. He had never directly worked with him. After the initial meeting involving -- 15 of 209 -- 6 Bond and Pitt and PRD employees, Rameau was excluded, the reason being advanced that it was because of a personality clash with Bond. It is not clear when Pitt first met Bond. He thought it was after the option proposal in February 1992. He was cross-examined as to whether it was earlier, when he had inspected the land in November 1991 but had no recollection of meeting him then. It is sufficient to say that Pitt did not know Bond before Kolback became involved in negotiations in connection with the land. 6. The Issues It was common ground that the factual issues were the same in both actions as between Coomera and Kolback, KGL and Pitt. The pleadings are long and complex but in opening Mr Chesterman summarised the case for Coomera against all defendants succinctly into a number of propositions in two categories. The first category was concerned with matters which Coomera claimed resulted in the venture agreement being voidable and voided by Coomera or being liable to be set aside under the Trade Practices Act or as having been repudiated by Kolback, which repudiation was accepted by Coomera bringing the venture to an end. Under this category a number of allegations arose: 1. There was a conspiracy by Kolback, Pitt, PRD and Bond and/or Nagano and a breach of fiduciary duty to permit Bond and/or Nagano to take a secret commission through Landbase. 2. Coomera was induced to enter the venture agreement by deliberate misrepresentations or misleading or deceptive statements as to Kolback’s financial position. 3. Kolback repudiated the agreement by not providing Coomera with correspondence with Metway concerning the terms of finance. 4. Kolback repudiated it by making four misrepresentations, fraudulently or in breach of s.52 of the Trade Practices Act, to induce Coomera to agree to relieve Kolback of the -- 16 of 209 -- 7 obligation to provide an interest security provided for in the venture agreement. The four misrepresentations which, it was alleged, were made fraudulently and in breach of s.52 were the following: · that Kolback was debt-free; · the effect of cl.9.1 of the venture agreement that Kolback provide Coomera with a cash bond or other similar security sufficient to cover the interest payments for each ensuing twelve month period; · the attitude of Metway with respect to the interest security obligation; · Kolback’s intention to secure an additional $14.5 million for construction of the golf course. 5. Kolback misrepresented its financial position during the currency of the venture. 6. Kolback repudiated the agreement by failing to obtain offers of finance conforming to the requirements of the venture agreement and failed to notify Metway of the respects in which the finance offered did not accord with them. 7. Kolback made a false statement to the Australian Stock Exchange that contracts had been let for civil works on the project allegedly for the purpose of supporting Kolback’s share price, not for the purposes of the venture. It was alleged that the statement endangered the venture in that if the falsity of the statement had been detected it would adversely reflect upon Kolback in the market and consequently upon Kolback’s ability to perform the agreement. 8. Kolback repudiated the venture agreement by issuing the writ on 29 August 1994 claiming that the venture was at an end and had been terminated by it, when the 21 days within which Coomera might remedy any default had not expired. -- 17 of 209 -- 8 The second category of issues arise out of construction of the venture agreement and, it was submitted, fell to be decided if Coomera failed on the first group of issues. In other words if Coomera failed to establish that the venture agreement was voidable or liable to be set aside or had been repudiated the consequences of that fell to be decided, largely as a question of construction of the venture agreement. In this category were the following: 9. The agreement was uncertain because the golf course land had to be defined and this was never done precisely. 10. Independently of breach of the agreement Kolback had failed to obtain finance on terms conforming to the agreement and that by the time Coomera delivered its notice on 2 August 1994 it was entitled to terminate the venture by reason of that failure. 11. On its proper construction the venture agreement did not transfer any interest in the land to Kolback. Kolback’s claim to an immediate half interest in the land was therefore unsubstantiated. 12. If there was a transfer of such an interest it would be a forfeiture against which relief could be granted since Kolback was not entitled to a windfall of that proportion. 13. Kolback was estopped from asserting that it had acquired an interest in the land under the venture as a result of a variety of statements made in company documents about the nature of its interest. 14. If the venture agreement did transfer an interest in the land to Kolback it created a debt of $20 million owed by Kolback and Coomera jointly to Coomera. 7. Relief Sought Reflecting the matters set out in the preceding chapter the following relief was sought:- -- 18 of 209 -- 9 In action 1321 of 1994: 1. Against Kolback and KGL In the alternative: · a declaration that the venture agreement was avoided by the notice of 2 August 1994; · an order under s.87 of the Trade Practices Act declaring the venture agreement void ab initio; · a declaration that the venture agreement was terminated by the notice of 2 August 1994; · a declaration that the agreement was frustrated on or about 3 August 1994 by the inability to obtain finance; · an order for rescission for misrepresentation. Also sought were: · damages for breach of contract, deceit conspiracy and under s.82 and/or s.87 of the Trade Practices Act for contravention of s.52; · equitable compensation for breach of fiduciary obligations; • declarations, in the alternative, that no interest or estate in the land was acquired by Kolback upon entering into the agreement; that Kolback was estopped from asserting that it acquired any such estate or interest; that $20 million was due by Coomera and Kolback to Coomera and the debt accrued on or about 3 August 1994. -- 19 of 209 -- 10 2. As against Pitt: • damages pursuant to s.82 and/or s.87 for breach of s.52 of the Trade Practices Act on the basis that he was a person involved in the contravention of s.52 by Kolback and/or KGL; • damages for conspiracy. 3. As against PRD: · declarations that the joint venture is avoided by the notice of 2 August 1994; that cl.37 is void or unenforceable; that no commission is payable by Coomera to PRD; · an order under s.87 of the Trade Practices Act declaring the venture agreement void ab initio; · damages under s.82 and/or s.87 for contravention of s.52 of the Trade Practices Act for fraudulent misrepresentation and for conspiracy; · equitable compensation for breach of fiduciary obligations. 4. As against Dietz: · damages under s.82 and/or s.87 for contravention of s.52 of the Trade Practices Act on the basis that he is a person involved in PRD’s contravention; · damages for conspiracy. In action 1329 of 1994 Kolback and KGL as plaintiffs claim the following against Coomera: · declarations that: - Kolback’s notice of 18 August 1994 was effective to terminate the venture agreement on and from 10 September 1994; - Kolback was entitled to either purchase Coomera’s interest in the venture or appoint a receiver; -- 20 of 209 -- 11 - Kolback’s and Coomera’s respective interests in the venture and venture assets were 50%; - the venture assets included the venture land, the railway compensation moneys, the old railway land and other miscellaneous items; - Kolback and KGL were entitled to $895,430.25 of the railway compensation money; - there were liabilities of the venture of $273,933 of which Coomera was liable to pay $248,787. - damages, including damages for lost opportunity to profit. 8. Explanation of Methodology In the following chapters and the appendix events are set out in chronological sequence without any preconception that the evidence is admissible or inadmissible against individual defendants. Questions of admissibility will be dealt with separately as necessary. The chapters in the judgment contain the essential facts for an understanding of the broad sweep of what occurred. The accompanying detailed analysis of the interaction between the venturers(Appendix) is included for the purpose of demonstrating the intricacy, fluidity and complications of their relationship, giving some insight into why it was so, and to demonstrate why I have reached the conclusion that there was a significant chance that the project would not have proceeded on the terms of the venture agreement in any event. This method which necessarily involves some compression of discussion, is necessary to avoid inordinate length in the main section of the judgment. Omission of reference in the judgment to matters mentioned in the detailed analysis does not mean they have been disregarded in reaching ultimate conclusions. Some matters raised in the comprehensive written submissions may not be specifically referred to in the detailed analysis. They -- 21 of 209 -- 12 have been considered in reaching conclusions in the judgment on the issues in respect of which they have been raised. 9. History of Hoko’s connection with Coomera Land The land was purchased in November 1989 by Hoko from Triko Project Management Pty Ltd for $22,000,000 which, together with expenses, represented an outlay by Hoko of over $24,000,000. FIRB approval was given on 10 April 1990 with a condition that the project commence within 18 months. PRD was agent for the vendor. Omura had a concept under which a residential development with a resort and golf courses would be constructed. When the Japanese share market fell and there was a general downturn in economic conditions in the early 1990's Hoko suffered substantial liquidity problems. Hoko’s Australian accountants and solicitors proposed that the land be transferred from Hoko to Coomera. Omura agreed with the proposal, and the decision was made to do so. The consideration was to be $27,000,000, to be satisfied by the issue of shares to Hoko by Coomera. On 5 April 1991, Coomera was incorporated with Omura, Bond and Nagano being appointed directors. On 26 June 1991, FIRB approval was given to transfer the land from Hoko to Coomera. A contract for the transfer of the land was executed. It is common ground that notwithstanding the contract the land has not to this point been conveyed to Coomera. It was not suggested that anything turned on this for the purposes of these proceedings. 10. Dealings between Douglas and Bond in relation to fees -- 22 of 209 -- 13 Douglas was aware that Hoko had been sold the land in 1989 by the division of PRD headed by Dietz. He recalled that PRD had not received its commission because the vendor company went into liquidation before settlement. He also gave evidence that a Japanese company MACC had been paid $150,000 on the basis that it had introduced Omura to the property and acted as middleman in the transaction. In 1990 he had numerous meetings with Bond concerning the development of the land. Douglas was not convinced that it was a viable project until he undertook a trip to the United States with Omura, Tokita, Nagano and Bond in March 1990. Arising out of that trip PRD was appointed to retail the land when it was developed. A draft marketing agreement for submission to Hoko was drawn up. Omura came to Australia in May 1991 and from 13 May until his departure on 16 May 1991 he was involved in activities concerning the project. One issue at that time was the proposed resumption of land by Queensland Rail for the construction of the Brisbane-Gold Coast line and the siting of a railway station on or adjacent to the land. The morning following Omura’s return to Japan, Douglas had a breakfast meeting with Bond and Tokita during the course of which Bond said that in his role as local advisor to Coomera he would be doing a lot of the work that PRD would normally do in fulfilling its obligations under the marketing agreement. He went on to say that he was having difficulty organising a financial package for himself and that the best way for that to be rectified was for him to get part of the fee PRD was to receive. He suggested .5% of the sale price of land in the development. Douglas gave evidence that he told Bond that before there could be such an agreement he would need written acknowledgment by the vendor and that he would have to have the arrangement approved by his lawyer. Either Bond or Tokita said that that would not be a problem because Nagano had agreed. Douglas said that he believed that such an arrangement would be illegal unless the vendor was aware of it. He made an entry in his diary for 17 May 1991 immediately after the meeting to the following -- 23 of 209 -- 14 effect: “Change marketing agreement to reflect point five per cent going to Bond. Present Tokita, Bond - Nagano has agreed.” Under cross-examination he said that he was surprised when Bond said he wanted a better package. He believed it was something which concerned Bond and his employer and was not PRD’s problem but agreed to pay the fee. Although there is no written note of the event, he said that he had subsequently phoned Nagano about the proposal. He also said he had spoken to his solicitor. There is, likewise, no note supporting this evidence notwithstanding the concern he had about the legality of the transaction. Neither of these contacts was referred to in his affidavit. He explained this by saying that he had thought a lot about the matter and recalled them since he had sworn his affidavit. No written acknowledgement by Hoko or Coomera that the arrangement had approval was produced. He also accepted that no change had been made in the marketing agreement to reflect that .5% commission was to go to Bond. Douglas thought that the draft sent to Hoko may have been sent before the conversation with Bond. He also said that the issue of the marketing agreement became academic within weeks because the economic situation and, in particular, Hoko’s financial crisis meant that the proposal was not going to proceed. Because of the amount of work PRD was doing in connection with the project without any income being generated a monthly consultancy fee of $12,500 per month was provided for in the draft marketing agreement. According to Douglas’ evidence, he first became aware of Landbase at about the time when PRD entered into the consulting agreement which provided for payment of the .5% fee to that company. He was told by Bond or Tokita that Landbase would act as an interface with the developer although he agreed in cross-examination that such an arrangement was unnecessary. He said that the reason he was prepared to entertain the arrangement was that he believed Bond formed an absolutely integral link of communication between the Japanese and the consulting team. He believed, from his experience of dealing with Japanese companies, that if he -- 24 of 209 -- 15 had objected to the arrangement PRD would have lost the business. He thought that the negotiation of that agreement was conducted by Jewell and Bond. On 28 May 1991 Bond had written to Jewell advising that he had sent a copy of the consulting agreement to Choi for approval. Douglas signed the document on 30 May 1991 and the photocopy produced purports to be signed by S Choi on behalf of Landbase on 5 June 1991. No original was produced. He agreed that he had not raised the matter with Omura. He maintained, despite the absence of supporting evidence and the failure to refer to it in his affidavit, that he had communicated with Nagano on the subject. He said that while he understood the need to have a written acknowledgement from the vendor the collapse of the project meant that events overtook him before he had to pay any moneys. He said that he had asked Bond if he had any connection with Landbase and Bond said he had no connection other than dealing with it as a company able to introduce buyers of real estate from Hong Kong and other areas of Asia. On 5 August 1991 PRD sent an invoice for $36,000 for work performed pursuant to the marketing agreement. Douglas’ affidavit was to the effect that it had not been paid but in his evidence he said that he had recently discovered that it had been paid and of that sum $15,000 had been paid to Bond. On 14 August 1991 there was a meeting with Bond and Tokita at which Douglas was informed that PRD would be paid only $7,500 per month. Of that sum $2,500 per month was to be paid to Bond as a consultancy fee for work he was doing in relation to the project. Douglas did not regard this arrangement as improper because it did not involve payment of commission to Bond. In effect he was being remunerated for his work, not by way of a proportion of sales. This arrangement was confirmed the following day. In cross-examination Douglas was asked about correspondence concerning the marketing agreement which had ensued with Tokita at a time after the breakfast meeting on 17 May 1991. Despite a letter being written by Douglas on 12 June 1991 in reply to Tokita’s letter of 10 June 1991 proposing substantive alterations to the agreement from PRD’s point of view in other respects, no -- 25 of 209 -- 16 mention was made of the change in arrangements insofar as it related to payment of .5% of PRD’s commission due PRD to Landbase. Douglas did not offer any explanation for that, other than the assertion that the agreement became academic within weeks and that he was merely responding to the matters raised in Tokita’s letter. At about that time PRD was given instructions by Coomera to attempt to introduce a joint venturer and Douglas’ involvement ceased. He was not involved in negotiations leading to the joint venture. Dietz took over responsibility for the project. Douglas’ evidence had unsatisfactory features but this phase of the matter is somewhat limited in its use because there is no compelling evidence that Dietz was aware of the transactions. As it does not have a direct impact on the issues concerning formation of the joint venture it is not necessary to go into more detail than to say that. I am satisfied that Douglas was uncomfortable about the arrangement to pay a fee to Landbase based on sales on two scores. The first was that, as he said, it was coming out of his pocket. The second was that he was concerned about the character of the transaction. Given the sequence of events involving the agreements to pay moneys to Bond and Landbase, that is not surprising since it would have required a degree of naivety that I could not detect in him for him to fail to be gravely suspicious about Bond’s place in the scheme of things. However I am also satisfied that he was prepared for commercial reasons to submerge his serious misgivings and acquiesce in the transaction without probing it or, more particularly, by not doing anything that might bring it to Omura’s attention. The failure to amend the marketing agreement when the opportunity was available and the fact that there was no communication in writing to Coomera or any other part of the Hoko Group about it demonstrate this. 11. Instructions to PRD to seek joint venturer (August-October 1991) Bond gave instructions to PRD through Dietz to seek a venture partner for a fee of 5% of asset value, with half the commission to go to Landbase if the venturer was introduced through Hong Kong. Bond reconfirmed that he would receive $2,500 per month project marketing fee out of PRD’s -- 26 of 209 -- 17 $7,500. Dietz and Rameau tried unsuccessfully to find a venture partner. On 25 September 1991, they contacted Pitt but before he had time to respond, Omura decided to sell the land. Tokita proposed to Bond that PRD be sole agent, suggested that PRD seek 5% commission and referred to the “Club” being profitable through the deal. Dietz was given a copy of this letter. 12. PRD’s activities after Omura’s decision to sell (October 1991-July 1992) Dietz thereupon proposed 5% commission, which Omura amended to 3%. When Bond told Dietz and Rameau that PRD would be in conjunction with Landbase and get 1.5% they objected fruitlessly. Originally the Sole Agency Agreement covered only a sale but at some unidentified time, probably when a joint venture seemed likely, it was amended accordingly by Bond. On 3 December 1991, Pitt discussed and inspected the property with Dietz and Rameau and on 10 December 1991 a letter was written about various possible prospects, including Kolback and Landbase and referring to interest by Landbase on behalf of a Hong Kong client. In February 1992 Pitt proposed a series of options. Dietz suggested that this was a “try-on” and it was rejected by Omura. (Coomera submits that these events were in furtherance of a conspiracy) A discussion then followed of a joint venture based on Coomera contributing the land and Kolback the cost of development, with equal sharing of net profits after recoupment of the value of the land and development costs. The proposal appeared acceptable in concept. However, Coomera sought a firm commitment for the golf course to be built. On 26 March 1992, heads of agreement were signed. Drafting of the agreement proceeded and Pitt sounded out Metway about funding. Omura began to be concerned that the project might not be completed if Kolback was unable to provide the necessary funds and about mortgaging the land at the outset. On 22 June 1992, Pitt wrote a letter allegedly designed to assure Omura of Kolback’s capacity to perform an agreement of the kind proposed. Notwithstanding inquiries made about Kolback’s profile, Omura remained concerned about ensuring that funds were definitely in place. On 7 July 1992, Pitt wrote another letter -- 27 of 209 -- 18 explaining Kolback’s objectives and allegedly attempting to allay his concerns. Two days later, the venture agreement was signed. 13. Other offers prior to execution of venture agreement A letter of 28 January 1992 from Bond to Dietz refers to a meeting between Rameau and a developer named Fitzgerald who offered $11,000,000 over 4 years for the land. That offer was rejected with an intimation that Omura might negotiate at, say, $18,000,000. The letter dated 21 February 1992 from Dietz to Bond in which confidence is expressed that Pitt will make an offer also refers to a meeting between Dietz and representatives of Villaworld. The letter records that an offer in the vicinity of $5,000,000 was suggested which Dietz told them was nowhere near what was being asked and was totally unacceptable. Bond confirmed on 24 February 1992 Coomera’s unwillingness to pursue negotiations with Villaworld. There is also evidence that in discussions with an officer of the Department of Housing a verbal offer of $11,000,000 by means of a term contract was made. This offer was never committed to writing because when it was mentioned to Bond verbally he was unenthusiastic about an offer of that amount. Advice that such an offer had been made was never sent in writing to Coomera or Hoko. This was rationalised on the basis that it was far below what Omura was seeking and for cultural reasons his sensitivities had to be protected. Rameau thought that the offer was made in the second half of 1991. If that is correct it was apparently still considered a possibility on 19 June 1992 as it was one of the alternative strategies referred to at a meeting between Bond, Lazarides, Pitt and Dietz on 19 June 1992. 14. The venture agreement The venture agreement and the project management agreement were executed on 9 July 1992 by Pitt and Bond on behalf of their respective companies. It is convenient to summarise some of the provisions of the venture agreement to demonstrate how it was intended to operate. -- 28 of 209 -- 19 (a) Constitution of venture and interest of the venturers. By cl. 2 Coomera and Kolback agreed to become venturers. In consideration of Kolback performing its obligations Coomera agreed to pay 50% of the profits of the venture in a manner governed by cl.21 which sets out an order of application of sales proceeds as follows:- (i) Payment of Coomera’s pro-rated land entitlement; (ii) Repayment of principal borrowed; (iii) Payment of project costs outstanding at the date of settlement of a sale or disposal; (iv) Distribution of the surplus between the venturers according to the interest in the venture of each venturer. Each venturer was to have a 50% interest in the assets of the venture (schedule, item 3). The venture assets were described as land, benefit of approval, plans, finance procured, benefit of contracts, cash belonging to the joint venture, the benefit of work done for the venture, proceeds of insurance and rights of purchasers of land in respect of the golf course land. (b) Management Committee The management committee was to consist of one representative of each venturer and had authority to act for and commit the venture. The actions of a nominee were binding on the party appointing the nominee. (c) Dealings with the land (cl.5) The venturers were to arrange for Coomera to be registered as proprietor. However Coomera was not a trustee for the venturers. Kolback was not to caveat in respect of the land. The land was to be mortgaged or charged only in accordance with cl.9. The -- 29 of 209 -- 20 title deeds were to be held in escrow by Feez Ruthning to be used only to register a mortgage for venture finance or other dealing and sub-division and the issue of separate titles for the golf course land. (d) Kolback’s obligations with regard to finance (cl.9) Kolback’s obligation was to procure all venture finance as and when required by the business plan. It was required to be on commercial terms acceptable to the venturer subject to the following requirements:- (i) The venture financier must agree to Coomera receiving its pro-rated share of the proceeds of the sales of land; (ii) Such entitlement was to be documented and secured in a manner satisfactory to Coomera. (iii) Interest was not to be capitalised against any security over the land; (iv) Coomera was not to be liable to the venture financier or otherwise for interest; (v) Kolback would not be in default if finance was procured on normal commercial terms and conditions then currently available in the market place, even if such finance was not acceptable to a venturer; (vi) Coomera and Kolback would be joint borrowers and jointly and severally liable for venture borrowings. As between venturers liability was in proportion to their interests in the joint venture. Coomera was obliged only to give a mortgage to secure moneys advanced for the project. If finance was not procured within 3 months of the adoption of the business plan or 9 months of the venture agreement, whichever was the earlier venturer was entitled to terminate by written notice. Kolback was obliged to procure KGL to guarantee -- 30 of 209 -- 21 repayment of borrowings, interest and expenses of borrowings and by executing the venture agreement KGL agreed to give such guarantee. Kolback was obliged to pay interest and other expenses on all venture borrowings up to $20,000,000. It was obliged to pay such sums as they fell due from its own funds. Coomera had no liability for venture borrowing costs but for borrowing costs for borrowings between $12,000,000 and $20,000,000 Coomera might secure or pay them and deduct them from Kolback’s entitlements. Any borrowing costs over $20,000,000 were to be a venture expense. No venture expenditure was authorised except in accordance with annual or 6 month budgets or as otherwise agreed having regard to the business plan. (e) Relationship between the parties By cl.12, the venturers covenanted to co-operate in the venture business and to use best endeavours to ensure its success. By cl.13 they acknowledged that the relationship was of a fiduciary nature. By cl.24 the venturers covenanted to be just and faithful in all transactions relating to the venture and to inform the other venturer of things concerning the venture. (f) Events of default and consequences. By cl.18 the following were events of default:- (i) Failure to perform the agreement, such failure not being remedied within a reasonable time. There was provision for a notice specifying the breach and requiring the party in default to remedy it. There was then an obligation to remedy within 21 days. (ii) Winding-up of venturer. (iii) Appointment of receiver and manager to the venturer. -- 31 of 209 -- 22 (iv) Occurrence of a ground which would be a ground for dissolution if the joint venture were a partnership; and (v) Breach by Kolback of the project management agreement. A non-defaulting venturer could give 21 days notice within 28 days of knowledge of the breach of intention to terminate. The termination was effective if the breach was not remedied, or the parties agreed otherwise. (g) Golf course land By cl.32, The golf course land was not an asset of the venture and Kolback was declared to have no right to it. Coomera expressed its intention to develop the golf course from its pro-rated entitlement, funds obtained by Kolback by using its best endeavours to secure $2,000,000 for the purpose and its own borrowings. Coomera agreed to consult Kolback and to consider its recommendations including those as to timing, to maximise the beneficial effect of the golf course on the project. Coomera stated its intention to finally resolve the planning, layout and timing of the golf course before construction or development of the land commenced but that did not commit Coomera to undertake the development. Kolback was obliged to use its best endeavours to secure $2,000,000 to be used by Coomera to develop the golf course. Acceptance of the loan was at Coomera’s discretion. The security for the loan would be a first registered charge over the golf course land and Coomera’s interest in the venture. Interest on this sum was to be a venture expense and the $2,000,000 was to repaid out of Coomera’s pro rated entitlement. (h) Commission The venturers acknowledged that PRD in conjunction with Landbase was the effective cause of their introduction to one another. That was at best a fiction. It is also to be -- 32 of 209 -- 23 noted that a Japanese translation prepared by Nagano for Omura omitted any reference to Landbase. The commission was to be a joint fee to PRD and Landbase, of 3% of $20,000,000. It was to be a venture expense. It was agreed to pay the sum in three equal instalments each of $200,000 the first of which was to be paid within 30 days of the execution by the venturers of the joint venture agreement or approval under the Foreign Acquisitions and Takeovers Act, whichever was the later and the second and third instalments at such times and in such manner as the venturers might agree with the agents. This is by no means a comprehensive summary of all the provisions of the venture agreement. However it deals with matters relevant to the issues arising at this stage of events. 15. Events concerning liability for commission -- 33 of 209 -- 24 On 7 July 1992, Salotti had made known his reservations about the lack of precision as to when commission had to be paid. It is apparent from the tenor of Salotti’s letter that he had had previous discussions with Pitt about some aspects of the venture. On the same day an agreement was reached between Dietz, Pitt and Bond that the two subsequent payments would fall on the first and second anniversaries of the first payment. Pitt maintained that the timing of the agreement was purely coincidental. He suggested that the fax from Salotti had been received after close of business on that day. That is not borne out by the fax markings which show that it was sent at 13.25, presumably Perth time, since that was where Salotti was based. When questioned about whether any thought had been given to Landbase’s interest in deferment of the second and third payments for 12 months and 2 years respectively he said that he was only concerned about the commission due to PRD. With apparent reference to Salotti’s fax of 7 July 1992 Pitt wrote to him on 13 July 1992 advising that he had been unable to negotiate any improvement in the position about making the payment of commission subject to finance. Furthermore he did not tell Salotti that an agreement had been made to pay in three instalments covering a 2 year period. What he said was that “we have confirmed with Coomera Resort that the 2 subsequent commission payments will only be paid when the venture is “comfortably” able to do so.” Another aspect of this letter received attention in connection with a demand made by PRD for payment of the first instalment which had remained unpaid. Pitt gave evidence that he became extremely angry when the letter of demand was received. He agreed that the agreement provided for the first payment of $200,000 to be made 30 days after execution of the agreement or after FIRB approval. However he maintained that it was understood in the negotiations that the deferment for 30 days was to allow finance to be obtained in the expectation that approval would have been given by them. He maintained that PRD had a moral obligation if not a legal one not to claim commission until the finance had been obtained. The letter of 13 July 1992 to the extent that it would have been read by Mr Salotti as saying that an attempt had -- 34 of 209 -- 25 been made to have the payment of commission deferred until finance had been approved was not frank. If one accepts Pitt’s version of events he had in fact negotiated what he believed was a deferment until finance had been obtained but it had not been included in the agreement in those terms. 16. Initial Funding (August-October 1992) On 5 August 1992, Metway approved an advance of $800,000 for a feasibility study and $100,000 for interest. The offer was accepted by the nominees at a meeting on 25 August 1992, the legitimacy of which as an MCM was subsequently disputed by Omura. After the Metway documentation was sent, Omura said that he accepted that the land must be mortgaged for the second stage of funding but that he had not been advised of the need to do so for the first stage. After that discussions ensued inconclusively for the next few weeks with a view to having Kolback’s interest protected. 17. Proposals to Fund Golf Course (October 1992-June 1993) The issues dominating this period, which was characterised by increasingly acrimonious correspondence, were the following: • Omura’s desire to build the golf course earlier than would otherwise be possible; • Discussion of possible means of doing so, including variations of the venture agreement which would be required; • Complaints that Omura kept changing his position; • Whether there had been a decision at the meeting on 27 November 1992 that finalised the definition of the golf course, with Pitt asserting it had and Omura asserting that it had not, because further advice had to be obtained from the architect; • Pitt’s concern that Omura’s failure to settle golf course issues was delaying the project; • Pitt’s belief that the business plan could be delayed no longer; • Pitt’s insistence that Kolback was not instigating changes to the venture agreement, but only seeking them to accommodate Omura’s proposals; • Omura’s complaint that there should be an independent third party as project manager, with the implication, resented by Pitt, that there was a conflict of interest inherent in the existing arrangement under the venture agreement whereby Kolback was project manager. -- 35 of 209 -- 26 • Omura’s suggestion that the venture engage in building condominiums initially dismissed by Pitt but later discussed on the basis that it might be entertained if profitability could be demonstrated, or that Coomera could do it on its own without objection; • Non-payment by Hoko of its share of expenses; • Complaints by Omura about not being informed about approaches to financiers, and Pitt’s reply. The final letter was a request by Pitt for written confirmation that, notwithstanding the continuing existence of the venture agreement, Kolback should proceed to seek finance to allow early construction of the golf course. 18. “Decision” to Proceed under Original Agreement (June-August 1993) On 27 June 1993, a decision was taken to revert to the original venture agreement. Soon after, Pitt went to Metway for a $12,000,000 facility. Omura confirmed the decision. Pitt reminded Coomera of its obligations to mortgage the non-golf course land. Coomera’s response was that it would do so only if the whole $12,000,000 was paid to the venture account. Pitt maintained that this was contrary to and in breach of the agreement. On 16 August 1993 the possibility of Landbase being involved in a secret commission was discussed by Ikeda with Coomera’s solicitor. 19. Further Proposal to Fund Golf Course through Metway (August 1993-February 1994) Notwithstanding the previous decision to proceed under the agreement and perhaps as a result of Omura’s attitude to mortgaging the land, during this period possibilities for funding early construction of the golf course were explored by Pitt and Metway, and conveyed to Omura. The sticking point was that not all funding thought necessary by Omura would be firmly in place. At one point, Metway was unwilling to fund except as a staged project. However, after representations by Pitt, a letter of offer for $12,000,000 with 10.1 million to be drawn was issued. Kolback was prepared to accept the offer, but it contained requirements unacceptable to Omura, which Pitt had foreshadowed in his early correspondence with Metway. -- 36 of 209 -- 27 During this period, Omura requested detailed information about approaches to financial institutions but was not given it in terms which fitted that description. Omura was also concerned over what he perceived to be the lack of equality in the project. His concept of “fair burden spirit” principally involved the notion that Coomera was not receiving a fair return from the project because of its pre-venture costs and that the “cash flow” (the arrangements governing returns from the project) must be adjusted in Coomera’s favour. The correspondence throughout this period shows a rising level of abruptness again. 20. Other Proposals - Interest Subsidy (February-March 1994) Pitt then set about finding other ways of having the golf course built, including an interest subsidy to Coomera. Robbie was appointed to advise Coomera. 21. Concurrent Discussions about Metway Funding (March-April 1994) Omura responded on 23 March 1994 to Metway’s offer of 19 January 1994 by saying that several points, especially the veto power, were unacceptable. Pitt tried to persuade him that the terms were reasonable for a project of this kind. On 8 April 1994, Metway made a new offer, which Pitt again urged should be accepted. Omura was concerned that the golf course and residential projects were dealt with in the one security. He also complained again that Coomera’s burden was unequal. He set out his terms for an approach to Metway and proposed that the agreement be terminated on 10 May 1994 if finance had not been obtained. Pitt remonstrated that Coomera had requested the inclusion of the golf course in the application and that its tardiness in replying and changes of position had led to delay for which Kolback was not responsible. He rejected 10 May 1994 as the termination date, saying Kolback would require a reasonable time to approach other financiers. In the end, he agreed to go back to Metway on the basis of Coomera’s requirements while pointing out the risk that Metway might not give ground. -- 37 of 209 -- 28 22. Separation of Golf Course and the Venture Development (April 1994) Pitt sought confirmation that Kolback should cease seeking to assist in connection with the golf course. Omura replied that the venture agreement contemplated that the venture and the golf course funding were separate, and advanced arguments why the offer did not comply with the agreement and that a cashflow prepared on 13 April 1994 demonstrated unequal burdens on the parties. Pitt asked Metway to delete golf course funding. Omura confirmed that the golf course should be deleted and set out Coomera’s requirements, saying that he was prepared to enter into the funding agreement subject to their being met. Later, Omura wrote to Pitt about “fair burden spirit”, saying that the “cash flow” relating to it should be decided before Metway’s offer was accepted. Pitt replied that Kolback was not obliged to assist Coomera in that regard but was attempting to provide something as a goodwill gesture. A funding request based on $7.7 million cost for stage 1 and $2 million bond was sent to Metway by Pitt. 23. Complaints about Form and Implementation of Agreement (May-July 1994) Pitt complained about the deterioration in the relationship between the venturers since Robbie had been involved and pointed out that it was difficult to predict whose benefit would ultimately be greater. After being told that the agreement did not reflect Omura’s objectives accurately, Pitt said that Kolback was prepared to consider concessions within the constraints on directors of public companies. The use of the railway compensation moneys to pay creditors pending resolution of the dispute as to their ownership was proposed. Omura’s principal concerns over the agreement were articulated as: • expectation of equal burden and profit share by Coomera introducing the land and Kolback introducing an equal amount of equity or borrowings; • emphasis on return of development capital and interest rather than acquisition capital; • lack of provision for recovery of interest on acquisition costs; • inability to use title deeds for other purposes. -- 38 of 209 -- 29 There were also complaints about the quality of the relationship from Coomera’s perspective, later refuted by Kolback’s solicitors. On 14 June 1994, Metway’s revised offer, to be open for 30 days, was made. Kolback’s solicitors replied to the suggestion that the agreement did not meet Coomera’s objectives by saying that the agreement superseded the parties’ individual requirements and that Kolback had acted in good faith towards implementing it. They explained their view of its effect and denied that holding costs or railway compensation had been raised at appropriate times. There was a binding agreement, which Omura wished to renegotiate. Kolback was not obliged to do so but was prepared to offer concessions. Pitt then offered, subject to Coomera accepting Metway’s offer, to pay $523,000 of the railway compensation money and 40% of “special sales” to Coomera. Alternatively, if the value of the land was reduced to $12,000,000 Kolback would share the borrowing and holding costs. This was rejected by Coomera. Pitt said that the latest Metway offer complied with the venture agreement, and attempted to convince Kuniya of the beneficial effect of the interest subsidy proposal. He also wrote to Omura expressing discontent over Omura’s attitude, but agreeing reluctantly to submit Omura’s current requirements to Metway. Omura replied that he wanted Metway’s response to his comments by 27 July 1994. In his letter of 27 July 1994 to Metway, Pitt conceded that capitalisation of interest did not conform to the agreement. 24. “Termination” and subsequent events (August 1994) On 2 August 1994 notice of termination by Coomera was delivered to Kolback. On the same day Omura wrote to Hewson saying that the venture assets vested in Coomera, requesting a handover of the intellectual property associated with the agreement and claiming a $1.9 million adjustment in favour of Coomera. On 3 August 1994, Metway’s solicitor wrote to Coomera’s solicitors advising the result of consideration of proposed amendments. With respect to compounding of interest the letter contains the following paragraph:- -- 39 of 209 -- 30 “Whether or not Metway accepts to limit the liability of Coomera to that of the principal sum only and not seek recourse to Coomera and any of its assets in relation to interest is a commercial matter and the decision rests with Metway. Should Metway accept that Coomera’s obligation is limited to the repayment of principal and costs etc. but not be liable for any interest under the facility the compounding of interest can be accommodated in a separate document between Metway and Kolback.” An amendment restricting the power to control variation and determination of the agreement to material variations or defaults was proposed. With respect to distribution of the proceeds it was said that Metway’s concern was not that the proceeds be distributed in accordance with the provisions of the joint venture agreement but that the proceeds be distributed to ensure that certain payments were made to Metway in the distribution of those proceeds. A mechanism to ensure that Metway received a certain pre-determined amount from the proceeds of sale of each developed lot would suffice. The requirement for a fixed and floating charge was insisted on. On 18 August 1994 Kolback denied that there was a right to terminate, said that the purported termination was a default under cl.18.1 and gave notice of intention to terminate the venture agreement. On the same day Pitt wrote to Omura requesting inter alia, an explanation of the view that railway compensation was not a venture asset and stating that in view of the termination of the agreement the golf course land must be sub-divided off. On 24 August 1994, Coomera’s solicitors demanded the memorandum of transfer by Hoko in favour of Coomera from Feez Ruthning. The same day Feez Ruthning refused to do so saying that in view of the competing claims between the venturers, it was not prepared to expose itself to action by handing over the document without the consent of both parties. On hearing of Coomera’s solicitor’s demand, Kolback’s solicitors wrote on 25 August 1994 remonstrating and asking for undertakings designed to preserve the status quo, to be given by 4.30 p.m. on 26 August 1994. The letter concluded:- -- 40 of 209 -- 31 “Should the undertakings we have requested not be forthcoming by that time, our clients will have no alternative but to infer that their rights are seriously at risk by reason of the possibility of unilateral action by your clients.” On 26 August 1994 Coomera’s solicitors wrote justifying their demand and stating that they did not expect to have the client’s instructions by the deadline but expected to have them in the course of the following week. Advice as to the capacity of Kolback to give a meaningful undertaking as to damages was sought. The reply, sent the same day included, amongst other things, an extension of time for the undertakings to 1.30 p.m. that day. Coomera’s solicitors replied the same day without advancing the matter any further. This produced a letter from Kolback’s solicitors to the effect that in view of the urgency of the matters the position adopted by Coomera was unacceptable. Accordingly the writ and notice of motion and an affidavit in support of it were taken out on the same day. It was advised that the matter had been set down for the following day seeking interim relief. If undertakings were provided on an interim basis the hearing would not proceed. On 30 August 1994 Coomera’s solicitors advised that they had spoken to Kuniya and offered undertakings. This gives some insight into the circumstances in which the writ was issued before the expiration of 21 days. The chapters following commence with an indication of factors bearing on credibility of the two main witnesses. They are general comments, and should be read subject to the conclusions on individual issues where independent factors have a bearing. Next, there are observations as to whether Coomera’s notice of termination was effective on the basis that there was an event of default by Kolback. Then, Coomera’s claims in 1321 of 1994 are dealt with and Kolback’s claims in 1329 of 1994 follow that. -- 41 of 209 -- 32 25. Credibility - Omura Omura’s evidence was given through an interpreter with the inherent difficulty in assessing credibility according to ordinary methods. The cross-examination proceeded under difficulties. It was necessary to cross-examine extensively, on documents, a witness who was inclined on occasions to take issue with the form and meaning of questions and to apparently dispute what was, subject to the possibility of difficulties in translation, obvious. On some occasions, the questions were more complex than was helpful in a case where translation was necessary. The last comment is not intended as a criticism of counsel. The questions were not deliberately framed in that form and ordinarily would not have created difficulties. It is simply a statement that it was a further complication in assessing Omura’s credibility. The issue of how credible his evidence was is clouded by these matters and by the fact that for part of the relevant period Bond and Nagano, upon whom he relied for his information about the project were beyond any real doubt engaged in a concerted deception of him to further their own interests. I am satisfied that Omura was an experienced business man who was autocratic in running his business. The safest way to approach his evidence is by considering it in the context of the documentary evidence and other acceptable evidence and drawing conclusions in the ordinary way from the whole of the evidence, including the perception that at times, even allowing for difficulties previously adverted to, there were occasions when his evidence was evasive rather than straight forward and the general background fact that during the period the joint venture agreement was being sought Hoko had been in a fairly desperate financial situation. -- 42 of 209 -- 33 26. Credibility - Pitt Pitt presented as an intelligent and experienced businessman. I am satisfied that the evidence supports the view that, at times, he was excessively self-confident and optimistic that he could solve the significant difficulties that Kolback was in during the period when the venture agreement was being negotiated. There is evidence that he did not fully reveal relevant matters to his directors and to Hoko/Coomera. I am satisfied that in at least some parts of his evidence he was less than frank. It was submitted that the “numerous occasions” when he said he could not give an explanation of facts which were not easily reconcilable with Kolback’s case were an indication of his honesty. While it is true that he did not positively advance reasons for the apparent incongruities I do not accept that it necessarily implies complete honesty of his evidence. I am satisfied that in an attempt to promote Kolback’s interests he was prepared during relevant transactions and in his evidence to disregard objective signs of the difficulties faced by Kolback and on some occasions to positively conceal or distort the truth. His general presentation is inconsistent with any other conclusion. His literacy and fluency made it unlikely that he used certain expressions in correspondence in the imprecise and inaccurate way he now ascribes to them to give them a less damaging effect. 