CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P; MAHONEY and CLARKE JJA 3 and 4 April 1991, 7 August 1991 [1991] NSWCA 68 CONTRACT — financier promises "full funding to property developer — whether binding contract — held: In the circumstances, there was. The Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd, CA, unrptd, 5 July 1991 discussed — DAMAGES — loss of profit — loss of chance — project of property development collapses for want of funding by promised finance — proper approach to calculation of damages considered. CONTRACT — binding contract — partners propose property development — suburban shops and residences — funding of $6.5 million required — financier A offers "full funding" subject to "total satisfaction" of it and its solicitors of "documentation" — financier B offers to "match" that offer accepts commitment in terms of financier A's letter — inserts penalty provision — promises later letter confirming "full funding" — developers accept offer of financier B and decline financier A — proceed to various stages of development promised letter committing "full funding" never supplied despite later undertakings to do so — financier B later discloses "change of policy" — development collapses developers sues financier B for breach of contract and for deceptive or misleading conduct under s52 Trade Practices Act 1974 (Cth) — financier B sues developers for recovery of advances and debt — developers plead estoppel asserting entitlement to relief on the ground of financier B's unconscientious conduct — trial judge (Cole J) finds (a) breach of contract; (b) breach of s52 Trade Practices Act; and (c) entitlement to rely on estoppel — awards damages for (i) futile borrowings less value of land plus (ii) loss of profits which would reasonably have accrued to the developers had "full funding" been provided as promised appeal — TRADE PRACTICES — deceptive and misleading conduct representations by financier to property developers — whether conduct misleading and deceptive at the time — Whether finding that it was is liable to appellate disturbance — held: Unnecessary to determine having regard to the respondents' entitlement to damages for breach of contract and conduct of the trial. ESTOPPEL — reliance — whether reasonable for representee to act — financier adopts brief letter promising "full funding" for $6.5 million property development — further documentation clearly contemplated — whether reasonable for party to act on letter — whether, when policy changed, party obliged to seek alternative funding — held: Unnecessary to determine in the light of entitlement to recover for breach of contract. The Commonwealth v Verwayen (1990) 170 CLR 394; Lorimer v State Bank of New South Wales, Court of Appeal, unreported, 5 July 1991 considered. DAMAGES — contract — breach of — promise to lend money financier promises developer to provide "full funding" for property development — later modifies terms on basis that policy has changed — proper approach to damages — held: (Kirby P and Mahoney JA: Clarke JA dissenting) (1) The developer was entitled to the consequential loss of profits which flowed from the failure of the financier to adhere to its promise to provide full funding, which failure occasioned the collapse of the 2 UNREPORTED JUDGMENTS development. Head v Kelk (1963) 63 SR (NSW) 340 distinguished; (2) It was open to the trial judge to conclude that the developer could not readily later obtain alternative funding and the onus of proving that it could have done so lay on the financier; (3) Various complaints of factual error on the part of the trial judge were not sustained. Held: (Dismissing appeal) (by the Court) (1) Having regard to the conduct of the case at trial, it was not open to the financier to raise for the first time on appeal a defence that the arrangement contained in the letter promising "full funding" was "subject to contract" as this would involve a procedural unfairness to the developers. Masters v Cameron (1954) 91 CLR 349, 360 considered; Coulton v Holcombe (1986) 162 CLR 1, 7 applied; (2) On the facts, it was open to the trial judge to conclude that the parties intended to enter legal relations upon the basis of the letter accepted by financier B. McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125 (HL); Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 applied; (3) The terms of the promise were not so uncertain as to prevent enforcement. Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130; Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582, 587; The Cool Cliff Collieries Pty Ltd v Sijehama Pty Ltd, Court of Appeal, unreported, 5 July 1991 distinguished; Godecke v Kirwan (1973) 129 CLR 629, 641; Axelsen v O'Brien (1949) 80 CLR 219, 225; Charalambous v Ktori [1972] 1 WLR 951 applied; (4) Accordingly, the judgment based on breach of contract would be upheld and damages calculated on that basis sustained. Discussion by the Court of the desirability of giving legal effect to the commercial expectations of business people. Trade Practices Act 1974, s52, s52A, s87. Kirby P This appeal comes from a judgment entered by Cole J. It raises two difficult questions. The issues and course of the proceedings The first is whether a finance company will be held liable to provide "full funding" for a multi-million dollar property development scheme upon the basis of a promise said to have been made in oral representations and evidenced in a brief letter. Where it was clearly contemplated that, to give effect to the "deal" (to use a neutral expression), a multitude of detailed, complex interrelated security documents would have to be prepared, approved and executed by the parties, will the law enforce the 'deal' or decline to do so because it lacks the necessary certainty? Will such uncertainty be taken by the law As an indication that the parties lacked the intention necessary then to enter into legal obligations? Contingently upon an affirmative answer to the first question (whether found in the law of contract, estoppel or in rights arising from the Trade Practices Act 1974 (Cth), (the Act) (s52 and s52A) a subsidiary question is posed as to the calculation of the damages or determination of the other relief to which the disappointed parties are entitled when the finance company failed to provide such "full funding". Other questions, including one addressed to the procedural fairness of the appellant's principal argument on the appeal, took the Court into an examination of the way in which the respective cases of the parties were pleaded, particularised, presented and argued before Cole J. His Honour dealt with the contentions of the parties in two stages. By reasons given on 15 November 1990, he concluded that a legally binding contract had been made and breached. He went on to conclude that the appellant had also misled and deceived the respondents in breach of s52 of the Act. This entitled the respondents to relief under s87 of the Act. In response to a cross claim by the URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 3 appellant against the respondents, Cole J concluded that the appellant, as cross claimant, was estopped from denying that it had entered into a legally binding agreement to provide "full funding" and was thereby prevented from relying on the terms of the securities taken by it. By reasons given on 14 December 1990, his Honour gave judgment for the respondents in the sum of $4,079,359.88. Upon the cross claim he gave judgment in favour of the appellant, as cross claimant, in the sum of $3,164,050.58. He stayed the execution of the judgment on the cross claim until the judgment in the principal action had been satisfied by payment to the respondents. Against the judgment giving effect to those orders, the appellant has appealed to this Court. Originally, the respondents, by notice of contention, sought to uphold the judgment upon bases different from those advanced by Cole J. However, during the hearing of the appeal, without objection by the appellant, the Court gave leave to the respondents to file a cross appeal to claim relief of a kind different from that provided to them by Cole J. This related to relief based upon the provisions of s87 of the Act or, alternatively, upon the principles governing the grant of equitable relief against unconscionable conduct. From this sketch of the general issues raised by the appeal and cross appeal, it is necessary now to descend into the detail of the facts concerning the "deal" between the parties. It is then necessary to examine the respondents' contention that the appellant, on the appeal, had raised an entirely fresh basis to resist its suggested liability. The respondents argued that, at trial, the appellant had presented quite a different case. To permit it now to change its contentions would, so it was said, involve a procedural unfairness of the kind forbidden by the requirements of due process as explained in Coulton v Holcombe (1986) 162 CLR 1, 7f. Findings on credibility: failure to call witnesses The primary facts were not in dispute either before Cole J or in this Court. At the trial, this point was emphasised (as his Honour noted) by the failure of the appellant to call the evidence of its officers. The significance of this omission will become obvious. His Honour accepted as truthful the evidence given by Messrs William Jamieson and Glenn Pearson (the second and third respondents). They were the principals of Cenepro Pty Limited (the first respondent) (Cenepro). This was a shelf company to be used for a property redevelopment. Cole J did not leave the acceptance of the testimony of Messrs Jamieson and Pearson to inference. He expressly affirmed his acceptance of the evidence of Mr Pearson upon the basis of his impression from the witness box. He concluded that he could accept that evidence, and that of Mr Jamieson, as "the undenied evidence of truthful witnesses". The appeal must be approached, therefore, upon the basis that the respondents' evidence was truthful. Jones v Hyde (1989) 63 ALJR 349, 351; Abalos v Australian Postal Commission (1990) 171 CLR 167, 179. So much was accepted by the appellant. Its counsel conceded that there was no challenge to any of the facts found by Cole J on the issue of liability. All of his Honour's findings, as to what was said by the respondents and to them by the officers of the appellant, were unchallenged. It was also conceded that a prime actor in the appellant's employ (Mr Stephen Bembrick) was not uniformly "consistent" in what he had said to the respondents. Neither Mr Bembrick, nor his superior, Mr Bruce Anderson (the New South Wales manager of the appellant) testified. Whilst their absence from the witness box does not provide affirmative material for the respondents' case, it does give rise to the inference that nothing they could have said would have denied any of the material 4 UNREPORTED JUDGMENTS testimony given by Messrs Jamieson and Pearson; that nothing they could have said would have advanced any substantial evidence favouring the appellant (for otherwise they would have been called); accordingly that inferences which would otherwise reasonably arise from the testimony given in the respondents' case might more comfortably be drawn because contradictory testimony was not called to correct or qualify such inferences. See Jones v Dunkel (1959) 101 CLR 298, 302; Clayton Robards Management Ltd v Siu (1988) 6 ACLC 57; QANTAS Airways Ltd v SS Pharmaceutical Co Ltd, Court of Appeal, unreported, 20 July 1990; (1990) NSWJB 78. In a case of this kind, it is desirable to incorporate in these reasons, by reference, all of the findings of fact made by Cole J. The great bulk of his Honour's first reasons is taken up in a review of the protracted dealings between the appellant and the respondents. In a sense, the legal conclusion emerges only from an understanding of the detailed facts, as found. Whilst taking into account all that his Honour said in his reasons, I will content myself with the following exposition of the facts, taken from those reasons. It is convenient to adopt the same course as his Honour did. I will deal first with the issues concerning the liability of the appellant. Proposal for property development Mr Jamieson owned one of a complex of properties at the corner of Bellevue Road and Riddell Street, Bellevue Hill. His property, number 27A Bellevue Road, comprised a butcher shop with a residence above it. Other shops in the complex were number 23A (a newsagency), 2S (an electrical store), 25A (a fruit shop) and 27 (a laundry). Adjacent to the newsagency were premises owned by the Commonwealth Bank of Australia (number 23). At the rear of the bank's premises was a carpark. A right of way in favour of the Woollahra Municipal Council ran at the rear of numbers 25 to 27A. In 1988, Mr Jamieson conceived the idea to redevelop properties 23A to 27A inclusive and to acquire the bank carpark and the right of way in order to incorporate these in the redevelopment. He approached his friend, Mr Pearson, an architect with experience in the development of properties, to join in the enterprise. Mr Jamieson was to contribute his interest in number 27A and Mr Pearson his expertise and skill in drawing up the plans and proposals. Plans showing five commercial premises with five three-bedroom residential units above were duly prepared. Messrs Jamieson and Pearson had discussions with the owners and tenants of the premises. In late July 1988, Mr Pearson approached Mr Bembrick, an officer of the appellant with whom he had had previous dealings. A meeting took place in early August 1988 at the appellant's offices. Mr Bembrick indicated that the appellant would be interested to fund the project. But he suggested a number of alterations to the plans, including the substitution of eight two-bedroom units for the five three-bedroom units originally proposed. Mr Pearson later drew amended plans to conform to Mr Bembrick's suggestion. During this initial discussion Mr Bembrick explained different modes of providing finance: either a joint venture with another developer or a 100% finance figure for redevelopment exclusively by the respondents. Mr Pearson expressed a preference for the latter. But it was agreed that Mr Bembrick should discuss the proposal with other clients of the appellant who were involved in participating in joint property ventures. URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 5 On 12 August 1988, Cenepro entered into a contract to purchase number 23A. Soon thereafter it took an option over 25. Both of these arrangements were subject to time clauses. Adding Mr Jamieson's interest in 27A, the respondents therefore had, by this stage, a capacity to secure three of the five allotments. Pursuant to Mr Bembrick's instruction, Mr Pearson gathered financial data. On 1 September 1988, Mr Bembrick inspected the site. He indicated that he had all the information required to prepare a submission to the appellant. It was understood that this was to be on the basis of full funding of the respondent's proposal for both acquisition of the allotments not yet owned and for construction of the redevelopment proposed. On 6 September 1988, Mr Bembrick, on a letter which described him as "Senior Property Finance Manager: NSW", wrote to Cenepro advising that the appellant had approved a facility of $880,000 for specified acquisitions. This was guite different from that sought. It led Mr Pearson to telephone him. He protested that it was: "\.. not for full funding as we discussed." Mr Bembrick explained that the intention of the letter had been to tide the respondents over "for the moment". But Mr Pearson said: "... We're not interested in just purchasing one property and there is no guarantee that Custom Credit give us funding for The whole deal. Having reached this imposse, the respondents looked around for finance elsewhere. By way of a broker, they were put in touch with Devreal Capital Limited, (Devreal), a company engaged in financing projects of this nature in competition with the appellant. The proposal submitted to Devreal by the broker was for a facility of $6.32 million for total acquisition and construction costs, together with capitalised interest. This proposal was put to Devreal on 8 September 1988. Soon afterwards, Mr Bembrick telephoned Mr Pearson to inform him that he wanted the nomination of a valuer. This was provided. On 14 September Mr Bembrick proposed a meeting with a client of the appellant, Scotts Developments Pty Ltd (Scotts). This company was put forward as a joint venturer. Mr Pearson asked whether there was any problem with "doing the project with us only". Mr Bembrick replied: "No, this is just another avenue, and because of Scotts existing line of credit may be easier. I'm just looking at all the possibilities. I'm trying to help you guys." The meeting went ahead. The proposal was for Scotts to receive 60% of the profits, 40% going to the respondents. Eventually the respondents' agreed to the proposal. Heads of agreement were to be prepared by Scotts. Meanwhile, the broker for Devreal advised Mr Pearson that: "Subject to final checks and investigation being satisfactory we have been assured that Devreal J will give a commitment to proceed with the full project... The Devreal offer will be based on total funding and they are developing a proposal based on a mixture of fees and profit share. The end results will be a substantial savings on what Custom Credit have suggested." By 21 September 1988, the respondents had still not received the heads of agreement signed by Scotts. That morning, the broker sent a letter by facsimile to the respondents enclosing an offer from Devreal. This offer is a key document. Offer of finance from a competitor The letter, dated 21 September 1988 was addressed to the Directors of Cenepro. 6 UNREPORTED JUDGMENTS It began: "we are pleased to confirm our offer of finance on the following terms and conditions." It then set out details of the name of the borrower (being Cenepro and Messrs Jamieson and Pearson as directors); the amount (being $6.5 million to be drawn by an initial tranche with further advances): "... subject to completion of Devreal's project feasibility, an external valuation of the total development scheme, check costings, and DA approval from the local council, proving satisfactory in all respects." The loan purchase was then defined as was the term of 18 months, with an initial tranche for 90 days; the amount of an establishment fee ($15,000), the specification of the interest rate (15.95%) "reviewable at Devreal's discretion", the specification of security, and the identification of the respective lawyers for the parties. The following key provition was then included: "Documentation Subject to Devreal and its lawyers total satisfaction." There then followed items, all likewise expressed in summary form, detailing arrangements as to costs. The letter closes with the following provisions: "Material Adverse Change: Devreal reserves the right to withdraw the facility should anything transpire that renders its completion undesirable. Insurance: A comprehensive policy noting Devreal as mortgagee must be provided with cover for the replacement value of the improvements. Special Conditions: Initial Tranche Satisfactory valuation of 23A Bellevue Road, Bellevue Hill. "Acceptance: To confirm you acceptance of the terms and conditions please sign the attached copy of this letter and return same with your cheque for $5,000. This sum will be reimbursed on drawdown. This offer is open until 23 September 1988. Yours sincerely DEVREAL CAPITAL LIMITED" (Signed by the Joint Managing Directors) Armed with this letter, Mr Jamieson telephoned Mr Bembrick on behalf of the respondents to inform him of the offer of "full funding from another financier". Devreal's broker had warned him by letter: "T would reiterate comments... that you would be unwise to go forward with Custom Credit on the verbal assurances of an officer of that company who does not have decision making power." Mr Jamieson confronted Mr Bembrick with his need to make an urgent decision on Devreal's offer. As found by Cole J, the following conversation ensued: MR BEMBRICK: Look, at least give me a chance to see if I can get it together before you do anything. As you know I've put lots of work into this and so has Scotts. Do you think you can hold off? MR JAMIESON: Scotts were supposed to have signed up on this deal already and I don't want to jeopardise the deal with Devreal. MR BEMBRICK: Leave it with me and I'll get back to you straight away." There followed a flurry of meetings with representatives of Scotts and with Mr Bembrick. Agreement was reached on the heads of agreement of the joint venture with Scotts as previously proposed. At Mr Bembrick's suggestion, Mr Pearson URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 7 then telephoned Devreal's broker to advise that Cenepro had made "alternative arrangements" and would not now be proceeding to accept Devreal's offer of full financing of $6.5 million. Messrs Jamieson and Pearson duly attended at Scott's solicitor's. But Mr Bembrick arrived at 6 pm with the news that Scotts had decided not to proceed with the project after all. The following conversation ensued: "MR BEMBRICK (Scotts):... have pulled out of the deal.... ' ve spoken to my superior, Bruce Anderson about it and in the circumstances Custom Credit would be prepared to fund the project. JAMIESON: I have been told... that you don't have the authority to approve this deal. In fact I have o fox saying just that. MR BEMBRICK: I don't have authority. But Bruce Anderson does. He is the New South Wales State Manager. I've spoken to him about it already. He's back at the office playing cards. We can go across there now and talk to him but we have to hurry." A deal clinched with the Appellant With Mr Bembrick, Messrs Pearson and Jamieson thereupon returned to Custom Credit's offices. They met Mr Anderson. At his request, they showed him a letter of approval from Devreal. Mr Bembrick referred to the problem of authority. Mr Anderson said: "Of course I've got authority, I'm the State Manager for New South Wales." Having read the Devreal offer there ensued the following conversation: "MR ANDERSON: Steve, I can't see why I can't do the same deal as Devreal. MR BEMBRICK: I can't see why not either. MR JAMIESON: Can you do a better deal than Devreal? There was then some discussion pursuant to which Mr Anderson agreed to reduce the profit share taken by the appellant from 20% to 15% and to reduce interest marginally to give a rate of 2% above the bank bill rate. Security was then discussed. Mr Jamieson outlined difficulties in raising security on his property mortgaged to the Commonwealth Bank. This led to the following exchange: MR ANDERSON: Okay. How about we structure in this way. Ill prepare documentation so that you give Cenepro an opinion over your property and then Cenepro can change the opinion in favour of Custom Credit. But in the meantime we want a lien over your bills. MR JAMIESON: But you've took my personal guarantee as well as (Glen Pearson's) and there's $100,000 equity in the property anyway - 23A is worth $450,000 and we took it for $350,000. that should be enough. MR ANDERSON: You were willing to give a lien over the bills in The Devreal offer. MR JAMIESON: Well I really need the money now. Anyway in the Devreal offer it was agreed that the lien is going to be released on substitution of security over 27A and that it is going to happen quickly. I was going to get paid up front. ANDERSON: Well that's what's going to happen here. The lien will only be there until final documentation is completed and an option on 27A in favour of Cenepro is documented. Then your bills will be returned. JAMIESON: Okay, I'm happy with that. MR BEMBRICK: Are you happy with that Glen? MR PEARSON: Yes." Drinks were then brought in to celebrate the "deal". Mr Anderson explained that all the secretaries had gone home so that it was not possible to prepare the documentation that evening. As found by Cole J the following exchange ensued: 8 UNREPORTED JUDGMENTS MR BEMBRICK: we could use our previous offer just to defer the immediate settlement so we can have a cheque ready for that on Friday. we could also at the same time prepare a letter for The full funding for Cenepro to sign on Friday. MR ANDERSON: Fine. MR JAMIESON: So all this can be ready on Friday? MR BEMBRICK: Yes. It was then that the letter of 6 September 1988 offering the facility of $880,000 was amended to constitute a facility for $480,000. The earlier letter was changed to show that it related only to the acquisition of number 23A. Mr Anderson expressed his determination to ensure that the respondents were "on the hook" to the appellant: MR ANDERSON: "...I want to make this clear. If we can't get the whole deal there's no basis for us simply to fund the first settlement. We