New South Wales Supreme Court CITATION : Commonwealth Bank of Australia -v- Randle & Ors, Commonwealth Bank of Australia -v- Rinhilt Pty Limited [2001] NSWSC 119 FILE NUMBER(S) : SC 15142/92; 15096/92 HEARING DATE(S) : 10/02/00, 14/02/00 - 18/02/00, 26/06/00 - 30/06/00, 14/08/00 -18/08/00 JUDGMENT DATE : 7 March 2001 PARTIES : Commonwealth Bank of Australia (ACN 123 123 124) -v- Edwin Alfred Randle and Pauline Susan Randle Commonwealth Bank of Australia (ACN 123 123 124) -v- Rinhilt Pty Limited (ACN 003 622 017) JUDGMENT OF : Bell J at 1 RG Forster QC (Plaintiff/Cross-Defendant) Mr Edwin A Randle - (First & Second Defendants/First and Second Cross Claimants) COUNSEL : RG Forster QC (Plaintiff) Mr Edwin A Randle - Rinhilt Pty Limited Abbott Tout (Plaintiff/Cross-Defendant)) Mr Edwin A Randle (First & Second Defendants/First and Second Cross Claimants)) SOLICITORS : Abbott Tour (Plaintiff) Mr Edwin A Randle - Rinhilt Pty Limited CATCHWORDS : Fully drawn loan facilities - development project - what constitutes reasonable conduct by the financier with respect to release of progress payments in the absence of express terms. Real Property Act,1900 LEGISLATION CITED : Residential Tenancies Act 1987 Contracts Review Act 1980 CASES CITED : Parras Holdings Pty Ltd v Commonwealth Bank of Australia (unreported, 24 October 1997) DECISION : 1. In proceedings No 15142/92 verdict and judgment for the plaintiff against the second defendant in the sum of $2,860,368.67.; 2. Dimiss the amended cross-claim.; 3. The defendants/cross-claimants are to pay the plaintiff/cross-defendants' costs as agreed or assessed.; 4. In proceedings No 15096/92 verdict and judgment for the plaintiff as against the first defendant in the sum of $2,743,108.67.; 5. Judgment for the plaintiff for possession of the whole of the land comprised in Certificate of Title Folio Identifier 5/SP 40383 and known as 5/21 Anembo Road, Berowra in the State of New South Wales.; 6. Dismiss the amended cross-claim.; 7. The defendants/cross-claimants to pay the plaintiffs/cross-defendants' costs as agreed or assessed. IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION BELL J 7 March , 2001 15142/92 - COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124) -v- Edwin Alfred RANDLE and Pauline Susan RANDLE 15096/92 - COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124) -v- RINHILT PTY LIMITED (ACN 003 622 017) JUDGMENT HER HONOUR: Introduction 1 In January 1989 Edwin Arthur Randle ("Mr Randle") approached the Gladesville Branch of the Commonwealth Bank of Australia ("the Bank") seeking finance on behalf of Rinhilt Pty Limited ("Rinhilt") in connection with a proposed townhouse development at Berowra. 2 On 21 March 1989 the Bank informed Rinhilt that it had approved a progressive fully drawn loan of $1,000,000 to assist with the purchase and development of the property located at 21 Anembo Road, Berowra. The loan was to be secured by personal guarantees (unlimited as to amount in each case) from Mr Randle, his wife, Pauline Susan Randle ("Mrs Randle") and Harold Arthur Miller ("Mr Miller"). Mr and Mrs Randle's guarantee was secured by mortgage no. E294083 over property located at Wobby Beach. Rinhilt was required to execute a first mortgage over the premises at 21 Anembo Road, Berowra. In due course the security documentation was executed and the loan funds advanced. The loan has not been repaid. 3 By its amended summons in proceedings 15096/92 ("the Rinhilt proceedings") the Bank seeks an order for possession of property being Unit 5/21 Anembo Road, Berowra and judgment in the amount of $2,493,004.32 together with interest thereon at the rate of $943.79 per day from 15 June 2000 to-date being the balance of the debt said to be owed to it by Rinhilt. 4 By its amended summons in proceedings 15142/92 ("the Randle proceedings") the Bank claims as against Mrs Randle judgment in the amount of $2,493,004.32, together with interest thereon at the rate of $943.79 per day as from 15 June 2000 to-date pursuant to the guarantee given by her securing Rinhilt's debts. Additionally it claims as against Mrs Randle for arrears of rent in respect of 5/21 Anembo Road, Berowra as from 4 July 1992 and continuing. 5 The two sets of proceedings were ordered to be heard together on 12 May 1993. 6 By its original summons in the Rinhilt proceedings the Bank sought orders for possession of units 2, 6 , 7 & 8/21 Anembo Road and by its original summons in the Randle proceedings it sought an order for possession of the Wobby Beach premises. On 28 November 1996 consent orders were made with respect to townhouses 2, 6, 7 and 8 and the Wobby Beach property. Those orders provided for the sale of the properties and for the proceeds of the sales to be credited to Rinhilt's account with the Bank. 7 The defendants in each of the proceedings brought cross-claims against the Bank. On 17 November 1997 an order was made pursuant to Part 31 r 2 of the Supreme Court Rules 1970 ("SCR") that the defendants' cross-claims be determined separately and prior to the issue of quantum of damages with respect to those claims. 8 At the commencement of the hearing, amended cross-claims were filed in respect of each matter. In each instance the cross-claimants refined their claims against the Bank, confining themselves to contending that the Bank was in breach of its contract with Rinhilt and that it had acted negligently and in breach of its duty of good faith. The claim was essentially pressed in contract. The particulars of negligence and of the breach of the duty of good faith depended in each case on the contractual provisions upon which the alleged breach of contract was based. 9 Central to the real issue between the parties was the cross-claimants' contention that the Bank had failed to release progress payments pursuant to the loan facility in a timely way. This failure, so it was contended, delayed the construction of the townhouse development leading to Rinhilt suffering loss. The Bank's failure was said to be the result of its Property Valuation Department ("PVD") making an error in its costing of the project. This error was said to have led the PVD to undercost the construction of the townhouse development by an amount of approximately $190,000. The Facts 10 On or about 16 September 1987 the Bank agreed to lend Mr and Mrs Randle $40,000 to assist them in the purchase a property at Wobby Beach. The loan was to be secured by registered first mortgage over the property. On 20 October 1987 the Bank approved an overdraft limit of $5,000 to assist Mr and Mrs Randle in connection with certain travel expenses. That facility was to be secured by a mortgage over the Wobby Beach property. On 2 December 1987 Mr and Mrs Randle executed mortgage E294083 over the Wobby Beach property. 11 In January 1989 Mr Randle and Mr Miller were directors of Rinhilt. They were builder/developers. Around January 1989 Rinhilt was seeking finance for a proposed townhouse development at 21 Anembo Road, Berowra. In early 1989 Mr Randle approached the Gladesville Branch of the Bank on Rinhilt's behalf in this respect. 12 Mr Randle swore an affidavit on 8 December 1992 ("the first affidavit") in which he set out his account of his discussions with officers of the Bank's Gladesville Branch leading to the approval of the loan facility. He said that in or about February 1989 he spoke with Mr Tony Ronan, Manager of the Gladesville Branch. In the course of that conversation, he said that he was seeking the provision of the capital sum for the design and construction of a four duplex development at Berowra. He supplied Mr Ronan with a document described as an activity schedule which set out the phases of the project from initial land inspection to completion over a sixteen week time span. Mr Randle said that during the course of his discussion with Mr Ronan he explained that the property was the subject of an existing development application. It was considered that the approved design could be improved upon in a number of respects. Any re-design would have to be carried out after the land was purchased. Any feasibility study of the project would have to be based upon the existing development application. The final costings could not be prepared until after the building approval was granted. 13 Mr Randle went on in his first affidavit to state that in or around May of 1989 he had a meeting with Tony Ronan and that during the course of that meeting he supplied him with a costing schedule comprising a nine page typed document dated 18th May 89 ("the second Phontos bill of quantities") and a hand written one page document headed "Estimate: - of total cost of development of Lot 21 Anembo Road Berowra" ("the Rinhilt revised estimate"). During this meeting Mr Randle deposed to saying: "The construction cost, taking the land off, is going to be about $850,000. The construction period is twenty four weeks. We would be looking for draw downs every fortnight which works out at approximately $70,000." It was Mr Randle's account that Mr Ronan agreed to this proposal. 14 Mr Ronan swore two affidavits in the proceedings; the first on 14 March 1993 and a second on 19 January 2000. Mr Ronan denied meeting with Mr Randle in or about February 1989. He asserted his belief that Mr Randle had met with the Loans Officer of the Gladesville Branch, Mr Iain Stevens, in February 1989. Mr Ronan denied meeting Mr Randle in May of 1989 and specifically denied that he had been a party to a discussion in which Mr Randle had said he required construction funds at the rate of $140,000 per month as fortnightly draw downs in the sum of $70,000 or that he had agreed to such a proposal. Mr Ronan said that he had only met Mr Randle on one or two occasions when Mr Randle had been introduced to him as a consultant for the Phontos Group. 15 In an affidavit sworn on 9 July 1997 ("the second affidavit") Mr Randle referred to the first of Mr Ronan's affidavits and said that, contrary to the assertions therein, all of his initial dealings with respect to the loan application had been with Mr Ronan. Following Mr Ronan's departure he had dealt with Mr Cummerford. Specifically Mr Randle denied meeting with or dealing with Mr Stevens until after May 1989. 16 Ian Cummerford was the Acting Manager of the Gladesville Branch of the Bank from January 1989 to about April 1989. He swore an affidavit on 18 January 2000. To this he annexed a copy of a telephone attendance note written by him. The original of that note was tendered during the course of the proceedings. 17 By reference to his file note Mr Cummerford was able to say that on 6 January 1989 Mr Randle had said to him words to the effect: "We need to borrow $1,000,000 to build eight townhouses at a cost of $1.25 million. The land costs $420,000 and we have $260,000 on of our own money to put into the project." Mr Cummerford recalled that his discussions with Mr Randle were of a preliminary nature and that he had said to him words to the effect: "Before the Bank can consider this matter further, we require full personal balance sheets, copy of the DA, the plans and specifications and your costing as well as an on completion valuation from our Property Valuation Department." 18 By reference to the contents of his file note Mr Cummerford was able to say that either he or Mr Randle had said words to the effect of "The first draw down will take place after $200,000 has been spent". It was Mr Cummerford's belief that he would have said those words for the reason that it was the practice of the Bank to require customers to use their own funds before drawing on funds advanced by the Bank. 19 Mr Randle denied the conversation with Mr Cummerford. In particular, he denied that any representation had been made on behalf of Rinhilt that $260,000 of Rinhilt's money would be applied towards the construction costs or that the first $200,000 was to be applied before the initial draw down. 20 I preferred the evidence of Mr Cummerford to that of Mr Randle. I accept that Mr Cummerford had a telephone conversation in the terms to which he deposed consistent with his handwritten file note. The date on that note is not in Mr Cummerford's handwriting. He believed it had been recorded by a clerical officer in the ordinary course when the memorandum was filed in the diary. I accept that is so. Mr Cummerford impressed as a conscientious and careful bank officer. I had no hesitation in preferring his evidence to that of Mr Randle to the extent that the two were in conflict. 21 Generally, where there was conflict between the evidence of Mr Randle and that of bank officers I preferred the latter. In this respect it is appropriate that I make some observations concerning Mr Randle's credit. It is necessary to comment on the conduct of the proceedings. It would appear that in the period following the construction of the Anembo Road project, Mr Randle undertook studies in law. By the time the proceedings came on for hearing Mr Randle had obtained admission to the bar in this State and in New Zealand. Mr Randle appeared as counsel for Rinhilt and for his wife and himself in the proceedings. 22 The conduct of the proceedings on behalf of the cross-claimants was notable for some forensic decisions which were made. Thus Mr Ronan was not required for cross-examination on his affidavits and yet in the course of his evidence Mr Randle maintained a version of discussions between the two which was quite at odds with the assertions contained in Mr Ronan's affidavits. 23 In his first affidavit Mr Randle gave a detailed account of his conversation with Brian Gardiner (the Manager of the Bank's Gladesville Branch) in late February 1990 in which, inter alia, he claimed to have told Mr Gardiner: "The deal I've got with Tony Ronan is that I will be drawing $70,000 a fortnight while construction is going on, and that it will not be held up by the Bank's staff". Mr Gardiner denied that any such conversation had taken place. Mr Gardiner was not cross-examined on his denial in this respect. 24 In the course of his closing submissions Mr Randle informed me that he had only recently graduated in law (T.878). This exchange occurred in the context of submissions concerning the significance, if any, to be attached to his failure to cross-examine Mr Gardiner on this topic. It seemed to me clear, with respect, that Mr Randle's experience as an advocate was relatively limited. I have endeavoured to take that into account in the weight which I have given to matters such as the failure to require Mr Ronan for cross-examination and the failure to cross-examine Mr Gardiner on the conversation deposed to by Mr Randle in paragraph 20 of his first affidavit. 