27. Events of Default by Kolback? An event of default (cl.18.1(a)) consists of the following elements: • Failure to observe or perform a binding obligation or to comply with any other provision of the agreement; • (In a case where the breach is capable of remedy) one of the following: (i) Failure to remedy within a reasonable time; or (ii) Failure to remedy within 21 days of written notice to remedy. An event of default in cl.18.1(d) is the doing of any act which would in the case of a partnership allow for dissolution. -- 43 of 209 -- 34 The non-defaulting venturer’s right, in a case where the right has not been waived, is subject to the following: • it must be exercised within 28 days of knowledge of the occurrence of the event of default; • 21 days written notice of intention to terminate the agreement is required; • The agreement is terminated on expiration of the notice unless the default is remedied within the period of the notice or the parties otherwise agree. There are two steps involved where the notice procedure is used. The first is to give notice to remedy. Failure to remedy is an event of default. Then, the non-defaulter may, within 28 days, give notice of intention to terminate, effective 21 days later. Kolback did not commit an act of default under cl.18.1(a). One of the methods, giving notice to remedy which was not complied with within 21 days, was not utilized. Even allowing that formality is not always necessary for a notice to be effectual, nothing constituting a notice in accordance with cl.18.1 was given by Coomera. In particular the letter of 12 April 1994 is expressed in terms of seeking agreement to termination if finance was not obtained by 10 May 1994, not in terms of an intention to end the agreement unilaterally if Kolback did not obtain finance by then. There is no event of default by reason of non-compliance with a notice to remedy. Insofar as the other method under cl.18.1(a) is concerned it is difficult to conclude, having regard to the diversions from the original concept with Coomera’s encouragement and, to a degree, pressure, that the mere fact that finance was not obtained in accordance with the venture agreement by the time when Coomera purported to terminate was a failure to remedy a default within a reasonable time. More directly, however, if there had been an event of default which had not been waived, the process of giving 21 days notice of intention to terminate was not given. The purported notice to terminate is peremptory and immediate in effect at the end of the period specified. Coomera did not validly terminate the venture agreement in accordance with the procedure specified in cl.18.1. -- 44 of 209 -- 35 28. Conspiracy as Pleaded The conspiracy alleged against all defendants is that prior to the execution of the venture agreement there was a conspiracy between one, some or all of Kolback, KGL, Pitt, PRD and Dietz with Bond and/or Nagano to permit Bond and/or Nagano to use Landbase as a means of obtaining a secret commission from Coomera in respect of its entering into the venture agreement. As against Kolback and KGL, the conspiracy is alleged to be evidenced by the following overt acts, although not all of them are strictly of that description: (a) They were aware that Coomera was a subsidiary of Hoko and that the decision making power concerning Coomera’s affairs vested in Omura; whose lack of English made him dependent on Bond and Nagano; that Bond and Nagano represented Coomera and took instructions from Omura; that Landbase was not involved in the introduction of Kolback and KGL to Coomera; that Landbase was an entity adopted by Bond and/or Nagano to derive a secret commission from Coomera; and that commission of 3 per cent was excessive. (b) They acted in breach of fiduciary duty to Coomera by failing to disclose that Bond/Nagano were to receive half the commission in the guise of Landbase; that 3 per cent commission was agreed to by Bond because of his personal interest in receiving commission; that advice about the terms of and entry into the joint venture were being given in circumstances where personal interests were in conflict with duty. As against Pitt the conspiracy particularised was that he was an officer of Kolback and KGL principally involved in negotiating the venture agreement and that he executed it knowing the matters in (a) above:- In respect of PRD and Dietz the same conspiracy is alleged. The overt acts are: (a) PRD wrote the letter of 10 December 1991 containing information about Landbase. It was aware that Coomera was a subsidiary of Hoko; that the decision making power -- 45 of 209 -- 36 vested in Omura; that Bond was a director of Coomera until 20 November 1992; that Coomera entered into the venture agreement on the advice of Bond and Nagano; that Landbase was a Liberian company adopted by Bond and/or Nagano as a means of obtaining a secret commission. (b) Bond and/or Nagano acted in breach of fiduciary duty by arranging the secret commission without disclosing it to Coomera; by failing to disclose to Coomera that advice and recommendations were given where there was a conflict of personal interest with duty; by failing to advise Coomera that 3 per cent commission was excessive; by giving instructions to solicitors to insert cl.37 in the venture agreement; and by failing to advise Coomera of the conflict of interest during the life of the venture agreement. (c) PRD acted in breach of fiduciary duty and its duties to act in good faith without concealment or any form of deception or misleading representation as required by the Code of Professional Conduct under the Auctioneers and Agents Act; by failing to disclose the matters in (b); by engaging in correspondence to facilitate the obtaining of a secret commission by Landbase (alone or with others) while knowing the matters in (a) and (b); by agreeing to accept commission in cl.37 in breach of fiduciary duty and the duty under the Code of Professional Conduct. (d) The passage in the letter of 10 December 1991 about Landbase and the offer were false, misleading, deceptive or likely to be false, misleading or deceptive because PRD did not believe it to be true or wrote it recklessly and in breach of the Trade Practices Act. As regards Dietz, the overt acts are that he was aware that Landbase was not a Hong Kong based company, that it did not act for high profile clients, that it had not been presented to the Coomera land by PRD and that it was an entity used by Bond and/or Nagano to obtain a secret -- 46 of 209 -- 37 commission. PRD and/or Dietz acted fraudulently knowing that the letter of 10 December 1991 was false, or acted recklessly in sending it. 29. Conspiracy - Kolback, KGL and Pitt The allegation is that at a time before the venture agreement was entered into, Kolback, KGL and Pitt conspired with Bond and/or Nagano to permit them to use Landbase to obtain a secret commission. The conspiracy must therefore be proved prior to 9th July 1992. Whatever happened after the execution of the venture agreement is relevant only to the extent that it sheds light on whether they were involved in a conspiracy before that date. Pitt was Managing Director of Kolback and KGL and had responsibility for negotiating the venture agreement. It was not suggested that, if he was a party to payment of a secret commission, Kolback and KGL were not liable for its consequences. The evidence in support of the conspiracy is said to be found in four areas. Firstly, there is evidence from Palmer that he had mentioned the level of commission to Pitt who told him that there was a “trick” and that Nagano and Bond were getting half of it. Secondly, there was evidence from Robbie that in the period 10th-13th May 1994 Pitt had told him that Bond had said that the venture agreement would not be signed if Landbase was not included. Thirdly, a body of evidence relates to events prior to the signing of the venture agreement. This evidence is said to support the inference that Bond, Dietz and Pitt orchestrated a series of events and correspondence designed to manoeuvre Coomera into signing the agreement and agreed to Landbase taking a share of the commission. The fourth relates to events after the signing of the joint venture agreement. The major focus is events in October and November 1992 when payment of commission and Landbase’s identity became the focus of attention. Palmer was extremely disappointed that his employment had not been continued after he suffered a cerebral episode at work in September 1992 from which he believed he had sufficiently recovered to recommence by January 1993. His evidence was not definite whether the “trick” was -- 47 of 209 -- 38 mentioned on one or more occasions, nor as to the dates, although he said that one occurred in the period between meetings in May 1992 and the discussion of drafts of the agreement. He maintained that Pitt had used the words sworn to by him but he was prepared to concede that it was possible that Pitt had observed that the commission was a bit high and that he was suspicious that Bond and Nagano might be sharing in it, although he said it was not what he recalled. On further questioning he replied, to a similar question, that he did not believe that that was what was said or anything along those lines. He said that what was said was along the lines of what he had said in evidence. However, he was prepared to concede that the meaning could be exactly what Counsel was suggesting but his affidavits contained what was said. I am not persuaded that I should act upon this evidence as establishing to the required degree that Pitt admitted that he was a party to a conspiracy to permit Bond and Nagano, through Landbase, to obtain half PRD’s commission. The second piece of direct evidence relied on is from Robbie to the effect that in discussions held between the 10th and 13th May 1994, Pitt told him that Bond had said that the agreement would not be executed without Clause 37 being included and a commission paid to Landbase. There is no reason to doubt, since there is reference to it in an extensive written summary of a meeting, that that was said to Robbie and no reason to doubt that such a statement was made by Bond at some time during the course of negotiations. I do not consider that it is an unequivocal admission on the part of Pitt that Pitt was involved in an illicit transaction. In view of the findings about Palmer’s and Robbie’s evidence, the case that there was a conspiracy is circumstantial. Three matters preceding the execution of the venture agreement were relied on by Coomera. One was the lack of curiosity on the part of Pitt as to who was behind Landbase when it was introduced into the agreement. He said that he made a casual inquiry and was told by Dietz that it was a Hong Kong agent. He assumed thereafter that there was an agreement between Coomera and Landbase. It was submitted that this lack of curiosity was explicable only on -- 48 of 209 -- 39 the basis that Pitt knew precisely who was involved in Landbase. Reliance was also placed on Pitt’s evidence that he had attempted to lower the commission. It was submitted that this indicated that Pitt thought that the commission was too high. The submission was put in the context that Pitt had failed to raise this with Omura prior to the agreement being signed and was explicable only on the basis of reluctance on his part to expose the secret commission. As in any case of circumstantial evidence these submissions will be taken into consideration in deciding whether the ultimate inference is to be drawn. The third matter was Salotti’s letter of 7 July 1992 in which he raised the indefiniteness of timing of the second and third payments of commission. He said that the resolution of the issue of timing could be difficult if there was no agreement. The next comment, that he was mindful of the presence of Bond as one of the two venturers’ nominees, was relied on as showing that Salotti must have had a reason to think that Bond may act in a way that was contrary to the venturers’ interests in relation to payment of those installments. The reason suggested was that Salotti was aware that Bond had an interest in the timing of payment of the commission. Salotti’s explanation why he thought Bond might act in a way which caused difficulty was that Bond, so far as he was aware, was a real estate agent or land broker and was a freelance operator not tied to Coomera. His concern was that a person with that degree of independence could disturb the relationship between the venturers. Surprisingly, he maintained that at no time was he aware that Bond was a director of Coomera. If Bond’s background was the point of concern, it is odd that Salotti did not inquire in more detail about it. The alternative is that when he acquired the information about Bond’s background he was not specifically told that he was a director. One other aspect of the letter was that despite Salotti’s having made comments earlier in the letter about the clauses relating to venture nominees, the comments about Bond’s suitability are in the paragraph relating to the commission. He explained this on the basis that he considered that that was the first occasion when a disagreement caused by Bond’s -- 49 of 209 -- 40 intervention would occur. Pitt apparently placed no particular significance on the remark, according to his evidence. However, barring a remarkable coincidence Pitt participated in a discussion on the same day which resulted in Salotti’s immediate concern about timing being removed. One possible view of the letter is that, in isolation, its context strongly suggests that Salotti must have had some reason to believe that Bond may not have complete loyalty to the venturers or at least divided loyalties. Although Salotti surprisingly professed not to know it, Bond was a director of Coomera. The suggestion from Salotti that Bond’s background did not fit his idea of qualities a nominee should have is troubling. To say this is not to suggest that if there were some untoward deal involving Bond, Salotti necessarily knew precisely what it was. He would have been aware of Landbase’s inclusion in the agreement. Having regard to the generally cautious approach displayed by Salotti in his role as a director, that would have been sufficient to cause him to write the passage if he had been told something suggesting that Bond may be connected with Landbase. Such information is unlikely to have come from anyone but Pitt. Even if it had been put no higher than that Bond had insisted on Landbase being included, it is at odds with Pitt’s and Salotti’s evidence. The evidence just referred to has to be taken into account with the rest of the evidence in deciding whether the inference that Pitt was involved in a conspiracy from the outset is to be drawn. It is, of course, necessary to keep in mind that knowledge of a conspiracy gained after the execution of the joint venture or mere suspicion on Pitt’s part at any time that there might be one, is not sufficient to establish the conspiracy pleaded. Two events occurred in October and November 1992. Some important facts are in dispute but two documented incidents are PRD’s demands for payment of commission and the responses and discussion about Landbase at MCM on 27 November 1992. On 12 October 1992 Jewell had written a letter to Bond seeking payment from Coomera of the first instalment of commission. Pitt thought he might have received a similar letter but, in any event, was given a copy by Bond. On 19 October 1992 he replied to it in terms which, it was submitted, showed -- 50 of 209 -- 41 that Pitt had participated in negotiations to which Omura was not a party. It was submitted that the inferences that these negotiations were in connection with a secret commission and that Pitt was not merely a passive bystander should be drawn. In his evidence Pitt explained that the “undertakings” were concerned with mortgaging the property shortly after the venture agreement was signed. Pitt accepted that cl.37 on its face made commission payable 30 days after execution but said that that clause had been negotiated in that form on the underlying understanding that finance supported by a mortgage of the land would be obtained within that period. The most probable meaning of the letter is that it alludes to Omura maintaining that he had not been told that the land was to be mortgaged at an early stage. The negotiations to which Hoko was not directly a party were the discussions which led to the 30 day delay in payment being inserted (the underlying premise being that it would be equivalent in practical effect to delaying until finance had been obtained and a mortgage put in place). The explanation contended for by Mr Chesterman that the negotiations were the discussions relating to secret commission does not sit comfortably with the context of the letter. The reference to PRD knowing that Hoko maintained that it was unaware of the undertakings given is a reference to the comment in PRD’s letter about the impasse concerning stage one funding. This was concerned with Omura’s reluctance to mortgage the land for that purpose. The reference to Hoko is intended to differentiate it from Bond because if the reference was intended to include Bond the reference to Hoko maintaining that it was unaware of the undertakings would be meaningless since Bond was directly involved in any negotiations relating to the secret commission. The preferable view is that it is not a case where there is any express agreement not to claim commission until finance was in place. Rather, there was an optimistic assumption that the 30 day period prescribed would be sufficient for that to occur. That assumption was falsified by Omura’s resistance to mortgaging the land for the initial phase of funding. -- 51 of 209 -- 42 Reference was also made to Pitt’s response to Salotti’s letter of 7 July 1992 in which he said that he had been unable to renegotiate the agreement to make it subject to finance. The letter to Salotti is probably literally correct in that the obligation to pay the first amount of commission is not expressed in terms of payment upon the finance being obtained. However at the time it was written there was an expectation that that would be the practical outcome. The failure to mention that expectation or assumption illustrates a characteristic of several of Pitt’s dealings throughout the matter generally, that he was secretive and expressed himself equivocally which had the effect of obscuring the truth while not speaking clear untruths. Each side relied on events in October 1992 to February 1993 in support of a conclusion in their favour. One issue involving credibility was that Pitt said that he had met Ikeda in early November 1992 and during the course of briefing him in respect of the venture matters when Ikeda had just become involved, Ikeda told him that Omura had asked him to find out about Landbase. Ikeda denied that such a conversation occurred. Pitt’s evidence that he had spoken to Nagano by telephone at some time before the MCM on 27 and 28 November 1992 and Nagano said that Hoko did not know Landbase was also disputed on the basis that Pitt’s affidavits did not include reference to this conversation but his evidence did. Pitt’s evidence was said to be supported by a letter of 8 January 1993 in which Pitt confirmed, while dealing with proposed amendments to the minutes of the MCM, that Nagano had told him before the MCM that Hoko did not know Landbase. Support was also sought in the tenor of the conversation on 23 November 1992 between Pitt, Rameau and Dietz. That conversation occurred when Pitt had received a formal letter of demand from PRD’s solicitors for payment of the commission and rang Rameau in an agitated state. During this conversation, Pitt made reference to a secret commission. Rameau reported the conversation to Dietz who contacted Pitt and suggested that Pitt give a commitment to pay within a certain time. The competing submissions made were that if Pitt’s comment was to be construed as a statement that it was being -- 52 of 209 -- 43 said by others that a secret commission had been paid, it was inconsistent with his being a conspirator. The contrary submission was that the conversations should be construed as a threat by Pitt that the truth would come out to PRD’s detriment if action was taken to recover commission. Coomera also relied on Pitt’s failure to demand verification that Coomera knew Landbase by reference to the documents that Dietz had said existed. Pitt responded that to demand proof would be tantamount to impugning the integrity of Omura and Dietz and that he believed that it was a matter that had to be resolved between Hoko and PRD. The contrary submission was that the failure to seek verification was not the conduct of an innocent person especially when Pitt did not disclose the conversation when Omura was asking about Landbase at the MCM a few days later At the MCM on 27 and 28 November 1992 Omura raised the question of Landbase. His stance was that he had not known about it and submissions were made concerning whether he was dissimulating to Pitt’s knowledge at the time. The thrust of the submissions for Coomera was that there were a number of things that Pitt could have told Omura but did not and that this was indicative of the fact that he was not prepared to reveal the extent of his knowledge because he knew that there was a secret commission. One was that he did not tell Omura about an attempt he had made prior to the execution of the agreement to reduce commission. Pitt said that the solicitor for Coomera was also involved in those negotiations and, in effect, he saw no need to mention it independently. Other matters were that he did not answer Omura’s question about whether Landbase was a Hong Kong company by saying that Dietz had said so; that he did not tell Omura of his conversations with Nagano and Ikeda early in November (because it was said, they did not occur); he did not tell Omura about Dietz’s statement that Landbase was known to Hoko and that that was documented; that he did not tell Omura of his conversation of 23 November 1992 with Rameau and Dietz and that his claim that he had forgotten about it should be rejected. In particular the point was made that he did not tell Omura that he had made an allegation concerning a secret commission. It was also submitted -- 53 of 209 -- 44 that his failure to inquire who Landbase was from Dietz even after Omura had raised the issue at the MCM was also inexplicable on the basis of honesty. Pitt maintained that the relationship between Hoko, Landbase and PRD was not his business. Attention was also focussed on events following the demand and in particular concerning a golf game which had been proposed between Pitt, Nagano and Dietz. It is not clear how the idea originated, but the most likely explanation seems to be that it was initiated by Dietz. Nagano contacted Pitt seeking advice, the underlying concern being whether there might be unpleasantness in view of the demand from PRD for payment of commission. Pitt replied expressing the view that he was confident that there would not be unpleasantness because he believed that the demand was self-serving and designed for another purpose. It was submitted by Coomera that this indicated that Pitt was aware that the demand was a sham and suggested that its real purpose was to keep Bond quiet. Pitt was unable to give any very satisfactory explanation of what he meant when he wrote the letter. There was also a letter written by him later asking Dietz to keep “periphery issues” under control. Once again it was suggested that this was an encouragement by Pitt that Bond be kept under control. Once again Pitt’s explanations are not particularly convincing. Coomera also relied on things said at a meeting where Pitt was secretly video-taped prior to the February 1993 MCM where he says things, which he described as “theorising”, that Bond, Nagano and Dietz might be involved in a secret commission deal. The essence of Coomera’s submission was that the failure to mention a number of matters or Omura and Pitt’s conduct coupled with his failure to give or attempt to give any adequate explanation of his conduct in some instances was inconsistent with innocence. A number of other submissions are recorded in the written submissions. These have been taken into account without the need to make specific reference to them. -- 54 of 209 -- 45 Care must be taken in using post-agreement material as cogent evidence of pre-agreement involvement in the conspiracy. Subsequently acquired knowledge that Bond and Landbase were identical is not relevant. It is also important to distinguish between suspicion that Bond and Landbase may be connected (which is not enough to establish conspiracy since the essence of conspiracy is agreement or combination) and a state of mind equivalent to knowledge of that fact. Before a finding of conspiracy can be made it is necessary to infer to the required standard that the alleged conspirator’s state of mind went beyond suspicion to the point of active involvement in an agreement or combination. It is necessary also to be conscious of the seriousness of an allegation of conspiracy and the need to apply a commensurate standard of satisfaction before making a finding that conspiracy is proved on the balance of probabilities (Briginshaw v Briginshaw (1938) 60 CLR 336). It is appropriate to have regard to the post-agreement evidence in conjunction with the pre- agreement evidence to establish what inference the evidence as a whole properly supports. It will be apparent from what has been said previously that Pitt’s evidence had unsatisfactory elements about it. However, it too must be looked at in the context of the whole of the evidence. Having performed that process I am of the view that the point at which the conspiracy pleaded breaks down is in proving to the required standard that Pitt (and therefore Kolback and KGL) knew prior to the making of the agreement that Landbase was a vehicle for Bond and/or Nagano to receive a secret commission. I am not satisfied that prior to the agreement being made Pitt knew that that was the case and that he agreed at that time to be a party to a conspiracy that a secret commission be paid to Bond and/or Nagano through Landbase. In the case of Kolback, KGL and Pitt, the pleading does not allege that they were involved in the creation of documents leading to an expectation that Landbase was a genuine company interested in purchasing the land. It is not one of the overt acts alleged against them. That allegation is against PRD and Dietz only. To the extent that the pleading may allege that -- 55 of 209 -- 46 breach of fiduciary duty is a valid basis for an unlawful means conspiracy the conceptual framework of that is dealt with later. 30. Conspiracy - Dietz and PRD On behalf of the 7th and 8th defendants it was submitted that it would be concluded that Dietz was not involved in a conspiracy with Bond to obtain a secret commission on behalf of Landbase. It is true that in a case of this kind one must be vigilant to ensure that a suspicion which can be raised by reference to a mass of documents is not magnified by hindsight. A number of matters were advanced which it is said are contrary to the conclusion that Dietz had entered into the arrangement alleged. A number of the propositions depend on acceptance that references to Landbase in documents sent to Hoko or Coomera were evidence of transparency of the transaction because of the risk they would come to the knowledge of Omura. There was evidence from which it can be deduced that Nagano was the conduit or perhaps the filter through which information reached Omura. The submission must be viewed in light of common experience that it is not uncommon for a fraud to remain undiscovered until the person who can control the knowledge necessary to discover it loses the capacity to exclude others from access to that information. Particular reference was made to correspondence in December 1991 in the context of an offer which did not eventuate. On the assumption, which seems to be supported by the existence of Japanese writing on one of the copies, that this was brought to Omura’s attention, the only risk would appear to be that Omura’s memory might be jogged if Landbase’s involvement in receiving commission was brought to his attention later. He was unable to say whether even on the occasion of the first letter he was made aware of Landbase. This evidence eliminates those matters pleaded which depend on reliance on that letter as a foundation for a cause of action. It would in any event seem necessary to include a reference to Landbase in at least some documentation concerning the venture to allow PRD’s accounting system to operate, in that if the commission was paid to PRD so -- 56 of 209 -- 47 that PRD could disburse it to Landbase (as one would expect it would be if knowledge of the entitlement to commission within Hoko or Coomera was to be restricted) it is highly unlikely that Jewell would have paid $300,000 from PRD’s accounts without supporting documentation. It was also Jewell who sent the initial letter of demand for outstanding commission and attended one of the conferences with solicitors prior to the solicitor’s letter of demand being sent. The suggestion that the pursuit of the commission and the subsequent legal action is consistent with PRD’s non- involvement is less compelling if information counter to the decision to make demands was not shared with PRD’s accounts division or solicitors. The question was also posed why Dietz and Rameau would give up half their commission, especially when the benefits of retail sales of land would not flow through their section. One obvious answer is that if Bond demanded half the commission be paid to Landbase or the deal would not occur there was a reasonably compelling reason to make a commercial decision that half of $600,000 was better than none. The indignation by Dietz when the rate of commission was reduced to 3 per cent is consistent with a perception that the 5 per cent anticipated (encouraged by Tokita) had been reneged on. I have considered Dietz’s involvement without reference to anything alleged to have been said by Pitt about the issue to others. Such evidence is not admissible against Dietz and PRD under the conspiracy rule (Ahern v. The Queen (1988) 165 CLR 87). Dietz said that after Bond made the demand of him and the arrangement to pay $300,000 of PRD’s commission to Landbase was made, he would have made Douglas aware of it. Douglas did not accept that he had. Either this occurred, with the consequence that Douglas knew of the arrangement, or it did not, leaving open the conclusion that Dietz did not highlight what had occurred. Whatever is the true situation, it does not work in PRD’s favour. There was also evidence that Dietz had received a copy of the letter referring to the “club” being profitable through the deal, -- 57 of 209 -- 48 in the context of PRD being offered the sole agency at 5% commission. His evidence in connection with this was unconvincing. While I accept that the Code of Professional Conduct does not impose binding obligations (Roots v Oentory Pty Ltd (1983) 2 Qd.R 745), there was no written record created of the alleged conjunction of the kind envisaged. All dealings concerning Landbase were channelled through Bond. Even allowing for the effect of hindsight on the way in which his evidence was expressed, Dietz’s evidence in some passages treated Landbase as if he was satisfied that it was synonymous with Bond. The hurried arrangement settling the time at which the second and third instalments of commission would be payable was made in a way that had no regard to Landbase as a separate entity. It was made in a way suggesting that Bond could commit Landbase to it. The alternatives, that the decision was taken without any regard to Landbase’s interest in the subject, or because Dietz was concerned only with PRD’s commission, are not persuasive. I am satisfied that no later than mid-November 1991 Dietz was aware that Bond was coercing PRD into paying half its commission to Landbase in circumstances where Landbase had done nothing to entitle it to commission according to ordinary standards. He admitted that by 10 December 1991 he believed that Omura had not instructed Landbase to be used as a conjunction agent. I also accept, as Mr Chesterman submitted, that when it became apparent that Coomera was questioning the involvement of Landbase, Dietz provided information to or drafted answers to his solicitors to that letter which were at best misleading and at worst false. Instead of those answers the letter asserting that Landbase was well-known to Hoko and that the purpose of the letter was to fish for evidence of wrong doing which did not exist was sent instead. Nevertheless the content of the proposed answer emanating from Dietz suggests an intention to distance PRD from Bond in regard to the matter. One other curious thing is that Dietz found it necessary or desirable to ask his solicitor if he needed to do any more than rely on Bond’s denial that he was connected with Landbase. Where it appears in the affidavit seems to connect naturally with the receipt of instructions in August 1991, although Dietz -- 58 of 209 -- 49 was disposed to relate it to the time when Landbase became an issue. Nor could Dietz recall, according to his affidavit, why he asked the question in the first place. I am satisfied that Dietz’s involvement went beyond turning a blind eye to what Bond was doing. It is, of course, necessary to approach the matter on the basis that a person does not become a party to a conspiracy merely because he or she knows that a scheme has been created by others, and that mere acquiescence in such a process will not without more result in liability for it. Having regard to the above analysis of Dietz’s evidence I am satisfied on the balance of probabilities that Dietz was aware that Landbase was a means by which Bond was to receive portion of PRD’s commission on the sale or joint venture of the property. However there are two more fundamental issues, raised by PRD (and joined in by Kolback) in relation to the conspiracy pleaded. They are whether it is an element of the tort of conspiracy that there be an intent to injure and that the pleading does not plead an actionable conspiracy because it omits the element of intention to injure the plaintiff and whether the unlawful means alleged is a breach of fiduciary duty, and being a breach of an equitable obligation, it is not capable of founding an action for tortious conspiracy. 31. Conspiracy - what has to be proved and pleaded At the threshold it was submitted that the pleading of conspiracy was inadequate since one of the elements of the cause of action for an “unlawful means” conspiracy is an intention to injure the plaintiff and it was not pleaded. (No argument was addressed as to whether it was appropriate to allege what had happened, which was, in effect, two reciprocal offences of soliciting and offering secret commission, as a conspiracy). PRD’s submissions (joined in by Kolback) were to the effect that an “unlawful means” conspiracy required the following elements to be proved:- (a) an agreement or combination; (b) the commission of or threat of an unlawful act; (c) an intention to injure the plaintiff; and -- 59 of 209 -- 50 (d) damage resulting from the threats or unlawful acts. It is conceded that the pleading does not specifically include the third element. However it was submitted for Coomera that such an element did not have to be proved for this kind of conspiracy. In England the issue was directly considered in a series of cases, the first of which was Lonrho Ltd v. Shell Petroleum Co. Ltd (No.2) (1982) AC173, the next was Metall Und Rohstoff AG v. Donaldson Lufkin and Jenrette Inc. (1990) 1 QB 391 and the third Lonrho PLC v. Fayed (1992) 1 AC 448. In Metall the Court of Appeal had held that a “predominant purpose” to injure the plaintiffs was an essential element for the species of conspiracy known as an unlawful means conspiracy. Lonrho v. Fayed overruled Metall in that respect holding that a pleading of intention, where it was conceded that an intention to cause injury was not the predominant purpose of the unlawful act, was sufficient. It is therefore authority for the proposition that intention (but not a predominant intention) is a necessary element. In reaching that conclusion Lord Bridge who delivered the leading speech quoted a passage from Lord Denning’s judgment in the Court of Appeal (unreported) in Lonrho v Shell which included the following (467):- “... I think there is a cause of action when it is remembered that the tort is a conspiracy to injure. I would suggest that a conspiracy to do an unlawful act -when there is no intent to injure the plaintiff and it is not aimed or directed at him - is not actionable, even though he is damaged thereby. But if there is an intent to injure him then it is actionable. The intent to injure may not be the predominant motive. It may be mixed with other motives.” Then (467-8) he quoted passages from Lord Diplock’s speech in Lonrho v Shell which included the following:- “So the question of law to be determined is whether an intent by the defendants to injure the plaintiff is an essential element in the civil wrong of conspiracy, even where the acts agreed to be done by the conspirators amount to criminal offences under a penal statute. It is conceded that there is no direct authority either way upon this question to be found in the decided cases; so if this House were to answer it in the affirmative, your Lordships would be making new law. ------ -- 60 of 209 -- 51 This House, in my view, has an unfettered choice whether to confine the civil action of conspiracy to the narrow field to which alone it has an established claim or whether to extend this already anomalous tort beyond those narrow limits that are all that common sense and the application of the legal logic of the decided cases require. ------ I am against extending the scope of civil tort of conspiracy beyond acts done in execution of an agreement entered into by two or more persons for the purpose not of protecting their own interests but of injuring the interests of the plaintiff.” Pre Lonrho v Fayed English authority must be read in light of that case. Discussion of Australian authority almost inevitably involves McKernan v Fraser (1931) 46 CLR 343 and Williams v Hursey (1959) 103 CLR 30. In McKernan v Fraser Dixon J formulated the two kinds of conspiracy alleged as (359) a combination to interfere with persons in the exercise of their calling by unlawful means or a threat of unlawful means, and (362) a combination which had the sole true dominating or main objective of wilfully inflicting damage. He said that the latter assumed that the end was not unlawful, the means were not unlawful and there was no threat of illegality. It was necessary that damage actually be caused, however. Inevitability of damage was not of itself sufficient. Evatt J (378) in identifying the elements of an unlawful purpose conspiracy speaks of it as a combination which, having as part of its object the intentional infliction of temporal harm upon another which is duly carried into effect and inflicts such harm but which is unaccompanied by “breach of contract, tortious or other unlawful acts”. In Williams v Hursey, Fullagar J (77) described an unlawful means conspiracy as a combination amounting to an actionable conspiracy of the kind best recognised in law viz. a combination to do unlawful acts necessarily involving injury. Dixon CJ agreed. Menzies J in an extended passage on the subject said the following– Conspiracy: Some general observations about the law of conspiracy are, I think, necessary. If two or more persons agree to effect an unlawful purpose, whether as an end or a means to an end, and in the carrying out of that agreement damage is caused to another, then those who have agreed are parties to a tortious conspiracy. Although it is probably too late in the day to divide conspiracies, for the purpose of legal classification, into two sorts depending upon whether the purpose of the combination -- 61 of 209 -- 52 would be lawful or unlawful if it were the purpose of an individual, there is much to be said in favour of approaching any consideration of the law of tortious conspiracy and its application in that way. It is, I think, quite clear that an agreement to do something, either as an end or as a means to an end, it being something that would, if it were done by an individual, be a criminal offence, is a tortious conspiracy if another suffers damage by reason of action pursuant to the agreement. The same it seems is true if the agreement is to do something which, if done by an individual, would be a tort or breach of contract, although authority for this depends upon dicta (see e.g. South Wales Miners’ Federation v. Glamorgan Coal Co.Ltd, per Lord Lindley; Crofter Hand Woven Harris Tweed Co.Ltd v. Veitch, per Viscount Simon LC, per Lord Wright, per Lord Porter) rather than upon decided cases except the old cases of conspiracy for falsely indicting one of felony and such like, where the tort of conspiracy is closely associated with malicious prosecution. See Skinner v. Gunton and Bullen & Leake’s Precedents of Pleadings (1968) 3rd., p.290. Up to this point the term ‘unlawful’ in relation to conspiracies means something that is itself and independently of any element of combination, a criminal or civil wrong. The law has, however, gone further and treated as unlawful the doing in combination of some things which could be done by an individual without any infringement of public law or private rights. Since Quinn v. Leathem it has, to use the words of Lord Buckmaster in Sorrell v. Smith been settled ‘that acts done in pursuance of a conspiracy having for its real purpose the injury of a man in his trade or calling are an actionable wrong’.” This formulation by referring to “an end or a means to an end” necessarily implies that agreement to effect an unlawful purpose is purposive at least. Further, in Northern Territory v. Mengel (1995) 185 CLR 307, 342-3, 344 there are passages which suggest (obiter) that conspiracy is to be regarded as based on an intention to cause injury. In most cases the facts of the alleged “unlawful means” conspiracy will inevitably lead to the inference there is a person against whom the act is directed and that there was an intent to cause damage to that person even though it is not necessarily the only intent or even the predominant intent. The difficulty illustrated in the present case is that the conclusion that Dietz and Bond were acting in combination with an intent to injure Coomera is not obvious. The formulation by Fullagar J in Williams v. Hursey has been applied in several recent authorities (e.g. Goodchild Fuel Distributors Pty Ltd v. Holman (1992) 59 SASR 454, 481; Ansett Transport Industries (Operations) v. Australian Federation of Air Pilots (1991) 1 VR 637, 687; Beach Petroleum NL v. Johnson (1993) 43 FCR 1, 19). However, in Ansett the position was taken -- 62 of 209 -- 53 on the basis of a concession by counsel for the defendants that having regard to Williams v. Hursey it must be accepted that it was unnecessary to prove that there was a predominant intention to injure and that the motive for combining is irrelevant as long as the defendants combine with the intention of pursuing an unlawful object or employing unlawful means in pursuit of that object. In Beach Petroleum it was said that as the alleged conspiracy was one involving unlawful means it was sufficient merely for the applicants to prove that the combination of the defendants to do one or more of the unlawful acts alleged resulted in damage to them. It was not necessary to prove that the predominant purpose of the conspirators was an intention to injure the plaintiffs. Both Lonrho v. Fayed and Williams v. Hursey are cited as authority for that proposition. Having regard to the way in which the nature of the tort is expressed in Australian authority I am unconvinced that as a matter of pleading the allegation in the statement of claim is inadequate to appropriately inform the defendants of the nature of the claim against them. Having said that, there is good reason in principle why an intention to injure the plaintiff, albeit not the predominant motive, has to be established. Ordinarily the nature of the offence the conspirators agree to commit and the facts of the case will inevitably lead to the conclusion that it is intended to cause damage to a particular person. On the other hand, whatever other cause of action might be available, it would be contrary to principle for liability for tortious conspiracy to attach merely because a combination was put into effect and a person who was not reasonably within the contemplation of the conspirators as a person likely to suffer damage nevertheless suffered damage while it was being put into effect. In such a case, it would be impossible to infer that the conspirators had an intent or purpose of causing damage to that person. Nevertheless, such liability would attach if Coomera’s submissions are correct, since there would be an agreement or combination, the commission of an unlawful act and damage resulting from the unlawful act. The concept of a requirement of some intent or conduct directed at the plaintiff was applied by Windeyer J in Womboin Pty Ltd v. Reinchelt (unreported, -- 63 of 209 -- 54 SCNSW, 5175/92 25 August 1995). If the reference in the judgment of Menzies J in Williams v Hursey, where it refers to unlawful means being used as an end or a means to an end, is intended to imply that the conspiracy must be purposive or directed at the person who complains of having been the victim of the conspiracy, the only sense in which the conspiracy was directed at Coomera was by the implication that, in conducting its affairs, Bond would subjugate Coomera’s interests if necessary, to ensure that PRD got the right to earn commission in which he was to share. To the extent that the pleading of conspiracy relies on an agreement for a secret commission having been made, s.442B of the Criminal Code is relevant. The argument in support of the commission of such an offence would be that Bond corruptly solicited (or perhaps received within the extended definition of that term) from Dietz for Landbase valuable consideration (one half PRD’s commission) the expectation (or receipt) of which would tend to influence him to show favour to PRD in relation to Coomera’s affairs or business (i.e. that PRD would be placed in a position where it could gain commission). So far as Dietz is concerned it would be that he corruptly offered to Bond (or gave to Bond within the extended concept) valuable consideration (half PRD’s commission) the expectation (or receipt) of which would tend to influence Bond to show favour to PRD in relation to Coomera’s affairs or business. It was certainly not the predominant purpose of the arrangement to cause damage to Coomera. The predominant purpose of the exercise was on the part of Dietz to secure the right to earn commission for PRD. On the part of Bond it was to secure a portion of the commission otherwise payable to PRD. It was not necessary to persuade Omura of PRD’s credentials, since he had dealt with them before. The rate of commission had already been fixed at 3 per cent by Coomera for a sale. This was extended by Bond to apply to a joint venture at a later stage. There is nothing in the evidence to suggest that Omura did not make his own decision to pay 3 per cent or that he genuinely dissented from this level of commission. On the evidence, 3 per cent is not manifestly excessive as -- 64 of 209 -- 55 a level of commission for a transaction of this kind. An argument was advanced that the purchase price had been inflated to $20 million for the purpose of ensuring that the parties who were to share the commission would get, in effect, 5 per cent of the real value of the property. The flaw with this argument, although it is mathematically correct, is that the $20 million nominal purchase price was not obviously conceived for the purpose of inflating the level of commission. The rationalisation of it was that it was a value assigned to the property to indicate a return to Coomera more in the vicinity of the purchase price of the land bearing in mind that payment for the land was to be staged over a number of years. That rationalisation is in my view not untenable and there is no basis for concluding that Omura disagreed with that purchase price being used in the contract. Leaving aside questions of what might properly be included in damages for conspiracy for the moment, the reality is that since Coomera voluntarily had agreed to pay 3 per cent commission to PRD it was not exposed to any additional liability as a result of the arrangement between Bond and Dietz, which had the effect of reducing PRD’s share of the commission, not causing Coomera to pay more than it was prepared to pay. In that sense, Coomera suffered no monetary damage. Furthermore, since there is no evidence that Omura ever considered doing other than what he did (except for a brief encounter with another development company after the commission rate and the sum which was to appear in the joint venture had emerged) there is insufficient basis to conclude that Coomera’s interests were actually subjugated to Bond’s, if that be relevant. However there is one other aspect of damages. It is that in some circumstances costs of unravelling the conspiracy which are not recoverable as costs of the action may be recovered as damages for conspiracy. The statement relied on by Coomera is in British Motor Trade Association v. Salvadori (1949) 1 Ch 556, 569. The facts of that case were that in the time of post-war shortages the plaintiff on behalf of its members sought to prevent the escalation of new car prices. Members required purchasers to enter into a covenant not to sell the vehicle for 12 months. The defendants -- 65 of 209 -- 56 were a group who tried to subvert this system, often by use of dummy purchasers who broke the covenant by a series of transactions resulting in the vehicle being sold at a higher price by a person not bound by the covenant. Speaking in the context of conspiracy to procure breach of contract, Roxburgh J said the following: “ . . . To resist such a counter-attack and also counter-attacks from various other directions, the plaintiffs maintain, and must maintain, a large investigation department, and the money actually expended in unravelling and detecting the unlawful machinations of the defendants which have been proved in this case before any proceedings could be taken must have been considerable. I can see no reason for not treating the expenses so incurred which could not be recovered as part of the costs of the action as directly attributable to their tort or torts. That these expenses cannot be precisely quantified is true, but it is also immaterial. Accordingly, the plaintiffs have proved the damage which is essential to the tort of conspiracy.” The focus in that passage is evidence that expenses could not be recovered as part of the costs of the action. It is by no means clear, since the question of quantum was not developed at this stage of proceedings, whether there are damages in this category. Further, the facts in Salvadori, where protective measures were necessary, are rather different from the present case. If the incurring of such expenses can be proved, even though they may not be precisely quantifiable, they may be recovered if conspiracy is proved. If they are proved, the fact that they have been incurred will establish the necessary element of damage for the purpose of proving the tort of conspiracy. To summarise the position with respect to conspiracy: 1. I am satisfied that Bond and Dietz combined together to allow Bond and probably Nagano to obtain, through Landbase, part of the commission payable to PRD in return for an expectation that PRD would obtain the right to commission. 