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Mesana Pty Ltd v Zamia Investments Pty Ltd[2010] QSC 419

Mesana Pty Ltd v Zamia Investments Pty Ltd[2010] QSC 419

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Mesana Pty Ltd v Zamia Investments Pty Ltd and Anor [2010] QSC 419

PARTIES:

MESANA PTY LTD (ACN 106 499 727)
(Plaintiff)

v

ZAMIA INVESTMENTS PTY LTD (ACN 010 304 677)
(First Defendant)

and

ROBERT ARTHUR MICHAEL ASHLEY and DOROTHY JEAN ASHLEY
(Second Defendants)

FILE NO/S:

BS1628 of 2006

DIVISION:

Trial Division

PROCEEDING:

Claim

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

17 November 2010

DELIVERED AT:

Brisbane 

HEARING DATE:

2 August 2010, 13 - 15 October 2010

JUDGE:

Boddice J

ORDER:

1. Judgment for the plaintiff against the first and second defendants

CATCHWORDS:

CONTRACTS – TERMS AND CONDITIONS OF CONTRACT – LOAN AGREEMENT AND OTHER FACILITIES – CLAIM FOR RECOVERY OF DEBT - where Bank provided loan to a company – where second defendant gave guarantees – where moneys on lent to third party company – where Bank assigned debt – whether moneys recoverable from first and second defendants – whether debts assignable

EQUITY - ESTOPPEL – where representations as to the loan agreement in dispute – whether it would be unconscionable to permit the Bank to depart from the assumption

Supreme Court Act 1995 (Qld), s 47

Elsafty Enterprises Pty Ltd v Mermaids Café and Bar Pty Ltd [2007] QSC 394

McIntosh v Linke Nominees [2008] QCA 275

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457

Pacific Brands Sport and Leisure Pty Ltd v Underworks Pty Ltd (2006) 230 ALR 56

Thomas v National Australia Bank Limited & Ors [2000] 2 Qd R 448

Waltons Stores (Interstate) Ltd v Maher (1988) 165 CLR 387

Wright v Hamilton Island Enterprises Ltd [2003] QCA 36

COUNSEL:

JW Peden for the plaintiff

C Wilson for the first and second defendants

SOLICITORS:

Gadens Lawyers for the plaintiff

Courtice Neilsen Lawyers for the first and second defendants

  1. This a claim for moneys owing. Mesana Pty Ltd (“Mesana”) claims from Zamia Investments Pty Ltd (“Zamia”) debts alleged to be due and owing by Zamia to the National Australia Bank (“NAB”), which debts were later assigned by NAB to Mesana. The debts relate to a loan of $250,000 advanced by NAB to Zamia on or about 25 March 2003, and a business cheque account facility. Mesana also claims these amounts against Robert Arthur Michael Ashley and Dorothy Jean Ashley (“the Ashleys”) pursuant to guarantees executed in favour of NAB, also allegedly assigned to Mesana. Zamia is the trustee of the Ashleys’ family trust.
  1. It is not in dispute that NAB advanced Zamia the moneys in question. The issues for determination are:
  1. the terms of the loan for $250,000, and of the other facilities provided to Zamia by NAB;
  1. whether those amounts, and guarantees executed by the Ashleys, were properly assigned by NAB to Mesana;
  1. whether NAB, and therefore Mesana, is estopped from recovering those amounts having regard to representations allegedly made by NAB.

Background

  1. In 2002 and 2003, a group of companies known as the Mini Tankers Group was carrying on the business of providing mobile refuelling services. The ultimate holding company of the group was Mini Tankers International Pty Ltd (“MTI”). Zamia was a shareholder of MTI.
  1. In late 2002, MTI was experiencing liquidity problems, particularly due to the ongoing costs of one of the companies in the group, Mini Tankers USA (“MT USA”).  It needed further funds for its operations.  At the same time, its banker, NAB, was seeking that it reduce its outstanding facilities. 
  1. In early 2003, MTI agreed to sell its shares in Mini Tankers Canada Limited (“MT C”).  Those funds were to be used to reduce its outstanding facilities with NAB and to provide ongoing funds for MT USA.
  1. In or about March 2003, the board of MTI met to discuss ongoing funding of MT USA.  One option discussed was that Zamia borrow funds from NAB to on-lend to MTI for use in funding MT USA.  NAB subsequently agreed to loan funds to Zamia which were then loaned by Zamia to MTI.  Those funds, and other amounts, remained outstanding when NAB appointed receivers to MTI on or about 19 September 2003.  On 31 October 2003, debts owing to NAB, including the debts owed by Zamia, were assigned to Mesana, together with NAB’s securities.  Relevantly, these securities including guarantees provided by the Ashleys in December 2002 and by Mr Ashley in July 2003.