25 Taking the above consideration into account I nonetheless preferred the evidence of the Bank officers, in cases of conflict, to that of Mr Randle. On occasions Mr Randle's evidence was contradictory. Thus he gave widely varied accounts of the circumstances of his first meeting with Mr Stevens. When confronted with the inconsistencies in his affidavits on this topic, he gave yet another version which had not figured in the earlier affidavits. 26 Mr Randle gave evidence concerning the personal guarantee executed by his wife. This is a topic to which I shall return. For present purposes I note that I found aspects of his evidence on this issue to be most unconvincing. 27 On 10 February 1989 Iain Stevens met with Mr Randle to discuss the possibility of the Bank providing Rinhilt with a loan. The meeting was a preliminary one since the Bank required further information before making an assessment as to whether a loan would be approved. Mr Stevens made handwritten notes of this conference. Mr Stevens' notes include reference to "$60,000 over twelve months then extra if Ryde case unresolved" and a separate notation "P & E will adv from $60K to provide W/cap for R & M Constructions prior to P.P draw downs". I take R and M Constructions to be a reference to Randle Miller Constructions, the builders engaged by Rinhilt to construct the townhouse development. The note is consistent with the Bank being informed that working capital was available to fund the project prior to progress payments being made under the facility. It is to be noted that on the statement of assets and liabilities which was submitted to the Bank in support of the application for a loan, Mr and Mrs Randle's combined assets include the sum of $60,000 being a loan secured by deed from P & E Phontos Pty Ltd. There was evidence that as at February 1989 Mr Randle was expecting to receive a sum of money from P & E Phontos in connection with some litigation in which that company was then engaged. 28 On 1 March 1989 P & E Phontos prepared a bill of quantities for Rinhilt for the construction of the townhouse development at Anembo Road, Berowra ("the first Phontos bill of quantities"). The project was costed overall in an amount of $624,512. This included provision for builder's profit. The construction costs without any provision for profit were assessed as $529,249. The first Phontos bill of quantities appears to have been based on the development approval which had been granted by the Council in January 1989. Other costings apparently prepared by Mr Randle based on the original development approval are generally consistent with the first Phontos bill of quantities. Thus a handwritten document titled "Feasibility Development Lot 23 Anembo Road, Berowra" (Exhibit 12, p 42) which was prepared prior to the exchange of contracts at a time when the purchase price of the property was thought to be $420,000 estimated construction costs (including site costs) in an amount of $640,000. The costs of construction, net of builder's profit, were in the vicinity of $544,000. 29 On 13 March 1989 Rinhilt submitted a preliminary application seeking a fully drawn loan in the amount of $1,000,000. The purpose of the loan was shown as: "$320,000 to complete purchase of site at No 21 Anembo Road Berowra (p/p $360,000 + d/a cost $60,000) $610,000 construction costs for 3, two storey duplex building and single storey split level duplex building (total 8) $74,3000 interest capitalised over 7 months." 30 By letter dated 21 March 1989 the Bank advised Rinhilt of its approval of a progressive fully drawn loan of $1,000,000 to assist with the purchase and development of the Anembo Road project ("the approval letter"). Relevantly, the terms of the letter were as follows: "The loan is subject to the Bank's usual terms and conditions generally, for loans of this type, and in particular to the following: Term of loan: 10 months maximum from initial drawn down to complete land purchase. Repayments: Full clearance of principal, interest and accrued charges within the term from all proceeds from sales of units. Progress payments: Progress payments will be released by satisfactory inspections by the Bank's technical staff and are to be supported where requested by engineer's certificates for slabs and survey certificates confirming placement of walls etc. … Security: Security must be to the Bank's satisfaction and will comprise the following; (a) guarantee unlimited as to amount from Edwin Alfred James Randle and Pauline Susan Randle and Harold Arthur Miller, secured by the existing second mortgage signed by Mr and Mrs Randle … Satisfactory costing and on completion valuation of all security properties by the Bank's valuers". 31 On 3 April 1989 Rinhilt exchanged contracts for the purchase of the Anembo Road premises. 32 On 23 April 1989 the PVD assessed the costs of construction of the project at $698,239. This figure included an allowance of 15% for builder's profit. It did not include a number of items including professional fees, council contributions, the demolition of existing buildings if required, above normal site excavation and rock excavation and various other items as specified. 33 On 10 May 1989 the security and related documents were executed by Mr and Mrs Randle, Mr Miller and Rinhilt. 34 On 18 May 1989 a revised costing was prepared on Rinhilt's behalf ("the second Phontos bill of quantities"). This costing was prepared upon the basis of revised plans which made provision for increased floor and garage space and generally superior finishes. The second Phontos bill of quantities estimated the cost of construction at $650,194. 35 In his first affidavit Mr Randle stated that he handed the second Phontos bill of quantities together with an additional document (Ex D XC12.9) to Mr Ronan "on or around May 1989" ("the revised Rinhilt costing"). The latter is a handwritten document setting out an estimate as to the total cost of the townhouse development. Consistent with the second Phontos bill of quantities it estimates the cost of construction of the eight townhouses at $650,194.84. Additionally, another $222,320 worth of costs including excavation, landscaping and drainage works were included. The total cost of the development is shown as $872,514.84. In his first affidavit Mr Randle said that the revised Rinhilt costing was handed to Mr Ronan in the course of the meeting during which he claimed that an agreement had been reached as to fortnightly draw downs of $70,000. 36 It is to be noted that in his second affidavit Mr Randle asserted that in the course of a telephone conversation with Mr Stevens prior to 18 May 1989 he had been asked to provide the Bank with revised costings based on the new building plans. He went on to give an account that he had attended at the Bank's Gladesville Branch and handed the detailed revised costings to a female employee asking that they be given to Mr Stevens straight away. Mr Randle was confronted with this inconsistency in the course of his cross-examination. I found his answers unconvincing. 37 In a diary memo of 4 August 1989 Iain Stevens recorded that Mr Randle had called in and left a copy of the revised plans for the Anembo Road project. His notation recorded that Council had rejected the original B/A and that amended plans, featuring an increase in the size of the smaller units to 120 square metres together with double garages and the inclusion of a pool in the common property, had now been lodged. Mr Stevens recorded that he had requested Mr Randle to supply the B/A approved plans together with a revised cash flow and construction costing. I accepted Mr Stevens as a reliable and honest witness. I accept the accuracy of his diary note. I am satisfied that the Bank had not been supplied with the second Phontos bill of quantities prior to 4 August 1989. 38 I note that in Mr Stevens' diary note of 4 August 1989 he recorded Mr Randle as advising that Rinhilt anticipated the all up costs of the project could be contained within the original approval parameters. To similar effect is a memorandum prepared by Mr Gardiner on 29 August 1989. That document recorded that Mr Randle had been interviewed on that day and he had explained that although the eight units would be larger, and would include double lock up attached garages, the overall costs would be kept within estimates because of the reduced labour and material costs resulting from a developing slump in the building industry. In the course of his cross-examination Mr Randle agreed that he had expected the overall costs of construction in accordance with the amended plans to be kept within original estimates. 39 Mr Stevens denied that he had at any time received the revised Rinhilt costing. The revised Rinhilt costing did not form part of the Bank's discovery. I am satisfied that the Bank was not supplied it. 40 The loan approval was sought upon the basis that construction costs were in the vicinity of $610,000. It is clear that as at August 1989 Mr Randle, on Rinhilt's behalf, was maintaining in discussions with officers of the Bank that the construction could proceed in accordance with the revised plans within the original estimates as to total construction costs. In the course of his evidence Mr Gardiner confirmed, consistent with the tenor of his diary note of 29 August 1989, that such a representation had been made to him. Against this background I consider it inherently unlikely that Mr Randle furnished the revised Rinhilt costing to the Bank showing construction costs to be well in excess of the estimate upon which the approval had been granted. It is to be noted that at a meeting between Mr Randle and officers of the PVD held on 26 July 1990 Mr Randle is recorded as agreeing that the building costs associated with the project would be approximately $750,000. This does not sit well with the suggestion that he had earlier supplied the Bank with a costing in the amount of $872,514.84. 41 On 7 June 1989 the Bank advanced the sum of $310,000 to Rinhilt to complete the purchase of the property. 42 On 4 August 1989 the council approved the revised development application. Mr Randle attended a meeting with Mr Stevens and provided a copy of the revised plans for the construction at Berowra. It was on this occasion that Mr Stevens requested a revised cash flow and costings. A revised cash flow was not supplied at any time. The second Phontos bill of quantities was provided some time after this meeting. 43 On 4 September 1989 the Bank approved an advance of $35,000 on the first progress payment on Rinhilt's fully drawn loan account. There was some issue as to the characterisation of this payment. Rinhilt submitted that it was not a progress payment. Mr Gardiner did not consider it to have been a progress payment. It appears there had been discussions in which it was contemplated that the sum of $35,000 might be advanced to Mr Randle by way of increase in his overdraft facility. Such a request had been made by Mr Randle during the course of his meeting with Mr Gardiner on 29 August 1989. Be that as it may it is clear that the Bank's Northern Metropolitan Zone ("NMZ") approved an advance on the first progress payment due to Rinhilt. Rinhilt's fully drawn loan account, No 2171 0015 6826, shows the sum of $35,000 as debited on 4 September 1989. That sum was credited to Rinhilt's working account No 2171 156957 on that day. Any examination of the adequacy and timeliness of progress payments made by the Bank must necessarily include this initial payment notwithstanding that neither Mr Gardiner or Mr Randle viewed it as such. 44 In September 1989 bulk earthworks commenced on the Anembo Road site. This was prior to the grant of the building approval by council. On 28 November 1989 the building approval was issued. It was forwarded by the Gladesville Branch of the Bank to PVD on 15 December 1989. The evidence does not establish when Mr Randle, or any person on behalf of Rinhilt, supplied the Gladesville Branch with the approval. It appears to have been received by the Bank sometime after 29 November 1989. On that day Mr Stevens reviewed the Rinhilt loan account file. He noted that "amended B/A plans will soon be to hand". 45 On 13 December 1989 Dennis Wilcher of the PVD inspected the Anembo Road site and assessed the value of work completed at $32,000. At this time the Bank's costing of the project was based on the original development approval and totalled $698,239.00. No allowance was made for unfixed building materials on site in Mr Wilcher's assessment of the value of the work completed. He reported that there were ten thousand bricks on site which he valued at $4,000. Mr Wilcher noted that a survey certificate was required to confirm identification. The terms of the loan facility made the release of progress payments dependent upon "engineers certificates for slabs and survey certificates confirming placement of walls etc" where these were requested. There was no evidence of any request being conveyed to Rinhilt for the production of an identification survey arising out of the inspection on 13 December 1989. 46 On 5 March 1990 a further inspection of the site was carried out by PVD. The author of the inspection report requested that a site survey certificate to enable identification of the site be forwarded to PVD. On 27 March 1990 it appears that the Gladesville Branch submitted copies both of engineers' certificates and a site survey to PVD. 47 Following the inspection of 13 December 1989 no progress payment was made until 23 January 1990. On this occasion a second progress payment in the amount of $36,000 was advanced to Rinhilt. It would seem that this sum represented the $32,000 certified by Mr Wilcher at his December inspection together with an allowance for the unfixed materials on site. 48 On 24 January 1990 PVD reassessed the costs of construction of the project in the light of the revised building approval. The revised costing estimated total construction costs at $747,195. 