Supreme Court New South Wales Medium Neutral Citation: Marquess Investment Fund Pty Ltd v Tjen [2023] NSWSC 675 Hearing dates: 13 and 14 February; 13 March; 16 June 2023 Date of orders: 23 June 2023 Decision date: 23 June 2023 Jurisdiction: Common Law Before: Chen J Decision: (1) Direct that the parties confer with a view to agreeing upon proposed orders finalising the proceedings in accordance with these reasons (including costs), with agreed orders to be filed and served by 30 June 2023, 5pm. (2) To the extent that agreement cannot be reached, direct that each party is to file and serve, by 30 June 2023, 5 pm, the proposed orders it seeks with submissions explaining the basis for why those orders are sought limited to no more than 2 pages. (3) Direct that any evidence in support of any contested orders be filed and served by 30 June 2023, 5pm. (4) The matter will be listed for further argument, and the entry of further orders, on a date to be fixed. Catchwords: CONTRACTS – construction of contract – where parties entered into forbearance agreement – whether the forbearance agreement discharged the borrowers' obligations under the original loan agreement CONTRACTS – termination – repudiation – where the borrowers did not make repayments on terms with the forbearance agreement - where the lots of land that formed part of the project were progressively sold such that the borrowers were factually unable to perform the project – whether repudiation of the forbearance agreement was accepted by the sending of letters of demand to the borrowers Legislation Cited: Civil Procedure Act 2005 (NSW) Cases Cited: Almond Investors Limited v Kualitree Nursery Pty Limited [2011] NSWCA 198 Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; [1987] HCA 15 Ayers Rock SkyShip Pty Ltd v Voyages Indigenous Tourism Australia Pty Ltd (2019) 19 BPR 39541; [2019] NSWSC 828 Brighton v Australia and New Zealand Banking Group Ltd [2011] NSWCA 152 Champtaloup v Thomas (1976) 2 NSWLR 264 Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168 Ex parte Dawes; In re Moon (1886) 17 QBD 275 Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53 Foran v Wight (1989) 168 CLR 385; [1989] HCA 51 Franklins Pty Limited v Metcash Trading Limited (2009) 76 NSWLR 603, [2009] NSWCA 407 Galafassi v Kelly (2014) 87 NSWLR 119; [2014] NSWCA 190 Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 Great Northern Developments Pty Ltd v Lane [2021] NSWCA 150 Heyman v Darwin's Ltd [1942] AC 356 Hickory Developments Pty Ltd v Brunswick Retail Investment Pty Ltd [2012] VSC 224 Holland v Wiltshire (1954) 90 CLR 409; [1954] HCA 42 Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133; [1919] HCA 64 John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115; [2007] HCA 61 Lakshmijit v Sherani [1974] AC 605 Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 623; [1989] HCA 23 Leotta v Public Transport Commission of NSW (1976) 50 ALJR 666 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410; [1996] FCA 870 OneSteel Manufacturing Pty Ltd v BlueScope Steel (AIS) Pty Ltd (2013) 85 NSWLR 1; [2013] NSWCA 27 Payne v Parker [1976] 1 NSWLR 191 Rawson v Hobbs (1961) 107 CLR 466; [1961] HCA 72 Ryder v Frohlich [2004] NSWCA 472 Thai Airways International Public Company Ltd v Farag Menzies Aviation Group (Ground Services) Australia Pty Ltd [2011] NSWCA 172 Vitol SA v Norelf Ltd [1996] AC 800 Vivlios v Westpac Banking Corporation [2010] QCA 230 Wilkie v Gordian Runoff Limited (2005) 221 CLR 522; [2005] HCA 17 Wood Factory Pty Limited v Kiritos Pty Limited (1985) 2 NSWLR 105 Zhu v Wang [2021] NSWCA 240 Texts Cited: JD Heydon, Heydon on Contract (1st ed, 2019, Thomson Reuters) Category: Principal judgment Parties: Marquess Investment Fund Pty Limited (plaintiff) Joshua Tjen (defendant) Representation: Counsel: Mr D P O'Connor (plaintiff) Mr C D Freeman (defendant) Solicitors: Douros Jackson Lawyers (plaintiff) Braddon Marx Lawyers (defendant) File Number(s): 2020/297756 Publication restriction: Nil JUDGMENT Introduction 1. These proceedings arise out of the failed development of property at Box Hill, NSW and the alleged failure to perform, and repay money due under, a funding agreement and personal guarantee. The plaintiff loaned the money used in the development to the borrowers, and the defendant provided a personal guarantee that it would be repaid. The borrowers defaulted, and the plaintiff called upon the defendant, under the guarantee, to make good the default – but he has refused to do so. The central issue in the proceedings is whether that refusal is correct, or not. 2. By these proceedings, Marquess Investment Fund Pty Ltd ('the plaintiff') seeks three types of relief: first, to recover the sum of $1,200,000, plus contractual interest, alleged to be owed pursuant to a loan agreement dated 28 February 2017 ('the loan agreement') entered between itself, Halcyon Rise Pty Ltd and South Land Holdings (NSW) Pty Ltd (or 'the borrowers'); secondly, damages for breach of the loan agreement; and, thirdly, a declaration that it has lawfully terminated an agreement – described as: 'Profit Sharing and Forbearance Deed' ('the forbearance agreement'). Background 1. The background facts are within relatively small compass, and were not significantly in issue. I will cover them in essentially two parts – although there is necessarily a degree of overlap. The first part outlines the property development. The second part sketches the contractual arrangements involving the plaintiff, the borrowers and the defendant (the detail of the agreements is dealt with in a later part of these reasons: 'The agreements: the key terms': see [37]ff, below). What follows sets out my findings in relation to these matters. The development 1. At the time of entry into the loan agreement on 28 February 2017, Halcyon Rise Pty Ltd ('Halcyon Rise') was carrying out a residential sub-division project at Terry Road, Box Hill and Old Pitt Town Road, Box Hill. 2. The property being developed was owned by Halcyon Rise and involved five lots: 1. 1/347514 (78 Terry Road, Box Hill). 2. 11/39157 (136 Old Pitt Town Road, Box Hill). 3. 1/10157 (138 Old Pitt Town Road, Box Hill). 4. 22/577893 (140 Old Pitt Town Road, Box Hill). 5. 21/577893 (142 Old Pitt Town Road, Box Hill). 1. The monies advanced to the borrowers were used by them in respect of the project. Indeed, the express purpose of the loan agreement was to provide the borrowers with the funds ($1,100,000) to permit them to complete payment of the deposit for the purchase of the property in Box Hill, as well as to fund working capital and legal costs associated with the facility: loan agreement, cll 1.1 (definition of 'Purpose') and 3.1(a) and (b). 2. As it happens, the property was never developed. On 4 December 2017, an administrator was appointed to Halcyon Rise. There were several copies of the form of appointment of the administrator. In one of them the appointment was described as: "Controller (other than receiver, receiver and manager or managing controller) of the property described in schedule of property" – hereafter, 'the administrator'). The 'Schedule of Property', within the form of appointment, provided: All of that piece and parcel of land situated at Lot 1 in Deposited Plan 10157 (Folio 1/10157), commonly known as 138 Old Pitt Town Road, Box Hill NSW 2765 and Lot 22 in Deposited Plan 577893 (Folio 22/577893), commonly known as 140 Old Pitt Town Road, Box Hill NSW. 1. In another one, the appointment was described as: "Receiver and Manager of the property described in the schedule of property". The 'Schedule of Property', within the form of appointment, provided: All present and after-acquired property – No exceptions. 1. (There were also two further forms, bearing the date 19 December 2017, containing the same information. During submissions, no particular attention was paid to the nature of the appointment. I will return to the significance of the appointment of the administrator in the context of dealing with the repudiation argument: see [114], below). 2. It was alleged in the further amended statement of claim ('the FASOC' – filed 24 March 2023) (par 7E(i)), and admitted in the defence to the FASOC (par 6EA(a)), that, following the appointment of the administrator, the various lots that formed the development were progressively sold, with the transfers occurring as follows: 1. 1/347514 (78 Terry Road, Box Hill) on 2 January 2018. (As noted in [26], below, this date appears to be erroneous as the transfer records the date as 21 December 2017). 2. 11/39157 (136 Old Pitt Town Road, Box Hill) on 30 January 2018. 3. 1/10157 (138 Old Pitt Town Road, Box Hill) on 9 February 2018. 4. 22/577893 (140 Old Pitt Town Road, Box Hill) on 9 February 2018. 5. 21/577893 (142 Old Pitt Town Road, Box Hill) on 20 September 2018. 1. Joshua Tjen ('the defendant') is alleged to be liable for the amount claimed because he entered into a deed of personal guarantee on 28 February 2017. 2. The defendant was a director of Halcyon Rise. A company search records that the defendant was a director from the time Halcyon Rise was first registered until 26 June 2017. The defendant also accepted that he was a director of South Land Holdings – at least at the time that he signed the transaction documents in the present case. The defendant was involved in property development through Halcyon Rise and South Land Holdings. At least as at 23 May 2017 (being the date of the forbearance agreement), South Land Holdings held 50% of the shares in Halcyon Rise. 3. The loan of the money under the loan agreement was short term. The period of the loan was 3 months: the loan agreement thus required the monies advanced under it – $1,100,000 – to be repaid with contractual interest by 28 May 2017. The loan agreement defined two types of interest that might become payable by the borrowers: the 'facility interest rate' – which was 4% per month (cll 1.1, 6.1(a) and Item 6 of the Schedule) and the 'interest on overdue amount' – which was 10% per month (cll 1.1 and 7.1). (The plaintiff only claimed the former interest, not the latter). 4. It was accepted by the parties that the amount $1,100,000 was advanced by the plaintiff to the borrowers pursuant to the loan agreement, and I find that it was. 5. The plaintiff alleges that the borrowers failed to repay the money that was advanced under the loan agreement by the due date – albeit that the plaintiff accepts that the borrowers paid to it the sum of $132,000 representing part of the interest that had accrued in the period of the loan (see [21], below which explains this). The defendant, I add, does not contest these matters but argues that the borrowers performed what was required under the agreement by the entry into the forbearance agreement – and otherwise raises a range of arguments which are said to stand against the defendant having any liability to the plaintiff. (The arguments and defences raised by the defendant are summarised in [36], below). The contractual arrangements 1. At the time of entry into the loan agreement, two other agreements were entered. One was a Deed of Personal Guarantee ('the guarantee') between the plaintiff and defendant. The other was a General Security Deed (the 'GSD') between Halcyon Rise and South Land Holdings (described as the 'Grantor') and the plaintiff (described as the 'Secured Party'). The copies of these agreements that were exhibited to the affidavit of David Tan (the sole director/secretary of the plaintiff) were undated, although Mr Tan's evidence, which I accept, is that each of them were signed on or about 28 February 2017. 2. The plaintiff sues the defendant on the guarantee. The defendant specifically admits that he entered into the guarantee dated 28 February 2017, and I find that he did. Put simply, the guarantee secured the obligations of Halcyon Rise and South Land Holdings under the loan agreement: cl 3 of the guarantee. The defendant accepted that, subject to the defences that he has raised, he is (and was) obliged to make good any failure by the borrowers to repay the money advanced under the loan agreement. 3. The GSD, in very general terms, created further security interests in favour of the plaintiff. (To the extent that any of the terms of this agreement are relevant, they are referred to in [54]ff, below). 