New South Wales Supreme Court CITATION : Cypjayne Pty Limited v Babcock & Brown International Pty Ltd [2010] NSWSC 180 HEARING DATE(S) : 9-13,16,17 November 2009 JUDGMENT DATE : 12 March 2010 JUDGMENT OF : Bryson AJ at 1 (1) On the plaintiffs' claim, give judgment for the defendants with costs. DECISION : (2) On the cross-claim, declare that the cross-claimant CAGCare Pty Ltd is entitled to the deposit of $400,000 and interest thereon paid on 19 December 2007 and held as stakeholder by Osbornes lawyers pursuant to clause 4.2(d) of the Allocated Places Purchase Agreement. (3) Direct that the cross-defendant Blue Hills Village Management (Liverpool) Pty Ltd direct Osbornes Lawyers to pay over the deposit and interest to the cross-claimant. (4) Order that the cross-defendant pay the cross-claimant's costs of the cross-claim. CATCHWORDS : CONTRACT – Formation – Reasonable commercial endeavours. - TRADE PRACTICES ACT – Misleading and deceptive conduct – Extended negotiation for sale of Retirement Village business began September 2007 – Contracts drafted and two exchanged on 19 December 2007 for sale of Allocated Places – complex continuing negotiations and dealings involving – Heads of Agreement stating when agreements would become binding – Modifications in detail of proposed contracts and parties – Contemplated extended sequence of entry into agreements to accommodate Vendors' concept of effects on their CGT position – Applications to Commonwealth Department of Health and Ageing for administrative approvals for transfer – Obligation of purchaser of Allocated Places to use reasonable commercial endeavours to bring about fulfilment of conditions precedent which would require decisions of others to commit capital – DOHA approvals available on 23 June 2008 but conditions precedent not fulfilled – Detailed consideration of complex facts led to findings that there was no breach of contract and no misleading or deceptive conduct – Claims dismissed deposit refunded – Decision on facts. Aged Care Act 1997 (Cth) s16 LEGISLATION CITED : Retirement Villages Act 1999 (NSW) Trade Practices Act 1974 (Cth) s52 CATEGORY : Principal judgment Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 CASES CITED : Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd) [2008] NSWCA 149 Secured Income Real Estate (Australia) Limited v St Martins Investment Pty Limited (1979) 144 CLR 596 Watson v Foxman (1995) 49 NSWLR 315 CYPJAYNE PTY LIMITED (ACN 008 651 509) (first plaintiff) Edwin Paul CAYZER (second plaintiff) Sverre RODSKOG (third plaintiff) B&L TRADING PTY LIMITED (ACN 003 742 818) (fourth plaintiff) D&C PROPERTIES PTY LIMITED (ACN 100 441 236) (fifth plaintiff) PARTIES : Maurice TULICH (sixth plaintiff) Curtis Jack MANN (seventh plaintiff) David BRODIE eighth plaintiff BLUE HILLS VILLAGE MANAGEMENT (LIVERPOOL) PTY LIMITED (ninth plaintiff) BABCOCK & BROWN INTERNATIONAL PTY LTD (ACN 108 617 483) (first defendant) CAGCARE PTY LIMITED (second defendant) FILE NUMBER(S) : SC 2008/290462 COUNSEL : B A J COLES QC/ J J YOUNG (plaintiffs) D B STUDDY SC/ K H BARRETT (defendants) SOLICITORS : Harris & Company Solicitors (plaintiffs) Watson Mangioni Lawyers Pty Limited (defendants) - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST BRYSON AJ Friday, 12 March 2010 2008/290462 CYPJAYNE PTY LIMITED and Others v BABCOCK & BROWN INTERNATIONAL PTY LIMITED and Others JUDGMENT 1 HIS HONOUR: The plaintiffs' claims arise out of the proposed sale of Blue Hills Village and Blue Hills Manor, a retirement village business and aged care facility conducted at Prestons, New South Wales, by a partnership among three companies and two persons who are the first to fifth plaintiffs. Each of the sixth, seventh and eighth plaintiffs was the principal of one of the three companies, and within the Partnership each guaranteed the obligations of one partner company. The sixth and seventh plaintiffs, Mr Tulich and Mr Mann, acted together as co-managers of Partnership affairs, and were the representatives of the Partnership in dealings with others and acted so as to bind the Partners. There were some differences or disputes within the Partnership, but they do not affect the present case. 2 The Partnership owned the land on which the retirement village and aged care facility were erected; the land in Lot 100 DP 870327 and Lot 134 DP 879295. The retirement village contains 152 living units. The ninth plaintiff, Blue Hills Village Management (Liverpool) Pty Limited ("BHVML") operated the aged care facility under some arrangement with the Partnership, and was controlled by the Partnership. BHVML held 67 low-care Allocated Places under the Aged Care Act 1997 (Cth). Holding the Allocated Places brings entitlement to subsidy from the Commonwealth. 3 Conducting a retirement village and aged care facility are activities which are heavily regulated by Commonwealth and State legislation. In practical terms it was not possible to sell the retirement village and aged care facility together unless the purchaser was or put in place a person who was an approved provider for the purposes of the Aged Care Act 1997, so approved by the Secretary of the Commonwealth Department of Health and Aging or by a delegate. (The Department is referred to as DOHA.) It was also necessary that a transfer of an operational place be approved by the Secretary: s 16-1 of that Act. An effect of s 16 was that the proposed transfer day had to be at least 90 days after the date of the application; if the application was made on 31 January the transfer date could not be earlier than 30 April. Provisions of the Retirement Villages Act 1999 (NSW) s 41 also had to be complied with; residents had to be given information about a new operator at a meeting on at least 7 days notice, and the meeting had to be at least 28 days before the change of operator. The difficulties of compliance with these statutory requirements had to be dealt with appropriately when making arrangements for a completion date. It is unlikely that a transferee would initiate procedures for a meeting under the State law unless it knew that it had approval under the Commonwealth law. 4 The defendants were all part of the Babcock & Brown Group of companies, a complicated structure the ultimate holding company of which was, at the relevant times, Babcock & Brown Limited. Babcock & Brown Limited went into voluntary administration on 13 March 2009 and into liquidation on 24 August 2009. In the complex array of proposed arrangements which can be thought of as the proposed sale CAGCare Pty Limited, the second defendant, was formed while negotiations were proceeding for the specific purpose of purchasing the Allocated Places, and for that purpose becoming an Approved Provider and obtaining approval for transfer of the Allocated Places to it from BHVLM for various considerations, principally payment of $4 million. BHVML and CAGCare entered into a written agreement for that sale on 19 December 2007; this is the Allocated Places Purchase Agreement, referred to as APPA. The first defendant Babcock & Brown International Pty Ltd (BBIPL) gave BHVML a Performance Guarantee relating to CAGCare's obligations, executed on 21 December 2007. BBIPL was involved because it had sufficient resources to be financially responsible; CAGCare had no significant assets, subscribed capital or resources at all and could do nothing except with resources provided from elsewhere in the Babcock & Brown Group. Officers of the third defendant, Babcock & Brown Australia Limited (BBA) conducted the negotiations with the Partnership, both before and after 19 December 2007. BBA entered into Heads of Agreement dated 4 October 2007 which state the terms upon which negotiations and dealings proceeded. 5 Babcock & Brown Communities Ltd (BBC), is not a party to the proceedings; it had some association with the Babcock & Brown Group, but was not a member of that group; it was a public company listed on the Australian Securities Exchange, conducted in the interests of its shareholders and not of the Group, and had independence in the conduct of its affairs. BBA provided BBC with financial and banking investment advice. 6 Neither the evidence nor these reasons observe precision in references to parties. Entire consistency is difficult as there are nine plaintiffs, five Partners and vendors and three guarantors, and BHVM was vendor only of the Allocated Places. Events and conduct referred to as those of BBC and BBA are sometimes those of subsidiaries or related companies. In internal documents and letterheads there are many references to Babcock & Brown, B&B and to Babcock & Brown Limited. Babcock & Brown Limited was not a significant actor in the events but was in ultimate control of the companies which were. CAGCare Pty Ltd is the only company which ever truly became a purchaser. I have tried to observe precision where it is important but at many points generalised reference to BBA or to defendants is sufficient. 7 The plaintiffs' claim is pleaded in Part C – The Plaintiffs' Contentions of the Further Amended Summons filed at the opening of the hearing on 3 November 2009 and can be separated into three counts. 1. Breach by CAGCare of the APPA with BHVML, with a claim against BBIPL under the Performance Guarantee. 2. The defendants are estopped in relation to the APPA and the Transaction Documents. In final address this claim was not pressed. 3. The defendants are liable for an indemnity and damages for conduct in contravention of the Trade Practices Act. 8 One breach is that CAGCare did not, on 24 June 2008 or thereafter ensure the execution of the Transaction Documents (Contentions C26, C27). 9 A second breach (C27A) is not participating in steps to extend the Transfer Day approved by the Secretary of DOHA after 1 September in breach of Cl 2.1(b). 10 There is an alternative allegation of breach of Cl 2.2(a) by failing to ensure that condition precedent 2.1(b) was satisfied (C28 and C29 and C30 to C34). 11 The defendants based another claim on allegations that the defendants engaged in conduct in contravention of the Trade Practices Act 1974 (Cth) s 52 (1). "A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." This claim is based on three representations. The Document Representation (C41 to C47) was (C41): 41. Further and in the alternative, the Defendants represented to the Plaintiffs that terms acceptable to the Second Defendant and the Ninth Plaintiff to effect the acquisition of the Retirement Village and the Manor and the business operations associated with them were agreed and that the Conditions Precedent to Completion remained to be satisfied only by: (a) Appending the schedules to the Asset Purchase Agreement; (b) Inserting the description of the Babcock and Brown entities into the Warranty Deed, Loan Agreement, Deed of Assignment, Deed of Admission and Deed of Procurement of Retirement; and, (c) Execution of the Transaction Documents as referred to in paragraph C13(c)(i)-(vi) and that the Defendants had the authority and capacity to satisfy them ("the Document Representation").. 12 There are many Particulars and in the course of the judgment I will deal with those sufficiently significant to require disposition. The particulars refer to a number of matters, none of which is literally a representation to any of the effects alleged. 13 It is further alleged that the Document Representation was false in that the transaction documents were not acceptable to CAGCare (C43). It is alleged that in reliance on and induced by the Document Representation (C44) the plaintiffs conducted themselves from 19 December 2007 onwards in accordance with it, causing BHVML to enter into and perform obligations under the APPA, continue negotiations, refrain from seeking alternative purchasers and incur consultant's costs; and that they suffered consequent loss of damage. 14 It is also alleged that the defendants made the Approval Representation (C48) in these terms: Further and in the alternative, the Defendants represented to the Plaintiffs that all internal approvals had been obtained to effect the acquisition of the Retirement Village and the Manor and the business operations associated with them ("the Approval Representation"). 15 Again many particulars are given, a large array of acts and events which could be thought to deal with the approval representation only in very oblique ways. I deal with those which I find significant in these reasons. Again it is alleged that the Approval Representation was false. It is again alleged to have caused conduct by the plaintiffs relying on and induced by it, loss and damage. 