AIRBERG PTY LIMITED vy NATIONAL MUTUAL ROYAL BANK LIMITED SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL PRIESTLEY JA, HANDLEY JA and POWELL JA 6 February 1996 [1996] NSWCA 9 CONTRACTUAL ARRANGEMENTS BETWEEN BANK AND CLIENT — BILL ACCEPTANCE FACILITY — EARLY TERMINATION OF FIXED FACILITY — WHETHER PREPAYMENT/TERMINATION FEE PAYABLE. Appellant entered into bill facility with bank in response to bank's letter which had enclosed contractual forms - forms completed by appellant - bill facilities made available to appellant for a period of two years - appellant claimed arrangement with the bank would cease within the period on payment of discharge figure of $385,000 - bank took the view that a sum of money in addition to $385,000 was payable - dispute whether part of one of the forms, Schedule of Loan Charges, headed "Prepayment/Termination Fee" was part of contractual arrangements between parties and operative parts of printed conditions 10 and 7 in another form had to be read as being eliminated. Held: The parts of the forms said to be inconsistent could be reconciled - impossible to conclude prepayment/termination fee connoted a contractual right to terminate and override the printed conditions 10 and 7 in the "Application for Bill Facility" - "termination fee" treated literally as dealing with the situation where the contract came to an end by agreement and not breach - appellant had no express right or option of early termination of fixed term facility - no question of such a fee could arise. Priestley JA. The case that has come up from Brownie J is one which is, in essence, within an extremely narrow compass. We have taken longer to conclude the argument and reach our conclusion than I myself anticipated partly because Mr Weber has argued what, in the end in my mind, is an unpromising appeal from his point of view, with some noticeable skill and persistence. The point which the court has to decide arises from some documents which came into existence before the respondent bank — which I will simply refer to as 'the bank' — made available bill facilities — to use the jargon of banking — to the appellant. By letter dated 15 March, 1991 the bank had written to four persons. These four were connected subsequently with a company (now the appellant) which they acquired for the conducting of a particular business. The letter offered bill facilities. It referred, in its opening paragraph, to applicationforms attached which had to be completed and returned to the bank. The application form consisted of three pages, so far as the appeal papers reveal. Following execution of the application form by the appellant the bank did make bill facilities available to the appellant for a period of approximately two years. The appellant then wished to bring its arrangement with the bank to an end. At that stage a bill was outstanding, which would become payable in December 1993, apparently requiring a figure of $385,000 for its discharge. The appellant took the view that, by paying out the bill by the tender of this sum to the bank on the due date or at some appropriate time before the due date, it would be relieved of all its obligations to the bank pursuant to the agreement it had entered into with the bank in 1991. 2 UNREPORTED JUDGMENTS The bank took the view that the arrangement with it could only come to an end at the time when the appellant wanted to end it by the payment of a sum of money in addition to the $385,000 I have already referred to. That sum was eventually calculated as being in the order of $40,000. The appellant's claim that its arrangement with the bank would come to an end upon the payment of $385,000 was based upon one of the documents which had been sent to the four persons named in the letter of 15 March 1991 along with that letter. This document was headed 'Schedule of Loan Charges' and set out a number of fees of differing kinds in its printed form, in which places were left for unprinted matter to be inserted. These places were only partly filled in. It is quite clear when the various kinds of fees and payments referred to in this Schedule are compared with the printed Conditions set out on the second and third pages of the three-page document entitled 'Application for Bill Acceptance and Fixed Rate Discounting Facilities' that the document headed 'Schedule of Loan Charges' was not designed to be used only with the Application for Bill Acceptance, etc form. Some of the matters in it were relevant to the kind of agreement that would come into existence upon acceptance of the Application for Bill Acceptance etc arrangement. Some were not. It was argued before both Brownie J and in this court that part of the Schedule of Loan Charges headed 'Prepayment/Termination Fee' was incorporated into the agreement that was made between the appellant and the bank. This contention was opposed by Mr Street, who appeared for the bank. It does not seem to me that it is necessary to decide this question in order to dispose of the appeal. I will assume, without deciding, in favour of the appellant, that the Prepayment/Termination Fee section of the Schedule of Loan Charges did become part of the contractual arrangements between the parties. For the appellant Mr Weber submitted that, once it was accepted that the Prepayment/Termination Fee section of the Schedule of Loan Charges was part of the contractual agreement between the parties then consequences favourable to his client flowed as to certain of the printed Conditions. His submission was that, first, the Prepayment/Termination Fee section of the Schedule of Loan Charges in so far as it, taken together with what was added to the form and was not printed in the form in its original condition, in so far as that was inconsistent with anything in the wholly-printed part of the Application for Bill Acceptance form, had to be given primacy over inconsistent printed conditions. He then submitted that Condition 10 was inconsistent with what he argued was the meaning of the Prepayment/Termination Fee part of the Schedule of Loan Charges. After some discussion it became apparent that this submission meant that the whole of Condition 10 had to be read as being eliminated from the contractual arrangements between the parties and not only Condition 10, butalso the operative part of Condition 7. Condition 7 required the appellant to deliver to the bank a replacement bill for the full face value of the maturing bill on every occasion of a bill maturing during