Burns & Ors v AMP Finance Ltd [2004] NSWSC 166

New South Wales Supreme Court

CITATION : Burns & Ors v AMP Finance Ltd [2004] NSWSC 166 HEARING DATE(S) : 08/03/04, 09/03/04, 10/03/04 JUDGMENT DATE : 18 March 2004

JUDGMENT OF : Gzell J DECISION : Statement of claim dismissed. Judgment for defendant on cross claim

CATCHWORDS : CONTRACTS - General Contractual Principles - Construction and Interpretation of Contracts - Whether later variations of a finance facility were interim variations within an earlier conditional variation for a regular amount - Whether representations led to estoppel of the defendant arguing otherwise - Whether defendant in breach of contract for failure to release lots from security on request - Whether a variation to hold lots until required was agreed - Whether the defendant was obliged to endorse a linen plan of boundary adjustment which differed significantly from agreed earlier plan - No principles involved LEGISLATION CITED : Real Property Act 1900 Australian Securities and Investments Commission Act 2001 (Cth) John Burns - 1st Plaintiff PARTIES : Dolroy Pty Ltd - 2nd Plaintiff O'Malley's Acquariums Pty Ltd - 3rd Plaintiff AMP Finance Ltd - Defendant FILE NUMBER(S) : SC 4194/03 COUNSEL : Ms Natalie Obrart - For the Plaintiffs Mr Simon White - For the Defendant SOLICITORS : Jackson Smith Solicitors Kemp Strang Solicitors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

GZELL J

THURSDAY 18 MARCH 2004

4194/03 JOHN BURNS & ORS V AMP FINANCE LTD JUDGMENT 1 In 1995 the plaintiffs entered into a facility agreement with the defendant then called GIO Finance Ltd. It lent the facility limit of $875,000 to the second plaintiff, Dolroy Pty Ltd. Dolroy and the third defendant, O'Malley's Aquariums Pty Ltd granted registered first mortgages over land by way of a security. The first plaintiff, John Burns and O'Malley's Aquariums guaranteed Dolroy's performance of obligations under the facility agreement. 2 From time to time the facility limit was increased. In its cross claim, AMP alleged that Dolroy fell into arrears of interest in January 2003. In February 2003, a notice pursuant to the Real Property Act 1900, s 57(2)(b) was served on Dolroy. Thereafter, AMP declared the amount outstanding, interest and all other amounts payable under the facility agreement to be immediately due and payable pursuant to the default provision in that agreement. 3 As at 1 March 2004, the total amount outstanding under the facility agreement was $5,044,483.39. AMP claimed this amount together with interest from that date against Dolroy and against Mr Burns and O'Malley's Aquariums as guarantors. It also claimed possession of the mortgaged properties. 4 The plaintiffs' primary argument was that the facility was not in arrears when the demands were made or at trial. They claimed that the facility limit had been increased by an amount in excess of their entitlement to capitalise interest. 5 The land provided as security by Dolroy was situated at Dunns Creek in the Port Stephens Shire in New South Wales. Dolroy wished to develop it as a 26 lot residential subdivision. It was a term of the facility agreement that, upon registration of a consolidation and subdivision of the land, AMP on receipt of a written request would release from its security, portion of the land marked with an X on an attached plan. That area became lots 1 and 2 on DP 875533 which was registered in August 1998. The two lots were not released by AMP until November 2001. The plaintiffs claimed damages for breach of contract and, if their primary argument failed, estoppel against AMP alleging that the plaintiffs were in breach of the facility agreement. 6 The consolidated lot 3 on DP 875533 was crossed by a road, title to which Dolroy obtained from the Crown in early 2000. In June 2003, Port Stephens Council raised a concern with respect to the subdivision because some of the lots would be land-locked. Dolroy proposed to AMP that, as a boundary adjustment, the road reserve be consolidated into lot 3 in exchange for AMP releasing from its security, prospective lots 101 and 102 under the subdivision of lot 3. In October 2001, AMP agreed to this boundary adjustment. In June 2003, a different boundary adjustment was presented to AMP in a linen plan which it refused to endorse. The plaintiffs claimed damages for breach of contract and, again, if their primary argument failed, estoppel against AMP alleging that they were in breach of the facility agreement. 7 On each occasion the facility limit was increased, AMP forwarded a letter to Dolroy indicating conditional approval of a new facility limit on specified terms. By the letter of December 1999, AMP notified conditional approval of a new facility limit of $3,065,000 for a variable loan and a fixed rate loan. The facility agreement was to be stamped for the increase in the facility limit and a cheque for $260 was required. All other terms of the facility agreement were to continue to apply and the consents of all parties were required by endorsement of a duplicate of the letter. Upon satisfaction of these conditions and subject to completion of various searches and enquiries, the increased facility was available for draw-down. 8 The principal issue between the parties centres upon the next letter of 19 April 2000. It notified conditional approval of a new facility limit of $5,307,000. It required the facility agreement to be stamped for the increase in the facility limit and additional security in the form of a registered charge by another company controlled by Mr Burns specific to a fixed price building contract between that company and the building contractor. 9 Unlike its predecessor, this letter stated a purpose as follows: "(Continuing) Line of Credit to cover fluctuating business or investment requirements from time to time on a variable interest basis and, in the first instance, to cover:- $ (a) Working Capital to Dolroy Pty Ltd 15,000 (b) Assist with construction costs to complete subdivision at Dunns Creek security properties 435,000 (c) Part reimbursement of costs expanded on roadworks and subdivision 165,000 (d) Provision of capitalised interest for both the current variable loan and the current fixed rate loan 120,000