2. To make such an arrangement was contrary to the statutory provisions relating to secret commissions and therefore an unlawful act for the purpose of the law relating to tortious conspiracy. -- 66 of 209 -- 57 3. There was an intention at the time the agreement was made to injure Coomera in that, if necessary, Bond would subjugate Coomera’s interests to ensure that PRD would obtain the right to commission, although the predominant intention was to implement the combination in 1, and the evidence does not establish that Coomera’s interests were subjugated. 4. Whether damage was caused depends on whether it is established whether there are damages of the kind referred to in British Motor Trade Association v. Salvadori. Final resolution of whether there is liability for tortious conspiracy depends on resolution of the issue in finding 4 above. Insofar as a liability for commission arose by reason of the venture agreement being executed, I am not satisfied that it can be said to be a consequence of the existence of the arrangement between Bond and Dietz. It is however referred to in another context later. 32. Can Conspiracy be Based on Breach of Fiduciary Duty? -- 67 of 209 -- 58 The submission was made that a conspiracy to cause someone to breach fiduciary duty was a form of conspiracy unknown to the law. The submission was that the conspiracy had to be as to a criminal offence or perhaps a breach of contract or a tort. Reliance was placed on the passage from McKernan v. Fraser where Evatt J (378) said that an unlawful means conspiracy involved a breach of contract or tortious or other unlawful acts. The same notion was repeated by Menzies J in Williams v. Hursey (122). No authority was cited supporting the view that a conspiracy to breach fiduciary duty was capable of supporting a tort of conspiracy. PRD and Dietz relied, by analogy, on the statements in Metall Und Rohstoff AG v. Donaldson Lufkin and Jenrette Inc. (1990) 1 QB 391, where the issue was whether a tort of procuring or inducing a breach of trust existed in English law. It was stated by Gatehouse J (408-9) that there was no reported decision to the effect that such a tort existed. He expressed the view that nothing was gained by inventing an unnecessary tort since, in the case of an express trust, anyone who procured a trustee to act in breach of trust became liable himself as a trustee. In the Court of Appeal it was said that the short answer was that the principles of the laws of trusts were quite sufficient to deal with persons who had cited breach of trust or wrongfully meddled with trust estates or interfered with the relationship of trustee and beneficiary. It was said that there was no sufficient justification for the introduction of a new tort of this nature. Reliance was also placed on a passage from Salmond and Heuston on Torts, 19th ed. p.4 as follows– “No civil injury is to be classed as a tort if it is only a breach of trust or some other merely equitable obligation. The reason for this exclusion is historical only. The law of torts is in origin a part of the common law as distinguished from equity and it was unknown to the Court of Chancery.” The overruling of Metall on another point does not affect this aspect of it. I was not referred to any Australian authority on the point and such authority by way of dicta as there is does not suggest that a conspiracy to cause a breach of fiduciary relationships is capable of supporting an unlawful means conspiracy. In the absence of anything to the contrary, I am of opinion that the -- 68 of 209 -- 59 traditional view that only a conspiracy to commit a criminal offence, a breach of contract or a tort may support the allegation of a tortious conspiracy should be applied. To the extent that the pleading of conspiracy alleges a conspiracy to cause Dietz to breach PRD’s fiduciary relationship with Coomera, the claim is not well founded. 33. Was there a fiduciary relationship between Kolback and Coomera before the joint venture? Coomera submitted the parties owed each other a fiduciary relationship during the period prior to execution of the venture agreement. It was submitted that this was evidenced by the agreement to negotiate in March 1992. The fact that they were negotiating with a view to an agreement under which they would owe each other fiduciary duties gave rise to a fiduciary duty in any event. Reliance was placed on United Dominions Corporation Ltd v. Brian Pty Ltd (1984) 157 CLR 1, 7-8, 12 which establishes that there is no general proposition that the relationship between prospective partners or joint venturers cannot be fiduciary until there is a formal agreement. The passage at 12 identifies, as examples of fiduciary relationship situations, where the conduct of the partnership or venture business has begun before the precise terms of the agreement are settled and where informal arrangements have been made to assume the relationship of partnership or joint venture and steps involved in its establishment or implementation have been taken. It was submitted that the agreement to negotiate imposed obligations of good faith in language consistent with the existence of a fiduciary obligation. The obligations imposed by the agreement were a restriction upon Coomera dealing with the land for 60 days except with Kolback and an agreement to negotiate in good faith and finalise and document a joint venture within 60 days. While accepting that the examples given of situations which in principle may lead to a fiduciary relationship prior to the execution of a formal agreement are no more than examples the situation identified in them is some what further advanced than the -- 69 of 209 -- 60 situation that had been reached in this case. For example in UDC v. Brian several identifiable transactions which could only be reasonably related to furthering the proposed joint venture had taken place. In my opinion at the time before the venture agreement was executed in this case the relationship fell short of being one where mutual fiduciary relationships had been created. 34. Breach of fiduciary duty - PRD The claim of breach of fiduciary duty is constructed in the following way:- (a) PRD was aware that Coomera was a subsidiary of Hoko; that the decision making power vested in Omura; that Bond was a director of Coomera until 20 November 1992; that Coomera entered into the venture agreement on the advice of Bond and Nagano. (b) PRD was aware that Landbase was a Liberian company adopted by Bond and/or Nagano as a means of obtaining a secret commission or to which Bond paid a secret commission to ensure his engagement in a remunerative role in the project; that Bond and/or Nagano acted in breach of fiduciary duty by arranging the secret commission without disclosing it to Coomera; by failing to disclose to Coomera that advice and recommendations were given where there was a conflict of personal interest with duty; by failing to advise Coomera that 3 per cent commission was excessive; by giving instructions to solicitors to insert cl.37 in the venture agreement; and by failing to advise Coomera of the conflict of interest during the life of the venture agreement. (c) PRD acted in breach of fiduciary duty and its duties to act in good faith without concealment or any form of deception or misleading representation, as required by the code of professional conduct under the Auctioneers and Agents Act by failing to disclose the matters in (b); by engaging in correspondence to facilitate the obtaining of a secret commission by Landbase (alone or with others) while knowing the matters in (a) and (b); by agreeing to accept commission in terms of cl.37 of the venture agreement. -- 70 of 209 -- 61 In so far as the claim is based on failure to conform with the Code of Professional Conduct is concerned Thomas J. held in Roots v. Oentory Pty Ltd (1983) 2 Qd.R 745, 758-9 that s.45 of the Auctioneers and Agents Act 1971 did not evince any intention to create substantive duties and was intended to act merely as an indicator of the ethical standards to which representatives of real estate agents were expected to aspire. That was said in the context of a claim for breach of statutory duty. I accept that interpretation of the Auctioneers and Agents Act. In so far as the pleading alleges that there is a legal duty to conform to the code it cannot be sustained. With respect to fiduciary duty, as agent for Coomera in the transaction PRD is in one of the recognised categories of fiduciaries. The thrust of the case is that, through Dietz, it knew that Landbase was being used as a vehicle to enable a secret commission to be obtained and that by failing to disclose that to Omura it was in breach of its fiduciary duty. It was submitted that the pleading in so far as the case pleaded is a failure to disclose the matters set out above is misconceived and is not one known to Australian law. Breen v. Williams (1996) 186 CLR 71, 113 establishes that in Australia the obligation imposed on a fiduciary is proscriptive. A fiduciary is not to obtain an unauthorised benefit and is not to be in a position where duty conflicts with interest. In the context of the present case, the vice alleged is that PRD did not discharge its fiduciary obligation of loyalty to Coomera because it knowingly, through Dietz, who had authority to act in transactions of the kind being negotiated, entered into a transaction involving payment of commission to Landbase, while at the same time Dietz believed that Omura’s subordinates were acting without his authority to obtain such a benefit. While the language of failure to disclose is used in the pleading and since Breen v. Williams it is more accurate to focus on the fact that informed consent had not been obtained from the principal “to answer circumstances which otherwise indicate disloyalty” (137), the factual content of the claim and the way it was litigated make it plain that the allegation was one of prima facie disloyalty by agreeing to the arrangement -- 71 of 209 -- 62 which was not rebutted by disclosure to and consent of the principal. In my opinion the pleading is sufficient. If a real estate agent was aware that someone was obtaining a secret commission in respect of a transaction, in principle it would be obliged to disclose that fact to the principal. It is not without significance that the original commission proposed by Nagano and incorporated in the authority to act by Dietz was 5 per cent. There is little to support the view that 5 per cent was in a reasonable range of commission. At the relevant time there was no scale of fees for this kind of transaction. It was therefore a matter for negotiation. However the statutory scale which had applied not long before was 2½ per cent of the purchase price. Pitt expressed the view that he thought that 3 per cent, to which Omura reduced the commission when he signed the authority to act was higher than usual. Viewed against this context the disagreement between Bond and Dietz when Bond informed him that Omura had reduced the commission to 3 per cent can easily be thought to be coloured by the dashing of the expectation that each would have got the equivalent to the old scale fee under the original proposal but each was now getting considerably less. It was a breach of fiduciary duty not to disclose the transaction especially, as Dietz said, he believed that the arrangement with respect to Landbase was being carried out by those who were acting for Coomera in the negotiations without Omura’s knowledge. This is especially so having regard to Dietz’s knowledge of Omura’s dominant role in the transaction. It was submitted for PRD that there was no causal relationship between the non-disclosure of the arrangement concerning commission and Coomera’s decision to enter into the venture agreement. Reliance was based on Omura’s evidence that had he learned of the arrangement he would have proceeded with the venture but ensured that Bond did not receive any commission and evidence of the necessity for Coomera to solve its financial and FIRB problems by entering into the venture. The extent to which exploration of what a person may or would have done even if aware of a breach of -- 72 of 209 -- 63 fiduciary duty is relevant is one of some difficulty. One factor to be taken into account is that questions about what a person would have done if he had known in a timely way of the breach of fiduciary duty often do not expose all the ramifications of the breach. Regard must be had to that factor if it is legitimate to have regard to the realities of the case in deciding what equitable compensation to award. The analysis of the issue in recent authorities such as Permanent Building Society (in liq) v Wheeler (1993) 11 WAR 187, Gemstone Corporation of Australia Limited v. Grasso (1994) 62 SASR 239 and Maguire v. Makaronis (1997) 144 ALR 729 illustrates that one uniform approach may not be applicable to all circumstances. The purpose of equitable compensation is to restore the person suffering loss to the position as if there had been no breach of duty. As an equitable remedy it is discretionary. As such it should reflect the justice of the case (including the ordinary equitable considerations). The present case is unusual in that 3 separate adverse influences were in operation in the period leading up to the execution of the venture agreement. These were the fact that Bond and Nagano were acting in a way which was calculated to produce advice that was not necessarily in Coomera’s interests, the fact that Dietz was prepared to collaborate with them in regard to the arrangement enabling them to obtain commission and the fact that Pitt was writing letters which gave a misleading account of Kolback’s present and future prospects. In a case like the present it is important to identify what is the effect of the breach of the fiduciary duty as between the parties. Omura, as the controlling mind of Coomera, authorised execution of the venture agreement by Bond in the belief that by doing so Coomera was incurring a liability to PRD for commission and that the whole amount would be PRD’s. He did so because he was not told by PRD that his subordinate Bond had solicited portion of the commission for Landbase, which on the findings above, Dietz knew represented Bond, and that PRD, through Dietz had agreed to pay. -- 73 of 209 -- 64 Where an employee receives a bribe, the employer may recover that sum from him, if it is quantifiable (Reading v. A.G (1951) AC 507). In the present case, the liability under the agency agreement, which became due when the venture agreement was made is the commission. Where an agent commits a breach of fiduciary duty, the principal is entitled to rescind the contract of agency and the agent forfeits any right to commission. (L.S. Harris Trustees Ltd v. Power Packing Services (Hermit Rd) Ltd (1970) 2 Lloyds LR 65, 68). It is to be noted that Omura was not specifically asked what attitude he would have taken to paying commission to PRD if he had known that it had entered into the collusive arrangement with Bond. While it may be true that he would have gone ahead with the transaction due to his financial and other difficulties, I am not convinced that, had he been made aware of his rights, he would have still been prepared to pay commission to PRD. The reality is that, as the matter stands, Coomera has a potential liability for commission to PRD. Furthermore, PRD has commenced legal proceedings to recover it, despite the breach of fiduciary duty. In my view, Coomera is entitled to be relieved of liability for the debt and to a declaration that no commission is payable by Coomera to PRD. 35. Submissions about the representations -- 74 of 209 -- 65 The allegations of deceit and misleading and deceptive conduct require detailed analysis of what was written. Mr Morrison submitted that it was important to understand the proper construction of the letter of 22 June 1992. He submitted that it was not concerned with whether Kolback had sufficient capacity to provide a guarantee for the whole amount of expenditure for the project but with whether it had sufficient capacity to enable it to get finance from a financier. The questions were would a bank lend and would Kolback be able to pay the interest. The letter had to be taken in context and in context it was a letter intended to satisfy Omura’s remaining concerns. Omura was not concerned with the overall financial capacity of Kolback or KGL nor with the estimated true worth of the guarantee. His remarks at the September 1993 MCM showed that he had not realized that the underlying assets supported the guarantee. Further, the discussions preceding the letter of 22 June 1992 had related to bank debt. It was also submitted that there was an issue as to what representation was actually conveyed since the translation was not comprehensive. However, the translations in evidence include the matters relied on by Coomera. It was also pointed out that one matter opened as a misrepresentation, the reduction of the debt by 75 per cent, was not pleaded and indeed that was not specifically pressed in Coomera’s submissions. With respect to the guarantee, Coomera submitted that the representation was that the guarantee was worth $12M and that that was a false or misleading statement. Kolback submitted that Omura did not take into account the guarantee had any particular worth. He first realised at the September 1993 MCM that all assets supported the guarantee. At the most he may have been concerned whether Kolback could provide a guarantee acceptable to a financier not a guarantee of any particular predetermined value. It was further submitted for Kolback that the proper construction of the letter is that it did not promise the worth of the guarantee. Kolback submitted that the elements of the letter were the following. Kolback acknowledged that it was obliged to find $12M. Pitt was -- 75 of 209 -- 66 confident he could do so. Kolback could contribute its own funds but preferred not to do so because of the restructuring which would “hopefully” see it debt free by the end of 1992. The reduction of level of debt would provide more value for the guarantee. Kolback was a company of substance and credibility. It was submitted that there was no warranty that the guarantee was worth any particular sum. Further finance would only have to be put in place at some time in the future and the letter contained only an expression of confidence that finance would be raised, not a warranty. Pitt was therefore making a representation as to future matters because at that time the agreement had not been signed and the obtaining of finance was a future event. The submission was encapsulated in the written submissions by saying that at best for the plaintiff the letter could only be read as saying that Kolback was confident that when the time came it would be able to convince a financier to lend $12M. At that time Kolback would be able to give the financier a guarantee which it would accept. There was no reasonable basis for construing that as a representation that the guarantee would necessarily be worth $12M. To do so would be count the other security taken by the financier at zero. The only way in which a reasonable person would read the letter, assuming the plaintiff’s case at its highest, was that a financier when weighing up all available security would accept the guarantee as part of its security in order to make $12M available. It was not a representation that the guarantee was or would be worth $12M. It was submitted that this interpretation was supported by the correspondence. It showed that the raising of funds on the security of Coomera’s land and Kolback’s asset was the primary concern. That did not amount to an assessment of the guarantee independently of the other security and that the funding was to be based on the dual security of the land and the guarantee. Omura’s belated realisation that KGL’s assets would be used to support the guarantee showed that he was not at the relevant time considering the question on that basis. -- 76 of 209 -- 67 The relevant principles concerning a future event are to be found in Global Sportsman Pty Ltd v. Mirror Newspapers Ltd (1984) 2 FCR 82, James v. ANZ Banking Group Ltd (1986) 64 ALR 347 and Tobacco Institute of Australia Ltd. v. Australian Federation of Consumer Organisations Inc (1993) 38 FCR 1. Where s.52 of the Trade Practices Act is involved the principles, in summary are that a contravention does not depend on the intention or belief concerning the accuracy of the statement on the part of the person making it. The question is whether the statement contains or conveys a meaning which is false. There may be an inaccurate statement about a past or present fact or a literally true statement containing or conveying a false meaning. Promises, predictions and opinions involve a state of mind of the maker at the time the statement is made, in many cases. Such a statement ordinarily conveys expressly or by implication the meaning that the maker had that state of mind and a basis for it. If the meaning in or conveyed by the statement is false the making of the statement will have contravened s.52 in such cases. On the other hand, if an expression of opinion can be identified as no more than such, it conveys only that the opinion is held and perhaps that there is a basis for it. If it is no more than an expression of opinion, even if it is erroneous there is not a representation. It is a question of fact whether a particular formulation is an opinion or a statement of fact. The subjective purpose or motivation of the maker is not significant. The reader’s perception is significant. A statement will more often be taken to be a statement of fact if it is measurable against objective criteria. On the other hand, if it is a mere expression of judgment or opinion the situation is different. The character of the representation said to be false or misleading is to be tested at the date of making it not with the benefit of hindsight. (Bill Acceptance Corporation Ltd. v. GWA Ltd (1983) 78 FLR 171). It was submitted that what was said in the letter was Pitt’s belief based on the assets of the company and its financial position. It was an honest belief. It was submitted that it was not a valid approach to conduct a valuation exercise in hindsight in determining the quality of the belief. At the -- 77 of 209 -- 68 worst, the letter conveyed that the directors honestly held the view that a guarantee of $12M could be given. There was also a basis for concluding that the directors honestly held the view that they could give a guarantee upon which a bank would lend $12M. It was submitted that these views were reasonably held. With respect to the statement that the company would be hopefully debt free by the end of 1992, Kolback’s submissions were the following. In the context of the negotiations, “debt” meant historical bank debt. The evidence established that Pitt had discussed the subject with Bond on that basis. As to whether there was a misrepresentation it was submitted that there was no reason to assume that the words “introduce funds” meant introduce all the funds because it had never been in contemplation that Kolback would do that. In addition Kolback held at material times cash in excess of $1M. The statement that Kolback was restructuring its finances was correct and the statement that the company would hopefully be debt free was, at the highest, a prediction. Pitt’s view was that Kolback’s board’s approach to seek borrowings was unnecessary because money was not needed, although he conceded that his was a minority view. The explanation that Kolback was seeking to establish a relationship with a bank with a higher reputation than Tricontinental was advanced as one of the reasons for seeking the credit pursued initially with NAB and later with other financial institutions. (I comment in passing that there is no difficulty in accepting that a company may wish to have a reputable banker. However the evidence is clear that it was not the only factor operating in this case.) It was submitted that the only misrepresentation in what Pitt wrote was in not saying that his view was a minority view and not that of the Board. There was no evidence that Omura’s view would be different if he had known that. It was submitted that no warranty was incorporated in the venture agreement or sought and that it would have been sought if considered important. It was submitted that this demonstrated a lack of reliance. -- 78 of 209 -- 69 It was also submitted that the borrowing proposed involved the purchase of assets. There was no certainty that a draw down would be made if the loan was approved. It was submitted that it was not to replace existing debt or to fund day-to-day capital requirements. Because of some of the identified purposes, the net effect was to acquire a debt but back it with assets. It was submitted that if there was a misstatement it was not a material misstatement. It would have not operated on Omura’s mind when making his decision because he was under pressure himself to enter into a venture agreement. Coomera’s submission was that it was inappropriate to say (as had been attempted in cross-examination) that the only representations relied on were that Kolback had substantial assets and backing; that Kolback was listed on the Australian Stock Exchange; that Kolback had ability to raise up to $20M; and that the joint venture could be dissolved if finance was not obtained. Coomera accepted that the context of the letter of 22 June 1992 was important. However it was submitted that it was artificial to break up the letter into segments and that it was, overall, a letter written to satisfy Omura’s concerns as to Kolback’s ability to raise the necessary finance. In deciding the quality of the representations made, it is wrong as a general rule to focus on passages in isolation. The words or conduct must be viewed as a whole (Parkdale Custom Built Furniture Pty Ltd v. Puxu Pty Ltd (1980) 43 FLR 405), although it may also be the case that particular expressions are alleged to be misleading or deceptive. The representation inherent in the statement that the reduction of debt would increase the value of the guarantee was demonstrably false and went to the central purpose of the letter. It may be noted at this point that Omura, having identified to Mr Sheahan some specific matters, said he also had taken into account “the partner’s wealth of financial resources, sound and strong financial resources”, its experience in development and that the partner was an “honest company that would make contributions to the success of the joint venture”. -- 79 of 209 -- 70 Before considering the arguments on reliance, it is useful to set out events in the few weeks prior to the execution of the agreement. Drafting had proceeded in consequence of the heads of agreement and further discussions. The sequence of correspondence was that on 16 June 1992 Nagano wrote to Lazarides making the following points: • the value of Coomera’s land was insufficient to support the borrowing of the full projected cost of the project; • Coomera was unable to provide the shortfall; • Kolback’s assets would have to be used for security purposes; • if Coomera’s land was used first and Kolback would or could not provide the shortfall Coomera would be left with an unfinished project and complications in disposing of the land; • Coomera wished to establish how much Kolback could provide, with a view to Kolback providing the initial funding and Coomera then mortgaging the land. On 16 June 1992 Nagano advised Mr Lazarides of Feez Ruthning of some points for attention in the draft. Amongst these was a concern about financing, which Lazarides summarised in a fax to Morris Fletcher & Cross on 17 June 1992 in the following terms:- 1. How much funds are Kolback able to furnish to the joint venture without mortgaging the land? 2. Coomera Resort would prefer that the funds for stage 1 be provided by Kolback without mortgaging and then additional finance can be arranged using the land for security. Obviously this depends on how much funding Kolback can bring to the project without mortgaging the land. On the same day Nagano wrote to Bond and Lazarides reinforcing that Omura’s final attitude depended on the amount Kolback could furnish to the venture at the beginning of the first stage -- 80 of 209 -- 71 without using the land for security purposes. On 18 June 1992 Nagano wrote to Bond about pursuing the question and on 19 June 1992 Nagano again wrote to Bond saying that he was confident he could get Omura to execute the agreement if Kolback could prove that it could fund $12-15M for the first stage from finance secured by Coomera’s land and Kolback’s own assets. Morris Fletcher & Cross replied to Feez Ruthning to the effect that Pitt would speak directly to Bond in relation to the funding question. On 19 June 1992 Nagano also advised Bond that Omura’s intention was to secure the necessary funds so that the project was not suspended after commencing. He would be satisfied if Kolback proved it could raise $12-15 million using Coomera’s land and its own assets. Despite inquiries of Japanese banks, he had not been able to check Kolback’s reputation. He said Omura “trembled to think how to make sure” how Kolback could find the money. On 19 June 1992 Lazarides sent a fax to Nagano to the effect that following a meeting with Pitt that morning the drafting of the venture agreement and the project management agreement was complete. The fax continued:- “The one outstanding matter, is what you raised in your fax to Bond san regarding the amount of funds Kolback is to bring to the venture without security on the land. This of course is a new direction because our discussions and negotiations with Kolback for the last several weeks have proceeded on the basis that, while Kolback was responsible for securing the loan funds, the land would be made available as security. Of course the advantage which CR has extracted for putting the land up as security is a pro-rata arrangement, ie, that CR is to receive out of the net proceeds ahead of the other payments a pro-rata amount for the land based on an “inflated” value of the land ($20,000,000 as opposed to its market value of $12,000,000 or less).” The fax then went on to express views about advantages accruing to Coomera and the way in which, in accordance with Australian practice, Kolback might react making the deal far less commercially attractive. On 22 June 1992 Pitt faxed to Dietz a draft letter to Bond concerning funding asking for comments if Dietz had any to offer. As this letter is one upon which reliance is placed by Coomera -- 81 of 209 -- 72 in connection with aspects of the relief concerning misrepresentation it is necessary to quote at length from it. The relevant parts are:- “I appreciate the concern of Mr Omura regarding funding. I am sure that we can satisfy that concern. Kolback is a company of substance with assets and creditably (sic). Apart from our Highland Park operation Kolback has substantial assets which include investments in the waste disposal industry that generate significant income. Although a comparatively small company many prominent institutions and investors are shareholders. Among our holding company Board of Directors are two civil engineers and two finance professionals. The directors of Kolback do not offer the parent company’s guarantee lightly. Kolback does not favour debt. The company’s debt has been reduced by approximately 75% in the past eighteen months. We have never done any business with a Japanese Bank and this is perhaps why they are unable to provide a reference. We have had a long and friendly relationship with Shimizu. Mr K Inomata, Shimizu’s previous managing director in Australia may give a reference to Kolback and myself. You already have a copy of a reference from Kolback’s previous partner, Elders Finance Group. Kolback is a public company listed on the Australian Stock Exchange. Kolback understands that it is to introduce and guarantee the funding using the land as security. It is also understood that the only amounts to be secured by the land will be project expenses and not include interest or any other liability incurred by Kolback. Kolback’s initial commitment is to fund $12.0 million to enable development of the business plan, construction of advanced infrastructures and the first stage of commercial development. Thereafter and up to $20million the funding is to be introduced by Kolback subject to commercial viability of any particular stage. It may be that the financier gives an approval for the first $12 million subject to commercial viability of the business plan. This may not be a bad thing for all parties. I am confident that it will prove to be viable and look forward to maximising profit. Regarding the funding. We are having discussions at a senior level with officers of Metway Bank Limited. Not only for the project finance but for a package which will include banking and administration services, a loan to Coomera Resort for golf course construction, public authority guarantees and most importantly finance for individual purchasors.(sic) Metway Bank is based in Queensland and is one of the few financiers not to have suffered during the property downturn and is now looking to take advantage of the property cycle. -- 82 of 209 -- 73 Negotiations with Metway are proceeding most satisfactorily. To obtain the best overall package for all concerned it is necessary to proceed step by step. Please advise me if you require any further information. If Mr Omura is concerned about availability of funding it would be possible to allow for termination if Kolback were unable to introduce funding 60 days after presentation of the business plan. However I remain confident that finance will not be a problem. Kolback does have the ability to introduce funds itself but is in the process of re structuring its finances as part of a program that will hopefully see it debt free by the end of the calendar year. Such a debt reduction adds substantial value to the guarantee by Kolback in support of Coomera Resorts security. I repeat that Kolback does not give its guarantee lightly and would not have proceeded to this point if it were not confident of raising the funds.” After that, further negotiations and drafting were carried out. On 3 July 1992 matters had reached a stage where Pitt wrote a memorandum to the directors of Kolback saying that all outstanding matters that could be resolved “from both parties ambit claims” had been settled. He recommended that Kolback proceed with the transaction. On 6 July 1992 Nagano sent a fax to Bond. The gist of it is that Omura wanted to secure enough funds for the project and that Kolback should mortgage its assets at the same time Coomera mortgaged its, as well as giving a guarantee. Nagano suggested to Bond that Lazarides might provide a letter explaining how a financial institution would approach the question of sufficiency of security. He also asked if Pitt would provide a list of assets which would provide security for the project. Bond made a copy of Nagano’s fax available to Dietz to pass on to Pitt. In his covering note to Pitt he said the following:- “ ... Mr Omura keeps getting back to this matter, his concern as expressed previously is the manner in which loan funds are to be secured. It needs to be explained to Mr Omura how the Coomera land which may be valued at say $10 or $11 Million would secure a peak debt of say $12 to $15 Million. Would additional security be offered or would the improved value of the subject property after certain works are completed satisfy the lender. We believe that this is the last remaining point of the venture agreement that needs to be clarified.” -- 83 of 209 -- 74 On 6 July 1992 Lazarides replied to Nagano’s fax. The relevant passage is the following:- “I think it is probably unrealistic to expect Kolback to stipulate now which assets it is prepared to put up as security. It would not be unusual for Kolback assets to already be “charged” under a floating debenture in favour of its bank to secure its normal business overdraft. In any event, a financier to the Project may or may not want additional specific security from Kolback - it might be quite content to rely on the Kolback guarantee as additional security, but that is a decision that only the financier can make. There seems to be little point in trying to second guess now what requirements the financier may have. Also clause 9.1 does require Kolback to procure “all finance for the Venture as and when required for the Venture in accordance with the Business Plan.” He then went on to suggest that the problem might solve itself in practice in any event. If the financier required more security that would be known relatively early and would force Kolback to deal with it. Kolback would be in a position where it might have to provide additional security or forego the venture entirely. On 7 July 1992 Pitt wrote to Bond. Amongst other things he pointed out that Kolback had not at any time agreed to mortgage its assets in favour of the venture. It had offered to obtain the funding and to provide the guarantee from KGL which in itself included the support of all Kolback’s assets and shareholders funds. Pitt also said that from his discussions with Metway, Metway preferred to keep its initial exposure to $1,000,000 while it appeared that favourable consideration would be given to the total package of funding when the business plan proved the feasibility of the development. He said that Metway had some initial concern in relation to the $2,000,000 for golf course construction and would like to see the concept refined during the business plan stage. Then, almost ad misericordiam, he referred to the concessions he had made in Coomera’s favour, the lack of capacity to make further concessions and the risk of jeopardising his relationship with his directors, the financiers, the local authority and others if the deal did not proceed. The following paragraph also appears:- -- 84 of 209 -- 75 “If Mr Omura is concerned at the Kolback balance sheet in respect of the guarantee then he can be satisfied as many of the “intangible” amounts relate to asset values including the Highland Park development, over and above book values.” He then went on to spell out that Kolback’s initial commitment was to raise $1,000,000 for the business plan stage. The second commitment was to raise funding for the infrastructure costs and first stage of development to a total of approximately $11,000,000. Thirdly it was to raise additional funds to make up a minimum total of $20,000,000 providing that such new stages of development were commercially viable. He said “Metway have no problem with this concept providing the business plan indicates the viability of the investment.” On 7 July 1992 Nagano advised Bond that everything had been made clearer to Omura and that an appointment with the Australian Consul to execute the Power of Attorney under which the agreement would be executed was fixed for the next day. With respect to the submission that Omura was financially desperate it was submitted that Hoko’s financial position had improved after March 1992 when a large number of shares were sold and that even if it were desperate, reliance was not negatived by that fact. Indeed Coomera would be even more intent on obtaining a financially stable joint venturer. With respect to the suggestion that Coomera had financial information from which it could check Kolback’s financial capability it was submitted that there was no evidence that that material had been brought to Omura’s attention at any relevant time. With respect to the passage of the letter in which the prospect that Kolback might be debt free was discussed, the points were made that the letter did not mention historical bank debt, merely debt; the new bank debt would not add to the value of the guarantee; the board decision was to borrow up to $9.5M; the money was fully budgeted for and there were no plans to enable repayment of the convertible note holders; the letter referred to a $6.25M draw down, contrary to Pitt’s suggestion that the money was not really needed. While Pitt conveyed in evidence that he fundamentally disagreed with the decision to borrow, he had signed the subsequent applications for -- 85 of 209 -- 76 finance and the rights issue which raised capital for the group came only after a series of rejections from financial institutions and critical comments about the attitude of financial institutions. (I comment that Pitt’s comments on these rejections are hard to reconcile with the notion that he did not really wish to have the financial facility approved. At best, Kolback’s intention was to have a manageable amount of bank debt by the end of 1992.). 36. Representations Concerning Guarantee The considerable debate about the nature of the representation about the guarantee is in my view not of critical importance. The reality of the situation is that such evidence as there is on the subject suggests that Metway as the prospective financier would not have conducted the same kind of minute scrutiny of Kolback’s accounts as was attempted in the financial and environmental and valuation evidence. It would have taken a more panoramic view of the situation. Omura was concerned about Kolback’s ability to generate sufficient finance for the project without risk to Coomera’s assets or funds. This was a theme recurring throughout the negotiations and correspondence preceding the execution of the venture agreement. It is probably the case that Omura did not fully understand what was involved in the guarantee to be offered since he appears to have clearly understood it for the first time some time after the agreement was entered into. The better view is that looking at the matter objectively it would not be a reasonable view to construe the letter as meaning that Kolback would be able to provide backing for the whole of the funding itself. The submission that what was really being conveyed was that Kolback was confident that a financial institution would be persuaded to accept KGL’s guarantee is well founded. 37. Debt Reduction -- 86 of 209 -- 77 It is true that Kolback had reduced its debts significantly over the preceding 12 months or so. However that was achieved by a capital raising and sale of assets which had been acquired for the generation of long term profits. The letter to Omura conveyed that Kolback was engaged in a debt reduction program which, hopefully, would see it debt free by the end of 1992. At the time the letter was written the board of Kolback had decided to seek funding, in effect to extinguish its existing debt to Tricontinental and for other purposes related to business operations. However the money was to that extent to be obtained by incurring an equivalent amount of debt to the new financier. Some of it was to be used to acquire assets and for business purposes. Further, no provision had been made in that plan to enable payment to be made to the note holders from the borrowings. What was contemplated at the time of the letter of 22 June 1992 was not calculated to further reduce the overall bank debt significantly even if viewed in terms of historical bank debt. The explanation that the letter was intended to convey that historical bank debt was being reduced is unacceptable in the context of the whole letter. It is hardly of any consequence to say in a letter which addresses an expressed concern about the financial capacity of the company to successfully undertake fund raising that existing debt to a bank is being replaced by a similar amount with another bank even if it is more reputable. The notion that the debt reduction under the restructuring programme would hopefully see Kolback free by the end of the year was, at that time, not in accordance with the reasonable probabilities of the situation. Pitt’s explanation that he did not agree with the decision of the majority of the board to seek funds by borrowing and the implication that the letter reflected his view that it was not necessary and that a different strategy was appropriate is no answer to the submission that that part of the letter is misleading or deceptive. The submission that the only vice in it was that Pitt had not said that it was his personal minority view that Kolback should be pursuing that line calls for no comment except that for the purposes of negotiating the transaction Pitt was Kolback’s spokesman -- 87 of 209 -- 78 and there was no reason why a person reading the letter would not justifiably conclude that he was speaking of the actual state of Kolback’s affairs. 