49 On 26 February 1990 Mr Randle attended at the Gladesville Branch and spoke with Ms Lorraine Foley and made a request for a progress payment of $80,000. It appears that he informed Ms Foley that all foundations and initial brick work had been completed. He is recorded as telling Ms Foley that the payment should have been requested several weeks earlier but that he had been on holidays and his partner, Mr Miller, had suffered a heart attack and undergone a triple bypass operation. It appears that on the strength of this information Mr Gardiner approved a $40,000 payment against the loan facility which was advanced on 28 February 1990. This progress payment was not supported by a PVD inspection report. 50 PVD conducted an inspection of the site on 5 March 1990. The value of work completed was estimated at $71,000 against the revised PVD total costing of $747,195. Following this inspection the Bank released a further $31,000 to Rinhilt. 51 On 9 May 1990 the Bank requested that Rinhilt supply it with a check survey certificate. A check survey certificate is one certifying that the footings of the walls and other improvements were correctly placed in relation to the boundary. 52 By letter dated 25 May 1990 Mr Gardiner wrote to Rinhilt requesting that Mr Randle call by appointment as soon as possible and bring the engineer's and survey certificates requested on 9 May 1990. By letter dated 14 June 1990 (advising that a further release of $19,000 to the credit of Rinhilt's account had been made) Mr Gardiner advised that the Bank would be unable to release further drawings until the engineer's and survey certificates requested on 9 and 25 May 1990 were produced. 53 By facsimile dated 28 June 1990 the Gladesville Branch directed a further request to Rinhilt to supply the engineer's and survey certificates as requested on 9 May, 25 May and 14 June in order to enable the release of a further progress payment. The check survey (bearing the date 5 June 1990) was supplied to the Bank on 29 June 1990. 54 Construction of the project continued during 1990. By February 1991 the project was substantially complete. PVD treated it as being so as at 13 February 1991. It is to be noted that it was not until November 1991 that the Council on a final inspection found all items as satisfactorily completed. The strata plan for the premises was registered on 13 December 1991. 55 PVD conducted a total of twenty six site inspections during the course of the construction of the project. The adequacy of the estimates made by PVD on each of these occasions was at issue. I will return to this in due course. 56 The Bank made advances to Rinhilt up until 25 February 1992. 57 Mr Meredith, Associate Chief Estimator with Rider Hunt, who prepared a report on behalf of the Bank, calculated the total amount of advances by the Bank to Rinhilt to exceed $1,212,000. Of this an amount in excess of $902,000 was advanced towards the construction of the project. There was no issue as to either of these calculations. It appears that Rinhilt applied funds of its own towards the construction, but the evidence did not disclose this sum. 58 The terms of the facility extended by the Bank, as set out in the approval letter, provided that the loan was repayable ten months from the initial draw down to complete the land purchase. Thus, settlement having been effected on 7 June 1989 the loan was repayable on 7 April 1990. It was not repaid on that day and has not been repaid. 59 The amount of the loan and the time for its repayment were extended by the Bank on three occasions. On 5 October 1990 the facility was extended to $1,200,000 (being an amount inclusive of interest capitalised) and was repayable six months from completion of construction work, or registration of the strata plan, whichever occurred first. On 22 November 1990 the facility was further extended to $1,330,000 (again inclusive of capitalised interest). The terms of the loan provided that the properties were to be listed for sale on or before 1 December 1990 and, if contracts had not been exchanged on at least two properties by 25 December 1990, Rinhilt was expected to reduce its asking price in order to meet the market. On 6 June 1991 the Bank further increased the facility to $1,528,020 thereby making available a further $75,900 over Rinhilt's then debit balance. 60 On 29 November 1990 Mr and Mrs Randle executed acknowledgments in relation to the increase in the facilities to Rinhilt, and thus to their potential indebtedness pursuant to the guarantee executed on 10 May 1989, to the sum of $1,330,000. On 21 June 1991 they executed further acknowledgments of the increase in facilities to $1,530,000. 61 During March and April 1992 three of the eight townhouses were sold. The proceeds of sale were credited to the Rinhilt account with the Bank. There were no further sales and on 13 May 1992 the Bank made a demand on Rinhilt for the amount of $1,181,744. On 19 June 1992, Rinhilt not having satisfied the demand, the Bank issued demands to Mr and Mrs Randle pursuant to the guarantee given by them in respect of Rinhilt's debt then in the amount of $1,200,211. 62 On 15 July 1992 a notice pursuant to s 57(2)(b) of the Real Property Act 1900 was served on Rinhilt. 63 On 12 August 1992 notices pursuant to s 57(2)(b) were served on Mr and Mrs Randle in relation to the Wobby Beach premises, pursuant to the mortgage given by them over the premises on 2 December 1987. 64 On 4 July 1992 Rinhilt entered into a residential tenancy agreement with Mrs Randle as the lessee of townhouse 5/21 Anembo Road, Berowra. The agreement provided for a lease for 52 weeks at a weekly rental of $260. The agreement provided that at the end of the term the tenant was entitled to remain in occupation at the same rent and under the same terms unless or until the agreement was terminated in accordance with the provisions of the Residential Tenancies Act 1987. There is no evidence of the residential tenancy agreement having been terminated. As the Bank noted, Mrs Randle's Notice of Appearance filed on behalf of herself and Rinhilt on 3 February 2000 showed her as residing at the premises at 5/21 Anembo Road. 65 On 13 November 1992 a receiver of rents was appointed by the Bank with respect to townhouses 2, 5, 6, 7 and 8. It appears that rents have been received in respect of townhouses 2, 6, 7 and 8 but that no rent has been received in respect of townhouse 5. There was no issue as to this. 66 In an affidavit sworn on 30 March 2000 Barry Robert Watson deposed to an amount of $127,052.34 having been credited to the Rinhilt account in respect of rents received in relation to the four townhouses. 67 On 28 November 1996 consent orders were made in the proceedings relating to townhouses 2, 6, 7 and 8 and the Wobby Beach property. Those orders provided for the sale of each of the properties and for the proceeds of those sales to be credited to Rinhilt's account with the Bank. No orders were made concerning townhouse 5. The four townhouses and the Wobby Beach property were sold by the Bank in 1997. The proceeds of the sales amounting to $714,018.74 were deposited to the credit of Rinhilt's account. 68 Mr Watson in his affidavit sworn on 22 June 2000 deposed to the amount of $2,493,004.32 (together with interest accruing at the rate of $943.79 per day) being the sum owing to the Bank by Rinhilt secured under the mortgage of the Berowra property. There was no challenge to this evidence. The Rinhilt Cross Claim 69 It is convenient to turn firstly to the cross-claim brought in the Rinhilt proceedings. 70 On the execution of the security documents on 10 May 1989 a contract came into existence between the Bank and Rinhilt, the express terms of which were as set out in the approval letter of 21 March 1989. So much was not in issue between the parties. 71 It was Rinhilt's contention that an express term of the contract was that a satisfactory costing be made by the Bank's valuers. This is a reference to the words appearing under the heading "Security" in the approval letter : "Satisfactory costing and on completion valuation of all security properties by the Banks (sic) valuers." The Bank submits, and I accept, that this term was inserted solely for the benefit of the Bank so as to entitle it not to proceed with the facility in the event that a costing undertaken by it was not satisfactory. In such a circumstance the Bank would have been at liberty to refuse to fund the project at all. 72 The structure and language of the approval letter lends little support to Rinhilt's contention that the Bank was required to prepare a satisfactory costing. The reference to satisfactory costing appears in that section of the approval letter dealing with the security to be taken by the Bank. The reference is to "satisfactory costing and on completion valuation of all security properties". If the Bank was required as a term of its contract with Rinhilt to prepare a satisfactory costing of the Anembo Road project it must follow that it was also under an obligation to prepare a satisfactory "on completion" valuation of the same. An on completion valuation is one which seeks to assess the commercial value of the completed project. I accept the Bank's submission that it would seem strange for the parties to have intended to impose upon the Bank an obligation to prepare a satisfactory on completion valuation. On the other hand it made good commercial sense for the Bank to reserve the right to refuse to fund the project if, on preparing an on completion valuation for itself, it concluded that it was not feasible. 73 The reasonable commercial construction of the words extracted in para 71 above suggests that the Bank, not having itself undertaken any calculation as to the costing or the potential sale price of the project, sought to reserve to itself the right to refuse funding if either of those calculations (should they be performed by the Bank) turned out to be unsatisfactory. In this regard I note the observations of Davies J in Parras Holdings Pty Ltd v Commonwealth Bank of Australia (unreported, 24 October 1997) at page 73: "The case put for the applicants is that the Bank breached the condition in the Terms Sheet in that it failed to value the properties on an "on completion" basis, valuing them rather on an "in one line" basis. In my opinion this contention has no validity for the condition did not place an obligation on the Bank to do anything … Once all of this had occurred [ie once the Bank advanced certain funds to the borrower] the Bank had waived its right under the Terms Sheet either to call for further security or to terminate the facility by reason of lack of security. By failing to act upon the valuation condition, the Bank waived compliance with the term. Counsel for the Bank did not contend otherwise. The condition was included in the Terms Sheet for the Bank's benefit. It chose not to take advantage of it." 74 Adopting his Honour's reasoning in Parras I consider that the provision relied upon by Rinhilt permitted the Bank to refuse to fund the project in the event that it carried out its own costing which proved to be less than satisfactory. 75 In the event, the Bank advanced the sum of $310,000 on 7 June 1989 in accordance with its approval of the facility, and must be taken to have waived any right that it had to refuse funding on the basis that its own costing proved not to be satisfactory. 76 Rather more to the fore in the way Rinhilt put its claim in the course of closing submissions, was the contention that the Bank had breached its contract by unreasonably failing to release progress payments. Rinhilt submitted that it was an implied term of the contract that the Bank would take all steps as were reasonably necessary to ensure that it, Rinhilt, had the benefit of the advance and, generally, to release progress payments in a timely manner so as not to delay the construction of the project. 77 The only express term of the contract governing the release of progress payments was that which provided that payments were to be subject to satisfactory inspections by the Bank's technical staff and that they were to be supported where requested by engineers certificates and survey certificates. The Bank concedes that it was under an obligation to act reasonably in releasing progress payments. 78 Rinhilt contended that, as a matter of fact, the Bank would only release progress payments upon certification by its PVD. The PVD made an error in costing the project. This, it was submitted, produced deficiency of the order of $190,000. This error was said to have infected all assessments made by PVD as to the value of the work completed on the site. 79 The costing prepared by the PVD on 24 January 1990 does contain a significant error. The PVD costed the construction of the townhouses by applying a fixed rate per square metre of floor space. By reference to this rate it allowed $63,581 as the cost of construction of units 1 and 2 (without reference to PC items and variables). Eighty one square metres were costed for the ground floor and seventy nine square metres for the first floor. The total floor area allowed in respect of units 1 and 2 was thus one hundred and sixty square metres. In fact the total area of units 1 and 2 was three hundred and twenty square metres. It is evident that one unit was omitted from the calculation. The costing of units 1 and 2 by the method adopted by PVD created a deficiency of $63,581. A similar error occurred in relation to the costings of units 3 and 4 and 5 and 6. Overall the deficiency, accepting the method of costing adopted by PVD, amounted to $190,743. 80 The PVD's costing of 24 January 1990 was prepared by John Scott. Dennis Wilcher, who was responsible for carrying inspections of the project on behalf of the PVD, agreed that Mr Scott's costing appeared not to take into account three units. Mr Wilcher carried out numerous inspections at the site. He used the January 1990 PVD costing as a basis for determining the value of the work completed for the purpose of progress payments. He had not been aware of the error at the time (T.511). 81 I did not understand the Bank to challenge a finding that the January 1990 PVD costing contained an error in the calculation of the floor size of the project. The Bank did not accept that it necessarily flowed from such a finding that the PVD costing was deficient to the extent of the construction costs of three of the double storey townhouses. Mr Meredith observed that regard had to be paid to the rate allowed by PVD per square metre. If the rate was high the error in calculation as to the area of the project would not produce an error as great as the omission of three of the double storey townhouses. 