4. On 23 May 2017 – that is, some five days prior to the date the money advanced under the loan agreement was required to be repaid – the plaintiff negotiated with the borrowers (and others), and entered into a further agreement described as a 'Profit Sharing and Forbearance Deed' (earlier defined as 'the forbearance agreement'). There is no issue between the parties that this agreement was entered on that day involving the plaintiff and the borrowers. There was also no issue that this document was known to the defendant, and signed by him. In the execution part of the forbearance agreement, the defendant signed the document on the three occasions: in his capacity as a director of South Land Holdings, in his capacity as a director/secretary of Halcyon Rise, and in his capacity as director of JMCON International Pty Ltd. 5. To signpost: the parties are at odds about how the forbearance agreement should be characterised. In essence, the plaintiff says that the forbearance agreement is simply that – viz., the underlying obligations contained within the loan agreement were specifically preserved, rather than discharged, and the promise not to enforce that obligation was in return for the performance of some act by the borrowers (essentially the payment of a percentage of profit from the project). The defendant, on the other hand, in essence argues that the forbearance agreement should be construed as an agreement envisaged by cl 9.1(b) of the loan agreement with the consequence that the borrowers' obligations under that agreement were discharged or, alternatively, as a variation to the loan agreement with the consequence that any obligation that the defendant had under the guarantee was discharged. 6. On 23 May 2017 the plaintiff and the borrowers also entered into a second loan agreement. The second loan agreement did not feature significantly in the submissions of either party (the defendant relied upon that which occurred around the time of its execution to buttress its argument that the forbearance agreement was an agreement within cl 9.1(b) of the loan agreement: see [97], below where that argument is addressed). The terms of the second loan agreement can be briefly addressed. 7. The second loan agreement was in similar terms to the (first) loan agreement. The second loan agreement made provision for the plaintiff to provide funds to the borrowers to "complete payment of the deposit for the purchase of the property" and to "fund working capital and legal costs associated with the facility": cll 3.1 (a) and (b) and Item 3, Schedule-Facility Details of the second loan agreement. The facility limit was $2 million. The termination date of the agreement was two months from the commencement date (which was defined as "the earlier of 1 February 2017 and the date on which the 1st drawdown is made": cl 1.1, definitions. This date may well be erroneous bearing in mind the date of the agreement; nothing turns on this and no party suggested that anything did). 8. The plaintiff made available the funds for the second loan agreement – but it retained $437,500: $200,000 was a prepayment of the interest on the second loan, and $237,500 was for the interest and legal fees in connection with the (first) loan agreement. 9. In addition to executing the second loan agreement, a General Security Deed, a Deed of Personal Guarantee from the defendant, and the forbearance agreement were also executed on this day. 10. On 24 July 2017 the plaintiff entered into a deed of assignment with three entities wherein the plaintiff assigned all of its rights, title and interest in the second loan agreement in return for the payment of $2,100,000. On 25 July 2017 the plaintiff was paid the amount of $2,100,000. 11. As earlier noted, on 4 December 2017 an administrator was appointed to Halcyon Rise and, on 21 December 2017, the land known as 78-80 Terry Road, Box Hill – land that forms part of the residential subdivision – was transferred to Legpro 67 Pty Ltd. (The parties referred to this transfer date as 2 January 2018, but the transfer itself records the date as 21 December 2017. Nothing appears to turn on this difference). 12. The project failed, according to Mr Tan, and I accept that it did. (The defendant did not suggest otherwise, it should be noted). That finding is also supported by the fact that, as the plaintiff argued, an administrator was appointed in December 2017 and thereafter, progressively, all the property the subject of the development was sold (see [7]-[9], above). Indeed, during submissions, the defendant conceded that, at least following the sale and transfer of the last lot (the transfer occurred on 20 September 2018), there was a repudiation of the forbearance agreement by that date. It will be necessary to return to this issue, and make further findings about it, in the context of the argument that there was a repudiation of the forbearance agreement (this is Issue 3: discussed, below). 13. Some other contractual documents, and background matters, should also be noted. At the time the loan agreement was entered, not only did the defendant enter into a guarantee, but two other individuals did too: Darren Thomas and Peter Turnbull. Darren Thomas was a director of Halcyon Rise and South Land Holdings. There was evidence as well, which I accept, that Peter Turnbull was also a director of those entities. The plaintiff's case: short summary 1. The plaintiff claims damages for breach of the loan agreement (Relief Claimed, pars 1 and 2), as well as a declaration that the plaintiff has lawfully terminated the forbearance agreement (Relief Claimed, par 2A). Breach of agreement 1. In relation to the claim for damages, the plaintiff claims the sum of $1,200,000 "pursuant to the agreement" (Relief Claimed, par 1), as well as seeking "damages for breach of the agreement" (Relief Claimed, par 2). 2. In substance, however, and as confirmed during the course of submissions, the claim is one seeking to enforce the personal guarantee provided by the defendant, as contained within the guarantee. The plaintiff specifically relies upon cl 3 of the guarantee. The plaintiff alleges that the "breach" of the loan agreement by the borrowers and breach of the guarantee by the defendant has caused the plaintiff to suffer loss – which is alleged to be the amount of $1,200,000 that was outstanding as at 28 May 2017: further amended statement of claim, pars 10(a) and (b) and particular (a). 3. Ultimately, a different amount was claimed by the plaintiff (reflected in MFI 2: $1,970,481.07) and, further, the parties agreed that quantification of any damages to which the plaintiff might be entitled should be deferred pending delivery of my reasons. I discuss quantification of the plaintiff's claim further as Issue 5: see [170]-[172], below. The declaration 1. In relation to the declaration (Relief Claimed, par 2A), the case for the plaintiff is that the borrowers did not perform their obligations by not paying to the plaintiff 8% profit from the project, as promised (FASOC, par 7D) and, further, "breached" the terms of the forbearance agreement "by becoming insolvent, resulting in a receiver being appointed who in turn sold part of the property the subject of the development making it impossible to complete their obligations" under it (FASOC, par 7E). 2. The plaintiff further alleges that the above (as well as other) conduct "constitutes a repudiation of the terms of the forbearance agreement", a repudiation that the plaintiff has chosen to accept (FASOC, par 7F) and, as a result of the plaintiff's "termination of the forbearance agreement it is entitled to be discharged from its terms and reassert the terms of the original agreement" (FASOC, par 7G). During the course of the hearing the plaintiff sought, and was granted, leave to file a further amended statement of claim to reflect the evidence (Leotta v Public Transport Commission of NSW (1976) 50 ALJR 666, 668, and s 64(2) of the Civil Procedure Act 2005 (NSW)). As it happens, a dispute erupted between the parties over whether the amendments proposed by the plaintiff were consistent with, or beyond, the leave granted. 3. Ultimately, following argument, the plaintiff was granted leave to file the FASOC, and the plaintiff was granted leave to reopen its case to adduce further evidence. By the FASOC, the plaintiff alleged that there was a repudiation of the forbearance agreement and, as ultimately put during submissions, this occurred by reason of one, or a combination, of the following: 1. by the borrowers failing to pay the plaintiff 8% profit from the project: FASOC, par 7D; 2. by the appointment of the administrator: FASOC, par 7E; 3. as a result of the properties (as defined in the schedule to the loan agreement) being sold – thereby making completion of the project an impossibility: FASOC, par 7F; and 4. by reason of the fact that the appointment of the administrator constituted an 'event of default' under cl 13.1 (and the definition of 'insolvency event' in cl 1.1) of the loan agreement. The defendant's case: a short summary 1. In relation to the claim that the defendant has failed to comply with the terms of the guarantee, the defendant raises the following arguments: 1. First, the defendant argues that there was no debt owed under the loan agreement because it was discharged, by operation of cl 9.1(b) of the loan agreement, by the entry into the forbearance agreement. Put simply, the defendant argues that the amount owing under the loan agreement was discharged not by repaying the amount due to the plaintiff on the termination date (cl 9.1(a)), but by the parties negotiating, during the term of the loan, an agreement that converted "the amount owing into equity" (cl 9.1(b)). On this argument, if that is the proper characterisation of that which has occurred, there is no liability under the loan agreement to pay the amount owing and, accordingly, the defendant has no liability under the guarantee (defendant's submissions at [2](a)) and [17]; further amended defence, par 7(bb)). I deal with this argument as "Issue 1": see [67]-[99], below. 2. Secondly, the defendant argues that the forbearance agreement amounts to a written variation of the loan agreement – specifically relying upon cl 2(c) – and any and all liability under the deed of guarantee was discharged upon entry into the profit sharing and forbearance deed: this is said to follow "because it varied the obligations under the Guarantee without the agreement of" the defendant (defendant's submissions at [2](b); further amended defence, par 7(bc)(ii)). I deal with this argument as "Issue 2": see [100]-[113], below. 3. Thirdly, it is said that: "no moneys at all were owed at the date of the commencement of these proceedings (or to date)" under the loan agreement (defendant's submissions at [2](c)). This argument, in substance, is the defendant's argument that the period of forbearance as provided by the forbearance agreement had not ended and there had not been any repudiation of it by the borrowers. I deal with this argument across "Issue 3" and "Issue 4": see [114]-[169], below. 4. Fourthly, the defendant also alleges that the sum of $1,030,000 has been repaid: further amended defence, par 9. I deal with this argument as "Issue 5": see [170]-[172], below. The agreements: the key terms 1. The parties approached the contested issues as involving questions of construction of the particular agreements – specifically, three of them: the loan agreement, the guarantee and the forbearance agreement. It should be noted that neither party sought to rely upon evidence of the circumstances leading to their formation; rather each side argued for particular constructions based upon the terms of the agreements themselves, or when read with another agreement. In relation to the loan agreement and the guarantee there was no issue between the parties about the effect of the key terms, as I will shortly record. 2. Essentially the substantive dispute reduced to the proper construction of the forbearance agreement. The resolution of that contested issue of construction largely resolves the dispute. That is because, if I conclude that that agreement is no more than a "forbearance agreement" (as the plaintiff alleges), then the only two (broad) issues that remain are: (a) whether cl 2(c) of the forbearance agreement constitutes a 'variation'; (b) whether the period of forbearance has ended (which involves the repudiation issue); and (c) the quantification of the plaintiff's claim. 3. On the other hand, if I conclude that the forbearance agreement should be construed as the defendant contends, then that has the consequence of discharging the defendant under the guarantee: at a minimum, because the borrowers fulfilled – or discharged – their obligations under the loan agreement: cl 9.1(b). 