want to lock you in so that you don't go back to Devreal. MR PEARSON: Well, since you are giving us full funding and a bit better deal, we don't want to do any deal with anyone else. MR ANDERSON: We want to make sure that you don't. MR BEMBRICK: What if we put in a discharge fee of $50,000?" MR ANDERSON: Good idea." Mr Bembrick then wrote onto the amended letter the following additional term: "Discharge Fee: Should this facility be discharged at the expiration of the term a fee of $50,000 is payable on discharge." The respondents agreed to that change. As found by Cole J, they left the meeting with Messrs Anderson and Bembrick confident in the belief that the appellant had accepted the obligation of full funding; that it would signify this in writing on the following Friday; that the only reason it did not do so there and then was the Absence of typing staff; and that as a measure of the commitment required and given for this arrangement, a penalty of $50,000 was inserted, as Mr Anderson had said, to 'lock' the respondents into the appellant and to prevent them going back to Devreal. It was not argued that Mr Anderson lacked authority to make this arrangement, whatever its legal effect. It was argued that Mr Bembrick lacked authority and could make no representations for, or binding promises on behalf of, the appellant. But there is a difference between Mr Bembrick's ostensible authority before the meeting with Mr Anderson on 21 September 1988 and thereafter. There after, it is clear that Mr Bembrick was acting with whatever authority Mr Anderson had lent to the "arrangement". That authority was, by his own assertion, ample, as one would expect in the case of the State Manager of the appellant. As neither Mr Anderson nor Mr Bembrick gave evidence to deny authority, the suggested want of it can therefore be rejected. The parties' conduct after the 'deal' Like Mr Anderson, the respondents were interested only in "the whole deal" and not with the purchase of individual allotments. Just before the meeting on 21 September, recounted above, Cenepro had obtained an option over number 27. It thus had control over four of the five frontage allotments. Agreement had also by that time been achieved, in principle, both with the Commonwealth Bank and the local council respectively for the sale of the car park and extinguishment of the right of way, although in both cases the price had still to be finalised. URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 9 It was expected that arrangements relating to number 25A would be resolved shortly. Armed with their "agreement" with the appellant, the respondents could have been excused for thinking that at least foreseeable problems were behind them and full funding for their redevelopment would be provided by the appellant, substituting for Devreal. Both Mr Pearson and Mr Jamieson gave evidence, which Cole J expressly accepted, that neither of them would have accepted the facility for $480,000 for the settlement on 23 September unless they believed that the appellant had agreed to fund the total acquisition and construction costs of the whole development. His Honour found that, had they believed that it was otherwise, they would have reapproached Devreal on the following morning for a revival of its $6.5 million financing offer on a "full funding" basis. It may be inferred that his Honour believed that that offer would have been forthcoming from Devreal. There is no reason to conclude otherwise. When, however, 23 September 1988 arrived, no letter from the appellant confirming the full funding arrangement, made on 21 September 1988 with Mr Anderson, was forthcoming. Mr Jamieson protested this fact. The appellant's solicitor telephoned Mr Bembrick. Mr Jamieson confronted him with the promise to provide the letter "for full funding" and a refusal to sign the document for the settlement of 25A without the letter. According to Cole J's findings Mr Bembrick replied: MR BEMBRICK: I haven't had time to finish it. ''ve been busy doing the paper work for 23A. But be done. You' ve got nothing to worry about. The deal is done. It's just a matter of putting together paperwork." Further reassurance was given that the respondents had nothing to worry about. That they would get their letter. That the deal was done. And that the letter would be ready 'in a week'. It was only then, and, as Cole J found "acting upon those assurances", that the loan documentation was executed for Cenepro and the personal guarantees and indemnities executed by Messrs Pearson and Jamieson in connection with the purchase of 23A. Cole J accepted the evidence that the guarantees were only executed: "... based upon the representations and assurances of Mr Bembrick on 23 September 1988 confirming the arrangement mode between Cenepro and Mr Anderson on behalf of Custom Credit on 21 September 1988 that Custom Credit would provide full acquisition and construction funding." It would be tedious to recount the tale of prevarication, fobbing off and interim arrangements which thereafter ensued. The detail of it is set out in Cole J" reasons of 15 November 1990. Mr Bembrick, for a time, continued to assure the respondents that "the letter will be out soon". For their part, they frequently requested a letter confirming "full funding". Each time they received a fresh promise from Mr Bembrick. However, when on 5 December 1988 a letter was finally received, it was not in the terms of "full funding". Instead, it offered a facility of $2.9 million, being for some of the acquisition costs and capitalised interest. It also contained a new provition for a "participation fee" of $100,000 or 20% of the profits whichever was greater. Cole J concluded that this letter was not a fulfilment of the promise made by Mr Anderson at the meeting on 21 September 1988 and repeated thereafter on numerous occasions by Mr Bembrick. The letter led to a confrontation between Mr Pearson and Mr Bembrick. The latter contended that it was "easier to do it this way". He again put off the provision of the letter for full funding. When asked for another meeting with Mr Anderson, he was assured by Mr Bembrick that Mr Anderson was: 10 UNREPORTED JUDGMENTS "\..Aware of all this and this is the best way to do it... Don't worry, you will get your full funding. I'm doing this for you and I am personally getting nothing out of it." Cenepro declined to accept the offer of 5 December because it did not regard it as consistent with the agreement of 21 September 1988. Meanwhile, despite his soothing words as recounted by the respondents, Mr Bembrick was writing internal memoranda which came to light in the litigation, at variance with the repeated promises of commitment for full funding. By mid-December 1988, Mr Bembrick advised the respondents that he had another client of the appellant to offer as a joint venturer. Nothing eventuated. On 3 February 1989, at a meeting between Messrs Jamieson, Pearson and Bembrick, Mr Bembrick finally acknowledged that the appellant had changed its policy: "MR PEARSON: What the hell is doing on? What happened with our funding? Things aren't going the way you said they would. Custom Credit seems to be changing its mind all the time... MR BEMBRICK: I'm with you guys but Custom Credit has altered its position. With the downturn in economy they're only dealing with existing clients and I think it's going to get worse. MR PEARSON: Yes, but we agreed to do this back in September. MR BEMBRICK: Custom Credit doesn't think you and Mr Jamiesons are strong enough. Maybe you should consider bringing in a third party. that would give them some comfort down the road MR PEARSON: Look, we don 't agree with it. Everything is just about done. It's only got to be built... we think the project can stand on its own. Custom Credit must have agreed this in September then reconsidered. MR BEMBRICK: Custom Credit's policy has changed. MR PEARSON: That is fine for new clients but not for us. Cole J was not convinced that Custom Credit's policy had actually changed. He stated that the internal documents made it clear that Mr Bembrick had never submitted an application for approval of full acquisition and construction funding. Instead, Custom Credit pressed its revised offer of 5 December 1988. But Cenepro never took up the $2.9 million facility proposed in that letter. Further fruitless discussions took place and still more joint venturers were introduced but declined. The date for the settlement of number 25 on 6 April 1989 approached. The approach of that date ultimately required Cenepro to accept an interim arrangement with the appellant. As found by Cole J, the respondents could not find finance elsewhere. They could not afford litigation. Their only option was to take up the offer of finance which the appellant made. They signed a variation of the facility agreement and then secured funds to purchase No 25. Indeed, a total of fourteen separate offers were made by the appellant. All of them were particular to the specific acquisition and other costs. None of them fulfilled the obligation which the respondents kept asserting that the appellant had promised to "provide full funding". In April 1989 Mr Bembrick answered the repeated protestation of Mr Jamieson with these words: "Policies have changed again. The facility to value ratios and security requirements have changed and this is the best that I can do... we need comfort in the form of a going venturer or equity." In May 1988 the appellant offered Cenepro a letter of finance with a facility of $3.61 million. To Mr Jamieson's protest, Mr Bembrick replied: URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 11 "T've spoken to my superiors about it and in the current economic circumstances this is the only way it can be done. My superiors don't think Cenepro is strong enough." Again the respondents were in a precarious position. The settlement of No 25 was approaching on 9 June 1989. Time had been made of the essence. In a conversation shortly before that date, Mr Jamieson expressed concern about the "extremely precarious position" of the respondents if they could not settle. Mr Bembrick replied: "As I told Glenn, because of the downturn in the economy our loan to value ratios have changed and we need more security. We want a mortgage over your property." This presented difficulties for Mr Jamieson as he had already explained to the appellant. Further negotiation ensued. Ultimately Cenepro had no real or commercial alternative. As found by Cole J it was faced with accepting the appellant's offers or abandoning the project. In July 1989 Cenepro therefore sought to introduce a third party to the appellant to become a joint venturer on terms similar to those earlier proposed for Scotts. However, the appellant insisted on personal guarantees of the directors which, it had previously been made clear, would not be provided. The settlement of 25A then fell due on 16 October 1989. Again Mr Jamieson requested the letter of "full funding" which he at least expected would be forthcoming with the participation of a viable joint venturer. Mr Bembrick, consistently with his earlier stance, said: "Look, approval for the full facility should issue soon. We'll give you on interim facility to settle 25A. We'll make the term for one month. That should be enough time for us to get the approval for the full project costs." As earlier, so now. The letter of approval for full funding did not ensue. By December 1989 Mr Bembrick had explained that the matter was out of his hands. At the same time, the last of the prospective joint venturers withdrew. The project collapsed. At the time of its collapse, Cenepro had acquired 23A, 25, 25A and 27. Mr Jamieson owned 27A. The purchase of the car park and acquisition of the laneway had not been completed. In all, the appellant had advanced the respondents $2.635 million. With accumulated interest to the date of trial, the amount outstanding by the respondents to the appellant exceeded $3 million in debt and upon the personal guarantees which the appellant had insisted upon. The appellant held mortgages over the properties purchased by Cenepro. It also held a charge over Mr Jamiesons bank bills and over number 27A. It was in these circumstances that the respondents, as plaintiffs commenced proceedings in the Supreme Court. Those proceedings were heard in the Commercial Division. By their summons, the respondents sought damages for breach of contract and relief under of the Act. The appellant defended and by a cross claim sought to recover the debt alleged to be outstanding to it. In defence to the cross-claim the respondents asserted that the appellant was estopped from claiming repayment, on the ground that it was unconscionable for it to seek to do so. In the alternative, they sought to offset against any sums found to be owing the amounts to which they were held to be entitled. Cole J found for the respondents upon the three legal bases relied upon by them. In his second reasons, published on 14 December 1990, he resolved the issue of damages. As earlier stated, he awarded the respondents damages. On the cross-claim, Cole J found the appellant entitled to judgment in a smaller sum. He stayed execution of the judgment on the cross-claim until the damages were paid. 12 UNREPORTED JUDGMENTS The result of the litigation was the nett recovery by the respondents of $915,301.30 in damages and costs. It is this outcome which the appellant challenges in the appeal. Issues in the appeal In summary form, the issues argued in the appeal were as follows: 1. Whether, consistently with the matters litigated at the trial, it was open to the appellant on appeal to argue that no legally enforceable agreement was reached on 21 September 1988 upon the basis that any such "agreements" was, expressly or by implication, to be subject to subsequent formal documentation, and consequent negotiation and further express agreement. If such defence were available to the appellant, it contended that it answered the claim of an agreement to provide "full funding" and that, under the "agreement", so understood, it had fully performed its side of the bargain by proceeding, at each successive stage, to negotiate, and when agreed, to document, the provision of funds in furtherance of the agreement, so understood; 2. Alternatively, within the case presented at the trial, the appellant contended that there was no legally enforceable promise As a result of what was "agreed" on 21 September 1988. This was argued upon the basis that the suggested "agreement" was not one to which the parties intended legal consequences to attach or was one, the terms of which were so uncertain that the law would withhold legal enforcement of it; 3. The appellant contested the finding that it had engaged in misleading or deceptive conduct within s52 of the Trade Practices Act and suggested that there was no evidence from which such a finding could be made; 4. The appellant also contended that it was not open to the respondents to succeed on estoppel if a contract was not found. Alternatively, it argued that the requirements of estoppel had not been established by the facts as found; 5. The appellant attacked the conclusions on the respondents' entitlement to damages, if liability were established. If there were any liability, it contended that the damage suffered was limited to the cost of securing alternative finance in January 1989 when it must have become plain that the "full funding", as understood by the respondents, would not be provided. Alternatively, the appellant contended that the respondents had provided evidence which would only support a claim for damages on the basis of breach of contract. Such evidence was not available to support the different form of relief (more akin to tort) sought under s87 of the Act or the different relief against unconscionability provided upon proof of an estoppel. Cf Lorimer v State Bank of New South Wales, Court of Appeal, unreported, 5 July 1991. Upon this basis, the appellant contended that, if the respondents failed in their claim in contract, but succeeded under s52 of the Act or on the estoppel, they would be denied relief, having forfeited the opportunity to provide evidence by which such relief could be fashioned; and 6. Finally, the appellant criticised a number of factual finding made by Cole J in his reasons on damages and thereby sought to undermine at least the quantification of the damages, if all other arguments failed. It is convenient to deal with these arguments in turn. Conduct of the trial In this Court it was the primary submission of the appellant that Cole J had attributed legal consequences to the "unenforceable arrangement" between the parties on 21 September 1988 when it was clear that such arrangement was "subject to formal contract". It was put that it was the clear intention of the URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 13 parties that no binding contract would come into existence between them until the formal documentation relating to the proposed loan and all of its many terms have been executed by the parties. In this way, the appellant argued that the case fell within the third class of cases in Masters v Cameron (1954) 91 CLR 353, 360. It is worth remembering that catalogue of possibilities. Although very familiar and now criticised as incomplete, it usefully identifies the respective positions of the appellant and the respondents on the appeal. In Masters, Dixon CJ, McTiernan and Ritto JJ (at 360) said: "Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the cases may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller and more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, The case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract." Essentially, the respondents contended that the "arrangement" on 21 September 1988 fell into the first class. There was a concluded contract, although documentation to give effect to the agreement (eg by mortgage, charge etc) was clearly contemplated. On the appeal, the appellant contended that the case was in the third class. In support of that contention, the appellant pointed to a number of indicia in the Devreal letter which it had accepted. It also relied on the very nature of a complex financing transaction of the kind contemplated by the parties. So far as the letter was concerned, the appellant laid emphasis upon the fact that it reserved to the "total satisfactions of Devreal and its lawyers acceptance of documentation". The latter retained in Devreal the right to withdraw the facility should anything render its completion "undesirable". It clearly contemplated further documentation; but did not contain precise agreement about their terms. The letter also contemplated subsequent eventualities which were not defined with precision but which envisaged the possibility of Devreal's withdrawal or placing a limitation on its liability. Thus the provition for further advances was stated to be subject to the completion of Devreal's project feasibility study. Costings were to be "subject to independent assessment by Devreal's appointed consultant". The letter did not deal with what would occur if the project cost exceeded the total amount of the facility of $6.5 million, as subsequently transpired. Various items certainly "blew out". Thus the cost of the purchase of the laneway from the Council was budgeted at $25,000. In fact, the estimated cost when the project collapsed was just short of $138,000. In these circumstances, the appellant contended that the Devreal letter itself, and the very nature of such a transaction between such parties dealing in such sums, clearly envisaged further documentation of considerable complexity with a multitude of terms upon any of which agreement could break down. This was not a case where, upon any view, an informal arrangement would have been contemplated by the parties. The appellant was a large finance company whose internal procedures would, self-evidently, require security documents to be 14 UNREPORTED JUDGMENTS executed. The subject of the loan was the acquisition and charging of land in respect of which formal documents are ordinarily required as all parties would have appreciated. In such circumstances the appellant urged that the proper characterisation of the "arrangement" of 21 September 1988 was an agreement in principle, but subject in the ordinary way to the preparation of the necessary documents at the successive stages at which the provision of funding by the appellant to the respondents fell due. It was this "subject to a contract" argument which the respondents urged involved an entirely new case; one different from that presented at the trial. An appellate court may, and in appropriate circumstances should, allow a party to raise a new case on appeal where all that is involved is the application to given facts of principles of law not relied on at the trial. This arises from the character of an appeal such as the present one, as a "rehearing", as s75A of the Supreme Court Act provides. However, in a series of cases, the High Court of Australia has made it clear that an appellate court may not permit an enlargement of the issues on appeal if to do so would occasion procedural unfairness to the other party. Thus in Coulton v Holcombe (1986) 16 2 CLR 1, 7, Gibbs CJ, Wilson, Brennan and Dawson JJ said: "Tt is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily served on the parties... The powers of an Appellate Court in respect to amendment are ordinarily to be exercised within the general framework of the issues so determined and not otherwise. In a case where, had the issue been raised in the Court below, evidence could have been given which by any possibility could have prevented the point from succeeding, This Court has firmly maintained the principle that the point cannot be taken afterwards: see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, 438; Bloemen v The Commonwealth (1975) 49 ALJR 219." The gist of the respondents' opposition was that this case, on appeal, was quite different from the case presented at trial. There, it was contended, the appellant's case was that it would not be bound until a letter was provided promising "full funding"; that no such letter had been provided; and that in default of the condition precedent the "arrangement" had never acquired the force of a binding legal contract. In this sense, it was the respondents' submission that the appellant's case at trial was more akin to the second of the classes mentioned in Masters v Cameron rather than the third. Of course, the case may not fall readily into any of the categories in Masters v Cameron. The parties intended to be bound immediately and yet to have a letter evidencing the agreement. Precisely what had been the appellant's case at trial was the subject of a heated contest in this Court. The respective positions were asserted. But as counsel had changed and no agreement could be reached, the Court required the matter to be dealt with in a formal way, ie either by the provision of an agreed statement or by the taking of evidence. Cf Builders' Licensing Board v Mahoney (1986) 5 NSWLR 96, 98 (CA). Eventually, a statement, signed by counsel who had appeared at the trial, was tendered. This contained the following agreement: "The address on behalf of the appellant occupied approximately an hour and a half, during which the submissions were developed.... It was submitted on behalf of the appellant: URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 15 (a) that the informality of the discussion on 21 September 1990, coupled with the complexity of the transaction and the embryonic state of the project pointed away from an objective conclusion the binding contract as made in the discussion; (b) that the parties contemplated a letter embodying the facility and the respondent had nothing until a letter was forthcoming; (c) That to hold otherwise would characterise Cenepro as bound to borrow the money and to render Cenepro liable in damages if the development did not proceed, which is wholly unrealistic considering the informality of the circumstances in which the proposed financing as discussed." The written submissions tendered at the trial were examined. Upon this point they contained only the following paragraphs: "27. The conversations on 21 December 1988 between Anderson representing Custom Credit and Jamieson and Pearson representing Cenepro did not constitute an offer and acceptable capable of giving rise to a binding contract. 28. There was no intention to create contractual relations unless and until an offer is produced and accepted. 