SUPREME COURT OF QUEENSLAND

SUPREME COURT OF QUEENSLAND CITATION: National Australia Bank Limited v Murphy & Anor [2018] QSC 106 PARTIES: NATIONAL AUSTRALIA BANK LIMITED ACN 004 044 937 (plaintiff) v JOHN PAUL MURPHY (first defendant) and JENNIFER PATRICIA MURPHY (second defendant) FILE NO/S: BS No 4178 of 2016 DIVISION: PROCEEDING: ORIGINATING COURT: Trial Division Trial Supreme Court at Brisbane DELIVERED ON: 21 May 2018 DELIVERED AT: Brisbane HEARING DATE: 12, 13 and 15 February 2018 JUDGE: ORDER: Jackson J The order of the Court is that: 1. The plaintiff recover possession of all that parcel of land located at 9 Pacific Heights Court, Coolum Beach in the State of Queensland, more particularly described as Lot 15 on RP 886657, County of Canning, Parish of Maroochy, Title Reference 50048499. 2. The counterclaim is dismissed. 3. The defendants pay the plaintiff s costs of the proceeding. CATCHWORDS: CONTRACTS GENERAL CONTRACTUAL PRINCIPLES DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH DISCHARGE BY AGREEMENT GENERALLY where alleged parties entered into contract(s) that had the effect of rescinding and replacing existing loan facilities and contracts where if contract(s) made it is not disputed that repudiated by the plaintiff and terminated by the defendant whether previously existing loan facilities and

2 contracts remain in place GUARANTEE AND INDEMNITY DISCHARGE OF SURETY DISCHARGE OF SURETY BY AGREEMENT where alleged parties entered into contract(s) that had the effect of discharging existing guarantee where if contract(s) made it is not disputed that repudiated by the plaintiff and terminated by the defendant where further alleged that guarantee discharged in any event by repudiation and termination whether guarantee discharged MORTGAGE MORTGAGEE S REMEDIES POSSESSION PROCEEDINGS TO OBTAIN where defendant s property mortgaged to plaintiff where alleged defendants owe amounts under guarantee(s) and personal liabilities subject to the mortgage where default notice given allowing 31 days to remedy where notice not complied with where alleged whole amount became payable on demand where whole amount demanded and not paid within 7 days whether plaintiff may enforce the mortgage and take possession of the property Land Title Act 1994 (Qld), s 78 Australia and New Zealand Banking Group Ltd v Manasseh [2016] WASCA 41, cited Balanced Securities Ltd v Dumayne Property Group Pty Ltd [2017] VSCA 61, cited Commissioner of Taxation (Cth) v Sara Lee Household & Bodycare (Aust) Pty Ltd (2000) 201 CLR 520, cited Concut Pty Ltd v Worrell (2000) 176 ALR 693, cited Hillam v Iacullo (2015) 90 NSWLR 422, cited COUNSEL: SOLICITORS: S Couper QC, with P O Brien for the plaintiff A Morris QC for the defendants by direct brief Corrs Chambers Westgarth for the plaintiff No appearance for the defendants