4. I will start with identifying the relevant contractual provisions across the three key agreements and then note the relevant principles that apply when construing them. The loan agreement A short summary of the loan agreement 1. The basic structure of the loan agreement is as follows. 2. Halcyon Rise and South Land Holdings were defined as the 'Borrower', and Marquess Investment Fund as the 'Lender'. The purpose of the facility was for the plaintiff to provide the money in order to permit the borrowers to complete payment of the deposit for the purchase of the property in Box Hill, as well as to "fund working capital and legal costs" associated with the facility: loan agreement, cll 1.1 (definition of 'Purpose') and 3.1(a) and (b). 3. The term 'Advance' is defined to mean "the principal amount of the loan to be made by the Lender to the Borrower" (cl 1.1). Item 2 of the schedule to the agreement describes the 'Facility Limit and Advance' as "A$1,100,000". 4. The 'Term' of the agreement was defined to mean "the period of time commencing on the Commencement Date and ending on the Termination Date". The Commencement Date "means the earlier of 1st February 2017 and the date on which the 1st drawdown is made". The Termination Date means "the date specified as such in the Schedule, or such later date as the Lender may agree". The schedule provides, in relation to the Termination Date: "3 (three) months from the Commencement Date". 5. The loan agreement permitted the borrower to draw down at any time provided the 'Obligors' had executed all "transaction documents": cl 4.1(a) of the loan agreement. The term 'Transaction Documents' was defined to mean the loan agreement "the Personal Guarantee, the Mortgage and the General Security Deed": cl 1.1. 6. The agreement made provision for the payment of interest. Interest was payable on the advance, to be calculated in accordance with cl 6.1. The rate of interest on the advance was the 'Facility Rate': cl 6.1(a). That term was defined to mean "the Facility's interest rate as specified in the Schedule": cl 1.1, definitions. Item 6 of the Schedule provided that the 'Facility (interest) Rate' was: "4% per month". Clause 7 deals with 'interest on overdue amount'. When any amount payable by the borrower under the loan agreement is "not paid in full on its due date, interest will accrue on that are paid amount at the Default Rate from the date the unpaid amount was due, until it is paid in full …": cl 7.1. The term 'default rate' is defined to mean "10% per month": cl 1.1, definitions. 7. Clause 8 of the loan agreement deals with security. Relevantly, by cl 8.3, guarantees are to be provided: "The Personal Guarantor will execute a Deed of Guarantee in respect of the Borrower's obligations under this document in favour of the Lender". 8. The term 'Personal Guarantee' is defined to mean "the guarantee given by the Personal Guarantor": cl 1.1, definitions. The term Personal Guarantor is defined to mean "the person so identified in the Schedule and any other person the lender may reasonably require": cl 1.1, definitions. Item 9 of the Schedule identifies three Personal Guarantors: Darren Leslie Thomas, the defendant, and Peter John Turnbull. These guarantees were entered into by each of the "three Personal Guarantors": see [28], above. The additional key terms of the loan agreement 1. I turn now to identify the additional key terms. 2. Clause 9.1 of the loan agreement is in the following terms: 9.1 Amount owing (a) subject to clause (b), the Borrower must pay the Amount Owing plus any other money due to the Lender on the Termination Date. (b) During the term of the Loan, the parties shall negotiate in good faith with a view of converting the Amount Owing into equity (on terms to be agreed), but if by the Termination Date, the parties have not reached agreement the terms of clause(a) apply. 1. As I have earlier noted, cl 9.1 is central to the arguments of each party. It is also the key obligation (cl 9.1(a)) that has been guaranteed by the defendant under the guarantee. 2. Clause 13 deals with default. To the extent relevant, it provides: 13.1 Meaning of Event of Default Any one or more of the following events is an Event of Default: (a) the Borrower fails to pay or discharge the amount owing when due; (b) the Borrower or a Security Provider fails to perform or observe another obligation imposed on them by this document or a Collateral Security; … (e) an Insolvency Event occurs to the Borrower or a Security Provider; … (z) any other event occurs or any circumstances arise which, in the Lender's opinion, prejudices the Borrower's or a Security Provider's ability to meet any one or more of its obligations under this document or a Collateral Security. 1. Upon the occurrence of an Event of Default, the "amount owing is deemed to be immediately due and payable": cl 13.2. Following the occurrence of any Event of Default, the lender may, relevantly, "enforce this document" or "enforce any Collateral Security": cll 13.3 (a) and (b). It will be necessary to return to this clause when dealing with Issues 3 and 4: as I have earlier noted, the plaintiff specifically relies upon cl 13 as part of its argument that the borrowers repudiated their obligations under the forbearance agreement as a consequence of the appointment of the administrator to Halcyon Rise in December 2017. The General Security Deed 1. The GSD was entered between Halcyon Rise and South Land Holdings (described as the 'Grantor') and the plaintiff (described as the 'Secured Party'). 2. The plaintiff made reference to the following clauses within the GSD: 1. Clause 1.1(11) Event of Default: which is defined to mean "any event or circumstance specified as such in clause 10 or otherwise specified in this document as an Event of Default". 2. Clause 1.1(14) Insolvency: has the same meaning as given to the term 'Insolvent' in the Loan Agreement". 3. Clause 1.1(16) Loan Agreement: "means the loan agreement between the Grantor and the Secured Party dated on or about the date of this document". 4. Clause 1.1(26) Secured Money: "means all money that the Grantor (whether alone or with another person) is or at any time may become actually or contingently liable to pay to or for the account of the Secured Party (whether alone or with another person) for any reason under or in connection with a Transaction Document". 5. Clause 1.2 loan agreement definitions: "Terms and expressions defined in the Loan Agreement apply in this document unless that term or expression is defined in this document or the context indicates otherwise". 6. Clause 17 'Preservation of rights'. 1. Clause 17.1 'Primary obligations' provides: "The Grantor's obligation to pay the Secured Money is a primary obligation and the Secured Party is not obliged to proceed against or enforce any other right against any person or property or demand payment from any other person before making a demand for payment by the Grantor of the Secured Money". 2. Clause 17.2 'Preservation of Grantor's obligations' provides: "The Grantor's obligations and the Secured Party's rights under this document will not be affected by anything that, but for this clause 17.2, might abrogate, prejudice or limit them all the effectiveness of this document including: (1) any variation of a right of the Secured Party or variation …, termination … (2) the granting of any forbearance, time or other concession to any person". 1. Clause 28 'Further assurances'. Clause 28.1 is in the following terms: 28.1 Notice to Grantor The Secured Party may, by notice to the Grantor at any time, require the Grantor to do any or all of the following things: (1) … (2) execute any notice, consent, document or amendment to this document; (3) … (4) do any other thing, that the Secured Party considers necessary or desirable to ... 1. Clause 28.3 'Transaction Document' provides: "Any new document that the Grantor is required to sign under clause 28.1 constitutes a Transaction Document". The Deed of Personal Guarantee 1. The Deed of Personal Guarantee (the guarantee) required the defendant to provide a guarantee and indemnity: cl 3. The present case concerns the guarantee. That is provided by cl 3.1: The Guarantor unconditionally and irrevocably guarantees to the lender the punctual payment and performance by the Borrower of the Guaranteed Obligations as and when they become due. 1. Clause 1.1(3) defines 'Borrower', to mean Halcyon Rise and South Land Holdings. 2. Clause 1.1(7) defines 'Guaranteed Money' to mean: All money that the Borrower (whether alone or with another person) is or at any time may become actually or contingently liable to pay to or for the account of the Lender (whether alone or with another person) for any reason under or in connection with a Transaction Document … 1. Clause 1.1(8) defines "Guaranteed Obligations" to mean: (a) all obligations or liabilities to pay all repay of the Guaranteed Money; and (b) all other Obligations, and includes any part thereof; 1. Clause 1.1(16) defines 'Transaction Documents" to mean: (a) this document; (b) the Loan Agreement; and (c) any document which is a 'Transaction Document' as defined in the Loan Agreement for the purpose of this document, and any agreement or instrument created under any of them". 1. The plaintiff also drew attention to cl 4.3, which is headed 'Preservation of Guarantor's obligations'. That clause provides, relevantly: The Guarantor's obligations and the Lender's rights under this document are not affected by anything that might abrogate, prejudice or limit them or the effectiveness of this document, including: (1) any variation of a right of the Lender or variation (whether material or not), termination or replacement of any agreement giving rise to the Guaranteed Money or any agreement between the Lender and any Transaction Party including any: … (c) variation in the time or method of payment of any amount payable by the borrower to the Lender; (2) the granting of any forbearance, time or other concession to any transaction party or any other person". The Profit Sharing and Forbearance Deed 1. On 23 May 2017 an agreement, described as 'Profit Sharing and Forbearance Deed' (which I have previously defined as 'the forbearance agreement'), was executed between a range of parties (including Halcyon Rise and South Land Holdings) and the plaintiff. 2. The meaning of the forbearance agreement – and whether it was an agreement of the kind contemplated by, and falling within, cl 9.1(b) of the loan agreement – was a key issue for determination. As I have earlier noted, the plaintiff essentially argued that the agreement had the character of its name, whereas the defendant argued that it was an agreement that satisfied cl 9.1(b) of the loan agreement. 3. In view of the centrality of this agreement to the respective positions of the parties, I will set out the details of the forbearance agreement when I deal with it as part of "Issue 1". The principles of construction 1. The principles that apply to the interpretation and construction of an agreement reduced to writing are not in doubt. Each side referred to decisions that established them. It is convenient to refer to Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46]-[50] ('Mount Bruce Mining'), where they were summarised: The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose. In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract. Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning. However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals. Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties' statements and actions reflecting their actual intentions and expectations. 1. Given the arguments of the parties, it is necessary to supplement these principles in connection with particular arguments raised. I will identify these principles, and apply them, when dealing with those arguments. Issue 1: the forbearance agreement and clause 9.1(b) of the loan agreement Introduction and overview 1. The defendant argued that the borrowers were not in default of the loan agreement on the termination date because they had complied with the terms of cl 9.1(b) of the loan agreement; accordingly, there was nothing for the defendant to guarantee, under cl 3 of the guarantee (or otherwise), because no monies were repayable under cl 9.1(a) of the loan agreement (defendant's submissions at [19]). The argument that underpinned these submissions was that the forbearance agreement represented performance of cl 9.1(b) of the loan agreement (defendant's submissions at [17]). 