29. Further the terms of the foreshadowed facility were too uncertain to constitute the basis for a binding contract." It is difficult to resolve a dispute of this character. I start from a desire to ensure that, so far as it is fair to do so, the appellant should have the benefit of any legal arguments which are available to it. For a number of reasons, however, I have concluded that it would involve a procedural unfairness to the respondents to permit the appellant to rely here upon a "subject to contract" argument. It is not clearly stated in the written submissions tendered at the trial. Nor is it clearly contained in the note of counsel's recollection of the oral arguments. It is not clearly pleaded in the defendant's Statement of Contentions by Way of Defence. It was not clearly put to the respondents' witnesses during the hearing on liability. It was not stated in Cole J's epitome of the issues presented at the trial as he perceived them. It was not clearly raised in the grounds of appeal. Most importantly, to permit the argument to be raised for the first time would inflict a particular procedural injustice on the respondents. They had issued a subpoena at the trial requiring the appellant to produce its operating procedures. As a consequence, a substantial book was produced titled "Property Finance Division - Operating Procedures". Having regard to the way the appellant presented its case, the respondents did not tender this document. The Court was invited to infer that standard operating procedures, and pro forma documents existed so that, from this material, it would have been open to Cole J quite readily to construct the series of security documents (and their terms) envisaged to give effect to the "arrangement" for full funding of 21 September 1988. In short, from the Operating Procedures it would have been possible to define with a high degree of precision "the terms restated in a form which will be fuller and more precise but not different in effect" from the agreement of 21 September 1988. There is another consideration. As recorded in the evidence, Mr Pearson was an architect with experience in the development of properties. Had it been clear that the appellant's case at trial was that the "arrangement" of 21 September 1988 was "subject to contract", it would have been open to the respondents to seek to elicit from Mr Pearson evidence concerning his experience of the way in which agreements of the kind recorded in the Devreal letter are translated in the marketplace by using standard form security documents. Mr Pearson gave evidence that he had been involved in some fifteen developments. He was not 16 UNREPORTED JUDGMENTS cross examined to suggest that financiers, such as the appellant, never made commitment to provide finance without first obtaining the execution of formal security documents. Instead, the line of cross examination adopted was that he was waiting for a letter which, though promised, never came. And there is a still further consideration. Had this been the appellant's case at the trial, the respondents could have sought to explore, by evidence, the practices normal in the business of financing property developments. Cf Air Great Lakes Pty Limited and Ors v K S Easter (Holdings) Pty Limited (1985) 2 NSWLR 309, 332. In the foregoing circumstances, Suttor and Coulton require this Court to refuse to entertain an argument on appeal which was not the case fairly raised and presented at the trial. Of course, it is still open to the appellant to contend, for other reasons, that no legally binding contract was made. But it cannot do so upon the basis that it was an agreed precondition to the achievement of such a contract that the parties would first agree upon the precise terms of the security documents which were expressly and impliedly contemplated by it. No intention to contract or contract too uncertain The appellant certainly argued at the trial that the evidence demonstrated that there was no intention, at 21 September 1988, to enter into a promise which would be legally binding on it. It also clearly contested liability upon the basis that any "promise" then made was too uncertain and would not, therefore, be enforced. These are alternative ways of presenting the same idea. They bear and obvious relationship to the "subject to contract" argument; but they are not the same as it. Drawing upon many of the facts already referred to, both in the terms of the Devreal letter which it accepted and in the very nature of such a transaction between such parties, the appellant argued that the arrangements on 21 September 1988 fell far short of a concluded agreement. It was clear at that time that a great deal of documentation would be required to evidence the security arrangements in respect of such of the properties which form part of the development. So much was not disputed by the respondents. In such circumstances, so the argument ran, the law would withhold enforcement of an agreement which the parties had themselves not yet concluded in appropriately precise and detailed terms. As is usual in cases of this kind, indicia exist in the evidence to support the competing contentions of the parties. Take, for example, the following indicia which support the appellant's arguments: 1. The terms of the Devreal letter have already been referred to. They contain many provisions which appear to contemplate a requirement of "total satisfaction" on the part of Devreal and its lawyers in documentation still to come and a full right of Devreal to withdraw upon grounds rendering "its completion undesirable". These and other terms suggest a provisional character for the letter, lacking the precision, completeness and certainty normally found in a legally binding promise to provide "full funding" in a multi-million dollar transaction; 2. Mr Pearson, at least, on behalf of the respondents, had been engaged in a number of property developments. He would have known, and the other respondents would therefore have known, of the detail typical of security documents, mortgages, charges, options etc. The parties, as at 21 September 1988, would have been aware that their solicitors would have to negotiate the detail of such security documents. Upon that detail there would be numerous opportunities for legitimate differences of opinion. One security document tendered contained 45 different clauses. Even allowing that many of them would URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 17 be standard, some particular provisions could easily give rise to disputes. So much would have been plain to the parties on 21 September 1988 if they had turned their attention to it. Every person engaged in property development would know (so it was said) that funds are not actually handed over until security documents are completed. Even if such documentation was not a pre-condition to liability, its necessity (as the parties would have realised) argued against an intention to be bound where and when, before the documents were settled and agreed; 3. On its face, the Devreal letter included only the principal terms of the proposed "arrangement" between the parties. The reservation to the "total" satisfaction of Devreal and its lawyers did not provide an independent arbitrator who could resolve differences and fill in blanks. No reference was made to "usual documents". No independent means was provided to settle disputes over terms which caused later disagreement. Instead, one party only, the financier, reserved to itself and its lawyers the necessity of "total satisfaction" and an unqualified "right to withdraw the facility"; and 4. The right to withdraw the facility "should anything transpire that renders its completion undesirable" was reserved by Devreal and, by inference, therefore, also by the appellant. It is a commonplace that financiers operate in a financial market which is subject to the swings of economic circumstances. So much, it was argued, would have been known to the respondents, at least, by inference, because Mr Pearson had extended experience in property development. Accordingly, when economic circumstances changed, it was entirely normal that the appellant would wish to reconsider its position. It was perfectly regular that it should seek to improve its equity and to increase the price of its finance. This was particularly so because the costs had increased beyond those contemplated on 21 September 1988. Even upon the terms of the Devreal letter, the respondent was not committed to extend "full funding" without documentation. It at was entitled to have total satisfaction in the documentation provided and to withdraw the facility should anything transpire which rendered its completion "undesirable". This, in effect (so it was said) was what it had done. As against these considerations, the respondents pointed to a number of features of the "arrangement" which tended to confirm an intention to contract and the achievement of terms which were sufficiently certain for the law to enforce them: 1. The background to its acceptance of the Devreal letter demonstrated that the appellant was keen to get the respondents' business. So much was even stated by Mr Anderson who said: "We want to lock you in so you dont go back to Devreal." "Locking" in is the language of obligation. The conversations found by Cole J, leading to the acceptance by the appellant of the Devreal letter also contain language of promise. If all that had been involved as a "moral obligation" it would seem curious to have celebrated it with drinks and to have promised a letter committing the appellant to "full funding". The repetition of that promise and the constant reassurance that the respondents need not be concerned because the "deal" was "done" represented further evidence of obligation and commitment; 2. Although the transaction envisaged a multi-million dollar facility, the evidence of the Devreal letter (and other evidence of a letter from the Macquarie Bank Limited) indicated clearly enough that this was the way in which, in the world of finance, facilities of this magnitude are offered and accepted. In virtually 18 UNREPORTED JUDGMENTS every case, such facilities contemplate further security documentation. If the law were to withdraw its support from the enforcement of such promises, given and accepted, a dangerous divergence would arise between legitimate commercial expectations and legal protection; 3. As a further indication of the intention of the parties that they should be legally bound by what they agreed on 21 September 1988, they specifically concurred in the inclusion of a $50,000 discharge fee. This was designed to provide a disincentive to the respondents going back to Devreal and to "lock them in" to the appellant. It seems unlikely that, had the respondents in fact returned to Devreal, that the appellant would have waived or ignored its claim on this penalty. At least, no evidence was given for the appellant to suggest that it would or to demonstrate that the penalty had no effect; 4. The discussion between the respondents and Mr Anderson about the authority which he and Mr Bembrick enjoyed had no point except as it related to the authority to bind the appellant. But binding the appellant is a matter of legal obligation, not mere moral commitment. By exploring the respective authority of Messrs Anderson and Bembrick, the respondents were disclosing their concern to secure a legally enforceable right. By asserting his undoubted authority, Mr Anderson was responding affirmatively to this inquiry. He did not say that, although he had the authority to bind the appellant, its actual obligations would not arise until the security documents were agreed. He simply made a "deal" and asserted his right to do so on behalf of the appellant; and 5. The breakdown of the "arrangement" between the parties did not arise because of any uncertainty in the Devreal letter, nor from the failure to agree on any particular term of a security document proffered to give effect to that letter. It was not as if the appellant or its lawyers failed to have "total satisfaction" in the documentation designed to give effect to the "deal". Instead, as Cole J found, the appellant continued to string the respondents along. Ultimately, it simply changed its policy. Thus, it was not uncertainty of the commitment which occasioned the dispute. The amount of the loan was clear. So were the interest rates. So were the participation fees. The basic obligations assumed by the prospective parties were clearly spelt out in the Devreal letter which the appellant, with modifications agreed to by the parties, accepted. The appellant did not even purport to act on the material adverse change clause. It did not withdraw the facility citing anything which had transpired which rendered "its completion undesirable". Instead, as found by Cole J, it prevaricated, repeatedly made false promises that a letter for "full funding" would follow and only later announced that it had changed its policy. A shift in the approach of the law to the problem that is presented in this case can be seen by contracting May and Butcher Ltd v Ring [1934] 2 KB 17n with more recent English authority collected in D W Greig and J L R Davis, The Law of contract, Law Book Co, 1987, 379 and J Paris, Making Commercial contracts, BSP Commercial Books, Oxford, 1988, 30. Young J in Corpers (to 664) Pty Ltd v NZI Securities Australia Ltd (1989) ASC #55-714 at 58-415 citingGreig and Davis, has suggested that: "... commercial pressures have moved commercial courts in The last 50 years from that was logically correct to what is realistic. The logically correct view reflected in such cases as May and Butcher Limited v King... so that if parties did not direct their minds to vital terms of their contract, there was no contract. This being a commercially unrealistic point of view, the judges in England were within a few years made to reconsider the matter and the view was finally taken, URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 19 as expressed by Williams J in York Air Conditioning and Refrigeration (Australasia) Pty Ltd v The Commonwealth (1949) 80 CLR 11 at 26 that if the Court: "... comes to the conclusion that parties intended to make a contract, it will if possible give effect to their intention no matter what difficulties of construction arise."" There are, of course, limits. They arise where, to an unacceptable extent, the parties have themselves failed to agree upon essential terms. See Biotechnology Australia Pty Limited v Pace (1988) 15 NSWLR 130, 133; ANZ Banking Group Ltd v Frost Holdings Pty Limited [1989] VR 695; noted (1991) 65 ALJ 59. The matter debated in this Court is not beyond argument as the elements in the evidence listed by the parties clearly indicate. I remind myself that the intention to enter into legal relations is to be determined not by reference to the actual intentions of each party but by reference to what each was reasonably entitled to conclude from the words and attitude of the other. Cf McCutcheon v David MacBrayne Limited [1964] 1 WLR 125, 128 (HL). See also Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337; Summit Investment Inc v British Steel Corporation [1987] 1 L1 L Rep 230, 233 (CA); Australian Broadcasting Corporation v XVIth Commonwealth Games Limited (1988) 8 NSWLR 540, 549. As pointed out in the lastmentioned case, it is the obligation of Australian courts to have regard to the commercial circumstances surrounding the exchange of communications and to the subject matter of those communications. Allen v Carbone (1975) 132 CLR 528, 531f. See also R Lewison, The Interpretation of Contracts, Sweet and Maxwell, London, 1989, 1.02. Many of the considerations which must be taken into account in deciding cases such as the present are collected by me in my reasons in The Coal Cliff Collieries Pty Ltd Anor v Sifehomo Pty Ltd and Anor, Court of Appeal, unreported, 5 July 1991. I will not extend these reasons by repeating what I said there. In the result, I have not been persuaded that Cole J was wrong to conclude that the appellant and the respondents by their agreement on 21 September 1988 intended to enter into legally binding relations. Nor am I persuaded that his Honour was wrong to reject the contention that the terms of such agreement were so uncertain that the law would not enforce it. Whilst it is true that there was a clear contemplation that numerous security documents would be required to flesh out the agreement which the parties there made, I consider that these were, in the circumstances, of the kind contemplated by the first class in Masters v Cameron. To the extent that differences arose upon the terms of the documentation necessary to give effect to the binding promise, a formula was provided by which the "total satisfaction" of the appellant and its solicitor would determine the matter. Cf Godecke v Kirwin (1973) 129 CLR 629, 641f. This would not mean that the appellant, as one party to the contract, would be at liberty to insert any provision whatever. The satisfaction, total or otherwise, was limited to "documentation" of the agreement already reached. I believe that this is the kind of formula which courts will accept as machinery to resolve uncertainties. Cf Axelsen v O'Brien (1949) 80 CLR 219, 225. To the extent that total satisfaction was unreasonably withheld, a court would itself be able, in a matter such as a security document, to settle the appropriate terms of a conveyance, lease, mortgage or other instrument by which the contract was to be completed. It would do to, normally, by referring the matter to a Master. See Charalambous and Another v Ktori [1972] 1 WLR 951, 953 (Golding J). Doubtless in the instant 20 UNREPORTED JUDGMENTS case, had such disputes arisen, they would have been resolved by reference to the Operating Procedures Manual of the appellant, which was brought to Court on subpoena but not tendered in the way the case developed. These facilities provided in this case adequate means of resolving disputes about the machinery documentation necessary to give effect to the agreement of the parties achieved on 21 September 1988 and substantially set out in the Devreal letter which the appellant accepted. Their availability distinguishes the case from such earlier decisions as Biotechnology Australia Pty Limited v Pace (1988) 15 NSWLR 130; Austotel Pty Limited v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582, 587 and The Coal Cliff Collieries case (above). In none of those cases did the Court have the relevant expertise for, or means of, resolving the omission in the agreement on vital terms which the parties had left. In coming to the conclusion which I have reached, I confess to being influenced by the same movement towards a more practical approach to this question as is noted by Young J, approving the analysis of Professors Greig and Davis. If, as seems obvious from correspondence from three financial sources, large and important commercial agreements are effected substantially upon short letters which contain the essence of the parties' promises, it would be a great misfortune if the law refused to enforce such promises where the business community organises its affairs upon the assumption that such promises would be fulfil led and, if necessary, enforced. Such a disparity between commercial expectations and legal principle should be avoided if at all possible. Cf The Eurymedon [1975] AC 154, 167 (HL) (per Lord Wilberforce). In the commercial context, there is a presumption that parties in the position of these parties do intend legal relations. This presumption does not answer the question whether the parties actually entered into a contract undertaking. See Kleinwort Benson Limited v Malaysia Mining Corp Berhad [1989] 1 WLR 379, 383 (CA). What is required is sufficient evidence of a clear commitment to permit the inference to be drawn that the parties intended their agreement to be legally enforceable. Cf Gibson v Manchester City Council [1979] 1 WLR 294, 297 (HL). See also discussion A de Moor, Intention in the Law of contract: Elusive or Illusory? (1990) 106 LQR 632, 636. The better interpretation of the dealings between these parties is that, on 21 September 1988, a reasonable observer would have understood that they had given a clear commitment and were bound to an agreement. That agreement, in plain terms, from the letter which was incorporated, obliged the appellant to provide the respondent Cenepro with "full funding", as stated, for a significant property development. The conduct of the respondents thereafter was entirely consistent with that interpretation of the promise of the appellant. The conduct of the appellant did not initially deny that promise; but rather affirmed it, in the facts found. In such circumstances, the law holds the appellant to that promise. Belated endeavours to reinterpret or qualify that promise should be rejected. I consider that this is the more commercially realistic conclusion. That opinion has brought me to the same result as Cole J reached. Misrepresentation and estoppel The foregoing opinion sustains the judgment in favour of the respondents and Cole J's approach to their claim for relief, by way of their entitlement to damages for breach of the contract found. The conclusion obviates the necessity to explore at length the alternative bases upon which the respondents sought either to claim against the appellant (under the Trade Practices Act) or to fend off its claim for URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 21 recovery from them (by estoppel). The respondents would be entitled to secure that measure of relief most beneficial to them. I did not understand them to argue that if they succeeded in contract, and recovered damages under that head, they additionally or alternatively sought relief under s87 of the Trade Practices Act or to prevent damage being suffered to them by the unconscientious conduct of the appellant. See The Commomwealth v Verwayen (1990) 170 CLR 394 and Lorimer v State Bank of New South Wales (above). I will, nevertheless, note briefly the appellant's arguments in regard to these heads of claim. So far as the claim for relief on the basis of s52 of the Act is concerned, Cole J found that the evidence made it clear that the appellant: "\.. did not intend to, and did not in fact, honour the representation." This was the representation to provide full funding to the respondents made at the meeting on 21 September 1988, including by the acceptance of the Devreal letter, and repeated thereafter by Mr Bembrick, including on 23 September 1988 when the promised letter Containing the confirmation of "full funding" was not forthcoming. The appellant argued that Cole J had erred in attributing to the appellant the conduct of Mr Bembrick. Even if his conduct was misleading and deceptive or likely to mislead and deceive, he was not authorised to make representations and the respondents were aware of this from the alert they received from Devreal's broker. This argument has no merit. There was no contest but that Mr Anderson, as State Manager for the appellant had authority. After the meeting on 21 September 1988, it was open to reasonable inference that Mr Bembrick's representations were made in furtherance of the "arrangement" then made by the appellant with the respondents. Accordingly, whatever had been the position before that date the representations after that date were made with authority. No evidence was given for the appellant to gainsay this conclusion. Then the appellant contended that Mr Anderson's representations had to be construed as they would be by a reasonable person in the position of the respondents in the relevant context. From this it was argued that the representation of "full funding", in terms of the Devreal letter, amounted to a representation "subject to formal contract". For the reasons already stated, this argument cannot be admitted as it was not the way in which the appellant conducted the trial. As Cole J's treatment of this issue again demonstrates, the appellant's case at trial was simply that a letter would be forthcoming, and it never was. This argument was rejected, rightly in my view, as lacking commercial reality. Then the appellant argued that the respondents would know that they could not rely upon any such representation as was made to them without agreement on the relevant formal documentation. Being subject to documentation which required the total satisfaction of the appellant and its solicitors, a reasonable person in the position of the respondents would not have been misled by an "in principle" commitment to "full funding". Such a person would know that such a commitment was always subject not only to documentation but to the vicissitudes of the economy, particularly in the case of a facility for $6.5 million involving the acquisition and mortgage of land. This argument can be rejected upon the same basis as the equivalent argument by which the appellant sought to defeat the claim in contract. There was no clear specification that the agreement on 21 September 1988 was provisional only. In the words used, and in what the parties thereafter did and said, it was clear that 22 