16 The plaintiffs further allege the Completion Representation in these terms (C55): Further and in the alternative the Defendants represented to the Plaintiffs that the defendants are bound to, and will, complete and execute the Transaction Documents after the Second Defendant obtained approved provider status …" 17 Similarly there are many particulars and allegations of reliance, inducement and damage. The particulars to paragraph 55 refer to passages in the evidence of Mr Mann and Mr Tulich similar and some cases the same as earlier referred to. 18 Senior Counsel for the plaintiff in the course of closing submissions told me (t 309/184): COLES: … the relevant representations which are dealt with later are those which or the conduct are those which existed and induced the step taken by the plaintiffs as at 19 December to enter into the agreement and bind themselves. The relevant representations or statements or communications between the parties after that have evidentiary significance in connection with the misleading and deceptive conduct claim to the extent that they confirm or acknowledge the prior and wholly consistent representations or conduct of which the plaintiffs complain up to and including 19 December. 19 The Blue Hills Partnership Agreement was formed in April 2004; the business which it conducted had existed earlier. In 2007 the Partnership under the control of Mr Tulich and Mr Mann was minded to sell the business, and obtained the assistance of Colliers International. In August 2007 Colliers circulated an information memorandum to a small number of persons seeking expressions of interest. This led to expressions of interest including one from BBA. By the end of August 2007 BBA's expression of interest was regarded as appropriate to pursue. BBA's letter to Colliers International of 29 August 2007 (A2/370) offered an indicative purchase price of $30,190,000. The letter referred to a number of related subjects including there being no deduction from the offer for accommodation bond liabilities, to the need for due diligence investigation, to other subjects to be considered, and to other possible new business. Significant passages in the letter include these: This indicative bid is made by Babcock & Brown on the basis that if Babcock & Brown is selected as a preferred bidder, Babcock & Brown intends to offer this opportunity to BBC for their consideration. We note that this will not impact the timing and process for the acquisition of the blue Hills Assets or our ability to execute on the acquisition if we are the preferred bidder. We believe that the Blue Hills Assets would be an excellent addition to BBC's portfolio of retirement villages as it is very complementary to BBC's current asset mix and provides BBC with further penetration into the New South Wales market. …… 3. CONDITIONS, REPRESENTATIONS AND WARRANTIES This indicative offer is subject to the following terms: Detailed due diligence, by which we mean controlled access to the assets within the Blue Hills Assets, business records, operations and staff (where and when appropriate), all of which will be kept confidential; and Execution of satisfactory contracts to effect the transfer. The letter also referred to the Partnership's objective - "2 To conduct an expeditious process with minimal disturbance to residents and staff." 20 The letter was signed for BBA by Andrew Tyndale and Christine Ku. Mr Tyndale was the leader and Ms Ku was a member of the management team concerned with this part of BBA's affairs. Mr Tyndale had some delegated authority to make decisions but I am not concerned with its scope as he did not exercise it. Ms Ku did not have such authority. Soon afterwards representatives of BBA embarked on due diligence investigations within restrictions imposed by confidentiality agreements. Colliers informed BBA that BBA was the preferred purchaser. But the contemplated purchaser was or soon became BBC. Communication was opened in September 2007 between solicitors, Mr Osborne of Osbornes Lawyers on behalf of the Partnership and Mr Velez of Watson Mangioni on behalf of the Babcock & Brown interests, and information was passed between them. 21 BBA and Mr Tulich and Mr Mann entered into an arrangement entitled "Heads of Agreement for the Sale of Blue Hills Village and Blue Hills Manor". This arrangement is recorded in a letter from BBA to Mr Mann and Mr Tulich dated 4 October 2007 and the endorsed acceptance signed by them and dated 7 October 2007. (One copy in evidence is defective: see both Ex A2/452-455 and A2/461-465.) The main purpose of the letter was to record, after due diligence investigation, "a final cash offer of $30,190,000 for the assets of Blue Hills as described …". Several passages are significant for present purposes. We note that this letter is from Babcock & Brown on behalf of Babcock & Brown Communities and confirm that Babcock & Brown has entered into an investment advisory mandate with Babcock & Brown communities (BBC) for Babcock & Brown to act on BBC's behalf in relation to the proposed purchase of Blue Hills ("the Transaction"). We are pleased to propose the following as a Heads of Agreement for the Transaction to proceed on substantially similar terms as contained within this letter. 22 There is reference to a need for final confirmatory due diligence. There was to be no deduction for accommodation bond liabilities. The transaction structure was described in Clause 2 and took the form of the acquisition by BBC of stated assets – the business, entitlements under existing residency contracts, 67 bed licences (referring to the Allocated Places) and related assets. There was a proposed sale process timetable which led to settlement at the end of November 2007 subject to Commonwealth approval. Particularly significant is par 5: 5. TERMS AND CONDITIONS This offer is subject to the following: Confirmatory due diligence, including controlled access to your facilities, business records, operations and staff (where appropriate) by us and our (advisors, all of which will be kept confidential; and Internal and external approvals; Documentation; arid Execution of satisfactory sale contracts to effect the transfer. Following completion of these matters, our offer will be binding. Please note that we do not anticipate any changes to pricing over the course of confirmatory due diligence, unless materially significant variations are uncovered. As noted above, this bid is also subject to the usual settlement adjustments (e.g. working capital movements, accommodation bond changes and any resident movements during the period to settlement). Under paragraph 7 … the parties agree to deal with each other in relation to the potential acquisition of Blue Hills on an exclusive basis for the duration of the timetable outlined in clause 4 unless otherwise extended by the parties. Throughout this document there are minor anomalies of numbering. The timetable is at Clause 3 but it is plainly the timetable referred to and led to settlement estimated to be end November 2007, and settlement adjustments estimated to be three weeks from settlement. 23 Clause 8 imposed requirements of confidentiality. Following Clause 8 was this passage: (Ex A2/464) Except with respect to paragraphs 9 and 10 this Heads of Agreement is not intended to be legally binding. No agreement for the sale of Blue Hills will be legally binding until the parties enter into future sale agreements. The parties agree that it is only at the execution of the sale agreements that a contract of sale will be entered into by the parties. There are no pars 9 and 10 but the reference is obviously to pars 7 and 8, relating to exclusivity and confidentiality. 24 Mr Mann and Mr Tulich accepted by signing this statement (ExA2/455): This heads of agreement, as outlined above, is accepted for and on behalf of the vendors of the assets referred to in paragraph 3, and we confirm that those vendors have obtained all necessary approvals and authorities to enter into this agreement. It will be seen that there were references, on both sides, to necessary approvals. The existence of the Heads of Agreement must have facilitated open negotiations. 25 In the Heads of Agreement it is distinctly stated, at two places and in two different ways, that a number of circumstances must exist before the offer is to be binding, and before an Agreement for Sale is to be binding. These statements establish what was then the intention of the parties about how they would proceed, what effect their negotiations would produce, and the circumstances in which their dealings would become binding. Unless and until a party or both parties stated or otherwise indicated in a clear way that it or they no longer intended to proceed on that basis, but intended to proceed on some other basis, these statements of intention continued in effect, and on an objective view of their communications neither party intended to enter into a legally binding contract in any other way. The parties' communications and negotiations remained subject to these limitations unless and until there was some clear indication that their intentions had changed. Nothing happened which overtook them with respect to any proposed agreement under consideration; except that the APPA and the Indemnity passed to the point where documents were executed. 26 On 4 October 2007 Mr John Martin, Managing Director of BBC approved incurring costs of $450,000 in association with due diligence, and a Preliminary Capital at Risk (PCAR) Report was prepared by Ms Ku. 27 Thereafter those involved gave their attention to due diligence, with a number of meetings and inspections and inquiries. Mr Velez began the preparation of draft documents and sent several to Ms Ku on 12 October 2007 (A2/523) and his draft, following the letter of offer, related to three agreements, a Land Purchase Agreement, a Business Purchase Agreement and an APPA. Their communications reflect the prefinality of what was taking place: "for review", "look forward to your comments", and so forth. 28 An important development, not at first involving BBA, is first noted in documents in evidence at Ex A2/589G, a written advice of 25 October 2007 to Mr Mann written by Mr Scott McGill of Pitcher Partners, Accountants and Advisors, reviewing in considerable detail aspects of Capital Gains Tax on the interests and affairs of the Partners relating to the proposed sale. Soon afterwards the Partnership obtained written advice on the tax implications of the proposed sale from Mr Edgar Baltins of KPMG. The first draft advice was dated 1 November 2007 (A2/598); there was a further draft on 8 November 2007 (A2/670) and the written advice itself was dated 22 November 2007 (A3/902). 29 On 26 October 2007 Ms Ku sent a message to Mr Barry Smith of Colliers (Ex A2/593) saying that due diligence had been performed on leases which had been the subject of some expression of concern, stating We confirm that we will proceed with the acquisition of the Blue Hills' assets at the offer price of $30,190,000 with no deduction for the amount of the accommodation bond liabilities with some reference to adjustments, and suggesting a meeting of principals to discuss sales documentation with a target date of 6 November. In this period Ms Ku was also preparing a Capital at Risk ("CAR") Report for consideration by BBC's management board relating to a contemplated commitment of $32.1 million. It was then contemplated that BBC would buy the assets from the Partnership, generally as in the three draft contracts then under consideration. This CAR was not ever completed, submitted, approved or disapproved; it was overtaken by events, but it confirms what was then contemplated. 30 Particular 41(c) and Mr Tulich's first affidavit refer to a meeting on 23 November 2008 at Whitehall, where the Partners had or used an office, at which Ms Ku stated and explained that BBC did not want to have to announce the acquisition immediately. He says that Ms Ku said: We don't want to have to announce the acquisition immediately. So we can't sign the land transfer straight away. Instead, we will have this ready to sign and will sign them after receiving approved provider status. 31 Mr Tulich's affidavit also says that at a later point Mr Velez said: BBC as a listed entity has an obligation to announce acquisitions and for these reasons BBC wants to delay announcement until next year. The allocated places agreement would be signed and the balance would be signed when BBC could make the announcement in January 2008. 32 As narrated in Mr Tulich's evidence, these statements could not in their context convey or support the document representation as alleged. What was under discussion was the time when contemplated arrangements would be carried out, not that the contemplated arrangements were in a state where they were or could be committed to. It is extremely improbable that Ms Ku or Mr Velez said anything which would convey a commitment. Ms Ku denied doing so and Mr Velez gave an altogether different account of what he said. Mr Osborne (Affidavit 38) gave an account of what took place which was altogether different to Mr Tulich's account and included attributing to Mr Velez a suggestion that documents be prepared, signed but not exchanged – "… hold them in escrow – that way there is no binding agreement and we can make the announcement later." Events at this meeting did not convey or support the document representation. 