2. In furtherance of this, the defendant relied upon the unexceptional principle that a guarantor is discharged when the principal fully performs the obligation under the principal contract: the borrowers complied with cl 9.1(b) of the loan agreement, with the consequence that the defendant's obligations were discharged under the guarantee upon entry into the forbearance agreement (defendant's submissions at [21]). 3. The plaintiff argued that, on no view, was the agreement of the character suggested by the defendant; rather, the plaintiff essentially argued that the forbearance agreement made provision for the plaintiff to be entitled to 8% of the net profits of the project and in consideration of this, the plaintiff agreed to forbear exercising its rights under the loan agreement until a defined date. 4. There is some common ground between the parties that should be recorded. The defendant accepted that: (a) but for this argument, there would be a failure to perform cl 9.1 by the borrowers; and (b) the defendant had guaranteed the borrowers' performance of this obligation under the guarantee, with the consequence that he would be liable for that failure to perform. 5. I will start with cl 9.1 of the loan agreement, which was in the following terms: 9.1 Amount owing (a) Subject to clause (b), the Borrower must pay the Amount Owing plus any other money due to the Lender on the Termination Date. (b) During the term of the Loan, the parties shall negotiate in good faith with a view of converting the Amount Owing into equity (on terms to be agreed), but if by the Termination Date, the parties have not reached agreement the terms of clause (a) apply. 1. The parties were in agreement as to the meaning of this clause, which I regard as correct – namely, it requires performance of the repayment obligation by either paying the 'Amount Owing' plus any other money to the plaintiff by the termination date (cl 9.1(a)) or by the parties reaching agreement by the termination date on converting the 'Amount Owing' into equity (cl 9.1(b)). 2. Relevantly here, the payment of 'Amount Owing' plus any other money to the plaintiff by the termination date (cl 9.1(a)) was the performance that the defendant guaranteed under the guarantee. The parties were in agreement about that as well. The forbearance agreement 1. It is necessary to say something more about the forbearance agreement. 2. The parties to the forbearance agreement included the borrowers and the plaintiff. There were a range of other parties to it. Some parties include those described as "Existing Shareholders". The relationship of those parties – if any – to the borrowers, the plaintiff or the defendant was not explored during evidence or submissions. There is evidence that the defendant was a "director/secretary" of one of the entities referred to in the forbearance agreement – JMCOM International Pty Ltd – but beyond that little more is known. In the circumstances, and in view of the stance taken by the parties, I will not pursue the matter further. 3. Halcyon Rise is nominated in the agreement as the "Company". 4. The forbearance agreement is contained within four clauses. There are also four recitals – Recitals A-D. 5. I will set out the key parts of the forbearance agreement. 6. The recitals are: A. The Company is carrying out a residential subdivision project ("Project") at 78 and 80 Terry Road and 132-142 Old Pitt town Road, Box Hill ("Properties"). B. The current shareholders of the company are Southland as to 50% and M&A as to 50% of the share capital of the Company. Despite the shareholdings, the Existing Shareholders are entitled to the dividends and distributions from the Company and the Project. C. On 28 February 2017, under a loan agreement ("Loan Agreement") [the plaintiff] advanced a loan ("Loan") of $1,100,000 ("Loan Amount") to the Company and South Land for a period of 3 months for the Project". D. The parties have agreed to convert the loan to equity in the Project on the terms set out in this Deed. 1. Clause 1 of the agreement (headed: "Net Profit") provides that "'Net Profit' means the net profit of the Company from the Project available for distribution after payment of all liabilities (including tax liabilities) and development costs". 2. Clause 2 is headed: "Marquess' Share of Net Profit Distributions". The parties focused much of their submissions on cl 2. I will therefore set it out in full: 2. Marquess' Share of Net Profit Distributions (a) Despite any other previous agreement and the shareholdings of the Company (as registered with ASIC or otherwise), each of the parties agree that Marquess will be entitled to 8% of the Net Profits of the Project. (b) In consideration of the share of the net profits given to Marquess, but subject to clause 3: (i) Marquess agrees to forbear exercising its rights under the loan agreement including its right to demand repayment of the loan, interest and all other costs until the senior funder for the Project and all secured creditors have been repaid and funds are available from the project to repay the Loan but before distributions of Net Profits are made under the Project to shareholders ("End of Forbearance Period"), and (ii) the Loan will not accrue interest under the loan agreement from the date of this Deed until the End of Forbearance Period. (c) Marquess does not disclaim or forgive the Loan Amount and all monies payable under the Loan Agreement, (d) Marquess may exercise its rights under the Loan Agreement at the End of Forbearance Period. 1. Clause 3 is headed: "Interest and Risk Fees". It provides: 3. Interest and Risk Fees (a) The parties agree that: (i) total interest accrued for 3 months is $132,000 (at 4% per month) under the Loan Agreement, (ii) legal costs incurred is $5500, and (iii) Halcyon will pay a risk fee of $100,000 to Marquess for the forbearing the payments under the Loan Agreement. (b) Marquess' agreement to forbear payments under clause 2(b) is subject to payment of all interest, fees and costs set out in clause (a), being a total of $237,500. 1. Clause 4 contains a number of provisions. They did not feature in any of the submissions of the parties. For completeness only, one of them should be mentioned: cl 4.7 "Construction". That clause provides: No rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of, or seeks to rely on, this Deed or any part of it. The construction of the forbearance agreement: discussion and consideration 1. I turn now to the proper construction of the forbearance agreement. 2. That task is to be approached having regard to the principles that I have referred to, as summarised in Mount Bruce Mining: see [65], above. It will also be necessary to refer to some further principles when dealing with the respective arguments of the parties. 3. The defendant's argument was that the forbearance agreement was an agreement within cl 9.1(b) of the loan agreement, a conclusion that was said to follow because (so it was argued) the "Court would objectively infer that clause 9.1(b) was satisfied because of Recital D" (defendant's submissions at [17]). I do not accept that this is the proper construction of the forbearance agreement. 4. It is self-evidently correct, as the defendant has submitted, that Recital D provides some support for the construction that the defendant advocates. But reliance upon the Recital only goes so far, in my view. That is because the constructional enquiry is not confined to the words of Recital D and, in any event, general principles of contractual construction stand against elevating the primacy of Recital D in the way, at least implicitly, argued by the defendant. 5. The following matters, in my view, inform the proper construction of the forbearance agreement: 1. Recital C defines the "Loan Agreement" to be the loan agreement. 2. Clause 2(a) makes provision that the plaintiff will be entitled "to 8% of the Net Profit of the Project". 3. Clause 2(b) provides that in "consideration of the share of the net profits given to [the plaintiff], but subject to clause 3": the plaintiff "agrees to forbear exercising its rights under the Loan Agreement including its right to demand repayment of the loan, interest and all other costs …", until certain events occur: …": cl 2(b)(i); and; the loan (being the advance under the loan agreement – Recital C) "will not accrue interest under the Loan Agreement from the date of this Deed until the End of Forbearance Period": …": cl 2(b)(ii). 4. Clause 2(c) provides that the plaintiff "does not disclaim or forgive the Loan Amount and all monies payable under the Loan Agreement". 5. Clause 2(d) provides that the plaintiff may exercise its rights under the loan agreement at the end of the forbearance period. 6. Clause 3(a) make provision for payment: the "parties agree" that the total interest accrued under the loan agreement "for 3 months is $132,000": cl 3(a)(i); and that Halcyon Rise will pay "a risk fee of $100,000" to the plaintiff "for the forbearing the payments" cl 3(a)(iii). 7. Clause 3(b) provides that the plaintiff's "agreement to forbear payments under clause 2(b) is subject to payment" of the interest, fees and costs set out in cl 3(a), "being a total of $237,500". 1. I do not accept that the forbearance agreement is properly construed, and characterised, as an agreement within cl 9.1(b) of the loan agreement. That is for the following reasons. 2. When construing a contract, the Court has regard to all of the words used in the agreement "so as to render them all harmonious one with another" and to ensure the "congruent operation of the various components as a whole": Fitzgerald v Masters (1956) 95 CLR 420, 437; [1956] HCA 53; Wilkie v Gordian Runoff Limited (2005) 221 CLR 522; [2005] HCA 17 at [16]; Mount Bruce Mining at [46]. When approached in that way, in my respectful view, the position is quite clear: there is overwhelming textual support for the conclusion that the agreement was not of the kind contemplated by cl 9.1(b). 3. What was agreed reduced to the following key elements: 1. The plaintiff was entitled to 8% of the net profits of the project: cl 2(a). 2. In consideration of the plaintiff acquiring that share of the net profits (but subject to cl 3), the plaintiff agreed to forbear exercising its rights under the loan agreement until satisfaction of defined events (defined as: "End of Forbearance Period") and interest would not accrue until the "End of Forbearance Period": cll 2(b)(i) and (ii). 3. The plaintiff expressly did "not disclaim or forgive the Loan Amount" and all monies payable under the loan agreement: cl 2(c). 4. The plaintiff "may exercise its rights" under the loan agreement at the "End of Forbearance Period": cl 2(d). 5. The forbearance was subject to an agreement to pay $237,500 (cl 3(b)) – which included interest under the loan agreement (cl 3(a)(i)); and, Halcyon Rise paying a risk fee of $100,000 to the plaintiff "for the forbearing the payments" under the loan agreement (cl 3(a)(iii)). 1. The performance of the loan agreement by the borrowers, and in particular what was required by cl 9.1 of the loan agreement, presented a binary choice: put simply, the borrowers were required to repay the funds advanced with interest (cl 9.1(a)) or reach agreement to convert the amount owing into equity in the project (cl 9.1(b)). To be clear the latter was to discharge the former; instead of receiving the amounts owing under the loan agreement, the plaintiff would receive equity in the project. Here, in my view, the forbearance agreement (put simply and relevantly) preserved the amount owing under the loan agreement and made provision for the plaintiff to take equity in the project. An agreement of that kind is plainly not of a kind captured by cl 9.1(b) of the loan agreement. 2. There is, in my view, considerable textual support for this construction – in particular the preservation of the loan agreement. In essence, this is what the plaintiff relied upon to support what it argued was the proper characterisation of the agreement, being a forbearance agreement. The plaintiff drew attention to the fact that there were particular provisions which made it explicit that the loan amount – defined to be the money advanced under the loan agreement – was neither disclaimed, nor forgiven (cl 2(c)) and, further, that, following the "End of Forbearance Period", the plaintiff was at liberty to exercise its rights under the loan agreement (cl 2(d)). 