38. Was the Company one of substance and credibility? -- 88 of 209 -- 79 Coomera submitted that Pitt’s statement that Kolback was a company of substance with assets and credibility was at 22 June 1992 false or misleading. A statement in those terms involves value judgments rather than application of objective criteria. That does not necessarily exclude the possibility of the statement being false, or misleading or deceptive. The phrase implies that the company has qualities such as resources and a financial state which entitle it to be described as a company of substance with assets and credibility. Credibility may also connote that it can be relied on to perform its obligations. Omura understood Kolback to have these qualities when he made his decision to proceed. It was submitted that Pitt’s evidence that he had an honest belief that that was the case should be disbelieved because he knew at the time that Kolback was dependent on refinancing or forbearance to avoid defaulting on repayments to Tricontinental and to the note holders as they fell due. He also knew that his salary was over $100,000 in arrears at that time. Events throughout 1991 were relied on by way of background to establish that he was aware of the precarious state of the company. In February 1991 Hewson had reported that the group only continued to operate on the proceeds of a million dollar share placement in September 1990 and with finance from its consultants, senior employees, solicitors, accountants and convertible notes. Pitt quibbled only with the word “only” in that statement. In May 1991 Tricontinental had imposed strict limits on expenditure for the group including a requirement for a programme for disposal of assets and the direction of proceeds to Tricontinental. The immediate problem was alleviated by selling assets acquired for long term income generation rather than non-income producing assets such as the landfill site at Wetherill Park. In November 1991 Tricontinental had withdrawn the concession allowing interest to be capitalised. It was also submitted that the endorsement of cheques payable to Kulim Limited to Tricontinental rather than having them pass through another bank account was indicative that if the cheques had been paid to Kulim’s account the other banker might not have allowed the amounts to be drawn. Whilst accepting the force of Mr Chesterman’s submission in that -- 89 of 209 -- 80 regard, an explanation was given which leads me to conclude that that particular inference ought not to be drawn to the required degree of satisfaction. Pitt’s belief that by June 1992 Kolback’s difficulties were behind it reflected a belief that any liabilities at the time were well managed and the company had sufficient means to meet them. Contemporaneously with this, however, applications were prepared to financial institutions seeking moneys for payment out of Tricontinental’s debt and for other purposes, which did not include provision for paying the note holders. The relevant time for considering the true state of affairs is the time when the letter was written. However his reaction to the rejection of the applications for finance subsequently to that date does not suggest that he believed that the money sought was unnecessary. Further, a component of Pitt’s belief in the financial standing of Kolback is the value of $21.9M being placed on assets in Epoch, Highland Park and Wetherill Park. Reasonably contemporaneous documents, even allowing for the influence of negotiating positions on some of them, suggests that there were serious qualifications on that figure and that it was unrealistically optimistic to expect that a figure anywhere near $21.9M could be obtained even allowing for a reasonable margin for error of judgment or opinion. The valuation evidence relating to Wetherill Park came from three valuers. The evidence from Mr McRae was not as impressive as that from Mr Retallick and Mr Howes. Their evidence coincided in important respects, with the major point of difference being the effect that the need for remediation would have on the price obtainable for land which was affected by leaching and gas emissions, and an artificial hill on the site. As with most valuation evidence where methods other than comparative sales comparison are used, there is room for genuine difference of opinion. There was a good deal of evidence from environmental engineers. I prefer the evidence of Mr Amaral to that of Dr Colenbrander on subjects upon which they conflict largely because of his knowledge of the relevant land. With respect to the gas emission evidence, I am satisfied that remedial work would be required to meet necessary environmental standards. I do not, however, think that the level of expenditure -- 90 of 209 -- 81 suggested on behalf of the plaintiff would be necessary. The evidence relating to the flow of leachate was widely divergent. The nature of the evidence was such that I have some difficulty in finding that it forms a satisfactory basis for making any finding of the extent of the problem with confidence. The ultimate conclusion on the valuation evidence, on the basis of this body of evidence as a whole, is that the value of $20 per square metre for the land without remediation is on the high side. A figure in the vicinity of no more than $5 million would be the highest that I would be prepared to assign to the whole of the Weatherill Park land at the relevant time. This view confirms the conclusion expressed above about the realistic view of the assets at the relevant time. There is no doubt in my mind that Pitt thought he had secured a good deal for Kolback in negotiating the prospect of the joint venture. The vigour, subsequent to the joint venture and notwithstanding that it was in place, with which he attempted to satisfy Omura’s doubts, desires and demands illustrates this. I am also satisfied that Pitt was always bullish about projects in which he was involved. No doubt a highly positive attitude is a good attribute for a businessman to possess. However when such attitude results in statements being made which cannot be objectively justified having regard to underlying facts, an assertion that the maker honestly believed that they were accurate runs the risk of being disbelieved. Objectively it was not correct to describe the company as one of substance with assets and credibility at the time that the statement in the letter of 22 June 1992 was written. Looked at objectively it was deceptive and misleading, even allowing for the fact that the phrase is somewhat metaphorical. 39. Representation of capacity to introduce funds -- 91 of 209 -- 82 Coomera’s submission is that the representation contained in the statement that Kolback had the ability to introduce funds itself was false. If it was a statement of fact it was incorrect. If it was an expression of an opinion then it was an opinion that could not have been honestly held by Pitt. It was submitted that there were two aspects. The first was whether Kolback had a present ability to introduce funds from its own resources. The second was that it had a present ability to raise funds on the market or from shareholders. The same arguments were relied on as were relied on in relation to the company being a company of substance and credibility in relation to the ability to introduce funds from its own resources. It was submitted that at 22 June 1992 Kolback had pressing financial commitments which had to be met. The funds applied for from NAB as a result of the Director’s meeting of 9 June 1992 were, with the exception of about $350,000, not optional. There was no provision for refinancing convertible notes due to mature in December 1992. The Board had noted that an equity raising might be necessary if finance from NAB was not forthcoming but no steps had been relevantly set in train to pursue that option. The moneys sought by Kolback from the banks were for its own businesses and in part to refinance existing debt. This was not consistent with surplus resources being available to devote to the venture. The submissions also referred to subsequent events. I treat those as relevant only to the extent that they shed some light on the state of mind of the company at the time when the application for funds from NAB was considered and the letter of 22 June 1992 was written. In this category is a submission that Kolback’s attempt to renegotiate the venture agreement in early 1993 was indicative of inability to raise funding in accordance with the venture agreement. These events were some six months after the letter of 22 June 1992 was written and Kolback’s rejection by financial institutions had by that stage become known. The only use that the evidence can be put to is to reflect the submission that, in June 1992, without an injection of funds from an external source, Kolback could not have raised the necessary funds to fulfill its obligations. -- 92 of 209 -- 83 The problem about finding that, in isolation, the statement is false or misleading or deceptive is that it does not, in context, suggest that any particular amount of funding was available to be introduced and that the reference to the debt reduction program suggests that while it had the ability to introduce “funds” (not “the funds”) the preference was to concentrate on the program to reduce debt. Further, having regard to the adeptness, born of necessity, that Kolback had developed to remain viable, it is as likely as not that some means of providing funding, in some amount, for the project would have been found by juggling its obligations for as long as possible to allow the project to proceed. The nature of the “debt reduction” is a separate matter, but so far as the discussion of ability to introduce funds is concerned, the statement is not to be regarded as false or misleading or deceptive. 40. Reliance The relevant principles relating to reliance are set out in the judgment of Wilson J in Gould v. Vaggelas (1983) 157 CLR 215, 236. While that was a deceit case, similar principles apply where a breach of the Trade Practices Act is alleged. (Sutton v. A.J. Thompson Pty Ltd (In Liq) (1987) 73 ALR 233; Kabwand Pty Ltd v. National Australia Bank Ltd (1989) ATPR 40-950). The passage establishes that if a representee does not rely upon the representation he has no case even though it may be false and fraudulent. If a material misrepresentation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation. The inference is rebuttable. The representation need not be the sole inducement. It is sufficient so long as it plays some part, even if only a minor part, in contributing to the formation of the contract. This proposition is also to be found in the judgments of Gibbs CJ, 219, Murphy J, 231-2 and Brennan J, 250-1. -- 93 of 209 -- 84 The primary focus of Coomera’s submission was that Pitt’s letter of 22 June 1992 to Omura and in particular the statements that Kolback was a company of substance and credibility and that it was in the process of restructuring its finance as part of a programme that would hopefully see it debt free by the end of 1992 was relied on by Omura in deciding to enter into the venture agreement. That letter had been preceded by a letter from Nagano to Bond which Pitt had been given and which he accepted showed Omura was concerned about how much money Kolback could bring to the deal. Accordingly the letter of 22 June 1992 was an attempt to allay Omura’s concerns even though the notion of the land not being made available for the initial finance was contrary to previous discussions. While Omura could not say precisely when he read the translation of Pitt’s letter I am satisfied on the balance of probabilities that he had read it prior to the signing of the agreement. Omura was cross-examined with a view to isolating specific parts of the letter upon which he had relied. With varying degrees of directness he referred to the statements that Kolback had substantial assets and standing, that it was listed on the Australian Stock Exchange, that it could raise $20M and that the joint venture could be dissolved if funds were not raised. Embedded in this cross-examination was a statement that he believed the document as a whole. He was not directly confronted as to whether that was true. Counsel for Kolback chose to approach the matter more obliquely by asking whether there were “any particular parts ...... that mattered more than others” and to rely on the answers given to submit that reliance could not be established outside these matters or at all. It is artificial to view the letter of 22 June 1992 in isolation from the rest of the correspondence which led up to the signing of the venture agreement. The correspondence is summarised above. Some attention was focussed on a Dun and Bradstreet report which was in Omura’s possession in June 1992. Its analysis excluded an item of “intangibles” shown in the most recent financial statements. This item was explained in evidence as representing the difference in value between -- 94 of 209 -- 85 assets taken into KGL and the book value of those assets when they were taken into the parent company. The exclusion of this item by Dun and Bradstreet produced a less favourable view of the company’s financial position. It is true that the material concerning Kolback in Hoko’s possession was comprehensive and that there is an analysis by Nagano of aspects of it. However the rating of the company as having an overall credit risk score of 4 which meant “proceed but monitor” and was the lowest positive assessment on the scale was hardly likely to allay Omura’s entrenched concerns about the capacity of Kolback to provide or obtain the anticipated funding requirements. The correspondence shows that Nagano had passed on to Bond and indirectly to Pitt Omura’s continuing concern over how the loan funds were to be secured, especially in the context of the current actual value of the land and the expected level of debt which exceeded that value. Pitt’s response of 7 July 1992 takes up the question of the effect on the balance sheet of the intangibles. Pitt was asked whether he was aware of the Dun and Bradstreet report at the time he wrote the letter, which he denied. However the focus on the intangibles in the letter of 7 July 1992 seems to suggest that he must have been aware that they needed specific explanation to Omura even if he was not aware of the report itself, especially as he pointed out in evidence that intangibles were explained in notes to the accounts. On the balance of probabilities I conclude that one of the objectives of the letter of 7 July 1992 was to reinforce the impression created in the letter of 22 June 1992 that Kolback’s asset position was such that it could adequately raise the necessary funds. I am satisfied on the balance of probabilities that Omura relied on the statements in the letters of 22 June and 7 July 1992 in making his decision to enter into the venture agreement. -- 95 of 209 -- 86 41. Contravention of Section 52 of Trade Practices Act The statements that Kolback was a company of substance with assets and credibility and that it was in the process of restructuring its finances as part of a program that would hopefully see it debt free by the end of 1992 were misleading. There is nothing in the overall context of the letter which detracts from the impression the words would create in the mind of the reader. This is a contravention of Section 52 of the Trade Practices Act 1974. The remedies to be given will be discussed later in this judgment. 42. Deceit To establish this tort it is necessary to prove that, at the time a false statement was made, the person making it either knew it was false or made it recklessly, not caring whether it was true or false (Derry v. Peek (1889) 14 App Cas 337). Pitt gave an explanation of the statement that Kolback would hopefully be debt free by the end of the year to the effect that, in discussions with Bond, he had discussed this in terms of Kolback’s historical bank debt. Subjectively, he was referring to that when he wrote the letter of 22 June 1992. That statement would not have been clearly false since there was a process under way which hopefully would have replaced the Tricontinental debt with debt to a more reputable bank. Pitt’s position was that he expected the statement in the letter to be read in the light of the prior discussions. He denied that he had deliberately misstated the position. A person not conversant with the prior conversations would not read the letter in that way. However, there is nothing in the evidence establishing that Pitt had not discussed the debt in that context. Where it is necessary to prove that a statement is deliberately false or recklessly made, regard should be had to the meaning intended by the maker if the explanation is not so unreasonable or unrealistic as to not be fairly open. In the circumstances, I decline to make a finding that statement that the statement was deliberately false or reckless. -- 96 of 209 -- 87 The second statement to be considered is that Kolback was a company of substance with assets and credibility. The critical question is whether, having regard to the finding that the statement was objectively not correct, it was made deliberately knowing it to be false, or recklessly. These two concepts involve a mental element. The person making the statement must either know the statement will be false if made but still make it or, realising it may be wrong, makes it without caring whether it is true or false. If the person asserts he has neither of these states of mind but the true facts are widely divergent from what has been said, a tribunal of fact may be persuaded that the inference should be drawn that one or other of the states of mind exists. However, the drawing of such an inference is not inevitable. Other factors may indicate to the contrary. Often it will be easier to draw the inference if what is said relates to an objectively verifiable fact and is wrong. Where what is said is stated as a fact but it is really a conclusion drawn from a number of variables it will often be more difficult to infer that one of the necessary states of mind existed. The margin for honest error increases. Further where the words used express qualities rather than objective facts, the subjective reason for using the words must also be taken into account. While upon an objective view of them they may be false the question still is whether the inference that one of the necessary states of mind accompanied them when they were said. In the present case, there is the additional factor of Pitt’s high level of self-confidence which resulted in a mindset that was, effectively, that the difficult was achievable, even if a detached observer may have serious reservations in a particular case. Having regard to the combination of those circumstances, and keeping in mind the seriousness of the finding, I am, after some fluctuation, not persuaded to the required standard of proof that the statement was made with knowledge that it was false, or recklessly. A conclusion of this kind is not inconsistent with a finding that according to objective criteria the statement was misleading. -- 97 of 209 -- 88 43. Repudiation by Refusing to Provide Correspondence with Metway -- 98 of 209 -- 89 This aspect revolved around Clause 24.1 of the venture agreement. Coomera argues that Pitt deliberately concealed information concerning the negotiations between him and Metway, that he did not advise of information he had obtained about the terms upon which Metway was prepared to lend and that despite requests for information he gave information only selectively and, in one letter, refused to do so on the basis that discussions between Metway and him were confidential. It was submitted that the manner of concealment and the distortion of such information as was supplied was a repudiation of the contract by reason of the refusal to comply with cl.24. The evidence indicates that in addition to the correspondence there were conversations between Pitt and Ikeda. Kolback’s case was that Ikeda had been kept sufficiently informed and that in any event had made an arrangement with Pitt that joint consideration would occur only when an approval issued from a financier in the form of a draft letter of offer. Kolback also submitted that none of the correspondence which, on its face, is a request for information about the state of Kolback’s efforts to obtain finance specifically asked for copies of correspondence. The written submissions develop the argument that it was reasonable in all the circumstances, and in accordance with the arrangement with Ikeda, not to provide the correspondence. The difficulty about accepting this is twofold. Firstly, Pitt did not rely in his evidence on the existence of the agreement, although the implications of its existence of which were developed at length in the written submissions as a justification for not providing the information. Secondly, his evidence both by way of positive assertions and his inability to advance any reason for not providing the correspondence was unconvincing. I am satisfied that during the period relied upon which covered essentially the second half of 1993 he was attempting to conceal from Omura that he was having difficulty in obtaining from Metway an offer which conformed with the venture agreement. Repudiation can occur if a party evinces an intention to be no longer bound by the contract or shows that he intends to fulfil it only in a manner substantially inconsistent with its obligations. In such a case the innocent party is entitled to accept the repudiation with the effect -- 99 of 209 -- 90 of discharging himself from further performance. Damages may flow (Shevill v Builders’ Licensing Board (1982) 149 C.L.R. 620). The difficulty with Coomera’s submission is that Omura did not purport to accept the repudiation assuming that there was one. He must have been aware that information of the kind which he was seeking was not being provided during this period but nevertheless continued to negotiate both within and outside the confines of the venture agreement for many months beyond that time. Therefore, repudiation in this respect accepted by Coomera, has not been established. 44. Repudiation by Withdrawing Application for Interest Guarantee This submission has its genesis in a letter of 25 August 1993 in which Metway informed Kolback that it was prepared to discuss the question of an interest guarantee but did not favour such proposal because it believed Coomera should take the commercial risk. Coomera’s case is that Pitt deceived Omura as to Kolback’s financial position in order to obtain deletion of the clause (Cl. 9.4) and withdrew its application to Metway for the guarantee on the false premise that there was an agreement on the issue when Kolback’s board had not approved the terms of the Deed of Co- operation and Further Assistance discussed at the September 1993 MCM and that the funds had not been sought in accordance with it, in any event. It was submitted that this was an abrogation of Kolback’s obligations under the venture agreement to provide such interest security and evinced an intention not to be bound by the terms of the venture or any variation of it. The matters relied on in support of this proposition were discussion at the September 1993 MCM in which Pitt is recorded as saying that Kolback was debt free. In previous correspondence with Ikeda this subject had been discussed on the basis that bank debt was being spoken of. It was submitted that the purpose of the guarantee, having regard to cl. 9.4 was to protect Coomera in the event of Kolback defaulting in paying interest. Kolback had not told Coomera of Metway’s attitude as conveyed in the letter of 25 August 1993 and Pitt had tried at the September 1993 MCM to -- 100 of 209 -- 91 persuade Coomera to allow the interest guarantee to be deleted. It was submitted after that meeting Pitt withdrew the request to Metway for the interest guarantee on the basis that it was not required, not that Kolback would make other arrangements. It was also submitted that it was significant that the application for funds in conformity with the Deed of Co-operation and Further Assistance was not made simultaneously with withdrawal of the request for the guarantee. Kolback submitted that Coomera’s submissions were a distortion of reality. The sequence of correspondence and contact between the parties showed that there was no repudiation on the part of Kolback in seeking that Cl. 9.4 be deleted. The proposal was only made, and understood as being made, as an integral part of the proposal to obtain $14.5M for golf course funding as contemplated in the Deed of Co-operation and Further Assistance. Coomera had insisted and Kolback had agreed that the deletion was conditional upon the implementation of the proposal in the deed. I am satisfied that the discussion at this time of deleting the interest guarantee was and was understood to be within the framework of the proposal in the deed. The transcript of the September 1993 MCM records discussion about the relationship between removal of the requirement for the interest guarantee and the raising of the $14.5M golf course funding contemplated by the deed. The process of settling the minutes and subsequent discussions on the subject support this understanding. It is true that it appears that Pitt did not take the Deed of Co-operation and Further Assistance to his Board for formal endorsement. However the reality is that whatever its status was - and the minutes do not suggest that Omura was not in agreement with it despite the fact that he has not formally signed it - the fact of the matter is that negotiations took place on the basis of it until it was subsequently abandoned and other possibilities explored. In view of the subsequent dealings between the parties after this proposal collapsed, I am not satisfied that there was a repudiation and in any event if there was it was not accepted and acted upon by Coomera. 45. Repudiation by Failing to Obtain Conforming Offer -- 101 of 209 -- 92 Coomera’s submission is that where a party unjustifiably manifests by words or conduct an inability to provide the other party to a contract with the benefits the other party expected there is a repudiation of the contract. This is not dependent upon intention not to carry out the contractual obligations. The fact that the person is unable to do so and thereby prevents the other party from receiving what he bargained for is the critical event. The matters relied on in support of demonstrated inability to carry out Kolback’s obligations under the agreement were the following. Firstly from July 1992 to August 1994 Kolback had not obtained an offer of finance from a lender that conformed with the venture agreement. Kolback only ever intended to borrow funds and did not intend to pursue other avenues of funding, according to Hewson. If an equity raising had been considered by Kolback substantial procedural steps were necessary and had not even begun or been contemplated by August 1994. The prospect of equity raising succeeding was improbable given the proportion of market capitalization which would have to be sought. Secondly, Pitt said that from June 1993 onwards, Metway was the only financier prepared to consider funding the project. However, Metway at no stage made a decision to lend funds to Kolback in accordance with the venture agreement. Thirdly, the offers made proposed a conventional loan where interest and principal were both secured by the land. There was no credible evidence that Metway was ever likely to make a loan in terms of the venture agreement. Brown’s evidence was that that decision to make a loan of the kind sought would have to be made by Metway’s Board which had not considered the application by the time Coomera purported to terminate. But in any event no prudent lender would have agreed to lend money to Kolback on the basis that the lender had to rely solely on Kolback for payment of interest. It is literally correct to say that from July 1992 to August 1994 Kolback had not obtained an offer of finance from a lender that conformed to the venture agreement. However to take that statement at face value misrepresents the true state of affairs. Since the relationship between Coomera and Kolback during that period is characterised by attempts to arrange financing not in -- 102 of 209 -- 93 conformity with the venture agreement, principally to satisfy Omura’s desire to build the golf course, these divergences from the obligations under the venture agreement cannot make out a case that Kolback was dilatory to the point of repudiation in seeking finance in accordance with the venture agreement. Pitt was very attentive to attempting to obtain finance as is demonstrated by the summary of what happened in the Appendix. It is also correct to say that none of the offers made by Metway conformed with the venture agreement, generally because of the content of the various applications placed before Metway pursuant to the various proposals pursued from time to time. Having regard to this, the critical period for the purpose of assessing whether there was a failure to obtain a conforming offer is from about 12 April 1994 onwards since it was then that the suggestion was made that the venture be terminated if finance could not be obtained and that the golf course financing and venture financing be treated as separate issues. A detailed analysis of events in this period is contained in the Appendix. By the time Coomera’s Notice of Termination was delivered, Pitt’s negotiations with Metway had reached the point where cl.8 of Metway’s offer required the “borrower” (Kolback and Coomera) to pay interest but acknowledged that under the venture agreement Kolback was liable to pay interest and Metway agreed not to seek payment of interest from Coomera. Pitt’s letter of 27 July 1994 advised Metway that Omura was concerned that if Kolback defaulted on payment of interest there was potential for the interest to be capitalised against the land. Pitt expressed the view that while the provision was an improvement on previous provisions it did not fully satisfy the requirements of the venture agreement. Pitt said that Kolback and KGL had undertaken to prepay 12 months interest in advance. KGL had the capacity to guarantee payments but he suggested that it was not necessary and may cause complications. In his comments on Coomera’s concerns with respect to specific clauses he said the following under the heading cl.8.2 - Compounding of Interest: -- 103 of 209 -- 94 “CR wish to have this clause deleted as it is contrary to the commercial terms of the joint venture agreement in that Kolback is to be solely responsible for interest. Is it possible to accommodate CR by Kolback satisfying Metway’s requirements separately outside the letter of offer?” This letter is dated 28 July 1994, the date nominated unilaterally by Omura as the date by which he wished to receive Metway’s response. Pitt had pointed out that because of the internal processes necessary within Metway that date might not be feasible. At a conference on the same day Pitt and Brown had discussed a proposal about a separate security being provided in order to overcome the capitalisation issue. Brown was prepared to recommend it but it was accepted that the final decision could not be made by him. There is a total absence of evidence from persons who would have been involved in making the decision had they been asked to do so. The only evidence bearing on the question comes from Mr Graham, a merchant banker, who said essentially that no prudent bank would lend money on the basis that one of the borrowers would not be liable to have interest capitalised against it. Mr Morrison took the stance that this evidence was not worthy of cross- examination if relevant at all. It was submitted that Graham’s experience did not include dealing with a lending proposal like the present and that he spoke only from general experience and did not profess to be an expert in the field. Mr Morrison submitted that on the other side of the balance Metway had actually entertained the proposal and had got to the point of considering the issue of a separate security to avoid Coomera’s concerns about capitalisation of interest. So far as the sufficiency of the security contemplated from Kolback was concerned, Brown’s view was that if a deposit of cash was forthcoming no further inquiry would be necessary. If Metway were required to issue a bank guarantee in favour of Coomera the security for that guarantee would need to be provided by Kolback or Kolback’s banker by way of cash or bank guarantee. The point made was that the question of acceptability of Pitt’s proposal was still a live issue, under consideration by -- 104 of 209 -- 95 Metway’s solicitors with a view to seeing if it would be put in a form acceptable to Coomera. The absence of evidence (apart from Mr Graham’s which is unsatisfactory as assistance on the issue) as to what may have been the outcome of the negotiations I am not prepared to draw the conclusion that the proposal must inevitably have been rejected, and Coomera’s submissions on this point fail. However, having said that, attention is drawn to the chapter “Would the Agreement have Proceeded” later in the judgment. 46. Breach of fiduciary duty/contract - Kolback, KGL, Pitt Once the venture agreement was in operation, Kolback became subject to obligations under it. The most relevant are that the relationship between the venturers was acknowledged to be of a fiduciary nature (cl 13). The venturers covenanted to be just and faithful in all transactions relating to the venture and to inform the other venturer of things concerning the venture “of which they may have become possessed” (cl 24). Of less direct relevance in this context, but relevant to the nature of the relationship contemplated by the parties, is the covenant to cooperate in the venture business and to use best endeavours to ensure its success (cl 12). A number of allegations were pleaded which may be conveniently considered under this heading. To gain the appreciation of the relationship between the venturers which is necessary to put them in context the detailed summary of events in Chapters III to X of the Appendix has to be read. The matters pleaded are the following:- (a) That Kolback sought to slow the progress of the venture in various particularised ways until it and KGL were in a sufficiently improved financial position to be able to accommodate the burden of taking on finance for the joint venture. The acts of delay were alleged to be proposals to vary the agreement to allow for the building of the golf course and the failure to pursue finance for the joint venture between August 1992 and mid-1993. -- 105 of 209 -- 96 It was alleged that it was a breach of fiduciary duty and a breach of cll.24 and 13 of the venture agreement not to inform Coomera of the ulterior reason for the delay. The allegations in this regard are fundamentally flawed and untenable. Omura had a dream of building a golf course. At the time when the venture agreement was executed, Omura had problems of a financial nature and with the FIRB which made it attractive to enter into a venture with what he had reason to believe was a sound company with previous development experience. Kolback also had good reason to ensure that a project which was anticipated to provide a good return over a period of years did not fail. I am not satisfied that the divergence from the narrow joint venture concept was entered upon by Kolback for the purpose of delaying the day when funding would have to be provided. I am satisfied that Omura was a willing participant in the exploration of ways in which the golf course might be built which, as the detailed analysis in the Appendix shows, was the focus of efforts, without demur, on both sides for almost the whole of the life of the venture. (b) That Kolback failed to disclose that at all times between 9 July 1992 and 3 August 1994 it had neither sufficient funds nor the capacity to provide and maintain the interest security from its own resources. It was alleged that this was in breach of its duties under cll. 24 and 13 of the agreement, and in breach of the Trade Practices Act. This is a claim that Kolback engaged in conduct that was misleading or deceptive by failing to disclose that it was incapable of providing the interest security and that it was in breach of its obligations of disclosure under the venture agreement. It is based on the proposition that Kolback’s financial state was such that it could not perform its obligation with regard to the interest security. There is no doubt that Kolback was in a precarious financial state which varied in intensity for much of the period. In the early part, it was unable to obtain an offer of finance for payment of historical bank debt and for other purposes. It was also considerably -- 106 of 209 -- 97 in arrears in its payment of salary to directors. Then it had to rely on noteholders postponing rights to avoid a serious difficulty about being able to pay them. The fact that this occurred was, in a way, consistent with Pitt’s conviction that Kolback could juggle its commitments, if necessary, to accommodate its obligations, including those under the venture agreement. Hewson to a degree also held this view. The allegation that it was misleading or deceptive conduct or a breach of fiduciary duty or contractual obligation not to disclose the company’s financial state must be viewed in that light. Taking a pragmatic view of the matter, it is difficult to conclude that a sum sufficient to provide for the interest security would not have been found despite the company’s obvious difficulties, since the preservation of the project was so important to it. In the circumstances, I am not prepared to find that there was misleading or deceptive conduct in the manner alleged. For the same reasons, I do not find a breach of the contractual obligations relied on. I am unpersuaded that this particular is made out. (c) That representations were made by Kolback at the September 1993 MCM about the need for the interest security, and that Kolback and KGL were debt free. These representations were untrue, because the companies were not debt free and because an interest security protecting Metway from Kolback’s default was different from one in favour of Coomera protecting it from Kolback’s default. It was alleged that there had been a breach of the obligations in cll.24 and 13, contravention of the Trade Practices Act and fraudulent misrepresentation, and that if Coomera had known the true situation, it would have avoided the venture agreement forthwith. Pitt, it was alleged, was knowingly concerned in the contravention of the Trade Practices Act by making the representations. -- 107 of 209 -- 98 The chapter of this judgment above dealing with “repudiation by withdrawing application for interest guarantee” advances reasons why the aspect of this allegation concerning the interest security is misconceived and does not entitle Coomera to relief. In respect of the remark during discussion in the MCM about Kolback and KGL being debt free, there is no evidence that it was relied on in any relevant way, assuming that in context it was false, misleading or deceptive. (d) That by failing to disclose Metway’s letter about its attitude to the interest guarantee and other correspondence with Metway, despite requests by Coomera, Kolback was in breach of its duties under cl 24 and cl 13. The findings of fact in the Chapter above, “Repudiation by refusing to provide correspondence with Metway”, show that Pitt actively avoided disclosing detailed information about his negotiations with Metway to Coomera. Some of this information related to matters directly within the venture agreement. No adequate justification for this attitude was advanced having regard to the fiduciary relationship under cl 13 and the obligations in cl 24. (e) That KGL on behalf of Kolback told Coomera that it would pay interest from its own funds when it did not have the resources to do so. This was alleged to be a contravention of the Trade Practices Act upon which Coomera relied and thereafter continued to progress the venture and delayed avoiding the agreement. It was also alleged to be a breach of cll 24 and 13. For similar reasons to those in (b) above, this allegation is not made out. (f) That Coomera advised Kolback and KGL that the terms and conditions of finance in letters from Metway in January, February and April 1994 were not in accordance with the venture agreement and proposed 10 May 1994 as the date upon which the venture should terminate in accordance with cl 9.1 of the venture agreement; that Kolback did not notify Metway of the -- 108 of 209 -- 99 respects in which the offer did not conform with the venture agreement; that Kolback did not require Metway to advise whether it was prepared to offer finance in accordance with the agreement; that the letter from Metway on 28 June, 1994 did not offer finance in accordance with the venture agreement, and that Coomera advised Kolback and KGL accordingly and required Kolback to call for Metway to advise by 27 July 1994 whether it was prepared to offer conforming finance, which Kolback and KGL did not do. Pitt engaged in numerous discussions with officers of Metway over the life of the venture. One of the difficulties about the negotiations was that the basis upon which funding was sought frequently changed. Another was that the failure to exercise the golf course land caused difficulties in connection with offers relating to the venture. The analysis of the evidence from p. xliii onwards of the appendix demonstrates these. While it can be seen from the offers of finance that they did not conform to the venture agreement and on at least one occasion Pitt expressed the preference not to put all Omura’s objections at once to Metway, I am not satisfied that the complaints are satisfactorily made out. For example, while Omura demanded a response from Metway by 27 July 1994 despite Pitt’s caution that the time might be too short, it is apparent that Pitt had engaged in further discussions and had alluded to the capitalisation problem in a letter he wrote on 27 July 1994. This particular is used, along with those above, to support the submission which follows. (g) That in all the respects in (a) - (f), and having regard to the obtaining of an offer of only enough to prepare a business plan in August 1992, Kolback was in breach of its obligation to use its best endeavours to obtain finance in accordance with cl 9.1 of the venture agreement. The short answer to this is that the divergence from the venture agreement almost immediately, and the way in which other proposals unfolded and folded make the proposition untenable. The failure to give information to Coomera in detail about the discussions which were ensuing -- 109 of 209 -- 100 may have been in breach of the obligations imposed by the venture agreement but it does not follow that it establishes a failure to use best endeavours to obtain finance. This allegation, then, is not made out. 47. Alleged false statement by Kolback to Australian Stock Exchange This allegation arises from a statement made in Kolback’s interim report on 15 March 1994 to the Australian Stock Exchange to the effect that the first stage of 100 residential lots had been approved “and contracts have been let for the civil works on this stage. Construction will commence as soon as finance negotiations and documentation are finalised”. The interim report, which was generally not encouraging, was signed by Hewson. The sequence of events leading to the report were that discussions had ensued between Coomera and Kolback concerning contractors to do the earthworks for the project. Hepburn & Thorpe had tendered and a recommendation had been made that they be selected. Correspondence ensued between the venturers about the use of Hepburn & Thorpe. A minute of the MCM in February 1994 records that “final acceptance is subject to a formal direction to proceed with construction work from management committee”. Transcript of the meeting shows Omura saying that he did not mind using Hepburn & Thorpe but wished to ensure that construction would not commence until funds were obtained. On 7 March 1994 the question of beginning works to establish “substantial commencement” by 30 March 1994 was raised because of the risk that approvals would lapse. Omura again raised the question of not commencing the work until the review of Metway finance had been completed. The argument that the statement to the Australian Stock Exchange was false revolved around an argument whether there had been an agreement to use Hepburn & Thorpe but not commence until finance had been approved or whether there was to be no contract awarded until finance had been approved. It is the case that no formal contract was entered into between Hepburn & Thorpe and the venturers. -- 110 of 209 -- 101 The letter to the Australian Stock Exchange was under Hewson’s hand although Pitt had input into it. Hewson said that he was under the impression that the preferred tenderer had been advised that the tender had been accepted, on the basis of discussions with Pitt. He said he had not set out to mislead the Stock Exchange. The better view is that the statement was not literally true. However it is another thing whether the making of the statement has any relevant consequences. The essence of the claim is that the making of the untrue statement was not in the interests of the venture and potentially damaging to it in so far as knowledge of its falsity or an investigation into why it was made would adversely impact on the venturers’ capacity to arrange finance, Kolback’s capacity to raise and guarantee finance, the reputation and standing of the venture and the reputation and standing of the plaintiff. There is no evidence that Coomera knew of the statement at any time during the life of the venture. Nor is there anything suggesting that the Australian Stock Exchange or anyone else who may have the capacity to affect the standing of the venture or the venturers in the market place or with respect to finance was aware of it. There is no evidence suggesting that loss has been suffered as a result of the statement. It is impossible to construe it as being of such seriousness as to constitute repudiation. The issue is a dead-end in the evolution of the matter and calls for no further comment. 48. Uncertainty -- 111 of 209 -- 102 The submission made by Coomera is that the venture agreement lacked certainty because at no time was the content of the golf course land and the venture land definitively resolved and that therefore the venture agreement was void for uncertainty. The essence of the venture agreement is that the parties will carry on activities in respect of Coomera’s land excluding the golf course land and ultimately share any profits. It is therefore essential that land to which the venture agreement relates be identified. A contract is only void for uncertainty if an essential term is uncertain (Thorby v. Goldberg (1964) 112 CLR 597; Godecke v. Kirwin (1973) 129 CLR 629, 646). Because of the great inconvenience otherwise resulting, courts nowadays strive to uphold the existence of a contract if possible (York Airconditioning and Refrigeration (A’Asia) Pty Ltd v. The Commonwealth (1949) 80 CLR 11; Meehan v. Jones (1982) 149 CLR 571). The notion that it would be a reproach upon the law if the parties who had intended to agree and believed they had agreed were told that for legal reasons the contract had never come into existence is uppermost in the court’s mind (Hillas & Co Ltd v. Arcos Ltd (1932) 147 LT 503; Prints for Pleasure Ltd v. Oswald-Sealy (Overseas) Ltd (1968) 3 NSWSR 761). But such belief is not decisive of the existence of a certain contract. It is important to avoid a “narrow or pedantic” approach (Upper Hunter County District Council v. Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429, 437). If the parties have acted on the basis that there is agreement, the readiness to uphold it may be reinforced (F & G Sykes (Wessex) Ltd v. Fine Fare Ltd (1967) 1 Lloyds Rep. 53; Brown v. Gould (1972) Ch. 53). Where the parties have shown by conduct that they can understand and apply the terms of the contract, a court should be reluctant to find the contract is uncertain (Hillas & Co Ltd v. Arcos Ltd; York Airconditioning and Refrigeration (A’Asia) Pty Ltd v. The Commonwealth). But if an uncertainty cannot be resolved there is no room for upholding the agreement. It is, however, not uncommon that parties may clarify what was previously uncertain. Agreement to agree or negotiate at some future time is generally not enforced (May & Butcher Ltd v. The King (1934) 2 KB 17) but that situation is to be distinguished -- 112 of 209 -- 103 from a case where a party has a discretion as to how it is to perform the contract (Thorby v. Golberg), so long as the area within which he is to have such freedom is clearly laid down. Cases involving real property encounter special difficulties when there is an element of uncertainty or obscurity in the description of the relevant land. If the area involved cannot be ascertained according to objective criteria (which produced certainty in Havenbah Pty Ltd v. Butterfield (1974) 3 ALR 347) the fact that the precise location of land to be excised from a larger parcel has been left ambiguous is likely to result in the contract being uncertain (as in Heritage Properties (No. 3) Pty Ltd v. Coles Supermarkets Australia Pty Ltd (1993) Q Conv R 54-448). Analysis of how the venture agreement was intended to operate is crucial to resolving whether there is uncertainty or not. The venture agreement defines “the land” as various enumerated parcels in Item 1 of the Schedule “excluding the golf course land ....”