UNREPORTED JUDGMENTS the promise of full funding was made in order to get the respondents committed to the appellant so that they would not return to Devreal which had offered them such a commitment. The appellants next argued that they had never refused to provide funding. They had made fourteen separate offers of funding, each of them adjusted to the circumstances of the time, the equity of the respondents and the economic situation generally. This may be so. But, as Cole J found, the offers, successively made, fell short of the promise of "full funding". That is what the appellant, through Messrs Anderson and Bembrick, represented to the respondents they would receive. Cole J concluded, by reference especially to internal memoranda but also to the whole conduct of the appellant and its officers, that it had never intended to provide "full funding". It did not so intend when it agreed as it did on 21 September 1988, and this despite the use in the Devreal letter which it adopted of that very phrase. The respondents did not have to go so far as to establish that the representations made on behalf of the appellant were false when they were made. It was enough, for the respondents to succeed under s52 of the Act, to establish that when it made its representations, the appellant did not have reasonable grounds for making them. See the Act, s51A. The appellant complained that a case amounting to fraudulent misrepresentation had not been pleaded, as it should. It urged that, at worst, the facts simply supported a conclusion that it had changed its policy. Such a conclusion fell far short of positive deception at the time the promise" of "full funding" was made. My own interpretation of the facts differs somewhat from that reached by Cole J. The internal memoranda casting doubts upon the viability of the respondents as borrowers did not appear until many months after the representation on 21 September 198B that "full funding" would be provided. If necessary, I would prefer to conclude that the appellant, at that meeting did intend to provide full funding. But it rapidly went cold on the idea. And then, instead of frankly informing the respondents of the change of policy, continued, through Mr Bembrick, to spin the respondents along with what, by then, was the false promise that full funding would be afforded and confirmed by the much delayed letter. Such prevarication and lack of candour may be reprehensible. But it is not clear that they amounted to a deliberately false representation. In view of the conclusion which I have reached on the claim in contract, it is not necessary for me to resolve this issue. The relief to which the respondents would be entitled under the Trade Practices Act involves the application of the measure of damages applicable in tort. Cenepro would be thus entitled, if it succeeded under the Act, to be put in the position that it would have been in if the representation of full funding had not been made. See Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1, 12f. However, although the respondents never abandoned their claim to relief under s87 of the Trade Practices Act, I will confine my attention to the relief afforded them by Cole J. This was in contract. I can adopt a similar approach to the challenge to Cole J's finding that the appellant was estopped from denying that it was bound to provide full funding to Cenepro. Because I have concluded that the respondents were entitled to succeed in contract, it is unnecessary to explore the appellants' submission that an estoppel cannot arise which would prevent a party from denying the existence of an "agreement" which was not a legal agreement at all. Cf Austotel Pty Limited and Anor v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582, 584. If, as I have URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 23 found, the contractual obligation was proved, it is unnecessary, in the way the respondents presented the appeal, to explore the alternative relief to which they would be entitled to prevent unconscionable conduct and to do justice between the parties. See Verwayen, (above) and Lorimer (above). Cf Amalgamated Investment Property Co Ltd (In Liq) v Texas Commerce International Bank Ltd [1982] QB 84, 103. I see no reason to doubt Cole J's conclusion that an estoppel was proved, given his Honour's findings of the representations made by the appellant to the respondents, their reliance on those representations, and their actions, as a consequence, resulting in detriment to them. It was open to the respondents to choose any form of relief available to them upon any basis in law upon which they could succeed. As they have succeeded in contract, they are entitled, if they so elect, to have their damages assessed in contract. That was the course adopted by them before Cole J. I therefore turn to the complaints about what his Honour did in that regard. The trial Judge's assessment of damages Cole J had before him a claim for damages based upon loss of the expectation of profit on the development. He had a cross claim by the appellant for the amounts owing to it for the sums extended to the respondents upon various security documents. There was no dispute about the total amount owing to the appellant in this way. The sum was agreed at $3,284,359.88. From that sum credit had to be given in respect of the charge enjoyed by the appellant over Mr Jamieson's bank bills. This credit of $120,309.30 reduced the sum owing to the appellant to $3,164,050.58. It was in that sum that his Honour entered judgment on the cross claim in favour of the appellant. That component of the adjustment of the entitlement of the parties has not been disputed. Cole J then turned to calculate the amount owing to Cenepro for the breach of the promise which he had found the appellant had given that company to provide "full funding" for the Bellevue Hill property development. He had before him a claim for loss of profits on the development. Most of the reasons given 14 December 1990 are devoted to testing the various hypotheses by which the loss of profit could be calculated in the events which had occurred. It was acknowledged that proceeding to the calculating involved making a number of assumptions about what would have happened if the appellant had adhered to its contractual promise. To assist him in his task, his Honour had expert evidence which utilised alternative computer programmes. Into these was fed the data upon the essential variables from which a profit or loss on the venture would be derived. His Honour acknowledged the necessity to determine five variables, acting on the assumption that the appellant had provided Cenepro with "full funding. These variables were: 1. The date of the completion of the development and sale of the component parts; 2. The pre-sale of some of the components off the plan prior to such completion; 3. The value of the development at completion 4. The cost of completing the project, including land consolidation costs, development expenses, construction expenses and interest and, if, as seemed likely, those costs went beyond the $6.5 million agreed between the appellant and Cenepro, whether additional finance would have been obtainable and if so upon what terms; and 5. Cenepro's ability to raise finance. 24 UNREPORTED JUDGMENTS As to the date of completion, by reference to the evidence Cole J concluded that it was probable that Cenepro would have been in a position to complete sales by 31 March 1990, had the appellant not breached its agreement. By reference to the evidence of an experienced real estate agent, which he accepted, Cole J concluded that sales of the units could have been achieved off the plan. This reinforced his view that settlement of all the sales by 31 March 1990, as suggested by Cenepro, would have been achieved. There was a dispute between the experts called for the respective parties as to the value which would have been placed upon the project on completion and upon the assumption of sales of all units by 31 March 1990. The appellants' expert gave an estimation of $10.4 million. Cenepro's expert estimated $11.09 million. Cole J preferred the latter. He did to by reference to unsatisfactory features of the appellant's witnesses evidence. In the appeal, the appellant did not challenge the gross realisation of $11.09 million. There was a similar dispute concerning the costs of construction. Upon this matter too, Cole J had expert evidence and various quotations. The figure he preferred was $3.3 million, being the top range of a figure contained in a report of Mr Fisher, an experienced quantity surveyor, prepared in February 1989. That report had been prepared at the request of Cenepro for incorporation in a valuation report requested by the appellant. It was therefore accepted by Cole J as an estimate: "\.. which all of the parties relied upon for their commercial purposes in circumstances free of litigation." In addition to the acquisition and construction costs, it was necessary to add various other minor costs, such as for selling, advertising, leasing commissions, insurance, rates and taxes and sundry expenses. The amounts allowed for these have not been disputed, most of them being allowed in the sums contained in the computer programme. When to the costs of acquisition and construction, the sundry costs were added, and the resulting product deducted from the gross realisation of $11.09 million as agreed, the result for nett profit was found by Cole J to be $2,740,709. His Honour rounded this for unforeseen contingencies to $2.7 million. Under the Devreal letter, as varied by it, the appellant was entitled to 15% of this nett profit. Accordingly, the residual profit to which Cenepro was entitled, upon these premises was $2,295,000. Cole J acknowledged that the foregoing calculations assumed that the project would have proceeded to completion notwithstanding the cost over-runs beyond the $6.5 million which the appellant had, as found, agreed to lend. His Honour had before him evidence led for Cenepro from Mr Leon Bovaird. He was an person with an extensive background in financial organisations, having for a time worked with Equity Pacific Finance Limited. He gave evidence, which Cole J accepted, that it was his experience that financiers, faced with cost over-runs, provided additional finance to enable the development to be completed and sold as a completed project. Only by doing so did they avoid the low returns invariably involved in partly completed projects. Faced with an absence of contrary evidence from the appellant, Cole J concluded that on the balance of probabilities the additional funds required to complete the project could have been obtained on the same terms as the appellant had agreed in the modified Devreal terms. URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 25 The result of these calculations led to the orders which Cole J then made. The parties were agreed that the value of the land acquired by Cenepro and still held by it was $1.5 million. It was therefore necessary for credit to be given for this substantial asset. When from the residual profit of $2,295,000 the value of the land of $1.5 million was deducted, the nett sum owing to Cenepro as its final loss of profit on the development, which it would have recovered had it gone ahead as agreed, was $795,000. Cole J then concluded that Cenepro was entitled to recover as damages this sum together with the amount of principal and interest owing on the existing loans. It was in that way that Cenepro recovered against the appellant judgment in the sum of $4,079,359.88. The judgment on the cross-claim for $3,164,050.88 represented the amount agreed to be recoverable by the appellant under the terms of the mortgage without taking into account the sum of $120,309.30 on Mr Jamieson's bank bills. The appellant mounted two attacks on these orders. The first contended that Cole J had adopted the wrong principle in calculating Cenepro's damages. The second, whilst accepting his Honour's approach, challenged a number of the assumptions upon which he reached his final figure. The cost of securing finance The primary argument for the appellant was that the proper measure of damages for breach of contract was any additional cost of finance which Cenepro suffered by reason of the failure of the appellant to provide it with the "full funding" which it was found it had promised. The appellant argued that, by 5 December 1988, or alternatively by January 1989, Cenepro was fully aware that the appellant would only proceed to provide funding on a stage by stage basis. At least by that time, the earlier hopes of the provision of a letter would confirm the earlier promise of "full funding" must have faded in the mind of any reasonable observer. The appellant pointed out that the respondents themselves must have come to this conclusion. Certainly, Mr Pearson gave evidence that by January 1989 it was clear to him that the appellant had repudiated "whatever assurances they had given". The appellant relied upon the respondents' approach to the Macquarie Bank. A letter from that bank was admitted in evidence. Bearing date 23 March 1989, addressed to Cenepro and written to Messrs Jamieson and Pearson, it confirmed that bank's: "\..interest in considering an application for a Facility to be structured as follows:" The facility envisaged the provision of an amount of $7,650,000 to Cenepro to provide funds to meet the cost of the Bellevue Hill development. It is worth noting (by contract to the Devreal letter which the appellant, with modifications, accepted) that the letter from the Macquarie Bank bore the stern warning at its head: "please note that this letter does not represent confirmation of formal approval of a facility. macquarie Bank Ltd reserves the right to amend, add or delete any terms or conditions contained in this letter. This letter does not impose an obligation on Macquarie Bank Ltd. A formal letter of offer containing all terms and conditions to be forwarded once formal approval has been obtained." Neither this letter, nor any other, resulted in a firm commitment of a financier, other than the appellant, to take over the financing of the Bellevue Hill acquisition and development. Cenepro was a shelf company. Various attempts had been made to secure a joint venturer for it. The attempts by the appellant itself had come to nothing. The economy had, after the promise of 21 September 26 UNREPORTED JUDGMENTS 1988 become more difficult. The very fact that the appellant, unlawfully as it has been held, endeavoured to extricate itself from its promise and to add further terms and conditions, provides material from which Cole J was entitled to conclude that the possibility of obtaining alternative finance, equivalent to that which the appellant had promised, was insignificant. When the respondents witnesses were cross-examined, it was not put to them for the appellant that they could have obtained alternative finance. Cole J specifically found that in the circumstances in which they found themselves the respondents had no real alternative but to go along with the successive proposals of the appellant. The suggestion that Cenepro should have sought out and obtained alternative sources of finance comes rather unconvincingly from the appellant, given that at no stage did it make that suggestion to the appellant. Its submission amounts to a contention that Cenepro failed to mitigate its loss because it could have obtained funding elsewhere and there by reduced its damages. The onus of establishing such a contention lies upon the appellant. In support of its contention on this issue, the appellant relied on Head v Kelk (1963) 63 SR (NSW) 340. There it was held that, under a contract for the loan of money, where the breach alleged was the acceleration of the demand for repayment contrary to the terms of the loan, the only contemplated loss suffered by the plaintiff was his loss, if proved, occasioned by the raising of a loan of similar amount on less advantageous conditions and the expenses of doing so where he had been forced to repay the loan earlier than he otherwise would. However, that finding was offered in a context quite different from the present. The loan in Head was to provide housing and a settled income to the borrower. The loan was for 12,000 pounds. None of the difficulties would have stood in the way of raising an equivalent sum as would have been presented to Cenepro in this case. There was clear evidence before Cole J of the difficulties typically experienced in a half completed development in raising alternative finance. The very difficulties which the appellant experienced in its numerous attempts to secure a joint venturer speak eloquently of the obstacles of belatedly securing alternative finance. The viability of the project had, by reason of the delay, become quite marginal. This is plainly demonstrated by the nett residual profit ultimately found by Cole J and challenged in this appeal. In there circumstances, it is reasonable for Cenepro to say that, if the appellant suggested that it should have sought alternative funding elsewhere, it neither said so at the time, nor did it call evidence at the trial to establish that it would have been as possible to obtain it as it now contends. It was open to Cole J to conclude that, realistically, no other source of funds was available to Cenepro in early 1989 other than from the appellant. In such circumstances it was open to his Honour to approach the calculation of damages as he did: seeking to ascertain the losses which flowed from the breach of contract. In the United States it has been held on a number of occasions that so long as a financier has notice of the purpose, for which funds were desired by a borrower, it will be liable for damages caused by the borrower's inability to carry out its purpose if the performance by the financier of its promise would have enabled the borrower to do so. See eg W C Shepherd Co Inc et al v Royal Indemnity Co (1951) 192 F 2d 710, 717; Avalon Construction Corp v Kirch Holding Co Inc (1931) 175 NE 651, 653; Bond Street Knitters Inc v Peninsula National Bank (1943) 42 NYS 2d 744: Here the borrower's losses included the obligation to pay the loans, secured in futility, from the appellant, together with the nett loss of profit which would have been derived by Cenepro if the appellant URJ | CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (kirby P) 27 had adhered to its promise. I see no error in the general approach which Cole J adopted to calculating the respondents' loss of profit. I agree with what Mahoney JA has written on this general point. Specific complaints on damages calculations This conclusion leaves only the particular heads of complaint by which the appellant attacked a number of the assumptions upon which Cole J's conclusions had been based. Specifically, the appellant contested his Honour's conclusions that: (a) The construction of the development would have been completed by mid-February 1990; (b) The registration of the strata plan would have been achieved by 31 March 1990; (c) The cost of construction was $3.3 million; and (d) The strata units would have been sold in their entirety by 31 March 1990. The thrust of the attack on items (a) and (b) rested upon the contrast between the timetable of dates assumed by Cole J and the evidence of the actual date upon which the event occurred. The contrast was advanced in order to establish that, even had the appellant complied with the contract as found, the programme of acquisition and development lagged a long way behind that assumed by Cole J. It thus took the respondents into a period when, on the evidence, the costs of construction were higher and the economic downturn threatened the prospect of sale of the units, whether on the plans or otherwise. As these variables affected the calculation of nett residual profit, it was legitimate for the appellant to take the Court to the detail of the evidence in order to test the factual premises upon which Cole J's conclusions rested. The utilization of a computer programme does not improve the calculation of damages if the factual variables fed into it as data are not sustained by the evidence. The following table was relied upon by the appellants: " Event Found Actual Lodgment of development application 8.8.88 8.8.88 Development consent Dec 88 14.3.89 Lodgment of building application Jan 89 9.6.89 Building consent Apr 89 3.11.89 Commencement of construction 1.5.89 Nil Completion of construction mid-Feb 1990 Nil Approval of stata plan 31.3.90 Nil Settlement of Sales 31.3.90 Nil The appellant argues that the delay in securing development consent was occasioned by the difficulty which the respondents experienced in securing the written consent of the tenant of the fruitshop to vacate his shop. The evidence showed that at one stage the tenant asked for $100,000 consideration. Later he even asked for $280,000. Originally, the local council stated that it would not give development consent until the written consent of the tenant was produced to it. Later, it agreed to proceed upon the basis of a promise by Cenepro that it would treat the tenant fairly. But the point made by the appellant was that it was not responsible for the delay occasioned by this controversy. It disputed that the promise of "full funding" included moneys to be paid to the tenant of the fruit shop. No item for that purpose had been specifically disclosed in the respondents' 28 UNREPORTED JUDGMENTS feasibility proposal. Nor was it allowed for in the application for finance presented by the respondents to Devreal, which resulted in the Devreal letter. On the other hand, whilst acknowledging in cross-examination that the appellant would be "expected" to act upon his statement that "there would be no problem with any of the tenants", Mr Pearson asserted that the appellant was "fully aware of the situation". By this I infer that it was "fully aware" of the difficulty being experienced in securing the consent of the tenant of the fruitshop. It was open to Cole J to infer that it was the lack of funds provided by the appellant to Cenepro which occasioned the somewhat languid dealing with the fruitshop tenant and the Council. Had "full funding" been available, as promised, it is relatively easy to infer that Cenepro would have accelerated its efforts to obtain development consent upon just the kind of undertaking which was later offered and accepted by the Council. In reaching his view, Cole J took into account the evidence of the average time taken to obtain such building approvals. I do not believe that this Court would be entitled to disturb his Honour's conclusion that: "Tf Custom Credit had honoured its contract, greater diligence would have been exhibited in pursuing Woollahra Council to issue the building approval more promptly than in fact it did after lodgment." The appellant then attacked Cole J's conclusion that the cost of the construction would have been $3.3 million - a figure which he based upon the top range estimated by a quantity survey, Mr Fisher, called for the appellant. The appellant's complaint was that this estimate was based upon sketch plans, not fully detailed, which were the only plans available to Mr Fisher when he gave the estimate. Subsequently, those plans were amended. Two quotations were obtained from builders who received the amended plans. Mr Fisher made a later estimate of the construction costs of $4.078 million based upon one of the two builders' quotations (Sid Greaves Shopfitter). However, Cole J rejected this adjustment. He did not accept Mr Fisher's evidence. He rejected it as nothing more than an adaptation of the Sid Greaves quotation. Cole J had before him the evidence of Mr Pearson (whole testimony on liability he had accepted unreservedly). He asserted that the estimate given by Mr Fisher in February 1989, before litigation had commenced, provided a proper estimate of the building costs associated with the project. Mr Pearson was an architect with experience in property development. The February 1989 estimate by Mr Fisher had been provided on the basis of the commencement of construction on | June 1989 with costs escalating at 10%. The evidence showed that the respondents were seeking a fixed price tender to protect them against increases in construction costs. By adopting the upper limit expressed in Mr Fisher's February 1989 estimate, Cole J provided a margin for Cost increases resulting from amendment of the plans. Mr Fisher's report of February 1989 was an unbiassed contemporaneous opinion of likely costs upon which it was intended that the parties should rely. The later figures secured for the litigation were unaccepted quotations which envisaged a commencement date many months after that which Cole J found upon the hypothesis that "full funding" had been provided to Cenepro. In these circumstances, I do not believe that Cole J was wrong to revert to Mr Fisher's earlier estimate. As his rejection of Mr Fisher's later "recantation" in evidence depended in part upon his rejection of that evidence (and implied an opinion that it lacked impartiality), this Court would not be authorised to reverse such rejection. In any case, the reasons given for returning to the top of the range URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Mahoney JA) 29 estimation at the time the project was viable are convincing. His Honour's conclusion in this regard should not be disturbed. That leaves finally the appellant" complaint about Cole J's conclusion that the units in the development would be pre-sold "off the plan" during construction (issue (d)). That finding depended, as the appellant acknowledged, upon the evidence of two witnesses, Messrs Meredith and Robingon. The appellant called their evidence "speculative". It pointed out that Mr Meredith, in his written reports, had allowed a period of sale after completion of construction. However, that left the evidence of Mr Robinson. He was the proprietor of the Bellevue Hill real estate agency which carried on business close to the development. He gave evidence that it was a project well able to be sold off the plan. He testified to a number of enquiries regarding the development. Cole J stated that he was impressed by Mr Robinson as "an experienced real estate agent". He accepted his evidence. That evidence included the following passage: "Well, we received enquiries up there. Bellevue Hill is a different area to a lot of other areas. Bellevue Hill - the top end of Bellevue Hill, which are the areas we are mainly concentrating in, they have a lot of older style units there. There are very few modern units. When they do come up they do sell well. Bellevue Hill, as everyone knows, has a very high Jewish fraternity, with quite a few synagogues in the immediate vicinity with level walks. The Bellevue Hill area is an older aged group area where we have a lot of home owners whose kids have grown up wanting to move out of their house, get into a security unit, less maintenance and looking for units." Upon the basis of this evidence it was certainly open to Cole J to conclude that the sale of all units could have been achieved off the plan. Upon the timetable which his Honour hypothesised this sustained the conclusion that the sales would have been completed by 31 March 1990. It permitted the calculation of the profit which Cenepro would have made upon those assumptions. Conclusions and orders In the foregoing reasons I have dealt with those grounds of the notice of appeal which were argued before the Court, either in written submissions or in oral argument. I will assume that those grounds of appeal which have not been the subject of argument are not pressed. Within the matters argued none of the criticism of Cole J's order has been sustained. The cross appeal was filed defensively. No significant additional time was taken in disposing of it. The orders which I would therefore propose are: 1. Appeal dismissed with costs; and 2. Cross appeal dismissed. No order as to costs. Mahoney JA I agree with the judgment of Kirby P. In view of the arguments which have been submitted I shall add some observations of my own upon two matters: the uncertainty issue and the issue of damages. 