3. It is, I think, worth observing that the constructional outcome argued by the defendant could quite simply and easily have been reached, if that is what the parties wished to achieve: by drafting an agreement that reflects the discharge and performance of cl 9.1(b) and an acknowledgement as such. 4. Further, once the principle referred to in [90], above, is recognised, there are limits to the singular reliance upon a recital to govern the meaning of an agreement: the recital forms part of the agreement. It may be accepted – and both parties did – that recitals that set out background and context to a transaction embodied in an agreement are available to assist in the interpretation of operative provisions to that agreement: Franklins Pty Limited v Metcash Trading Limited (2009) 76 NSWLR 603, [2009] NSWCA 407 at [29] and [379]; OneSteel Manufacturing Pty Ltd v BlueScope Steel (AIS) Pty Ltd (2013) 85 NSWLR 1; [2013] NSWCA 27 at [63] ('OneSteel Manufacturing'); Great Northern Developments Pty Ltd v Lane [2021] NSWCA 150 at [66]. Nevertheless, there is a related principle – namely that, whilst the recitals "can assist in interpretation of operative provisions, … they do not control the latter's operation when clear and unambiguous": OneSteel Manufacturing at [63] citing Ex parte Dawes; In re Moon (1886) 17 QBD 275, 286. I do not consider that there is any ambiguity that might permit the use of the recital in the way that the defendant contends, so as to accord primacy to the recital over the terms of the agreement. Furthermore, in my view Recital D is qualified in its expression of what the "parties have agreed to" do – viz., by emphasising that it is "on the terms set out in this Deed". 5. It is necessary to come back to the question posed by this issue: namely, whether the forbearance agreement is of the kind contemplated by cl 9.1(b) of the loan agreement. In my view it was not, for the above reasons. 6. The defendant also argued that, having regard to the payment of money that had been made on or around 23 May 2017 (in line with Mr Tan's evidence when cross-examined), an inference should be drawn that Recital D was drafted in the way that it was because that was the amount that was owing on that date. I am not prepared to draw that inference based on that evidence simply because the forbearance agreement itself identifies why that amount of money was to be paid: see cll 3(a) and (b). I am also not prepared to draw that inference because Recital C is, in my view, merely descriptive of the loan agreement, and what occurred (in general terms) pursuant to the terms of it. That is, Recital C is descriptive of background, not prescriptive in the way that the defendant has argued. 7. The defendant also argued that it did not matter that the borrowers and the plaintiff "later agreed to a clause of forbearance" in the forbearance agreement and, further, that the defendant "never agreed under the Guarantee (which incorporated clause 9 of the Loan Agreement) that [the plaintiff] would be entitled to repayment of the loan and equity in the Project …" (defendant's submissions at [20]) (underlining in original). I do not accept either submission. 8. In relation to the first limb, I can accept – generally speaking – that a forbearance agreement could achieve compliance with cl 9.1(b) of the loan agreement, as well as contain other clauses. But it is difficult to see how this could be so in the present case: the discharge or performance of the loan agreement under cl 9.1(b) would obviate any need for forbearance because the agreement would be performed. In any event, construing the forbearance agreement as a whole, there is no separate – or "later" – agreement, but a single one, as I have described. In relation to the second limb, in my view that submission is, respectfully, not to the point: the plaintiff is seeking to enforce the guarantee over the loan agreement, not the forbearance agreement. Issue 2: the variation issue 1. The defendant next argued that, in substance, there had been a variation to the loan agreement – with the consequence that any obligation that he had under the guarantee was discharged. Put simply, the defendant's argument was that cl 2(c) of the forbearance agreement amounted to a variation of cl 9.1 of the loan agreement (defendant's submissions at [22]). 2. In this respect the defendant relied upon the proposition, which is uncontroversial, that in instances where a principal and creditor agree, amongst themselves, to vary the terms of principal transaction, without the consent of the guarantor, the guarantor is discharged "because the obligation in its altered form is not what was guaranteed". This flows, the defendant argued, from the High Court decision in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549, 559; [1987] HCA 15. There it was held that where alterations of a contract between a lender and debtor occurs (without the consent of the guarantor), that will discharge the liability of the guarantor unless the lender shows that the alteration is insubstantial and not prejudicial to the guarantor. 3. I do not accept the defendant's submission in connection with the variation issue for the following reasons. 4. The submission assumed that the defendant did not consent to any variation. I am unable to accept that this is so given the fact that the defendant signed the forbearance agreement in his capacity as, at least, a director of Halcyon Rise, South Land Holdings and JMCOM International. It impresses, respectfully, as being somewhat artificial, given that the defendant signed the forbearance agreement in the circumstances described, to suggest that in fact he did not consent to formation of the forbearance agreement. 5. As to the balance of this submission, it may be accepted here that if there was a variation to the loan agreement to the effect that there was not only an obligation in relation to the debt but also in relation to equity, then that variation would be 'substantial' and prejudicial to the guarantor. In my view, however, that is not what occurred: put simply, the plaintiff secured equity in the project for its forbearance. The defendant could not be called upon to guarantee the forbearance agreement, and the plaintiff did not submit that he could. It follows, therefore, that there has been no alteration nor (if there was) was any variation either substantial or prejudicial to the guarantor (the defendant). I will explain this briefly in what follows. 6. The defendant's argument that cl 2(c) of the forbearance agreement varied the loan agreement, involved the following steps: 1. The loan agreement provided that it may only be amended by the written agreement of all parties to it: cl 25.1 (defendant's submissions at [22]). This step may be accepted, and need not be considered further. 2. Clause 2(c) of the forbearance agreement provided that the plaintiff "did not 'disclaim or forgive the Loan Amount and all monies payable under the Loan Agreement'" – and this was said to constitute a written variation to the loan agreement (defendant's submissions at [22]). 3. The forbearance agreement was not a Transaction Document – and thus not within the guarantee (defendant's submissions at [23]). 4. By cl 20 of the guarantee, any variation to it was not effective unless it was in writing, and signed by the parties (defendant's submissions at [24]). 1. In relation to the second step, the defendant argued that by cl 2(c) of the forbearance agreement there was a written variation to cl 9.1 of the loan agreement because, so the defendant argued, the plaintiff "had to agree under the Loan Agreement to convert the loan to equity and under the [forbearance agreement] it obtained equity and repayment of the loan as well" (defendant's submissions at [22] (underlining in original)) and that the inclusion of cl 25 was "because someone clearly understood that it was necessary to vary the terms of clause 9.1" of the loan agreement (defendant's submissions at [22]). These submissions I have largely rejected in connection with 'Issue 1': there was no agreement to convert the loan to equity, as the defendant argued. 2. In my view, the forbearance did not vary the loan agreement; rather, it preserved it. Indeed, in my respectful view, contrary to what has been argued by the defendant, cl 2(c) makes that quite clear. 3. To the extent that the act of forbearance might be considered to amount to a variation the following should be noted. 4. First, the defendant did not argue that it did; the defendant's argument was confined to the variation being contained in cl 2(c) of the forbearance agreement. Even if that were not so, any such variation would not, in my view, be substantial or prejudicial to the guarantor. 5. Secondly, the guarantee expressly dealt with, and preserved, the guarantor's obligations when there was any change in the time for payment etc: (a) "variation in the time or method of payment of any amount payable by the Borrower to the Lender": cl 4.3(1)(c); and (b) by "the granting of any forbearance, time or other concession to any Transaction Party or any other person": cl 4.3(2). The plaintiff therefore argued that even if it be found that by the entry into the forbearance agreement there was a variation, these clauses meant that the plaintiff's rights under the guarantee remained unaffected. It has long been accepted that clauses may be included in contracts of guarantee which have the effect of excluding the principles in Ankar (see, for example, Brighton v Australia and New Zealand Banking Group Ltd [2011] NSWCA 152 at [91]) and the plaintiff, to this end, relied upon the decisions in Vivlios v Westpac Banking Corporation [2010] QCA 230 at [6]-[7] and [19]; Hickory Developments Pty Ltd v Brunswick Retail Investment Pty Ltd [2012] VSC 224, especially at [64]-[65], [72]. 6. In my view, these clauses were drafted, and included in the guarantee, in order to preserve the effect of the guarantee notwithstanding 'variations' of a kind which might result in discharge of the guarantee under the general law. The defendant, it should be noted, did not address the effect of these clauses, nor the authorities relied upon by the plaintiff, nor did the defendant submit that the clauses did not operate in the way the plaintiff argued. 7. The defendant's argument appears to assume that the only agreement that survives (consistent with the position that it adopted in connection with Issue 1), following the execution of the forbearance agreement, is the forbearance agreement and/or that the plaintiff is suing upon (or could only sue upon) the forbearance agreement. Neither assumption is sound: in relation to the first assumption, I have held that the loan agreement has been preserved notwithstanding the execution of the forbearance agreement; in relation to the second assumption, the plaintiff is suing upon the loan agreement and not the forbearance agreement. 8. To be clear, even if there was an alteration of the obligation in the way that the defendant has argued, I accept, and find, that the alteration is insubstantial and not prejudicial to the guarantor. The performance that the defendant guaranteed was satisfaction of cl 9.1 of the loan agreement – essentially the money advanced (specifically, the Amount Owing), unless an agreement of the kind envisaged by cl 9.1(b) was reached by the termination date. At that date, there being a failure to perform, the defendant could at any time have been called upon by the plaintiff to make good the borrowers' breach of the loan agreement. By the forbearance agreement, the requirement to repay that amount was deferred. In those circumstances, it is not easy to understand how deferring the time for payment of this amount, without imposing any other obligation upon the defendant, acts to his disadvantage. In my view it did not. Issue 3: the repudiation issue Introduction 1. The issue of repudiation has arisen in the following way. 2. The defendant has argued that if the plaintiff's arguments are accepted, then the period of forbearance under the forbearance agreement is yet to come to an end: the consequence being that no monies are repayable under the loan agreement and, as a corollary, the defendant cannot be sued upon the guarantee. The plaintiff, by way of response, has alleged that the borrowers repudiated the agreement, and that repudiation was accepted, thereby terminating the agreement – with the consequence that it is no longer bound by the forbearance agreement, nor the period of forbearance referred to in cl 2(b)(i). 3. To be clear: the arguments raised by the parties that I have summarised in the above paragraph are in fact two issues: Issue 3 (whether the forbearance agreement has been repudiated) and Issue 4 (whether the period of forbearance has ended). Self-evidently Issue 4 only arises if I conclude Issue 3 adversely to the plaintiff. 