. “The golf course land” means the land owned by Coomera Resort not part of the venture business which Coomera Resort intended to develop into a golf course with golf clubhouse and associated facilities “the indicative area and approximate location of which is the eastern course set out in the Dye Design plans and drawings” annexed to the venture agreement. Under Clause 32 there is a statement recognizing the likely benefit to the project of development of the golf course land. Coomera agreed to consult with and duly consider Kolback’s recommendations about its “design and location and layout and construction”. It also states that it was Coomera’s intention to “finally resolve the planning layout and timing aspects of development of the golf course land before any construction or development of the land” commenced. However Coomera was not committed by anything in the agreement to undertake the development of the golf course land. The effect of this is that even if actual development of the golf course land may not occur, at least its location was intended to be finally resolved prior to commencement of any construction or development on the venture land. -- 113 of 209 -- 104 Omura agreed in cross-examination that at the start of the joint venture the location of the golf course was decided as the east course. He was also asked whether it was clear that the Dye Design east course was part of the joint venture agreement and that it was clear what the layout was, to which he replied, “I think so”. Omura and Pitt both appear to have believed that the golf course land, for the purpose of the agreement made on 2 July 1992, was the Dye Design East Course, although, by agreement, it had been varied in consequence of procedures agreed to at the MCM in November 1992. He defended himself against allegations that he had failed to finalize the golf course by saying that the golf course design initiated by the MCM in November 1992 was the final design. He agreed that following the November 1992 MCM route plans were produced, one of which became accepted in terms of the decision taken at that meeting. At the MCM in February 1993, however, there is evidence that Omura showed a preference to return to the 1991 design. In evidence Pitt said that his understanding was that the east course in the Dye Design mentioned in the venture agreement was, failing agreement to vary it, the golf course plan. He believed that on 27 November 1992 an agreement was made to vary the limits of the golf course and that it was agreed how to finalize it in the sense that what Forsyth received from Dye Designs was to be the course. At the MCM on 26 and 27 November 1992, the difficulty about proceeding with planning until Coomera fulfilled its obligations with respect to the golf course was discussed. A brief to Dye Designs was discussed. Sketches of possible configurations were attached to a draft letter. These represented a significant departure in a number of respects from the original design. The minutes record the following: “There was discussion regarding definition of the golf course land and consideration of a letter written by Mr Forsyth in that regard. RESOLVED: To modify the brief prepared by Mr Forsyth to highlight the following points: -- 114 of 209 -- 105 The purpose of the current study is to define land capable of subsequently being developed as a championship golf course based primarily on the Dye eastern course but allowing the repositioning of 3 to 5 holes on the area adjoining the railway generally as shown on Plan B attached to Mr Forsyth’s letter. Dye Designs also to consider location of club house site. Mr Forsyth to liaise with Dye Designs directly. It was FURTHER RESOLVED that for the purposes of preparing the master plan and in terms of the agreement between Coomera Resort and Kolback the redefined land and club house site will be the ‘golf course’ land. Mr Pitt explained that the master plan will be prepared as soon as the ‘golf course’ land was defined and that the master plan would be based on an engineering/services structure plan that could not be completed until such time as the golf course land was defined.” The argument for Coomera was that at no time was the location of “the golf course land” fixed with certainty. Although it is concluded that the contract was not uncertain by reason of its true construction, reference will be made later to evidence and submissions on that issue lest the finding of certainty is flawed. The reason why the venture agreement was not uncertain may be stated briefly. Evidence as to the state of belief of Omura and Pitt has been referred to above. Both believed that the golf course land was that defined in the Dye Designs plans for the purposes of the agreement. Both engaged in extensive and expensive activities on the basis that the venture would proceed, albeit with fluctuating degrees of enthusiasm on Omura’s part after a period. The belief of the parties is not decisive of the question whether there was a concluded contract, but where the parties have that belief, it is the kind of case where the court would lean against a finding of invalidity for uncertainty if possible. The proper analysis is that there was a concluded agreement on 9 July 1992 the effect of which was that the parties would enter into a profit sharing agreement to develop the venture land. It was not the intention of the parties to settle the precise location of the golf course land immediately and it was contemplated that it would be some time before development itself was to -- 115 of 209 -- 106 commence. Notwithstanding that cl.32 is couched in terms of an intention on Coomera’s part to finally resolve the planning, layout and timing aspects of development of the golf course land before any construction or development of the venture land commenced, it is, in the context of a commercial arrangement, indistinguishable from a statement that Coomera would finally settle the location of the golf course before that time and that it would be, in size, of the order of the area shown in the Dye Design plans and in approximately the same location as that shown in the plans. This process was not to be dependent on Kolback’s agreement as to its location. The parties provided for the final location of the golf course to be fixed by Coomera. This is to be distinguished from the kind of case where the location had been left to later agreement between the parties. Subject to Coomera making the decision in good faith and in compliance with the parameters as to size and location, it was left to Coomera to fix the final location of “the golf course land”. Given the nature of the agreement the contract was not bad for uncertainty at the time of execution. If it be relevant, I am satisfied that while Pitt was conscious of the importance of fixing the location of the golf course precisely for planning purposes, and he frequently experienced irritation that failure to address golf course issues was causing delay, he never brought the issue to a head in such a way as to allow for a conclusion that Coomera had positively refused to comply with its obligation. Much of the argument about certainty of the agreement on other bases focused on documents containing depictions of the golf course both in isolation and in the setting of the whole development. In relation to the situation as at 2 July 1992, one was a plan of the last course prepared by Dye Designs. The plan in evidence (Exhibit 254) is a copy with later revisions to October 1991 of that plan. Exhibit 253 consists of two separate plots by surveyors Brown & Pluthero which on their face were done at different times from different source materials, one being based on Hulbert Group drawings and the other on drawings by Kinhill Cameron McNamara. If the dates on the plans follow the Australian convention (and Mr Forsyth’s evidence suggests that that is so) the plot using the -- 116 of 209 -- 107 Kinhill drawings was done on 11 June 1991 and the plot based on Hulbert was done on 2 July 1991. Mr Forsyth was asked about the Brown & Pluthero plans (but only insofar as they relate to the Hulbert drawings) in the following passage: “Can you tell us whether the markings on Exhibit 253, the Brown & Pluthero plans, are in fact the plot of the Dye design of 254 - in Exhibit 254?-- In some cases they are. In some cases they are not?-- In some cases they are not. Well, does that mean that whatever Brown & Pluthero did, they didn’t faithfully follow the Dye design in Exhibit 254?-- I think - I believe it says on here that they were designed off the architect’s plans. The architects were the architects that were designing the estate. The whole thing would be in the process of evolution. I am not sure whether this is the final plan or not. I wasn’t involved at that time. This may not be the latest plan. I follow. All we can say is that Exhibit 254 is a design for Coomera Woods done by Dye Design and Exhibit 253 is a plotting by surveyors of a plan, maybe 254, maybe not?-- As given by instructions to them, yes. Whatever those instructions were, we don’t know?-- No. You can’t help us?-- I can’t help you there. All right. When you referred to the architect’s plans, to what were you referring? There is a plan which I think these drawings refer to - golf course boundary scale from Holbert drawing. Do you know who Mr Holbert - Mr or Mrs Holbert were?-- They were architects employed by Mr Omura. Someone distinct from Dye Designs?-- They were distinct from Dye Designs. They would be coordinating the whole affair. I follow. The date of the Brown & Pluthero plans, can you tell us from the document?-- 2/7/91.” The re-visiting of the matter in re-examination in the following passage did not assist in clarifying the situation:- “MS DALTON: Mr Forsyth, do you recall Mr Chesterman asked you to give him the dates that the drawings in Exhibit 253 were prepared and you said it was 2 July 1991?-- Right. -- 117 of 209 -- 108 And you said that the drawings in 253, that is the Brown & Pluthero drawings -----?-- Correct. ----- were matched to or matched from -----?-- Scaled from this drawing - not this drawing, a large sized version of it. Just before you tell me, they’re matched to an architectural plan you said?-- That one, yes. And you are saying it’s the original of the architectural plan that’s -----?-- I can’t say - I would say it’s a plan that’s similar to that one, yeah. I can’t say it’s exactly that one, but similar to that one. But you can see -----?-- It looks to be the same.” The architectural plan to which Forsyth was referring was the one in the joint venture agreement (Exhibit 280) which appears between pp. 32 and 33. The point being made was that the definition of “the golf course land” referred to the eastern course set out in the Dye Design plans and drawings annexed to the venture agreement and that the Dye plan had been translated into a survey plan which, according to Mr Forsyth, was sufficient to allow a surveyor to fix the area of the Dye Design golf course on the ground. Therefore there was certainty as to what was within the contemplation of the parties as to the area to be occupied by “the golf course land”. There are a number of difficulties about this proposition. Firstly the definition of “golf course land” says that “the indicative area and approximate location” of the land which Coomera intended to develop into a golf course with golf clubhouse and associated facilities was the eastern course set out in the Dye Design plans and drawings annexed. That is a particularly convoluted way of saying that the golf course land is the eastern course set out in the Dye Design plans and drawings if that was the intention. Further, the use of the phrase “the indicative area and approximate location” is not suggestive of an intention to clearly fix the area and location of the golf course land at that point of time. It is difficult to interpret those words as meaning more than that land in the approximate location of about the size shown on the Dye plans and drawings was to be -- 118 of 209 -- 109 designated as the golf course land. In recent years “indicative” has acquired a meaning, particularly in marketing and commerce, conveying that what is shown gives an indication without any commitment that the information purports to be wholly accurate. The word “approximate” needs no elaboration. Secondly, when the definition of “golf course land” is read with Clause 32.3 under which it was said to be Coomera’s intention to finally resolve the planning, layout and timing aspects of development of the golf course before any construction or development of the land commences and that Coomera agreed to consult with and duly consider Kolback’s recommendations concerning the design and location and layout and construction of the golf course and any golf course, clubhouse and other golf facilities “to be constructed on the golf course land”, the conclusion that no final decision had been taken as to the precise dimensions or location of the golf course land had been taken at that time is reinforced. The criticism of Coomera’s submission on the premise that commercial people would hardly enter into an agreement which was uncertain loses much of its force when one looks at the framework of the agreement. But even if the agreement was initially uncertain, had Coomera’s intention been put into effect, as commercial people would ordinarily expect, the precise description of the land excluded from the venture business would have been made certain and, no doubt, any question whether the agreement was initially uncertain would have become irrelevant once the parties acted upon it after the golf course land had been precisely identified. If contrary to his evidence, it occurred to Pitt that the agreement may have a degree of uncertainty about it since the precise size and location of the golf course land had to be determined at a later date by Coomera, his willingness to endure Omura’s procrastination in this regard and to put so much time, effort and resources into attempting to advance the agreement would be explicable as simply one more indication of his consuming determination and optimism that the project would eventually proceed. -- 119 of 209 -- 110 One other difficulty is that the Dye Design plans (Exhibit 254) do not include any area dedicated to the clubhouse and associated facilities. They are concerned with designing the course itself. It is plain from the definition of “the golf course land” and Clause 32 that it was contemplated that they be built on golf course land not venture land. Sheet 2 of 3 of Brown & Pluthero’s Plan 8352A shows the centre of the clubhouse plotted at a place which, by reference to the co-ordinates common to the Dye Designs and the Brown & Pluthero plans, is outside the area marked on the Dye Designs plan. Without placing undue significance on the nature of the Dye plans, it is noted that Sheet GD 2 of 5 of the Dye plans also shows alternative possible boundaries of the golf course. The principal argument advanced for Kolback was that the plan annexed to the venture agreement was a scaled down version of the Royal Coomera master plan dated August 1991 and that that provided sufficient certainty. The copy in the venture agreement tendered is significantly illegible, but such evidence as there is suggests that it is derived from a larger plan. However, the evidence is unsatisfactory as to whether it fixes the dimensions of the course in a way which could be used to fix its location with precision. Leaving aside the added complication of the definition of “the golf course land” which does not, of itself, suggest that the land was to be fixed precisely as at the making of the agreement, it is problematical whether the evidence establishes the location of it sufficiently. Coomera’s argument also addressed the question whether at any subsequent time the agreement became certain. Essentially, the argument was that it did not, since there was no subsequent common acceptance of the design appearing in the Concept Plan (Exhibit 25). An overview of Omura’s and Pitt’s stance on this has been referred to above. Ikeda said his understanding of the result of the MCM in November 1992 was that Forsyth was to liaise with Dye Designs to establish the envelope. The envelope was an area within which housing -- 120 of 209 -- 111 would not be built. However, he did not agree that Forsyth and Dye Designs would effectively determine the envelope without reference to Hoko. After the MCM on 27 December 1992, Forsyth contacted Dye Designs about the new proposals. A Minute of the Project Control Group meeting of 7 December 1992 records the following: “Golf Course Layout Received. Amended and tabled. Forsyth to fine tune to allow boundaries to benefit residential development. Pitt to advise Ikeda in writing confirming approval for preliminary golf course envelope to establish preliminary residential design for resubmission to Dye Designs. Essential (for questions of time) to establish the golf course envelope” He agreed in cross-examination that Forsyth’s fine tuning was part of the process of fixing the envelope. On 8 December 1992, Pitt wrote to Ikeda concerning the understanding at the meeting the previous day concerning the definition of the golf course, residential layouts and staging plans. The letter continued: “It occurred to me that perhaps the best way to ensure steady progress is for us to record such agreement on this matter, and others that may arise, as a formal resolution of the management committee. Under the master agreement this is possible by the action of the nominees. Accordingly I have set out such a resolution below. Please let me know if you are unhappy with the resolution or the procedure. Under the agreement this letter can be regarded as a minute of meeting on which we agreed to short notice. Resolved by M Ikeda and R Pitt at Coomera on 7 December, 1992. That for the purposes of master planning the plan attached defines the `golf course’ land on a preliminary basis. Kolback should now prepared a service structure plan, draft residential layout and staging plan to suit the preliminary definition of the golf course land. Kolback should continue to communicate with Dye Designs in order that the final plan is produced that meets Dye’s requirements and interacts with the planned residential development in a financially prudent manner.” A resumé of an informal meeting on 6 January 1993 shows that it was recognized that the limits of the golf course would need to be re-defined prior to final acceptance of the concept plan. -- 121 of 209 -- 112 Pitt accepted in evidence that this indicated that Forsyth had not at that time finished his fine tuning. In his affidavit Pitt had deposed that at the MCM of 27 November 1992, Omura had agreed that whatever envelope was decided between Forsyth and Dye Designs would be the golf course envelope without further resort to Coomera. In pursuit of the submission that the agreement was uncertain, Pitt was shown a minute of the MCM meeting of 27 June 1993 to the effect that separate final definition of the golf course land was not practical at that stage. Pitt explained this by saying that no plan had been produced and it was always allowed that it was open whether the boundaries might be fixed with the ongoing stages of development. He said there was always potential to vary the boundaries from time to time. Pitt was also referred to a transcript of the meeting in January 1994. He maintained that the envelope was defined, notwithstanding the statement by Forsyth that they were not sure of the exact size of the golf course and there was reference to the fact that a survey had not been done. He was also not able to explain why he had written to Lazarides on 11 April 1994 saying that there were very practical reasons why it was difficult to define the golf course by survey and denied as an explanation that he was trying to force the whole of the land to be mortgaged. He was also referred to an MCM on 14 April 1994 at which he referred to the need to ensure that the golf course boundary and the golf course description were right because it could not be changed. Returning to the question whether there was finality reached in consequence of the decision to have Forsyth pursue other designs with Dye Designs, the minutes of the MCM held between 12 and 16 February 1993 record that the Development Control Plan was discussed and that it was resolved: “That the draft concept plan be adopted subject only to adjustments to ensure adequate parking around the proposed club house and to position the 13th, 14th, 15th and 16th holes be adjusted to be within the approved golf course envelope but as far away from the railway line as possible. Also that some lakes be shown on the golf course subject to prudent engineering practices as town planning constraints. -- 122 of 209 -- 113 . . . . . Kolback Securities was instructed to complete the concept plan and business plan and that the concept plan be lodged with Albert Shire Council for approval in principle.” The Concept Plan (Exhibit 25) includes narrative information about the project and a number of pages relating to design features and financial information. The page described as “BE2" shows a map of the whole project with a table assigning areas of land occupied by various uses including the golf course. It bears a note “all areas are preliminary only and subject to further detailed plan”. There is also a section with a brief narrative concerning the golf course and a page entitled “Revised Golf Course Area Plan” which contains a drawing of the golf course in fairly diagrammatic or schematic rather than detailed form by Coomera’s engineers and planners with a note “This drawing is for discussion purposes only and is subject to detail survey, hydraulics soils investigations, design and relevant authority approvals.” The Concept Plan which was to be progressed following the February 1993 MCM shows the layout of the golf course in relation to residential development. However, there is no evidence before me as to the data from which it was compiled and more particularly whether there is any objective way in which the boundaries of golf course land and the boundaries of non-golf course land can be accurately determined. It may be that this evidentiary difficulty is the result of Kolback’s concentration on the notion that the agreement was always certain. However, the result is that it is difficult to conclude that the mere existence of a Concept Plan which bears the note “all areas are preliminary only and subject to further detailed concept design”, and which was prepared for the purpose of obtaining approval in principle only, achieves the requisite degree of certainty. 49. Frustration -- 123 of 209 -- 114 The pleading is that the venture agreement was frustrated on or about 3 August 1994 by the refusal of Metway to agree to provide finance for the venture in accordance with the venture agreement. The underlying notion is that, after the contract has been entered into, events occur which radically alter the situation envisaged by the parties (Codelfa Construction Pty Ltd v. State Rail Authority of NSW (1982) 149 CLR 337; Brisbane City Council v. Group Projects Pty Ltd (1979) 145 CLR 143). To state the pleading, with knowledge of the terms of the venture agreement, is enough to dismiss the possibility that the doctrine of frustration might apply. The possibility that finance might not be obtained was clearly within the contemplation of the parties. Therefore the doctrine of frustration does not apply. -- 124 of 209 -- 115 50. Repudiation by Issue of Writ It was submitted by Coomera that Kolback, by issuing Writ 1329 of 1994, had repudiated the agreement. Some comments will be made about this, notwithstanding that it was conceded that consideration of this claim arose only if it was found that Coomera was not entitled to rescind the contract for fraudulent misrepresentation, was not entitled to relief under the Trade Practices Act, or was not entitled to terminate pursuant to a contractual right to do so upon Kolback’s failure to obtain finance in accordance with the venture’s terms by 2 August 1994. It was also conceded that if Coomera was not entitled to terminate, Coomera’s issue of the notice of termination was an act of default and that Kolback so treated it. Coomera maintained that the notice by Kolback could be negated by Coomera withdrawing its notice at any time prior to 8 September 1994. According to Coomera’s argument, the issue of Writ 1329 of 1994 prior to that date (on 29 August 1994) was wholly inconsistent with the contract remaining on foot and with Coomera’s right to remedy at any time up to 8 September 1994. It was submitted that the issue of the writ was an act of repudiation accepted by Coomera by the letter written on its behalf on 6 September 1994. It was submitted that this put an end to the contract and that Kolback’s repudiation put an end to any rights dependent upon the ongoing existence of the contract. The only rights Kolback had were with respect to breaches, if any, committed prior to termination. Kolback’s response was that Kolback’s notice specified an act of default under cl.18.1(d) of the venture agreement which provides that it is an event of default if a venturer does an act which, if the venture were a partnership, would be grounds for dissolution of the partnership by a court. The concept relied on was that it was, by reason of Coomera’s purported termination, not reasonably practicable for Kolback to carry on business as venturer with Coomera (s.38(d) Partnership Act 1891) and that the same result would flow under the just and equitable provision (s.38(f)). Coomera’s notice rendered it impossible for Kolback and Coomera to carry on business together -- 125 of 209 -- 116 according to the agreement, because they could not place that confidence in each other that each had the right to expect (re Yenidje Tobacco Co Ltd (1916) 2 Ch 426). It was submitted that it was not a case where the event of default was capable of being remedied, with the result that the notice would become effective at the expiration of 21 days of service. Further it was submitted that the writ was not repudiatory since it sought relief based on continued existence of the agreement. Upon termination the rights in cl.19.2 of the venture agreement were intended to be asserted. It was submitted that contemporaneous correspondence supported this interpretation and if there was any ambiguity arising from the premature issue of the writ it was clarified promptly upon its being pointed out. It was submitted that the degree of unequivocal demonstration of an intent to be no longer bound by the contract necessary for repudiation was absent (Shevill v. Builders’ Licensing Board (1982) 149 CLR 620; Progressive Mailing House Pty Ltd v. Tabuli (1985) 157 CLR 17). The events set out in chapter 24 above show that a chain of events commencing with correspondence on 24 August 1994 which might reasonably have been construed as prejudicing Kolback resulted in the writ being issued prior to the expiry of 21 days from Kolback’s notice of termination. Analysis of what happened during the period preceding the issue of the writ shows that, from Kolback’s perspective, it was necessary to take steps to protect its position and that, as part of those steps, the writ and the notice of motion founded upon it were issued. Kolback’s notice of termination was based on the notion that the relationship between the venturers had so broken down that the venture must be dissolved. In such a case, there is a difficulty in believing that the event of default could be unilaterally repaired by Coomera. Whether the relationship had broken down to the necessary extent could only be determined by the Court in the event that it remained in dispute. But if the Court so found, the notion of the capacity of one party to repair it unilaterally within a fixed time cannot apply. -- 126 of 209 -- 117 Kolback’s action was defensive of its claimed rights under the agreement. Although 21 days had not expired, if it made out the ground in its notice that would not matter. Subject to that, its issuing of the writ was not a repudiation which Coomera could accept. 51. Termination Without Breach -- 127 of 209 -- 118 It was submitted that even if there was no breach by Kolback, Coomera was entitled to terminate the agreement because contractual pre-conditions to the venture proceeding were not satisfied within nine months of the agreement. This involved reliance on the notion that the contract was voidable at Coomera’s instance because finance had not been obtained unconditionally and irrevocably for the benefit of the venture. In particular, an offer providing that Coomera would not be liable for interest and that interest would not be capitalised against any security over the land mortgaged for the venture had not been obtained (Sutton v. Gundowda Pty Ltd (1950) 81 CLR 418, 441). Coomera’s argument concedes that Sutton v. Gundowda does not resolve the question whether Coomera could terminate the contract without giving reasonable notice of intention to do so. It was submitted that Coomera had never waived the right to finance in accordance with cl.9 and that no notice was required because the true construction of the venture agreement was that finance be obtained by a certain time in a form acceptable to the parties (Perri v. Coolangatta Investments Pty Ltd (1982) 149 CLR 537; Mailman & Associates Pty Ltd v. Wormald (Aust) Pty Ltd (1991) 24 NSWLR 80). With respect to waiver it was submitted that the evidence did not support a conclusion that Coomera had irrevocably waived the right to rely on the conditions as to the obtaining of finance. The argument concedes that it is a factual question. The unusual feature of this case is that once the venture agreement was entered into, other development proposals involving different financial requirements were explored. There was non-adherence to the precise terms of the venture agreement almost immediately. Also, these proposals shifted in response to fluctuations in Omura’s wishes so the proposals never progressed beyond negotiations with the financier. This process never crystallised into a formal abandonment of the joint venture, although the other proposals would have involved modification of it had they proceeded. Clause 28.2 of the agreement was to the effect that modification or amendment of the venture agreement would be binding only if in writing and duly executed by all venturers. The practical result of the other negotiations was that from time to time -- 128 of 209 -- 119 the parties suspended the implementation of the original agreement. There was no waiver in the sense of an unequivocal and irrevocable abandonment of the right to rely on the joint venture. Indeed both parties resorted to it from time to time in support of their position, in correspondence. The case is factually dissimilar from those where a need for notice has been explored in relation to mere failure to fulfil the condition precedent or a contingent condition where the contract has remained operational without the kind of interruptions to its implementation that occurred in this case. In the unusual circumstances of this case it was in my view incumbent on Coomera to indicate unequivocally to Kolback that it was putting to an end all digressions from the original agreement and expected it to be complied with within a time which was objectively reasonable. From 12 April 1994 when the notion of bringing the agreement to an end if finance was not obtained under the joint venture agreement was raised until the notice was given by Coomera on 2 August 1994, other ways of accommodating Omura’s ongoing complaints about the “fair burden spirit” of the agreement were still being actively discussed in the correspondence. I am satisfied that Kolback was not unequivocally put on notice that Coomera would terminate the agreement if finance in full compliance with the venture agreement was not obtained. The notice of termination was therefore not effective as a termination not based on breach of contract. -- 129 of 209 -- 120 52. Has Kolback an interest in the land? Kolback asserted a claim to 50 per cent interest in the land other than the golf course land. It is common ground that this issue depends on the construction of the agreement. Clause 2 says that the venturers agreed to become venturers for the venture business which is defined as “the planning development marketing and completion of sale of the land”. Coomera agreed to pay a fee equalling 50 per cent of the profits of the venture, with the distribution of the surplus from the land sales to occur only after payment of Coomera’s prorated land entitlements, repayments of principal and payment of project costs outstanding at the date of settlement of a sale or disposition of land. In consideration of that fee and on the basis that Kolback was to have and discharge an active role in the management of the venture Kolback assumed liability for 50 per cent of any losses. Subject to these provisions each venturer’s interest in the venture assets and losses was 50 per cent. Subject to the subject matter or context being inconsistent with it, “venture assets” included “land” which was elsewhere defined as non-golf course land. Clause 5 provided for the land to be registered in the name of Coomera and declared that Coomera did not hold it as trustee or in a fiduciary agency or other capacity for the venturers. Kolback was not permitted to caveat in respect of the land. There is no provision for immediate transfer of the land to Kolback, nor for immediate payment of any sum to Coomera. The concept is that as the land is transferred to a purchaser, Coomera receives payment for that land with profit sharing between Coomera and Kolback being the end result from any residue. Kolback’s argument depends on an analogy with the rights of a partner to an interest in partnership assets (Canny Gabriel Castle Jackson Advertising Pty Ltd v. Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321; United Builders Pty Ltd v. Mutual Acceptance Ltd (1978-9) 144 CLR 673). It was submitted that cl.5.2 is merely declaratory of that interest and that cl.5.3 was designed to avoid conflicting decisions as to the right of a partner to a caveatable interest (Connell v. Bond (1992) 8 WAR 352; contrast with Chettle v. Brown (1993) 2 Qd R 604). It was -- 130 of 209 -- 121 submitted that these provisions reinforce rather than contradict the notion that Kolback is entitled to a declaration that the venture land is a venture asset in respect of which Kolback is entitled to a 50 per cent interest. The contrary argument, which I accept, is that cll. 5.1 and 5.2 are declaratory as between the partners of the manner in which the land is to be held for the purpose of the venture which is essentially a profit and loss sharing agreement. To the extent that cl. 1.2 suggests otherwise it must yield to the context. Clauses 9.1 and 21.1 support this construction. In light of this conclusion it is unnecessary to consider the further submission as to estoppel by convention. However in Coomera’s written submissions references are collected which suggest that notwithstanding claims to the contrary in evidence Kolback’s directors did not consider the venture as more than a profit sharing arrangement. I conclude that Kolback’s claim that it has or is entitled to a 50 per cent interest in the land itself is unfounded. 53. Exclusion Clause Clause 25.1 of the venture agreement was raised in connection with the claims based on representations. Its true construction is therefore important since, if it does not by its terms extend to the making of the representations it is irrelevant. Firstly, it states that it contains the entire agreement and understanding of the parties “with respect to the subject matter to which [the] agreement relates”. Then it provides that it will supersede any “prior . . . inducements, promises . . . between the parties extending, defining or otherwise relating to the provisions of [the] agreement or binding on the parties with respect to the subject matter to which [the] agreement relates”. As a matter of construction, the representations previously found to be misleading or deceptive do not fall within the descriptions in cl.25.1. Liability is therefore not excluded by it. -- 131 of 209 -- 122 54. Railway Compensation Moneys All Hoko’s rights to compensation in respect of four resumptions by the Commissioner of Railways proclaimed on 26 May 1990 and 8 December 1990 were assigned to Coomera in the contract transferring the land. Hoko assigned the right to negotiate with respect to compensation and any rights in respect of further resumptions to Coomera. The venture agreement includes in the definition of “Venture Assets” the land and, amongst other things, “any compensation receivable by virtue of any resumption of any part of the land”. In the agreement to negotiate of 26 March 1992 the schedule refers to forthcoming changes in description as a result of railway resumptions. By the time the schedule to the venture agreement was incorporated in it, new titles had issued or were soon to issue. It is reasonably clear, although not without some ambiguity, that Hoko’s intention had been to divest itself of any rights in connection with the Coomera land. Any doubt that the intention was that the railway compensation moneys were to be treated as a venture asset is dispelled by the course of conduct followed by the parties subsequent to the venture agreement becoming operative. Omura said that he objected to this notion at MCM3 on 16 September 1992. However the minutes never reflected this although it is true that, later, Omura persistently resisted the notion in correspondence and discussions. Further, the MCM and Project Central Group meetings, right from the first MCM on 29 July 1992, discussed the railway compensation moneys on the basis that they were part of the business of the venture. There is therefore no reason to find that the railway compensation moneys in respect of the earlier resumptions were not part of the venture assets. There can be no dispute that compensation for a resumption which occurred subsequent to venture agreement falls within the terms of the venture agreement. -- 132 of 209 -- 123 55. Would the Agreement Have Proceeded? Two major uncertainties were left at the time when the parties each purported to terminate the agreement. One was whether Kolback would obtain finance conforming to the venture agreement within a reasonable time or at all. Any decision in this regard had to be made at the highest level within Metway. No other financial institution was an active prospect at that time. The terms which would conform with the agreement were unusual and out of the ordinary but Pitt’s persistence had managed to reduce the non-conformity to hard core issues which had to be considered at a higher level than that at which Pitt had been negotiating. The fact that there may have been a recommendation at that level was no guarantee that it would survive the scrutiny at higher levels within Metway. In the absence of any direct evidence from Metway on that issue it is difficult to assess what would have happened. The question remained essentially hypothetical since the purported termination by Coomera supervened before it could progress to the decision making levels. However the application had been subject to scrutiny within Metway over a period. The fact that it had got down to hard core issues and that Metway’s position appeared to be that there was little room for further concession means that there was a significant possibility that Kolback would not obtain conforming finance. The second matter is whether if finance had been obtained on terms conforming to the requirements of the agreement Omura would have been prepared to accept it on Coomera’s behalf. There is no doubt that Omura had come to the view that the “fair burden spirit” of the agreement was tilted in Kolback’s favour and despite Pitt’s explanations that it was impossible to predict, because of the variables involved, precisely what the respective outcomes would be at the end of the project, was not persuaded otherwise. I am satisfied that, at the latest, from the time Robbie became a consultant the issue became prominent. I am satisfied that Omura had been told by his advisers that the venture agreement was binding. I am not satisfied that during the turbulent discussions about -- 133 of 209 -- 124 adjusting what Omura believed to be the imbalance in Coomera’s and Kolback’s positions he indicated unequivocally that he would not go ahead with the agreement. Some attention was paid to a statement made by him during an MCM where he said something to the effect “well, let’s end it”. I treat that as something said in the heat of discussion. The fact that discussions continued after that bears out that it was not an expression of finality. So far as the final events in the relationship are concerned, I am satisfied that Omura adopted the approach that if finance in accordance with the agreement was not obtained the parties should treat the agreement as being at an end. There has been a finding that reasonable notice was not given. In assessing whether this was an attempt to force Kolback into the position where the terms of the agreement were not satisfied so that Coomera could terminate the agreement without any adverse consequences or whether it was merely the result of a desire to have some kind of finality, it is essential to have regard to the detailed analysis of the evidence in the Appendix. I am satisfied that the more probable view is that by the time that point was reached Omura had convinced himself, especially having regard to the time that had passed without the proposal, with or without the golf course, proceeding the venture agreement was more in Kolback’s favour than Coomera’s. I am satisfied that by that time he wished to disengage Coomera from it. I am satisfied also that there was a significant possibility that there would have been ongoing disagreements about whether any further offer of finance from Metway complied or did not comply with the venture agreement and ordinary commercial terms. The detailed analysis of evidence in the Appendix demonstrates this. Whether Omura’s view of the balance of the agreement would have extended to refusing to comply with an offer demonstrably and undeniably in conformity with the agreement is speculative. He was aware that the agreement was binding and would also have been aware that unjustified termination would have rendered Coomera liable to financial consequences. At the end of the day I consider that what -- 134 of 209 -- 125 may have happened in that regard is speculative but cannot in the light of what had happened be dismissed as a real possibility. The reality of the matter is that there was a possibility which was more than slight that for one reason or another the venture would have collapsed, although any attempt to predict in what circumstances involves speculation to such an extent as to make it impermissible to legitimately attempt to do so. 56. How should the matter be resolved? The venture has irretrievably broken down. For the reasons above, there was no certainty that Kolback would obtain finance within the terms of the agreement and, if it did, a real possibility existed that Coomera would not be prepared to proceed further because of Omura’s entrenched perception that the venture agreement was unfair to Coomera. Kolback did not persuade me to the required standard that finance in conformity with the venture agreement would be obtained. Kolback’s claim that it became entitled to purchase Coomera’s interest in the venture on the basis of cl.19 or to appoint a receiver under cl.20 lacks justification. It also follows from the finding of a contravention of s.52 of the Trade Practices Act that the right on which it seeks to rely arose from an agreement entered into by the other party on the basis of misleading representations. There is no compelling reason why, even if Coomera’s attempt to end the agreement were to be viewed as a repudiation accepted and acted upon by Kolback, Kolback should be entitled to claim the rights conferred by cll.19 and 20 in the circumstances. Section 82 of the Trade Practices Act enables a person who suffers loss or damage by conduct of another person in contravention of s.52 to recover the amount of loss or damage. This is restricted to compensation for actual loss or damage (Wardley Australia Ltd v. Western Australia (1992) 175 CLR 514, 526). -- 135 of 209 -- 126 A wide range of orders is available under s.87 of the Trade Practices Act, including an order that the person who engaged in the conduct or a person who was involved in the conduct pay to the person who suffered the loss or damage the amount of such loss or damage (s.87(2)(d)). Section 87(2)(a) also allows the contract to be declared void and if the court thinks fit, to have been void ab initio or at all times on or after a date specified in the order. Loss or damage will include the detriment suffered by being bound by a contract induced by misleading and deceptive conduct (Demagogue Pty Ltd v. Ramensky (1992) 39 FCR 31, 33) or the disadvantage suffered by a person as a result of an act or default of another person (ibid, 47). Gummow J (ibid, 43) summarises the operation of the two sections in the following way:- “Thus, whilst s 82 is concerned with the recovery of an amount representing the loss or damage, s 87 is concerned with compensation, whether in whole or in part, for loss or damage and with the reduction of loss or damage, and with the prevention of loss or damage which is likely to be suffered. In the phrase “likely to be suffered”, the word “likely” speaks of a “real chance or possibility”: Western Australia v Wardley Australia Ltd (1991) 30 FCR 245 at 261.” At the trial, it was common ground that findings of fact and law would be made which would provide the framework for the assessment of damages, if any. It was envisaged that appropriate orders would then be made to enable damages to be assessed expeditiously. The findings require damages to be assessed in Coomera’s favour. The appropriate course is to receive submissions from Coomera on the one hand and Kolback KGL and Pitt on the other as to what orders are appropriate in light of the findings including whether an order declaring the agreement void, and if so, from what date, should be made. Whatever principal orders are made, ancillary orders will be necessary to provide the machinery to undertake the assessment. Needless to say, the narrower the areas of contention in this regard, the better it will be. In relation to PRD and Dietz, the only area in which an enquiry as to damages is required in light of the findings is the extent to which damages within the category established by British Motor -- 136 of 209 -- 127 Trade Association v. Salvadori can be proved. The other relief granted to Coomera against PRD was argued as a matter of principle at the trial and does not require further consideration. Submissions will be received from PRD and Dietz on the former matter. Submissions will also be received from all parties as to costs. All submissions shall be in writing and be in the form of a brief, concise summary of what is sought, which may be supported by a separate more extensive elaboration of the points in the summary. These submissions must be delivered to my Associate no later than 4 p.m. on Friday 6 March 1998, with a copy being delivered to the solicitors for the other party or parties no later than that time. Any reply must be delivered to my Associate no later than 4 p.m. on Wednesday 11 March, 1998, and to the solicitors for the other party or parties no later than that time. 57. Summary of Findings, Orders and Declarations In 1321 of 1994 (a) In relation to the claims against Kolback, KGL and Pitt 1. I find that there was contravention of s.52 of the Trade Practices Act. 2. I find that Pitt was a person involved in that contravention. 3. I find that there was a breach of the duty of disclosure under the venture agreement (consisting of failure to give Coomera information about the negotiations with Metway). 4. I dismiss the claims of deceit and conspiracy against Kolback, KGL and Pitt. 5. I declare that the venture agreement was not avoided or terminated by Coomera’s notice of 2 August 1994. 6. I declare that the agreement was not frustrated on or about 3 August 1994 by inability to obtain finance. 7. I declare that the agreement was not void for uncertainty. -- 137 of 209 -- 128 8. I declare that no interest or estate in the relevant land was acquired by Kolback on entering into the agreement. (b) In relation to the claims against PRD and Dietz 9. I find that PRD, through Dietz, breached its fiduciary duty to Coomera. 10. I declare that no commission is payable by Coomera to PRD in relation to the venture. 11. I order that Coomera be relieved of any obligation to pay commission to PRD in relation to the venture. 12. Subject to it being established that damages of the kind discussed at pp.54 and 55 of the judgment were suffered, I order that Dietz and PRD pay damages to Coomera for tortious conspiracy. 13. I declare that the venture agreement was not avoided by Coomera’s notice of 2 August 1994. In 1329 of 1994 14. I declare that the railways compensation moneys and the old railway land are venture assets. 15. I declare that no interest or estate in the relevant lands was acquired by Kolback on entering into the agreement. In 1321 of 1994 and 1329 of 1994 I order: 16. In other respects, final orders and declarations are deferred until the submissions referred to in paragraphs 17-20 hereof have been received and considered. 17. That submissions, in the form described in Chapter 56 of the judgment, as to appropriate orders consequential upon the findings of fact and law in the judgment be delivered to my Associate no later than 4 p.m. on Friday 6 March 1998. 18. That any party making submissions deliver a copy of them to the solicitors for the other party or parties no later than the time of delivery to my Associate. -- 138 of 209 -- 129 19. That any reply to any such submissions be delivered to my Associate no later than 4 p.m. on Wednesday 11 March 1998. 