33 Particular 48(a) refers to acts and events in nine paragraphs of Mr Tulich's affidavit of 8 July 2008. Paragraph 14 of the affidavit refers to statements by Ms Ku and Mr Velez at the meeting of 23 November 2008 with which I dealt earlier. There was no support in the events of that meeting for the approval representation. Mr Velez's evidence, which no evidence contradicted, is that he expressly referred to both sides being uncomfortable about there not being a binding agreement (Velez Affidavit at 8). 34 Particular 48(b) again refers to Mr Mann's first Affidavit of 7 July 2008 par 23 and to the meeting of 23 November 2008. Mr Mann gives an account of a conversation initiated by Ms Ku stating that BBC did not wish to announce the purchase of the Village to the market and would prefer to wait until January or February. There was a conversation where Ms Ku and Mr Velez took the position that "The moment we purchase the Village it will become material for BBC and we will have to notify the market." Ms Ku, Mr Osborne and Mr Velez also gave evidence about events at this meeting. Their accounts differ in emphasis and in significant detail, but in no view of any of them was the approval representation stated or conveyed. Formulation of the proposed course and the documents was only beginning and any impression created then must have been completely overtaken by other communications before 19 December 2007. 35 Particulars par 48(c) refer to Mr Osborne's affidavit sworn on 7 July 2008 par 38 and to the meeting of 23 November 2007. Mr Osborne gives longer statements about that meeting including a statement attributed to Mr Velez, generally similar to Mr Velez's evidence, confirming that there was to be no binding agreement until a deferred announcement could be made. Mr Osborne's account in no way supports the approval representation. Particular 55(a) again refers to the events of 23 November 2007, and also of 2 May 2008 and 20 June 2008, in support of the completion representation, to no greater effect. 36 An event which took negotiations in a new direction was that on 19 November 2007 (or not long before) the Partnership's solicitor Mr Osborne sent BBA's solicitor Mr Velez a draft discussion paper seeking a revised structure for the transaction along lines indicated in Mr Baltins' drafts, confirmed in his advice of 22 November 2007. 37 Theretofore the structure of the transaction under consideration had its complexities and inherent conditionality in that the sale of the land and the business could not take place unless there had been administrative approval by DOHA for transfer of the Allocated Places. What Mr Baltins of KPMG advised, and what the vendors wished to do involved a far more complex array of agreements and arrangements. I will not state them in all detail. They began with a series of transactions and events adjusting arrangements within the Partnership, concluding with an amendment of the Partnership Agreement. Then there was a series of steps in transactions with BBC and it was contemplated that BBC entities, not BBC itself but entities introduced into the proposed transactions by Mr Baltins' advice, were to become partners in the Partnership and in that way take ownership of the retirement village. 38 This would be brought about by a series of steps. (1) In step 1 BBC would acquire the bed licences from BHVML for their market value of $4 million and the fixed assets from the Partnership for the written down value of $80,000. (2) In step 2 BHVML would use most of the money received under the APPA to repay a loan BHVML owed to the Partnership. (3) In step 3 BBC would lend the Partnership $24,948,240 unsecured and on terms that it would be recoverable only from the partners for the time being (not, that is, from anyone who left the Partnership). Mr Baltins contemplated (not in clear terms) deferred repayability of the loan and commercial rate of interest; at a later stage the proposed transaction differed a little from this. (4) In step 4 the Partnership would use the $24.9 million loan and the $3.8 million received from BHVML to pay out the current accounts of the Partners and an unsecured debt of $5.6 million to a bank; these would approximately equal the moneys received. (5) In step 5 each Partner would assign a 99.9 per cent share of its interest to one of the BBC entities for a total consideration of $1,159,580. (6) In step 6 the BBC entities would be admitted into the Partnership, in which they would own a 99.9 per cent interest. (7) In step 7 the BBC entities would pay $2,180 to other Partners to procure their retirement. (8) In step 8 the original Partners would retire. (9) In step 9 there would be a transfer of title to land from the retired Partners to the BBC entities. (No Land Sale Agreement was referred to.) There was no express reference to stamp duty on this transfer; I see the possibility that a large sum of stamp duty might be payable. (10) In step 10 the retired Partners would pay consultant and agents' fees; and (11) In step 11 the new partners would progressively repay outgoing resident loans. After these steps the loan of $24.9 million would be repayable to BBC only by the new partners, BBC's own entities, and the old Partners would not be liable for it. 39 The account I have given of Mr Baltins' advice has been greatly compressed. As I understand it an object was that the capital received by the old Partners on disposal of their interests in the Partnership would be a relatively small sum and would not include the amount of the loan. The array of transactions required would be much more complicated than the documents drafted by Mr Velez and then under consideration. 40 It was a central and evidently important aspect that the documents were to be entered into in sequential steps. Mr Tulich's evidence showed that he understood that the transaction was to proceed in that way. I could not bring his mind to deal with whether the desired taxation consequences would have been achieved if all the agreements had been committed to at the same time; but I regard it as obvious that there were advantages in the sequential procedure and that the plaintiffs understood that the advantages would not be achieved without the sequential procedure. 41 Mr Osborne's discussion paper, which was communicated to Mr Velez on 19 November and discussed soon afterwards, generally follows Mr Baltins' advice; not in all details. The discussion paper included the following passage: 5.2 From the seller's prospective, it is imperative that the following steps are occur in the following order:- (a) the loan to the Existing Partners and the payment of their current accounts; (b) the assignments to BBCT1 and BBCT2 of 99.9% of the Existing Partners Partnership interest; (c) BBCT1 and BBCT2 being admitted to the Partnership; (d) BBCT1 and BBCT2 paying the $2,180 to the Existing Partners to procure their retirement and a transfer of the remaining 0.1 % of the interest in the Partnership; (e) the retirement of the Existing Partners from the Partnership. 5.3 The general intent of the parties is that every step in the transaction is interdependent on the others occurring will need to be recorded in one of the documents, with provision that if anyone step fails to take place then the other agreements can be rescinded. 5.4 The condition precedent specified in the earlier transaction documents can no longer operate. The condition precedent now will be something like:- (a) the completion of the allocated place agreement; (b) the retirement of the Existing Partners from the Partnership; (c) the admission of the New Partners to the Partnership; (d) the transfer of the real property. 42 Babcock & Brown were prepared to entertain the new structure. Mr Osborne set about drafting suitable documents. On 26 November 2007 he sent Mr Velez his redraft of the APPA and the Loan Agreement. The condition precedent did not accord with what Mr Osborne had said in his discussion paper. The condition precedent received close attention and (it seems) several significant alterations before it achieved the form in which it was executed on 19 December 2007. Mr Osborne forwarded further drafts on 27 November 2007 as follows: (1) deed of variation of partnership deed; (2) deed of assignment of 99.9 per cent interest in partnership; (3) deed of admission to partnership; (4) deed of procurement of retirement. Several of these drafts needed to be replicated to produce parallel documents involving each Partner. Mr Velez drafted an Asset Sale Agreement and sent it to Mr Osborne on 27 November. He also drafted a Warranty Deed that would see the existing Partners give warranties about a number of matters relating to Partnership affairs. Another warranty term related to the involvement of BBC. 43 BBC made a large acquisition, and announced to the Australian Securities Exchange on 1 November 2007 that it had purchased the Conform Health Group for about $160 million. This was followed by a presentation and meetings of BBC representatives with groups of investors, some of which Ms Ku attended. A majority of investors expressed views against BBC making any further acquisitions at that time. Mr Martin, the Managing Director of BBC, told Ms Ku that from the perspective of management and investor expectations it was unlikely that BBC could do another deal in calendar year 2007. As settlement of the Blue Hills purchase was contemplated for late November 2007 this meant that if the purchase was to take place within that time frame, BBC would not be the purchaser and would not provide funds. 44 Drafting of a CAR relating to committing capital of BBA began in November 2007 while Ms Ku was absent on leave, and continued when she returned. Contemplation by Ms Ku and within BBA of the proposed transaction altered, and the contemplation became that an entity of BBA would enter into the first of the sequence of transactions which the vendors now required, the APPA, using capital provided by BBA, in the expectation that BBC would again be in a position to consider acquisitions in 2008, after its half yearly results were released in February 2008; Ms Ku expected that the results would exceed market expectations. She proceeded with preparation of a draft CAR seeking approval of Mr Topfer, an officer of BBA who had some delegated authority which was not defined by evidence but was accepted as sufficient to approve the CAR relating to the proposed purchase. Mr Topfer was asked to approve placing $4 million at risk on the APPA. CAGCare was incorporated on 3 December 2007, as the contemplated purchaser in the APPA. CAGCare had no employees, has never traded, had no financial statements and has no assets. Its only activity ever has been to enter into the APPA and make the application for DOHA approvals which followed, using BBA's money, staff and resources. 45 Procedures within BBA for considering a CAR were highly structured and included obtaining endorsements ("sign off") by persons within BBA's organisation with responsibilities for legal/compliance, accounting, tax, treasury and in some cases (but not this case) several others. Late in November and into December the process of drafting and considering the CAR received fairly intense attention within BBA. Meanwhile the drafting process between Mr Osborne and Mr Velez continued, also intensively. 46 Mr Osborne's affidavit par 41 deals with a telephone conversation among Mr Osborne, Mr Velez and Ms Ku on 27 November 2007. Mr Mann and Mr Tulich did not take part in this telephone conversation. The statement attributed to Mr Velez dealt with reasons for not signing documents and holding them in escrow, which might bring an obligation to make a public announcement, and described a scheme in which a subsidiary of Babcock & Brown, not of BBC, would be the party to the APPA and the subsidiary could later be sold to BBC, so that BBC would then make the announcement and enter into the other agreement. What Mr Velez proposed was not having documents signed but not exchanged, but exchanging the APPA and making that conditional on, among other things, receipt of approval. The approval representation has no support there; quite to the contrary. 47 A meeting "with the vendors and lawyers" on 11 December 2007 (A5/1517) attended by Mr Hector of BBA's Corporate Finance reviewed outstanding issues. Mr Hector reported that: the current plan is to have all DD [due diligence] completed and all docs agreed by Thurs/Fri this week [13/14 December] such that we are in a position to sign the Allocated Places Agt on schedule on Mon 17 th Dec (the vendors understandably do not want to defer past this date as this threshold date has been a 'line in the sand' in the docs for a while). The $400k deposit would be associated with such signing. 48 It was Mr Mann's evidence (Affidavit 7 July 2008 [28]) that a conversation occurred at the meeting on 11 December 2007 at the offices of Whitehall which supported the document representation. Mr Mann gave evidence that he said to Mr Osborne and Mr Velez "Are the contracts complete so they can be signed without any further amendments?" Both Mr Osborne and Mr Velez responded "Yes". Mr Mann said "So when the approval is secured, we can just sign and complete the transaction." Mr Velez, while collating his documentation and packing up responded "Yes". 