1. The uncertainty issue: I agree with the conclusions of Kirby P and of Clarke JA that the parties, during the conversation with Mr Anderson on behalf of the defendant, reached an agreement and that agreement was sufficiently certain to constitute a legally binding contract. The parties were, I think, agreed as to what the plan of the plaintiffs was for the development of the relevant land and as to what the defendant should do in and about the financing of that plan. I do not desire in this regard to add to what has been said by Kirby P and Clarke JA. 30 UNREPORTED JUDGMENTS The parties, in my opinion, thought that what they had done constituted a legally binding contract. I do not mean by this that subjectively Mr Anderson or Mr Pearson adverted precisely to the legal requirements of contract or the application of those requirements to what had been agreed. But it was, in my opinion, their belief that what they had done by way of agreement was such that neither party could, at will, legally withdraw from it. Each understood, I think, that the other was "locked in" for this purpose. But such a belief by the parties does not as such mean that their agreement is valid and enforceable as a contract. And it is to this matter to which, in the main, the submissions have been directed in this appeal. The issue to be determined is whether, though there was an agreement, it is not enforceable as a contract because of uncertainties affecting it. The defendant has submitted that the present agreement is affected by such uncertainty. The law should not hold uncertain a contract which the parties believe to be a valid and enforceable contract unless it is necessary to do so. To say that is to add little to the store of legal knowledge: what is to be determined is, of course, whether it is necessary to do so. But to say it is to help in focusing upon what is the issue which must be determined. It helps because it leads to the consideration of what the law should or should not see itself as able to do in rendering certain that which allegedly is too uncertain to be enforced. As has been pointed out: see, eg, Greig and Davis "The Law of Contract" at 363 et seq; there are various kinds of uncertainty. A contract may be uncertain because there has been no agreement at all: there is merely an agreement "to agree": Masters v Cameron (1954) 91 CLR 353 at 362-4. It may be uncertain because the agreement arrived at leaves undetermined one of the terms which the law requires to be specifically agreed in order that the contract be valid and enforceable: there may, for example, be no agreement on the date of the commencement of the term of a lease: see Halsbury Laws of England, 4th ed, Vol 27, par 204. One of the terms of the agreement may contain words which are so vague as to be for this purpose meaningless: a promise to pay "a substantial cut on all work done" has been held to be such: Stevenson v Ellis (1912) 29 WN (NSW) 52; cf a different view of "pay you handsomely" in Kina v Ivanhoe Gold Corporation Limited (1908) 7 CLR 617. Or one of the terms of the contract may assume something which does not in fact exist: it may provide for "the usual terms" where there are in fact no usual terms: see G Scammell and Nephew Ltd v Ouston (1941) AC 251, eg, at 268-9. In the present case, the attack upon the certainty of the agreement as a contract is not limited to one particular matter. A number of submissions have been made: these are referred to in the judgments of Kirby P and of Clarke JA. I desire to add some observations of my own in relation to two of these matters: provisions providing for documentation by third parties; and the settlement of the detail of obligations agreed upon in general terms. Reference was made in the agreement made with the Davreal company for the agreement to be the subject of "documentation" and for such documentation to be "subject to Davreal and its lawyer's total satisfaction". Such a provision does not, in my opinion, mean that necessarily there is no binding ana enforceable contract or that there is no agreement because that which is agreed is, eg, "an agreement to agree". The significance of provisions of this kind must be determined in the context of the surrounding circumstances of the particular agreement. A provision that the parties or their lawyers shall produce documentation obviously involves that a discretion or a choice will be exercised, URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Mahoney JA) 31 for example, in the selection of the terms to be embodied in the relevant documents. But that discretion or choice may be of at least two kinds: I shall describe them as operative and ministerial. It may be the intention of the parties that what the third parties are to do in the process of documentation will involve the creation of or the variation of the obligations of the parties: that involves an operative discretion. In other cases, the intention to be drawn from the transaction is that the terms chosen to constitute the documents are not to vary but to give effect to the obligations upon which the parties have already agreed: that involves merely a ministerial discretion. There will no doubt be, in this second case, a discretionary choice between different kinds of provisions: thus, in the documentation of a provision requiring a party "to give an equitable charge over...", there may be a discretionary choice by the lawyers as to the circumstances in which the equitable charge is to crystallise or the receiver is to be appointed. Experience shows that provisions of this kind may take many forms and many pages may be used in their documentation. But the fact that there is no universally accepted clause of this kind does not mean that, unless the precise terms of such a clause is agreed upon by parties in advance, a clause in an agreement providing for "an equitable charge over..." will result in a contract too uncertain to be enforced. If necessary, the court will settle the documentation necessary to give effect to the parties' intention. It is not beyond the law's capacity to do so. Therefore, the fact that such a matter is left to documentation in this way does not necessarily produce the result of uncertainty. It will not produce that result if, as I have said, the discretion in documentation is ministerial. Whether it will be so will, as I have indicated, depend upon the intention of the parties. There may, of course, be cases in which the intention of the parties was that the discretion was to be not ministerial but operative; in such cases, there will be no final agreement and so no binding contract. What is this intention is to be derived from the context and surrounding circumstances and, no doubt, the nature and significance of the obligations which the documentation is to detail. That leads to the second matter to which I have referred. This is related to the first but, I think, raises a distinct matter, namely, how far the courts can and should go in formulating the detail of the parties' rights and obligations. In some cases, the agreement made by the parties may provide for one party to have a right or be subject to an obligation the terms of which are to be specified in writing but may make no provision for the settlement of those terms. Thus, in the present case, it was contemplated in the conversation between Mr Anderson and Mr Jamieson that the defendant should have "a lien over your bills" and that Mr Pearson and Mr Jamieson should give a "personal guarantee". And it was contemplated that there should be a mortgage or charge security given to secure the finance to be provided for the project by the defendant. It was obviously contemplated that a document would be drawn for these purposes, but no provision was made as to who should draw it. A party taking objection to the certainty of clauses such as these sometimes asserts that "the law is not capable of" giving effect to provisions of this kind in that they clearly contemplate that an appropriate document will be drawn and that it will be in a form going beyond what has been adverted to by the parties or has been specified in the parties' agreement. 32 UNREPORTED JUDGMENTS I do not think that the law should be held to be incapable of giving effect to terms of this kind. In earlier times, it was not beyond the capacity of, eg, the Court of Chancery to give effect to an agreement for "a marriage settlement" or "a mortgage". The court would refer to the relevant Master or Conveyancing Counsel the settlement of the detailed terms of the relevant document. In a decree for specific performance of a conveyancing transaction, the court frequently settles documents the terms of which create obligations which the parties have not, in detail, specified in their agreement. There are, no doubt, matters which are beyond what a court may do in this regard. But in cases of the kind here in question many of the matters to be settled are, in the relevant sense, interstitial and the fact that they impose specific obligations on parties in terms not adverted to in the agreement does not, in my opinion, mean that the terms of them cannot be settled in this way. The law will not, of course, make an agreement for parties where they themselves have not done so. But where they have made an agreement which they believe to be enforceable within the law, the courts should not refuse to do what the parties expected them to do, at least where what is involved is interstitial rather than substantial. 2. The measure of damages: It is, in my opinion, proper to adopt the "loss of profits" basis as the basis for calculation of the plaintiffs' damages. There was a clear breach of the plaintiffs' contract with the defendant. It was a complicated contract and, as the judgments of the other members of the Court have indicated, it was not possible for the plaintiffs to obtain alternative finance of the kind which the defendant had promised to provide. In such a case as this, damages are, in my opinion, available for the breach of a contract to provide finance. In such a case, a plaintiff is entitled to be put, by an award of damages, in the position in which he would have been if the contract had been performed: Livingstone v Rawvards Coal Co (1880) 5 App Cas 25 at 39; Butler v Egg and Egg Pulp Marketing Board (1966) 114 CLR 185 at 191. That position was the position of parties who would have been provided "full funding" in the terms of the agreement that had been made. It is therefore necessary to ascertain the loss which the plaintiffs suffered because they were not, by performance of the contract, put in that position. The plaintiffs had intended, if that funding had been provided, to proceed with the development project to which the agreement related. They contemplated that they would have made profits from the completion of the project. But the law does not assume, for the purposes of assessing the plaintiff's damages, that that project would have been completed according to its terms. The cases establishing the measure of damages require that the injured party be put in the position he would have been had the promise been performed but no more. Therefore the plaintiffs in the present case are not entitled to have, as such, the profits which they would have derived had their plan gone well: they are to be treated merely as if, by the provision of the agreed full funding, they would have had the opportunity to make those profits. And the loss which they have suffered and for which they are to be compensated by damages is essentially the loss of the advantages of that chance. In Levi Strauss (Aust) Pty Ltd v Mayne Nickless Ltd (Court of Appeal, 17 December 1976, unreported) I referred at length to the considerations relevant to the ascertainment of damages for the loss of a chance. I shall not extend this judgment by incorporating in terms what I there said: I remain generally of the opinion set forth on pages 4-10 of my judgment in that case. URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Mahoney JA) 33 It is, then, necessary to determine the compensation appropriate for the loss by the plaintiffs of that chance. There is, in my opinion, no single approach which must be adopted for the purpose of assessing the damages for such a loss. The court will adopt the mode of calculating the loss which will give the true, or at least the best, reflex of the plaintiffs' loss: see, eg, in the context of a building case, the adaptation of the processes for assessment of damages to achieve a just result in the context of building or repair contracts in Bellgrove v Eldridge (1954) 90 CLR 613 at 616-9. In some cases, the assessment of damages will best be made by valuing, as such, "the chance" which the plaintiff would have had if the defendant had performed its contract. In the present case, that would be the chance of making profit from the development of the land with the benefit of such finance as the contract provided for. Chances of this kind and even more contingent possibilities are capable of valuation: see, eg, Chaplin v Hicks (1911) 2 KB 786; Davies v Taylor (1974) AC 207 at 220, per Lord Simon of Glaisdale. In other cases, the appropriate approach may be to calculate the profits which would have been derived if the plan had been carried into operation according to its terms and then to discount the amount of profits so arrived at to take account of the contingencies which, at the date of breach or other the relevant date, affected the chance of the plaintiffs to make those profits. This latter process of assessing loss is, in my opinion, essentially the process adopted in assessing damages in many personal injury cases, eg, for the loss of the capacity to work. What there is done is, in principle, to determine what, uninjured, the plaintiff would have done in working at his chosen employment: the wages to be earned, the period of employment, and the discount for present value are calculated in conventional ways. And a discount is then applied to take account of the possibility that, by reason of loss of employment, other accidents, or the like, the plaintiff uninjured would not have derived such a sum. This is conventionally seen as a proper reflex of the loss of the plaintiff's capacity or chance of earning income. That, I think, is essentially what was done by Cole J in the present case. His Honour calculated the profits which the plaintiffs would have derived if the plaintiffs' plan of development had been carried out according to its terms and the events on which it was posited had occurred as the plan contemplated. The learned judge then took into account what, conceptually, were the contingencies apt to affect the carrying out of the development plan, that is, the contingencies which, as at the date of the defendant's breach of contract, would have been seen to exist. His Honour examined the main contingencies which had been referred to in argument, expressed his conclusion as to what would have been likely to be the outcome of each of them, and arrived at a conclusion as to the extent to which each of them, so assessed, should be seen to affect the profit to be derived from the development scheme as the appropriate measure for assessment of damages in this case. His Honour did not, I think, spell out each of these matters in detail but what he did involved in principle such a procedure. The submissions which have been made to this Court in this regard require, I think, that the matter be spelled out in more detail than it was necessary for the trial judge to do and that the significance of the various contingencies be considered. As I have said, the plaintiffs' contention was that, had full funding been provided as agreed, the development plan would have been carried out and they would have earned the profits detailed in their submissions. The defendant's 34 UNREPORTED JUDGMENTS argument in this regard was that the carrying out of the development plan was affected by such contingencies that, at the date of the breach of contract and at the present date, the outcome of the plaintiffs' plan was so uncertain that it was no proper basis for the assessment of the plaintiffs' damages. It is therefore necessary to examine the nature of those contingencies. The learned judge took into account what, conceptually, were the contingencies affecting the successful carrying out of the plan for development of the land. Those contingencies were essentially of two kinds: contingencies inherent in the development plan itself; and contingencies arising from factors outside that plan. The inherent contingencies: It was recognised by the parties and by the trial judge that, in a plan of development of the kind here in question, there were a number of contingencies which might adversely affect the outcome of the development plan. Thus, for example, the outcome of the plan and the profits contemplated to come from it would be affected by costs incurred in carrying out the work and those costs could be affected by, eg, adverse weather, strikes, and the like. The calculation of profit was, according to the plan, contingent upon the state of the market for land at the relevant times: it was seen as affected by whether units in the development could be sold "off plan prior to completion" and by what would be the market price of units to be sold upon completion of the development. Inherent contingencies such as these are, as it may be put, contingencies which a developer would ordinarily take into account in calculating what would be the likely outcome of the development. The learned judge, in his judgment in respect of damages, referred to five matters as the "principal matters" to be taken into account in this regard. He examined each of them and arrived at conclusions as to what, absent breach of the contract by the defendant, would probably have been the outcome of each of them. His conclusion was, generally I think, that the outcome of these contingencies would not have affected the plaintiffs' calculation of the profit to be derived from the development programme, at least to such an extent that the projected profit was an unsafe basis for the calculation of damages. His Honour outlined, briefly but sufficiently, the outcome of each of the contingencies. I do not think that he erred in this regard. There are, no doubt, different approaches to each of the contingencies and different ways of analysing them but, in the end, the result would, in my opinion, be no different. The outside contingencies: There were, in addition to those contingencies inherent in the development programme, other contingencies which might affect the financial outcome of the development. Submissions were addressed by the parties to these contingencies. Factors of this kind potentially affect any development programme. The programme itself may be sound but the developer may lack, eg, the energy or the expertise to carry it out according to its terms. Other things may go wrong: in the present case, the difficulty involved in achieving a consensus with the tenant of part of the land was an example of this. It is, I think, important to understand the way in which the evidence relating to these contingencies was used in the present case. Properly understood, the defendant's argument was, or at least involved, that, with the benefit of the knowledge of what actually happened following the defendant's breach, it should be inferred that, had the contract not been broken, the development programme would yet not have proceeded as planned and that therefore it is wrong to use the profits which would have come from the carrying out of the programme as planned as the basis for assessment of damages. Over-simplified, the suggestion URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Mahoney JA) 35 is that, however good the plan, it would not in fact have proceeded because, as subsequent events have shown, outside contingencies of this kind would have defeated it. Such an approach as this raises at least two questions: whether, if full funding had in fact been provided, what did occur would have occurred; and, if it would have occurred, how it would have affected the outcome of the plaintiffs' development programme. The matter may, I think, be tested sufficiently by considering the delay which in fact occurred in carrying out the development programme. As Clarke JA has pointed out, the plaintiffs development programme contemplated that a building application would be lodged with the council in or about December 1988 or January 1989 and that building approval would be given within three or four months from that time. In fact, the application was not lodged until much later. This, the argument suggested, would have delayed the programme, would have affected the sale of units "off plan" and would have produced the result that the units after completion would have been sold on a market more adverse than was contemplated by the development plan. Therefore, the argument suggested, it should be inferred that, had there been no breach of contract by the defendant, the development plan would not in any event have been carried out. But that, of course, depends, inter alia, upon whether what in fact happened would have happened if the defendant had provided full funding and otherwise carried out its contract. The plaintiffs accepted that there were such delays but contended that those delays resulted from the defendant's failure to provide finance as it promised to do. The trial judge, in my opinion, accepted the thrust of the plaintiffs' submission in this regard. The matter was dealt with in the evidence of Mr