3 [1] The plaintiff s claim is for recovery of possession of the land at 9 Pacific Heights Court, Coolum Beach. It is made under s 78 of the Land Title Act 1994 (Qld). The defendants are the registered owners of the land and mortgagors under a first registered mortgage to the plaintiff that incorporates the terms of a standard terms document. Under cl 20.1 of the standard terms, the plaintiff may enforce the mortgage by taking possession of the mortgaged property if the plaintiff demands payment of the amount owing and it is not paid within 7 days. [2] The defendants defend the claim and bring a counterclaim on three bases, that may be broadly stated. First, they allege that on 5 November 2014, the parties entered into a contract or contracts that had the effect of rescinding (by agreement) and replacing the existing loan facilities and contracts ( 5 November agreement ). The relevant parties are the plaintiff, the defendants and Milglade Pty Ltd ( Milglade ), a company of which the defendants are the only directors and members. The defendants allege that because the existing facilities were replaced by new loan contracts, the demands based on the existing facilities relied upon by the plaintiff as constituting notices of default under the mortgage were invalid. Second, the defendants allege that part of the 5 November agreement was that the guarantee that secured the existing facilities from the plaintiff to Milglade ( Milglade guarantee ) was discharged by agreement. Third, the defendants allege that the plaintiff repudiated the 5 November agreement for the replacement facilities and the defendants accepted the repudiation, so that the Milglade guarantee was automatically discharged in any event. [3] The defendants counterclaim for declaratory relief that the Milglade guarantee was discharged by agreement on 5 November 2014. They also claim declarations that the contracts for the replacement facilities were repudiated by the plaintiff and damages. However, the damages claim was abandoned at the trial. [4] Other possible grounds of defence were pleaded in the defence but were not pressed at the trial and it is not necessary to mention them at this point. As the trial was conducted, and simplifying, the dispute resolved into two main questions. First, did the plaintiff and the defendants enter into a contract or contracts to replace the existing facilities on 5 November 2014? A part of that question is whether the parties expressly or impliedly agreed to rescind the Milglade guarantee from 5 November 2014. Second, it is not disputed by the plaintiff that it repudiated any such contract or contracts in March 2015 and that the defendants accepted the repudiation and terminated any such contract or contracts by 2 April 2015. Accordingly, the remaining question is whether the existing facilities remained on foot when the 5 November agreement was made and after any contract or contracts made under the 5 November agreement were terminated? If they did, it is common ground that the plaintiff made demands for the purposes of the mortgage on 27 November 2015 and again on 14 April 2016 and the defendants did not pay the amounts demanded. [5] For the reasons that follow, in my view, if the 5 November agreement constituted a binding contract or contracts, still the parties did not expressly or impliedly agree to rescind the Milford guarantee on and from that date and the contract or contracts did not operate immediately as an agreement to rescind the existing facility agreements or the existing guarantees. Further, when the defendants terminated any such contract or contracts, for the plaintiff s repudiation, and thereby elected to discharge the parties from future performance, the defendants were not released from their obligations under the existing facilities or existing guarantees.

4 [6] The outcome is that the defendants failure to pay the amounts demanded on 27 November 2015 and 14 April 2016 constituted defaults within the meaning of cl 20.1 of the standard terms of the mortgage and the plaintiff is entitled to an order for possession of the land. Further, the counterclaim must be dismissed. Facts [7] Since March 1984, the defendants have been customers of the plaintiff. Since at least August 2003, Milglade has been a customer of the plaintiff. From about 2002, the defendants and Milglade were debtors to the plaintiff under eight loan facilities as follows: Loan No. Account No. Loan Type Limit Debtor Secured Regulated 1 8882 Fleximortgage 505,000 Milglade Yes No 2 7127 Overdraft 7,000 Milglade Yes No 3 8492 Residential investment 138,000 Milglade Yes Yes 4 8949 Overdraft 20,000 Mr Murphy Yes No 5 4686 Home loan 160,000 The Murphys Yes Yes 6 Visa Card 15,000 Mr Murphy No Yes 7 Mastercard 9,900 Mr Murphy No Yes 8 5351 Joint Overdraft 10,000 The Murphys Yes No [8] On 20 December 2004, the defendants executed a joint and several guarantee of Milglade s performance under each of Loans 1 to 3 ( Milglade Guarantee ). [9] On 3 November 2004, the second defendant executed a guarantee of the first defendant s performance under Loan 4. [10] The mortgage over the land secured the liability of the defendants under each of the guarantees. [11] On 12 October 2011, the plaintiff terminated Loans 1, 2, 4 and 8. [12] In April 2011, the plaintiff transferred the defendants and Milglade s facilities to its Strategic Business Services team.

5 [13] In 2014, the first defendant and Catherine Curry dealt with the plaintiff on behalf of the defendants and Milglade in relation to a proposal to restructure the existing facilities and loans. During September 2014 to mid-january 2015, Sam Waterhouse was the plaintiff s employee within the Strategic Business Services team who had responsibility for dealing with the defendants and Milglade s facilities and loans including the restructuring of those facilities and loans. From approximately October 2014, Craig Costello was the plaintiff s relationship manager for the defendants and Milglade. [14] On 19 September 2014, Mr Waterhouse sent an email to Ms Curry that: (a) (b) (c) (d) set out the defendants and Milglade s debts at that time; requested financial information; requested Ms Curry to outline the entity and structure the defendants desired; and stated that he would like to have an outcome to the restructure proposal, hopefully including an approval for the same, by no later than 31 October 2014. [15] On 13 October 2014, the first defendant sent an email to Mr Waterhouse attaching copies of the defendants tax returns and financial reports for the years ending 30 June 2012 and 30 June 2013. [16] On 14 October 2014, the first defendant met Mr Waterhouse and Mr Costello at the plaintiff s office at Creek Street, Brisbane. [17] At the 14 October 2014 meeting: (a) (b) (c) the parties discussed the defendants and Milglade s financial position and likely progress in the future; the first defendant requested that the loans other than Loan 5 be converted to interest only, and requested that Loan 5 remain as a principal and interest loan; the first defendant proposed that the balances of the following loans be included in a single new loan to Milglade: (i) the three existing Milglade loans (Loans 1, 2 and 3); (ii) the first defendant s personal overdraft (Loan 4); (iii) the defendants joint overdraft (Loan 8); and (iv) the first defendant s two NAB Credit Cards (Loans 6 and 7). [18] Also at that meeting, the plaintiff s employees requested that the defendants supply further financial information. There is a dispute about whether Mr Waterhouse showed the first defendant a drive by or desk valuation of the land, that it is unnecessary to resolve. [19] On 21 October 2014, Mr Waterhouse sent an email to the first defendant confirming the information required as a cashflow forecast until 31 December 2015 with commentary, 2014