Pleadings

  1. In its statement of claim, Mesana alleges:
  1. It was a term of the loan from NAB to Zamia that in the event of default by Zamia, that loan, together with all interest fees and charges would become immediately due and payable after NAB served a notice of demand and, further, that NAB may assign any debt owed pursuant to it.
  1. Prior to 5 February 2003, NAB agreed to provide Zamia with a business cheque account.  It was a term of that facility that Zamia would pay NAB’s fees and charges, and that NAB may assign any debt owed pursuant to it.
  1. On 4 December 2002, the Ashleys executed a guarantee and indemnity in which they agreed to pay to NAB, upon demand, any amounts Zamia was in default, up to the maximum liability in the guarantee.  It was a term of that guarantee that NAB may assign its rights thereunder.
  1. On or about 23 July 2003, Mr Ashley executed a second guarantee and indemnity, in addition to the first guarantee.  It was a term of that guarantee that he would pay to NAB upon demand any amounts Zamia was in default, up to the maximum liability.  It was a further term of the second guarantee that NAB may assign its rights thereunder.
  1. On 9 August 1993, Zamia executed a registered mortgage debenture in favour of NAB over all its property asset rights and privileges.  It was a term of that charge that Zamia would, upon demand, pay NAB all moneys outstanding to it, and that NAB may assign its rights under the charge.
  1. On 31 October 2003, in consideration of a payment by Mesana, NAB assigned to Mesana absolutely its right, title and interest in Zamia’s liability pursuant to the facilities, and under the guarantees.
  1. Zamia and/or the Ashleys are in default under the facilities and/or guarantees, and are liable to pay Mesana the amounts claimed.
  1. By their second further amended defence, Zamia and the Ashleys allege:
  1. The terms of the loan made between NAB and Zamia were:
  1. NAB would lend to Zamia, to on loan to MTI, $250,000;
  1. The $250,000 was to be repaid by MTI from the proceeds of the sale of shares in MT C;
  1. When the share sale proceeds were received by MTI, $250,000 thereof would be paid by MTI to Zamia, or directly to NAB in satisfaction of Zamia’s loan;
  1. NAB would obtain an irrevocable letter of direction from MTI;
  1. Zamia did not agree to any term that the loan was assignable and NAB was not entitled to assign its debt;
  1. NAB made a representation to Zamia and the Ashleys prior to making the loan that its terms would be as set out and that NAB would accept repayment of the loan from the share sale proceeds to be received by MTI;
  1. Zamia and the Ashleys relied upon the said representation;
  1. Notwithstanding the share sale proceeds being received into MTI’s account, NAB did not transfer $250,000 to Zamia or debit it against the loan, but used the money to reduce MTI’s debt to NAB;
  1. NAB is estopped from claiming the $250,000 remained due and owing by Zamia, and Mesana is also estopped having taken an assignment of Zamia’s debt pursuant to a Deed of Assignment dated 31 October 2003.

Evidence

  1. Tony Hartin is the beneficial owner of the shares in Mesana. He was a director of MTI. He gave evidence that towards the end of 2002 a division developed between directors as to the future of MTI and its associated entities. In particular, there was concern as to the ongoing viability of MT USA.[1]  Its operations required the injection of significant funds at a time when MTI’s banker, NAB, was seeking to have MTI reduce its bill facility.  By early 2003, MTI’s shareholders were suffering “fatigue” and were unwilling to inject further funds of their own for the ongoing operations of MT USA.  A decision was made to sell MT C.[2]  The proceeds were required to reduce NAB’s loan facility, and to continue funding MT USA.[3]
  1. At the board meeting of MTI held on 3 March 2003, discussions were held as to the need to inject further funds into MTI. Mr Hartin was not prepared to invest any further funds, nor were other shareholders.[4]  It was the view of the directors (other than Mr Ashley) that MT USA should be wound up.  Mr Ashley was told he should put further equity in himself.[5]  Mr Ashley suggested he would lend $250,000 to MTI to on-lend to MT USA.[6]  Mr Hartin gave evidence the $250,000 contribution from Mr Ashley, through Zamia, was “a further investment of equity in the business” and was “by way of loan”.[7]  There were no discussions or agreements with Zamia as to how that further investment was to be repaid.[8]  It was his understanding the funds from the sale of MT C were for the purpose of reducing NAB’s facility and, if there were further funds, towards the support of MT USA.[9]  He denied having any discussions with Mr Ashley about using the proceeds from the sale of MT C towards the debt of $250,000 Zamia had borrowed from NAB.[10] 
  1. Mr Hartin said that subsequent to that March meeting, he was informed by MTI’s CEO, Geoff Gault, that he had sent a letter to NAB in relation to the basis of the advance of the funds by Zamia to MTI. Mr Hartin had a strong view the proceeds of the sale of MT C should not be used to repay that loan but did not discuss it with Mr Ashley, and did not direct Mr Gault to send any further correspondence to NAB. 
  1. Mr Hartin said that in August 2003, Mr Gault presented him with a circular resolution of the board dated 19 August 2003, signed by Rob Ashley, directing NAB to repay Zamia the sum of $250,000 out of MTI’s account.[11]  Mr Hartin refused to sign that circular.  By that time he had lost confidence in the accuracy of the accounts and affairs of MTI.  Ernst & Young Accountants were appointed to report on MTI’s affairs.  Subsequent to that report, receivers were appointed to MTI by NAB.  On or about 31 October 2003, NAB and Mesana entered into a deed of assignment whereby Mesana was assigned the outstanding debts owing to NAB, including the debts owed by Zamia.  Mesana was also assigned the benefit of NAB’s guarantees and other securities.
  1. Philip Smith is the director of Mesana. He executed the deed of assignment on its behalf. He did not negotiate its clauses.[12]  He also executed the certificate of indebtedness in relation to the amounts owing by Zamia.[13]  Those amounts were calculated by Jeff Ham.  Mr Ham gave evidence confirming those calculations.
  1. Scott McKay is a former officer of NAB. He gave evidence he was contacted by Mr Ashley in March 2003 in respect of an application by Zamia for a loan of $250,000. He prepared a document headed “Memorandum of Increase – Business/AgriBusiness”.[14]  Relevantly, that document contains the following:

“1.Purpose

Customer seeks short term loan of $250,000 to contribute to a shareholder funded loan to Mini Tankers International Pty Ltd.  This funding requirement comes from the need for funding for the period between now and 30/4/03 by which time, Mini Tankers International will have sold its interest in Mini Tankers Canada for CAD$1.6M (AUD$1.77M) to provide clearance of this loan request and make substantial reduction to call facilities of MTI.

The funding forms a critical contribution to the operations in USA, as the US market moves out of the Winter into Autumn the cash resources are at their highest as the debtor ledger grows again.

Loan is to be funded in the name of Zamia Investments Pty Ltd atf the RAM and DJ Ashley family trust.

Facility sought:

Market rate advanced $250,000 to expire 31/5/03

Request is made under memo of increase, due to short term nature of advance.