Pearson, an architect and a director of the plaintiff company. In relation at least to the matters here in question, the learned judge accepted the evidence of Mr Pearson and, in accordance with established principles, this Court should, I think, accept Mr Pearson's basic evidence. The conclusions or inferences to be drawn from that evidence are, of course, for this Court to determine: Abalos v Australian Postal Commission (1990) 65 ALJR 11. Mr Pearson dealt with these matters in his evidence and the learned judge accepted what he said. I shall not extend this judgment by setting out the detail of his Honour's findings: they appear at pp 2445-8 of the appeal papers. His Honour's conclusion was: "The consequence is that the delay in obtaining the development approval was, in truth, due to Custom Credit's breach, and the delay in finalising building application plans was also due to Custom Credit's breach. I am satisfied that had Custom Credit properly honoured its promise made on 21 September 1988, development consent could have been obtained by December 1988 with the consequence that building approval could have been obtained by April 1989 permitting construction to commence in May 1989." In arriving at that conclusion, his Honour referred to the effect of the defendant's failure to honour its agreement to provide full funding and the consequences of that. He referred in particular to the fact, as it was suggested, that "the plaintiff was unable to engage engineering consultants to provide the engineering input to permit completion of the building application" and that "additionally during that period Mr Pearson was heavily involved in dealings with Custom Credit and was not able to attend to the architectural work on the project". The submission for the defendant suggested that the reason why the 36 UNREPORTED JUDGMENTS plan was, in the event, not adhered to, was not the unavailability of funding: it submitted that the plaintiffs could have engaged engineering consultants earlier than it did notwithstanding that funding was not to be provided by the defendant. There is force in these submissions. But, as I have said, the basic relevance of what happened in the absence of full funding is to assist in deciding what would have happened had full funding been provided. I do not think that it should be inferred from what happened following the defendant's actions that, had it honoured its promise and supported the programme, the programme would not have been carried through. The effect upon the plaintiffs of what the defendant did and the way it did it must, I think, have been great. It is not surprising that Mr Pearson saw himself as "heavily involved in dealings with Custom Credit" and "not able to attend to the architectural work on the project". What a person would do in the context of treatment such as the defendant afforded the plaintiffs is, I think, not a reliable guide to what they would have done had the plaintiffs had what the defendant promised. The likelihood is that, had money been available or had the plaintiffs been able to assure those to be involved in the programme that the defendant was committed to the full funding of it, the matter would have proceeded and finance would have been available to carry it forward as the development programme envisaged. On that basis, it is in my opinion proper to use the profits basis adopted by the trial judge as the basis for calculation of damages in the present case. I agree with the orders proposed by Kirby P. Clarke JA The first question which arises on this appeal is whether a contractwas concluded between the parties. The trial judge, Cole J, held that a contract had been concluded. The appellant submits that he was in error. Its argument is that in their discussions the parties remained in negotiation. Although counsel for the appellant accepted that the hallmarks of a concluded agreement were to be found in the critical discussion which took place between the parties on 21 September 1988 he submitted that outstanding matters on which there had been no agreement negated the existence of a binding contract. His submissions focused on three aspects of the discussion. First, the respondents requested, and the appellants agreed to provide, a letter evidencing the terms of the agreement discussed on 21 September. In the particular circumstances of this case the consequence of the appellant's promise to provide a letter was, according to the appellant's counsel, that the parties should be taken to have agreed that no contract would come into existence until that letter had been supplied. Secondly, statements in a letter, the terms of which had been incorporated in substance into the agreement discussed on 21 September, to the effect that security documents in a form satisfactory to the appellant and its solicitors were to be prepared properly led to the conclusion that there was no concluded agreement until that documentation had been executed by the parties. Thirdly, and because a number of matters were left outstanding, the agreement which was said to have been negotiated on 21 September was too uncertain to be enforced. Cole J rejected the first and third submissions of the appellants. He did not deal in his judgment with the second argument. The reason which the respondents (I will in the main speak generally of the respondents although it was the first respondent which was the developer) assigned for this omission was that the appellant had failed to raise it at the trial. Accordingly, the appellant should not, according to the respondents, be permitted to raise the question in this appeal. URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Clarke JA) 37 This area of contention between the parties is covered in detail by the learned President and I content myself with saying that I agree with his Honour that the appellant should not now be entitled to raise the point. Nonetheless, it is convenient to deal with this point, upon the assumption that the appellant had been allowed to raise it, in association with the other two questions raised. The relevant facts, which are fully recounted in the judgment of the learned President, can be summarised as follows. The second and third respondents wished to develop some property in Bellevue Road, Bellevue Hill. They approached the appellant seeking finance for the whole development. This occurred in August 1988 and negotiations continued between the second and third respondent, who intended that the first respondent actually carry out the development, and Mr Bembrick of the appellant. The negotiations did not proceed as the respondents wished and the respondents sought finance elsewhere. On 21 September 1988 they received an offer of finance from Devreal Capital Limited which was in these terms: "We are pleased to confirm our offer of finance on the following terms and conditions. BORROWER: Cenepro Pty Ltd Registered Office 91 Military Road, Neutral Bay Directors Jamieson, William Pearson, Gregory AMOUNT: $6,500,000, to be drawn as follows: Initial Tranche $430,000 reducing to $420,000 in the event the valuation on 23A Bellevue Road, Bellevue Hill is less than $365,000. Further Advances Will be subject to completion of Devreal's project feasibility, an external valuation of the total development scheme, a check costing, and DA approval from the local council, proving satisfactory in all respects. The pricing of the total facility will be as follows: Upfront Fee: 1.75% Profit Share: The higher of 20% of net project profit or $450,000 Interest Rate: Bank Bills + 2.75% pa Security will comprise a mortgage over the total development together with joint and several guarantees of W Jamieson and G Pearson. Costings will be subject to independent assessment by Devreal's appointed consultant. This consultant will also authorise project draw downs. LOAN PURPOSE: Initial Tranche (1) Provide purchase moneys for acquisition of 23A $350,000 Bellevue Road, Bellevue Hill (2) Acquisition Costs 25,000 (3) Consultants Fees 15,000 (4) Option Fees 15,000 (5) Establishment Fee - (Devreal) 15,000 (6) Fee to Equity Pacific Limited 10,000 38 UNREPORTED JUDGMENTS $430,000 Further Advances Will be in respect to the development of a mixed commercial, retail and residential project at 23A to 27A Bellevue Road, Bellevue Hill. It is contemplated funding will cover 100% of project costs, including capitalised interest. TERM: 18 months, with the initial tranche for 90 days. ESTABLISHMENT FEE: $15,000 INTEREST RATE: Initial Tranche 15.95% pa, reviewable at Devreal's discretion from the date hereof. Any adjustments generally reflect a change in Devreal's cost of funds. Interest is payable at the end of the term. SECURITY: Initial Tranche (1) Registered First Mortgage (by Cenepro Pty Ltd) over 23A Bellevue Road, Bellevue Hill. (2) Charge over Option Agreements in relation to 25, 25A and 27 Bellevue Road, Bellevue Hill. NB It is recognised that the option on 25A may not be available at settlement but will be provided as soon as executed. (3) Unregistered second mortgage over 27A Bellevue Road, Bellevue Hill. It is agreed no caveat will be lodged prior to the expiry of the loan term for the initial tranche. (4) Lodgement/assignment of Bank Accepted Bills of Exchange ("Bills") with face value of $140,000. (5) Joint and several guarantees of: W Jamieson and G Pearson. It is agreed the Bills will be released by Devreal, at its discretion, upon the substitution of satisfactory alternative security. DEVREAL'S Gadens, 175 Pitt Street, Sydney. LAWYER: Phone: 232-5566 (Mr Jon Denovan) BORROWER'S LAWYER: Hanley Cameron and Goold, 350 Oxford Street, Sydney (Mr Garry Cameron) DOCUMENTATION Subject to Devreal and its lawyers total satisfaction: COSTS: All legal and related professional costs are to the Borrower's account. If paid by Devreal they will be re-imbursed whether or not the facility is drawn down. MATERIAL ADVERSE CHANGE: Devreal reserves the right to withdraw the facility should anything transpire that renders its completion undesirable. INSURANCE: A comprehensive policy noting Devreal as mortgagee must be provided with cover for the replacement value of the improvements. SPECIAL CONDITIONS: INITIAL TRANCHE Satisfactory valuation of 23A Bellevue Road, Bellevue Hill. ACCEPTANCE: URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Clarke JA) 39 To confirm your acceptance of the terms and conditions please sign the attached copy of this letter and return same with your cheque for $5,000. This sum will be reimbursed on drawdown. The offer is open until 23 September, 1988." Following receipt of this letter the second and third respondents met with Bembrick and two officers of an organisation known as Scotts Developments Pty Ltd ("Scotts") in order to negotiate a joint venture between the first respondent and Scotts for the development of the properties which development was to be funded by the appellant. At 1 pm on 21 September Draft Heads of Agreement were settled. Following this occurrence the second respondent advised Devreal that its offer was declined. Later in the afternoon, however, Scotts pulled out of the deal. There then took place a meeting between the second and third respondents and Bembrick at which the latter said that in the circumstances of Scotts withdrawal the appellant would be prepared to fund the project. In response to a suggestion from the second respondent that Bembrick did not have authority to commit the appellant he suggested a meeting with Mr Anderson the appellant's New South Wales State Manager. At that meeting the following discussion took place: "BEMBRICK: 'Meet Bruce Anderson our State Manager. As I mentioned earlier, Bruce, Bill and Glen were just about to sign up with Bob Scott who pulled out. They had full financing for acquisition and development lined up from Devreal." JAMIESON: 'We knocked back our financing with Devreal because we had shaken hands with Scotts. As you know, Custom Credit had introduced Scotts to us." ANDERSON: 'Yes I know..." ANDERSON: 'Steve (Bembrick) has already told me about the offer from Devreal. Have you got a copy of the Letter of Approval from Devreal?' JAMIESON: 'Yes, here it is.' Mr Anderson was then handed a copy of the Devreal letter. Mr Bembrick then said to Mr Anderson: "Bruce, Bill and Glen have been told by Equity Pacific that the people they are dealing with at Custom Credit don't have authority. They've got a letter from Equity Pacific to that effect." Mr Anderson then requested a copy of the letter to which I have previously referred. It was handed to him. He responded: "What would he know. Of course I've got authority, I'm the State Manager for New South Wales.' Having read the Devreal letter of offer, the following conversation occurred. ANDERSON: 'Steve, I can't see why we can't do the same deal as Devreal.' BEMBRICK: 'I can't see why not either.' JAMIESON: 'Can you do a better deal than Devreal? We can still go back and see them tomorrow morning though I would feel embarrassed doing so at this stage." ANDERSON: 'Well what do you have in mind?' JAMIESON: 'What about the profit share?' ANDERSON: 'We're prepared to take 15% instead of 20% and that will be taken on completion of the end of the project. That's a better percentage than Devreal." 40 UNREPORTED JUDGMENTS JAMIESON: 'It's great, what about the interest rate? Devreal had offered 2.75% above bank bill rates. I'd prefer a fixed interest rate because I've had bad experiences with foreign currency transactions.' ANDERSON: 'I can't do a fixed interest rate for the whole term to match Devreal's offer because our rate at the moment is 17%. What we can do is fund acquisition costs at our normal rate of 17% and fund the construction using a percentage over bank bill rates. It is not our practice to use bank bill rates, but in this case, I think we could do it. The project is good enough. We can do better than Devreal and give you 2% above the bank bill rate. Bank bills will work well for the construction part of the project. What Custom Credit does is to draw the bills for a term of six months from its fund, deposit them into another account from which you can draw as the funds are required. That way the rate is fixed as best we can. The term for the whole project will be for 18 months as in the Devreal offer.' Security was then discussed. JAMIESON: 'I don't want my property tied up as security for the project. As you know my property is mortgaged to the Commonwealth Bank. What I am looking at is for Cenepro to purchase my property for $750,000 then I can pay out the Commonwealth Bank and Cenepro can give Custom Credit the mortgage it requires. As I told Steve, I want to make it clear to you that Cenepro and I are to be kept separate as far as this project is concerned. Also I don't want to take any risks. I've got some litigation on at the moment with the bank in relation to a foreign currency transaction and I don't want to do anything to ruin my position in relation to that litigation. That's why Bob Scott's offer was so good. He was going to give me an extra $370,000 on top of the $750,000 on my property and Glen was going to get his architectural fees up-front.' ANDERSON: 'OK. How about we structure it this way. We'll prepare documentation so that you give Cenepro an option over your property and then Cenepro will charge the option in favour of Custom Credit. But in the meantime, we want a lien over your bills.' JAMIESON: 'You' ve got my personal guarantee as well as Glen's and there's $100,000 equity in the property anyway - 23A is worth $450,000 and we got it for $350,000. That should be enough.' ANDERSON: 'You are willing to give a lien over the bills in the Devreal offer.' JAMIESON: 'Well, I really need the money now. Anyway, in the Devreal offer it was agreed that the lien was going to be released on substitution of security over 27A and that was going to happen quickly. I was going to get paid out upfront.' ANDERSON: 'Well that's what is going to happen here. The lien will only be there until final documentation is completed and an option on 27A in favour of Cenepro is documented. Then your bills will be returned.' JAMIESON: 'OK I'm happy with that.' BEMBRICK: 'Are you happy with that Glen?' PEARSON: 'Yes.' In celebration of the 'deal' drinks were obtained. The conversation continued: BEMBRICK: 'Bruce, what are we going to do about the settlement on 23A this Friday?' ANDERSON: 'All the girls have gone home so we can't get documentation prepared this evening.' URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Clarke JA) 41 BEMBRICK: 'We could use our previous offer just to deal with the immediate settlement so we can have a cheque ready for that on Friday. We could also at the same time prepare the letter for the full funding for Cenepro to sign on Friday.' ANDERSON: 'Fine.' JAMIESON: 'So all this can be ready for Friday?' BEMBRICK: 'Yes.' The letter of 6 September 1988 offering the facility of $880,000 was then amended to constitute a facility for $480,000. The purpose of the facility shown in the letter was changed so that it related only to the acquisition of No 23A. After discussion, the interest capitalisation facility was deleted, then reinstated. Provision was inserted for rental on 23A to be forwarded to Custom Credit. There was then a discussion about Custom Credit's fees. The following was said: JAMIESON: 'You are not going to charge anymore than Devreal's $15,000 establishment fee.' ANDERSON: 'No.' JAMIESON: 'When do you get your participation fee?' ANDERSON: 'On Friday when you get the cheque for 23A, we'll draw down the participation fee. Also, I want to make this clear. If we can't get the whole deal there is no basis for us simply to fund the first settlement. We want to lock you in so you don't go back to Devreal.' PEARSON: Well, since you are giving us full funding and a bit better deal we won't want to do any deal with anyone else.' ANDERSON: 'I want to make sure that you don't.' BEMBRICK: 'What if we put in a discharge fee of $50,000?' ANDERSON: 'Good idea." Bembrick then wrote onto the amended letter the following: 'Discharge Fee Should this facility be discharged at the expiration of the term, a fee of S50,000 is payable on discharge.' Bembrick then read those words out to Pearson and Jamieson and asked: "How does that sound?' JAMIESON: 'OK.'" Thus, according to the respondents an agreement was struck. That agreement was partly in writing (the Devreal letter) and partly oral. The question which confronts the court is whether in the light of surrounding circumstances an agreement was concluded. The question depends "upon the intention disclosed by the language the parties have employed" (see Masters v Cameron, 91 CLR 353, at 362). I have adopted those words from the judgment of the majority in Masters for the reason that it poses accurately the test which should be applied in the circumstances of the present case. Where there is a disputed contention that a contract, which is partly in writing and partly oral, is concluded between the parties the court is required initially to determine what was said in the relevant conversations and to identify the document or documents constituting the writing. Once the court has resolved these factual questions it moves to the second stage in which it considers whether the words, which it has found were spoken on the relevant occasion, and the documents it has identified, establish the alleged contract. In this task the court's attention is concentrated upon two questions, first, whether the necessary intention is established and, secondly, whether the terms of the alleged agreement are sufficiently certain. If it concludes that the parties 42 UNREPORTED JUDGMENTS did intend to conclude a contract - that is, that they were ad idem - and that the terms of the contract were not uncertain then it will uphold the existence of the contract. It should, however, be pointed out that when the court embarks on a consideration of this issue questions invariably arise as to the admissibility, and relevance, of evidence of surrounding circumstances. Evidence of this nature will clearly be admissible in relation to the first stage of the enquiry. Where the court is confronted with conflicting evidence as to what was said, and which documents were discussed, at the critical meetings it will necessarily turn its attention to those indicators which support one or other version advanced in evidence. Those indicators will generally include the surrounding circumstances - being events which occurred after, as well as before or simultaneously with, the conversations in issue. This is because the fact that one version of the critical conversations is more consistent with other events clearly established by the evidence will tend to suggest that it is more probable that that version is the correct one. Once, however, the first issue is resolved or where there is no dispute as to what is said, and which documents form part of the alleged contract - as in this case - there may be a question whether evidence of surrounding circumstances (including subsequent events) is relevant to the second stage of the inquiry. I think it can be taken that as a general rule it will be but before I expand on that statement it is convenient to say something about the intention of the parties. I can be brief on this topic for while there has been debate on the question whether the court seeks to ascertain the subjective intention of the parties or applies an objective test the authorities have come down firmly in favour of the latter. That is that the court looks to what was said and done and not to the subjective intention of the parties. As Holmes J said in "The Common Law" (p 309): "In contract, as elsewhere, it must go by externals and judge parties by their conduct". Or, as it was put by the majority in Taylor v Johnson, 151 CLR 422, at 428: "The law is concerned, not with the real intentions of the parties, but with the outward manifestations of those intentions". That is not to say, however, that evidence of actual subjective intention will never be relevant. It is established that such evidence is of direct relevance where it is said that a document which presents as a written contract is a sham. Or where a party makes, or accepts, an offer in jest to the knowledge of the other party. The subject is discussed in detail in the judgments in Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd, (1985) 2 NSWLR 220, but it is unnecessary to do more than note that evidence of actual intention may be relevant in particular cases for no reliance is placed on evidence of that nature in this case. Whether or not evidence of actual intention is admissible it has long been established that evidence of surrounding circumstances, and subsequent conduct, is admissible upon the question whether a contract has been concluded between the parties (Film Bars Pty Ltd v Pacific Film Laboratories, (1979) 1 BPR 9251; Australian Broadcasting Corporation vy XIVth Commonwealth Games Ltd, (1988) 18 NSWLR 540; Barrier Wharfs Ltd v W Scott Fell and Co Ltd, (1908) 5 CLR 647, at 669; Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd, supra). In this respect the question whether there is a contract between the parties is to be distinguished from the one which arises when it is the construction of a written contract which is in issue. In the latter case evidence of surrounding URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Clarke JA) 43 circumstances, but not subsequent events, is admissible in cases where the language used in the contract is capable of more than one meaning (Codelfa Construction Pty Ltd v State Rail Authority of NSW, 149 CLR 337, at 352). In this case the respondents contend that the conversation on 21 September, particularly when understood in the light of the preceding events, clearly constituted a binding contract. The appellant however pointed to a number of features of the transaction in support of the submission that it did not bind itself to the provision of 'full funding' or, more accurately, to lend $6,500,000 to the first respondent upon the terms of the Devreal letter as varied in the conversation of 21 September. Those features could conveniently be divided into two categories. The first containing various expressions in the Devreal letter which were said to be inconsistent with a concluded agreement. The second concerning those features of the transaction which rendered it inherently unlikely that the appellant would, as a large finance company, bind itself to lend approximately $6,500,000 to the respondents for use in a staged development involving complex security arrangements in the informal manner for which the respondents contended. In support of this submission reliance was placed upon B Seppelt and Sons Ltd v Commissioner for Main Roads, (1975) 1 BPR 9147, and Coogee Esplanade Surf Motel Pty Ltd v Commonwealth of Australia, (1983) 50 ALR 363. As I have earlier