20. That a copy of any such reply be delivered to the solicitors for the other party or parties no later than the time of delivery to my Associate. -- 139 of 209 -- 130 APPENDIX Detailed Summary of Evidence concerning the Project. -- 140 of 209 -- i I. Instructions to PRD to seek joint venturer Dietz who was Director of Special Projects with PRD had had an association with the Coomera land dating back to at least 1989 when the land was sold to Hoko. He and Omura had met at that time. Because Hoko’s plan was to develop the land into a golf course and resort hotel and to sub-divide and retail residential allotments Dietz, whose division was concerned with in globo sales, referred Hoko to Douglas and thereafter had no further role in relation to the project until August 1991. Hoko’s financial difficulties precluded it from proceeding to develop the land on its own. Omura had also decided that Hoko would not commit its funds from Japan to the project. In August 1991 Dietz was contacted either by Tokita or Bond and told that PRD was to receive an appointment to introduce a joint venture partner to develop the Coomera land The instructions to seek a joint venture partner were formalised by a letter dated 14 August 1991 from Bond with copies being sent to Nagano and to Big Vision Limited, a subsidiary of Hoko in Osaka. The letter stated that PRD was to market the land jointly with Colliers Jardine in Singapore and Landbase in Hong Kong and stated that Coomera was prepared to pay a fee equivalent to 5% of the asset value as reflected in Coomera’s balance sheet at the date of signing of the relevant documents. Such fee was to be shared equally between the parties, based on the country of origin of the joint venture partner. Dietz gave evidence that it was not uncommon for a vendor to direct PRD to market property using overseas agents particularly where those agents had past associations with the vendor and were known to have contacts. He said that he could not recall having heard of Landbase prior to receiving the letter. There was evidence that the various divisions in PRD were self-contained. Dietz said he was unaware of the arrangement between Douglas and Bond under which .5% of the proceeds of sales were to be given to Landbase as a result of Bond’s negotiating that arrangement. Douglas gave evidence that there was no reason why Dietz should have been aware of it. On 14 August 1991, the same day as the letter confirming the appointment of PRD to find a joint venturer was sent to Dietz, -- 141 of 209 -- ii Bond wrote to Douglas confirming a verbal agreement regarding fees for project marketing of the project. It also advised that from September 1991 for a period of 12 months fees of $7,500 per month would be paid. On 15 August 1991 Douglas wrote to Bond advising that when PRD received the outstanding fees invoiced it would remit Bond’s fees in accordance with the arrangement. It confirmed the new arrangement that PRD would receive $7,500 per month for 12 months from September 1991 from which it would pay $2,500 per month to Bond’s company. On the same day Bond wrote to Tokita addressing a “damage control strategy” which included, amongst other things, a proposal that the project should be started no later than September 1991 to create the impression for the FIRB that the project was under way, and to avoid the need to apply for an extension of time in which to commence it. There is no evidence that this memorandum came to the notice of any of the other parties and it is mentioned at this point only because a more sinister interpretation of the damage control strategy was suggested. That was that it had been conceived in a way which shut Omura out of the process of discussion. There may be an element of desire to protect the interests of those who were to share any financial benefits arising from the damage control strategy but looked at in context there is also a significant element of intent to do what could be done to preserve the asset from consequences which might flow from Hoko’s financial difficulties. Dietz gave evidence that enquiries were made of companies in the development industry with a view to ascertaining whether they were interested in a joint venture but little positive response was obtained. Having reached a dead-end Dietz and Rameau met to see if they could uncover further prospects. Rameau suggested Kolback because he had previously worked with Pitt. On being contacted by telephone Pitt expressed some interest in getting further information. As Pitt was on the point of going to America details were faxed to him the same day, 25 September 1991. Pitt advised that he would contact Dietz within the next 10 days. However he had not replied by the time Bond received a fax from Tokita on 15 October 1991 advising that “FO” had decided to proceed with -- 142 of 209 -- iii neither the project nor a joint venture. He had instructed Tokita and Nagano to work out a strategy for sale of the land to solve all the problems, particularly with FIRB. The next passage in the letter is as follows:- “In order to sale the land, I would like you to help us and keep your interest providing “CLUB” is profitable through the deal which we can and we need to discuss the issue ASAP.” The letter then went on to propose that PRD be appointed as sole agent for marketing the land. Tokita also requested Bond to obtain a letter from Douglas “in proper English, not in ‘Japlish’” addressing the following points:- The difficulty of selling the land quickly due to the current market and vendor’s legal problem i.e. FIRB; commission to be 5% of agreed sales price; Omura to pay all the fees for lobbying if necessary to solve the problem with the FIRB; requesting Omura to visit the Gold Coast to meet PRD and Bond; and requesting Omura to determine the minimum acceptable price for the land. II. PRD’s activities after Omura’s decision to sell -- 143 of 209 -- iv On 16 October 1991 Bond wrote on behalf of Coomera to Dietz advising of the instruction from Hoko to sell the property. Dietz was told upon receipt of the marketing proposal it was Coomera’s intention to appoint PRD as sole marketing agent. On the same day Dietz wrote to Nagano referring to Coomera’s instructions and suggesting a price not exceeding $15,000,000 for a reasonably quick sale. The marketing recommendation which suggested 5% commission was forwarded with the letter. An authority to act was also enclosed for signature. On 21 October 1991 Bond sent a fax to Tokita the purpose of which was to bring Tokita up to date from Bond’s end. He referred to Dietz’s marketing submission and said that appointments were being made with prospective purchasers pending “FO signing relevant Sole Agency Authority”. It also contains the following paragraph:- “I have had preliminary discussions with Peter Sanders, chairman of a public company called Red River Limited, concerning a possible purchase of Royal Coomera at a figure of around $10 Millions (in the future when FO is desperate enough). Should he proceed and purchase the property it would be done as a J.V. with the Club. This is entirely dependent on financial restructure of Red River Ltd. Balance Sheet through a Banking Source from USA. A long shot, but worth persevering with.” The fax also referred to one or two chances in the possible target market provided the price and terms were right. It was said “it will not be easy as funding will be the problem”. There was also reference to “the hospital as the best chance - how are things progressing?”. Tokita replied the same day. He said that the marketing submission had been received but “according to YN FO is grumbling to 5% commission though it will be fixed by us soon”. It continued “I am pleased to hear your approach with Red River Ltd. YN and I understand that deal will not be easy as funding will be the problem”. He then referred to the hospital but said that from his viewpoint there was only a small possibility to set up a joint venture arrangement for the project “though we have made good contact with them for Club’s future business”. On 5 November 1991 Dietz wrote to Bond setting out a list -- 144 of 209 -- v of prospective purchasers. A number of land development organisations were mentioned. KGL was one of the listed organisations but Landbase was not. The sole agency agreement was signed by Omura on 14 November 1991. He amended the commission to 3% of the sale price. According to Dietz’s evidence Bond brought the document to him and Rameau and told them of the reduction of commission. Bond then said that PRD would be in conjunction with Landbase and that PRD “would split the commission evenly with him”. Dietz and Rameau both gave evidence that they objected to the notion that they would get only 1.5%. When Dietz was cross-examined about the reference to sharing the commission with Bond he said that that was a slip of the tongue when he meant to refer to Landbase. Later in cross-examination he said that it had been established that Bond was Landbase when searches were made in Liberia. However that information was not disclosed by any documents from Liberia which were put in evidence. So far as the searches extend, the identity of those involved in Landbase remains a mystery. Dietz could only respond when pressed about that discrepancy by saying that he was mistaken and would withdraw the comment. As executed, the Sole Agency Agreement covered only a sale. It did not extend to a joint venture agreement. On a date which is not established satisfactorily by the evidence, Bond amended the Sole Agency Agreement by referring to a joint venture agreement as well. Dietz thought that the amendment was probably made at a time when the likelihood of a joint venture had become apparent rather than earlier, as was put to him. On 18 November 1991 a letter signed “S Choi” was received by Dietz. It thanked Dietz for arranging details on the property to be passed on to Landbase, but said that only a lukewarm response had been received by its clients. However a client who already had a presence in Queensland had expressed some interest in purchasing part of the property but not all. A request was made for PRD to enquire from the vendor whether the portion of the land west of the proposed railway line could -- 145 of 209 -- vi be purchased separately. If it was, Landbase would endeavour to seek an offer for it. On 19 November 1991 Dietz wrote to Choi confirming that an offer to purchase the land west of the line would be given serious consideration and that it was in order to seek an offer. On 5 December 1991 Landbase replied with another proposal. The essential elements of it were that the purchaser would pay a proportion of the total purchase price with the balance to be paid on completion of a “turn key” construction of the east golf course and club house facility. It was said that the reason for this approach was related to the financial burden of carrying a high land cost from the early commencement of the development phase and the non-existence of any cash flow during that period. The letter of 5 December 1991 from Landbase to Dietz refers to Landbase holding discussions with “a prominent Hong Kong development group”. The references to “personal representations” and presentation to Landbase somewhat overstate the position. Even taken at its highest all that happened, according to Dietz, was that he was told by Bond that he was going to Hong Kong and gave Bond some promotional material. Without enquiring further on Bond’s return he assumed that he had shown the material to Landbase. The “high recommendation” came from Bond. On 10 December 1991 Dietz wrote to Big Vision Australia Pty Ltd at its Bundall address advising that the project was being marketed “by way of personal representations to a list of qualified land developers, all of whom have proved track records.” A list of 7 companies including Kolback and Landbase, with a synopsis of each, was given. The passage of the letter relating to Landbase is as follows:- “Landbase Holdings is a Hong Kong based company which has been highly recommended to us. We understand that “Landbase” acts on behalf of some high profile clients. We presented “Royal Coomera” to Landbase Holdings several weeks ago and it is now seeking an indication of your attitude to a proposal of a purchase price comprising part cash and balance by way of the completed golf course. A copy of Landbase Holdings letter dated 5th December, outlining the proposal is attached for your consideration. We recommend that you treat this enquiry seriously and look forward to your early response.” -- 146 of 209 -- vii On 16 December 1991 Dietz said that the vendor had indicated interest in the proposal and requested a written offer. On 17 December 1991 Bond wrote to Tokita. The letter is principally concerned with matters that are not relevant to these proceedings but one paragraph states that Dietz has advised Bond that “we are very close to receiving an offer based on part payment and future payment upon completion of the golf course”. On 19 December 1991 Bond wrote to Nagano. He referred to the possibility that the Government would built a freeway through the land and set out various options for consideration by Hoko. He said that the property was being marketed at a price of $22,000,000 and that PRD had recently provided Coomera with a report indicating that there was “definite interest from two parties who would be prepared to make an offer shortly”. The notion was advanced that if there had not been an acceptable offer by mid-January 1992 limited works should be commenced before the final decision about the highway route was made in March/April 1992 to prove that the project was proceeding and to enhance compensation in the event that the freeway was constructed through the site. On 3 December 1991 Pitt had engaged in discussions with Dietz and Rameau and inspected the property. Dietz’s diaries record appointments with Pitt throughout January and February 1992. On 14 February 1992 Pitt wrote to Dietz confirming interest in the property and requesting a series of options over it. Dietz said this was not what he had expected in a letter of 17 February 1992 when he submitted the offer to Bond. He described Kolback as a well respected company with previous experience in land development on the Gold Coast and elsewhere with the ability to complete a purchase of that type. He also suggested that the initial offer may be a “try on” and that the door should not be closed on the negotiations. -- 147 of 209 -- viii On 18 February 1992 Tokita advised Dietz that Omura was not interested in the arrangement submitted by Kolback. However it was suggested that a joint venture arrangement on the west part of the land be explored. On 21 February 1992 Bond wrote to Nagano advising that he had had a meeting with Pitt who accepted that the original proposal was unacceptable but requested negotiations for a joint venture of the whole site. The concept proposed was a joint venture whereby Coomera provided the land unencumbered at a reasonable figure and Kolback undertook the cost of development at a similar figure. Development capital would be secured by a first mortgage with a profit split based on repayment of the land component to Coomera and development costs to Kolback, and then a 50-50 split of net profits. Bond advised that he had asked Pitt to provide a summary of the offer. On the same day Dietz wrote to Bond confirming his opinion that Pitt would make an offer to enter into a joint venture to develop the property. To complete the circle Bond had written to Dietz confirming that he had passed on the substance of the meeting to Nagano. On 24 February 1992 Bond advised Dietz that Coomera’s instructions were that should a joint venture be concluded with Kolback a fee of 3% of the value attributed to the land in the joint venture would be paid on a basis to be mutually agreed by the joint venture parties. On 24 February 1992 Pitt wrote to Bond setting out the framework within which Kolback would be prepared to consider a joint venture. Bond sent a copy of the proposal with a handwritten letter encouraging a visit to the Gold Coast to meet Pitt as soon as possible. Nagano replied the same day saying that the conditions were acceptable subject to some points which could be negotiated face to face. He said that he would come to Australia after he had basic agreement and authorisation from management. Bond sent a copy of Nagano’s reply to Pitt the same day. Pitt sent a memorandum dated 26 February 1992 to the directors of Kolback in which he discussed the status of its existing Highland Park real estate development. He said that because Kolback was “one of the few substantial Gold Coast developers who have not gone broke” it had received enquires about its interest in various sites. He then referred -- 148 of 209 -- ix to the Coomera site as worthy of consideration. He attached his letter of 24 February 1992 to Bond for the information of directors and said that the purpose of the memorandum was to advise directors of actions taken and to solicit comments as to the board’s views of such a development. He emphasised the potential benefit to Kolback if the project was presented as an extension of the Highland Park activity notwithstanding a policy of concentrating on the waste industry. On 11 March 1992 Nagano gave instructions to Bond to negotiate on the basis of propositions set out in Nagano’s fax. On 13 March 1992 there was a meeting between Pitt, Bond and Dietz. Dietz’s diary note shows that payment of commission in three stages was discussed as was a scheme similar to that in Landbase’s letter of 5 December 1991 about continuation of the golf course. Pitt’s response of 17 March 1992 concentrated on Coomera’s request for a firm commitment to construct the Dye Designs eastern golf course. He said that Kolback was only prepared to proceed to a joint venture in which there was a commitment to build a golf course if there was a take-out of the course on completion and an agreement that it be constructed with profits from the joint venture. He said that Kolback might consider such an arrangement if Coomera took the golf course as consideration for the land. He said that he believed that until the issue of the golf course could be resolved little progress could be made. On 19 March 1992 Nagano wrote to Bond advising that he had had a meeting with Omura in which Omura basically accepted to proceed with the joint venture. With respect to Pitt’s views about ownership of the completed course Nagano expressed the view that basically they were saying the same thing. The cost of construction would be deducted from Coomera’s profit in the future. On 24 March 1992 Bond wrote to Nagano advising that Pitt had telephoned to confirm that the contents of 19 March 1992 instructions were acceptable provided some minor fine tuning of the Dye east course design could be allowed to help with the residential marketing. He expected Pitt to submit his final offer for a joint venture the next day. Bond suggested that heads of agreement in -- 149 of 209 -- x option form should be prepared with a view to signing them on 26 March 1992. The letter proposed a deposit of $200,000 which would be released for payment to PRD as part of its introduction fee of 3%. There was no mention of commission going to any other person or company. On 25 March 1992 Pitt wrote to Bond proposing an option agreement to provide some contractual agreement while detailed points were negotiated. He said Kolback was not favourably disposed to paying a fee at that stage. He then set out the framework which Kolback would be prepared to accept. Matters of detail which are specifically recorded here because they may have relevance at a later stage are that the land value was proposed at $20,000,000. However that did not represent a sale of the land to the parties. Earlier it had been stated in another paragraph that the property would not be sold to the venture but would remain in the name of Coomera until its development and sale. On 26 March 1997 heads of agreement were signed by Bond and Pitt. Landbase is not mentioned in them. PRD’s entitlement to a 3% fee is recorded. On the following day 27 March 1992 Dietz wrote to Landbase stating that the letter would “irrevocably confirm the arrangement between our companies with regard to the share of fees” applicable to the joint venture agreement between Coomera and Kolback. It confirmed consideration at $20,000,000 the negotiated fee at 3% and each of PRD’s and Landbase Holding’s share to be 1.5%. On 30 March 1992 Pitt wrote a memorandum to all directors of Kolback, annexing a copy of the heads of agreement and advising that Coomera’s Australian representatives were anxious to present a draft document to their Japanese principals in Osaka on 9 April. The memorandum concludes:- “I think that you will agree that if an agreement was finalised in accordance with my 25 March letter we would have a very good deal. Whether or not we enter into such a venture is naturally a decision the board will have to take. At this early stage I am not making any recommendation and will report further on this subject if the “commercial principles” are successfully resolved in our favour.” -- 150 of 209 -- xi Following that, the respective solicitors for Kolback and Coomera negotiated over the terms of the joint venture agreement. On 14 April 1992 Pitt wrote to Dietz expressing dissatisfaction at the lack of progress. After a meeting on 27 May 1992 between Pitt, Omura and Nagano, a timetable was set to complete the drafting of the agreement. Drafting of the agreement by Feez Ruthning for Coomera and Morris Fletcher & Cross for Kolback proceeded accordingly. Pitt was in touch with Metway about Kolback’s financing requirements. On 16 June 1992 Nagano advised Mr Lazarides of Feez Ruthning of some points for attention in the draft. Amongst these was a concern about financing, which Mr Lazarides summarised in a fax to Morris Fletcher & Cross on 17 June 1992 in the following terms:- 1. How much funds are Kolback able to furnish to the joint venture without mortgaging the land? 2. Coomera Resort would prefer that the funds for stage 1 be provided by Kolback without mortgaging and then additional finance can be arranged using the land for security. Obviously this depends on how much funding Kolback can bring to the project without mortgaging the land. Nagano had also said that Omura’s final attitude depended on the amount which Kolback could furnish. Morris Fletcher & Cross replied to Feez Ruthning to the effect that Pitt would speak directly to Bond in relation to the funding question. On 19 June 1992 Nagano also advised Bond that Omura’s intention was to secure the necessary funds so that the project was not suspended after commencing. He would be satisfied if Kolback proved it could raise $12-15 million using Coomera’s land and its own assets. Despite inquiries of Japanese banks, he had not been able to check Kolback’s reputation. He said Omura “trembled to think how to make sure” how Kolback could find the money. He asked for details of Kolback’s plans, which Nagano asked for in draft form so he could check if it would meet Omura’s criteria. On 19 June 1992 Pitt sent to Lazarides what was -- 151 of 209 -- xii described as a draft letter to Bond which expressed surprise that there could be any confusion over the issue, reciting reasons in support of that attitude. It recited Pitt’s understanding of the position which had been reached in previous discussions. On 19 June 1992 Lazarides sent a fax to Nagano to the effect that following a meeting with Pitt that morning the drafting of the venture agreement and the project management agreement was complete. The fax continued:- “The one outstanding matter, is what you raised in your fax to Bond san regarding the amount of funds Kolback is to bring to the venture without security on the land. This of course is a new direction because our discussions and negotiations with Kolback for the last several weeks have proceeded on the basis that, while Kolback was responsible for securing the loan funds, the land would be made available as security. Of course the advantage which CR has extracted for putting the land up as security is a pro-rata arrangement, ie, that CR is to receive out of the net proceeds ahead of the other payments a pro-rata amount for the land based on an “inflated” value of the land ($20,000,000 as opposed to its market value of $12,000,000 or less).” The fax then went on to express views about advantages accruing to Coomera and the way in which, in accordance with Australian practice, Kolback might react making the deal far less commercially attractive. Pitt’s draft letter was forwarded with the fax. On 22 June 1992 Pitt faxed to Dietz a draft letter to Bond concerning funding asking for comments if Dietz had any to offer. As this letter is one upon which reliance is placed by Coomera in connection with aspects of the relief concerning misrepresentation it is necessary to quote at length from it. The relevant parts are:- “I appreciate the concern of Mr Omura regarding funding. I am sure that we can satisfy that concern. Kolback is a company of substance with assets and creditably. Apart from our Highland Park operation Kolback has substantial assets which include investments in the waste disposal industry that generate significant income. Although a comparatively small company many prominent institutions and investors are shareholders. Among our holding company Board of Directors are two civil engineers and two finance professionals. The directors of Kolback do not offer the parent company’s guarantee lightly. Kolback does not favour debt. The company’s debt has been reduced by approximately 75% in the past eighteen months. -- 152 of 209 -- xiii We have never done any business with a Japanese Bank and this is perhaps why they are unable to provide a reference. We have had a long and friendly relationship with Shimizu. Mr K Inomata, Shimizu’s previous managing director in Australia may give a reference to Kolback and myself. You already have a copy of a reference from Kolback’s previous partner, Elders Finance Group. Kolback is a public company listed on the Australian Stock Exchange. Kolback understands that it is to introduce and guarantee the funding using the land as security. It is also understood that the only amounts to be secured by the land will be project expenses and not include interest or any other liability incurred by Kolback. Kolback’s initial commitment is to fund $12.0 million to enable development of the business plan, construction of advanced infrastructures and the first stage of commercial development. Thereafter and up to $20million the funding is to be introduced by Kolback subject to commercial viability of any particular stage. It may be that the financier gives an approval for the first $12 million subject to commercial viability of the business plan. This may not be a bad thing for all parties. I am confident that it will prove to be viable and look forward to maximising profit. Regarding the funding. We are having discussions at a senior level with officers of Metway Bank Limited. Not only for the project finance but for a package which will include banking and administration services, a loan to Coomera Resort for golf course construction, public authority guarantees and most importantly finance for individual purchasors.(sic) Metway Bank is based in Queensland and is one of the few financiers not to have suffered during the property downturn and is now looking to take advantage of the property cycle. Negotiations with Metway are proceeding most satisfactorily. To obtain the best overall package for all concerned it is necessary to proceed step by step. Please advise me if you require any further information. If Mr Omura is concerned about availability of funding it would be possible to allow for termination if Kolback were unable to introduce funding 60 days after presentation of the business plan. However I remain confident that finance will not be a problem. Kolback does have the ability to introduce funds itself but is in the process of re structuring its finances as part of a program that will hopefully see it debt free by the end of the calendar year. Such a debt reduction adds substantial value to the guarantee by Kolback in support of Coomera Resorts security. I repeat that Kolback does not give its guarantee lightly and would not have proceeded to this point if it were not confident of raising the funds.” After that, further negotiations and drafting were carried out. On 3 July 1992 matters had reached a stage where Pitt wrote a memorandum to the directors of Kolback saying that all -- 153 of 209 -- xiv outstanding matters that could be resolved “from both parties ambit claims” had been settled. He recommended that Kolback proceed with the transaction, while at the same time taking a more aggressive attitude in terms of price to quit its Highland Park development project and to terminate that joint venture with Elders under the provisions in that agreement. However, on the same day, Bond was responding to a message from Nagano to the effect that Omura was considering involving Multiplex, an Australian construction company, in the development of the land. Bond argued strongly in favour of not disturbing the arrangement which was on the point of completion with Kolback. Also on the same day Landbase presented an account for initial payment under the venture agreement, namely $100,000 with a balance to be paid later of $200,000. It was requested that the $100,000 be remitted to a bank account at the Hong Kong & Shanghai Banking Corp Ltd, Central Hong Kong. On 6 July 1992 Nagano sent a fax to Bond. The gist of it is that Omura wanted to secure enough funds for the project and that Kolback should mortgage its assets at the same time Coomera mortgaged its, as well as giving a guarantee. Nagano suggested to Bond that Lazarides might provide a letter explaining how a financial institution would approach the question of sufficiency of security. He also asked if Pitt would provide a list of assets which would provide security for the project. Bond made a copy of Nagano’s fax available to Dietz to pass on to Pitt. In his covering note to Pitt he said the following:- “ ... Mr Omura keeps getting back to this matter, his concern as expressed previously is the manner in which loan funds are to be secured. It needs to be explained to Mr Omura how the Coomera land which may be valued at say $10 or $11 Million would secure a peak debt of say $12 to $15 Million. Would additional security be offered or would the improved value of the subject property after certain works are completed satisfy the lender. We believe that this is the last remaining point of the venture agreement that needs to be clarified.” -- 154 of 209 -- xv On 6 July 1992 Lazarides replied to Nagano’s fax. The relevant passage is the following:- “I think it is probably unrealistic to expect Kolback to stipulate now which assets it is prepared to put up as security. It would not be unusual for Kolback assets to already be “charged” under a floating debenture in favour of its bank to secure its normal business overdraft. In any event, a financier to the Project may or may not want additional specific security from Kolback - it might be quite content to rely on the Kolback guarantee as additional security, but that is a decision that only the financier can make. There seems to be little point in trying to second guess now what requirements the financier may have. Also clause 9.1 does require Kolback to procure “all finance for the Venture as and when required for the Venture in accordance with the Business Plan.” He then went on to suggest that the problem might solve itself in practice in any event. If the financier required more security that would be known relatively early and would force Kolback to deal with it. Kolback would be in a position where it might have to provide additional security or forego the venture entirely. On 7 July 1992 Pitt wrote to Bond. Amongst other things he pointed out that Kolback had not at any time agreed to mortgage its assets in favour of the venture. It had offered to obtain the funding and to provide the guarantee from KGL which in itself included the support of all Kolback’s assets and shareholders funds. Pitt also said that from his discussions with Metway, Metway preferred to keep its initial exposure to $1,000,000 while it appeared that favourable consideration would be given to the total package of funding when the business plan proved the feasibility of the development. He said that Metway had some initial concern in relation to the $2,000,000 for golf course construction and would like to see the concept refined during the business plan stage. Then, almost ad misericordiam, he referred to the concessions he had made in Coomera’s favour, the lack of capacity to make further concessions and the risk of jeopardising his relationship with his directors, the financiers, the local authority and others if the deal did not proceed. The following paragraph also appears:- -- 155 of 209 -- xvi “If Mr Omura is concerned at the Kolback balance sheet in respect of the guarantee then he can be satisfied as many of the “intangible” amounts relate to asset values including the Highland Park development, over and above book values.” He then went on to spell out that Kolback’s initial commitment was to raise $1,000,000 for the business plan stage. The second commitment was to raise funding for the infrastructure costs and first stage of development to a total of approximately $11,000,000. Thirdly it was to raise additional funds to make up a minimum total of $20,000,000 providing that such new stages of development were commercial viable. He said “Metway have no problem with this concept providing the business plan indicates the viability of the investment.” On 7 July 1992 Nagano advised Bond that everything had been made clearer to Omura and that an appointment with the Australian Consul to execute the Power of Attorney under which the agreement would be executed was fixed for the next day. On 7 July 1992 Mr Salotti, who had at the directors’ meeting of KGL on 9 June 1992 expressed concern about the impact of the proposal on Kolback wrote a memorandum to Pitt addressing a large number of the provisions in the agreement. The one upon which particular focus was placed during the hearing was his comment on cl.37.1. The comment is as follows:- “Clause 37.1. The commitment to meet half of the commission payable to PRD of $600,000 is clearly the principal and initial risk incurred by Kolback on signing the Venture agreement. Although the initial payment is $200,000 30 days from execution of the agreement and the balance in two further equal instalments, in the absence of an agreement between the parties as to the timing of the payments, the resolution of such an issue could be difficult. I am particularly mindful of the presence of Paul Bond (as one of the two Venture’s nominees) when addressing this matter.” He concluded by expressing the view that on the basis of the information he had the reward outweighed the risks involved in the venture and it should be pursued. The reference to Bond in the last paragraph of his comment on cl.37.1 attracted attention. Mr Chesterman submitted that it should be viewed as an indication that Salotti knew that Bond had an interest in the commission. -- 156 of 209 -- xvii It is convenient to mention at this point that Palmer who was working on the project on Kolback’s behalf says that he could not fathom why it was necessary for Hoko to involve Kolback in the project and to share the profits with them. He said that on at least one occasion before the venture agreement was entered into he observed to Pitt that the Japanese must be crazy to enter into the deal. He gave evidence that Pitt said there was a “trick” to it and that Bond and Nagano were to get half of the 3% commission to share between them. Pitt denies that any such conversation occurred. The venture agreement was signed on 9 July 1992. III. Initial Funding Kolback pursued finance for the initial phase of the project with Metway. On 5 August 1992 Metway sent a letter of approval of $100,000 in respect of interest and $800,000 in relation to the “feasibility study”. At MCM2 on 25 August 1992 the Metway letter of offer was accepted by the respective nominees. On 1 September 1992 Bond and Pitt met which resulted in Pitt writing to Bond on 2 September 1992 expressing concern over confusion regarding the obligation for Coomera to mortgage its land other than the golf course land. He requested a quick resolution of the misunderstanding. Since the question of cash flows becomes of some significance later it is desirable to quote a passage from the letter:- “I also refer to your request for us to provide a project cash flow. This will not be possible until our planning is more advanced with proper costings, the golf course arrangements are finalised and when we have determined target markets and take up rates. We believe the cash flows and the business plan should only evolve from facts and hard data. We do not wish to base any of our planning on guesses or assumptions. We believe that such an attitude is also in Coomera Resort’s interest and so costly mistakes are not made.” Bond referred this letter to Nagano. On 7 September 1992 Pitt wrote to Bond pointing out that no response had been received and that until security documentation was complete Kolback was unable -- 157 of 209 -- xviii to draw funds to pay rates or other costs. He enquired whether the overall funding procedures had been clearly explained to Omura. He pointed out that Metway had been presented with the total package, including $2,000,000 for Coomera for initial golf course funding, had approved the funding for the phase one loan to establish the venture and produce a new concept and business plan and had indicated its willingness to finance the total development on its acceptance of profitability of the business plan and associated cash flow. He said that it was important that the venture proceed both in accordance with the agreement and the deliberations of the management committee. On 11 September 1992 the executed document relating to the $800,000 loan approval was returned to Metway. On 15 September 1992 Metway forwarded its documentation in connection with the loan for execution by the parties. At MCM3 on 16 September 1992, Omura stated that he was aware of the requirement to mortgage the land to secure firm funding for the second stage. However he was not advised of the need to mortgage the land for partial funding. He understood under the venture agreement that Kolback would provide the entire funds for the project as well as the knowhow and that Coomera would offer the land without furnishing any funds. Pitt had prepared a memorandum which expressed in strong terms Kolback’s concern that Coomera was not adhering to the agreement or respecting the worth of Kolback’s guarantee. Certain variations were proposed to resolve the impasse. Omura requested deferment of a decision until 22 September 1992. Pitt stressed that a firm reply would be needed on that date. On 18 September 1992 Omura wrote to Lazarides and asked him to negotiate with Pitt. Nagano sent a handwritten fax to Pitt enclosing that letter. He said that he was not allowed to send the letter directly to Pitt but worried that Pitt would not have enough time to review it because of time constraints. He asked Pitt to keep it strictly confidential and not to disclose to anyone including Lazarides that he had received it. On 22 September 1992 Lazarides wrote to Pitt saying that Coomera did not suggest that Kolback was in breach of the venture agreement but wished to resolve the matter -- 158 of 209 -- xix in accordance with it. He said that Coomera’s view was that it was not commercially acceptable to mortgage all the titles to Metway when only a small part of the project funding was being provided. However it would be prepared, if requested, to offer a mortgage over some of the titles for partial funding but would not agree under any circumstances to mortgage the golf course land. He went on to state that Coomera insisted that funding be in accordance with clauses 9.1 and 9.4 of the agreement (which have been summarised as (d)(i) to (v) in section 11 “the joint venture agreement” above). Any venture funding must be guaranteed by KGL. Kolback must provide the security to cover interest on the venture funding and in accordance with the venture agreement. No caveat would be allowed. If Kolback and Coomera could not agree to both proposals Coomera’s view was the only alternative was for the parties to agree to fund all the venture expenses by cash injection and for the funding to continue until a satisfactory business plan was completed and a firm commitment from a financier for all venture funding had been obtained. Coomera did not expect Kolback to bear interest on any cash contribution made by either party. Lazarides expressed the personal view that the proposal was in accordance with the venture agreement. On 2 October 1992 Pitt replied, noting Lazarides’ comments regarding the interpretation of the agreement but saying that the present impasse seemed to have come about through Coomera’s reluctance to acknowledge decisions properly taken by the management committee which, in effect, varied the agreement. He went on to say that such variations were allowed to be made under the agreement and provision to do so was deliberately contemplated so that the venture could operate on a day to day basis. Pitt also wrote directly to Omura enclosing a Japanese copy of the letter. He said that the misunderstanding had arisen through communication problems rather than through any parties wishing to breach the agreement or any variation of the agreement arising from management meetings. He repeated the view that the main agreement provided the rules and the framework to -- 159 of 209 -- xx administer the venture but allowed changes to be made by the management committee so long as the changes were properly documented. He said that that was what had occurred in the case of the stage 1 funding. He said from Kolback’s point of view that the most important issues were that the business plan be completed as soon as possible so that stage 2 funding could be arranged and that Kolback’s interest in the land be reasonably secured in some way that attached to the land. He said that he believed that the business plan could be finished sooner than originally anticipated and that Kolback would continue to fund its preparation. He pressed for a variation of the venture agreement to allow a caveat to be lodged to protect Kolback’s interests and for provision for its removal if Kolback did not secure funding required by the agreement. MCM4 had been scheduled for 16 October 1992. However Omura’s brother passed away on 12 October 1992 and Nagano faxed Pitt accordingly. He also advised that Omura had refused to vary the agreement to allow for a caveat on the basis that as long as the parties contributed one-half of the expenses each, each party bore an equal risk. On 13 October 1992 Nagano faxed Bond asking him to attend the meeting. He said that apart from the golf course there was no substantial issue to clarify with Kolback. He said that a decision would be made in the next week whether a golf course would be built and asked for assistance from Kolback and Bond as to the cost analysis and operational cash flow of golf course. On 13 October 1992 Pitt wrote to Omura stating, amongst other things, that Kolback’s concern in seeking to have a consent caveat was not in relation to risk of capital but to “formally acknowledge Kolback’s interest in the venture”. He stated that if further or extended negotiations were required, Kolback required its interest to be formally acknowledged through the consent caveat up until the time provided for in agreement to secure funding for the second phase. -- 160 of 209 -- xxi IV. Proposals to Fund Golf Course Between 20-22 October 1992 Nagano and Pitt exchanged correspondence about building the golf course earlier than the expected cashflow would allow. The idea of developing the west side of the railway line was raised by Nagano. Pitt advised Nagano that the venture agreement set out the land payments and profit share but said it was difficult to see how the venture could pay more in years 3 and 4 to Coomera. He agreed to prepare a basic development proposal for the western land for discussion at the MCM on 27 October 1992 but set out perceived difficulties. He also advised that Metway was concerned that there was no case in Australia where a “stand alone” commercial golf course had been developed that was profitable. He said that that was a fact and it would be irresponsible for him not to bring it to Nagano’s attention. The minutes of MCM4 held on 27 October 1992 show that Omura was still concerned about funding the golf course. He was concerned to have a cash flow for the western side of the railway line but Pitt was at pains to point out that any such estimate would necessarily include many assumptions which would affect its accuracy. Pitt said that Kolback was in a position to proceed with preparation of the business plan once the golf course decision was made. He undertook to commence preliminary cash flows to assist with that decision including west of the railway. He also proposed that Kolback would apply 100% profit to golf course construction to commence in year 3 and that Kolback would take every care to maximise profits and to return a dividend to Coomera as soon as possible. An information memorandum concerning golf course options stated that the project was not able to fund golf course construction. It referred to other options and stressed the inability to make decisions relating to the infrastructure of the development in the absence of a decision about the golf course. It concluded by saying that Kolback would find it very difficult to proceed further with the business plan or negotiations with government instrumentalities until the golf course issue was resolved. -- 161 of 209 -- xxii On 2 November 1992 Pitt sent a letter to Nagano enclosing cash flows with some assumptions for west of the railway, prepared solely to assist the golf course decision and not to be construed as a business plan model. It also pointed out that a sum of about $10,000,000 mentioned by Hoko would not be sufficient to build an international standard golf course. On 5 November 1992 Nagano faxed Pitt advising that Omura had decided that day to build a golf course in the project. He said that they understood they would have a difficulty funding the costs of construction and that it was difficult to commit to timing of commencement of construction. He said that notwithstanding that, they would try to build the golf course to the Dye Design at an early stage in the project with Kolback’s cooperation and that Omura wished to discuss every possibility with Pitt. On 10 November 1992 Pitt replied, saying there were several issues concerning the golf course that needed to be resolved before the business plan could be completed. The exact position and layout had to be determined for engineering purposes. He pointed out that during the original negotiations Coomera undertook to resolve those matters and others in relation to the golf course prior to completion of the business plan. He also pointed out that the timing of the golf course construction was important to the success of marketing and profitability of the development. He once again referred to $10,000,000 being insufficient for an international standard course. He said Kolback was prepared to renegotiate the agreement to allow a Dye Designs course to be built in two 9 hole stages. However he said that since renegotiation of the agreement would adversely affect Kolback’s revenue there would need to be some compensation and security for Kolback, involving Hoko transferring the land to Coomera forthwith and granting Kolback a caveat. Coomera would effectively “buy” the golf course from land payments and profit share. All finance costs would be a venture cost. There would also have to be an acknowledgment that the real land value was $12,000,000 not $20,000,000. The agreement would have to be amended to reflect real land value -- 162 of 209 -- xxiii or a figure in between. He sought urgent advice of Omura’s attitude to those issues. If they were resolved Kolback might be prepared to commit the venture to construct the golf course. By this time Ikeda had become involved in the matter. His appointment as a Coomera nominee was formalised at MCM5 on 25 November 1992. On 9 November 1992 he wrote to Nagano setting out three ideas which involved firstly dividing the joint venture agreement into different projects, secondly, employing Kolback as project manager of the residential development, not as a partner in a joint venture and, thirdly by each party arranging its own finance. On 13 November 1992 Nagano faxed Pitt and advised that, notwithstanding Nagano explaining to Omura that the current value of $12,000,000 had been inflated to $20,000,000 for the purposes of the agreement, Omura’s point of view was that Hoko was paying interest on the land in Japan and therefore Kolback should bear the interest on $20,000,000. An accompanying document stated that Hoko did not wish to substantially change the present structure of the agreement but asked for Pitt’s opinion of propositions in the document. The first was that the golf course be constructed over 4 years from year 1 for $12,000,000. If $4,000,000 was committed in year 1, $2,000,000 in year 2, $4,000,000 in year 3 and $2,000,000 in year 4 a total of 16.6 million dollars total cost would arise at 12% interest. Other conditions in the agreement would remain unchanged. The document also stated that it was understood that Kolback would bear more interest if the proposal was accepted but suggested that this would be offset by the benefit on sales of having the golf course built earlier and of earlier completion of the project. On 16 November 1992 Pitt replied saying that Kolback did not wish to substantially change the structure of the agreement and was only proposing changes because it had offered to become involved in constructing the golf course. It was prepared to do so for a fixed price with progress payments being made from Coomera’s land payments and profit share. It asserted Hoko’s obligation to pay interest on the land was irrelevant and had not been previously mentioned in discussions. It -- 163 of 209 -- xxiv also refuted the suggestion made by Nagano that Kolback would be better off from the construction of the golf course saying that Kolback’s research had disclosed little benefit by reason of lots adjoining the golf course. The letter also referred to benefits that Kolback had already brought to the venture and said that it was attempting to assist Hoko to achieve its objective of constructing the golf course. It was suggested that Coomera should be realistic in assessing the amending conditions which must reflect some benefit to Kolback. On 20 November 1992 Nagano wrote to Pitt stating that Coomera wished to build the golf course after the completion of the first phase development. It was happy to involve Kolback in working with Dye Designs to fix the layout for master planning purposes. Coomera was not in a position to decide the funding conditions at that stage and it was suggested that Omura would discuss development of the west side of the railway to