  1. Debt servicing

Summary of ability to service the increased loans is a determined through the ability of the borrower’s family company Zamia Investments to be able to service the proposed debt increase.  [Various financial information set out]

…

  1. Exit analysis

Primary exit:  continued operation of practise in Zamia Investments will provide sufficient revenue to clear the proposed facilities.

Whilst we have demonstrated the servicing from normal activities, the clearance source of the loan will come from the sale proceeds of MTC to MTI.  We will hold an irrevocable letter of instruction to direct 250,000K from the sale proceeds to the clearance of the proposed new debt.  Also we hold evidence in the form of contract of sale from MTI to MTC and confirmation of finance application by MTC to facilitate the purchase.  All parties are confident the sale transaction will proceed.

Secondary exit:  security for the loan will comprise G & I from DJ Ashley (Rob’s wife) and supported by their family home at MacGregor.

…”

  1. Mr McKay did not have any specific recollection of the discussion with Mr Ashley about the type of facility sought, but there was no‑one else he could have obtained the information from in preparing that memorandum of increase.[15]  There was “quite a deal of urgency around the funding” and the loan was drawn down “almost immediately”.[16]  As Mr Ashley was “a reputable businessman who was a good client of the bank”, the funds were advanced on the basis the balance of the documentation would be signed at a later date.[17]  Subsequent to the draw down of the loan, he sent Mr Ashley a market rate facility document setting out the terms.[18] 
  1. Mr McKay prepared a memo subsequent to receipt of the proceeds of MT C.  The amount received was less than had been anticipated, and the available funds to reduce NAB’s facility were less than had been expected by NAB.  Further, MTI was requesting some of these funds be used to repay other outstanding debts.  This was contrary to the understanding at the time of the loan, including the “undertaking of sorts taken from Mini Tankers CEO Geoff Gault to make repayment of the $250,000 loan to Zamia Investments from the proceeds of the Canadian sale”.[19] 
  1. Mr McKay agreed in cross-examination that at the time the Zamia loan was advanced by NAB, NAB had reached a decision it would advance no further funds to MTI.[20]  He also agreed a condition of approval of the loan to Zamia was that NAB obtain an irrevocable letter of instruction from MTI.[21]  He did not recall telephoning Mr Gault to obtain that letter, or advising Mr Gault as to the terms of that letter.  He did not have any recollection as to the circumstances by which he received that letter.  He did not receive anything else from MTI and did not ask for any other letter or document from it.[22] 
  1. Mr McKay did not obtain any signature from Zamia before the $250,000 loan was advanced, and did not provide any letter of offer to Mr Ashley. He also did not provide to Mr Ashley any standard terms and conditions[23] or give Mr Ashley any of the clauses within the market rate facility document or tell him what those clauses contained before the loan was advanced by NAB.[24]  He would have sent the facility document later but could not recall sending the letter to Mr Ashley enclosing the market rate facility document.[25]  He forwarded Mr Ashley a note confirming NAB had approved the facility.[26]  He could not recall the circumstances in which he witnessed Mr Ashley’s signature on the guarantee.
  1. Rodney Adams is a retired bank officer. In 2002 and 2003, he was Mr McKay’s superior. He was aware of the loan by NAB to Zamia. He subsequently became involved in ongoing discussions in relation to its repayment after concerns had been expressed about Mr McKay’s conduct. On 29 July 2003, he sent an internal memorandum recommending NAB transfer $250,000 from funds held in MTI’s account to Zamia to effect clearance of its loan. Whilst that recommendation was subsequently approved, he did not act on it. He said that between making the recommendation, and receiving approval of it, it came to his attention there was conflict on the board of MTI. He felt it was in the best interests of NAB and the client that a fresh authority be obtained from MTI in the form of a board minute.[27]  He subsequently attended a meeting with Mr Hartin, Mr Ashley, Mr Gault and NAB representatives.  That meeting confirmed there was disharmony and disagreement within the board of MTI.  No mandate was provided to NAB by MTI to release $250,000 out of its account to pay Zamia.[28]
  1. Mr Adams did not consider it unusual the loan funds would have been advanced quickly without completion of all the necessary documentation so long as “our securities are in order”.[29]  At the time he became involved, there were a number of documents NAB were told had been executed that could not be found.[30]  He was unable to locate any guarantee.  He arranged for Mr Ashley to sign a guarantee in late July 2003.  Mr Ashley confirmed in writing he signed that guarantee under duress.[31]  At the time that guarantee was executed by Mr Ashley, he had not formed the view it was necessary or appropriate to obtain any further written mandate from MTI for the repayment of $250,000 from its funds to Zamia.  That proposal only arose after he became aware of dissention within the board of MTI.[32]
  1. Mr Gault was present at the board meeting on 3 March 2003 by invitation. He gave evidence there was a discussion of options, including that Mr Ashley contribute $250,000.  There was “no discussion in terms of the payment” of MTI funds to repay Mr Ashley or Zamia’s borrowings from NAB.[33]  At a meeting of shareholders held on or about 5 March 2003, Mr Ashley confirmed he had confidence in MT USA and would inject the further funds.  He did not at that meeting request MTI “pledge its credit or promise its own money to repay Mr Ashley’s loan”.[34]
  1. Mr Gault was unaware of the terms of the loan between Zamia and the NAB prior to being contacted by Scott McKay from NAB on or about 24 March 2003. Mr McKay indicated the Zamia loan had been approved, and requested Mr Gault “Send a letter acknowledging the understanding that those loan – the loan proceeds would be repaid out of the proceeds of the equity position in Mini Tankers USA”.[35]  On the basis of that conversation, Mr Gault prepared a letter dated 27 March 2003 in the following terms:

“Further to our discussion earlier this week we acknowledge that the $250,000 advance from Zamia Investments Pty Ltd was provided on the understanding that it would be repaid from the proceeds of the sale of Mini Tankers Investments Pty Ltd’s equity position in Mini Tankers Canada Ltd.”[36]