49 Mr Velez's evidence showed that he did not recall a conversation in these terms. Mr Osborne's affidavit dealt very briefly with this conversation in a way which did not bear out what Mr Mann said. Mr Osborne's par 56 relates to the meeting of 11 December 2007. Mr Osborne's evidence deals with Mr Velez speaking of BBC Nominees being parties to the unsigned documents and saying "but when we do the documents BBC entities will be substituted." There is no support for the approval representation there. Mr Osborne's agenda and notes (A5/1494) do not bear Mr Mann out; they are appropriate for detailed discussion of a number of draft documents and they show that a commitment about completion was not the business in hand at the meeting. Mr Mann in cross-examination accepted that the documents were not finalised and that he was not relying on advice from Mr Velez but received advice from Mr Osborne who did not ask Mr Velez whether the Agreements were complete. I find that nothing happened at this meeting which could support the document representation. The approval representation was not conveyed at this meeting; this finding is supported by what Mr Mann asserts was said then. 50 Particular 55(b) of the completion representation again refers to Mr Mann's first Affidavit par 28 and his evidence about the meeting on 11 December 2007. A key expression in the conversation of which Mr Mann here speaks is that it his evidence that he said to Michael Osborne and Peter Velez "Are the contracts complete so they can be signed without any further amendments" and both replied "Yes". However in cross-examination he accepted that he did not ask whether the agreements were complete (T90), although he affirmed that he asked whether the agreements could be signed without any further amendments. As he conceded soon after (T91) they could not be signed because they had not been finalised. 51 Intense preparation and attention continued during that week. On Friday, 14 December 2007 an arrangement was made for signing, that is, signing the APPA, on 19 December 2007 at 12.30 pm. Mr Osborne reported to the Partners in considerable detail by letter on Sunday, 16 December 2007 (A5/1626). This letter is distinguished for the clarity and frankness with which it refers to the irreducible uncertainties of the proposed course, and to Mr Mann and Mr Tulich's consideration and acceptance of the uncertainty. Mr Osborne advised the Partners comprehensively on the KPMG advice and on nine different deeds and agreements. He dealt in detail with the steps which were to be taken; his advice includes paragraph 1.7 (A5/1628). 1.7. The result of BBC's requirement not to announce this year means that the agreements will not be binding until at least January when the public announcement is made, though the unusual nature of the transaction means that in practical terms the agreements will not be binding until completion. This matter has been considered at length by the CEO's. the position of both CEO's (and the writer) is, taking into account all the circumstances of the negotiations and the fact the structure of the deal was radically altered half way through at the Partners' request, there is no viable commercial option to avoid the uncertainty surrounding the binding nature of the agreements prior to completion. 52 Dealing with the APPA Mr Osborne said: 3.2 This agreement is the only agreement to be signed this year. It is the agreement referred to in Step 1 (page 8) of the KPMG letter. He also said: 3.4 the allocated places purchase agreement also indirectly sets the timing for the whole transaction – the date for the transfer of the allocated places is determined by the Secretary of the Department of Health and Ageing – and it is around this date that the timing for the rest of the transaction will be set. 53 Mr Osborne noted that the lender in the Loan Agreement was a yet to be formed entity. So too were the two B&B entities which were to become partners, referred to in several of the documents. The transfer of land had not yet been prepared. 54 Mr Osborne's advice included a sequence of transactions (A5/1641-2) which proceeded on the assumption that the APPA would be exchanged on 19 December 2007 and the transfer would be approved by DOHA on Monday, 19 March 2008. On these assumptions the following sequence would be followed: Assumptions a) Exchange Allocated Places 19 Dec b) Allocated Places Transfer Approved by Secretary Monday 19 March 2008 THEN Stage 1 1. Exchange Allocated Places 19 Dec. Enter Intra Partner Agreements. Amend Partnership Agreement. Stage 2 2. On one day in January 08 Enter Fixed Assets Agreement; Enter Warranty Deed; BBC makes announcement; and Convene Section 41 meeting of Residents. Stage 3 3. Business day before 19 March, Enter Loan Agreement Stage 4 4. 19 March 2008 Complete Allocated Places Agreement Complete Fixed Assets Agreement (to be confirmed) BHVM uses money to pay loan to Partnership Partnership Draws down on loan Sufficient cleared funds are paid by BBC entities to discharge Adelaide Bank mortgage Balance of moneys drawn by direction to pay Partnership uses money to pay out current account debts of Partners (by direction to pay). Stage 5 20 March 2008 Deeds of Assignment of 99.9% interest in Partnership. Stage 6 21 March 2008 BBC and BBC2 admitted into Partnership BBC 1 and BBC2 acquire balance of interest in partnership and procure retirement of partners Real Property Transfer for Land Delivered. Balance of Funds Paid. Retiring Partners pay commission and advisors' expenses in connection with the transaction. 55 It was an aspect of his advice that in the course which Mr Osborne contemplated and pointed out to the vendors, the documents which had been drafted would not come into effect at the one time, but would come into effect in a series of clearly separated stages. To produce the contemplated outcome the whole series had to be completed. A previous contractual commitment to enter into each of the whole series would deprive the process of sequential entry of any meaning or effect, and would have complicated or perhaps prevented the desired outcomes. Whatever effect that would be, the course which Mr Osborne advised and the vendors and BBA embarked on was a course in which documents would be entered into sequentially and in the stated stages, not one in which there would be an initial commitment to all of them. This aspect of the transaction was introduced at the requirement of and to suit the purposes of the vendors. 56 Cross-examination of Mr Tulich showed that he well understood the uncertainties which Mr Osborne's letter conveyed. So too for Mr Mann also. 57 Particular 41(b) refers to correspondence between Mr Osborne and Mr Velez on 17, 18 and 19 December 2007 (A5/1723, A7/2095). At about 8.02pm on 18 December one of these messages, from Mr Velez' office, states "The revised documents are subject to our client's review" (A7/2193). These messages are a part of an intense series of exchanges, continuing until an hour or two before the documents were signed, about document drafting. They are inherently incapable of supporting the document representation; they tend to show the contrary, prefinality and need for further consideration, and the terms of the drafts produced on and by 19 December show prefinality on their face. The process of preparing draft documents leading up to 19 December 2007 was intense, and involved among other things very close application by Mr Osborne the plaintiffs' solicitor and repeated reference to Mr Tulich, Mr Mann or both of them. They cannot have supposed that provisions found in these documents were other than of high importance, or that entry into the documents was not truly the process which would form the contemplated relationships between the parties. 58 Some concerns arose very late. One related to the repayment deferral provisions in the Loan Agreement. The facts are obscure but there was a competition between drafting the Loan Agreement so as to provide for repayment after 200 years with potential repayment after 100 years, and alternatives of 20 and 10 years. I cannot follow from the documents from which side these alternative proposals came but Mr Osborne told Mr Velez in a message on Sunday, 16 December (A5/1643) "That term is not negotiable and must be reinstated. It's a deal breaker." However this was resolved in some way which did not break the deal. 59 The Partners reviewed the documents with their solicitor on 17 December 2007 (A5/1680). Other solicitors, Minter Simpson, were involved in drafting documents relating to internal arrangements within the Blue Hills Partnership. There were a number of drafting changes at late stages. On 18 December the APPA was reframed so that the guarantor BBIPL the first defendant was not a party but gave a guarantee in a separate document. This is BBIPL's only involvement in the whole narration. The arrangement for a separate stand-alone Performance Guarantee, and the redrafting which this involved emerged at a late stage; A7/2167, 2198. 60 In its final form the APPA contained Clause 2.1 conditions precedent and Clause 2.2 reasonable endeavours (A7/2119-2120): 2. Conditions for Completion 2.1 Conditions precedent Completion of this Agreement will not proceed unless and until each of the following conditions precedent have been satisfied or waived: (a) approval under the AC Act : the Buyer receives written confirmation of the approval of the Secretary of: (i) the Buyer as an approved provider for the purposes of the AC Act; and (ii) the transfer of the Allocated Places to the Buyer in accordance with this Agreement for the purposes of Part 2.2 of the AC Act on terms acceptable to the Buyer (acting reasonably); and (b) Acquisition of Village and Facility : the Buyer or a Related Corporation of the Buyer enters into agreements on terms acceptable to the Buyer and the Seller to effect the acquisition of the Village and the Facility and the business operations associated with them. 2.2 Reasonable endeavours (a) The Buyer and Seller must each use its reasonable commercial endeavours to ensure the Conditions are satisfied as quickly as possible including by providing all reasonable assistance to the other Party as is necessary to satisfy the Conditions. (b) The Buyer must use its reasonable commercial endeavours to become approved as a provider of aged care under the AC Act as quickly as possible. (c) Without limiting Clause 2.2(a), the Buyer and Seller must jointly prepare and submit an application to the Secretary for approval of the transfer of the Allocated Places to the Buyer in accordance with this Agreement ( Application ) as soon as practicable and in any event within 5 Business Days of the date of this Agreement. (d) Each Party must provide the Secretary with any information in relation to the Application as may be required of that Party and must do so expeditiously and in any event not more than 5 Business Days after receiving notice of the request. (e) Each Party must provide to the other a copy of any correspondence that the Party , receives from the Secretary and/or the Department in relation to the Application. 61 The Performance Guarantee is inherently conditional in the sense that the obligations which it guarantees arise under the APPA. 62 Separate arrangements were also made, on 19 December 2007, for other documents to be guaranteed. The final form of the APPA emerged only on the morning of 19 December 2007 (A7/2194). Also on the morning of 19 December 2007 Mr Topfer approved the CAR, in effect authorising CAGCare to enter into the $4 million purchase and pay a $400,000 deposit. Ms Ku and others within BBA's organisation were informed of Mr Topfer's approval by an email of 11.38 am on 19 December 2007. The deposit was paid by bank transfer later that day into a bank account of Mr Osborne's firm as stakeholders. Under Clause 4.2(d) of APPA the deposit is held by Mr Osborne's firm as deposit in an interest bearing account at a bank. The seller is entitled to the deposit if the Agreement is completed Cl 4.2(e). The buyer is entitled to the deposit if this Agreement is not completed other than as a consequence of a breach by the buyer of Clause 2.2 (See A 72148–2149). (The intermediate position between (d) and (e) did not happen.) Entitlement to the deposit carries with it entitlement to interest under Cl 4.2(c)(ii). 63 Mr Mann alleges (Affidavit 1/31) that Mr Velez made a relevant statement during the course of signing documents at the meeting at the offices of B&B on 19 December 2007. Mr Mann alleges that Mr Mann said "Are the remaining documents in order to sign when they have to be" and Mr Velez responded "Yes". Mr Velez's evidence is that the exchange was to this effect. Mr Mann said "Can we sign the documents?" or "Are we okay to sign the document". Mr Velez replied "Yes". Mr Tulich's oral evidence was to the effect that Mr Velez did not indicate to anybody while Mr Tulich was present that the draft documents were in a form that they could then be signed. It was altogether obvious that they were not; that must have been a prominent reality of the meeting. Mr Mann accepted in cross-examination that they were not. I do not believe this part of Mr Mann's affidavit evidence. 