seek a quick return at the forthcoming MCM. The letter also said “we would like you to proceed the business plan in accordance with the above decision”. On 25 November 1992 MCM5 was held. The business transacted was replacing Bond as Coomera’s nominee, substituting Ikeda in his place, and terminating any entitlements Bond may have had under the agreement. On 26 November 1992 MCM6 was held. Pitt reminded the meeting that the programme could not proceed until Coomera had fulfilled its obligations in regard to the golf course in accordance with the agreement. If, as Nagano had suggested it might, the envelope would be determined by 7 December 1992 Kolback might be able to complete a preliminary master plan by 15 December 1992. In answer to a question from Nagano, Pitt advised that Metway was keen to fund the project. However until the business plan and cash flows were complete he could not discuss funding with potential financiers. The position of ultimate funder was open and could change if more advantageous terms were negotiated. Omura raised the use of the land west of the railway and commencement of development in that area. Pitt advised that development costs would exceed the -- 164 of 209 -- xxv return from an affordable housing development but believed that the land would improve in value with the passage of time. Rezoning would be needed which would preclude its use in the early stages. He considered that it was preferable to leave the land available for future use to be determined but to allow within cash flows for conservative alternatives as a fall back situation. At a meeting on 27 November 1992 a brief to Dye Designs was considered and it was resolved that for the purpose of preparing a master plan the redefined land and club house site would be the “golf course” land. Pitt explained that the master plan could not be completed until the golf course land was defined. Following a meeting on 7 December 1992 Pitt wrote to Ikeda proposing that a management committee resolution be recorded that, for the purpose of master planning, the golf course land was defined on a preliminary basis by a plan attached to the letter. Kolback should prepare a service structure plan, draft residential layout and staging plan to suit the preliminary definition of the golf course land. Kolback should continue to communicate with Dye Designs with a view to getting a final plan which interacted with the planned residential development in a financially prudent manner. On 5 January 1993 Pitt wrote to Ikeda asserting that, as Ikeda knew, planning had been held up for the past 2 months while golf course issues had been determined. The letter then discussed marketing strategies and repeated the belief on his part that the golf course would not profitably impact on sale in the short or medium term. He said once again that should Kolback agree to the construction of the golf course and its inclusion in the business plan Kolback would require the land to be transferred to Coomera immediately and that the venture agreement be amended to precisely record the objectives and financial arrangements in respect of the golf course. At an informal meeting on 6 January 1993 a master plan described as a “preliminary plan pending further input from both parties” was tabled. -- 165 of 209 -- xxvi Pitt expressed further concern to Ikeda on 14 January 1993 at progress in completing the business plan, the main reason for the delays being Coomera’s failure to resolve golf course issues. On 27 January 1993 Ikeda transmitted Omura’s view that the present plan did not indicate a detailed proposal of the western site area and that unless the overall detailed concept plan was developed it would be very difficult for him to evaluate Kolback’s proposal and to proceed with the next stage of the business plan. There was a mild complaint that the result achieved, having regard to the money spent, was not what he had been looking for. Ikeda and Pitt met on 27 January 1993 to discuss the difficulties, with the matter not being further advanced. On 2 February 1993 Pitt wrote to Ikeda responding to Ikeda’s letter of 27 January 1993. Pitt said that it was too late to change the location of the golf course as had been suggested since the management committee had defined what constituted the golf course land. The letter also assured Omura that Kolback was proceeding with its role in the joint venture and placed the blame once again on Coomera not discharging its responsibilities in respect of the golf course for the delay in finalising the concept and business plans. On 8 February 1993 Omura wrote to Pitt stating that while the golf course envelope had been discussed in November, his understanding was that it was not the final envelope and layout as further investigation concerning the cost of design work and construction and further consultation with Dye Designs were needed. He repeated his request for a cash flow plan for the whole of the project including the western side of the proposed railway so that he could assure himself of the feasibility of the project and the profit of the joint venture. He said that he understood Kolback’s endeavour in the master planning work but the current information forwarded to him was not sufficient for him to make a final decision especially for the layout of the golf course and the total cash flow plan of the project. He said that the delay had been contributed to by Christmas and New Year holidays, his brother’s funeral and an illness which Pitt had suffered in about January 1993. -- 166 of 209 -- xxvii Management Committee Meetings were held in Osaka on 12, 13, 15, and 16 February 1993. Kolback was asked to complete the concept plan and the business plan with the concept plan being lodged for approval in principle by the local authority. Omura raised the prospect of amending the venture agreement and discussion ensued as to whether Hoko’s contribution was greater than Kolback’s. One matter discussed was the inclusion of the golf course as a venture project, which Pitt said was not Kolback’s preference without closing off the possibility if the risk was shared. During the meetings Pitt referred to the agreement providing for a loan from Metway secured by the property over the initial development costs. It became apparent that Omura had misunderstood the requirement to mortgage the property at this stage. It was agreed to share direct costs equally until mortgage funds were secured. On 1 March 1993 Pitt wrote to Ikeda enclosing an “action plan of outstanding matters that Kolback were working on to complete the business plan”. The letter repeated that Kolback was prepared to include the golf course in the venture but to raise funds for its construction the golf course must irrevocably be tied to the balance of the project. He stated that Kolback did not wish to risk its position in the venture by being solely responsible for funding. He said that Kolback was only agreeing to include the golf course to accommodate Hoko and it was not equitable for Kolback to solely be responsible for all interest payments. On 8 March 1993 Pitt, Ikeda and Forsyth met. Pitt produced a memorandum setting out Kolback requirements for including the golf course development as a venture objective. They were that Kolback secure finance for the total venture; failure to do so would not be a default; funds would be borrowed by both parties with a guarantee from Coomera and Kolback; interest on the total project would be a joint venture expense and be capitalised against project borrowings. Kolback was prepared to agree to Coomera having 75% of the profit. The proposal was faxed to Omura by Ikeda. -- 167 of 209 -- xxviii On 10 March 1993, Ikeda faxed Pitt advising that Coomera would develop and manage the golf course but not by a joint venture and proposed that the venture would pay to Coomera the cost of the land, 14.2 million dollars, over 3 years by instalments of 4.4 million, 5 million and 4.8 million in the respective years. Coomera would use the 14.2 million dollars for golf course construction and the venture would have a equal responsibility for borrowing the funds, the securities and interest payments. The venture would share the profit and loss equally. On 12 March 1993 Pitt wrote to Ikeda stating that notwithstanding some concerns on the part of Kolback, Omura’s proposal was acceptable subject to certain points. The first was that as the land purchase would be paid earlier the land should be transferred to a new entity controlled by Coomera and KGL equally. The second was that payments in respect of the land be made subject to the venture having funds on hand or being able to borrow the funds and be paid in stages to meet construction costs. The third was that Kolback would commit to do all in its power to raise the funds for the venture to make the land payments. He proposed a Deed of Variation be drafted. A draft Deed of Variation was sent to Ikeda by Minter Ellison Morris Fletcher. A letter of advice to Pitt from Minter Ellison Morris Fletcher was translated and sent to Omura on 26 March 1993. MCM7 was held on 15 and 16 April 1993. Pitt explained the format of the business plan and how the information had been compiled. Omura advised that he would require until 23 April 1993 to assess and comment prior to Kolback finalising the report. It was agreed that Kolback would complete the report as soon as possible after that date. The proposed variation to the venture agreement was discussed. The notion of forming a company in which Coomera and Kolback had equal shares and equal representation was agreed to subject to legal and accounting advice, with the existing structure to remain for the time being. Pitt noted that Kolback was foregoing project management status under the new proposal and again expressed concern that, apart from a consent use application lodged by Kolback, no apparent progress had been made on the golf course -- 168 of 209 -- xxix development which had always been Hoko’s responsibility. On 28 April 1993 a response was prepared to the minutes of MCM7 in which a number of variations were sought. One matter raised by Omura was that the venture should engage an interpreter or translator to take the minutes during the MCM meeting because the minutes prepared by Kolback did not reflect the actual discussion at the meeting. Ikeda had sent a list of questions concerning the business plan. On 3 May 1993 Pitt’s response pointed out that the business plan was not a legal document and was not binding on the venture partners. Its principal objective was to describe the project and set out the objectives. It was long overdue and could not be delayed any longer. If an agreement to vary the conditions of the venture occurred it would supersede its provisions. He asked Ikeda to allow legal representatives to meet as soon as possible to consider the options open. He expressed willingness on behalf of Kolback to be bound by the general provisions of the letters exchanged regarding restructuring the venture. However it was difficult to be specific until professional advisors had reported on relevant matters. A translation was sent to Omura by Ikeda on 10 May 1993. Ikeda sent a fax to Pitt to the effect that Coomera’s main reason for agreeing to the new company structure was that Coomera could develop the golf course at an early stage. KGL would not be required to provide a guarantee and the project management agreement appointing Kolback would be cancelled with a third party to be project manager selected on the basis of neutrality and fairness by the venture. Coomera saw a problem about Pitt being managing director and project manager under the new structure. Should Pitt insist on going back to the existing agreement Coomera would require the 14.2 million dollars to be arranged in three instalments in 3 years from joint venture funds, interest on those funds to be borne by Kolback and Coomera equally. Perceived benefits to Coomera and Kolback were set out. The letter then went on to assert that Coomera had realised for the first time that Kolback was not interested in building housing or building by the joint venture. It was asserted that in previous -- 169 of 209 -- xxx discussions Coomera had proposed to design, develop and sell condominiums on the residential lots facing the golf course. It was asserted that Coomera had never understood the project as being limited to selling land. The letter went on to assert that in principle the venture should have an objective of building condominiums, housing, the town centre, other building facilities, and selling packaged housing. This provoked a quick response from Pitt to Omura. Pitt expressed amazement at some of the comments in the letter. He said that during all negotiations prior to the venture agreement it was made clear that Kolback was not interested in building. He referred to the terms of the venture agreement which he said were restricted to dealings with land. He said that if Coomera wished to build on developed land it must buy the land on agreed terms as if it were a local buyer. He also stated that since Kolback was in the venture because of its skills in project management and marketing it was unusual to seek to change its direct involvement. He asked whether there was a lack of trust inherent in the suggestion that there should be a third party as project manager. He also said that Kolback’s position was that any changes proposed were at the request of Coomera and that if Coomera did not wish to proceed with the changes the original agreement was still in place. On 17 May 1993 Pitt raised with Ikeda the amount owed by Hoko to Kolback by way of venture expenses. Pitt said that due to Hoko’s failure to proceed with the security documentation and finance approved by the management committee Kolback had been left in the position of banker to the venture and was not prepared to continue to fulfill that role without adequate security. He proposed that the unused venture bank account be used with a contribution of $30,000 each for the time being. In another letter on the same day he wrote to Ikeda including new cash flows. He said that he believed the project was now moving at a satisfactory pace and that it was essential that the parties agree to proceed in the matter already agreed or to quickly make variations. He asserted again that Kolback had never sought to vary the agreement and that any recommendations by Kolback had -- 170 of 209 -- xxxi been made to accommodate Hoko. He restated that many months of delay had been caused by Hoko not coming to terms with golf course issues and that there was no evidence that Hoko had taken steps to facilitate complementary planning. He also pointed out that despite assurances no contact point for discussion of legal and accounting aspects of changes to the agreement had been nominated. He stressed again Kolback’s expertise in project management and the savings that that had brought to the project and required an urgent meeting with Ikeda to discuss all outstanding issues. He asked Ikeda to come armed with proper and full authority to commit Hoko. He asserted that as Hoko’s nominee Ikeda was required to make decisions and could not delay because he was waiting on instructions from Omura. He said that despite assurances that Ikeda had read the venture agreement and the manager’s agreement he still seemed to have misunderstandings which were fundamental. A meeting was held between Pitt and Ikeda concerning Coomera’s proposal that the joint venture engage in building. Pitt said that if Coomera could demonstrate a satisfactory profit risk factor for building then Kolback would reconsider its present view. If Coomera wished to build on its own account Kolback would not object. It was agreed that from 1 July 1993 all payments would be made from the joint venture account and Ikeda stated that he expected that Coomera would make payment for its share of direct costs as invoiced by 26 May 1991. Ikeda advised Pitt that Coomera wished to retain the existing venture partnership. Pitt said Kolback was happy with that arrangement and that the only remaining issues to be resolved were to quantify the land payments and to resolve Coomera’s concern regarding the project management agreement. He indicated that Kolback was prepared to agree to the venture making payments in accordance with a timetable provided by him for construction of the golf course on the basis that interest was a venture expense and Kolback was not in breach of the agreement in respect of being solely responsible for funding. Ikeda raised again Coomera’s concern about Kolback being a venture partner and project manager and Pitt repeated the rationale again. -- 171 of 209 -- xxxii On 28 May 1993 Ikeda again argued that the venture should appoint a third party to carry out project management. The letter also requested a reduction of the golf course construction period of 4 years to 2 years. It was also suggested that if the venture could not meet the funding of the golf course development for Coomera it would be a “fundamental failure of the principle of fifty-fifty share of joint venture project”, and that it was an enormous disadvantage to Coomera if the golf course could not be built as early as required by the venture agreement. He also asked if the present financing proposal was based on preliminary discussions with a lending institution and if so what had been discussed. If not Coomera wished to also arrange an initial discussion with financiers in relation to funding possibilities. He also asked for confirmation that the golf course land would not be subject to mortgage for borrowing of funds by the venture. Pitt replied on the same day. He said that the basis of the agreement was that Hoko had sought out and encouraged Pitt through Kolback to be project manager. There was no conflict of interest. He said again that delays had been and continued to be caused by Hoko’s failure to come to terms with golf course issues and Hoko’s request to vary the existing agreement and then introduce new conditions which varied points which had already been agreed. With respect to the golf course he said that Kolback had agreed to advance land payments early to meet Hoko’s requirements. Kolback agreed to the payment schedule in the most recent cash flow but would not vary it. If Hoko wished to build the golf course more quickly that was up to Hoko. He said that Kolback was “proceeding with funding applications as required in the existing agreement”. He again expressed amazement that Coomera should seek to change points that had previously been agreed. He said that, as previously advised, Kolback had had talks with Metway and also proposed to discuss funding with a number of other institutions and individuals. He said that the financier may initially require a mortgage over the golf course but would probably rely on the other land due to the fact that golf courses were not -- 172 of 209 -- xxxiii good security. He said that he was most concerned at the inability of Coomera to come to terms with the particular negotiation that it had started. On 31 May 1993 Ikeda transmitted a memorandum from Hoko to Pitt expressing concern that the venture could not raise funds for the golf course development as suggested by Pitt and complained that Hoko had not been informed if Pitt had commenced negotiation with financial institutions. It states that while the original agreement made Kolback responsible for project management, Pitt had been acting in that role without authority since Palmer had resigned and despite the fact that a new structure for the joint venture was under consideration. The memorandum also disputed Kolback’s view that the delay in the project was Hoko’s fault for reasons which were expanded on. In his response on 1 June 1993 Pitt denied that he was acting without approval since Kolback was the project manager and responsible for providing the personnel to fill the role. There was further discussion of the issue of delay and the letter concluded:- “Kolback’s view is that there should be no further delays. While Kolback is prepared to discuss variations with CR we feel that we should proceed on the basis of the existing agreement but varied as set out below:- 1. Kolback proceeds to arrange funding including funding of land payments over a 4 year period as set out in Kolback’s letter of 24 May 1993 Kolback to report progress by 21 June 2. Should financiers not approve funding for early land payments/golf course construction Kolback to make a fresh funding application under and in the same terms as those provided for in the existing agreement. If golf course funding on the above terms is obtained interest will be a joint venture expenses if not interest will be a Kolback expense.” On 4 June 1993 Nagano wrote to Pitt acknowledging that Kolback was appointed project manager under the agreement but expressing concern that Pitt was performing the role of nominee as well as project manager and expressing the view that there was a possibility of confusion if the same person held both positions. The letter said Coomera would not change its attitude regarding -- 173 of 209 -- xxxiv that issue. There was also a complaint that almost 2 months had passed after the business plan had been approved and Coomera had not received a copy of the revised cash flow which Kolback intended to use for the purpose of obtaining funding from banks. The letter stated that the issue which most concerned Coomera was funding and it wished to be more informed of the details of the progress in that regard. On 8 June 1993 Pitt wrote to Nagano strongly defending his role in Kolback’s performance of its role as project manager. He also disputed that there was any cash flow fitting the description in Nagano’s letter which had not been given to Hoko. Pitt’s final words were:- “Mr Nagano, Hoko still seems to have a terrible communications or understanding problem. While we are sympathetic in our thoughts and actions this is not our problem. This is an Australian venture to be carried out in English language and according to Australian customs and business practices.” On 17 June 1993 following a meeting between Pitt and Ikeda, Pitt wrote to him to the following effect:- “I have set out below the matters upon which we agreed yesterday could you please confirm your acceptance of these matters by signing a duplicate of this letter and returning it to me. In this manner we can confirm the manner in which we are to proceed. 1) The original signed agreements, including variations as agreed in writing, are the only legally binding agreements in force between the parties 2) Not withstanding the provisions of 1, above Kolback proceed to obtain expressions of interest from financiers in relation to funding as set out in the cash flow to allow early land payments to enable construction of the golf course 3) Messrs Pitt and Ikeda to meet on 5 July, 1993 to discuss response of financiers 4) Should Hoko not wish Kolback to pursue funding for golf course on the basis of 3) above then Hoko should so advise Kolback in writing and Kolback should then move to secure funding along the lines agreed in the original agreement.” -- 174 of 209 -- xxxv V. “Decision” to Proceed Under Original Agreement MCM9 was held on 27 June 1993. The most important decision was that the parties would proceed in accordance with the original venture agreement. Kolback confirmed that the golf course land was not required to be mortgaged if funding was not raised for the golf course but that separate definition of that land was not practical at this stage. The question of joint venture expenses which had been a source of concern to Kolback for some time was again raised. Kolback also agreed in principle to an interpreter but insisted that for the purpose of legal determinations the English language version of any minutes or document only was acceptable. At a meeting held on 5 July 1993 Pitt handed Ikeda a letter summarising the initial response of financiers. He expressed the view that financiers would not be interested in funding the total golf course costs but may favourably consider staging such funding and advancing, say, $2,000,000 towards immediate works of the golf course. It was agreed that Kolback would prepare a pro forma funding application for adoption by the management committee on 14 July 1993. On 13 July 1993 Pitt wrote to Nagano advising that local authority approval had been obtained and the engineering programme confirmed. He advised that the total amount required for the first stage was approximately $10,000,000 and Kolback would now set out to introduce the funds required of it in the venture agreement. He suggested that the most practical way of proceeding with the project was under the provisions of the original venture agreement. After further correspondence about a variety of matters, Hoko’s view of which Pitt refuted in a letter of 15 July 1993, he again said:- “I wish to confirm again that as we have apparently failed to renegotiate the agreement and are not able to fund golf course development Kolback will now formally obtain the $12 million required initially under the venture agreement so that the loan documentation can be completed and the project can proceed. -- 175 of 209 -- xxxvi We are prepared to consider using part of the $12 million to establish some basic golf course works to preserve Hoko’s position. We will also do everything in our power to assist Hoko obtain sufficient funds to complete the golf course at an early stage.” On 16 July 1993 Pitt advised Metway that it had been resolved between the joint venturers that development would now proceed in accordance with the venture agreement which required Kolback to introduce funds to a total of $12 million, be responsible for the payment of interest on development funds, and produce a guarantee for an amount equal to the anticipated interest bill for a 12 month period. The land excluding the golf course land, if funding approved was not used in relation to golf course funding, would be the principal security. Kolback would charge its interest in the venture and provide a parent company guarantee as security for the interest guarantee. Kolback’s expected exposure included an amount of $2,000,000 which would be used to construct early stages of the golf course. On 19 July 1993 Omura wrote to Pitt confirming that the project would proceed on the basis of the current venture agreement. On 22 July 1993 Pitt wrote to Omura explaining Kolback’s point of view with respect to the original agreement and the funding of the golf course. On 2 August 1993 Pitt wrote to Ikeda explaining the basis upon which the venture agreement had been entered into from the point of view of relative contributions. In particular he said that Kolback was obliged to raise $12,000,000 and that Hoko was required to mortgage the land in connection with it. On 4 August 1993 Ikeda replied saying that Coomera would not agree to mortgage all the non- golf course land for the funds drawn on an “as required basis”. Coomera would only accept mortgaging of the land when the whole $12,000,000 had been advanced from a financier to the venture account. Coomera would also require the venture to obtain and secure $12,000,000 in loan facilities. If the two conditions were satisfactory Coomera would be happy to proceed with funding for the project. Pitt replied that Coomera’s view was contrary to the provisions of the venture agreement. -- 176 of 209 -- xxxvii On 9 August 1993 Pitt wrote that there seemed to be some confusion by Hoko in relation to the venture agreement and that it was essential that there were no further misunderstandings. If Hoko’s interpretation of the venture agreement was different from Kolback’s view it should be discussed at the forthcoming meeting. At a meeting on 10 August 1993, Pitt tabled correspondence illustrating the differences in views of the venture agreement between Kolback and Coomera. Ikeda said he would furnish Kolback with a reply and that some misunderstandings may have arisen because the Japanese translation of the venture agreement may be different from the English version. Pitt stated again that the English version was the ruling document and that the issues involved were most important, being central to the commencement of the project. Ikeda stated that Coomera required Kolback to lodge $12,000,000 in the venture account. Pitt said this was unacceptable and a substantial departure from the agreement. Mr Ikeda again suggested that the Japanese version may be causing the confusion. On 13 August 1993 Ikeda wrote to Pitt stating that according to the venture agreement Kolback was responsible for funding which was acceptable to the venturers and the proposal by Kolback was not acceptable. An amendment was proposed, the essence of which was that a credit line of $30 million be obtained from the financier for stage 1. If $12 million was raised in one advance and deposited in the venture account Coomera would mortgage the golf course land but would not do so if the sum was less. On 16 August 1993 Ikeda and Lazarides met to discuss legal issues including the question of a secret commission in respect of Landbase. On 19 August 1993 Pitt wrote to Omura saying that the venture agreement had been exhaustively negotiated and set out the respective rights and obligations. He pointed out that Kolback had spent money fulfilling its obligations and that the business plan had been approved by the management committee. He said that Coomera was obliged to mortgage the -- 177 of 209 -- xxxviii land for venture financing and that Kolback would consider it to be a fundamental breach of obligation by Coomera if it did not mortgage the land. VI. Further Proposal to Fund Golf Course Through Metway On 25 August 1993, Pitt obtained an indication from Metway that it would be prepared to assess a proposal for a credit loan limit of $9.5 million to Kolback and Coomera together, with a bond of $2 million for council and SEQEB requirements, a loan of $2.5 million to Coomera comprising $2 million for bulk earthworks and other works on the golf course and $500,000 for construction of the club house, and a bond facility by Kolback to support the guarantee of interest to Coomera. However Metway said that it would prefer not to provide the interest guarantee because Metway saw little benefit in it and believed Coomera should take the commercial risk in that aspect. Metway would consider both Coomera and Kolback jointly and severally liable for principal and interest under the first two facilities and would require a mortgage of the golf course land and a guarantee by KGL. On 27 August 1993 Pitt advised Ikeda that it may be possible to raise a total amount of $4.5 million for the early golf course costs comprising$2 million to be provided from funds advanced to the venture and $2.5 million lent to Coomera directly on the basis that land payments would be used to repay it. On 30 August 1993 Omura wrote to Pitt stating that although he still believed that the financial arrangements currently proposed were not a fair burden for Kolback and that Coomera’s financial burden was much more than Kolback’s, Coomera agreed to mortgage the land (excluding the golf course land) if the funds referred to in the business plan were to be raised. He expressed the view that a $20 million credit line and a $12 million advance were not necessary for Coomera mortgaging the land so far as the business plan was satisfactory. Coomera was concerned to obtain sufficient -- 178 of 209 -- xxxix credit and advances to allow the project to succeed. Kolback was requested to show Hoko the details of bank loan arrangements which were being obtained. On 6 September 1993 Pitt wrote to Coomera setting out Kolback’s response. He agreed that Kolback’s obligation was to bring sufficient funding to enable the business plan to be carried out. He said he had not put any specific request to the financiers. Golf course funding was not easy but he believed that the package above might be procured. He said that a mortgage of the golf course land would be necessary and that land payments would be used to fund the golf course. He expressed a belief that the introduction of $4.5 million would advance construction sufficiently to enable Hoko’s land payments and profit share to complete the construction. Provided golf course works began immediately, Kolback would introduce and guarantee $4.5 million for golf course works and Kolback may allow Hoko a greater share of golf course land profits. The letter also pointed out that Kolback, in its role as project manager intended to appoint Mr Forsyth as the person in charge of management. On 10 September 1993 Pitt wrote to Ikeda explaining that Australian financiers look at each project on a case by case basis and do not give a general in principle approval. The letter also stated that Kolback had no bank debt. Because Kolback had given extra guarantees it would prefer not to give an interest bank guarantee. Because Kolback was a publicly listed company and had no bank debt a charge over its assets was a significant guarantee. On 15 and 16 September 1993 an MCM was held in Osaka. Omura expressed concern that not enough funds had been secured for the golf course development. Pitt said that a number of institutions had been approached. Funding was Kolback’s responsibility and it would not accept finance if it was not commercially responsible. Although the majority of funders were not interested in financing the golf course Metway could see benefits. It was advised that a fixed and floating charge over all assets of KGL would be required and it was agreed to delete the interest guarantee -- 179 of 209 -- xl requirement (cl 9.4). Pitt said that Kolback would agree to $2 million being paid from venture funds and $2.5 million from a separate golf course loan to fund the construction of the golf course. It was agreed to proceed in accordance with a “Deed of Co-operation and Further Assistance”. The Deed, the copy of which in evidence is signed only by Pitt, covers a number of matters but for present purposes can be summarised in the following way. It recites Hoko’s concern to have sufficient funds for the golf course and Kolback’s understanding that early commencement and completion of it will assist the venture. Subject to approval of its directors and the commencement of works by May 1994, Kolback would allow $2 million to be paid from joint venture funds and introduce $2.5 million for golf course construction, guaranteed by Kolback and the venture with interest being an equal expense. Kolback would guarantee land payments of $4 million by September 1997 and would use its best endeavours to secure an advance of $6 million to Coomera for use from November 1996 onwards to complete the golf course and club house. Interest would be the sole responsibility of Kolback and Hoko and repayments of the three advances would be made from Coomera Resort land payments and profit share. The Deed also recites that the proposal would involve Kolback in added liabilities of $14.5 million in return for which Kolback sought “comfort” from Hoko on the dates of and other details concerning construction, that Hoko agreed that Kolback’s prime responsibility was to introduce $9.5 million in venture funds and, by agreement by Hoko, that the interest guarantee provided for in the venture was not required (the increased interest being largely related to the golf course proposal). The Deed concludes by stating that Kolback’s position had been taken upon the understanding that the project would begin quickly and that Hoko would accept finance as required under the venture provided it was on normal commercial terms. On 22 September 1993 Pitt wrote to Metway withdrawing the request for the interest guarantee, requesting the other funding. On 23 September 1993 a letter was written to Esanda to -- 180 of 209 -- xli which a reply in unencouraging terms was received on 28 September 1993. On 29 September 1993 Ikeda wrote to Pitt confirming that cl.9.4 was to be deleted but saying that Hoko had not yet agreed to build the club house. On 8 October 1993 Metway advised Pitt that it was unable to commit to the facilities required because of uncertainty, particularly with respect to the golf course. It said it would assess the application as a staged project allowing up to $7.5 million for stage 1. It was not prepared to fund $2.5 million for golf course earth works. It said that it would require a mortgage of Coomera’s land excluding the golf course land, a guarantee from KGL, a fixed and floating mortgage debenture over Kolback’s assets (including a fixed charge over its interest in the joint venture) and a fixed and floating mortgage debenture over Coomera’s assets including its interest in the venture. On 11 October 1993 Pitt wrote to Metway hoping that it would consider a further submission from Kolback, that the concept was for Hoko to receive a completed golf course at a cost approximating the value of the land, and that it was in everyone’s interest for the golf course to proceed promptly. The venture was not seeking to buy land nor capitalise interest and liability to the bank comprised only 35 per cent of the project’s assets. He highlighted the difficulty of conducting a strictly staged development in this case. On 19 October 1993 Pitt advised Ikeda that the Metway negotiations were ongoing but there was a difficulty about the golf course. Pitt said that as Kolback was not responsible for funding the golf course under the existing arrangement, if the application was refused it would not constitute a breach of Kolback’s responsibility to introduce development funding. On 25 October 1993 a formal request to Metway was drafted by Pitt asking for $12 million funding and $2 million bond facility. On 1 November 1993 Omura wrote to Pitt referring to the draft to Metway and expressing the view that unless the provision of $14.5 million which was of vital importance to Hoko could be guaranteed by Kolback or Metway it would be difficult for Hoko to proceed with the project. -- 181 of 209 -- xlii On 3 November 1993 Pitt wrote to Omura. He stated that he understood Omura’s concern which he would convey to Metway but he had pushed the financier as far as he could. He stated that the Deed of Co-operation and Further Assistance provided a firm commitment to $8.5 million and a best endeavours component of $6 million. The new proposal gave $13 million in firm and guaranteed land payments. It was proposed on a best endeavours basis to raise another $1.5 million on the same basis as the $6 million. On 10 November 1993 Omura wrote to Pitt accepting that the golf course funding had improved but saying that Hoko believed that $14.5 million should be obtained on a firm basis. On 17 November 1993 Pitt wrote to Omura agreeing to raise $1.5 million on a best endeavours basis provided Coomera was prepared with Kolback to encumber venture assets for the purpose. On 18 November 1993 Metway wrote to Pitt advising that the loans committee proposed to give further consideration to the application for $12 million but required further information including audited accounts of Hoko and a bank reference from its principal banker in Japan. Any loan would be subject to a first mortgage over Coomera’s lands including the golf course land and unlimited joint and several guarantees from Kolback and Hoko. There would be an assignment or charge over all parties’ interests in the venture and a provision that the venture could not be terminated without Metway’s consent. While there would be a $12 million maximum, drawdowns would be subject to assessment by Metway. Initially approximately $10 million could be used with $3 million going to the golf course and approximately $7 million to stage 1 development. There would be a separate undertaking by Coomera and Hoko. Land payments would be charged to Metway to repay golf course costs and the golf course land would be part of the security. Metway would assess future funding before each stage began. On 22 November 1993 Pitt wrote to Metway stating that he had written to Hoko for the financial information and any delay was cultural not financial. With respect to security he referred -- 182 of 209 -- xliii to the previous approval in September 1992 which was not proceeded with. He said that it was unlikely that Hoko would become a guarantor having regard to the framework of the original agreement and suggested that a guarantee from an Australian based public company would be appropriate. He expressed the view that locking up the golf course payments and using the golf course land as a security were not problems for Hoko. On 23 November 1993 Pitt wrote to Omura urgently requesting financial information about Hoko as requested by Metway. On 29 November 1993 Omura wrote to Pitt expressing a preference for $1.5 million to be guaranteed rather than raised on a “best endeavours” basis. He requested detailed information about responses from financial institutions. He said that financial documents for Hoko to the 30 September 1992 would be available but those to 30 September 1993 were not available until December. He also disputed that meetings on 21 May 1993 and 10 August 1993 were MCM’s. On 7 December 1993 Pitt advised Omura that Kolback would not guarantee the $1.5 million. He said that there had been delays due to funding for the golf course. Otherwise approval for finance would have been given by now. He advised that the application was progressing in Metway’s committees but was held up by the requirement for Hoko’s financial information and reference. He said that he had told Metway that a guarantee would not be available from Hoko and that it had been sought because golf course funding had been requested. On 7 December 1993 Pitt wrote to Metway advising that involving Hoko as guarantor would be difficult because of the form of the joint venture agreement. The accounts of Hoko to 30 September 1993 were provided. On 15 December 1993 Omura wrote to Pitt. He said that he would not be able to begin the golf course without a guarantee of an additional $1.5 million, which would put off commencement for 5 or 6 years. Hoko would not give a guarantee but would mortgage the land if Kolback guaranteed the funds. He enquired when and by whom the business plan had been agreed. On 20 -- 183 of 209 -- xliv December 1993 Pitt replied that the business plan had been discussed at the MCM on 15 April 1993 where it was agreed that Kolback should complete the business plan subject to comments from Hoko by 23 April 1993. No amendments were proposed and the plan was subsequently confirmed by Ikeda. If Metway did not approve financing for the golf course he proposed that they confirm funding as originally requested and proceed with the plan. On 5 January 1994 Metway wrote to Pitt saying that it had agreed in principle to an advance of $12 million ($10.1 million of which was to be drawn for stage 1), by way of a line of credit and a $2 million bond limit. Amongst other things there would need to be a registered mortgage by Coomera over its land and a guarantee by KGL. On 7 January 1994 Pitt wrote to Omura advising that Metway had given preliminary approval and that Kolback was prepared to accept. On 11 January 1994 Pitt wrote to Metway signifying Kolback’s acceptance. On 12 January 1994 Pitt wrote to Omura. This letter contained a resume of the position from Kolback’s perspective. It stated that the Metway approval complied with Kolback’s requirements under the venture and the undertakings given under the Deed of Co-operation and Further Assistance. The business plan had been approved by the partners and having complied with the venture agreement and variations to it Kolback wished to proceed as soon as practicable. It stated that Kolback recommended that the venturers accept Metway’s conditions. The letter referred to delays of 14 months caused by golf course issues but accepted Hoko’s aim to build a golf course and expressed willingness to help. It was stated that the Deed of Cooperation and Further Assistance contemplated $2 million of venture funds being used, with the balance from Kolback’s undertakings. Metway had approved $3 million in direct funds for the golf course. Kolback was prepared, if there was a shortfall of sales or profits, to introduce funds to finish the construction. Funding for the club house would be sought by Kolback on a best endeavours basis. It stated again that Kolback -- 184 of 209 -- xlv recommended that the venturers now proceed on the basis of Metway finance, the Deed of Cooperation and Further Assistance, the provisions of the business plan and the venture agreement. On 14 January 1994 Omura replied to the letters of 20 December 1993 and 7 January 1994. Among the issues addressed was the need for a guarantee of the additional $1.5 million and the fact that Omura was waiting for a cash flow based on the Metway approval. He said because it was common ground that the golf course would enhance the project, there should be further discussion at the coming MCM. With respect to the requirements for security the request for Coomera to assign or charge its interest in the venture and the provision concerning non-termination without Metway’s consent should be deleted. Coomera would provide the land as security but since, under the venture, liabilities were shared equally and because Hoko was not sure of Kolback’s or KGL’s assets a request was made for details of them. It was also proposed that Metway should use its best endeavours to first obtain payment from Kolback and KGL before resorting to assets belonging to Coomera. Omura also requested deletion of Metway’s requirements that it retain funds from land payments to apply to golf course costs, that the golf course land be part of the security and that Metway assess the position before releasing funding for the next stage. He stated that only if the $1.5 million was guaranteed would Coomera give the land as security and that the degree of control by Metway was excessive. He also questioned the requirement for independent preparation of a cash flow and that it be satisfactory to Metway. He asked why Kolback’s cash flow and a review by Metway of it should not suffice. If the cash flow was prepared for Metway, Omura would not know if it was acceptable to him. The same kind of objection was taken to the requirement for confirmation of costs to develop construction by Metway’s consultants. On 18 January 1994 Pitt made a detailed reply. He recited that prior to the Deed of Cooperation and Further Assistance Coomera would have to rely on land sales and profits to construct the golf course. Commencement would be delayed and the completion date uncertain. In -- 185 of 209 -- xlvi the Deed, however, Kolback had agreed to introduce funds through a financier or to guarantee amounts for early commencement of the golf course. Kolback obtained $3 million from Metway as early land payments and guaranteed to introduce sufficient funds to complete the golf course over an agreed period. Kolback would use its best endeavours to fund the club house. Interest would be shared equally on the golf course funds. He said that it was natural for a mortgage to be given until the golf course moneys were repaid. Metway and Kolback required a guarantee that funds advanced for the golf course construction were used in that way according to an agreed timetable. He sought to justify the request for a charge over the venture assets and the requirement for Metway’s consent to termination of the joint venture. He said he was confident that the clause requiring the cash flow to be prepared independently would be amended and expected it to be in accordance with Kolback’s cash flow. On 19 January 1994 a draft formal letter of offer was prepared by Metway. On 21, 22 and 24 January 1994 an MCM was held. Omura said he wished to proceed with constructing the golf course provided all funds, including club house funds, were in place. Hoko had believed that there was only a $1.5 million shortfall, but Pitt said that Kolback stood by the Deed of Cooperation and Further Agreement which only guaranteed up to $8.5 million. It was agreed that the Metway offer would require further negotiation. With respect to the $3 million funding for golf course development, Pitt said that it had been difficult to obtain and should be retained. If the golf course did not proceed Coomera would be released from its security. It was agreed that because the provision relating to assignment or charge over Coomera’s interest in the venture and the provision relating to non- termination were unacceptable to Hoko, Pitt would try to renegotiate them. Pitt would also clarify that the charge over the deposit fund would apply only if funds were borrowed for golf course construction. Pitt was also to discuss with Metway the clauses relating to retention of land payment funds by Metway, the requirement for an undertaking that the golf course land form part of the -- 186 of 209 -- xlvii security for the loan facility, Metway’s intention to assess funding for each stage prior to advancing money and the requirement for independent confirmation of costings for golf course construction. Omura also expressed concern if Metway substantially changed the cash flows. On 28 January 1994 Pitt wrote to Omura about the concept of “equal burden”. He said that Kolback acknowledged that Hoko had suffered a significant burden in investing in the land prior to the venture. However Kolback had fulfilled its obligations under the agreement and by its expertise had effected savings to the joint venture. Kolback had given concessions to Hoko but was still prepared to consider, but not formally guarantee, methods of enhancing it. Possible avenues of doing so as a compensating factor for Hoko’s burden outside the agreement were discussed. Pitt said he would be drafting a letter to Metway to take into account Coomera’s comments on the Metway offer, which he did on 2 February 1994. Omura was warned