Mr Gault had not had any discussions with Mr Ashley in relation to the terms of that loan or its repayment prior to sending that letter.  He also did not discuss its terms with any member of the board.  He did not see the letter as a guarantee but as a “statement of intent”.[37]  He was not aware of any discussion with other members of the board or anyone else as to the term of the loan between Zamia and MTI.[38]

  1. Mr Ashley gave evidence that he was chairman, and through Zamia, a shareholder, of MTI. At the board meeting on 3 March 2003 he raised the possibility he would raise funds to bridge the gap between MTI’s current position “and the receipt of the Canadian proceeds”.[39]  Agreement was reached that he would “pursue the possibility of raising $250,000.[40]  Later that evening, he telephoned Mr Hartin to reaffirm the funds had to be raised to ensure continued funds for the US operations.  During that conversation, Mr Ashley:

“… reconfirmed the fact that I would look at the possibility of raising it, that it would – but that it was a funding – just to fund that gap.  It was a bridging loan and that I would then – that I would pursue the National Bank to raise that, and that it was – that the clearance of that loan would come from the Canadian sale”.

Mr Hartin replied “That’s fine, but I’m not putting any money in”.[41]

  1. Mr Ashley said that subsequent to that board meeting he telephoned Scott McKay of NAB and asked him whether he could consider an application by Zamia for a $250,000 advance to be used as a bridging loan for MTI. Mr McKay advised for that to proceed he would require a copy of the contract for the sale of MT C and “a letter of direction” from MTI.  Mr McKay said he would obtain both of those things “from Mr Gault”.[42]  Mr McKay also indicated he would require a guarantee from Mr Ashley’s wife.  This was not provided to NAB at that time.[43] 
  1. Mr Ashley said he was not required to fill out or sign any form of application.  He was subsequently advised the loan had been approved.  Mr Ashley denied ever receiving correspondence from NAB enclosing a copy of a market rate facility document.  There were no discussions with Mr McKay as to the terms of the loan.[44]  Mr Ashley accepted he raised no complaint with NAB that interest was charged on the loan, and that he knew that the terms and conditions of the loan required him to pay interest.[45]  He also accepted Zamia was responsible for the loan and had to repay it if MTI did not provide the funds. 
  1. Mr Ashley sent a letter to Mr McKay on about 16 June 2003 confirming that NAB were holding $250,000 to clear Zamia’s loan.[46]  He did not receive a response to that letter or to a letter dated 22 July 2003.[47]  He received a telephone call from Mr Adams following receipt of the July letter.  That letter dealt with NAB’s insistence he execute a further guarantee.  Prior to signing that guarantee, he was not advised by anyone at NAB that some other form of authority or resolution would be required from MTI in order to apply $250,000 to Zamia’s debt.[48]  He made handwritten notes of his two telephone conversations with Rod Adams on 22 July 2003.[49]  In that note he recorded Mr Gault “was asked to provide a letter of comfort from MTI”.[50] 
  1. Mr Ashley said at the meeting with Mr Hartin and representatives of NAB held on 22 August 2003, Mr Adams indicated he would require a fresh authority to clear the loan and that he was seeking a minute from the company. This was the first that he had heard of such a requirement,[51] although he agreed in cross-examination he had been notified of the need for “final authority” in a conversation with Mr Adams on 17 August 2003.[52]  Geoff Gault prepared a minute which he signed but Mr Hartin refused to sign it.  He subsequently took legal advice and instructed his solicitors, Sparke Helmore, to send a letter dated 23 October 2003.[53] 
  1. In cross-examination, Mr Ashley accepted the loan from NAB was to Zamia, not from NAB to MTI.[54]  There was then a loan from Zamia to MTI.  Zamia was responsible for paying back the loan moneys to NAB.  If MTI did not pay Zamia back, Zamia had to pay NAB.[55]  Zamia ultimately lodged a proof of debt in MTI’s liquidation.[56]  Mr Ashley agreed the only complaint he made about the second guarantee in his pleading was as set out in paragraph 16(b) of the second further amended defence.[57]  He also agreed the letter sent by Sparke Helmore in October 2003 set out what NAB required from him.[58]  That letter stated it had “requested that MTI provide a letter confirming that the loan made by Zamia to MTI will be repaid out of the sale proceeds”.[59]  He also agreed that after receipt of the sale proceeds of MT C, MTI requested various sums be immediately paid out of its account to other entities.  At no time was there a request by MTI to NAB for any funds to be transferred to Zamia.[60] 

Findings

The loan agreement

  1. Mesana alleges the terms of the loan entered into between Zamia and NAB were set out in a document entitled “Market Rate Facility”.[61]  It relies on a letter from NAB to Zamia dated 23 April 2003 enclosing that documentation.  Although Mr McKay could not specifically recall sending that letter, he said the loan was approved urgently, and it was normal practice to send the documentation at a later date.[62]
  1. Zamia denies ever receiving that letter or the enclosed documentation. In its original defence, Zamia alleged the terms of the loan were:

“(a)The National would lend to the first defendant $250,000 for the purpose of the first defendant on-lending that sum to Mini Tankers International Pty Ltd ACN 052 907 516 (“MTI”) as working capital;

(b)Repayment of the $250,000 loan by MTI to the first defendant would be made when MTI received the proceeds of a sale of shares in a Canadian corporation owned by MTI, Mini Tankers Canada Ltd (“the share sale proceeds”);

(c)When the share sale proceeds were received by MTI, $250,000 thereof would be repaid to the first defendant, or paid directly to the National by MTI in satisfaction of the first defendant’s $250,000 loan from the National;”

  1. On the second day of the hearing, leave was granted to amend this paragraph to add:

“(d)The National would obtain an irrevocable letter of direction from MTI for the repayments:

Particulars

(i)The term was oral.

(ii)The term was advised by Scott McKay to Robert Ashley during one of a series of telephone conversations between 5 and 24 March 2003, the precise date of which Mr Ashley is unable to recall.