4. What was not argued should also be noted. No issue was raised about whether or not the conduct giving rise to the (presently assumed) entitlement to terminate was of the kind that reflected a substantial failure to perform triggering the entitlement not merely to claim for damages, but to terminate further performance of the forbearance agreement. (That is, it was not argued by the defendant that, on the facts relied upon by the plaintiff, that the conduct did not go to the 'root of the contract', so as not to entitle the plaintiff to terminate). This had a related consequence, being that no clear attention was given to the precise term that was said to be breached: the argument, for both sides, revolved around whether the appointment of the administrator, and the sale of the land the subject of the project, demonstrated an unwillingness to be bound by the terms of the forbearance agreement or an inability to perform them. Specifically, the matter was argued by the parties on the basis that the completion of the project was a fundamental obligation under the forbearance agreement, and I have proceeded on that basis. (During final submissions, the defendant ultimately conceded repudiation had occurred, but only on and following the transfer of the last lot of land on 20 September 2018). Furthermore, no question of contractual frustration was relied upon: the case was squarely put, and only put, by the plaintiff on the basis that there had been a 'repudiation' of the forbearance agreement. 5. The argument that the defendant has raised focuses upon the forbearance period provided by cl 2(b)(i) of the forbearance agreement. That clause (relevantly) provides: (b) In consideration of the share of the Net Profits given to Marquess, but subject to clause 3: (i) Marquess agrees to forbear exercising its rights under the Loan Agreement including its right to demand repayment of the loan, interest and all other costs until the senior funder for the Project and all secured creditors have been repaid and funds are available from the Project to repay the Loan but before distributions of Net Profits are made under the Project to shareholders ("End of Forbearance"). (underlining added) 1. The short point made by the defendant, at least initially, was that there was no evidence that the events – as I have underlined in cl 2(b)(i), in [118], above – had occurred such that it was not open to find that the forbearance period had ended. However, as I have earlier noted (see [27] and [117], above), during submissions on the final day of the resumed hearing, contrary to the way in which the matter had previously been argued, the defendant ultimately conceded that there had been a repudiation of the forbearance agreement by 20 September 2018 and, in particular, it was expressly conceded that, from that point, "the borrowers could no longer … perform the agreement". Despite doing so, the defendant did not withdraw any of its submissions made that are incompatible with that concession. Some preliminary arguments 1. The defendant raised a number of arguments in support of its ultimate submission that the Court could not conclude that a repudiation of the forbearance deed had occurred. 2. The first argument raised by the defendant is that even if repudiation of the forbearance agreement had occurred, and if it be assumed that the repudiation was accepted giving rise to the right to terminate the forbearance agreement, it only conferred upon the plaintiff the right to sue in connection with the forbearance agreement, and not the loan agreement: it was argued that repudiation (and termination) of the forbearance agreement "does not revive an earlier agreement such as the Loan Agreement" or permit the plaintiff "to assert that the earlier agreement becomes operative again …" (defendant's submissions at [28](a)). 3. I do not accept this submission. It is true that, following any (assumed) repudiation and termination of the forbearance agreement, the plaintiff can sue for damages in connection with that breach, but it does not follow, in this case, that there needs to be a "revival" of the loan agreement: the loan agreement was never extinguished, as the submission appears to assume. 4. The defendant next argued that as "none of the parties" to the forbearance agreement or the loan agreement have been joined to the proceedings "that poses an insurmountable difficulty for the Court to make the declaration" sought by the plaintiff. The "issue" in connection with the loan agreement is a false one. That is because the plaintiff sues the defendant on his guarantee, and there is no requirement for any of the parties to the loan agreement to be joined. 5. In relation to the forbearance agreement, the defendant relied upon the decisions in John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19 at [131] and Zhu v Wang [2021] NSWCA 240 at [92]. The defendant's written submissions did not develop the matter further, but during oral submissions it was argued that a declaration – in terms that there had been a repudiation of the forbearance agreement – could not be made by the Court without the joinder of South Land Holdings. It was argued by the defendant that South Land Holdings was "one of the borrowers under the loan agreement who has a primary obligation to pay"; that it is a party to the forbearance agreement, and that a finding that there has been a "repudiation by South Land Holdings and Halcyon Rise" must necessarily affect the rights of South Land Holdings and, accordingly, "no more needs to be said". 6. The evidence relating to South Land Holdings is quite meagre. That is somewhat surprising bearing in mind they are argued to be a necessary party to these proceedings. 7. During this part of the submissions, when this was pointed out, counsel for the defendant indicated that the Court was "entitled to assume that counsel wouldn't make a submission to the Court if my client was a director" and further, counsel for the defendant observed that during opening submissions, counsel for the plaintiff indicated: "South Land Holdings, as I understand, still exists'". Counsel also employed the colloquialism – that South Land Holdings had "skin in the game" but did not identify what, precisely, that meant or involved in connection with this issue. 8. It is clear that the defendant was a director of South Land Holdings in the period during which all agreements were executed, albeit when he apparently ceased being a director – and why – was not the subject of evidence or submissions. 9. In my respectful view, it is less than satisfactory to be required to determine this issue against this background. Nevertheless, the argument having been made, I will resolve it. 10. The key question is whether the joinder of South Land Holdings was 'necessary'. If it be the case that the determination of the matters in dispute in the proceedings will affect the person to be joined in some material respect, such as directly affecting their rights or interests, then ordinarily joinder would be necessary: News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410, 524; [1996] FCA 870. In order to determine whether South Land Holdings was a necessary party "involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected": Australian Rugby Football League at 525. 11. Some matters should be noted. First, it impresses as somewhat unrealistic to think that South Land Holdings have any particular – that is, real – interest in the proceedings: it was a party to the loan agreement and has failed to perform it, and in consequence I was advised that two of the three guarantors have been called upon to satisfy, at least some, of South Land Holdings' liability under the loan agreement. Indeed, evidence to that effect was contained in the evidence from Mr Tan in his affidavit at [21]-[22], which was not challenged, and which I accept. (I add: I was also advised by counsel that the defendant relies upon these payments in reduction of the principal debt). Secondly, if South Land Holdings were a relevant and necessary party – to speak to or about the repudiation issue – there was no evidence that any attempt was made to call to give evidence any person connected with South Land Holdings. The defendant himself did not give evidence; indeed, the defendant did not even go into evidence at all. The defendant was a director of Halcyon Rise and South Land Holdings (at least in the period up to mid-2017) when they were developing the Box Hill property. In these circumstances it does impress, respectfully, as quite unrealistic to think that the co-borrower and co-developer was an important party to speak to the issue of repudiation – to "defend it" – when the defendant himself did not. Thirdly, in circumstances where the defendant stands to be exposed to a liability due to the default of the borrowers – which include South Land Holdings – no attempt has been made by the defendant to join South Land Holdings. Although unnecessary to decide the nature of them, there would, most likely exist rights on the part of the defendant (as guarantor) against South Land Holdings. Again, that stands against any suggestion that South Land Holdings was a necessary party to the proceedings. 12. In my view, having regard to these matters, and the fact that judgment is sought for a monetary sum, I do not consider that, assessed practically – and, importantly, realistically – South Land Holdings was a necessary party. Furthermore, I do not consider that, in the circumstances, a declaration is necessary – merely a finding that there has been a repudiation. 13. In that last respect it should be noted that a finding that there has been a repudiation of the forbearance agreement binds the present parties but does not – and no party suggested that it would – bind South Land Holdings in the event that at some point some party seeks to bring some claim against them, or in the event that South Land Holdings wished to do something in connection with the forbearance agreement (precisely what that might be was not addressed during submissions). 14. Separately, I would add the following. There is no evidence about the current status of South Land Holdings: the defendant sought to rely upon the statement made by counsel for the plaintiff, that I have referred to in [126], above to justify a finding that South Land Holdings currently exists so that it would be permissible (and realistic) for them to be joined, and that there would be some utility in doing so. Counsel for the defendant did not otherwise draw to my attention any evidence about its current status – which, presumably, explains why his submission relied upon what counsel for the plaintiff said during opening submissions. I am not prepared to act on the tentative statement made by counsel for the plaintiff, that I have referred to, particularly when it would be open to the defendant to simply prove this issue. In the absence of that evidence, I am not prepared to find that South Land Holdings was a necessary party. Repudiation: a summary of the competing positions 1. Before moving to discuss the matters relied upon to demonstrate repudiation, it should be noted that the facts surrounding the repudiatory conduct were only lightly touched upon by the plaintiff, and the defendant – although obviously a principal participant in the project – did not give evidence. 2. Here, the plaintiff relies upon the inability of the borrowers to perform their contractual obligations. In this respect it should be noted that there was no declaration – by one or other of the borrowers – of an inability to perform the forbearance agreement; at least none that the plaintiff relied upon. Rather, the plaintiff submits (as earlier noted in [35], above) that there was an inability to perform the forbearance agreement by reason of the following – alone or in combination: 1. by the borrowers failing to pay the plaintiff 8% profit from the project: FASOC, par 7D; 2. by the appointment of the administrator: FASOC, par 7E; 3. as a result of the properties (as defined in the schedule to the loan agreement) being sold – thereby making completion of the project an impossibility: FASOC, par 7F; and 4. by reason of the fact that the appointment of the administrator constituted an 'event of default' under cl 13.1 (and the definition of 'insolvency event' in cl 1.1) of the loan agreement. 