64 Particular 41(e) refers to evidence of Mr Osborne about an event during the meeting commencing at 12:30 pm on 19 December 2007 at which APPA and the Performance Guarantee were signed. Mr Osborne said in evidence (Affidavit 74) that he arrived at about 12:30 pm, Mr Velez and his assistant Mr Clarke were present and so were other persons. Mr Mann and Mr Tulich arrived about 1:00 pm. Mr Osborne said that soon after he arrived, that is before Mr Mann and Mr Tulich were there, Mr Velez (Affidavit 74): "… approached me and dropped on the table in front of me a suite of documents saying the following: 'Peter, here are copies for you of all the documents as agreed'." and Mr Velez went on to say that he was signing the APPA and Guarantee at Attorney, although he did not have copies of the powers at the moment. 65 Mr Osborne said (Affidavit 76): "When Curtis Mann arrived I heard the following conversation between Peter Velez and Curtis Mann. Curtis "Are all these documents complete – can we sign them without any changes?" Velez "Yes" 66 Mr Velez denied in evidence that he said that there were copies of all the documents "as agreed" and Mr Osborne accepted in cross-examination that Mr Velez did not say that the documents were "complete". Cross-examination of Mr Osborne showed that he had difficulty (which I regard as altogether understandable) in remembering the precise words which Mr Velez had used. 67 These exchanges are incapable of conveying or supporting the document representation. They can only have related to the documents which were then to be signed. I accept that it could well have been said by Mr Velez to the effect that he had copies of all the documents as drafted. It would not be a reasonable, indeed it would not be a rational interpretation of his saying something like that and producing documents that he was giving a commitment on behalf of the defendants that they would all be executed at some time. Obviously they were not to be executed at that meeting; as he explained, he had powers of attorney for the two which were to be executed (or rather he thought he did) and it would have been a complete departure from what either side wanted to do to make a commitment to any other documents on that occasion. The allegation that Mr Velez said or otherwise behaved in a way which indicated commitment other than to the documents which he was signing, or indicated that he was able to give a commitment other than for the documents for which he had powers of attorney, is extremely improbable. In my finding Mr Velez did not speak at the meeting on 19 December 2007 in terms which conveyed or could convey the document representation. 68 Mr Tulich's affidavit par 15 refers to events at the meeting at Babcock & Brown's offices on 19 December 2007 at which Mr Tulich signed documents. He says that at this event, and at a later lunch meeting at a restaurant, Mr Velez and later Ms Ku spoke to him in terms which conveyed that the Village had been sold. Mr Tulich says that when he signed the document he said "This now means the Village is sold?" and Mr Velez replied "Yes". Mr Tulich says that during lunch Ms Ku said to him "How do you feel now that you have sold the Village?" This statement if made could not convey the approval representation; it does not refer to internal approval. When cross-examined Mr Tulich could no longer recall their conversation. Ms Ku denied it. It is quite possible that someone may have spoken to him or spoken in general terms about selling the Village, but this cannot have misled anyone who took part in the events of that meeting and knew what had happened. 69 Mr Mann's affidavit par 31 says that at the meeting on 19 December 2007 when the APPA was signed Mr Mann said "Are the remaining documents in order to sign when they have to be" and Mr Velez responded "Yes". This was also relied on in support of the document representation. Mr Mann acknowledged when cross-examined that he knew that the draft documents were not in a position to be signed; (T107). He asserted that Mr Velez did indicate to him that once the approval was secured the parties could just sign the documents. In my finding the conversation was about the state of preparation of the documents, on the face of the documents there were obvious qualifications about their being ready to sign which all present must have known, and the subject of all necessary approvals being obtained was not dealt with. If it had been dealt with the striking anomaly of the presence of condition precedent 2.1(b) in the APPA would, with fair certainty, have been spoken about. There is no evidence that anyone ever sought to remove it having regard to the approval representation. The plaintiffs' case is an attempt to swear away special condition 2.1(b) and to have rights adjudged as if it were not there on 19 December; but it was plainly there before their eyes, and no one told them otherwise. 70 Mr Mann's affidavit par 32 and par 35 are referred to in particulars. Paragraph 32 sets out a conversation with Ms Ku at lunch on 19 December 2007 which as there alleged has no possible reference to the approval representation. She denies the attributed statement. Paragraph 35 is about lunch on 7 January 2008 and contains no relevant matter. 71 Mr Osborne's pars 76 and 77 relate to events on 19 December 2007. There is nothing in Mr Osborne's account which tends to support the making of the approval representation. The high point is that Mr Osborne says, to the same effect as Mr Mann, that Mr Mann asked Mr Velez whether the documents were completed and could be signed without any changes and Mr Velez said "Yes". Some of Mr Osborne's evidence under cross-examination was less precise in what he attributed Mr Velez. On no account in evidence of what Mr Velez said did he say that all internal approvals had been obtained to effect the acquisition, or say anything which meant that or could convey it. The most that could be understood from the plaintiffs' evidence at its highest is that Mr Velez behaved as if he thought the contemplated transactions would proceed and take place. There could be nothing misleading or deceptive in that; that is what Mr Velez, and also Ms Ku expected to happen. This could not rationally be understood to indicate that the documents which had been drafted did not mean what they said and that rights and opportunities in them would not be relied on. Any indication of expectation of progress related to progress in accordance with the documents. 72 The APPA provided for completion by 30 June 2008 in its cl 2.5(a). If any Condition was not satisfied or waived on or before 30 June 2008, the Buyer or Seller could terminate the APPA. There was some arrangement to extend this cut-off date to 31 August 2008, which was attended to, with no apparent urgency, by exchanges between solicitors and produced a Deed of Variation, executed by the parties and treated as given effect on 23 April 2008 (A7/2139, A10/3110). The APPA provided in clause 7 "subject to satisfaction or waiver of the Conditions, Completion must take place …. on the date nominated as the transfer date for the transfer of the Allocated Places by the secretary of DOHA …". Clause 7.2 contained provisions for making the time to complete time of the essence by notice, for which fourteen days was sufficient. If completion did not take place on the date nominated by the Secretary of DOHA, it was necessary to obtain a further decision from the Secretary nominating a later date. With co-operative action this did not prove difficult on the one occasion when it happened. Arranging for this variation showed the continuing interest of both sides. 73 The remaining documents and transactions, all of which had to be brought into effect if the Village and Manor were to be sold, were these: 1. Deed of Variation Partnership 2. Asset Purchase Agreement between BHVM and CAGCare. 3. Loan Agreement for a loan from an as yet unidentified company to existing partners, and an actual advance of $26,110,000.00. 4. Deed of Warranty between the plaintiffs CAGCare and two B&B entities not yet identified. 5. Assignment of the interest of Cypjane Pty Limited the first plaintiff to one of the new B&B entities of 91.9% of Cypjane's interest in the partnership. 6,7,8,9. Four deeds by which other Partners each assigned 99.9% of each Partner's interests to an entity yet to be formed. 10. Deed admitting two entities yet to be identified to the partnership. 11,12,13, 14,15. Deeds of procurement of retirement of existing partner, one for each existing partner and transfer of the remaining 0.1% interest in partnership assets at each as at yet unidentified B&B entity. Only one of the five assignment deeds, and only one of the five retirement deeds had been drafted; but it would have been a simple matter to prepare similar documents for each Partner. It would not have been difficult, given the resources available to BBA, to create the contemplated entities; this could have followed quickly on any decision by BBA to commit all the capital required; but there never was any such decision and the entities were never formed. While drafts remain uncompleted and unexecuted there had not been "documentation" as referred to in the Heads of Agreement. 74 Mr Osborne continued a correspondence after 19 December 2007 with Mr Velez about uncompleted aspects of the documents. The continued correspondence is itself an indication against the view that the draft documents had become binding: Sagacious Procurement Pty Ltd v Symbion Health Ltd (formerly Mayne Group Ltd) [2008] NSWCA 149 at [101] (Giles JA); but as the matters discussed in the correspondence were relatively minor, this consideration is not conclusive. 75 The Torrens transfer would have been very simple to prepare, and ordinarily Mr Velez representing interests associated with BBA including the proposed two entities which were to be transferees would prepare it. Until it was prepared and executed there would be no enforceable agreement in writing for the transfer of the land. It would probably incur a large liability for stamp duty, with significant associated attendances dealing with valuation. 76 Notwithstanding that the drafting of documents was well advanced, the drafting could not be completed and documents could not be in a form where if executed they would have meaning or be binding, for reasons which involved needs for further action from each side. The vendors' side had to supply and the purchasers' side had to approve much significant information, notably the Schedules required to complete the draft Asset Purchase Agreement and the Warranty Deed at A6/1827; there are many blanks in the Schedules. The purchasers' side had to incorporate and identify companies which were to participate in indispensably important parts of the array of proposed contracts. The absence of consensus in matters of detail is a consideration adverse to a conclusion that the parties have reached agreement, more so if the areas of absence are numerous and significant. See Sagacious Procurement at [73] and cases there cited. Neither at 19 December 2007 or at any later time was there any arrangement or machinery for establishing what was to go in the Schedules or fixing the time at which the assets, employees and other references should be established; necessarily these had to be deferred until more significant matters had been agreed and execution and exchange documents could take place. These circumstances are strongly adverse to a finding that any conduct indicated or was understood to indicate an overall commitment. 77 Documents drafted and redrafted Mr Osborne and Mr Velez contain clauses making them interdependent with the APPA. See Asset Purchase Agreement draft 4, 18 December 2007 Clause 9 (A6/1816): 9. Interdependent Contracts 9.1 Interdependent Contracts This Agreement is interdependent with Allocated Places Purchase Agreement. Any breach of this Agreement constitutes a breach of the Allocated Purchase Agreement and any breach of the Allocated Purchase Agreement constitutes a breach of this Agreement, any Party entitled to rescind or terminate this Agreement is entitled to rescind or terminate the Allocated Purchase Agreement and any party entitled to rescind or terminate the Allocated Purchase Agreement is entitled to rescind or terminate this Agreement. 