82 Rinhilt pointed to the evidence of Mr Gardiner in which he agreed with the proposition that he could only approve progress payments against the project provided they were authorised by the PVD (T.323). He also agreed with the proposition that if the PVD "under authorised" that was all that he would pay (T.323). 83 The Bank acknowledged that as a practical matter if it misled itself as the result of an incorrect costing of the project by the PVD, in so far as it acted upon PVD's recommendations, its actions may have resulted in breaches of its legal obligations. 84 In determining whether Rinhilt has established that the Bank was in breach of its contract with it by failing to release progress payments in a timely way I am concerned with an examination of the payments that were in fact made under the facility and not with the recommendations for release of funds made by the PVD. 85 I accept that Mr Gardiner understood that he might only release funds in accordance with the recommendations made by the PVD. However, the evidence discloses that on occasions payments in excess of those recommended by the PVD were credited to Rinhilt. 86 Mr Gardiner appears to have overlooked that an advance on the first progress payment in the amount of $35,000 had been credited to Rinhilt on 4 September 1989. On 28 February 1990 in response to Mr Randle's advice that he and Mr Miller were late in submitting an application for a progress payment (due to his absence on holidays and Mr Miller's ill health) Mr Gardiner approved a payment of $40,000 which was credited to Rinhilt's account. One week later PVD carried out a further inspection. On this occasion the work completed was valued at $71,000. Mr Gardiner approved a payment of $31,000 which was credited to Rinhilt's account on 8 March 1990. It appears that Mr Gardiner deducted the $40,000 which had been advanced on 28 February and authorised the release of the balance making a total of $71,000. In so doing Mr Gardiner overlooked the first payment of $35,000 and the subsequent payment on 23 January of $36,000. Thus as at 5 March 1990 the PVD certified work to the value of $71,000 as having been performed. As at 8 March 1990 the Bank had in fact advanced $142,000 towards the construction costs of the project. 87 The contract between the Bank and Rinhilt provided for the amount of $610,000 to be advanced in connection with the construction of the project. The construction costs were well in excess of this sum although the evidence did not disclose the total sum. In the absence of an express term in the contract governing the release of progress payments how is Rinhilt to establish that the Bank breached its contract by unreasonably withholding payments? 88 Rinhilt's case relied on the report of Douglas Martin, quantity surveyor and building economist, to establish that the progress payments made by the Bank were consistently inadequate. In his report dated July 1997 (Exhibit Cc) Mr Martin is critical of the PVD costing of 24 January 1990. He notes the error in calculating the area of the three double storey duplexes. In addition he comments that the lump sum allowance in respect of excavations and site works appears to be very low. His own estimate as to the construction cost for the project was $974,101. This estimate is 30.4% higher than the PVD costing. Mr Martin expresses the opinion: "the project was obviously going to experience considerable financial troubles especially when it is noted that the bulk of the missing funds related to early trades such as excavation, retaining wall construction etc". Mr Martin comments on the under valuing of work completed at various stages of the construction by the PVD and goes on to observe: "The above information records a story of a builder constructing a development where the funding from the Bank was insufficient by $226,906. This occurred when PVD failed to include in their estimate, for the cost of three dwellings, which we estimated to amount to an omission of $157,231. In addition the builder was further disadvantaged by PVD not properly calculating bulk excavation costs as well as site works items etc as described in the above report." 89 In the course of his evidence Mr Martin agreed that his opinion was based upon a number of assumptions concerning the contract between the Bank and Rinhilt. These assumptions included that Rinhilt was entitled to be paid one hundred percent of its construction costs; that it was entitled to be funded in respect of the construction in the sum of $974,101 (being his estimate of the correct costing of the project) or, on another view, that it was entitled to be paid the amount of the costs of the project, whatever those costs happen to be. The Bank was under no such contractual obligation. Rinhilt pleads, and the Bank accepts, that it was under an obligation to fund the construction costs of the project in an amount of $610,000. In this respect Mr Martin's assertions as to the extent to which Rinhilt was underfunded cannot stand. 90 In the course of submissions three different approaches were identified as the basis upon which the Bank was obliged to release progress payments. It was Rinhilt's submission that the Bank was required to release the first $610,000 (subject to satisfactory inspections and the production of certificates) without any consideration as to the percentage by which the project was approaching completion ("the first $610,000 method"). On this construction of the parties' contract the Bank would contribute the whole of that part of the advance allocated to construction costs prior to Rinhilt being required to put in its own funds. 91 The Bank's primary submission was that it was at all times entitled to retain sufficient funds to complete the project ("the cost to complete method"). In the alternative, the Bank submitted that it was entitled to release progress payments on the basis of applying to the sum reserved for the purpose, namely $610,000, the percentage of the project that had been completed at any given time ("the pro rata method"). 92 Rinhilt placed reliance upon the cashflow projection which had been submitted to the Bank in support of its application for the facility. This showed the total construction costs as $610,200. This it was submitted lent support to the view that the parties contracted upon the basis that the Bank was to fund the whole of the construction costs of the project. It is to be observed that in the event that the construction costs were $610,000 in total there would be no distinction between the three methods. All would produce the same result. 93 In the event, as I have noted, construction costs were well in excess of $610,200 while the extent of the Bank's obligation was to fund the same in the amount of $610,000. 94 Rinhilt submitted that I would find that the Bank knew that it, Rinhilt, had no funds to invest in the project. It was contended that as an owner/builder it had available to it cost savings that would be realised in the latter stages of the development. This, too, was said to have been known to the Bank. I am not satisfied that either of these contentions have been made good. 95 The contract between the Bank and Rinhilt was entered into in circumstances which included that Mr Randle had represented to the Bank both that Rinhilt had $260,000 and that the first $200,000 would be applied towards the construction before the initial drawdown. This finding to my mind tells against a view that the parties reasonably intended that the Bank should be required to fund the first $610,000 prior to Rinhilt contributing any of its own funds to the same. 96 The Bank relied on the evidence of Mr Meredith, set out in paragraph 10.5 of his report (Ex 11), in support of the submission that I would accept the cost to complete method as that which reasonably the parties must be taken to have intended, namely: "The method that is usually adopted by a quantity surveyor or architect when valuing the work covered by a progress claim is to first calculate the estimated cost to complete the project. The estimated cost to complete is calculating by determining the value of work completed and deducting this from the contract sum. The estimated cost to complete is based on the assumption that the works are to be completed by the building contractor within the terms of the initial contract. The estimated cost to complete the works is then deducted from the limit of funding. The amount left is the value of work completed and included within any progress certificate. From the amount certified the value of any retention should be deducted and any previous payments should also be deducted to provide the amount now due. The sum arrived at by such deduction gives the value of the work completed under the terms of the relevant contract and usually determines the maximum amount that the quantity surveyor or architect would recommend be released by the financial institution. The underlying principle of valuing the progress claim in this manner is to ensure that there are sufficient funds available under the relevant agreement to complete the work within the contract sum. The quantity surveyor's assessment is a recommendation and is not necessarily binding on the financier. The financial institution will usually require the developer to provide their own funds first prior to drawing the loan. In providing the above controls the risk to the financier in the developer not being able to complete the works is reduced (sic)". (para 10.5) 97 Mr Wilcher, in his affidavit sworn on 2 August 1999 (paras 11 and following) described the Bank's practice as being to release funds upon the basis that the Bank retained sufficient of the advance to complete the project. This was in accordance with the Bank's circular instruction C/I-25/23 (Ex 12 p 577). 98 In the course of his cross examination Mr Martin conceded the commercial good sense of the cost to complete method (T.238/T240). A lender would always wish to be in a position to complete the project and sell it in order to avoid the discounting that occurs on the sale of an uncompleted project. In the Bank's submission the commercial reasoning behind this approach to development project funding was compelling. 99 The Bank relied on the incorporation in the approval letter of its "usual terms and conditions". In the absence of any provision to the contrary, the Bank submitted that it was entitled to rely on its own practices and internal guidelines as forming part of those terms and conditions. 100 The approval letter expressly provided that the loan was to be subject to the Bank's "usual terms and conditions generally for loans of this type". There was no suggestion that Rinhilt made any inquiry as to what the Bank's standard terms and conditions for loans of this type were. Equally, the evidence did not identify any set of standard terms and conditions for fully drawn loans of this class or at all. In these circumstances I am not satisfied that the contents of the Bank's circular instruction C/I-25/23 (which appears to be an extract from an internal policy manual) can be said to form part of its standard terms and conditions for advances made against buildings in the course of construction. I am not persuaded that the incorporation of the Bank's usual terms and conditions (whatever they might be) into the contract between it and Rinhilt included a term that progress payments were to be made upon the cost to complete basis by virtue of the contents of circular instruction C/I-25/23. 101 The Bank submitted that I would hold, by reason of the custom and usage of lenders and borrowers, that it was an implied term of the contract between the Bank and Rinhilt that progress payments would be released upon a cost to complete basis. I do not accept this submission. In this respect, while I accept Mr Meredith's evidence (extracted at para 96 above) that such a method is usually adopted by a quantity surveyor or architect when valuing the work covered by a progress claim, I am mindful of the evidence of Mr Martin: "Q. What I'm asking you is whether in your experience that kind of arrangement whereby the borrower is required to put in his funds before the Bank puts in its funds is usual? A. I don't know the answer to that. Q. Your experience doesn't permit you to say one way or the other? A. I've seen examples of both, but I'm not sure which is the norm, if you like." (T.240) 102 Having regard to Mr Martin's evidence I am not satisfied that an implied term, that progress payments were to be released on a cost to complete basis, ought be found upon the basis of custom and usage between lenders and borrowers. 103 The Bank also relied on the terms of the approval letter which provided that the Bank was to "assist" with the purchase and development of the property in support of its submissions on the cost to complete method. I accept that this consideration tends against a view that the Bank was obliged to fund the first $610,000 (in that it does not assume that the Bank would fund the whole of the construction costs) however I do not see that it points to the cost to complete basis, as distinct from the pro rata basis, as the correct construction of the parties' contract. 104 Although I acknowledge the commercial sense of the cost to complete method from the financier's point of view I am not persuaded that I should conclude that the parties reasonably intended that it should govern the release of progress payments in this case. In this regard I take into account Mr Martin's evidence. I understood him to say that he was aware of facilities being extended in connection with construction projects in which progress payments were not released on a cost to complete basis. 