6 management figures with commentary, a debtors listing, a creditors listing and statements of financial personal position, both business and personal. [20] On 29 October 2014 Ms Curry sent an email to Mr Waterhouse attaching the requested information. [21] On 5 November 2014, Mr Waterhouse and Mr Costello met with the first defendant and Ms Curry at the plaintiff s offices at Creek Street, Brisbane. The principal factual dispute in the case concerns what was said at and the effect of what was said at the meeting. However, there are a number of facts that are common ground. [22] At the time of the 5 November 2014 meeting, the defendants liability under the Milglade Guarantee was limited to $652,000 and up to 12 months interest to the date of any demand on Milglade and other amounts totalling approximately $705,000. [23] At the meeting, Mr Waterhouse gave to the first defendant and Ms Curry a document comprising two pages ( offer document ) set out below:

7 Group Summary as at 5 Nov 2014 Debt 937,821 Limits 810,076 Repayments 6,976 Milglade Pty Ltd Type Account Balance Limit Arrears Repayment (mth) Notes NFPM 578058882 551,000.00 505,000.00 551,000.00 2,807.00 Expired BCA 560387127 61,000.00 7,000.00 61,000.00 913.00 Expired LHOM 834428492 141,000.00 137,086.00 3,914.00 830.00 753,000.00 649,086.00 615,914.00 4,550.00 John Murphy (commercial) Type Account Balance Limit Arrears Repayment (mth) Notes BCA 561708949 38,000.00 20,000.00 38,000.00 381.00 Expired 38,000.00 20,000.00 38,000.00 381.00 John & Jennifer Murphy Type Account Balance Limit Arrears Repayment (mth) Notes LHOM 576154686 122,500.00 116,090.00 6,410.00 1,298.00

8 122,500.00 116,090.00 6,410.00 1,298.00 John Murphy (personal) Type Account Balance Limit Arrears Repayment (mth) Notes VD #8682 14,621.00 15,000.00-450.00 MCD #8263 9,700.00 9,900.00-297.00 24,321.00 24,900.00 747.00

9 Summary of new position Debt 916,990.00 Limits 916,990.00 Repayments / m 5,879.58 New facility Type Limit Int Rate Repayment Expiry Security Note TBA 791,000.00 6.5% 4,284.58 30/11/2015 Supported G&I (property) I/O Consolidation of 1-4, Indicative To remain: John & Jennifer Murphy Type Account Balance Limit Repayment Expiry Notes LHOM 576154686 116,090.00 116,090.00 $1,298.00 5/11/2034 Arrears of $6.4 to be cleared, P&I facility John Murphy (personal) Type Account Limit Repayment

MCD #8263 9,900 $297.00 10

11 [24] Mr Waterhouse said to the first defendant and Ms Curry words to the effect that: (a) (b) (c) we have considered your proposal and the financial information that you sent us through Kathy ; the arrears of all the Milglade facilities will be capitalised ; and we will not include the balance of the Mastercard and you will need to look after that yourself as usual. [25] The plaintiff denies that Mr Waterhouse also said: (a) (b) (c) (d) (e) (referring to the second page of the offer document) this is what the bank is willing to do if you agree ; the existing Milglade facilities and your overdraft will be combined into one loan ; we will also include the balance of your Visa card in the new Milglade facility ; the new loan will be for one year, (but admits that Mr Waterhouse said words to the effect that if the new loans were put in place they would be reviewed after 12 months); if your performance is satisfactory we will extend the loan past the year (but admits that he said words to the effect that the review after 12 months would determine whether the plaintiff would extend further). [26] The defendants allege that what was said by Mr Waterhouse together with the second page of the offer document constituted an offer to the defendants and Milglade that was capable of acceptance and that the first defendant replied with words to the effect that: we can work with that, we ll go with that, we ve got a deal, thereby accepting the offer. [27] The plaintiff does not admit the effect of the words said by the first defendant and, in any event, alleges that no binding agreement was made because of other conditions or further statements that were said by Mr Waterhouse to apply to the proposed arrangements. [28] Those conditions or further statements by Mr Waterhouse are alleged to have been: (a) (b) (c) (d) (e) (f) the income projections provided by the first defendant would need to be confirmed; the defendants would need to provide approximately $6,000 to the plaintiff in respect of the arrears of the joint home loan of the defendants and a further $15,000 approximately to bring the credit card facility out of arrears and to close it; a formal application for the new loans would need to be approved by the plaintiff; a new valuation of the property at Coolum Beach would be required; new loan documents would need to be provided and signed; and the new loan documents would contain further conditions precedent which would need to be met.