(iii)The words used by Scott McKay were to the effect that … ‘we’ll require a letter of direction from MTI.  I’ll call Geoff Gault to organise it’.”

Zamia relies on the evidence of Mr Ashley, together with various bank memoranda and other documentation to support this aspect of its claim.

  1. I do not accept Mr Ashley’s evidence that Zamia did not ever receive a copy of the market rate facility document. Mr Ashley did not impress me as a reliable witness. His evidence left me with the overall impression that he was reconstructing what he thought to be the position rather than recalling events as they had occurred in 2003.
  1. The loan was organised urgently having regard to the pressing need to fund MT USA.  Both Mr McKay and Mr Adams gave evidence it was not unusual in those circumstances to approve the loan and forward the documentation at a later date.  The documentation is prepared externally.  Mr McKay’s evidence that he would have sent that document later accords with that practice.  The document was signed by Mr McKay.  It is likely, in those circumstances that it would have been sent by him in accordance with this usual practice.  Mr Ashley, and therefore Zamia, was aware interest was being debited for the loan.  This was never questioned, apart from a complaint that from June 2003 NAB commenced to charge interest on a default rate under the facility.[63]  Further, Mr Ashley never raised the non-existence of terms of the loan in the letter sent by his then solicitors, Sparke Helmore, in October 2003.  If Zamia had never received any terms in relation to the loan, it is an inexplicable omission that that fact was not the subject of specific reference by his solicitors having regard to the nature of the letter being sent by them.  I am satisfied Zamia received the market rate facility terms and conditions, and that the loan was on those terms. 
  1. As to the allegation that Zamia’s loan for $250,000 was subject to a specific term that NAB would obtain an irrevocable letter of direction from MTI “for the repayments”, the pleading alleges the term was an oral term, not a written term, advised by Mr McKay to Mr Ashley in a telephone conversation. Mr Ashley had one telephone call with Mr McKay.[64]  Whilst the pleading alleged Mr McKay said words to the effect NAB “will require a letter of direction from MTI” (emphasis added), the letter sent by Sparke Helmore on 23 October 2003 did not contain an assertion in those terms.  It asserted NAB “requested” a letter confirming Zamia’s loan to MTI would be repaid out of the sale proceeds. 
  1. Mr Ashley’s note of his conversion with Mr Adams on 22 July 2007 refers to NAB having sought a “letter of comfort”.[65]  That terminology is consistent with NAB requesting an acknowledgment from MTI that it would repay Zamia’s loan upon receipt of the proceeds of MT C.  A request for acknowledgment is markedly different to the loan being given on a term that MTI would be responsible for Zamia’s repayment to NAB. 
  1. The letter from Mr Gault was in terms of an acknowledgment of an “understanding”, not a direction to NAB. Mr Gault worded it, based solely on his conversation with Mr McKay. It was only a “statement of intent”.[66]  His evidence, and the terms of the letter, support the conclusion that Mr McKay sought confirmation that MTI was agreeable to Zamia’s loan being repaid from the proceeds of MT C, not that MTI was to be responsible for Zamia’s repayment to NAB.  Whether MTI ultimately did repay Zamia its loan was a matter between it and Zamia.  Zamia remained responsible for repayment of its loan to NAB.
  1. The transaction whereby MTI obtained $250,000 for use in the ongoing funding of MT USA involved two separate loans.  First, the loan from NAB to Zamia for $250,000.  Second, a loan from Zamia to MTI for $250,000.  The latter loan was a separate transaction.  There is no suggestion there was a tripartite agreement between Zamia, NAB and MTI in relation to the funding of MT USA.  The further and better particulars provided by the defendants on 21 May 2009 particularised there were two loans, with the agreement between MTI and Zamia being that the proceeds of the sale of MT C’s shares “would be repaid to [Zamia] by MTI …”.[67]  The loan for $250,000 obtained by Zamia was from NAB.  Zamia remained primarily responsible for its repayment.
  1. That the loans were separate is supported by a consideration of the “Memorandum of Increase – Business/AgriBusiness”.[68]  In section 4 “Exit Analysis”, Mr McKay, whilst referring to the bank holding an irrevocable letter of instruction “to direct 250K of the sale proceeds to the clearance of the proposed new debt” noted that NAB had demonstrated the loan could be serviced from Zamia’s normal activities.  Further, the loan was to be secured by a guarantee and indemnity from Mrs Ashley.  This notation is consistent with repayment of the loan to NAB remaining the ultimate responsibility of Zamia.
  1. In their further and better particulars filed 21 May 2009, the defendants alleged the funds were advanced by Zamia to MTI on the basis MTI would repay Zamia when MTI received the proceeds of the sale of MT C and that:

“These terms were agreed between Robert Ashley on behalf of the first defendant and Gault, the Chief Executive Officer on behalf of MTI on a date which the defendants are presently unable to particularise, but during a series of meetings with MTI directors and shareholders which took place between 3 March 2003 and 27 March 2003;”[69]