105 As I have noted I am not persuaded that the first $610,000 method was that reasonably intended by the parties. In this respect I take into account that my finding that the parties entered the contract upon the understanding that Rinhilt had funds available to it from another source to contribute to the project. The reference to the facility being to "assist with the purchase and development" of the project contained in the approval letter lends support to this view. The express terms of the contract made release of any progress payment dependent upon satisfactory inspections by the Bank's technical staff and, where requested, engineers' certificates and surveys. It was plain that an amount of construction work was to be undertaken before the Bank was required to release the first progress payment. In these circumstances I reject the submission that the parties might reasonably have intended that the Bank was to contribute the whole of the $610,000 before Rinhilt was required to utilise its own funds. 106 I turn next to the pro rata method. I favour this as the one which the parties must be taken to have reasonably intended. In written submissions in reply Rinhilt appeared to accept the pro rata method as a reasonable basis for determining when progress payments were due but to contend that it was to be calculated by reference to the PVD costing. I deal with this below. 107 Mr Meredith prepared a number of appendices to his report setting out alternative calculations based upon the pro rata method. Appendix 11.1C accepts the opinions expressed by Mr Martin as to the percentage of work completed by reference to his estimate that the construction costs in total were $993,519. Thus as at 13 December 1989, when Mr Martin assesses that $112,172 of work had been done, Mr Meredith records the construction as 11.29% complete as against Mr Martin's estimate of the total cost of construction. Accordingly, 11.29% of the $610,000 was due by way of progress payment. This being an amount of $68,871. 108 It was submitted on the Bank's behalf that an analysis of Appendix 11.1C revealed under payments occurring only on claims 5, 6, 7, 8 and 9 being claims made between 7 June 1990 and 8 August 1990. It was further submitted that there was no under funding by the Bank either before or after that date. It was noted that the breaches relied upon by Rinhilt relate to claims made prior to May 1990. 109 A difficulty with Appendix 11.1C is that Mr Meredith lists the sum of $111,000 in the line representing the first claim for a progress payment. The claim was made on 13 December 1989. The whole of the sum of $111,000 was not paid until 28 February 1990. This difficulty attends each of the Meredith Appendices dealing with the pro rata method of payment. It is a matter of some significance since Rinhilt contends that the first breach of its contract with the Bank was the failure to make a progress payment on or about 13 December 1989. I will return to this aspect of Rinhilt's claim in due course. 110 In Appendix 12.1F Mr Meredith details another set of calculations on the pro rata method based upon Rinhilt's estimated cost of construction of $872,513. For the purpose of Appendix 12.1F Mr Meredith estimates the percentage of work completed based upon the opinions expressed in his report, Ex 11. Appendix 12.2F modifies the calculations contained in Appendix 12.1F by increasing Mr Meredith's estimates as to the percentage of work completed. This modification was based upon the evidence given during the course of the hearing by Mr Randle. The calculations in Appendix 12.2F, even on this assumption more favourable to Rinhilt, do not reveal any underpayments by the Bank. Again, these appendices do not fasten, in terms of the first progress payment, on the position as at 13 December 1989. 111 The Bank accepts that the assumptions made for the purposes of Appendices 12.1F and 12.2F are only valid if I find that the Rinhilt revised estimate prepared by Mr Randle was furnished to the Bank. As I have noted, I do not accept that it was. In order to deal with the latter contingency, the Bank relied on Ex 15 being Appendices 12.1FX and 12.2FX which substituted Mr Meredith's costing of $885,000 for the Rinhilt costing. Unsurprisingly, this produces minimal differences from those shown in Appendices 12.1F and 12.2F. 112 The bank submitted that it was entitled to rely on its own costing since the second Phontos bill of quantities was inadequate. It did not take account of the difference in design of units 7 & 8 nor did it include items 2 - 6 as detailed in the revised Rinhilt estimate. It was Mr Meredith's evidence, which I accept, that in these circumstances the Bank was justified in doing its own costings. 113 The Bank submitted that I would find Mr Meredith's costing to be that which ought reasonably to have been arrived at the commencement of the project as to the estimated cost of construction. The other estimates as to the cost of construction included the PVD costing of $747,195 which it was conceded contained errors and Mr Martin's estimates variously in the amounts of $992,151 (Ex Cd) and $974,101 (Ex Cc). 114 I approach the matter upon an acceptance that a competent quantity surveyor in 1989 would have estimated the total construction costs of the project in the amount of the Meredith estimate, namely, $885,000. Mr Meredith's costing was a thorough one. Generally he impressed as a well qualified and careful witness. I am also influenced by the circumstance that Mr Meredith's costing produced a figure close to that made by Rinhilt at the time. 115 On the assumptions made in Appendix 12.2FX there was no under funding of the project at any stage. This, again, is subject to the difficulty that the figure for the amount paid is the figure as at 28 February 1990 while Rinhilt's complaint focuses attention on the position as at 13 December 1989. 116 In written submissions Rinhilt contended that I would not accept Appendices 12.1FX and 12.2FX firstly because the percentage of work completed was under estimated. It was contended that in relation to the first progress payment provision for $45,135 (Appendix 12.1FX - or $65,933 if one applies Appendix 12.2FX) was inadequate given that the value of the work complete was contended to be $138,000. I will return to the question of the extent of the work completed shortly. 117 The second challenge made by Rinhilt to an acceptance of Appendices 12.1FX and 12.2FX was the contention that in applying the pro rata method one should assume as the estimated total cost of construction at the date of the first progress payment the PVD's initial estimate and for subsequent progress payments the PVD's revised estimate. To this extent, as I have noted, I took Rinhilt in its written submissions in reply to accept that the pro rata method was an appropriate means of determining the content of reasonableness with respect to the release of progress payments. At issue was the estimate as to the total cost of construction. 118 I do not accept that I should have regard to the PVD estimates (which the parties agreed were in error) as the basis for determining whether the funds released by the Bank were reasonable. 119 In determining whether the Bank has been shown to have breached its contract with Rinhilt by unreasonably failing to release progress payments, I approach the matter upon the basis that it was obliged to release funds pro rata (out of a total of $610,000) by reference to the percentage of work complete accepting $885,000 as the correct estimate of the total construction costs. 120 It is necessary to have regard to the percentage by which the project was complete at the time of the application for progress payments made by Rinhilt and as pleaded in its cross claim. 121 Rinhilt submitted that the Bank's first breach of their contract was its failure to release a progress payment on or about 13 December 1989. 122 Little detailed evidence was led in Rinhilt's case to establish the progress of construction of the project. Mr Randle agreed that it was usual to keep a job diary. He had maintained such a diary but had not been able to locate it. There were no photographs, invoices or the like in evidence from which inferences might be drawn as to the progress of the works. Mr Randle's evidence on the point was general in the extreme. In his affidavit sworn in the Rinhilt proceedings on 9 July 1997 Mr Randle said this: "Commencement of the works on site was not delayed to February 1990. As at 15 December 1989 I had completed, in my estimate, over $110,000 worth of work. On 15 December 1989, whilst I did not accept such valuation, had valued actual work on site at $32,000. It was my estimate that by the end of February 1990 there had been in excess of $330,000 worth of contract work carried out on site including consultancy fees and DA fees and charges." (para 34) 123 In written submissions Rinhilt contended that an amount of work to the value of $138,955 had been done as at 13 December 1989. I note this figure is in excess of that which Mr Randle deposed to in his affidavit of 9 July 1997. 124 The sum of $138,955 was arrived at in the following way: (a) As at 29 August 1989 the drainage work prior to foundation work together with most of the initial foundation excavation work had been completed in an amount of $35,000; (b) As at 23 October 1989 works to the value of $85,000 had been completed being: (i) the clearing of the site and the removal of vegetable soil and all of the bulk excavation and soil filling of excavated material in the amount of $70,000; and (ii) the construction of the crib wall in the amount of $15,000 comprising the footing construction and the wall construction; (c) Between 23 October 1989 and 13 December 1989 works to a value of $10,000 had been completed, being all of the perimeter trenches and bored footings excavation to support the footing for each of the cluster homes (this excludes footings excavations for compact and fill inside bottom brickwork under concrete slabs); and (d) Preliminary costs in the amount of $8,955 had been incurred in completing the above works. 125 As to (a) (the drainage work and initial foundation work) Rinhilt pointed to document, ExD XC22, being an internal memorandum prepared by Mr Gardiner and dated 29 August 1989. That document recorded: "Due to the heavy rain and local flooding experienced during the first six months of 1989, the Local Council has now stipulated that additional drainage work be carried prior to foundation work approval. This work has been completed together with most of the initial foundation excavation work." 126 Mr Gardiner said that the source of the information set out in the above memorandum was Mr Randle. 127 There was evidence that Rinhilt sought, and obtained, an advance on the loan facility in the amount of $35,000 in early September 1989. Internal Bank memoranda suggest that these funds were sought in connection with the need to carry out additional drainage work. Rinhilt's submission that $35,000 had been expended on drainage works invites me to assume that the $35,000 released on 4 September 1989 was applied to this end. 128 Mr Meredith was cross examined as to the extent to which work had been completed on the site as at 13 December 1989. He commented that there was no documentation to tell him what drainage work had been done (T.636). 129 As to the extent to which bulk excavation, construction of the crib wall and the construction of the perimeter trenches and bored footings excavation had been carried out there was some conflict in the opinions expressed by Mr Meredith and Mr Martin. 130 In his report, Ex Cc, Mr Martin expressed the opinion that as at the first inspection conducted on 13 December 1989 the value of work carried out was $112,172. Mr Martin's opinion was founded upon the contents of two documents and upon certain assumptions made by him. The first document he described as being a survey of footing pegs dated 23 October 1989. The document has a handwritten notation on the top "Hammond Smeallie and Co P/L 23/10/89" ("the Hammond/Smeallie survey"). From this document Mr Martin concluded that bulk excavation at the site must have been completed and that as at 23 October 1989 the site was ready for footings. The second document bore the date 20/11/89 and was a certificate prepared by Unico, Design and Drafting Services, as to an inspection of Lot 21 Anembo Road Berowra - crib retaining wall ("the Unico certificate"). The Unico certificate records "the rock face exposed is adequate to support the imposed loads of the wall". 131 In his report Mr Martin observed that the Unico certificate indicates that the bottom of the crib wall excavation was suitable for the builder to proceed with footing construction. 132 By reference to the Hammond/Smeallie survey and the Unico certificate Mr Martin concluded that the builder had completed clearing the site and removing vegetable soil, that the builder had carried out bulk excavation and excavation of crib wall footings and spread approved excavated material to areas requiring fill and that preliminary costs had been incurred. He estimated, upon these assumptions, that work to the value of $90,172 had been carried out as at 20 November 1989. He noted that there remained a further three and a half weeks prior to the first site inspection. As he observed in his report "one can only speculate on the activities that occurred". He went on to express the opinion that it was reasonable to expect the bored piers to be excavated and concrete filled with reinforcement, as well as progress on the crib wall footing, excavation of some footings, say fifty percent. The latter items would total $22,000. In all an amount of work in the sum of $112,172 had been undertaken as at 13 December 1989 when PVD conducted its first inspection. 133 Mr Meredith said that he was unable to determine from the Hammond/Smeallie survey and the Unico certificate the amount of work which had been completed. 134 Generally concerning the Hammond/Smeallie survey Mr Meredith explained that the drawing did not indicate to him that, in fact, excavation had been completed. "What this drawing indicates to me is that some dimensions to set outs of a building - and it primarily seems to give what I call recovery pegs at various levels - sorry at various locations. Q. Can you tell me what "set outs" means? A. The process of excavating or building on a sloping site means that, generally, what we would call a preliminary set out, ie the marking out of where the bulk excavation would occur, is done. That is usually prepared by the surveyor putting in what are called recovery pegs. In other words, there's the building (witness indicated). He marks a point off here and off here (witness indicated), so that, in fact, you can then put a line between them (witness indicated) to determine the location of that, because, obviously when machinery is moving around the site, the set out pegs can be damaged, knocked, which could lead to errors in the set out of the building." 