indicated the appellant submitted at the trial that the parties did not intend that a binding contract came into existence until the letter referred to in the conversation had been provided and signed. I am unable to accept this submission. The circumstances in which the conversation occurred when considered together with the terms of the conversation deny the validity of this view. Let me amplify that statement. The respondents were not interested in proceeding with their venture unless they had secured a commitment from a financial organisation sufficient to fund the full development. This is what was meant, I apprehend, by the expression "full funding". They were not interested in securing a commitment for a lender to lend the funds for the purchase of individual properties. Those properties were of use to them only as part of the proposed development. They needed a commitment from a financier to lend all the moneys required for the development. It was for this reason that after receiving a letter dated 6 September from the appellant offering funds only for the purchase of 23A Bellevue Road the respondents looked elsewhere for financial assistance. The offer contained in the Devreal letter met their requirements. Devreal offered a commitment to provide $6,500,000 which constituted full funding and the respondents understood this to be an offer which would, upon acceptance, form the basis of a contract. Although they had rejected the Devreal offer before their important discussions with Bembrick and his superior, Anderson, they still believed that if no satisfactory arrangement could be secured from the appellant they could revive it. In this context they were interested only in securing a commitment, or, to put it another way, a binding obligation, from the appellant to provide full funding. This view is fortified by the respondents insistence that as Bembrick did not have authority to bind the appellant, they deal with someone who could bind it. Hence the conversation with Anderson whose authority was not in question. During the discussion agreement was reached on each point which arose and at the conclusion the participants enjoyed celebratory drinks. While these were being 44 UNREPORTED JUDGMENTS enjoyed there were further discussions which descended into greater detail. During these Anderson proposed an additional term to "lock" the respondents in. This term was also agreed. Following these discussions the respondents lost interest in Devreal. They had, or believed they had, a binding commitment for "full funding" from the appellant. Their belief was, as it seems to me, reasonable. The words of Blackburn J in Smith v Hughes, [(1871) LR 6QB 597, at 607] are apt: "Tf, whatever a man's real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that bellef enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party's terms." Neither Anderson nor Bembrick gave evidence so the court was never apprised of their subjective intentions. What they said and did, however, induced a reasonable belief in the respondents that they were entering into a contract. The terms of that contract were described by Cole J in these terms: "Thus, the agreement reached that evening was that Custom Credit would provide full funding. The arrangement was that it would be on the same terms as that offered by Devreal except that the profit percentage would be less and the interest rate slightly less. The letter for full funding was to be prepared and available on Friday 23 September. As an interim measure to ensure funds were available for settlement of No 23A on Friday 23 September, a letter relating only to those funds was prepared, being a handwritten amendment of the previous letter of 6 September. To ensure that Cenepro was bound to take the full funding from Custom Credit, it being contemplated the full funding letter would be ready for signing on 23 September, a provision was inserted to the effect that their failure to do so would result in an obligation to pay an additional $50,000." I see no reason to differ from the substance of his Honour's conclusions. The arrangement then concluded was not expressed to be subject to the letter which Bembrick promised (and which could not be furnished on 21 September because all the staff had gone home before the discussion). Nor, in my opinion, was there anything said during the conversation which gave rise to the implication that the agreement reached by the parties should be regarded as provisional until a formal letter confirming its terms was provided. There is, however, more substance in the uncertainty argument which it is convenient to consider at the same time as the "subject to contract" argument. Broadly, the submission was that there were so many aspects of the transaction left for future discussion and decision that the so-called contract lacked requisite certainty and was regarded by the parties merely as providing the fundamental bases for their arrangement, the full details of which were to be spelt out in a later agreement or agreements. These aspects included, but were not limited to, those sections of the Devreal letter dealing with "Further advances", "Documentation", "Material adverse change" and the terms of the mortgages which were to be executed. These terms were said to indicate that all of the details necessary for the implementation of the arrangement had not been worked out. In determining whether these features robbed the arrangement of the requisite certainty it is important to bear in mind that in situations where it appears that the parties intended to make a contract the courts will strive to give effect to that intention (see, Upper Hunter County District Council v Australian Chilling and Freezing URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Clarke JA) 45 Co Ltd, 118 CLR 429, at 437; York Air Conditioning and Refrigeration (A/asia) Pty Ltd v The Commonwealth, 80 CLR 11, at 26, Corpers (No 664) Pty Ltd v NZI. Securities Australia Ltd, 1989 ASC 55-714)In Biotechnology Australia Pty Ltd v Pace, 15 NSWLR 130, Hope JA said, at 143: "All these decisions show how far courts are prepared to go in order to find that there is an enforceable contractual promise where that is what the parties have intended. There are of course limitations. I have already referred to the case where the promisor has a discretion, not only as to what he shall do, but also as to whether he shall do anything. Such a promise is illusory. Furthermore it appears that the promise will not be enforceable if the manner of performance, including the amount of money to be paid or, if relevant, the number of shares to be offered, is a matter entirely in the discretion of the promisor and no criteria by which the performance required of the promisor can be measured, or the minimum of that performance can be measured, is expressed or can be found to be implied." In this case I have already indicated my view that in their discussion on the evening of 21 September the parties intended to conclude a contract. In these circumstances the court should strive to give effect to the parties' intentions. Furthermore neither the fact that the terms of the mortgages had not been settled nor that the precise implementation of the arrangement had been spelt out in detail should, in my view, necessarily lead to the conclusion that the contract lacked certainty. One of the questions which concerned the court in Godecke and Anor v Kirwan, 129 CLR 629, was whether a contract containing the following term" "6. If required by the Vendor/s I/we shall execute a further agreement to be prepared at my costs by his appointed Solicitors containing the foregoing and such other covenants and conditions as they may reasonably require." lacked certainty. The court concluded that it did not. Walsh J was of opinion that the clause permitted the insertion of covenants "not inconsistent with those contained in the offer" and which were objectively reasonable. If the parties could not agree on reasonableness the court could resolve their differences. Gibbs J agreed, pointing out that parties to a contract may leave terms, even essential ones, to be settled by the solicitors for one of the parties. Although Gibbs J left open the question whether the fact that the power to determine outstanding matters was vested in a party, rather than its solicitor or a third party, should lead to a different result Walsh J (and Mason J agreed with him) thought it should not. Of course there was no express requirement in this case that the terms of the documentation should be reasonable. The requirement was that they should be to the "total satisfaction of the appellant and its lawyers". In this respect it was similar to the contract considered by Bray CJ in Powell v Jones, 1968 SASR 394, whose judgment was approved by Walsh J in Godecke. His Honour held that subject to the qualifications expressed at p 398 there is no reason in principle for holding that there cannot be a binding contract if some matter is left to be determined by one of the contracting parties (see also Axelsen and Ors v O'Brien, 80 CLR 571; Hillas and Co v Arcos, Ltd, (1932) All ER Rep 494, at 507-8). That result would not flow if it was left to one party to determine not only the terms of documentation but whether it should proceed with the transaction itself. In the present case it was submitted that the terms relating to further advances under the heading "Amount" did leave that decision to the appellant. In my view, 46 UNREPORTED JUDGMENTS however, the better view is that the parties had made a contract a term of which enabled the lender to reconsider its position if, for instance, a DA approval was not objectively satisfactory. The submission that the case fell within the third category identified in Masters v Cameron (supra, at 300) raises a slightly different question. It assumes that the contract did not fail for want of certainty and propounds a consensual intention that no contract would come into existence until the execution of a formal agreement. In this case it was said that the discussion concerning the provision of a formal letter by the appellant when regarded in the light of the statements in the Devreal letter, such as the provisions regarding documentation which I have identified, evidenced a clear intention that no contract would come into existence until the letter was provided. I have already indicated my inability to accept that the parties intended that they remain in a state of negotiation until the letter was provided but there remains the contention that the provisions in the letter demonstrated that no contract had been concluded. The term concerning documentation would not lead me to that conclusion. It was simply a term of the contract reserving to the appellant and its lawyers a discretion as to the terms of the security documents. The provision headed "material adverse change" is more difficult for it reserves to the appellant the right to withdraw from the transaction. That right is not an unqualified one. Its exercise is dependent upon a material adverse change. Having regard to the whole of the letter I would regard this provision as a term of the contract permitting the appellant to withdraw from the facility (as it is described in the letter) upon the occurrence of what was objectively a materially adverse change. Whether any change was objectively materially adverse would fall to be judged upon the terms of the contract and its surrounding circumstances. Accordingly, I would reject this submission of the appellant and I would uphold his Honour's judgment on the existence of a contract. DAMAGES Cole J proceeded upon the basis that the respondents were entitled to maintain a claim for the loss of the profits which the respondents might have earned if the appellant had not breached its contract to provide "full funding". In his judgment he said that the respondents' right to maintain that claim was not in dispute. As his Honour pointed out the assessment of the amount of profit or loss which would have been occasioned had the breach of contract by the appellant not occurred and the project been completed and sold involved the consideration of various assumptions. Furthermore his Honour considered that it was necessary to determine at least four principal matters in order to arrive at conclusions on which to base an assessment of the likely position at the end of the hypothetical development. Those four matters were: (1) The date of completion and sale of the development. In this respect the respondents alleged the development would have been completed and sold by 31 March 1990. On the other hand the appellant alleged it would have been completed later resulting in additional costs, including construction and interest costs, and lower realisations due to a depressed market. (2) Could the units in the development be pre-sold off plan prior to completion? URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Clarke JA) 47 (3) The value of the development upon completion. (4) The costs of completing the project including land, consolidation costs, development expenses, construction expenses and interest. His Honour concluded that the development would probably have been completed by 31 March 1990 and that the units would have been pre-sold off plan prior to that date. Having assessed competing evidence he then determined that the value of the development upon completion would have been $11,090,000 and that the cost of completing the development (including construction costs of $3.3 million) would have been $8,795,000 leaving a profit to the developers of $2,295,000. The appellant challenged the fundamental basis on which the assessment was made and also the findings on the four principal matters which I have earlier set out. Its first submission was that his Honour was in error in proceeding to award damages upon a consequential loss basis. The proper measure of damages for breach by a lender of its contractual obligation to advance moneys was the additional cost of borrowing the moneys from elsewhere. If, according to this argument, the substitute funds could be secured from sources other than the defaulting lender then it was wrong in principle to award consequential losses flowing from the failure of the development which was dependent upon borrowed funds. That is because it remained within the borrowers capacity to complete its development albeit that it was required to pay additional interest to secure the substitute funds. If, on the other hand, other funds could be secured for no additional cost then the borrowers damages would be limited to the additional expenditure incurred in raising the substitute finance. In any event, the argument proceeded, where it had not been shown that the borrowers were unable to secure substitute funds it was quite wrong in principle to allow consequential losses by way of damages. There is, in my opinion, a great deal of substance in these submissions. Where a finance company declines to honour a contractual obligation to provide funds to a developer different consequences may flow. The developer may be able to obtain substitute finance and if he does so it would follow that its damages would be limited to the additional cost of the substitute finance together with incidental matters such as the expense of obtaining the alternative finance and, perhaps, damage flowing as a result of any delay occasioned by the breach of contract. It would, it seems to me, be contrary to principle to hold that a developer who could secure alternative finance should be treated as though it was incapable of completing the development and awarded consequential losses (See Head v Kelk, 63 SR 340). On the other hand if the evidence demonstrates that no alternative finance was available to the innocent borrower no reason would appear why, in appropriate cases, it should not be able to maintain a claim for consequential losses. In addition there may be cases where, although a borrower may theoretically be able to obtain alternative finance, the circumstances in which the breach occurred, or particular features of the case, lead to the factual conclusion that alternative finance would not, in a practical sense, be available to the borrower for the completion of the development. This, I think, is what was suggested by the respondents in this case. They claimed that after the initial promise by the appellant its officers not only decided not to honour the promise but led them on by making offers of much more limited finance in circumstances where it was not a sensible commercial alternative for them to seek the finance elsewhere. Indeed his Honour found that in all the 48 UNREPORTED JUDGMENTS circumstances of the case the respondents had no real alternative but to go along with the successive proposals of the appellant. Be that as it may the major difficulty with the appellant's present submission is that it would seem clear it was not made at the trial. Certainly his Honour's judgment on damages does not mention the point now under consideration. On the contrary his Honour stated that it was not in dispute that if a defendant is aware of the purpose for which the plaintiff enters into a contract of loan then, upon the defendant's breach of that contract, the plaintiff is entitled to consequential losses flowing from the consequential incapacity to effect that purpose. Further, reference to the written submissions of the appellant at the trial makes it clear that the appellant's sole concern with the principle that damages were recoverable in respect of the additional costs of securing alternative finance was to demonstrate that on the evidence in this case those damages could only be nominal. In effect its counsel raised the matter simply to show that no damages were properly recoverable under that heading. The written submissions then proceeded to deal with the claim for consequential loss. At no stage does it appear that it was submitted that, in the absence of proof that alternative finance could not be secured, a claim for consequential loss could not be maintained. Hence, the point now under discussion was not dealt with by his Honour at the trial. Not only did counsel for the appellant not take the specific point but he did not seek to raise with the respondents' witnesses whether they had found it impossible to raise funds elsewhere or why they had not followed up an offer contained in a letter from the Macquarie Bank dated 23 March 1989. It seems clear to me that if the point now under discussion had been a live issue at the trial then it would have been canvassed in the evidence and the respondents may have sought to lead evidence of the difficulties of raising finance from other sources. In all the circumstances I do not think it is now open to the appellant to raise this point and I would reject this particular challenge. The appellant also contested the findings in respect of each of the four principal matters earlier mentioned. It will be recalled that the first finding was that the development would have been completed by 31 March 1990. This finding depended, in turn, on a number of other findings as to the likely course of events which would have followed if the appellant had not breached its contract. The appellant put before this court a table which compared the likely course of events as found by his Honour and the actual course of events prior to the trial. That was a telling document and I think it is appropriate to set it out in full: " EVENT FOUND ACTUAL Lodgment of DA 8(or 12)/8/88 8(or) 12/8/88 Development consent December' 88 14/3/89 Lodgment of BA January'89 9/6/89 Building consent April'89 30/11/89 Commencement of construction 1/5/89 Nil Completion of construction mid-Feb'90 Nil Approval of Strata plan 31/3/90 Nil Settlement of Sales 31/3/90 Nil" URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Clarke JA) 49 The appellant submitted that the hypothetical timetable under which a building consent was obtained by April 1989 and construction commenced by 1 May 1989: (a) Could never have been accomplished, even if the appellant had not breached its contract, because of delays with occupiers of the properties and in the acquisition of the land which operated as independent causes of delay; and (b) Made no allowance for the actual delay in development consent between December 1988 and 14 March 1989 which could not be blamed on the appellant. His Honour rejected similar challenges upon the basis that the delays mentioned were consequential upon the appellant's breach of contract. In particular his Honour found that the respondents were unable to honour an agreement to pay one of the tenants $25,000 in December 198B because of the appellant's failure to honour its obligation to provide full funding. In addition his Honour concluded that the appellant's breach of contract had prevented the respondents from lodging the building application in January 1989 which was a necessary pre condition to the commencement of work on | May 1989. According to his Honour the relevant consequences of the failure of the appellant to honour its obligation to provide full funding were that the third respondent, an architect, was unable to devote sufficient time to the project because he was obliged to consult regularly with the appellant. This was of added significance insofar as the respondents did not have the funds to engage a firm of architects to do the work which the third respondent otherwise might have done himself or to engage engineering consultants to provide the engineering input to permit completion of the building application. In this respect his Honour accepted the third respondent's evidence that had the promised funds been available without prevarication the building application would have been attended to in time to enable its lodgment in December 1988 or January 1989. Of course the building application would not, in any event, have been lodged until after the grant of development approval. This is because, as the third respondent explained, there was a possibility that conditions would be imposed upon the grant of development for which provision would need to be made in the building application. Accordingly the lodgment of the building application in January 1989 would necessarily have been dependent upon the grant of development approval in December 1988. There are a great number of difficulties with this approach which have led me to the conclusion that it cannot be sustained. At the outset I am unable to accept that the failure to engage engineering consultants between September and December 1988 and architects earlier than January 1989 resulted from the appellant's breach of contract. Nor am I able to accept that the appellant was responsible for the delay in obtaining development approval. While I would accept that it may be appropriate to proceed upon the hypotheses that these steps had occurred as planned if the breach of contract had led to the initial delays in obtaining development consent and lodging the building application I do not think that there is any evidence that the breach did have these consequences. In this context it is important initially to recall the terms of the contract between the parties. It was not a contract under which the appellant agreed, in terms, to provide full funding for the development, whatever that phrase might mean. His Honour found that "The terms were those in the Devreal letter subject to the agreed amendments concerning profit share, interest rates, lien on commercial bills, rent directions and discharge fee". The contractual obligation thus undertaken was to provide a loan of $6,500,000: 50 UNREPORTED JUDGMENTS "To be drawn as follows: INITIAL TRANCHE $430,000 reducing to $420,000 in the event the valuation on 23A Bellevue Road, Bellevue Hill, is less than $365,000. (This term was varied in the discussions by making the initial tranche $480,000 in accordance with the letter of 6th September earlier provided by the appellant.) FURTHER ADVANCES Will be subject to completion of Devreal's project feasibility, and external valuation of the total development scheme, a check costing, and DA approval from the local council proving satisfactory in all respects." (My emphasis) No doubt the parties contemplated that an advance of $6,500,000 was akin to an advance of the whole cost of the development. That would appear from the respondents' estimates of the total development cost which were submitted, inter alia, to Devreal and which indicated a cost of $6,315.758. But the appellant did not undertake an obligation to provide full funding to the respondents as and when they sought instalments. Its obligation was clearly defined. It was obliged to provide an initial advance of $480,000-00 and the later advances were to become due upon the happening of the contingencies set out in the Devreal letter. All advances subsequent to the first one were dependent