12 [29] The plaintiff sets up further reasons why it denies that Mr Waterhouse made an offer or offers capable of acceptance, including that: (a) (b) (c) (d) neither the plaintiff nor the defendants intended to be bound by an oral offer and acceptance; objectively viewed, the words were not an offer capable of acceptance to form a binding agreement; to the extent that the terms of the new Milglade contract were set out in the document, those terms were expressed to be indicative; and all other terms of any proposed agreement were uncertain. [30] The defendants allege that there were two contracts so made. First, there was a new Milglade contract between the plaintiff, the defendants and Milglade relating to the debts represented by Loans 1, 2, 3 and 4 upon the terms set out in the offer document. Second, there was a new home loan contract, between the plaintiff and the defendants, on the terms set out in the offer document. [31] It is not in dispute that Mr Waterhouse said words to the effect that the defendants must transfer $6,500 from the joint overdraft account to the home loan account and that the first defendant agreed to do so. In fact he gave or confirmed authority for Mr Waterhouse to do so by an email sent on that day. [32] Finally, the defendants allege that the first defendant said words to the effect that: We will need new documentation for both the new loans. And the guarantee is gone, so we ll need a new guarantee document before we start payment. [33] The defendants allege that Mr Waterhouse said That s right and Okay, and then said that the parties should get formalities underway and the plaintiff would produce the documents as soon as possible for the defendants to sign. The plaintiff denies that the first defendant said that the guarantee was gone or that Mr Waterhouse agreed to that. [34] The plaintiff alleges that further things were said by Mr Waterhouse and Mr Costello as follows: (a) (b) (c) (d) Mr Costello, as relationship manager, would need to prepare a submission to the plaintiff for approval and Mr Costello would request any further information he needed; Mr Costello would confirm whether the new loans could be in the name of Milglade and what type of loan and interest would be available as part of his preparation of the submission; the timing of the new loans would be dependent on Mr Costello preparing the submission for the approval of the plaintiff; and that it would take approximately two weeks. From November 2014 to January 2015

13 [35] On 5 November 2014, shortly after the meeting, Mr Waterhouse sent an email to the first defendant requesting his authority to transfer $6,500 from the Loan 8 account to the balance of the Loan 5 account and approximately $2,700 from the Loan 8 account to the balance of the Loan 7 (Mastercard) account. The first defendant gave that authority by return email. [36] By his return email, the first defendant also asked whether the new commercial loan could be in his name and not in Milglade s name because, as he would be making the payments, he would like the tax deduction. [37] On 6 November 2014, Mr Waterhouse sent an email to the first defendant saying that he had a message in with Mr Costello to confirm (whether the replacement facility for the Milglade facilities could be in the first defendant s name) but did not see any problems with that proposal. He would confirm if there was any problem, otherwise the plaintiff would put together the restructure into a commercial profile in the first defendant s name. [38] On 14 November 2014, Ms Curry sent an email to Mr Waterhouse inquiring whether the plaintiff had ordered a valuation yet or was doing a desktop valuation instead of a full valuation. Mr Waterhouse replied that the valuation had been ordered and was a desktop valuation, and apologised for the delay. [39] On 3 December 2014, an employee or consultant of the plaintiff performed an internal valuation of the land showing a market value of $1,100,000. [40] Also on 3 December 2014 Mr Costello prepared a business submission for the plaintiff for the proposed replacement facilities including the following: BE2: John Paul Murphy (Consumer profile) $9,900 Mastercard BE3: John Paul Murphy and Jennifer Patricia Murphy $116,249 Home loan BE4: John Paul Murphy (commercial profile) $796,000 New Market Rate limit as above. [41] On a date that is unclear, but that was before finalisation of the submission dated 3 December 2014, Mr Waterhouse sent an email to Stephen Newell asking for his assistance in the absence of Mr Costello. The email had unidentified attachments. However, Mr Waterhouse stated that there was financial information attached which he was satisfied to use to approve the submission. [42] On 12 December 2014, Mr Waterhouse sent an email to Ms Curry apologising for the delay in addressing the restructure. The delay had been caused by Mr Costello s absence due to personal or family reasons. Mr Waterhouse attached an application form or forms to be completed for the new personal facility for the first defendant under NCCP Guidelines.