  1. At the time NAB advanced the loan moneys to Zamia, there was disputation within the board of MTI as to ongoing funding of MT USA.[70]  Further, NAB wanted MTI to reduce its bill facility.[71]  The sale of MT C was undertaken to allow this reduction to occur and to provide ongoing funding for MT USA.[72]  At the board meeting of MTI held on 3 March 2003, various options for providing ongoing funding support for MT USA were discussed, including a payment of “$250,000 from Rob Ashley and a further $250,000 from the bank or other sources”.[73]  Both Mr Hartin and Mr Ashley accepted that the minutes of the meeting dated 3 March 2003 accurately recorded the discussions at that meeting.  Those minutes did not record any reference to Zamia being repaid out of the proceeds of the sale of MT C.
  1. I do not accept MTI, Mr Gault or Mr Hartin, ever agreed that the injection of funds of $250,000 by Zamia was on the basis that Zamia’s loan would be repaid from the proceeds of MT C. Such a proposition, having regard to the extreme liquidity circumstances faced by MTI at that stage, and the views expressed by the other directors as to the winding up of MT USA, would have been a significant departure from the stated views of the other directors as documented in the minutes of that meeting.[74]  Mr Gault has no recollection of any agreement to repay Zamia’s loan.  Significantly, he said there were no further discussions with Mr Ashley after the  board meeting on 3 March 2003, although there was a shareholders meeting where Mr Ashley “confirmed that he would be prepared to back the venture”.[75]  He did not know the terms of the loan from Zamia to MTI.[76]  Mr Gault impressed me as an honest, independent witness.  I accept and prefer his evidence over that of Mr Ashley.  I do not accept, as alleged in the particulars, that Mr Gault agreed to Zamia’s loan being repaid out of the proceeds of the sale of MT C.  I accept his letter to NAB simply acknowledged an intent, not a binding agreement. 
  1. The suggestion Mr Gault or MTI had agreed Zamia’s loan would be repaid from the proceeds of MT C is also inconsistent with the fact that after receipt of the sale proceeds, various requests for payment were sent by MTI, signed by Mr Gault.  A request that Zamia’s loan be repaid was never sought by MTI, or Mr Gault. 
  1. Further, the suggestion Mr Ashley proposed, at the 3 March 2003 board meeting, that Zamia’s loan be repaid out of the proceeds of MT C, is inconsistent with Mr Ashley’s evidence in chief.  Mr Ashley gave evidence that at this meeting he:

“… raised the issue as to whether – the possibility of me raising those funds to bridge the gap between where we were currently and the receipt of the Canadian proceeds.

…

Was there any agreement reached at that Board meeting?  Well, agreement was that I would pursue the possibility of raising $250,000.”[77]

  1. Whilst Mr Hartin, in cross-examination, appeared to concede it may have been raised at that meeting, his evidence, in response to a suggestion Mr Ashley told the meeting he wanted to be repaid the $250,000 from the share proceeds, was:

“If Mr Ashley did say that, it was not with the support of any other shareholder at that meeting. … He may well have told the meeting but that was a totally unreasonable request given the circumstances of the business at that time”.[78]

Properly understood, that was not a concession that had been raised at the meeting.

  1. That it was raised at the meeting is also inconsistent with the notion that Mr Ashley specifically raised this issue with Mr Hartin later that evening.  There would be no need for him to do so if it had been discussed during the meeting.  I do not accept Mr Ashley’s explanation for why it was raised in the subsequent telephone call.  I do not accept his evidence that he raised it at all in the telephone conversation.  Whilst Mr Hartin did not recall Mr Ashley telephoning him later that evening, and did not recall a discussion to the effect that Mr Ashley wanted the $250,000 loan to be repaid from the proceeds of MT C, he denied ever saying to Mr Ashley “That would be fine”.[79]  I accept Mr Hartin’s evidence and prefer it over Mr Ashley’s evidence in relation to the contents of that telephone call.  In reaching this conclusion, I have had regard to Mr Hartin’s evidence that when he became aware of the existence of Mr Gault’s letter; he took no steps to speak to Mr Ashley about it, or to direct Mr Gault to retract it.  The defendants contend that conduct corroborates Mr Ashley’s evidence that he told Mr Hartin.[80]  I do not accept that submission.  Mr Hartin explained that Mr Gault was well aware of his view of the matter[81] and there was no loan agreement in place.[82]  I accept that explanation.
  1. It may well have been Mr Ashley’s intention and desire that the $250,000 be repaid out of the proceeds of MT C, but it is inconceivable Mr Hartin or his fellow director agreed to that course in circumstances where they had expressed a view at the board meeting on 3 March 2003 that MT USA should be would up. The minutes record Mr Ashley alone dissented from that position. As proceeds of the sale of MT C were required to fund MT USA, it is inconsistent with the expressed view of the board that it would have concurred with a proposition that $250,000 be injected by Mr Ashley on the basis he be immediately repaid from the proceeds of MT C.
  1. Having considered all of the evidence, I am not satisfied the loan from NAB to Zamia was subject to the oral term pleaded in the second further amended defence. The arrangement between NAB and Zamia was a loan on market rate facility terms. Zamia then lent that money to MTI. If MTI failed to repay Zamia, Zamia had its recourse to MTI. However, it continued to remain indebted to NAB. Mr Ashley accepted this was the ultimate effect of the arrangement, acknowledging that if MTI did not repay Zamia, Zamia remained obliged to pay NAB.

Business cheque account

  1. Mesana claims an amount outstanding in relation to Zamia’s business cheque account debt. Zamia admits that NAB opened this facility but denies its terms and conditions were as alleged by Mesana. However, in paragraph 8 of its second further amended defence, Zamia admits it was a term of that facility that Zamia would pay NAB’s fees and charges, together with interest. Mesana’s claim is on the basis of the amount outstanding, together with interest pursuant to s 47 of the Supreme Court Act (Qld) 1995.  Having regard to Zamia’s admissions, Mesana is entitled to recover this outstanding amount, together with interest thereon, if the debt was properly assigned to it.