upon those conditions including, relevantly, the condition that the respondents obtain a development approval satisfactory in all respects. In terms of that contract the respondents could not have held out any expectation of obtaining further advances to enable them to take steps in the development prior to the obtaining of the development approval. In particular they could not realistically have relied on the provision of funds prior to the grant of development approval for the retaining of architects and engineers to carry out work which they then required performed. Certainly they could have retained architects and engineers in the expectation that upon obtaining development approval they may have funds to pay them but no breach by the appellant of its contractual obligations deprived them of that opportunity nor caused them to delay retaining those persons. In fact the engineer was retained at the end of October and the other architect on 9 January - both events occurring before the grant of development approval. There is some difficulty in dealing with this point as his Honour did not define with any particularity in either of the judgments the precise breach committed by the appellant nor when it occurred. It was not suggested, however, that the appellant defaulted in compliance with the obligation to provide the initial tranche. If it complied with that obligation then the breach occurred in the failure to provide later instalments, the first of which became due, at the earliest, after the development approval had been granted. I appreciate that the respondents claimed that Mr Bembrick put them in a dilemma. He promised money to pay the tenant and failed to honour that promise. And he also failed to provide the promised letter. But the appellant was not contractually obliged to provide moneys before the grant of development approval to pay out a tenant and promises by Mr Bembrick had no contractual force. Additionally the appellant's failure to provide the letter may have made the respondents uneasy but did not, as it seems to me, constitute a breach of contract. The respondents had, as his Honour found (and they claimed), secured a binding commitment from the appellant and any failure on their part to take necessary steps before the grant of the development approval cannot, in my opinion, be regarded as a consequence of a breach of contract. I might add I find URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Clarke JA) 51 it difficult to conclude that the delay in the retention of the engineers, and even the architect, was occasioned by an anticipated breach. There are other problems with his Honour's conclusion that development approval was delayed by the appellant's breach of contract. His Honour noted that the development application was lodged in September 1988 and that approval was not given until March because the respondents were unable to pay the tenant of 25A Bellevue Road the sum of $25,000. In fact an amended development application was lodged on 25 October 1988. The occasion for the lodgment of an amended development application was the revision of the original plans in order to provide for the development on the site of eight two bedroom units. Notwithstanding, the respondents expected the application to be considered at the December meeting of the Woollahra Municipal Council but this did not occur. This was not surprising for on 10 November 1988 the third respondent's firm had provided additional information to the Council and on 14 December 1988 submitted floor plans showing a number of amendments. These were submitted two days after the Council meeting but in view of the third respondent's evidence that these were submitted in response to a requirement from Mr David Sung of Woollahra Council it is a fair inference that the respondents knew that the application would not be considered until the documents had been provided. In early January the third respondent heard, for the first time, that the tenant of 25A was not prepared, contrary to earlier indications, to consent to the project. This action on the part of the tenant led the Council to decline to deal with the application in January 1989. Thereupon the third respondent spoke to the tenant of 25A Bellevue Road who indicated that he was protecting himself until the money which he was expecting had been received. In evidence the third respondent stated that the respondents were unable to pay the tenant because the appellant had not funded them. But, as I have sought to point out, there was no contractual promise binding on the appellant to provide that funding at that stage. This had apparently been recognised by the third respondent for in a draft letter to the Council dated 8 March 19839 he stated, inter alia, "and in the light of the fact that funding for acquisition and development is subject to development approval...". This letter is also relevant for it contains a statement that the tenant had provided consent in the light of a letter of intent provided by the respondents (despite not having been paid $25,000) and it was this information which led the Council at its meeting on 14 March 1989 to consent to the development approval. It follows that I am unable to accept the conclusion that if the appellant had not breached its contract the development approval would have been granted in December or January at the latest. In my opinion the failure to obtain consent prior to 14 March cannot be laid at the door of a breach of contract by the appellant and his Honour's finding to this effect cannot stand. Insofar as this finding was fundamental to the later conclusion that completion of construction would have taken place by mid-February 1990 and final settlement of all sales would have been completed by the end of March of that year those conclusions were also erroneous. I should add that, quite apart from this matter, the six month difference between the hypothetical date on which building consent was taken to have been obtained and the actual date of the grant of such consent also presented a not inconsequential obstacle to an acceptance of the respondents' case. 52 UNREPORTED JUDGMENTS The third respondent gave evidence that it was normal after lodging the development application to work on the building application documentation so that upon receipt of the development approval any necessary amendments could be incorporated in the building application. His Honour noted that and then said "between September and December 1988 Custom Credit not having honoured the agreement to provide full funding, the plaintiff was unable to engage engineering consultants to provide the engineering input to permit completion of the building application. That position maintained until at least May". There was as I have pointed out no contractual obligation to provide funds prior to the grant of development approval but in any event the third respondent's evidence demonstrated that engineering consultants were engaged at the end of October 1988. Although the respondents might not have given them the full go ahead until later this could not, in my view, be sheeted home to the appellant. The respondents' case was that if funds had been available they would have been able to lodge the building application in December 1988 or January 1989. According to the third respondent his opinion was that approval would have been granted within three months, that is, by the end of April of that year. Leaving aside the fact that the period between the application and grant of building approval was longer than the third respondent had estimated there was simply no basis for concluding that the application would have been lodged in December 1988 or January 1989 except for a breach of contract by the appellant. The period between the grant of development consent and the lodgment of the building application was slightly under three months which was a far greater period than the few weeks which the third respondent thought would be needed. The evidence suggesting that this was the fault of the appellant was restricted to claims of impecuniosity delaying the efforts of the engineer and the additional architect. But the evidence to this effect was vague in the extreme and in my opinion, even assuming that there was a contractual obligation to provide funds at that time for engineering and architectural services, was insufficient to lead to a conclusion that the appellant was responsible for the delay. Furthermore the Council itself took nearly six months to process the building application because final amended plans were not submitted until 21 November 1989. I fail to see how this delay can be laid at the appellant's feet. Iam simply unable to accept that the evidence demonstrated that if there had been no breach of contract by the appellant the respondents would have secured building consent by April 1989 sufficient to enable them to commence construction on 1 May 1989. As the commencement of construction on that date was critical to a completion of the project in mid-February 1990 it must follow that I am unable to accept that, if the project had proceeded unimpeded by any breach of contract, the buildings would have been completed by that time. In my opinion the respondents failed to establish that if there had been no breach of contract they would have been in the position to commence construction prior to December 1989. Even if the construction is assumed to have taken only the 42 week period allowed by his Honour this would mean that the buildings would not have been completed until the end of July 1990, at the earliest, a date by which, on the evidence, the property market had substantially collapsed. It follows from this conclusion that his Honour's assessment of damages cannot stand and the judgment must be set aside. Although it would be highly desirable for this Court to reassess damages in the present circumstances in order to save the parties additional cost and delay I fear that the court is not in a URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Clarke JA) 53 position in this case to carry out that exercise. This was, I think, accepted by the parties who did not put before the court any calculations based upon assumptions different from those accepted by his Honour. Accordingly, in my opinion Cole J's judgment should be set aside and the case referred for a new trial on the issue of damages. The appellant also challenged his Honour's conclusions that the cost of construction of the development would have been $3,300,00 and that all sales of strata units would have occurred by 31 March 1990 (that is, before the market deteriorated). Insofar as I have indicated the damages ought to be reassessed it is not desirable that I deal with these claims. My silence on these aspects of the case should not, however, be regarded as any indication of my views. Finally, I observe that if this court had been able to re-assess the damages it would have been required to assess in accordance with appropriate legal principles. The application of those would, I tend to think, have required the court to adopt an approach different from that followed by his Honour. What is readily apparent is that the assessment of the damages depended upon answers being given to a significant number of hypothetical questions concerning the likelihood of specific events, a number of which were dependent upon the volition of third parties, occurring. For instance, the assessment depended essentially upon the hypothesis that, absent breach, construction would have been completed by mid-February 1990 and all sales settled by the end of March of that year. Those hypotheses depended in turn upon hypothetical findings that, breach apart, development and building consents would have been obtained at much earlier dates than they actually were and that construction commenced by 1 May 1989. The assessment also depended upon the acceptance of evidence given by Mr Robinson, a real estate agent, that it was probable that all units would have been sold off-plan by mid-February 1990. This evidence was, at best, an educated prediction of what might have occurred. There were other contingencies. That there would be no delay in construction that would lead to additional costs; that the construction costs would be as originally estimated by Mr Fisher the quantity surveyor in February 1989 with a minimal allowance for contingencies; and that (and this was most important) insofar as the cost of the project was far in excess of $6.5 million the respondents would have been able to raise additional funds on precisely the same terms as the original promised advance of $6,500,000 in order to achieve completion. All of these matters were highly speculative yet his Honour reached findings on the probabilities as to the likelihood of each of the contingencies occurring and having made findings treated each occurrence as certain. Indeed he went further. He decided that as each of these events would have occurred if there had been no breach it was probable that the respondents had lost profits in excess of $2,000,000. There is a real question in my mind whether this was a correct approach. Assuming that a loss of potential profits was capable of assessment it seems to me wrong in principle to assess the damages on the basis that a particular result would have occurred when the conclusion is based on evidence which could properly be described as speculative. I tend to the view that the claim in this case should more properly be regarded as a claim for the loss of an opportunity or chance to make profits than a claim for loss of actual profits. The principles concerning such a claim are discussed in Chaplin v Hicks, (1911) 2 KB 768, and Howe v Teefey, 27 SR 301. (See also Auburn Municipal Council v ARC Engineering Pty Ltd, (1973) 1 NSWLR 513, 54 UNREPORTED JUDGMENTS at 525.) Although in McRae v Commonwealth Disposals Commission, 84 CLR 377 (see also Hutley JA in Levi Strauss (Australia) Pty Limited v Mayne Nickless Limited, (Court of Appeal, 17 December 1976, unreported), it was suggested (at 412) that the principle in Chaplin v Hicks might be limited to the breach of a contract to give a party a chance to make a profit or gain a benefit the authorities seem to me to establish that the principle has a wider operation and applies in situations where a party seeks to establish a loss which is, in the light of a number of contingencies, properly categorised as one of an opportunity to gain a benefit. After all the second and third respondent, who were not experienced developers, were embarking on a speculative development at the end of which they may have made a profit or loss. While developers may have laughed at the suggestion that they might make a loss on a property development in the mid 1980's the extent of the property boom in 1987 and 1988 pointed to a possible collapse in the property market in later years. And this is what occurred. In assessing damages in civil actions the law observes a distinction between cases in which the question is whether a particular act has occurred and those in which the question concerns what will occur, or what might otherwise have occurred, in the future. This distinction was adverted to by Lord Diplock with Lord Diplock's statement in Mallett v McMonagal, 1970 AC 166, at 176. His Lordship said: "The role of the court in making an assessment of damages which depends upon its view as to what will be and what would have been is to be contrasted with its ordinary function in civil actions of determining what was. In determining what did happen in the past a court decides on the balance of probabilities. Anything that is more probable than not it treats as certain. But in assessing damages which depend upon its view as to what will happen in the future or would have happened in the future if something had not happened in the past, the court must make an estimate as to what are the chances that a particular thing will or would have happened and reflect those chances whether they are more or less than even, in the amount of damages which it awards." To like effect was the statement by Lord Reid in Davies v Taylor, 1974 AC 207, at 212-3. In Malec v J C Hutton Pty Ltd, 64 ALJR 316, Brennan and Dawson JJ said (at 316): "By contrast, earning capacity can be assessed only upon the hypothesis that the plaintiff had not been tortiously injured: what would he have been able to earn if he had not been tortiously injured? To answer that question, the court must speculate to some extent. As the hypothesis is false - for the plaintiff has been injured - the ascertainment of earning capacity involves an evaluation of possibilities not establishing a fact as a matter of history. Hypothetical situations of the past are analogous to future possibilities: In one case the court must form an estimate of the likelihood that the hypothetical situation would have occurred, in the other the court must form an estimate of the likelihood that the possibility will occur." (See also the majority judgment at p 318; "Evidence, Proof and Probability" (and Ed) Eggleton pp 210-212.) It is true that these statements were made in the context of torts. But I find it difficult to believe that there can be a distinction in principle in the manner in which the law deals, relevantly, with hypothetical situations depending upon whether the case is one of contract or tort. If, for instance, a patient sued a doctor claiming that he had been blinded as a consequence of the doctor's breach of contract and thereby lost the opportunity to become a concert pianist would the URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Clarke JA) 55 facts be dealt with differently depending upon whether the claim was advanced in contract or tort. I think not. In Hardware Services Pty Ltd v Primac Association Ltd, (1988) 1 Qd R 393, Thomas J expressed the same opinion at 401 and supported the opinion with reference to authority. It may be that in particular cases the court is able to make a finding that a certain event will probably occur in the future or, for example, that a present disability will, as a matter of probability, continue permanently. In those cases the law treats the event as certain and awards damages accordingly. Further the weight of authority would appear to support the view that in contract cases no discount is allowed for the possibility that the probable event may not occur. See for instance, Levi Strauss (Aust) Pty Ltd v Mayne Nickless Ltd, (New South Wales Court of Appeal, 17 December 1976, unreported, per Mahoney JA; TCN Channel 9 Pty Ltd v Hayden Enterprises, (1989) 16 NSWLR 130, at 151-6, 159; Sykes v Midland Bank Executor and Trustee Co Ltd and Ors, (1971) 1 QB 113, at 129-130 and Amann Aviation Pty Ltd v The Commonwealth, 22 FCR 527, at 538 and 539, 566, cf at 546. There is, however, something to be said for the opposing view and I would wish to reserve my own opinion on the question. But there is a clear distinction between those cases in which a court is able to conclude that a particular event would probably have occurred in the future if there had been no breach and those in which there is a contingency, or there are a number of contingencies, which rendered it quite uncertain whether the event in question would have come to pass. The former category would include cases where, to use the words of Best CJ "the plaintiff is entitled to have a compensation for being deprived of that which almost certainly happens in those cases" (Richardson v Mellish, (1924) 2 Bing 229, at 239) although it may not be limited only to those cases (see the valuable discussion of the subject by Mahoney JA in Levi Strauss). This case was, however, more complicated than a simple claim for loss of chance to make a profit on a venture. Properly analysed the respondents claim included two elements expenditure in the venture wasted as a result of the breach and the loss of prospective profits. They claimed that if the contract had not been breached they would have recouped their expenditure and made a profit. As their expenditure was far greater than the value of the assets (real property) obtained for use in the development their claim for damages could not accurately be described solely as a claim for loss of profits. Although there are statements in the authorities to the effect that an innocent party is obliged to elect between a claim for recoupment of expenditure and a claim for lost profits (eg Cullinane v British "Rema" Manufacturing Co Ltd, (1954) 1 QB 292, at 303) those statements should be understood as applying in those cases where to allow both claims would result in over compensation. In cases where it is necessary to make an award of damages including expenditure and lost profits in order to comply with the basic rule according to which damages are awarded for breach of contract then principle demands that the award made cover both elements. The judgment of Burchett J in Amann (supra, at 568 et seq) provides a convincing rebuttal of the contrary argument. In a case where claims for both heads of loss are maintained the court is required to determine, first, what expenditure has been wasted and, second, what, if any, profits were likely to have been received if the contract had been observed. 56 UNREPORTED JUDGMENTS The first task is a simple exercise in fact finding. The second involves consideration of the possible course of the innocent party's venture upon the assumption that a breach had not occurred. Except in those relatively rare cases in which a court is able to say that it is clear that a profit would have resulted the court will need to determine whether the evidentiary material is sufficient to support a finding as to the most likely of the possible courses which the venture could have taken. In some instances the uncertainties may be so great, or the contingencies may be so numerous, that the court will simply be unable to say whether a profit or loss was the likely result. In other words, any prediction would be no more than guesswork or speculation. In such a case it would seem to me that the innocent party would be confined to expenditure wasted. Where there is sufficient evidentiary material to enable the court to conclude that there was a reasonable possibility, say 40 per cent chance, that a profit of $X would have been earned then the damages should include an amount to reflect the loss of that chance. Where, however, the court concludes that if the contract had been observed the chances are that the innocent party would have suffered a loss it may well be that the claim for expenditure should be reduced to reflect the fact that all expenditure would not have been recouped if the contract had been fulfilled. However, neither this question nor an allied one concerning the onus of proof should be regarded as settled. (See generally Amman, supra p 570-1; McRae, supra p 414; CCC Films Ltd v Impact Quadrant Films Ltd, (1985) 1 QB 1, at 40.) There are two outstanding issues - breach of s52 of the Trade Practices Act and Estoppel - which received very little attention during the appeal. His Honour found a breach of s52 of the Trade Practices Act but did not assess the damages flowing from the breach for the simple reason that his assessment on the respondents' primary claim was more favourable to the respondents. The only challenge to the finding of breach was essentially the same as the appellants mounted on breach of contract. That is, that the representations made on 21 September 1988 would have been understood as having been conditioned on formal contracts. I have already rejected that submission and, accordingly, his Honour's finding on the s52 point should stand. The same comments apply in respect of the finding on estoppel which should stand. The importance of this finding was that it led to a judgment for the second respondent in the claim for possession of a mortgaged property. Although I am somewhat troubled by this aspect of the case it seems to me that once the only argument which was presented is rejected the judgment must stand. In the light of these conclusions the following orders should be made: (1) The appeal should be allowed; (2) That O.1 and O.3 made by Cole J in proceedings No 50199/90 be set aside. (3) Order a new trial in matter No 50199/90 before the Commercial Division of the issue of damages; (4) The appellant to pay the respondents' costs of the trial; (5) The respondents to pay the appellant's costs of the appeal and, if qualified, to have a certificate under the Suitors Fund Act thereof. ORDERS 1. Appeal dismissed with costs; and 2. Cross appeal dismissed. No order as to costs. Counsel for Appellant: T Simos QC and JM Ireland QC and PR Whitford URJ CUSTOM CREDIT CORPORATION LTD v CENEPRO PTY LTD (Clarke JA) 57 Solicitors for Appellant: Gadens Ridgeway Counsel for Respondent: TM Jucovic DP Robinson and D Pritchard Solicitors for Respondent: Freehill Hollingdale and Page