14 [43] On 17 December 2014, the first defendant sent an email to Mr Waterhouse saying that he and the second defendant would complete the applications and return them no later than Sunday night. [44] On 14 January 2015, Ms Curry sent an email to Mr Waterhouse attaching the completed applications. [45] On 15 January 2015, Mr Waterhouse sent an email to Mr Costello attaching the completed applications and asking Mr Costello to review and identify anything further that needed to be addressed. Mr Waterhouse informed Mr Costello that he was moving to a different section of the plaintiff. [46] On 30 January 2015, Mr Curry sent an email to Mr Waterhouse inquiring as to the progress of the restructure. [47] On 2 February 2015, Mr Waterhouse sent an email to Veronica Saggal asking her to follow up Mr Costello and to write a brief email to Ms Curry and the first defendant to let them know where things were. [48] On 3 March 2015, Mr Mark Baines, who replaced Mr Waterhouse in dealing with the defendants facilities, sent an email to Mr Costello stating that he was declining the proposal and asking Mr Costello to advise the client (apparently meaning the first defendant) of the decision and to request the client to advise if he would provide the bank with vacant possession and if so, when. [49] On 17 March 2015, the plaintiff issued notices of cancellation of four facilities, being Loans 1, 2, 4 and 8. [50] On 20 March 2015, the defendants received the notices of cancellation. [51] On 23 March 2015, the first defendant spoke to Mr Cooper (presumably Mr Costello). [52] On 24 March 2015, the plaintiff issued further notices of default and demand. [53] On 27 March 2015, the defendants received the further notices of default and demand. [54] On 2 April 2015, the first defendant sent an email to Mr Baines alleging repudiation of the contract or contracts made by the 5 November agreement and accepting that repudiation. As well, the first defendant stated that the guarantees were discharged by the 5 November agreement because of the fundamental change in the obligations that were originally the subject of the guarantees. [55] On 8 April 2015, the plaintiff issued notices of default pursuant to s 84 of the Property Law Act 1974 (Qld) ( PLA ). [56] On 10 July 2015, the plaintiff issued further notices of default under the PLA.

15 [57] Thereafter, the plaintiff issued further notices of demand and notices of default. There is no dispute in the proceeding as to their effectiveness, if the plaintiff was entitled to make demands under the existing facilities. Alleged terms of the new contract or contracts [58] As previously stated, in my view, the proceeding can be resolved without deciding the dispute as to whether the parties entered into a new contract or contracts to replace the existing facilities at the meeting on 5 November 2014. [59] The alleged terms of the new Milglade contract are as follows: (a) (b) (c) (d) (e) (f) (g) the debts (including arrears) represented by Loans 1, 2, 3 and 4 would be combined to form the initial principal balance of a single new Milglade contract; the principal of the new Milglade contract was the total of all the debts mentioned in (a), that is $791,000, plus the then balance of the first defendant s Visa credit card; the indicative interest rate was 6.5% per annum; repayments were to be $4,284.58 per month assuming that interest rate; the term was at least one year, to be extended subject to review after that time; the new Milglade contract would be secured by a new guarantee from the defendants which new guarantee would be secured by the mortgage; and The plaintiff would decide on the particular type of loan into whose standard terms the above terms would be incorporated. [60] The alleged terms of the new home loan contract are as follows: (a) the type of loan was that which the plaintiff designated LHOM ; (b) the term of the loan was extended to 5 November 2034; (c) (d) the new principal debt was $116,090; and repayments were to be $1,298 per month. [61] It is common ground that, whatever the arrangement was, new loan documents would be required for any new facilities or loan contracts. [62] It was also common ground that by his email sent on 5 November 2014, the first defendant requested that the new Milglade loan contract was to be restructured with the first defendant as the borrower, rather than Milglade. [63] From the facts as previously set out, it does not appear that anyone on behalf of the plaintiff finally agreed to that alteration in the proposed arrangements, beyond Mr Waterhouse s email to the first defendant sent on 6 November 2014, although the plaintiff sent application documents to the defendants consistent with an intention to do so.