78 The draft Warranty Deed (A6/1827) does not contain an interdependence clause, but it is inherently interdependent in that it could and would only be entered into if the Asset Purchase Agreements were entered into. 79 The draft deeds prepared by Minter Ellison and available on 18 December 2007, which relate to contemplated arrangements internal to the Partnership and among Partners, do not contain interdependence clauses or conditions precedent tying them to the APPA. A minor but not insignificant aspect of the facts is that the plaintiffs do not claim that any of these were executed, although the contemplated series of events provided for some of them to be executed before completion of the APPA. 80 It is highly unlikely that on 19 December 2007 Mr Velez made any statement which he intended to be taken as a commitment by BBA that the whole suite of documents would become contractually binding. He did not have, and did not appear to have, any position in which he spoke comprehensively in the interests of BBA. He was the lawyer dealing with preparation of documents, not an executive. It was obvious that this was his position. He had, or thought and said he had powers of attorney to execute two documents; it was his understanding, and it was also obvious that when he had powers they were conferred in a formal way, and extended only to the company which conferred them. (An incidental contretemps is that Mr Velez was told and believed that he had power of attorney for BBIPL, and executed its Performance Guarantee as under power of attorney on 19 December, but later found that that power of attorney was not executed until 20 December (A7/2380); so he again executed a Performance Guarantee under power of attorney on 21 December (A7/2290).) It was contemplated that there were also to be guarantees for the Warranty Deed and the Fixed Asset Agreement. 81 Ms Ku, an executive of BBA, was present; if anyone were to give a commitment it would be an officer of BBA. It is highly improbable that Ms Ku intended to make any statement which gave an overall commitment that all the documents would be entered into. She operated in a highly structured business system where commitments were given only after detailed written consideration. She had learnt an hour or so before signing of approval to put four million dollars at risk: she is unlikely to have made a verbal commitment to put thirty million at risk. It was plain that Ms Ku's position was important but also subordinate, and that the B&B Group and all the companies in it did not speak through her in a binding way, on a subject on which contractual documents were receiving detailed attention. Communication would hardly take place if her every unguarded pre-final expression were uttered at the risk of its returning in the guise of alleged misleading and deceptive conduct. 82 It is highly improbable that either Mr Mann or Mr Tulich understood any conduct, including any statement or other behaviour by Mr Velez or Ms Ku, as conveying a commitment that the whole suite of documents would be entered into and become binding. The table was covered with draft documents which evidenced the formality with which the parties were proceeding. Two were executed; the others were not. The APPA was executed and contained conditions precedent which suspended operation until all were in force. It would be a marked, indeed astonishing shift of the register in which communications were being conducted if after all this attention to formality and detail in writing, Mr Mann and Mr Tulich were in some way given to understand that the conditions precedent and documents left unexecuted counted for nothing and they had present assurance that all expectations would be fulfilled. The documents were not a shadow play in some scene where the oral exchanges were the real events. With the tax advice they had received Mr Mann and Mr Tulich did not want to be bound immediately to all the arrangements; the tax advice, which they were following, was that these arrangements were to be entered into in a sequence, at intervals, if they were to have the contemplated effect on liability for taxation. They had had this explained to them carefully by their accountants, and again spelt out, in a detailed written advice, by Mr Osborne, in terms which clearly conveyed that the whole suite of documents would not become binding immediately, and that this was a situation that could not be departed from but should be accepted; and had been accepted after careful consideration. I do not regard it is as possible that Mr Mann or Mr Tulich would have given a commitment of the kind which they say was given to them; not with Mr Osborne present. They had had the draft documents explained to them, and they knew their overall commitments in the Heads of Agreement. They could not rationally have thought that they had the benefit of a binding commitment but were not committed themselves. 83 I cannot have confidence that the evidence about the oral exchanges is accurate in detail. There is a need for clarity: Watson v Foxman (1995) 49 NSWLR 315 at 317, 318-319 per McLelland CJ in Eq. The assurances which Mr Mann and Mr Tulich claim that they were given from time to time did not deal with or explain away the incomplete state of the proposed contractual documents which was altogether clearly something which had not been resolved. Nothing communicated to the plaintiffs could possibly take away this abundantly clear difficulty, or convey some idea to the effect that the documents were mere ceremony and red tape and oral assurances were the reality. Nor could anything communicated spell away the conditions precedent in the document which had been entered into. 84 I do not find it possible to accept, as a fact, that Mr Mann and Mr Tulich were induced to enter into the APPA by brief and indirect expressions or by interpretations of the conduct of Ms Ku, Mr Velez or anyone associated with CAGCare. They were both experienced and successful businessmen; Mr Tulich had training and experience as an accountant and Mr Mann as a lawyer. It could be clearly seen that they and their lawyer, Mr Osborne, were applying themselves intensely and in detail to the preparation of documents which were to govern the transaction in detail, with the assistance of advice from two different firms of accountants about what their transactions should be and how they should be formed, and detailed advice from Mr Osborne to whom they spoke frequently, and who gave them careful and full advice. They also had advice from Minter Simpson. 85 The evidence of Mr Tulich and Mr Mann showed or seemed to show curiously poor perception of difficulties in the course in which they fully participated, and their concept of their interests required: a large suite of documents was prepared and more were contemplated, but were not executed, nor completed in detail, in a quite deliberate way and with a view to advantage: their not being binding would have been manifest to rational persons willing to open their minds to the obvious. Mr Tulich and Mr Mann seem from their evidence not to have been able to open their minds to the implications of the Heads of Agreement for understanding conduct and communications of the persons they were dealing with, or the absence of any clear event or stage, let alone express arrangements, at which the Heads of Agreement ceased to stand over and behind all conduct and communications. 86 Mr Tulich was not assisted by attitudes of mind which led him to interpret events and communications as supporting his position and conveying assurances on which he could rely, although the events and communications could not reasonably support his interpretation. His accounts of what was said to him were sometimes improbable and his interpretations sometimes approached the risible. Events which encountered the prism of his interpretation tended to emerge supporting his case at entirely new colours and angles. Mr Mann suffered from similar difficulty, to a lesser degree. 87 Mr Mann and Mr Tulich were fully involved in the Heads of Agreement, which include terms by which they undertook obligations for themselves. The reference in the Heads of the Agreement to an estimated settlement at "end of November 2007" does not set a time limit at the end of November 2007 for the operation of the Exclusive Dealing provisions of the Heads of Agreement, or for any other part of the Heads of Agreement. It does nothing to alter the two provisions of the Heads of Agreement which deal with the circumstances in which contemplated arrangements will become binding. Mr Tulich did not understand that the exclusive dealing arrangement had ceased to bind him. He referred, when giving oral evidence, to its continuing effect on his course of action in 2008. 88 In all rationality it must have been obvious to Mr Mann and Mr Tulich, the Partners and to any objective person, that before it could reasonably be understood that the proposed sale was binding the internal and external approvals referred to in the Heads of Agreement had to take place, to do which there had to be a decision by somebody to provide CAGCare with a very large amount of capital which it did not have, and that all the documents had to be executed and exchanged as the Heads of Agreement provided. 89 In my finding on the facts, those present on 19 December when documents were executed spoke and behaved then, and so continued later in the day, including at lunch, on the basis that they were carrying out a step in a contemplated course of arrangements which they expected to be fulfilled; that indeed was the true intention of all present; there is no indication otherwise. Promoting such conduct into conduct which was misleading and deceptive by indicating a commitment actually to carry out the whole contemplated chain of events would be a distorting step. In my finding Mr Mann and Mr Tulich did not understand the conduct which they observed in that way. 90 Particulars 55(c) to (g) assert that the completion representation is to be implied from the array of events and conduct earlier referred to in particulars of the approval representation. The matters referred to do not support the completion representation. It is difficult to understand the completion representation as alleged as a representation; it would be better classified as an assurance or promise that the defendants would conduct themselves as if their rights were different to those recorded in the Heads of Agreement and the APPA. Such a promise is very unlikely to be given by implication or by a side wind, or to pass without remark and clear record, and a request for confirmation, if it were given. My conclusion is that it was not given. 91 Bearing in mind the advice which they were receiving from KPMG and from Mr Osborne, Mr Mann and Mr Tulich cannot have believed the state of facts which the document representation would suggest. The transaction and its large array of contemplated documents had taken shape around their wish to follow KPMG's advice and enter into a series of transactions separated in time, and their wish not to have a relatively simple sale of assets uno ictu followed by pursuit of DOHA approval. 92 Insofar as the behaviour of Ms Ku, Mr Velez or anyone else associated with BBA indicated a general intention of BBA to proceed with the array of proposed transactions, and to do so in accordance with the Heads of Agreement and the provisions of the documents, the indication was true; but there was no indication that the documents, and any opportunities which they preserved or created for BBA would not be followed, or that the contract formation procedures in the Heads of Agreement would not be followed. 93 In my finding the courses taken by the plaintiffs on and after 19 December 2007 were not influenced by any misleading or deceptive conduct. 94 Preparation of applications for approval by the Secretary, Department of Health began. Mr Tulich and Mr Mann contributed information for that purpose. Mr Tulich's affidavit par 16 refers to celebratory drinks and lunch about 7 January 2008: this event could not possibly support the alleged approval representation. The information given was confirmed at a meeting and in communications on or around Friday, 11 January 2008. Mr Tulich's affidavit par 17 refers to a meeting about 11 January 2008 at which Mr Kirsch, Ms Ku, Mr Tulich, Mr Mann and several others were present. It is said that Mr Kirsch commenced the meeting by saying "Now that Blue Hills has been purchased we need to look at the ongoing relationship with B&B … " and went on to discuss other possible purchases. Mr Kirsch denied saying this and was not cross-examined. If he did say it, a passing reference like that could not possibly convey the approval representation to a reasonable person with the knowledge that Mr Tulich and Mr Mann had. Further, conduct and events after 19 December 2007 cannot have caused entry into the APPA. 95 Particular 41(e) relates to the preparation and contents of the Transfer Application for the Allocated Places. Events in preparation for the Transfer Applications took place in January 2008. This led to submission of the Transfer Applications, two of them, which included supportive statements from Mr Tulich and Mr Mann, on 31 January 2008. The applications to DOHA contained statements (A8/2366) showing that CAGCare which of course was unable to provide services itself, proposed to enter into a management agreement with a subsidiary of BBC which was in a position to provide the services. The application put forward Mr Tulich and Mr Mann as key personnel of the CAGCare organisation, and incorporated statements signed by them in support of this. The application included a considerable body of information about the proposed management company, Prime Life Management Services Pty Limited, and about its officers; and also about BBC. Preparation of the applications required collection of detailed personal statements by key personnel in CAGCare and Prime Life. A large body of information was collected (see A7/2360-2520). 