1. The defendant initially argued that there was no repudiation of the forbearance agreement because: (a) the plaintiff alleged that the conduct evidencing repudiation was a failure to pay 8% of the net profit from the project, but there was "no evidence that such nets profits were available for distribution" (defendant's submissions at [29]-[30], [32]) – given the defendant ultimately conceded there was a repudiation by, at least, 20 September 2018, this submission cannot be reconciled with such a concession; but, as already noted, the submission was not expressly withdrawn; and, (b) the plaintiff alleged that the borrowers became insolvent by reason of the appointment of the administrators on 4 December 2017 – but the "mere appointment of an administrator does not renounce a contract because the administrators have the ability to continue a business" (defendant's submissions at [33] (italics in original)). Further, in the event that there was a repudiation, it is said that the plaintiff did not accept that repudiation – with the effect that the forbearance agreement has not been validly terminated (defendant's submissions at [33] and [38]). 2. I will deal first with the plaintiff's argument that, by operation of cl 13.1 of the loan agreement, there has been an act of default by the appointment of the administrator in December 2017 with the consequence that there has been repudiation. Thereafter, I will deal with repudiation more generally at law (the first to third ways that the plaintiff argued repudiation: see [135], above). Repudiation: cl 13.1 of the loan agreement 1. The plaintiff's argument was that the terms of the loan agreement formed part of the forbearance agreement (that is, the loan agreement and the forbearance agreement should be "read together" (plaintiff's submissions at [37](iii); FASOC, par 7E(iv)). (It should be emphasised, however, that it was not suggested by the plaintiff that the forbearance agreement, by express terms, incorporated the terms of the loan agreement; rather the argument for the plaintiff appeared to be that there was an incorporation because the agreements were required to be "read together"). Further, "read together", it was argued that the defendant committed an Event of Default by the appointment of the administrator in December 2017 – for the purpose of cl 13.1 of the loan agreement, with the consequence that "all monies became due and payable for the purposes of clause 13.2" of the loan agreement (FASOC, pars 7E(v)-(vii)). I do not accept this submission. 2. The starting point is determining whether the terms of the loan agreement form part of the forbearance agreement. The plaintiff argued this was a "question of construction", and very broadly so much may be accepted. The question, more specifically, is whether these terms of the loan agreement were incorporated into the forbearance agreement. In support of this submission, the plaintiff relied upon the principle that documents that form part of the same transaction may be read together, citing, generally, Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235 at [259] and Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133, 142; [1919] HCA 64. Although it may be accepted that these decisions support the proposition that, in connection with instruments entered into contemporaneously, the terms of any one of them may be relevant to the construction of another of them (or form part of the context in which each agreement is to be construed), it does not follow, as the plaintiff appeared to argue, that all of the agreements in this case are to be treated as, in effect, a single agreement: Ayers Rock SkyShip Pty Ltd v Voyages Indigenous Tourism Australia Pty Ltd (2019) 19 BPR 39541; [2019] NSWSC 828 at [87]. 3. The agreements (being those entered on or around 28 February 2017) and the forbearance agreement (entered on or around 23 May 2017) were not contemporaneously entered, nor were they expressed to be interlocking. In those circumstances the principle relied upon by the plaintiff does not apply so as to cause an incorporation of the terms of cl 13 into the forbearance agreement. Given that the plaintiff did not seek to argue that there was anything within the terms of the forbearance agreement that effected an express incorporation of the terms of cl 13, it follows that I do not accept that cl 13 – and the appointment of an administrator – has the result that a repudiation of the forbearance agreement has occurred. Repudiation: the legal principles 1. The issue raised by the parties was argued as one of repudiation. In the sense in which it was so used, it is a reference to "conduct of a party which evinces an unwillingness or inability to render substantial performance of the contract": Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited (2007) 233 CLR 115; [2007] HCA 61 at [44] ('Koompahtoo'). Although current taxonomy suggests, in those circumstances, the use of the term renunciation, given that the submissions – oral and written – used the term 'repudiation', it is convenient to do likewise in this judgment, albeit that the terms repudiation and renunciation are used interchangeably. Here, the focus is upon inability to render substantial performance of the forbearance agreement. 2. In order for there to be a repudiation (or renunciation), the conduct of the party said to have repudiated the agreement must evince "an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent" with that party's obligations: Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 623, 634; [1989] HCA 23; Koompahtoo at [44]; Thai Airways International Public Company Ltd v Farag Menzies Aviation Group (Ground Services) Australia Pty Ltd [2011] NSWCA 172 at [18]. 3. Renunciation, whether by words or conduct, must be clearly made: the "test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it": Koompahtoo at [44]. Put another way, the test is an objective one – whether the actions of the defaulting party are such as to lead a reasonable person to conclude that they no longer intend to be bound by the terms of the agreement. In that situation, the repudiation is then evidenced by that conduct. In determining whether, assessing the circumstances objectively, there has been a repudiation, all of the circumstances must be taken into account inasmuch as they bear upon an objective assessment of the conduct. 4. In terms of "factual inability to perform" (as opposed to declared inability to perform), what needs to be demonstrated "is that the party in question has become wholly and finally disabled from performing the essential terms of the contract altogether": Rawson v Hobbs (1961) 107 CLR 466, 481; [1961] HCA 72; Almond Investors Limited v Kualitree Nursery Pty Limited [2011] NSWCA 198 at [62]; Galafassi v Kelly (2014) 87 NSWLR 119; [2014] NSWCA 190 at [62]-[64]. It is, however, important to emphasise that whether or not there has been repudiatory conduct, and breach, is "highly fact sensitive", and that "comparison with other cases is of limited value": Eminence Property Developments Ltd v Heaney [2010] EWCA Civ 1168 at [62]. Repudiation: discussion and consideration 1. The evidence in connection with this issue was – surprisingly – confined. The defendant was not called to give evidence, nor was his absence explained (despite him being in court during the course of the hearing). Indeed, as I have earlier noted, the defendant did not go into evidence at all. 2. Given the defendant was a director of Halcyon Rise and a director of South Land Holdings (albeit precisely when that ceased is not known), the defendant was, I find, well-placed to give evidence about this issue (viz., when and why the project failed, and whether there was an inability to perform). In those circumstances it is open to draw an inference (which I do) of the kind referred to in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 – namely, that the evidence of the defendant would not have assisted him on the key issues in dispute. That does not, of course, mean that I simply accept the plaintiff's evidence in the absence of contrary evidence from the defendant himself; rather it means that "the direct evidence of the party with the onus of proof can be more readily accepted, and inferences in his favour may be more confidently drawn": Payne v Parker [1976] 1 NSWLR 191, 201 ('Payne'). 3. At the risk of oversimplification, aside from the terms relating to forbearance, the central subject matter of the forbearance agreement was the project – being the residential subdivision of the Box Hill land and the profit payable upon completion of it: cl 2. The 'project' and the 'property' for the purposes of the forbearance agreement necessarily had the same meaning as those terms had in the loan agreement. 4. On the defendant's argument, despite the fact that an administrator had been appointed and despite the fact that, thereafter, all property was progressively sold, there was still the same project until the disposition and transfer of the final property on 20 September 2018. That is, despite the fact that four of the five lots had been sold before that time there was still the same project and, it was argued, no factual inability to perform until that time. As I explain in what follows, I do not accept those submissions. 5. It is necessary to restate some matters of fact in order to put the arguments into perspective. The borrowers were undertaking a residential subdivision project of land at Box Hill, NSW. The property that was being used for that project was owned by Halcyon Rise. The monies that were advanced to the borrowers under the loan agreement (dated 28 February 2017) and the second loan agreement (dated 23 May 2017) were to be used by them in connection with the project: more particularly, to be used to permit them to complete payment of the deposit for the purchase of the property. The funds advanced under the loan agreement were due to be repaid by 28 May 2017 but, shortly before the due date, the forbearance agreement was entered on 23 May 2017. 6. Little is known about what happened thereafter in connection with the development. The next significant event, however, was the appointment of an administrator to Halcyon Rise on 4 December 2017. As I noted in [7]-[9], above, no particular attention was given by the parties to the precise terms of the appointment: the matter was argued simply on the basis that an administrator had been appointed to Halcyon Rise on 4 December 2017. Thereafter, following the appointment of the administrator, the lots were progressively sold. There is no evidence about the date upon which contracts were exchanged, nor was there any evidence about the steps taken to sell them. Although I am prepared to infer that the properties were offered for sale for a period of time prior to the transfer of them, it is not possible to make a more precise finding about specifically when they were offered. 7. The transfers of the lots the subject of the development occurred on 21 December 2017, 30 January 2018, 9 February 2018 (2 lots) and 20 September 2018. 8. The point of disagreement between the parties is relatively narrow: the defendant argued that repudiation did not occur until the transfer of the final property, whereas the plaintiff argued for a finding of repudiation either at the point of appointment of the administrator or in combination with the sale of the various lots. 9. In my view, there was factual inability to perform, and thus a repudiation, before 20 September 2018 and I find it to be no later than 9 February 2018. Although the appointment of an administrator in and of itself does not constitute an inability to perform, in the present case, that appointment and the progressive sale of the subject matter of the development plainly does. It could hardly be said that the disposition of four of the five lots of the property is such that the project was still continuing and that there was ability to perform and complete the project. I am not prepared to find that it could do so beyond 9 February 2018. The disposal of so much of the land that formed part of the project meant that it then became beyond the power of the borrowers to complete it: once the properties were offered for sale and transferred the project was not the same project; at a minimum, it was a substantially different – and lesser – one; more probably, by this time, it was moribund. That finding is reinforced given the decision not to call the defendant (or explain his absence), and my finding that his evidence would clearly elucidate when and why the project failed, and whether there was an inability to perform the project: Payne at 201. Repudiation: the requirement that there be acceptance of a repudiation 1. The defendant also argued that even if there had been a repudiation by the borrowers, the plaintiff had not accepted that repudiation and therefore the plaintiff had not validly terminated the forbearance agreement – again with the consequence that it continued. 