16 Implied rescission of the existing loan facilities [64] With one exception, the defendants do not allege that there was an express oral agreement to rescind the contracts comprised in the existing facilities on as at 5 November 2014. The exception is that the defendants allege and the first defendant gave evidence orally that the first defendant and Mr Waterhouse expressly orally agreed that the existing guarantee (or guarantees) was gone, meaning rescinded by agreement. The plaintiff s witnesses did not agree with the first defendant s evidence on this point. [65] In my view, there is more than one reason why, objectively speaking, it would be surprising if such an agreement had been made. First, because the defendants were not personally the borrowers, the plaintiff s security in respect of the existing Milglade facilities and debt depended on the defendants guarantee of those debts under the Milgade guarantee and the mortgage that secured the defendants liability under the Milglade guarantee. If Mr Waterhouse and the first defendant orally agreed to rescind the guarantee or guarantees, the plaintiff would from that moment have been unsecured in respect of the Milglade debt. Yet no substitute guarantee had been produced or executed, and all parties considered that further facility or loan contracts would have to be prepared and executed in due course, but over a period of some weeks at least. Rhetorically, it might be asked what would have happened had the first defendant been killed in a road accident on his way home on 5 November 2014? Second, the first occasion when the first defendant asserted that the guarantees were discharged was in his email to Mr Baines sent on 2 April 2015. However, he did not base the discharge of the guarantees on express agreement but on the fundamental change in the obligations that were originally the subject of the guarantees, meaning the restructure of the existing facilities that was agreed. That point is significant given that the first defendant is a barrister by occupation. [66] In addition, on this point, I prefer the evidence of Mr Waterhouse and Mr Costello that does not support the defendants claim that the guarantee or guarantees were expressly orally rescinded. [67] However, in any event, the defendants allege that the contracts comprised in the existing facilities and guarantees were impliedly rescinded by agreement as a result of making the 5 November agreement. [68] Questions of a cognate or similar kind have been considered in a number of leading and contextually relevant cases. 1 The leading statement of principle is: When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract 1 Commissioner of Taxation (Cth) v Sara Lee Household & Bodycare (Aust) Pty Ltd (2000) 201 CLR 520; Concut Pty Ltd v Worrell (2000) 176 ALR 693; Hillam v Iacullo (2015) 90 NSWLR 422; Australia and New Zealand Banking Group Ltd v Manasseh [2016] WASCA 41; and Balanced Securities Ltd v Dumayne Property Group Pty Ltd [2017] VSCA 61.

17 standing, subject to the alteration. For example, something may turn upon the place, or the time, or the form, of the contract, and it may therefore be necessary to decide whether the original contract subsists. 2 [69] The present case is of a kind where the parties plainly intended to replace the existing facilities and loan contracts, with limited exceptions. Clearly, Loans 1, 2, 3 and 4 were intended to be replaced by the new Milglade facility or contract (whether that facility was granted to the first defendant rather than Milglade as requested after the meeting). One possible exception is that the changes to the existing home loan facility under Loan 5 were relatively simple. A clearer exception is that no change was proposed to one of the existing credit card facilities other than for the reduction of the credit limit. [70] Further, the parties were on common ground by the pleadings and the witnesses who dealt with it agreed that it was expressly agreed at the 5 November meeting that there would be new guarantees. [71] From these circumstances, in my view, it does appear that when the proposed new facility agreements were carried into effect, it was intended that they would replace the existing facilities subject to the points already mentioned. But that is not to say that the parties impliedly agreed that the existing facilities were rescinded instanter and before the new facilities were put in place by the processes that were agreed at the meeting, and which conformed to ordinary banking practice. [72] In my view, the parties agreement was that the replacement of the existing facilities was contingent upon the completion of the new facilities as agreed by the preparation and execution of the required facility agreements and new guarantees. Until that point, it was not the intention of the parties, objectively ascertained, that the existing facilities were rescinded by agreement. Consequences for existing facilities [73] Once it is concluded that the existing facilities and guarantee or guarantees were not rescinded by agreement on 5 November 2014, the result of the present case becomes clear. First, assuming that the 5 November 2014 agreement was a concluded and binding contract or contracts, the facts after 5 November 2014 until 2 April 2015 show that the parties proceeded to carry the terms of the contract into effect but did not complete the process. [74] There were delays. First, until mid-november 2014, there was additional information being sought by the plaintiff. Second, until 3 December 2014, there was a delay in the bank arranging a further valuation. Third, from mid-december 2014 when the plaintiff forwarded the additional application documents for the proposed facility in the first defendant s name until 14 January 2015, there was delay in the defendants execution of the application documents. Thereafter, progress seems to have halted because Mr Waterhouse changed position and no one took up immediate responsibility to see the matter was concluded. Last, from Mr Baines arrival on the scene, in March 2015, the plaintiff (at his instigation) changed 2 (2000) 201 CLR 520, 533 [22].