135 Mr Martin was adamant that pegs are not placed to determine the area of bulk excavation. He explained that pegs would be obliterated by the bulk excavator so that it would be a waste of time to place them in the first instance. The presence of the pegs in the Hammond/Smeallie survey indicated to him the building parameters and "You don't do that activity until you have set the new reduced levels of the site" (T.250). His attention was drawn to the circumstance that the pegs on the northern side are off set from the building site itself. It was suggested that this was equally consistent with the pegs indicating to a bulk excavator how far he should go or the outer perimeter to where he might go. To this Mr Martin said emphatically: "No, the bulk excavator is an individual who is not this precise. He basically has a big site area with instructions to get it down to the overall shape. This is too precise for a bulk excavator. This is setting out the location of the dwellings in regard to the boundaries, so this is detailed work which is the next stage after bulk excavation. This is the location of the footings". (T.250) 136 In written submissions Rinhilt invited me to find that as at 23 October 1989 the construction of the crib wall was complete. In this regard my attention was directed to the Hammond/Smeallie survey and to Ex K, a plan prepared by Hammond/Smeallie showing the nature and position of marks placed defining sites for proposed units together with levels. Both plans recorded "top of crib wall 15.62". Rinhilt relied on the cross examination of Mr Meredith in the course of which he agreed with the proposition that as the datum level is given to the top of the wall he would expect the wall to probably be there. The difficulty I have with Rinhilt's submission in this respect is Mr Martin's report, Ex Cc. Mr Martin relied on the Hammond/Smeallie survey as the foundation for his opinion as to the progress of the works. He did not conclude that construction of the crib wall was complete as at the date of the survey. Indeed by reference to the Unico inspection certificate dated 20 November 1989 he opined that the bottom of the crib wall excavation was suitable for the builder to proceed with footing construction. From the Hammond/Smeallie survey and the Unico inspection certificate read together he deduced that as at 20 November 1989 the builder had completed clearing the site, removing vegetable soil, carrying out bulk excavation in rock in parts, excavating crib wall footings and spread approved excavated material to areas requiring fill. 137 The request for progress payment dated 12 December 1989 (Ex D XC31) includes handwritten notations by Iain Stevens, in these terms: (i) clearing & pier excavation. (ii) retaining wall - approx 24 LM by 2 m high plus back fill (iii) 10,000 bricks on site. An undated handwritten memo (Ex D XC32) records, inter alia: "retaining walls $15K major earth works twenty five percent of bricks paid plus on site spent $150K incl council fees requesting $82K foundations starting Monday." 138 I note that Mr Stevens' memorandum, Ex D XC31, includes the handwritten notation "claim to have spent $150,000". I consider that Ex D XC32 is a document substantially contemporaneous with the request for progress payment made on 12 December 1989. As at that date I consider it probable that the crib wall had been constructed. 139 In its written submissions Rinhilt invited me to conclude that by 13 December 1989 all of the perimeter trenches and bored footings excavation to support the footings/foundations for each of the cluster homes were complete. This was said to flow from the circumstance that ten thousand bricks were on the site at the time of the PVD inspection on 13 December 1989. I was invited to infer that the bricks would not have been ordered for delivery unless the works had reached a stage for their immediate use. The evidence did not go that far. Indeed Rinhilt's own expert, Mr Martin, was only able to opine that excavation of some footings, say fifty percent, might be inferred as at 13 December 1989. 140 Both Mr Meredith and Mr Martin were well qualified witnesses with lengthy experience in the building industry. In the body of his reports on occasions Mr Martin was inclined to somewhat extravagant language. A number of his opinions depended upon an acceptance of things that had been conveyed to him by Mr Randle. This inclined me to some caution in accepting his opinion in instances where he was in conflict with Mr Meredith. Mr Meredith was a precise and measured witness. Mr Meredith was cautious about the conclusions open upon the Hammond/Smeallie survey. He did concede that the Hammond/Smeallie survey shows some reduced levels. I understood this to be consistent with a view that an amount of bulk excavation had been done. However, I did not understand Mr Meredith to agree that the Hammond/Smeallie survey, of itself, provided a sound basis for inferring that the bulk excavation was substantially complete and that the site was ready for footings. 141 Mr Martin assumed that in the three and a half weeks from 20 November 1989 it might be assumed that the bored piers had been excavated and concrete filled with reinforcement as well as progress on the crib wall footing and excavation of some footings, say fifty percent. I did not understand this latter opinion to be based on more than his assumption that works would have been progressing in the period between 20 November 1989 when Unico conducted its inspection and 13 December 1989 otherwise there was no evidence concerning these matters. 142 In his report Mr Meredith observed: "The Council BA was not granted until 28 November 1989. Mr Martin concluded that the excavation was one hundred percent complete, however, the engineer's certificate of some six weeks later makes no comment as to the status of units 5 - 8. If the builder had completed the $96,000 for the earth works within thirteen days this would be unlikely. It would not have been appropriate for the Bank to pay for the work completed without the building approval. I conclude that the excavation may not have been fully completed until after the date of the engineer's certificate." 143 Mr Meredith expressed the opinion that Mr Martin may have "front loaded the trades" in his estimate as to the project costs. In this regard I note Mr Martin's estimate of $96,136 for excavation in contrast with Mr Meredith's estimate of $19,000 for the same item. Mr Meredith explained that he had included in his figures the sum of $70,000 which included items such as internal roads, retaining walls and the like. As I have noted, the Rinhilt estimate was close to that made by Mr Meredith. Mr Martin's estimate differed in that his figure was approximately $108,000 in excess of both Mr Meredith's estimate and the estimate made by Rinhilt. Mr Meredith explained that the difference was not across the whole of the job, that is to say Mr Martin's estimate was not ten percent more than his estimate or the Rinhilt estimate in respect of each line item. The substantial difference was Mr Martin's figure of $96,000 for excavation when compared with the Meredith figure of $19,000 for the same item. 144 To a large extent the difference between Mr Martin and Mr Meredith was in relation to the progress payments for the early stages of the work. This is significant when one comes to consider whether Rinhilt has established that the Bank breached its contract by failing to reasonably release adequate progress payments in the early stages of the project. 145 I am not satisfied that Mr Martin is to be accepted when he asserts that $112,000 worth of work had been done as at 13 December 1989. It follows that I am not satisfied that as at that date the works were 11.29% complete. Generally, I prefer the opinion of Mr Meredith as to the percentage by which the project was complete at given times. Mr Martin's opinion on occasions depended upon assumptions as to the regular progress of the project and/or information which was not proved in evidence. 146 Rinhilt sought a progress payment on or about 13 December 1989. It did not receive a payment until 23 January 1990. By reference to Appendix 12.2FX to the Meredith report as at 13 December 1989 7.45% of the project was complete. Upon an acceptance of the pro rata method and a view that the total cost of construction was $885,000 this required the release of a progress payment of $45,446. In fact as at that date $35,000 had been released. On 23 January 1990 a further progress payment (based upon the 13 December 1989 inspection) in an amount of $36,000 was released. 147 There was an interval of almost six weeks between the claim and the release of the payment in this case. Mr Gardiner observed that there was a condition imposed on the progress payment following the 13 December 1989 inspection (T 359.57). This was a reference to Mr Wilcher's notation "survey certificate required to confirm identification". It was suggested to Mr Gardiner that an identification survey had been supplied to the Bank in July 1989. This was a reference to the document Ex D XC 16. Mr Gardiner rejected that proposition. I am satisfied that the identification survey sought was not produced until sometime shortly before 27 March 1990 when the Gladesville Branch sent a copy of the same to the PVD (Ex 12 p 149). The evidence did not establish whether Mr Wilcher's request for such a survey set out in his report of 13 December 1989 had been conveyed to Rinhilt. Mr Gardiner was not able to recall whether insistence on the production of the identification survey had been a condition of the release of the progress payment following the 13 December inspection (T 362.48). I do not think that the reason for the delay in the release of the progress payment on this occasion was the non production of the identification survey. Progress payments were made on 23 January, 28 February and 8 March prior to the production of the identification survey. 148 I am not inclined to consider that Rinhilt has established that the Bank was in breach of its obligation to release progress payments in a reasonable way by virtue of the delay in the release of the progress payment following the claim submitted on 12 December 1989. In this regard I take into account the intervention of the Christmas break between the inspection and the release of the payment. In the event that there was a breach I am not of the view that Rinhilt has established that it suffered any loss thereby for reasons which I set out below. 149 In its written submissions Rinhilt alleges that the Bank breached its contract with it by failing on or about 6 April 1990 to release a progress payment. 150 I note that Rinhilt's expert, Mr Martin, in Ex Cc, estimated the value of the work completed as at 6 April 1990 as $206,361. This represents 20.77% completion by reference to Mr Martin's estimate as to total construction costs. 151 By contrast Mr Meredith considered that as at 6 April 1990 12.2% of the job had been completed. He was prepared to adjust that figure up to 14.26% upon an acceptance of the evidence of Mr Randle as to the extent of work completed in the initial stages of the project (specifically the evidence concerning the payment of the reserve contributions in December 1989, an increase in the internal civil work and the existence of bricks on site in December 1989). Mr Meredith went on to note that he had not seen documentation to support Mr Randle's evidence and was thus not in a position to know whether it was true or not. I am satisfied that bricks were on site when Mr Wilcher inspected the project on 13 December 1989. I prefer Mr Meredith's revised percentages as a more accurate guide to the progress of the works. 152 There remains a discrepancy between the estimate made by Mr Meredith and the estimate made by Mr Martin as to the percentage completion of the project. For the reasons I have earlier given I prefer Mr Meredith's opinion. 153 PVD inspected the project on 6 April 1990. No progress payment was made following that inspection. The next payment was not until 9 May 1990. By reference to Mr Meredith's Appendix 11.1C, if one were to assume the correctness of Mr Martin's opinion as to the state of completion of the project as at 6 April 1990 and to his assessment of the total project cost, the Bank had paid out an amount by 8 March 1990 in excess of that which was due. A similar result obtains by reference to Appendix 12.2FX based upon an acceptance of Mr Meredith's revised percentage completion figure of 14.26% and the Rider Hunt estimate as to total construction costs of $885,000. 154 Appendix 12.2FX to the Meredith report shows that upon an acceptance of the total cost of the construction costs of the project as $885,000 and upon Mr Meredith's revised estimates as to the percentage completion of the works there was no underfunding throughout the project. I accept that to be the case save for the matter which I have outlined above as to the timing of the second progress payment following the 13 December 1989 inspection. 155 If the Bank were in breach of its obligation to make timely progress payments, upon an acceptance of the pro rata method on the assumptions I have noted above, in that for a period of, say, three weeks (allowing three weeks for the release of a payment in the ordinary course) the project was underfunded by an amount of $10,000 approximately, I am not persuaded that Rinhilt suffered any loss thereby. 156 As at December 1989 / January 1990 I am satisfied that there were funds available to Rinhilt to allow it to continue with construction in the event of delay in receipt of progress payments. On 29 November 1989 Mr Stevens reviewed the Rinhilt loan account file and noted: "Work is proceeding using directors' fund plus $35K already advanced. Mr Randle has recently rec'd $150K as his first instalment from P & E Phontos case. This money has been lodged with Alcan Const P/L who is the building company responsible for the Berowra job". The reference to Alcan P/L appears to be an error. As I have noted R & M Constructions was the building contractor retained by Rinhilt in connection with the Berowra development. In the course of his evidence Mr Randle agreed that he had received the sum of $150,000 from the Phontos group in connection with the settlement of the Phontos dispute with the Housing Commission. 