Deed of assignment

  1. The deed of assignment was entered into for consideration. It included the sums sought by Mesana. The defendants submit the amounts claimed by Mesana were not properly assigned as there were no specific terms and conditions allowing the assignment of the debts, or of the guarantees. Further, the deed of assignment specifically did not warrant the guarantees were valid and excepted from its warranties matters raised in Sparke Helmore’s letter of 23 October 2003. Finally, Mesana, whilst assigned a debt of $250,000, only paid $100,000 in respect of it.
  1. As to the debts, a party is free to assign the benefit of a contract, as a chose in action[83] unless there is an express provision preventing such assignment.  Neither Zamia nor the Ashleys plead any such express provision.  They do plead that the cheque account facility did not contain an implied term allowing assignment on the basis such an implied term is “neither reasonable nor necessary”[84] nor “so obvious that it goes with saying”.  I do not accept that contention.  There was no express prohibition on assignment.  Allowing an assignment of such debt is reasonable in the circumstances.
  1. As to the guarantees, clause 26 expressly provided that NAB may assign its rights under the guarantee.[85]  Accordingly, there is no basis in law to find that the guarantees were not able to be specifically assigned to Mesana.
  1. Zamia and the Ashleys submit that the deed of assignment was not effective to assign the debt owing pursuant to the loan made to Zamia on the grounds that that debt was not separable from NAB’s contractual obligation to obtain the irrevocable letter of direction and to give effect to that letter when the share sale proceeds were received. In support of that contention, they rely upon the principles in Pacific Brands Sport and Leisure Pty Ltd v Underworks Pty Ltd.[86]  However, those principles have no application in the present case having regard to my earlier findings as to the terms of the loan from NAB to Zamia.
  1. As the loan amount and the amounts outstanding under the business cheque account facility were properly due and payable by Zamia to NAB, NAB was entitled to assign those rights. The fact the deed of assignment excluded certain warranties does not alter that position. Similarly, that Mesana paid $100,000 in respect of that debt does not alter its recoverability.[87] 
  1. The defendants also pleaded the terms of the first guarantee, and of the charge, requiring the payment of interest, were unenforceable as they provided “an unfettered discretion” as to the rates.[88]  There is no merit in these contentions.  The interest rate is able to be identified by reference to the specified formula.

Estoppel

  1. Zamia’s claim in estoppel is premised on its assertion that NAB represented the terms of the loan would be:
  1. NAB would advance the sum of $250,000 to the first defendant on the terms pleaded by the defendants;
  1. NAB would accept repayment of the $250,000 loan from the share sale proceeds received by MTI, which proceeds would be paid at first instance into MTI’s account with the National.

and on further assertions that it was induced to act as it did in reliance upon the assumption, in circumstances where NAB knew that it would so act and that it would occasion detriment if the assumption was not fulfilled, and that it would be unconscionable to permit NAB to depart from the necessary assumption.[89]  Zamia further asserts that as the estoppel is binding upon NAB, it is binding upon Mesana as an assignee deriving title from that representor.[90]

  1. I am not satisfied NAB made the representations pleaded by the defendants. The terms of the loan were not as alleged. Further, NAB did not represent it would accept repayment of Zamia’s loan from the share sale proceeds. It sought confirmation MTI would repay Zamia’s loan from the share proceeds.
  1. The claim for estoppel fails as the premises upon which it is based, namely representation having been made by NAB as to the terms of the loan agreement between Zamia and NAB has not been established by the defendants.
  1. The defendants also plead, in support of the plea of estoppel, that upon receipt of the share sale proceeds from MT C, NAB “froze” MTI’s accounts, thereby preventing payment of Zamia’s loan, and later purported to offset MTI’s account against MTI’s liability to NAB.  There is no evidence to establish those contentions.
  1. The evidence establishes NAB was allowing day to day business transactions on MTI’s account after receipt of the share proceeds, and that MTI at no time requested Zamia’s loan be repaid by NAB. Further, after the purported offset was reversed there was no request that those funds be asked to repay Zamia.

Guarantee

  1. The Ashleys are said to be liable on the basis Zamia “owes NAB the sums claimed by it”.[91]  The Ashleys submit that principal obligation cannot be enforced having regard to the claim in estoppel and that as such, the guarantee does not operate.[92]
  1. Whilst in evidence there were claims that the second guarantee was signed by Mr Ashley under “duress”, that claim did not form the basis of any pleading.  According to the second further amended defence, Mr Ashley admits executing the second guarantee.  The basis upon which I have to determine whether the guarantees are enforceable is whether the Ashleys have made out their claim that Zamia does not owe Mesana the claimed amounts. 
  1. In submissions, Mr Ashley contended the second guarantee was signed in circumstances when Mr Ashley had previously been advised by NAB that MTI was holding $250,000 in relation to Zamia’s outstanding loan, but NAB changed its position after having Mr Ashley execute the signed guarantee.  Whilst that position accords with Mr Adams’ evidence, including his initial recommendation that $250,000 be transferred from MTI’s account to Zamia’s account to clear its loan, NAB’s conduct in that respect was not the subject of a pleading that it was estopped as a consequence.  Accordingly, on the pleadings, this issue does not form any basis to set aside the second guarantee.
  1. As I have found Zamia does owe the amounts claimed, there is no basis, on the present pleadings, to find the Ashleys are not liable pursuant to the guarantees.

Conclusion

  1. The plaintiff is entitled to recover the debts claimed by it from the first defendant, and from the second defendants pursuant to the guarantees.
  1. The amount of the debts is set out in the Certificate of Indebtedness signed by Mr Smith.[93] I accept the accuracy of that certificate.
  1. There will be judgment for the Plaintiff against the first and second defendants for that amount, updated to the date of judgment.
  1. I shall hear the parties as to the appropriate orders, and as to costs.

Footnotes

[1] Transcript 1-41/40.

[2] Transcript 1-42/30.

[3] Transcript 1-43/40.

[4] Transcript 1-45/30.

[5] Transcript 1-46/25.

[6] Transcript 1-86/1.

[7] Transcript 1-46/45-55.

[8] Transcript 1-46/55 – 47/1.

[9] Transcript 1-47/20.

[10] Transcript 1-47/30.

[11] See exhibit 13.

[12] Transcript 2-13/45.

[13] See exhibit 41.

[14] Exhibit 15.

[15] Transcript 2-19/25.

[16] Transcript 2-19/35.

[17] Transcript 2-20/40-45.

[18] Transcript 2-19/50.

[19] Transcript 2-23/45.

[20] Transcript 2-26/1.

[21] Transcript 2-26/55.

[22] Transcript  2-30/20.

[23] Transcript 2-34/30-40.

[24] Transcript 2-36/25.

[25] Transcript 2-35/25.

[26] See exhibit 46.