96 Particular 41(f) refers to the Application to Transfer Aged Care Places Exhibit A8/2534, 2541, 2542-3. This document and other related documents was prepared on behalf of BBA, and given to the plaintiffs for signature, and signed on behalf of BHVML by Mr Tulich and Mr Mann. They are of course as much statements by Mr Tulich and Mr Mann to DOHA as they are statements by CAGCare. They contain passages which speak on the basis that or address the situation in which the contemplated transfer had already taken place. It would be difficult to avoid such language. The officers of DOHA could not misunderstand the position, in which the transfer could only actually take place if approval was granted. Paragraph A17 says among other things: "The availability of expertise of this team (referring to the existing facility ……) will extend beyond the actual date of transfer … ." Paragraph 18 includes: "Under the contract for sale of the facility the transferee assumes all responsibilities contained within any residency contract with existing care recipients." Elsewhere in the document there are other expressions looking forward, without qualification, to a situation in which the transfer would have taken place. In the context of the nature of the application and the department to which it was directed, and of their own knowledge of their own affairs, submission of the application to them for signature could not rationally have conveyed to Mr Mann or Mr Tulich the document representation. 97 The applications were sent to the State Manager – Aging, Department of Health and Aging at DOHA's Sydney office by letter bearing date 23 January 2008, and receipt was acknowledged on 31 January 2008. Notwithstanding the date of this letter internal references within the applications show that some parts of the application were completed later, up to 30 January 2008. The applications were submitted with a covering letter to DOHA signed by Mr Kirsch and Mr Tyndale, the directors of CAGCare Pty Limited. Among other things the letter said: Babcock & Brown, on behalf of Babcock & Brown Communities, has been negotiating the potential acquisition of the retirement and aged care business at Blue Hills since August 2007. While our intention is for the Blue Hills assets to be housed within, and managed by, BBC, we wish to progress the transaction in stages. The first stage is the acquisition by CAGCare of the allocated places for the Blue Hills facility from Blue Hills Village Management (Liverpool) Pty Limited. We also enclose an Application to Transfer Aged Care Places in respect of these allocated places. Subject to receiving Approved Provider status for CAGCare and to the transfer application being approved, we anticipate completing this step by 1 May 2008. The second step will see BBC completing the rest of the acquisition directly from the owners of the Blue Hills facility as well as acquiring CAGCare from Babcock & Brown, at which point, the relevant Key Personnel will be aligned with those of BBC. 98 This states what was then contemplated – that CAGCare, a wholly owned subsidiary of BBA and the proposed approved provider, would pass into the control of BBC, and BBC would complete the rest of the acquisition directly from the owners of the Blue Hills Village. It was also contemplated that, although BBC had not yet done so, BBC would later agree to be the purchaser, and would enter into later stages of the array of proposed documents. 99 These applications contain statements throughout which are based on or support the intention that when the approvals sought were acted on, CAGCare would be or become a subsidiary of BBC which would in that way own the Blue Hills Village. These were indications to the officers of DOHA to whom they were directed and to others who saw the applications including Mr Mann and Mr Tulich, of what was then intended; they could not reasonably have been understood as an indication to Mr Mann or Mr Tulich free from context which showed that the arrangements described were arrangements which would be fulfilled when and as the contemplated agreements were completed. 100 Particular 48(d) refers, like Particular 41(f), to statements in the Transfer Application. Nothing to the effect of the approval representation is found there. The transfer application does not support the allegation about the approval representation, in a similar way as for the document representation. 101 At a meeting between Mr Mann, Mr Tulich and Ms Ku on 15 February 2008 Ms Ku gave an explanation of BBC's affairs which included a distinct statement that BBC would not be going ahead with the proposed purchase. She also made a statement about what the defendants would do. Her affidavit evidence was that she said to this effect: "As this is now a transaction for Babcock & Brown, I will put together a fresh proposal for Babcock & Brown to acquire and warehouse the retirement Village for six to twelve months at which time BBC would be in a better position to consider acquisition of the retirement Village. I will put together a fresh approval paper for Rob Topfer's approval." I accept that she said to this effect, and do not accept the version given in Mr Tulich's third affidavit: "If BBC cannot buy Blue Hills then Babcock & Brown will buy and warehouse it until BBC is in a position to buy". It as highly improbable that she spoke in terms of a commitment. There is a significant body of affidavit and oral evidence about this conversation and Mr Tulich and Mr Mann thought it sufficiently important to give Mr Osborne a long account of it when they saw him on 18 February – A8/2702 Mr Osborne's note. This conversation was a new and significant turn in the events; the contemplated ownership by BBC was plainly not going to happen and from BBA's point of view the venture acquired entirely new dimensions; the warehousing concept. This conversation and anything stated by Ms Ku in it were not included in the particulars under the Trade Practices Act. 102 Mr Osborne wrote to Mr Velez on 22 February 2008 (A8/2714), referring to this meeting and to what Ms Ku had said, and stating the vendor's position in summary, and calling for a further meeting. He said: "The position of both the Company and the Partners is they expect Cagcare and the Babcock & Brown Group to perform their obligations under the Allocated Places Agreement and complete the acquisition of the retirement village and aged care facility on the agreed terms". Mr Osborne's letter proposed a two-week deferral of public announcement of the acquisition to 10 March 2008, and further discussion and communication. 103 Some arrangements were made for a further meeting on 26 February 2008 but the meeting did not take place. Mr Mann made a note of a telephone conversation with Ms Ku on that day (A8/2726 and 7) and his note included the following: "I also informed her that the reason for having the meeting was to inform Babcock and Brown Limited that as far as we were concerned we had signed agreements and that those agreements required Babcock and Brown to use their best endeavours to have the remaining agreement signed which we considered complete and that any issue they had was an internal issue and really nothing to do with us. It was not our problem to which Christine agreed and advised me that it was an internal issue as to who was ultimately going to purchase the Village. If Babcock and Brown Communities Limited did not then Babcock and Brown Limited would purchase the Village." The note continued at length and included attributing to Ms Ku "She responded by saying that there was always a 5% chance that a contract would not be completed but as things stood she was 100% certain that Babcock and Brown Limited would purchase the Village and that she was waiting on Bank of Adelaide to get back to her to-day so that she could then submit a fresh submission to the Board on the basis that Babcock and Brown Limited would purchase the Village." The note went on at some length, concluding to the effect that Mr Mann no longer wanted a meeting to discuss the matter further. 104 There was a conflict of evidence about whether Ms Ku made the statements attributed to her in the terms recorded by Mr Mann; but in Mr Mann's terms, she did refer to the need for a fresh submission to the Board from which it would follow that there was a need for a fresh decision. Ms Ku (affidavit [133]) denied significant passages in Mr Mann's note and gave an account in which she referred to the need to prepare documentation for the Babcock and Brown approvals process and to the need to obtain approvals. The probabilities favour her having spoken in some such terms. 105 BBC published its half-yearly results in an ASX release on 25 February 2008 and stated the outlook in terms which did not include any further large acquisition (A8/2722). From this time on there was no serious contemplation that BBC might complete the purchase under consideration. Consideration turned to whether BBA could and should complete the purchase itself, hold the assets for a while and retain BBC to provide management, and dispose of the assets to BBC at some time in the future, a process referred to as "warehousing". Of course this involved entirely new considerations about availability and risk of capital of BBA. 106 On 3 March 2008 Ms Ku sent a report, called a Heads Up Memo (A9/2734) to Mr Topfer and others within BBA setting out BBC's view against an additional acquisition and saying "The current proposal is for B&B to complete the acquisition of Blue Hills with an exit to BBC in 6-12 months once BBC's share price has stabilised and management has built a track record of performance". She also said "B&B is contracted to acquire the age care licences and although the contract is conditional, there would be reputational damage to both B&B and BBC if the transaction was not completed." 107 Mr Mann made a note of a telephone conversation with Ms Ku on 5 March 2008 (A9/2736) which attributes to Ms Ku that she advised him "Babcock and Brown Limited will definitely be purchasing the Village … all that now has to take place is that the Approved Provider Status has to be completed and when approved Babcock and Brown Limited would proceed with the purchase." A note of a second telephone call on the same day attributes to Ms Ku that she told Mr Mann that Babcock and Brown could not go public on 10 March as they needed to get Board approval and have all the documents signed. Ms Ku gave an account (affidavit [137]) of this conversation which differed in significant ways from the evidence and note of Mr Mann; in her account she referred to having circulated the proposal for comment to Babcock and Brown and to being about to prepare a paper to go to Mr Topfer for approval. I regard it as improbable that she said anything which indicated that approval had been obtained or was unnecessary; indeed Mr Mann's note seems to bear this out. This conversation like the previous one is not referred to in the particulars of any representation. In my opinion neither has any real significance. 108 In March other communications continued. Ms Ku was given financial information about the Blue Hills Village business. DOHA requested further information and steps were taken to supply it. Mr Smith of Colliers communicated with Ms Ku. Mr Smith reported to Mr Mann on information obtained on his communications with Ms Ku (A9/2783) and said There are still three key steps which Christine needs to complete to achieve sale. 1. Internal approval. This is a two stage approval process which Christine is currently writing a paper. Hence the need for the additional information that she requested from you last week. There is risk with it, however Christine has tried to minimise the risk by keeping those in the approval process fully informed of market conditions and the assets which are the subject of the acquisition. It will likely take a further 2 weeks from now. 2. Approved provider status for Cagcare from the department. Obviously the issue of Victoria versus NSW has delayed this a little but we understand that the initial application was lodged in early January and the department has up to 90 days to approve. Christine expects the approval in early April which should coincide with No. 1 above. 