157 As at 26 February 1990 Lorraine Foley, an officer attached to the Gladesville Branch, recorded that Mr Randle had called by appointment to request a payment of $80,000. It appears that she was advised that all foundations and initial brick work had been completed. Her memorandum goes on to note: "He advised that the payment should have been requested several weeks ago, but he has been on holidays, and his partner Mr Miller, suffered a heart attack and had a triple by-pass operation. Paper work has therefore been delayed." Ms Foley's memorandum goes on to note that Mr Randle had informed her that he had deposits of $200-$300,000 himself "which he would utilise if necessary". It was in response to this contact that Mr Gardiner authorised a $40,000 progress payment without first obtaining a certification from PVD. The contents of the Foley memorandum do not sit well with the Rinhilt contention that it was as at February 1990 suffering in consequence of the Bank's failure to release progress payments in a timely way. 158 I am not satisfied that the Bank was in breach of its obligations with respect to the release of progress payments in accordance with its contract with Rinhilt. The Guarantee 159 It is not in issue that Mrs Randle executed a guarantee by which she guaranteed Rinhilt's debt to the Bank on or about 10 May 1989. Mrs Randle cross claims against the Bank seeking relief under the Contracts Review Act 1980. She contends that the contract of guarantee was unjust in the circumstances relating to it at the time it was made. The first basis by which she contends that the contract was unjust compendiously pleads that she executed it in circumstances where she expected the Bank not to breach the terms of the contract or to behave negligently or in bad faith in its dealings with Rinhilt and with her. It is not necessary to give further consideration to this aspect of her claim since I am not persuaded that the Bank was in breach of its contract or that it behaved negligently or in bad faith. 160 This does not dispose of Mrs Randle's Contracts Review Act claim. She contends that: · The effect of the guarantee was not explained to her; · She did not read the guarantee; · She derived no benefit from the advance; and · she was not advised to seek independent advice as to the merits of the contract or its implications. 161 Mrs Randle's account of the circumstances in which she came to execute the guarantee were set out in her affidavit of 12 December 1992 sworn in the Randle proceedings. Generally, she asserted that around February 1989 Mr Randle told her that the Bank had asked them to put up the Wobby Beach property as an additional security in relation to the Rinhilt project. She said that she had told her husband "OK I'll do it, but I want nothing more to do with it. I don't want to be involved, I want nothing to do with it." (para 3) She went on to say that in late April or early May 1989 she had a further discussion with Mr Randle at their home. During the course of this discussion he informed her that they would have to go into the Bank to sign some documents to get the money in order to settle the land. She remembered asking him "What kind of documents Ed, because I'm not involved". She said that Mr Randle replied "You've already agreed to put Wobby Beach up. That's what you have to sign". In the course of this conversation Mrs Randle recalled her husband telling her that the Bank wanted personal guarantees from him and from Harry Miller. 162 In May 1989 Mrs Randle said that she had received a telephone call at her place of employment from a person who identified herself as an employee of the Bank. The caller told her "We need you and Mr Randle and Mr Miller to come in to sign the papers today". Mrs Randle said "No its got nothing to do with me. You'll have to ring Mr Randle or Mr Miller". Shortly thereafter she said that she received a phone call from her husband who sounded most angry. During the course of the conversation he said words to the effect: "You have to meet me at Gladesville in one hour to sign the papers for the Bank otherwise we don't get the money for the loan and we lose our deposit" (para 6). During the course of this telephone conversation Mrs Randle asserted that her husband again informed her that her involvement was limited to the Wobby Beach premises. 163 Mrs Randle deposed to meeting her husband and Harry Miller outside the Gladesville Branch of the Bank about one hour after her telephone conversation. Mrs Randle said she queried why the situation was such an emergency and that her husband told her "They won't release the money to buy the land and we have to settle today, otherwise we'll lose our deposit. Do you want to lose your deposit?" Following this conversation Mrs Randle said the three of them entered the Bank and were taken to a small office where a girl produced a manilla folder which she opened saying words to the effect "These are the papers". Mrs Randle queried "Do we all sign the same paper?". The young woman replied "These are the only papers that you have to sign". Mrs Randle said that she said words to the effect "I'm only here because of Wobby Beach so shouldn't I sign something different?". She said that she was again informed that there was only one set of papers to be signed. She recalled specifically inquiring whether the papers referred to Wobby Beach and being informed by the Bank employee that they did. It is to be noted that there is no reference to Wobby Beach in the personal guarantee executed by Mrs Randle (Ex 1). 164 Mrs Randle deposed to the circumstance that the only conversation she had with any Bank employee was that with the young woman to whom she referred in para 9 of her affidavit and which I have summarised above. She said that she had not read the documents, nor were their contents explained to her. She believed that she had signed an approval for Wobby Beach to form part of the security for the loan to Rinhilt. In the course of her evidence Mrs Randle, again, asserted that at the time she signed the personal guarantee she understood she was giving security over Wobby Beach in favour of Rinhilt. She said this: "What I meant was that I wasn't party to Rinhilt. I wasn't involved in it in any way whatsoever. I wasn't a director, I wasn't a shareholder, I had no voice in Rinhilt. Rinhilt was a company my husband set up with Harry Miller. I was asked to put Wobby Beach up as security for Rinhilt and I agreed to do that." (T.54) 165 It was Mrs Randle's evidence that she did not realise she had executed a guarantee until after she had moved in to premises at 5/19 Anembo Road. 166 By letter dated 22 March 1989 addressed to Mrs P S Randle, 23 Helvetia Avenue, Berowra the Bank advised: "Dear Mrs Randle, Re: Rinhilt Pty Limited The document/s described below are provided herewith for your signature. Your present maximum liability to the Bank under the document/s is $1,000,000 plus interest, costs, charges and expenses as provided in the document/s. Prior to signing the document/s you should satisfy yourself that you understand the full nature and effect of your liabilities to the Bank and obtain appropriate advice, legal or otherwise, if you are at all uncertain of your position. Your signature to the document/s should be witnessed by an adult person (specially qualified where so called for in the document/s) who is not the borrower/debtor or a co-guarantor/mortgagor (if any) under the document/s. DOCUMENT/S Guarantee by you, Edwin Alfred James Randle and Harold Arthur Miller, in respect of the indebtedness of Rinhilt Pty Limited liabilities under which are secured by mortgage by you and Edwin Alfred James Randle over property at Lot 52 Wobby Beach." 167 Mrs Randle denied receiving this document. She agreed with the proposition that in all probability if a letter addressed to her at that address was received she would have opened it. However, she had no recollection of ever receiving it. 168 I was not impressed by Mrs Randle as a witness. Her evidence was in some respects contradictory and aspects of it were inherently implausible. Apparent contradictions may be explained by the interval of years since the subject events. However, Mrs Randle was prepared to be confident about events in the course of giving evidence which were at odds with the version given in her earlier affidavit. Thus during the course of oral evidence she denied that she had received a telephone call from the Bank. Her attention was then directed to the contents of para 5 of her affidavit of 12 December 1992 in which she detailed the telephone conversation between herself and the Bank employee on the day the guarantee was executed. It was put to Mrs Randle: "Q. You felt perfectly comfortable a few moments ago in stating in categorical terms, were you not, that you never had a conversation? A. Yes, because I never had a major conversation or never had real dealings with the Banks". (T.64) 169 On 22 March 1989 the Bank sent letters, separately addressed, to Mrs Randle and Mr Randle. Iain Stevens said that he believed that the letters would have been sent in separate envelopes. I accept that is so. I am satisfied that Mrs Randle received the letter addressed to her of 22 March 1989 and that she read it. 170 Mr Randle gave evidence that the two letters had been enclosed in the one envelope. He claimed not to have shown Mrs Randle the letter addressed to her. He said he had taken it to the Bank in order to query the requirement that his wife provide a personal guarantee. He said that he thought that the Manager had probably called Iain Stevens into the meeting. He said that he had said "Look, this - I want you to get it straight that my wife is only putting up Wobby Beach". Mr Randle's attention was then drawn to the contents of his first affidavit in which he had given an account in these terms: "On or about 22 March 1989 I had a telephone conversation with Mr Iain Stevens of the plaintiff Bank" (T.140). In the version set out in the affidavit Mr Randle described Mr Stevens as saying in the course of a telephone conversation "I'll look into it for you". In cross examination Mr Randle dealt with this saying that he had probably telephoned the Bank in order to make an appointment. He maintained that he had gone to the Manager's office to take up the matter of his wife's guarantee. He maintained that Mr Stevens had been called into that meeting. It was his recollection that Mr Stevens had indicated that he would rectify the matter: "Q. So your evidence is that Mr Stevens said that he would rectify it and exclude your wife from having to sign the guarantee? A. That her only involvement in the project was the fact that she was making available to the Bank an interest in the property that she had and that was all there was to it." (T.142) 171 Mr Randle maintained that he had not discussed the question of the personal guarantee with his wife. He agreed that he understood his wife was signing the same document that he and Mr Miller signed, namely a personal guarantee. Notwithstanding Mr Stevens' assurance that he would look into the matter, Mr Randle did not query the presentation of the personal guarantee to his wife for execution by her. Mr Randle impressed me as a person who would not be slow to complain should he consider that he was being treated unfairly or that some matter affecting his interest had been overlooked. His evidence on the issues surrounding the personal guarantee was at odds with the evidence of Mr Stevens and other of the Bank officers. Again, I preferred the evidence of the Bank officers. 172 Mrs Randle agreed that it had seemed strange to her that she should be asked to sign the same document as that signed by her husband and Mr Miller. This was so because she was aware that both her husband and Mr Miller were executing a personal guarantee to secure Rinhilt's debts to the Bank. Mrs Randle was shown the guarantee, Ex 1, it was pointed out to her that her signature appears above the word "guarantor". It was put to her: "It would be just about impossible for you to sign that document without noticing the word "guarantor" if you were signing above it? A. I think you should notice it, yes. Yes, you should notice it." (T.67) 173 The guarantee bears the words "hereby guarantees" in bold on the first page of the document. An alteration to Mr Miller's name bears the initials of each of the signatories on page 1. Annexure "A" to the guarantee contains a similar alteration, again bearing the initials of each of the signatories. 174 The guarantee is witnessed by Iain Stevens. In his affidavit, sworn on 24 February 1993, Mr Stevens stated: "I cannot recall the details of any conversation I may have had with Randle or the other guarantors when they executed the guarantee, but it was always my practice when executing guarantee documents to confirm whether or not the guarantors had received and understood "S33 letters" from the Bank. If there had been any indication of reluctance or hesitation to sign the document, the guarantors would have been encouraged to seek the appropriate professional advice, as recommended in our "S33" letters." 175 The reference to "S33" letters is a reference to the letter of 22 March 1989 addressed to Mrs Randle which I have extracted above. 176 Mr Stevens went on in his affidavit to assert that at the time of witnessing the guarantee he would have said words to the effect: "Did you receive the letters sent to you by the Bank dated 22 March 1989 setting out your maximum liability to the Bank and referring to the guarantee you are to provide to it?" 177 It was Mr Stevens' evidence that the guarantors would have said words to the effect "Yes" (C2 affidavit of 30 March 1993). 178 It was Mrs Randle's account that she had not been given an opportunity to read the document and that she had been present in the office attending to its execution for something less than a minute (T.65). Generally, she said she had felt rushed. On Mrs Randle's account the only bank officer present when the guarantee was executed was the young female. I do not accept that is so. I accept Mr Stevens' evidence that he was present at the time the guarantee was executed. I accept Mr Stevens' evidence as to his practice namely that he would inquire of guarantors whether they had received the Bank's S33 letters. On Mrs Randle's account she had queried that the document she was signing related to the Wobby Beach premises. I am satisfied that had she raised such a query, Mr Stevens would have advised her to seek appropriate professional advice. 