the four-year term of the appellant's commitment to the bank under the contractual arrangements. It seems to me that when the printed Conditions are read together with the letter of 15 March 1991 and the Schedule of Loan Charges which accompanied that letter and which contains the Prepayment/Termination Fee section essential to the appellant's argument, it is quite impossible to conclude that the Prepayment/Termination Fee section could carry a meaning which would write out of the printed Conditions such important parts of it as Conditions 7 and 10. URAIRBERG PTY LIMITED v NATIONAL MUTUAL ROYAL BANK LIMITED (Powell JA) 3 It is much easier to read the Prepayment/Termination Fee section of the Schedule of Loan Charges consistently with Conditions 7 and 10 than to treat it as having the extended meaning contended for by the appellant to the destruction of those two printed conditions. The way of reconciling the provisions I am speaking about is to treat "Termination Fee' as meaning what it says, namely, an agreed fee for an agreed termination of the arrangements between the parties and as referring to that only, and reading Condition 10 as referring to the quite different subject matter of the agreed consequences in the way of damages of the appellant unilaterally falling into breach of its obligation to present a replacement bill for every maturing bill until the expiry of the term. Condition 10 provides a way of quantifying the damages for the breach of contract that would be constituted by failure to comply with it. 'Termination Fee' on the face of it would in my opinion apply to a quite different subject matter, being a matter of agreement not breach, that is a matter of agreement to bring the contractual arrangement to an end rather than the different situation which arises when one party to the agreement falls into such breach of it as to entitle the other party to bring it to an end. I do not think it necessary to set out the details of the documents from which the arguments have arisen in this case in any more detail than I have in referring to them in what I have said to this point. Further facts are available in the reasons of Brownie J. What I have said is essentially an elaboration of the approach he took to the matter. In my opinion his conclusion was correct and the arguments raised today on behalf of the appellant must fail both for the reasons given by Brownie J and by me. I would dismiss the appeal with costs. Handley JA. I agree. I simply add some brief reasons of my own. The principles of the Common Law and Equity governing the early repayment of a loan of a fixed term were considered by the High Court in Hyde Management Services Pty Limited v FAI Insurances Limited (1979) 144 CLR 541 at 543 where Mason J said: The rule at Common Law and in Equity is that the borrower has no right to repay principal before the day named for repayment in the loan agreement, unless the agreement itself gives him such a right. If before the contractual date for repayment a mortgagor tenders to his mortgagee the principal outstanding, interest up to the contract date and costs, the latter is not bound to accept the money and to reconvey the security. A bill acceptance facility is not a contract for loan but in my opinion the same principles apply. The appellant had no express right or option of early termination of the fixed term facility. Any agreement in these circumstances that no termination fee was payable simply indicated that the contract being for a fixed term no question of such a fee could arise. Subject to those additional reasons, I agree that the appeal should be dismissed with costs. Powell JA. In its Summons in this matter the Appellant sought Declarations establishing a right on its part and an obligation on the part of the defendants to bring to an early end a bill facility which had originally been established with a term of four years. In order that it might establish that right and obligation the Appellant sought to rely on the 'Letter of Offer', to which Priestley JA has referred, and the 'Schedule of Loan Charges', to which his Honour has also 4 UNREPORTED JUDGMENTS referred which 'Letter of Offer' and 'Schedule of Loan Charges' it submitted were part of the total contractual arrangements between itself and the Respondents. Although the Respondents have accepted that the 'Letter of Offer' is part of the contractual arrangements, they have disputed that the 'Schedule of Loan Charges' is part of those arrangements. For my part I am not satisfied that either the 'Letter of Offer' or the "Schedule of Loan Charges' is part of the contractual arrangements which contractual arrangements, so it seems to me, are limited to the form of Application for Bill Acceptance Second Fixed Rate Discounting Facilities and the actions taken by the parties thereafter in relation to it. But, even if 'The Letter of Offer' and the 'Schedule of Loan Charges' are to be regarded as part of the contractual arrangements, it seems to me that the part of the 'Schedule of Loan charges' to which Mr Weber has drawn attention does not deal with any situation which would arise after the coming into operation of the bill facility. Rather, it seems to me that this part of the form is directed to what might be called 'up front charges' to be met before the coming into operation of the bill facility sought. Even if I be in error in that respect, it seems to me that, as Priestley JA has pointed out, the phrase 'termination fee' would postulate a contractual right to terminate and the existence of such a contractual right, as it seems to me, is completely inconsistent with the provisions of Conditions 7 and 10 in the Application for Bill Facility. There being, in my view, no contractual right of termination the Appellant must, of necessity, have been in breach of its contractual obligations if it failed to tender a bill on the due date and thus would have been liable for damages, whether they be unliquidated damages or damages such as those contemplated by clause 10. In my view, Brownie J was correct in the conclusion to which he came and I join with the other members of the Court in expressing the view that the appeal should be dismissed with costs. Priestley JA. The order of the court is the appeal is dismissed with costs. Appeal dismissed with costs. Counsel for the appellant: RJ WEBER Solicitors for the appellant: ANDREW THORPE Counsel for the respondent: AW STREET / MS C YORK Solicitors for the respondent: DOWE XENOS