that it was part of negotiations, and concessions may not be made on all matters. In the draft Pitt advised that Kolback had proposed a process which, with the $3 million in the offer, would have ensured the construction of the golf course. However because Coomera ideally wished to have certainty of funding, other options were being discussed and it may be unnecessary to draw the Metway funds. He proposed that, until that was resolved, Coomera mortgage the land and retain the right to draw down, but if it became unnecessary to do so, Coomera would wish to have the golf course land released from the security. With respect to the proposed charge over the venture and the provision relating to consent to termination of it by Metway, Pitt suggested that these were superfluous in view of other securities held. He also suggested that it would be better for Metway’s consultants to review rather than prepare monthly reports and cash flows themselves. On 4 February 1994 Omura wrote to Pitt enclosing a cash flow prepared by Hoko on the basis that the net borrowings from the first year were $12 million and the interest was paid by Kolback from its own funds, not from venture funds. It was asserted that this complied with the venture -- 187 of 209 -- xlviii agreement in that Kolback was obliged to pay interest up to $20 million from its own funds and that Kolback was to procure all finance for the venture. On 7 February 1994 Pitt wrote to Omura stating that the cash flow forwarded by Hoko did not conform with the venture. Land payments were shown as being received earlier than the venture contemplated. He referred to Kolback’s proposal to assist Hoko by early payments if the golf course construction began by 1994. He said that otherwise the parties should revert to the venture. He said that the value of $20 million was nominal and having regard to the current value Hoko’s analysis would place an unfair and unreasonable burden on Kolback. He reminded Omura that Metway’s offer was subject to a short deadline. On 8 February 1994 Omura wrote to Pitt saying that Hoko’s cash flow had been prepared on the basis of the “fair-burden-spirit” principle. It would bring the burden of both parties closer. He maintained the value of the land was what was shown in the cash flow and sought an explanation of the effect of payment of interest on the outcome of the project. He said that until the cash flow was resolved it was not possible to finalise the letter to Metway. On 9 February 1994 Pitt replied saying that while realising Hoko’s burden was high it arose from matters pre-dating the venture. He pointed out that the reply to Metway was specific to its offer and that the finance would have to be renegotiated if the cash flow was changed. On the same day Pitt sent the draft response to Metway. It was not totally identical to the draft sent to Omura but was not materially different so far as Hoko’s interests were concerned. On 12 February 1994 Omura wrote to Pitt conceding that some of Hoko’s burden arose from pre-venture matters but asserting that the burden that arose post-venture was not balanced or fair. The intent of Hoko’s cash flow was to make the burden fairer by early land payments and payment of interest from Kolback’s own funds. Omura believed that the cash flow shown to him involved payment of interest from loan moneys and that it would be a venture expense. He said that he had -- 188 of 209 -- xlix not finished reviewing the draft Metway letter and complained about the short response time. He also complained that the mutual trust necessary between venture partners was jeopardised by certain events including the making of decisions at MCM’s at which he was not present. He said, in relation to Kolback’s claim that it had made concessions with respect to Hoko’s expenses, that Hoko had made greater concessions because, despite having said it would not remit money from Japan for the project, it had in fact sent about $800,000. He also complained that Kolback was inconsistent in claiming the land was valued at $12 million when it agreed to commission at 3 per cent on $20 million and that the commission clause (cl.37) had not been translated into Japanese. He also referred to a number of other matters. On 14 February 1994 Pitt wrote to Omura saying that they should look forward optimistically rather than focus on old issues. He pointed out that he could not be held responsible for short comings in translations or in the conduct of Nagano and Bond who were Coomera’s officers. With respect to the cash flow he said that there were two which accommodated the business plan and the finance arrangements under the Deed of Co-operation and Further Assistance. He repeated that Kolback would pay interest from its own funds and that interest was not a venture expense. He said that Kolback had undertaken to underwrite a shortfall in golf course funding but not to guarantee the entire sum. He said that the cash flow submitted to Metway reflected the current business plan. He suggested that it was best to return to the venture while retaining the possibility of amending it later with respect to the golf course. He said he believed they should begin development works with the funding offered by Metway. He said that commission on $20 million was put to him by the agents and Nagano and Bond. Kolback only acknowledged $20 million value (including the golf course land) on the basis that it would be paid over a 10 year period. He said that they needed to proceed with construction to avoid problems with the FIRB and the local authority. -- 189 of 209 -- l On 21 February 1994 Pitt wrote to Omura proposing a visit to Osaka. He said, in answer to a comment by Omura, that the business plan covered the western side of the line and that the cash flow was not a matter of policy but was derived from costs and estimates of the yield of the works in the business plan. He said he hoped to bring the Metway revised offer to Osaka and that he believed it was prudent to accept it to ensure a prompt start while retaining flexibility concerning the golf course. He said they could revisit the golf course issue at Osaka but would not guarantee $14.5 million for it. Kolback would co-operate provided its exposure was not great. On 21 February 1994 Metway sent a letter of offer to the joint venturers. It contained a number of conditions including the following:- • an undertaking that payments to Coomera under the venture agreement would be retained by Metway which would have the discretion to apply the moneys to the golf course; • the golf course land would be part of the security; • Metway would assess funding prior to the commencement of any stage of the development; • there would be no payment to Coomera under the venture agreement unless it was deposited in an account with Metway “until the later date upon which: completion of the golf course ... and the total of those payments exceeded $4.7 million;” • the sum to be advanced would be $12 million and a $2 million performance guarantee; • a charge by Kolback and the guarantor over their rights in the venture; • a fixed and floating charge by each borrower over all its assets in the undertaking. On 22 February 1994 Omura said the business plan recognised that planning for the west side could not be completed until more studies had been completed and the final details had therefore not been decided. The cash flow was based on the business plan and he believed there could be many variations. He said he also wished to study the position as between the partners. The Metway offer could only be resolved after the cash flow which was the most important matter to be discussed was resolved. Unless it was agreed upon he did not believe the venture parties could co-operate in “smoothly proceeding” with the project. On 23 February 1994 Pitt wrote to Omura. He said that the business plan set out the areas to be set aside for particular uses, take up rates, costs and retail prices. The studies would fine tune -- 190 of 209 -- li those figures as the project progressed. The cash flow reflected the agreed business plan but alternatives could be agreed. He said that at the time of the agreement Kolback believed the land was worth $12 million but agreed to $20 million on the basis that it was payable over the life of the project. The joint venture required Kolback to provide funds as required by the business plan. These would fluctuate depending on the rate of development which would be dictated by the demand for the land as it was developed. VII. Other Proposals - Interest Subsidy On 24 February 1994 Pitt wrote to Omura about discussions with Thiess about constructing the golf course. The proposal was for 9 holes to be built immediately at no cost to Coomera, funded by the $3 million from Metway supplemented by funds raised by Kolback if sales revenues were not enough. Holding operational and maintenance costs would be a venture responsibility until Coomera purchased the golf course. At MCM 13 held at Osaka on 24-25 February 1994 Pitt advanced a proposal for an interest subsidy by Kolback. There was further discussion of the golf course the upshot of which was that discussions with and expressions of interest from contractors would be sought to build it and the club house within the available financial framework. It was agreed that the Metway offer would be reviewed as soon as possible following translation into Japanese on a “no responsibility” basis by Kolback. On 25 February 1997 Pitt wrote to Omura setting out details of the interest subsidy proposal. Effectively, Kolback proposed to subsidise Hoko’s holding costs up to $15 million on the basis of $1.5 million per annum being acknowledged. The actual sum paid would be $1.5 million, less Kolback’s interest, every 12 months. This was conditional upon a number of matters including the following:- -- 191 of 209 -- lii • acceptance of Metway’s offer and immediate commencement of stage 1 of the residential development; • construction of the first 9 holes of the golf course to be funded, in order, from the $3 million Metway advance (upon which interest was to be shared equally), the net balance of the subsidy payment and the funds introduced by Kolback if there was a shortfall; • the venture would be responsible for holding maintenance and operational costs of the first 9 holes until final completion of the course and the club house; • Coomera was to purchase improvements on the course at accrued cost by progressively crediting a “golf course fund” (consisting of subsidy payments, Coomera’s land payments and profits to the joint venture fund once Coomera’s profit and land payments used to construct the second nine and the club house amounted to $15 million.) On 7 March 1994 Pitt wrote to Omura advising that he had discussed the golf course proposal with a contractor and with Kolback directors. He said “I have to say that the precise assistance that I offered you ... may be difficult to repeat”. However providing the project and the golf course construction could start immediately Kolback was prepared to underwrite the golf course construction as discussed. Kolback was still prepared to discuss the interest subsidy. He asked for an urgent response to allow the proposal to be formulated for the next MCM. On 8 March 1994 Omura advised Pitt that he was having difficulty with the Japanese translation of Metway’s offer. He said he was engaging Doug Robbie & Associates at $7,000 per month for 6 months to fulfill the advisory role previously carried out by Ikeda. He said that efforts to enable the golf course to be constructed were appreciated and he was pursuing negotiations with companies with a view to reaching an agreement. VIII. Concurrent Discussions About Metway Funding On 16 March 1994 Pitt advised Omura that he was meeting Metway on 19 March and requested “any advice”. On 17 March Mr Kuniya, Mr Omura’s Japanese legal advisor, advised Pitt that they would be meeting on 22 March to finalise their attitude to the Metway offer. On 23 March, Omura wrote to Pitt with comments. The most important for present purposes were that he required the right of recourse to the security to depend on golf course moneys being drawn. He expected the golf course land to be released if they were not or if they were drawn and repaid. He requested -- 192 of 209 -- liii confirmation that liability for interest was Kolback’s and took issue with the extent of discretion given to Metway and its power of veto over variation or termination of the joint venture agreement and the execution of the rights arising upon default. On 31 March 1994 Pitt wrote to Metway suggesting a softening of the wording conferring discretions if it could not accept a positive obligation to act reasonably. He advised that the parties were exploring other possibilities with respect to the golf course and that it was expected that the golf course land would be released if sub-divided and no moneys were owing for construction. In the meantime he said that the condition was acceptable. On 5 April 1994 Pitt advised Omura that he believed Metway would act reasonably and that they would have redress if it did not. He believed that the current terms and conditions were acceptable having regard to financier’s requirements applicable to projects of this kind. He recommended that following the next negotiation they accept Metway’s offer. He did not expect Metway to give ground on any significant points. With respect to interest he said that Kolback and Coomera were joint borrowers. Kolback’s obligation was to deposit the interest and as between Kolback and Coomera it was Kolback’s obligation to pay the interest. On 6 April 1994 Kuniya advised Pitt that he was not satisfied with a number of provisions but would wait for the terms of the next offer. However the veto provisions were totally unacceptable. On 8 April 1994 Pitt suggested to Kuniya that a new clause to deal with the situation where golf course funding was not utilised might be inserted. On 8 April 1994 Metway sent a new letter of offer. On 11 April 1994 Pitt wrote to Lazarides. He said that the golf course was an unresolved issue. It was not Kolback’s responsibility but Kolback saw benefits in its early construction. He said that he had offered support but had not yet decided its final form. The $3 million could be used under the letter of offer. If the funds were drawn Metway would require security. The balance was subject -- 193 of 209 -- liv to discussion with Omura but Pitt expressed the view that Metway’s offer should be accepted on the understanding that if a better offer was received the provisions relating to the golf course land would not apply and security over the land would be released. On 12 April 1994 MCM 14 was held. Upon Omura expressing concern over the meshing together of the securities, it was agreed that Pitt would approach Metway with a view to separating the golf course and residential packages. There was discussion whether the cash flow had been agreed prior to the submission being made to Metway. Omura felt that the financial burden on Coomera was unreasonable. He requested Kolback to reconsider the perceived inequity which Pitt agreed to do. It was said that it was expected that the FIRB would give an extension to 30 June 1994 but that a further extension may well be refused.. On 12 April 1994 Omura wrote to Pitt, saying that because the Metway offer was in respect of both the project land and the golf course it was difficult to ascertain if it complied with the venture agreement. He accepted that divergencies arose because of Coomera’s efforts to get finance for the golf course but said that he felt that the Metway offer could not be accepted as one in accordance with the venture agreement. The fact that the funding issue was becoming critical because of the risk that the FIRB would not give an extension beyond 30 June 1994 for commencement led to the suggestion that if finance could not be obtained by 10 May 1994 the parties should agree that the venture terminate according to cl.9.1 of the venture agreement. He suggested that an approach should be made to see if Metway would fund just the venture with golf course funding being treated as an entirely separate issue. He suggested that Metway should be asked if it would grant finance on the basis that the golf course land was sub-divided off and only the venture land was mortgaged; that Coomera receive the sales proceeds unconditionally in accordance with cl.21 of the venture agreement; that interest not be capitalised against security given over Coomera’s land and that Coomera was not liable to Metway for capitalised interest; Kolback would guarantee moneys loaned -- 194 of 209 -- lv to the venture and provide security for the interest to Metway; the loan would be used only for the venture (not the golf course); that the security for Metway would be a first registered charge over Coomera’s land (excluding the golf course land), a guarantee from Kolback and interest secured by Kolback. While it was not required by the venture to do so, Coomera would give a floating charge over its assets in the venture but not over all its assets. It was presumed that Kolback would give a like charge and a company charge. He said he was prepared to attend further discussions at which he would also press some other points previously made but not accepted by Metway. On 13 April 1994 Pitt told Omura that Coomera had specifically requested him to include the golf course in the proposal put to Metway. He said that Kolback had said that that would complicate matters and delay finance. He also said that the variety of proposals and Coomera’s failure to respond promptly on many issues also had this effect. He said that he had always discussed what was to be in the funding proposal and that Kolback had proposed a variety of cash flows. With respect to areas in which non-compliance with the venture was said to have occurred he made the following comments:- • if the golf course was excluded the requirement for security of the golf course land would be excluded; • a floating charge was a normal commercial term imposed by any lender; • the latest offer had excluded the requirement that Coomera give a charge over its interest in the venture; • payment of land sales into an account was a consequence of the golf course being included. It would be excluded if the golf course was not included in the proposal; • because Kolback was assuming the obligation to pay interest and deposit security for it with Metway there was no capacity for interest to be capitalised; • the requirement for consent of Metway to exercise default powers was standard commercial practice. He said that the approval differed from the venture because Kolback had requested the golf course to be included in the application. The venture could be varied by agreement and lodgment of an application in terms requested by Kolback did not result in non-compliance with the venture. He said that Kolback did not accept that it was liable for the consequences of delays and changes of position -- 195 of 209 -- lvi by Coomera. He did not acknowledge that the agreement could be terminated if finance was not obtained by 10 May. He said he was prepared to join Coomera in approaching Metway with a proposal not including the golf course but it was possible that Metway may decline to give funding on terms sought by Coomera. Kolback would seek a reasonable time to approach other financiers in that event. With respect to the proposal that funding be sought secured by the venture land only, Pitt pointed out that it would be necessary to have an actual sub-division before the security could be given only over the venture land. The delay in doing so was Coomera’s responsibility and Kolback would not accept prejudice to itself arising from this. With respect to the offer for Coomera to give a charge over its assets in the venture but not over all its assets Pitt said that it was standard practice to require a charge over all assets but he would be prepared to negotiate with Metway for a more limited obligation with a representative of Coomera present. In a separate letter of 13 April 1994 Pitt confirmed he would make a further application to Metway in accordance with Coomera’s letter of 12 April 1994 and prepare a draft setting out Omura’s position so that there could be no confusion in approving finance. He suggested that bulk earthworks begin as soon as possible, to be paid from the railway compensation or direct contributions by the parties to ensure that the FIRB problem was avoided and the credibility of the project established. IX. Separation of Golf Course and the Venture Development On 13 April 1994 Pitt wrote to Omura saying that he was disappointed at the outcome of a meeting on 12 April 1994. The late request for new cash flows had frustrated the meeting and important management matters had not been discussed. He also complained that Hoko had had the offer since January 1994 and had only just responded. He concluded by saying that Coomera had not carried into effect its intention to finally resolve the planning layout and timing aspects of the golf course development before construction began under the venture, which had led to the present uncertainty (cl.32.3). Pitt said that notwithstanding Kolback’s rights under the agreement, Omura -- 196 of 209 -- lvii was requested to set out his reasonable requirements for funding acknowledging that Coomera had already agreed to be a joint borrower and jointly and severally liable for the repayment of advances. He asked for confirmation that Kolback should cease to investigate or offer any assistance with respect to the golf course. On 14 April 1994 Omura responded, saying it seemed to be agreed that while there had been discussions concerning the golf course and alternative funding the venture had not been varied. The venture agreement contemplated the land and the golf course funding being separate. The cash flow in the business plan had been prepared on a basis that did not conform with the venture agreement because it adopted a different land payment schedule. Even if it was done on Coomera’s instructions it did not effect an amendment of the venture agreement. The cash flow presented on 13 April 1994 which did accord with the venture agreement would not be acceptable to Coomera because it demanded unequal and unfair burdens and benefits between the venturers. As an example, he asserted that Coomera would get land value of $15 million paid over 10 years and half the profits (estimated at about $24 million) whereas Kolback would get its $24 million share for an outlay of about $3 million in interest over 7 years. He said that whatever reason there was for including the golf course land in the funding proposal the venture required the venture and the golf course to be kept separate. He said that while it may be a usual commercial term to insist on a charge from Coomera it was contrary to cl.17 of the venture agreement which required, inter alia, an undertaking from a financier about the manner of exercise of powers on default. A charge over Coomera would charge its interest in the venture. While the inclusion of the golf course land might be the reason for the requirement for control by Metway of land sales proceeds it was contrary to cl.9 and 21 of the venture agreement. He said that, notwithstanding Kolback being obliged to pay interest, a term of the venture agreement (cl.9.1) that finance have a condition that interest would not be capitalised and that Coomera not be liable for capitalised interest had not been complied with. Metway was required -- 197 of 209 -- lviii to acknowledge this. He disputed that the requirement restricting the rights of parties to exercise rights under the venture agreement was a standard term. He accepted that the venture could be varied but repeated that it had not been varied. The proposal to nominate 10 May 1994 as the date for termination if finance was not obtained was made in good faith to avoid the project meandering along in a state of suspense. He said that Metway would have adequate security without the golf course land, that the golf course land was defined and that a survey would be necessary in any event. On 18 April 1994 Pitt wrote to Metway saying that the parties believed that the inclusion of the golf course complicated the project financing and the financial relationship between the parties. He asked if Metway would delete the golf course funding from the offer and delete all clauses dealing with the application of Coomera’s land payment. He said that the golf course land had not yet been sub-divided, that it was not practical to sub-divide it but it was defined subject to final survey and the area was known. He said that Coomera would require a provision excising the land in the golf course envelope from the security upon registration of the sub-division. He said it was necessary for Coomera’s land payments to be calculated in accordance with the venture. He said that he was confident that the golf course would proceed independently but that in any event the project was not dependent on enhancement from the presence of the golf course. He said that Coomera was prepared to give a limited charge but not a total charge or an encumbrance on the land repayments. He said that Coomera was prepared to mortgage land other than the golf course land and acknowledge that it was a joint borrower. On 20 April 1994 Omura confirmed to Pitt that the golf course should be excluded from the development funding proposal. He set out principles of finance agreeable to Coomera, which were the following:- • it must be generally in accordance with the venture agreement; • Kolback would give a parent company guarantee and secure payment of interest and any other securities; -- 198 of 209 -- lix • Coomera would give the land as security subject to excision of the golf course envelope; • Coomera and Kolback were joint borrowers and jointly and severally liable for the debt; • Coomera would charge its intellectual property and other things relating to its interest in the venture (as well as land) but not the proceeds of land sales or the golf course land. Omura accepted that generally the terms and conditions represented normal commercial terms and conditions and subject to the requirements set out Coomera was prepared to enter into a funding proposal on those terms and conditions. On 22 April 1994 after a meeting with Metway, Pitt confirmed to Metway that the limit of the facility should be $9 million together with a bond facility. He was preparing an amended cash flow in accordance with the venture agreement without enhancement from the golf course. He pointed out that Metway was not paying for land purchase and that Coomera would be paid the price of land from sales. He said that he and Omura were keen to proceed as soon as possible subject only to the points in the 18 April 1994 letter. On 22 April 1994 Pitt wrote to Omura in connection with a previous discussion about respective burdens. He accepted that Hoko had borne very high costs with respect to the land and interest on the purchase price. He could not recommend additional benefits to Coomera within the confines of the venture agreement without demonstrating additional benefits to Kolback to his directors and major shareholders. He said that any attempt to identify respective benefits and burdens was imprecise because of the variables involved. He said that he would attempt to genuinely pursue a resolution to Omura’s request. On 25 April 1994 Omura wrote to Pitt saying he was waiting for Pitt’s formula which would recognise the “financial burden spirit”. He said he was not seeking any additional benefits but merely the burden as expected and provided for in the venture agreement. He said that the cash flow as between the parties should be decided before Metway finance was accepted. He raised the question of whether there might be two separate loans and said that he would like to see Metway’s proposals -- 199 of 209 -- lx with respect to both. He said he had not asked for a combined loan and had not been involved in discussions with Metway. On 26 April 1994 Pitt wrote to Omura saying that Kolback had no hesitation or reluctance in complying with the venture agreement. He said that the venture did not require Kolback to act outside it but Kolback was prepared to recognise an unrecorded “spirit” and was attempting to provide something as a goodwill gesture. He said that he did not understand the reference to “internal cash flow” which he said was clear already - expenses were to be paid by the financier; Kolback was to pay interest; income from sales would be used to pay Coomera’s land payments and then to the financier. He said that Metway had confirmed that it would not fund the golf course for which it had provided a maximum of $3 million and stated that Coomera had asked that it be withdrawn from the financial package. On 26 April 1994 he sent a “conservative” cash flow to Metway and on 28 April 1994 sent a detailed funding request. The estimated cost for stage 1 was $7.7 million and $2 million bond facility was also sought. X. Complaints about Terms and Implementation of Agreement On 17 May 1994 Pitt advised of ongoing discussions with Metway. He also said that it was impossible to hypothesise whose burden under the venture would ultimately be greater. Under the business plan Coomera would be paid in full including compensation for delayed payment. Coomera and Kolback would share profits equally. Kolback would pay interest on development funds. He said that he was concerned after his initial meetings with Robbie that Robbie apparently thought some provisions of the venture were unclear and that Coomera might not have fully understood its terms. He said that the implication that Kolback had taken advantage of Coomera was cause for concern. By way of instances, he pointed to the suggestion that the railway compensation was not a venture asset, that the termination provisions were unfair and that there was an implication that Kolback had been involved in the introduction of Landbase. He said that he would like an early -- 200 of 209 -- lxi response to his letter of 20 April 1994 to Kuniya which had enclosed a draft letter concerning finance, so that he could pursue alternative strategies if there were problems with Metway. Copies of this letter were sent to Kuniya and Robbie. On 25 May 1994 the possibility of a meeting between Pitt and Omura following Robbie’s review of the venture for Omura was discussed. On 3 June 1994 Pitt wrote to Omura saying that he had been told by Conrick and Kuniya that the venture did not accurately reflect Omura’s objectives at the time he entered into it. With respect to the suggestion that Kolback should modify the agreement to better deliver Omura’s objectives, Pitt said that he was prepared to make concessions if possible but he and the Board of Kolback were constrained by their duty as directors of a public company. If concessions hastened the implementation of the project he thought it may be possible. He cautioned against litigation. He also stressed that Kolback was of the view that there was a clear and binding agreement from which he was not resiling but was prepared to recommend concessions to the Board if it would move the project forward harmoniously and quickly. On the same day Pitt told Kuniya that he had worked hard to formulate a proposal addressing Omura’s concerns so that there was no misunderstanding and said that Kolback was not prepared to put a proposal until there was a clear understanding from Coomera that no more misunderstandings of the venture agreement would be raised. On 6 June 1994 Minter Ellison Morris Fletcher wrote to Clayton Utz referring to a conference they had held to discuss Omura’s concerns. With regard to ownership of the railway compensation moneys, the letter states Kolback’s belief that the funds were venture assets although certain concessions had been suggested in relation to them. It was suggested that it was beneficial to both sides to use some of them to pay off the creditors and that the balance be held in trust and invested pending resolution of the issue. On the same day Clayton Utz replied stating that the signed -- 201 of 209 -- lxii agreement was expected that day. The money was to be paid to the trust account and instructions about its disbursement, of which notice would be given, were being sought. On 9 June 1994 Pitt wrote to Omura saying that he understood he was to receive a letter setting out Omura’s concerns which would be addressed and then concessions proposed. He said that it was of concern that Omura’s new advisors inferred a lack of integrity on the part of Kolback and that if matters which were the responsibility of the project manager such as railway compensation and payment of creditors were removed from his responsibility, Coomera should be prepared to take responsibility for the consequences. On 9 June 1994 Clayton Utz wrote to Minter Ellison Morris Fletcher setting out Omura’s concerns. One was that when Omura entered into the venture he expected to contribute the land and the partner to contribute equity or borrowings in an equivalent sum. He expected an early return on his capital. In that sense there was equality of burden and equality of profit share. A further concern was that Omura felt that a neutral person was required as project manager to address the financial issues in an even handed way. He said that there appeared to be an emphasis on return of development capital and interest at the expense of the return of acquisition capital and that the cost analyses in the business plan had given concern because they showed a deferred return of capital costs as against the original planning. Further they showed development interest as a cost to the project but did not show recovery of interest on capital acquisition costs. The explanation that the cash flow analysis was not intended to show revenue distributions between the parties or the cost base of the project was noted but it was said that satisfactory arrangements for revised distributions must address those concerns. It was said that Omura had said at MCM 3 that the railway compensation was not a venture asset. Another concern was the requirement that the title deeds could only be used to register a mortgage in favour of the venture financier (cl.5.7). Omura had assumed that the project would proceed rapidly. He could not now resort to the asset for other development purposes. -- 202 of 209 -- lxiii Another was that while cl.9.3 obliged Kolback to be responsible for interest on project funds, this presumed that it achieved equality of contribution to the development. This had not occurred. In line with Omura’s view about equality of burden and benefit, satisfactory performance of the venture would now require the parties to share the burden of interest whether on capital acquisitions or development funds equally. There were also a number of complaints about operational matters:- • Pitt’s role as both project manager and Kolback’s venture spokesman; • Omura had not had the opportunity to meet or approve of the consultants; • the failure to provide translations of meetings; • the failure to include important comments of Omura’s in the minutes (eg his comments about using the land as security for initial funding of $1 million); • the shortfall in the level of cooperation between the chief executives which was necessary to make the venture work (eg, belated notification of Pitt’s reservations about Bond and approval of budgets when Omura was not at the MCM); • the failure to record Omura’s view that railway compensation was Coomera’s asset not the venture’s. Omura had envisaged that finance would be obtained within the time in cl.9.1 (i.e. 3 months of adoption of the business plan or 9 months of the venture whichever was earlier). He did not accept that golf course issues justified delay in this regard. Other complaints concern the direct - indirect costs issue, that he had been misled over the issue of deleting Kolback’s interest guarantee, non- appointment of Coopers & Lybrand as accountants and discrepancies with respect to Omura’s request for $14.5 million guarantee to build the golf course. On 14 June 1994 Metway wrote to the parties indicating the changes Metway was prepared to make in the approval. The essential features were the following:- • there would be a $9 million line of credit and a $2 million bond facility; • the golf course land would initially form part of the security but would be released for nil consideration once the land was surveyed and a certificate of title was available; • the charge over the deposit fund was deleted; • while Metway preferred a charge over Coomera’s assets, with Metway ceding priority to a contractor over assets affected, the position was negotiable. • if there were arrears of interest Metway would seek it first from Kolback. If it was unpaid after 30 days it would seek it from Coomera. The requirement that Kolback lodge 12 months interest would remain. -- 203 of 209 -- lxiv • provided there was no default, land payments would be in accordance with cl.21.2 of the venture agreement; • initial phase 1 funding would be $7.7 million; • the railway land transferred as part of the compensation settlement would be part of the security. An updated letter of offer would be provided upon confirmation to proceed within 30 days, otherwise the offer would be withdrawn. No other concession or change to the facility would be made. On 16 June 1994 Minter Ellison Morris Fletcher replied to Clayton Utz. By way of preliminary comments it was said that the parties’ individual requirements were to an extent superseded by the venture agreement. When Coomera abandoned its intention to sell the land in favour of a joint venture Pitt had been assured that issues such as the golf course and the need for proper communication and proper decision making processes would not be an impediment. Notwithstanding the understanding that the golf course would be dealt with during the development of the business plan it was still unresolved. The issue of holding costs had not been raised in the negotiations. While Omura’s problems in carrying out a development in a foreign environment were recognised Kolback had acted in good faith in accordance with the agreement. The agreement set out the profit sharing arrangements and the method of paying acquisition costs through land payments. Kolback had acted as project manager in accordance with the agreement and with a sense of responsibility to maximise Omura’s profits. Cash flows had been done from time to time to reflect savings in infrastructure costs and amendments had been approved by MCM’s. Such cash flows had worked from a cost basis assigned to the land in the agreement ($20 million including the golf course land). Where they showed interest it was to demonstrate viability of the project to Metway and to allow Kolback’s obligation to pay interest to be quantified. The letter said that Omura had never stated in English at MCM3 that the railway compensation was not a joint venture asset. Amendments to the minutes had been sought but not in that regard. The agreement allowed Omura to remove the golf course land from the security enabling it to be used for other purposes. -- 204 of 209 -- lxv Having regard to the demonstrated value of $12 million for all the land and $9 million for the land without the golf course land, the value of $20 million inherently allowed for interest to accommodate deferred payments. Provided the gross value was reduced to $12 million Kolback would be prepared to consider equal responsibility for development funds and land cost. Kolback was not responsible for Omura purchasing the land at a price which did not represent its value at the time of the joint venture agreement. Kolback had gone beyond it contractual obligations in translating documents in good faith. Omura had professional advisors. The proposal to mortgage the land to secure capital for the business plan stage had been discussed at length before the agreement was finalised. Nagano and Bond had told Pitt that Omura wanted to lock up the land. The obligation had been accepted at MCM2 but subsequently denied by Omura at MCM3. Pitt was not aware of Bond’s precise job description. The minutes disclosed which meetings Bond attended and which he did not. Kolback was not responsible if Bond did not measure up to Omura’s expectations. It was agreed that good communication was essential but letters to Omura had not been replied to. The assertion that Ikeda could not attend and make decisions at MCM’s was contrary to the joint venture agreement. After Coomera had failed to finalise the golf course issues Kolback was requested to examine them. Omura’s failure to reply to correspondence had delayed finance. The initial Metway funding was in compliance with the obligation to obtain funding under the joint venture agreement. It was the responsibility of Omura and Pitt to ensure that the minutes were correct. Kolback had amended the minutes, on occasions to include things said by Omura in Japanese but not in English. The request for $14.5 million in funding guarantees was made following repeated requests for Kolback to include the golf course funding in the overall project funding. Kolback was not obliged to make the generous offer it made. Kolback’s position was summarised in the following points. -- 205 of 209 -- lxvi • there was a legally binding agreement; • Kolback had performed its obligations; • Omura’s misunderstandings were caused by the translation or lack of it of English documents; • Omura wished to renegotiate the agreement; • Kolback saw no reason why it should do so. Despite that, Kolback was prepared to make concessions directly to Omura. On 16 June 1994 Pitt put a proposal to Omura. The essential elements were that if Coomera treated the railway compensation money as a venture asset Kolback would agree to a proportion amounting to $523,000 to be paid to Coomera as if it were land sales. Subject to securing Kolback’s interest it would agree to the Title Deed being released from escrow. An additional 40 per cent would be paid to Coomera in respect of “special sales”, which were essentially commercial sales. There would be an interest subsidy to Coomera from profits. Alternatively, if the land value was reduced to $12 million Kolback would share interest costs on borrowing and holding costs. The concession sought by Coomera would be conditional upon accepting Metway’s offer. If they were not given there should be a clear statement of the terms and conditions Coomera would accept to enable an approach to another financier. Pitt said that the proposal would require approval of Kolback’s Board but he undertook to recommend that Kolback accept. On the same day a further letter was sent by Pitt to Omura with comments about the need to accept the railway compensation and expressing concern that statements made by Robbie were reflecting badly on Kolback, Pitt and the venture. On 17 June 1994 Pitt sent Metway’s approval of 14 June 1994 to Omura. He pointed out that the golf course funding and the golf course account had been deleted and the golf course released from the security requirement. There was also provision for action against Kolback first if the interest was in arrears and land payments were in accordance with the joint venture. On 20 June 1994 Pitt wrote to Omura saying he had spoken to Kuniya. He demonstrated how the land payment of $523,000 from the railway compensation was calculated and the effect of the -- 206 of 209 -- lxvii 40 per cent increase on special sales. He said that interest subsidy was estimated at $400,000 over 4 years from the end of the second year. On 23 June 1994 Kuniya wrote to Pitt effectively rejecting the offer. The $523,000 was too small an amount. The enhancement of payment from special sales did not change the equal profit share since Kolback would later get an equivalent amount with interest. He did not understand the interest subsidy fully and was not prepared to accept any alternative which assumed $12 million for the total land value. He also enquired how Metway could be told that land payments were in accordance with the venture agreement if there were early payments in accordance with the concession. On 24 June 1994 Pitt wrote to Kuniya saying that the last offer from Metway complied with the agreement. He said he would wait for further explanation about the perceived inadequacy of the compensation payment. He said that the 40 per cent enhancement of land payments had the effect that land was paid for before all was transferred and therefore Kolback needed security. He said that the interest subsidy was proposed as a concept and was difficult to demonstrate by way of cash analysis. He said that Metway would be advised after acceptance of the offer. If there were difficulties Kolback would use its own funds. On 28 June 1994 he sent a hypothetical example of the operation of the interest subsidy. On 28 June 1996 the Metway letter of offer was received and sent to Kuniya. On 5 July 1997 Kuniya wrote to Pitt saying whether the 40 per cent additional payment was accelerated without disturbing the equal profit share of whether it was intended to increase Coomera’s profit by 40 per cent. He sought further explanation of the interest subsidy. On 6 July 1994 Pitt advised that the purpose was to accelerate payments not to change the profit share. He tried to explain that the interest subsidy would reduce as the land was sold. On 8 July 1994 Pitt wrote to Omura saying that while Kolback was prepared to consider concessions it was prepared to do so only if matters agreed on in the venture agreement proceed in -- 207 of 209 -- lxviii terms of the letter of 3 June 1994. He was under pressure to preserve Kolback’s rights under the agreement. Omura’s concerns had been conveyed by Clayton Utz and Kuniya. While Omura had previously accepted that the railway compensation was a venture asset his new advisors had given a different view. The proposed resolution was beneficial to Coomera. He also expressed concern that the ASX had queried Kolback about whether the venture had been terminated. He said that a prompt response to Metway’s letter was required. On 13 July 1994 Omura wrote to Pitt saying that he still had many concerns about Metway’s offer and that it had to be resolved before business matters could be discussed. He said that the concession package was not sufficient to make the venture partners’ burden fair. Detailed comments on the Metway offer were included. On 18 July 1994 Pitt wrote to Omura. He said he would write to Metway about his concerns but recorded concern over Omura’s delay in responding and his failure to detail his requirements. He said that this had severely hampered Kolback in obtaining finance and it was of particular concern that he had raised issues that had previously been negotiated with Metway at his request with the results incorporated in the latest letter of offer. He pointed out that Omura had not advised his requirements should Kolback provide the funds direct. Pitt also said that Omura seemed to be under a misapprehension that the joint venture was conditional on finance. Under the agreement Kolback had a positive obligation to fund and had placed finance offers on normal commercial terms before him for over 6 months. He expressed concern that Omura’s delays seemed to be with a view to improving his commercial position rather than for venture related reasons. He again expressed sympathy over holding costs but said that that was not a matter for the venture. The inclusion of the land at a value of $20 million was intended to compensate for holding costs. He said that Kolback was not obliged to offer any concessions at all and was entitled to insist upon performance of the agreement as it presently stood. He had said that Kolback was prepared to consider concessions with a view to facilitating good commercial relationships but was concerned that negotiations over the -- 208 of 209 -- lxix level of concession seemed to have taken precedence over the venture business to the detriment of the venture. He closed by saying that it was Kolback’s earnest desire that the venture proceed in accordance with its terms and expeditiously as possible. He expressed deep concern that delay occasioned by changing consultants and seeking to negotiate favourable changes to the document was prejudicing the profitability of the venture. He said his Board was gravely concerned about matters and had directed Pitt to reserve Kolback’s position. There were other matters addressed in the letter also, in a tone of irritated exasperation. On 20 July 1994 Omura replied saying that he would like to know Metway’s response to his comments, which had never been waived. Some had been accepted but some had not. He had made his best efforts to respond in a timely way notwithstanding the complexity of the offer in a foreign language. He said he could not give his requirements for finance because he was unfamiliar with finance in Australia. He said that the land price of $20 million represented a concession on his part because it had cost him more. He believed that holding costs were a “project cost” under the agreement. He believed that the agreement still provided for capitalisation of interest and requested Metway’s response to that and other comments by 27 July 1994. He did not agree that he was responsible for delay. On 27 July 1994 Pitt wrote to Metway enclosing a list of Coomera’s concerns. The letter contains a concession by Pitt that capitalisation of interest does not conform with the venture agreement. The question whether an arrangement outside the terms of the agreement with Metway could be reached to allow for a clause relating to compounding of interest to be deleted on Kolback undertaking to pay interest. On 2 August 1994 notice of termination by Coomera was delivered to Kolback. -- 209 of 209 --