2. It is necessary to refer to the principles in connection with the requirement for acceptance of a repudiation. Little was said about them during submissions, no doubt reflecting the fact that they are uncontroversial. They may be summarised as follows. 3. First, a repudiation is ineffective to terminate an agreement unless accepted or, put another way, if the repudiation is not accepted, the contract subsists: Foran v Wight (1989) 168 CLR 385, 421 and 441; [1989] HCA 51; Heyman v Darwin's Ltd [1942] AC 356, 361 ('Heyman'). Secondly, an innocent party confronted with an election to terminate is not bound to elect at once, but the election "must generally occur within a reasonable time of the discovery of the circumstances giving rise to the right": Galafassi at [88], citing Champtaloup v Thomas (1976) 2 NSWLR 264, 273. Thirdly, the right to terminate will be lost if the promisee's conduct evinces an intent to affirm its obligation to perform: Galafassi at [88]. Fourthly, whether an election has been made is determined objectively. Fifthly, what constitutes an acceptance is a question of fact. In Lakshmijit v Sherani [1974] AC 605, 606 it was said: No particular form of communication is needed. It is sufficient if the vendor makes it unequivocally clear to the purchaser that [they are] treating the agreement as being at an end. 1. The plaintiff relied upon the acceptance of the repudiation in one of two ways: first, by sending an identically worded letter of demand dated 14 February 2018 to the borrowers (the 'letter of demand'); and, secondly, by the commencement of the current proceedings by the filing of the statement of claim on 16 October 2020. The defendant contests that, in each respect, there has been a valid acceptance of the repudiation. 2. In relation to the letter of demand, the defendant submitted that the letter of demand (and the corresponding one sent to South Land Holdings) "merely allege a failure to pay the moneys" under the loan agreement, and do not "refer to the alleged acts of repudiation pleaded or purport to accept the repudiation" – and that the "content does not meet the requirements" as set out in the decision of McColl JA in Ryder v Frohlich [2004] NSWCA 472 at [116]-[120] (defendant's submissions at [36]). During submissions, the defendant pointed out that the letter of demand made no reference to the forbearance agreement and also emphasised that the letter of demand invited the borrowers to contact the offices of the solicitors for the plaintiff "to discuss repayment of the total amount outstanding" to the plaintiff – a matter that the defendant argued was inconsistent with there being an acceptance of the repudiation. 3. The plaintiff, on the other hand, argued that, by "making demand of the defendant under the terms of the loan agreement the plaintiff has elected to proceed on the basis of the borrowers have repudiated" the forbearance agreement, "and that repudiation has been accepted" (plaintiff's submissions at [65]). During submissions, the plaintiff argued that the letter of demand was a valid election to terminate the agreement because it did not try to enforce any term of the forbearance agreement, but rather pursued monies owed under the loan agreement. 4. It is important to emphasise that the question to be determined requires no particular form of communication, or words: the key is to convey an acceptance by acting in a manner to make plain that, in view of the wrongful conduct of the party who has repudiated, the promisee treats the contract at an end: Heyman at 361. Further, to be clear, the communication "does not have to be couched in the language of acceptance": Vitol SA v Norelf Ltd [1996] AC 800, 810-811. 5. The letter of demand was sent some few months after the administrator was appointed, and shortly after the land the subject of the development had been sold, and four lots had been transferred. The borrowers well knew this. The letter made clear that the plaintiff was relying upon the loan agreement – something that could only occur if the plaintiff was contending that the forbearance agreement no longer bound the parties. It is not necessary, as the defendant submitted, that there be an express reference to the repudiation or the events giving rise to it: Heyman at 361. Rather it is sufficient that the conduct is objectively consistent with the plaintiff treating that agreement as at an end. That is the position here, in my view, consistent with what the plaintiff argued: the sending of that letter is justifiable only as an election to accept the repudiation, which I find that it was. The submission made by the defendant – to the effect that a reference to requiring the repayment of the total amount being inconsistent with there being an acceptance of the repudiation – does not suggest a contrary result: read as a whole, there is no inconsistency nor, for that matter, do I consider that the sentence relied upon by the defendant has the result contended for. 6. Although, strictly, unnecessary to do so given my findings about the 14 February 2018 letter of demand, I will (briefly) deal with the second way that the plaintiff argued that there was acceptance of the repudiation – viz., by the commencement of proceedings against the defendant. 7. The commencement of proceedings can be a basis that makes clear that the repudiation had been accepted by the plaintiff: that is, (relevantly here) the commencement of proceedings can be a sufficient manifestation of the election to treat the contract (the forbearance agreement) as being discharged: Holland v Wiltshire (1954) 90 CLR 409, 416; [1954] HCA 42 ('Holland'); Heyman at 361 (cited approvingly in JD Heydon, Heydon on Contract (1st ed, 2019, Thomson Reuters) at [24.440]). 8. The defendant did not argue that a commencement of proceedings was insufficient to constitute an acceptance of a repudiation; but nevertheless submitted that the commencement of the proceedings against the defendant cannot be an acceptance because it was not communicated to the borrowers. To the extent that this submission employed a requirement of communication to the borrowers, I do not consider that it correctly reflects principle – which is not whether it be communicated directly to the defaulting party, but whether it has come to the defaulting party's attention: Holland at 416; Wood Factory Pty Limited v Kiritos Pty Limited (1985) 2 NSWLR 105, 146; Vitol at 811. Here, the defaulting parties were said to be Halcyon Rise and South Land Holdings. 9. Beyond this, however, there are difficulties with this part of the plaintiff's case. Although there was some evidence upon which an inference might – possibly – be drawn that the commencement of proceedings had come to the attention of one or other of the borrowers, the plaintiff did not seek to marshal that evidence as the basis for the drawing of an inference; nor was any attempt made to establish – precisely – when the commencement of proceedings came to the attention of the borrowers. Whether – and why – these inferences should be drawn were not squarely addressed during submissions (which, perhaps, may reflect the fact that this was a fallback position for the plaintiff). 10. It may be that the plaintiff's "case" rests on the basis that the commencement of proceedings was notification (in the sense described by the authorities) or possibly that notice to the defendant "as the guiding mind" (a phrase that was referred to during submissions) meant that his knowledge could be attributed to the borrowers. In relation to the first (assumed) argument, the difficulty with it is that it rather begs the question: how? In relation to the second (assumed) argument, the immediate difficulty with it is that the defendant was not an officeholder of Halcyon Rise as at October 2020, and there is no evidence about whether the defendant was an officeholder of South Land Holdings at that time: in those circumstances, the basis for drawing one or both of the inferences identified cannot be supported by the rules of attribution. Given my earlier finding about acceptance of the forbearance agreement, and the absence of submissions dealing with this aspect of the plaintiff's case, I do not propose to address it further. Issue 4: the 'End of Forbearance Period' issue 1. The defendant has also argued that, noting "that there has never been a termination", the forbearance period has not ended under the forbearance agreement (defendant's submissions at [45]). Thus, the effect of the defendant's argument is that, as there is no evidence that the "senior funder and all secured creditors were ever repaid", the "End of Forbearance Period" has not been reached, with the consequence that no monies are owing by Halcyon Rise and South Land Holdings and interest is not accruing (defendant's submissions at [46]). 2. The plaintiff argues against this position, advancing two submissions. The first is that the borrower – Halcyon Rise – became insolvent, and this was, for the purposes of cl 13.1 of the loan agreement a 'default', with the consequence that the amount owing is deemed to be immediately due and payable. The second is that there was a repudiation of the forbearance agreement. (These issues have been dealt with in connection with my resolution of Issue 3). 3. The defendant, despite the concession that was made that there had been a repudiation of the agreement, did not expressly abandon this issue; nevertheless, the concession in my view forecloses acceptance of the submissions advanced. Further, given my conclusion on Issue 3 (see [114]-[164], above), this issue does not arise. Issue 5: quantification of the plaintiff's claim 1. In the event that the preceding issues were resolved against the defendant, the defendant argues that "there appears to be only $70,000 of principal unpaid" (defendant's submissions at [44]). It is said that the evidence of the plaintiff is such that $1,030,000 "has been repaid leaving $70,000 of principal unpaid" (defendant's submissions at [6]). 2. At the hearing, the plaintiff set out its claim for damages in a document described as 'Plaintiff's Schedule of Principal and Interest'. The amount claimed was $1,970,481.07. 3. The parties agreed that proper account had been made by the plaintiff, in that schedule, of the amounts that had been paid in reduction of the principal amount. The interest that was claimed was at the rate of 4% per annum upon the outstanding principal from time to time. No issue was taken about the rate of interest claimed upon amounts outstanding by the defendant. The interest was calculated from 4 December 2017 – this being the date when the plaintiff alleged there had been a repudiation of the forbearance agreement that had been accepted by it. It was pointed out, during the defendant's submissions, however, that the letter relied upon to accept the repudiation was dated 14 February 2018: accordingly, interest could only be calculated from that time, or such time as the Court concluded that the repudiation had been accepted. The finding I have made is that the repudiation was accepted by the letter dated 14 February 2018. 4. The parties also agreed that, given that there was a measure of agreement in connection with what remains of the principal that is outstanding, the assessment of the judgment sum would need to take into account interest from a date consistent with the findings of the Court. In those circumstances, the parties sought an opportunity to calculate the entitlement to interest based upon the findings so made. Orders 1. For the above reasons, I make the following orders: 1. Direct that the parties confer with a view to agreeing upon proposed orders finalising the proceedings in accordance with these reasons (including costs), with agreed orders to be filed and served by 30 June 2023, 5pm. 2. To the extent that agreement cannot be reached, direct that each party is to file and serve, by 30 June 2023, 5 pm, the proposed orders it seeks with submissions explaining the basis for why those orders are sought limited to no more than 2 pages. 3. Direct that any evidence in support of any contested orders be filed and served by 30 June 2023, 5pm. 4. The matter will be listed for further argument, and the entry of further orders, on a date to be fixed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 June 2023