18 tack. Simply put, it repudiated the arrangements previously made by Mr Waterhouse on the plaintiff s behalf. As previously stated, if the 5 November 2014 agreement resulted in a contract, the plaintiff does not dispute that it repudiated the contract in March 2015. Further, although the defendants allege that on 23 March 2015 the first defendant accepted the plaintiff s repudiation of the contract or contracts and terminated those contracts and the plaintiff denies that the first defendant orally did so, there can be no doubt that by the first defendant s email to Mr Baines, sent on 2 April 2015, the defendants accepted the plaintiff s repudiation and terminated any contract or contracts made on 5 November 2014. [75] Accordingly, having rejected that the existing facilities and the guarantees were rescinded on 5 November 2014, it follows, in my view, that the defendants termination of any contract or contracts had the effect that the parties rights and liabilities continue to be governed by the existing facilities and guarantees. Conclusion on the claim for possession [76] Once that conclusion is reached, it is not seriously in dispute that there were amounts owing by the defendants both under the guarantee or guarantees and upon their personal liabilities as debtors under some of the relevant facilities, or that they did not pay amounts owing when due for payment, or that they were in default for more than one day and the plaintiff gave a default notice allowing a period of at least 31 days from the date of the notice to remedy the default, and the notice or notices were not complied with, so that the whole of the amount owing became payable on demand and was demanded and not paid within 7 days. [77] Accordingly, the plaintiff is entitled to enforce the mortgage by taking possession of the land under cl 20.1 of the standard terms. [78] It follows that the plaintiff is entitled to judgment on the claim for possession. Counterclaim for breach of contract [79] From the foregoing reasoning, it also follows that the declaratory relief sought by the defendants cannot be granted except for possible declarations that the plaintiff repudiated the new Milglade contract and the new home loan contract. However, the plaintiff s repudiation of any such contract and the defendants acceptance of the repudiation brought any such contract to an end, so there would be no purpose served by making any such declaration. In the absence of a claim for damages for breach of contract, it follows that the counterclaim on the contract or contracts must be dismissed. 3 [80] Accordingly, it is unnecessary to find that the alleged contract or contracts were made or were binding in law. 3 The defendants did not submit that there should be judgment for nominal damages on their counterclaim for damages for breach of contract.

19 Other counterclaims [81] Two causes of action alleged in the counterclaim remain for brief consideration. By one of them, the defendants allege that the plaintiff engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law by the conduct engaged in through Mr Waterhouse and Mr Costello between the 19 September 2014 email sent to the first defendant and the 5 November request by Mr Waterhouse to the first defendant for authority to make the transfer of $6,500 in performance of the arrangements made on 5 November 2015, because the representations made by those gentleman were of such a nature as would induce an ordinary and reasonable person to believe that they had authority and the Milglade guarantee had been discharged. 4 However, the defendants case as pleaded was that if the representations made through Mr Waterhouse and Mr Costello were misleading or deceptive, they suffered loss or damage because they did not refinance the relevant debts through Ms Curry, as they would have done, had they known the truth. At the trial, the defendants did not seek to advance that case. No evidence was led that they would have sought to refinance elsewhere or had any real chance of doing so. [82] Second, the defendants allege a similar case of breach of the Banking Code of Practice as incorporated into the Milglade Guarantee, based on the alleged failure of the plaintiff to communicate its decision not to proceed with the new Milglade contract, on the ground that the failure prevented Milglade and the defendants from taking remedial action that may have been open to them at the time of the alleged breaches of the Banking Code of Practice. However, again, at the trial the defendants did not seek to advance that there was any remedial action that may have been open to them at the time of those breaches or that they were caused loss or damage. [83] Similarly, an allegation that the alleged breaches of the Banking Code discharged the defendants as guarantors for Milglade s performance under the new Milglade contract was not pressed in submissions. [84] In the circumstances, in my view, it follows that the counterclaim must also be dismissed. Postscript - was the 5 November agreement a contract? [85] Although it is not necessary to do so to decide this case, against the possibility of error in the conclusions reached so far, I will make brief findings as to some of the issues that were raised as to whether a contract was concluded at the 5 November meeting. [86] First, the plaintiff submits that Mr Waterhouse for the plaintiff and the first defendant for the defendants did not intend to conclude a contract or agreement at the meeting. In my view, looking without regard to the subjective intentions of the participants, the general tenor of the discussion was that the parties did intend to reach a substantive agreement at the meeting, although there were clearly machinery matters that remained to be carried out afterwards. That conclusion is supported by a number of considerations. They include that, before the meeting, Mr Waterhouse had sought the necessary information to be able to make a clear 4 I have already found that no express representation of the discharge of the guarantee was made.