[27] Transcript 3-17/1.

[28] Transcript 3-18/10.

[29] Transcript 2-23/50.

[30] Transcript 3-28/40.

[31] Transcript 3-34/30.

[32] Transcript 3-42/20 - 43/10.  See also Transcript 3-52/40 – 53/1.

[33] Transcript 3-81/5.

[34] Transcript 3-80/50 - 3-81/10.

[35] Transcript 3-74/45.

[36] Exhibit 16.

[37] Transcript 3 - 82/30

[38] Transcript 3-71/20; 3-82/25.

[39] Transcript 3 - 85/40

[40] Transcript 3-85/45.

[41] Transcript 3-86/5-15.

[42] Transcript 3-88/10.

[43] Transcript 3-88/45.

[44] Transcript 3-89/10.

[45] Transcript 4-59/10.

[46] Transcript 3-89/40.

[47] Transcript 3 - 92/50

[48] Transcript 3-93/25.

[49] See exhibit 61; Transcript 4-67/35.

[50] Transcript 4-71/25.

[51] Transcript 3-95/1.

[52] Transcript 5-26/20; see exhibit 69.

[53] See exhibit 29.

[54] Transcript 4-53/55.

[55] Transcript 4-54/55; 4-55/10.

[56] Transcript 4-55/15.

[57] Transcript 4-77/25.

[58] Transcript 4-80/30.

[59] Transcript 4-82/35.

[60] Transcript 5-6/30.

[61] See exhibit 43.

[62] Transcript 2-19/40-50.

[63] Exhibit 60; transcript 4-59/20.

[64] Transcript 4-78/25.

[65] Exhibit 61

[66] Transcript 3-75/25; 3-82/25.

[67] See Defendant’s Further and Better Particulars (court document 20) paragraph 5(b)

[68] Exhibit 15

[69] Above at n 68, paragraph 5(c)

[70] Transcript 1-41/40.

[71] Transcript 1-42/30.

[72] Exhibit 11.

[73] Exhibit 12.

[74] Exhibit 11.

[75] Transcript 3-80/30.

[76] Transcript 3-75/20; 3-80/30-40.

[77] Transcript 3-85/40.

[78] Transcript 1-86/15-20.

[79] Transcript 1-86/35.

[80] Transcript 5-42/40.

[81] Transcript 1-87/30.

[82] Transcript 1-89/10.

[83] Thomas v National Australia Bank Limited [2000] 2 Qd R 448.

[84] Second further amended defence (court document 35) paragraph 10(b).

[85] Exhibit 5

[86] (2006) 230 ALR 56 at 63, 64 and 67 as per Finn and Sundberg JJ

[87] Exhibit 14

[88] Second further amended defence (court document 35) paragraph 19(b)

[89] See, generally, Waltons Stores (Interstate) Ltd v Maher (1988) 165 CLR 387; Wright v Hamilton Island Enterprises Ltd [2003] QCA 36 at [40]-[41].

[90] Elsafty Enterprises Pty Ltd v Mermaids Café and Bar Pty Ltd [2007] QSC 394 at [28].

[91] Written submissions for the first and second defendants (filed by leave on 15 October 2010) paragraph 39

[92] McDonald v Dennys Lascelles (1933) 48 CLR 457 at 467, 471, 479-480; McIntosh v Linke Nominees [2008] QCA 275 at [39] per Muir J

[93] Exhibit 41

Close

Editorial Notes

  • Published Case Name:

    Mesana Pty Ltd v Zamia Investments Pty Ltd and Anor

  • Shortened Case Name:

    Mesana Pty Ltd v Zamia Investments Pty Ltd

  • MNC:

    [2010] QSC 419

  • Court:

    QSC

  • Judge(s):

    Boddice J

  • Date:

    17 Nov 2010

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2010] QSC 41917 Nov 2010Plaintiff claimed for moneys owing by first defendant and guaranteed by second defendants; whether debt properly assigned by National Australia Bank to plaintiff; judgment for the plaintiff against the first and second defendants: Boddice J
Primary Judgment[2010] QSC 45101 Dec 2010Whether plaintiff entitled to interest on amounts ordered in [2010] QSC 419 in light of significant period of delay; plaintiff entitled to recover interest for the entire period: Boddice J
Appeal Determined (QCA)[2011] QCA 27407 Oct 2011Appeal by first and second defendants dismissed with costs to be assessed: White JA, Margaret Wilson AJA and Fryberg J

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
Elsafty Enterprises Pty Ltd v Mermaids Cafe & Bar Pty Ltd [2007] QSC 394
2 citations
Jump To
Cite 1 - [2007] QSC 394
Cite 2 - [2007] QSC 394
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457
2 citations
Jump To
Cite 1 - (1933) 48 CLR 457
Cite 2 - (1933) 48 CLR 457
McIntosh v Linke Nominees Pty Ltd [2008] QCA 275
2 citations
Jump To
Cite 1 - [2008] QCA 275
Cite 2 - [2008] QCA 275
Pacific Brands Sport and Leisure Pty Ltd v Underworks Pty Ltd (2006) 230 ALR 56
2 citations
Jump To
Cite 1 - (2006) 230 ALR 56
Cite 2 - (2006) 230 ALR 56
Thomas v National Australia Bank Limited[2000] 2 Qd R 448; [1999] QCA 525
2 citations
Jump To
Cite 1 - [2000] 2 Qd R 448
Cite 2 - [2000] 2 Qd R 448
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
2 citations
Jump To
Cite 1 - (1988) 164 CLR 387
Cite 2 - (1988) 164 CLR 387
Wright v Hamilton Island Enterprises Limited [2003] QCA 36
2 citations
Jump To
Cite 1 - [2003] QCA 36
Cite 2 - [2003] QCA 36

Cases Citing

Case NameFull CitationFrequency
Zamia Investments Pty Ltd v Mesana Pty Ltd [2011] QCA 2742 citations
1

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