179 I do not accept Mrs Randle's account that the guarantee was signed in haste in circumstances in which she was being pressured by her husband to execute what she understood to be a security document in order that funds might be released to permit settlement of the purchase of the Anembo Road property. The security documents were executed on 10 May 1989. The contract for sale of the Anembo Road property was signed on 3 April 1989. Settlement was effected on 7 June 1989. The evidence does not suggest that as at 10 May settlement was imminent or provide any support for the proposition that Rinhilt perceived itself as being under pressure to execute the security documents in order to comply with its contractual requirements and not be at risk of losing its deposit. On 5 May 1989 the Bank wrote to the secretary of Rinhilt advising that the security documents had been completed and that the Bank would be pleased if arrangements could be made for the same to be executed. This, it would seem, provided the impetus for Mr and Mrs Randle to attend on 10 May 1989 in order to attend to the same. 180 On or about 2 October 1990 the Bank wrote to Mrs Randle noting that Rinhilt's borrowings had increased and seeking her acknowledgment of an increase in the facility to an amount not exceeding $1,200,000.00. Mrs Randle did not recall seeing the letter although she agreed that she may have done. She accepted upon the assumption that it reached her that she would have read it. It is to be noted that the acknowledgment of debt document which was attached to that letter wrongly referred to the guarantee of 10 May 1990. Mrs Randle signed the acknowledgment as to the increase in the Rinhilt facility the subject of her guarantee to $1,200,000.00. It was her evidence that she did not understand the effect of it. 181 Mrs Randle signed a further acknowledgment of an increase in the Rinhilt facility the subject of her guarantee in the amount of $1,330,000. Both acknowledgments purport to be witnesses by a bank officer, Ms Mangeruga and bear the Gladesville branch receipt stamp of 29 November 1990. Mrs Randle maintained she had signed both documents at home and returned them to the bank by mail. I think the likelihood is that both were signed at the Gladesville branch of the Bank in the presence of Ms Mangeruga who witnessed the same. This serves to explain how the signed acknowledgment as to the increase in the facility to $1,200,000 correctly records the date of the guarantee as 10 May 1989 notwithstanding that the acknowledgment attached to the bank's letter of 2 October 1990 bore the incorrect date. I accept Mr Stevens' evidence that the Branch's received stamp was affixed to documents received in the mail or executed at the Bank. I do not accept Mrs Randle's evidence that she did not understand the effect of the acknowledgment. I am satisfied that Mrs Randle was aware she had executed a personal guarantee securing the Rinhilt debt on 10 May 1989 and that she understood as at 2 October 1990 that Rinhilt's facility was being increased and on or about 29 November 1990 she acknowledged that her personal guarantee secured the extension in the Rinhilt facilities in an amount as at that date of $1,330,000.00. 182 On 21 June 1991 Mrs Randle signed a further acknowledgment of her increased liability under the personal guarantee. On this occasion the Rinhilt facility was extended to amounts not exceeding $1,530,000.00. 183 Mrs Randle was born in 1951. She was raised in New Zealand where she completed her high schooling. She matriculated. Subsequently she came to New South Wales. For a relatively brief period around 1981 or 1982 she was enrolled in a Bachelor of Business degree course at the Nepean College. She did not complete this course as the result of ill health. She had attended classes for about a year. Prior to this Mrs Randle had attended the Auckland Technical Institute where she studied shorthand and typing. She had a somewhat varied job history. She had taken several years out of the work-force as a young woman to go sailing. She had worked as a records clerk with the New Zealand Government and elsewhere as a data entry clerk. 184 While undertaking the course of studies at the Nepean College she had worked part time as a customer service clerk with Chargecard Services. Subsequently she had worked at Woolworths in the head office doing data entry work. Thereafter the Australian Federation of Credit Unions approached Mrs Randle and offered her employment. She was a "Settlement Officer" with that organisation. She explained her job in this way: "It is when the Credit Union issue cards to their clients and their clients go and the cardholders go and use the cards at say the ANZ merchants, then my department would be responsible in clearing those funds daily and paying the ANZ Bank for what our cardholders had spent. So it was like reading computer reports and advising how much money was spent and paying." (T.49) 185 Mrs Randle agreed that as at 1987 when she and her husband executed the mortgage in favour of the Commonwealth Bank over the Wobby Beach premises, she understood the effect of default. In the course of her cross examination she agreed that as at May 1989 she understood in general terms what a personal guarantee was. (She had what she described as "some basic understanding of what it was" (T.56)). 186 I considered Mrs Randle to be a woman of reasonable intelligence with some grasp of financial matters. I consider that she understood there was a distinction between offering security in respect of Rinhilt's debts to the Bank over the Wobby Beach property and executing a personal guarantee to secure the same. 187 I am satisfied that Mrs Randle understood she was executing a personal guarantee when she did so on 10 May 1989. As I have noted, I am satisfied that Mrs Randle received and read the letter of 22 March 1989. There was, thus, an interval of some six weeks during which Mrs Randle had the opportunity to obtain legal or other advice concerning the transaction. This letter constituted the sole advice to Mrs Randle that she consider obtaining legal or other advice offered by the Bank. As at 10 May 1989 Mrs Randle was not a director of Rinhilt. She was being invited to execute a personal guarantee securing Rinhilt's debts in circumstances in which she was to receive no direct benefit from the advance. It does appear to have been contemplated that Mr and Mrs Randle would on the completion of the project move into occupation of one of the units. 188 Mrs Randle's claim is for relief pursuant to the provisions of the Contracts Review Act 1980 ("the Act"). Section 7(1) of the Act provides that where the Court finds a contract to have been unjust in the circumstances relating to the contract at the time it was made, it may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequent or result, grant various relief including making an order declaring the contract void in whole or in part. The Court is required to have regard to the public interest and to all the circumstances of the case in determining whether a contract, or a provision of a contract, is unjust in the circumstances relating to it at the time it was made; s 9(1) of the Act. Section 9(2) lists twelve matters to which the Court is to have regard (to the extent that they are relevant to the circumstances) including: "(h) whether or not and when independent or other expert advice was obtained by the party seeking relief under this Act; (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect; (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract; (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract; or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract." 189 I do not find that Mrs Randle was subject to any undue influence, unfair pressure or unfair tactics in relation to her execution of the personal guarantee. 190 Mrs Randle executed the personal guarantee in circumstances in which she stood to obtain no financial benefit from the advance by the Bank to Rinhilt. This much must have been apparent to the Bank. The steps taken by the Bank to ensure that Mrs Randle understood the purport and effect of the guarantee were desultory. However, I am satisfied that Mrs Randle understood she was executing a personal guarantee and that, in general terms, she understood the effect of so doing. 191 In the light of this latter finding, I am not of the view that the contract was unjust in the circumstances relating to it at the time it was made and I am not disposed to grant Mrs Randle relief pursuant to the provisions of the Act. 192 I should note that Mrs Randle sought a declaration that the mortgage over the Wobby beach property be set aside it being contended that it was void and unenforceable. No submissions were advanced in support of the cross claim in this respect. Mrs Randle's evidence was that she had been involved in organising the loan of $40,000 which had been used to purchase the Wobby beach premises. She understood that the loan was to be secured by mortgage. She was familiar with the concept of a mortgage since she and her husband had executed a mortgage over premises they had owned in Campbelltown. Mrs Randle understood the consequences of default under a mortgage (T.50). The circumstances surrounding the execution of the mortgage over the Wobby Beach premises give rise to no basis for setting the same aside. 193 No basis has been identified for setting aside the Wobby Beach mortgage in so far as it served to secure the debts of Rinhilt. I am satisfied that Mrs Randle understood the purport and effect of the transaction. It was not submitted otherwise. 194 For the above reasons I consider the cross claimants have not made good their claims in either proceedings. 195 In the Rinhilt proceedings the Bank claims judgment in the amount of $2,493,004.32 together with interest thereon at the rate of $943.79 per day as from 15 June 2000. The evidence supporting this claim is as set out in the affidavit of Barry Robert Watson sworn on 1 February 2000 and supplemented by his further affidavits sworn on 30 March 2000 and 22 June 2000 respectively. The matters deposed to therein were not the subject of challenge. The only answer made by Rinhilt to the Bank's claim were the matters pleaded in the cross claim. Accordingly there will be judgment for the bank in the sum of $2,493,004.32 together with interest to date being an amount of $250,104.35. 196 The Bank also seeks an order for possession with respect to townhouse 5, 19 Anembo Road, Berowra pursuant to the mortgage executed by Rinhilt on 10 May 1989 (Ex 2). The mortgage incorporates the provisions set forth in the memorandum, registered no. T340042. A copy of the terms of the memorandum appears at pp 99-102 of Ex 12. The mortgage was an "all moneys" mortgage conferring upon the mortgagee a right to enter upon and take possession of the premises upon the power of sale becoming exercisable. 197 In the Randle proceedings the Bank seeks judgment against Mrs Randle in the amount of $2,493,04.32 together with interest thereon at the rate of $943.79 per day as from 15 June 2000 pursuant to the terms of the guarantee dated 10 May 1989. The demand it relies upon is that made on 15 July 1992 by letter addressed to Mrs Randle on behalf of the Manager of the Gladesville Branch of the Bank. 198 Mrs Randle's only defences to the Bank's claim were to contend firstly, that Rinhilt was not indebted to the Bank for the reasons raised in the Rinhilt cross claim. Secondly, Mrs Randle sought relief pursuant to the provisions of the Contracts Review Act. I have rejected both these claims and, accordingly, there will be judgment for the Bank against Mrs Randle in respect of her liability for the debts of Rinhilt under the guarantee. 199 Mrs Randle raised no defence to the Bank's claim with respect to the arrears of rent for townhouse 5 as from 4 July 1992 to date. As at 4 July 2000 the Bank's claim amounted to $108,160.00. Since that date an amount of $260 for each week has continued to accrue. To-date the arrears in rent total $117,260.00. There will be judgment for the Bank against Mrs Randle in the sum of $2,860, 368.67 in total. 200 The Bank also seeks against Mrs Randle an order for costs pursuant to Part 4 r 4A(5) of the SCR. In this respect I note that Mrs Randle filed a Notice of Appearance in the Rinhilt proceedings. Annexed to this notice was an affidavit sworn by Mrs Randle in conformity with the provisions of Part 11 r 1A of the SCR setting out that she had been authorised by resolution of the directors to enter an appearance and to defend the proceedings, that authorisation not having been revoked. The Bank sought and was granted leave to add Mrs Randle as a second defendant pursuant to Part 11 r 1A(4) of the SCR. 201 Part 4 r 4A(5) of the SCR provides that the Court may make against the authorised director any order for costs which, if the authorised director had not been a party, it would have made against the organisation. On Mrs Randle's behalf it was not submitted that I would not make an order for costs against her pursuant to Part 4 r 4(5) in the event that the Bank was successful in the Rinhilt proceedings. Orders 1. In proceedings no 15142/92 verdict and judgment for the plaintiff against the second defendant in the sum of $2,860, 368.67. 2. Dismiss the amended cross-claim. 3. The defendants/cross-claimants are to pay the plaintiff's/cross-defendants' costs as agreed or assessed. 4. In proceeding no 15096/92 verdict and judgment for the plaintiff as against the first defendant in the sum of $2,743,108.67. 5. Judgment for the plaintiff for possession of the whole of the land comprised in Certificate of Title Folio Identifier 5/SP 40383 and known as 5/21 Anembo Road, Berowra in the State of New South Wales. 6. Dismiss the amended cross claim. 7. The defendants/cross-claimants to pay the plaintiffs/cross-defendants costs as agreed or assessed. ***** Last Modified: 03/08/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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