20 restructure proposal and had said in email correspondence that he wanted the question whether there would be a restructure concluded by the end of October. As well, before he came to the meeting, Mr Waterhouse confirmed his authority to make the proposed offer he had formulated with his superior. Added to that, I find that Mr Waterhouse did not hedge his language in putting the proposal as what the plaintiff was prepared to do on the basis that the proposal was subject to further internal credit approval processes by others within the plaintiff s organisation. [87] Second, the plaintiff submits that a number of matters were raised as conditions precedent to the finalisation of any new facilities being put in place, that had the effect that the agreement on 5 November was subject to contract. One was that there would have to be a satisfactory valuation. The defendants disputed that there was any agreement that a satisfactory valuation was to be obtained, but on this point I do not accept the first defendant s evidence. That any agreement reached was subject to a satisfactory valuation was not, in my view, a condition precedent to contract but a condition subsequent that did not make any contract uncertain 5 and does not significantly affect the conclusion whether a contract was made. As the facts found show, a valuation was obtained and it was not alleged to be unsatisfactory. [88] In a similar way, that it was a condition of any agreement that the defendants pay the arrears on their home loan account and the first defendant pay of one credit card account and reduce the balance upon his other credit card account, does not make those matters conditions precedent to any contract being made or final agreement being reached. Although Mr Waterhouse described these points as a condition precedent, they were matters clearly capable of operation as conditions subsequent to contract. The home loan account arrears were cleared by arrangements made on 5 November, after which the plaintiff proceeded or continued to carry into effect the other arrangements necessary to finalise the new arrangements. The plaintiff did not at any stage say that the arrangement failed because the credit card clearance and reductions were not made or allege that in the defence. [89] I accept that Mr Waterhouse said at the 5 November meeting that there was some more information that the plaintiff would require to document the replacement loans. I do not accept, however, that he said that there would need to be a further credit approval process, or any statement that there would be further conditions to be met beyond his formal approval of the submission that Mr Costello was to put together to carry the arrangements agreed at the meeting into effect. As the facts found above show, Mr Waterhouse was disposed to formally do so in or about December 2014, when the formal submission was being put together and it does not appear that he ever changed his view. The change came with Mr Waterhouse s replacement. I would add that my general impression of Mr Waterhouse was favourable and I thought that he had some real recollection of the meeting. He also had a file record made from notes of the meeting although the file record was made later. [90] On the other hand, I was not so impressed by Mr Costello s evidence as to the meeting. I formed the distinct view that Mr Costello s answers were a reconstruction based on his views as to what was usual process rather than any actual or real recollection. 5 Meehan v Jones (1982) 149 CLR 571.

21 [91] In general, I was favourably impressed by the first defendant s evidence, with two important exceptions, mentioned previously. I do not accept that he said or that Mr Waterhouse agreed that the guarantees were gone, meaning rescinded instanter, and I do not accept his evidence that the question of a further valuation was not raised. I was also prepared to accept the evidence of Ms Curry, generally speaking. [92] I do not accept that the circumstance that shortly after the 5 November meeting the first defendant requested by email whether the proposed new Milglade facility could be provided instead to him personally is inconsistent with any agreement having been reached at the 5 November meeting that was or was capable of constituting a contract or proof that the parties did not reach a concluded contract or contracts at the meeting. [93] The findings I have made thus far do not conclude the question of law whether the parties reached a binding contract or contracts at the 5 November meeting. There are other arguments raised by the plaintiff as to why there was no such contract but they do not need to be considered for the findings already made and a court of appeal would be just as well placed as I am to consider them. Accordingly, in the particular circumstances of this case, I do not consider that it is necessary or appropriate to further consider the question whether the parties reached a concluded contract or contracts at the 5 November meeting.