3. Department transfer of the approved places which should follow relatively automatically after No. 2 above. Christine appeared very confident of the sale finalising. Time is of the essence for Babcock and Brown as well given the constantly re-pricing of debt. They clearly want this to happen sooner rather than later. She confirmed the drop dead date on the deal of 31 August 2008 which we will ask her to confirm in writing 109 In Particular 48(e) it is alleged that the approval representation is supported by, that is implied from, Mr Kirsch's giving Mr Mann and Mr Tulich on 19 March 2008, a copy of a draft letter to DOHA which stated that CAGCare "expected shortly to reach agreement on the terms of an agreement with Prime Life Management Services Pty Ltd to manage the Retirement Village and Manor." This does not and rationally could not support the allegation. 110 Ms Ku began drafting a CAR for decision by BBA. The first draft on 27 March 2008 contained an expectation of the probability of success at 100 per cent (A9/2825). This draft, which involved participation of a number of other people within BBA's organisation, was finally completed and submitted on 30 June 2008 but was never approved by Mr Topfer. 111 On 14 April 2008 Ms Ku circulated a full statement of what was proposed and draft documents to many persons within BBA's organisation who might well be concerned. Mr Naz Klendjian, often referred to in evidence by his first name Naz, responded, also on 14 April 2008 and said (A10/3084) "The precise steps and alteration of partnership interests etc are likely to have a number of income tax and CGT consequences which need to be fully considered …" This set off a chain of close consideration, involving external advice, directed particularly to the Capital Gains Tax implications of the proposed mechanism in which a large part of the cost to BBA of the acquisition was to take the form of a loan to the Partnership and not consideration paid to the vendors. Mr Klendjian's perception was that attention had to be given to whether this loan would form part of the cost base when BBA made the contemplated disposal to BBC. If it did not, the cost base would be far lower and the Capital Gains Tax far higher than otherwise. Mr Klendjian set out in his affidavit the extensive and detailed consideration which was given to these difficulties, and his evidence was not challenged by cross-examination. 112 Ms Ku sent a message to Mr Mann and Mr Tulich on 23 April 2008 (A10/3119) requesting six classes of further information: she said "We continue to progress with our formal internal approvals here at B&B. I have had a request for further information from our internal tax and accounting guys which I have listed below". The information requested was extensive. A considerable body of information was collected from within BBA and from the vendors. Arrangements for BBC's subsidiary Prime Life Management Services Pty Ltd to enter into a management agreement with CAGCare also received attention. BBA requested and Mr Tulich obtained information and assistance from the vendors' tax advisor on the vendors' proposed treatment of the transactions. 113 After considerable attention, meetings and discussion involving Mr Osborne and Mr Velez, Mr Baltins of KPMG who had advised the vendors, and external taxation advisors of BBA, Mr Osborne gave Mr Velez on 27 May 2008 a discussion paper prepared by Mr Baltins (A11/3604). The contents of this paper made Mr Klendjian feel comfortable that the Capital Gains Tax concern was essentially resolved. Mr Baltins' paper did not express a final view, it was said to be a "preliminary steps paper … prepared for discussion purposes …" and "a work-in-progress document and not to be regarded as final or as advice". It listed a number of matters but among them was that the loan of approximately $24 million to the partnership was to be a loan for a period of less than 10 years and to bear a commercial interest rate. This was significantly different to what had previously been under consideration embodied in the draft loan documents in December 2007, in which the loan was to be for a period of twenty years, reduced in some contemplated circumstances to ten years, and was not to bear interest. Mr Klendjian addressed this change, and obtained advice including the advice of solicitors Messrs Clayton Utz on the alteration. He also considered Clayton Utz's advice on stamp duty considerations. Attention given to these concerns by BBA's officers and lawyers was intense, detailed and genuine, as was altogether appropriate. The prefinality of Mr Baltins' document indicates that there would be further attention before it would emerge whether or not what Mr Klendjian contemplated would be acceptable to Mr Baltins, and to the plaintiffs. 114 Mr Klendjian completed his revision of his comments relating to his sign-off on 25 June (A12/3750). Ms Ku sent the CAR to Mr Topfer on 30 June 2008. In the CAR the structure of acquisitions was modified in the way Mr Klendjian had contemplated (A12/3821). Mr Klendjian's support for the CAR was on the express basis that the acquisition structure was to be as he then described. Mr Klendjian's view required a differently structured transaction, and this appeared by the message he sent to Mr Kirsch on 25 June 2008 (Exhibit A/3787). In his comments on the sign off, Mr Klendjian saw some residual risk arising from the structure which the vendors required. Mr Klendjian's comments included: "3. Notwithstanding the above, and the fact that the acquisition structure has been entirely proposed by the vendors with little room for negotiation, it should still be noted that the transaction as structured still carries a level of residual tax risk to B&B as purchaser given the outcome which the vendor is seeking." In the revised transaction steps to which Mr Klendjian referred (A12/3697) B&B was to lend $24 million to CAGCare Pty Limited and CAGCare was to lend $24 million to the Blue Hills Partnership, for a period of less than ten years and at a commercial rate of interest, and CAGCare was to form a new subsidiary which was to acquire an interest in the Partnership. 115 In effect then the resolution of the CGT difficulty upon which Mr Klendjian was prepared to support a Capital-at-Risk decision, and the only basis on which it was likely or possible that such a decision could proceed, required extensive recasting of the loan documents and of the documents relating to acquisition of assets and altered interests within the Partnership. The CAR was never approved but if it had been it is not possible that it would have been approved except on a basis which required further consideration on behalf of the vendors and their concurrence which in turn would with fair certainty have required them to consult and obtain a final view from Mr Baltins, who had only expressed a preliminary view for discussion purposes, and whose view did not relate to the full terms of what Mr Klendjian considered satisfactory. The resolutions recommended (A12/3837) included "Delegation of authority to Andrew Tyndale to finalise the terms of the acquisition as outlined in this CAR." 116 In the structure of the transactions then considered 2. CAGCare lends approximately $24 million to the Blue Hills partnership ( Partnership ) to enable it to pay out the partners' current accounts. The loan has a term of less than 10 years and bears a commercial rate of interest. 3. CAGCare incorporates a new subsidiary company, CAGCare Subsidiary and capitalises the company with approximately $2 million of equity. 117 It is not possible, in fact, whatever time became available, that a decision would have emerged which did not require further negotiation and further drafting of documents, with the introduction of a further CAG subsidiary. This result did not emerge. There were time constraints. The transfer date approved by DOHA was not long postponed, the plaintiffs commenced litigation and the transfer date passed without any further progress towards fulfilment of the condition or exchange of contracts. 118 Observations by Mr Mann and Mr Tulich in evidence tended to express or support the view that this was not the vendors' difficulty, or that it was entirely the defendants' difficulty, while observations by the plaintiffs' senior counsel at times seemed to suggest that attention given to this subject was a contrivance to create delay. There was no evidence or other basis supporting any of these views. In my opinion the question of the Capital Gains Tax implications of the arrangement was of high importance, and fully justified the attention and time given to it. It plainly needed attention when considering whether there should be internal approval for BBA to enter into the further steps. The subject arose because of steps which the vendors, on the advice of KPMG and Pitcher Partners, wished to take so as to influence the impact of Capital Gains Tax on them. The plaintiffs are not in a position to complain or to make adverse observations on the attention which was given by Mr Klendjian and by BBA to the impact on BBA. 119 Mr Tulich's affidavit par 29 gives an account of a meeting with Ms Ku on 16 April 2008. Ms Ku is alleged to have said "B&B were on track to complete the purchase once they received approved provider status and the licences transferred." This statement, if made, could not convey the approval representation. Someone on track has not reached their destination. Mr Tulich under cross-examination went no further than to assert that Ms Ku led him to believe that the transaction would be completed. Ms Ku denied this statement and was not cross-examined on her denial. I am not satisfied on the probabilities that the statement was made, but if it was made it could not support the allegation. In any event it was too late to be relevant. 120 Mr Tulich's affidavit par 31 relates to a meeting at lunch at a restaurant on 2 May 2008 during which Ms Ku said "We are just waiting for Approved Provider Status and transfers are to happen on 1 July 2008." This could only have been reasonably understood as a statement about what Ms Ku expected to happen, and not as an assurance that it would all happen, regardless of any other rights in the matter. A person who had seen the documents and had his own lawyer available could not rationally make a conclusion about the rights of the people he was dealing with on the basis of something he heard in a conversation over lunch, and could not infer that because some qualification was not especially mentioned it did not exist. When he came to give oral evidence Mr Tulich could no longer recall this conversation. Ms Ku denied it and was not cross-examined about it. At this time, as he acknowledged, Mr Tulich knew that what BBA thought of as the tax issue was under consideration and had not been resolved. It is improbable that there was any such statement, but if there was, it could not have conveyed the approval representation. 121 Mr Tulich's affidavit par 32 refers to a meeting at a coffee shop between Mr Mann, Mr Tulich and Ms Ku on or about 7 May 2008 at which Mr Mann said "We are concerned at the slowness of the approval and Babcock & Brown's ability to complete", Ms Ku replied "I assure you that the deal is on foot and will be completed" and Mr Tulich replied demanding finalisation as soon as possible. Ms Ku denied that she said the words attributed to her and gave a different account (Affidavit 3 [164]) in which she pointed out that the tax issue was being considered and when Mr Tulich said "Is that the only issue that remains outstanding? I am concerned that other issues will be raised again" she said "At this stage tax is the issue that has been raised … " and discussion proceeded to direct contact between BBA and Pitcher Partners, the accountants who advised the plaintiffs. On her account then, what Ms Ku said did not exclude the possibility that there would be issues other than tax. In any event, to an intelligent hearer that possibility ought to have been obvious. I am satisfied that she said nothing which meant, or indirectly indicated, that all internal approvals had been obtained. 122 In Mr Mann's third affidavit which he swore on 16 October 2009 he said that he recalled Ms Ku saying words to the following effect at the coffee shop meeting of 7 May 2008, in addition to statements he had attributed to her at some length in his first affidavit of 7 July 2008: "We've taken legal advice. If we don't proceed, you'll sue us for misrepresentation and we will lose. I have included this advice in my submission." Ms Ku denied saying this, gave a different account of what was said on that occasion, and adhered to her evidence under challenge. The reference to possible proceedings in her draft submission is to quite different effect to what Mr Mann attributes to her. Mr Mann adhered firmly to his evidence on this subject under forceful challenge in cross-examination, and a suggestion that the evidence was a recent invention, referring to its only appearing in his third affidavit, was successfully rebutted by evidence showing that he had given his solicitor instructions about that subject at an early time. But on the whole I find it improbable that Ms Ku would, on 7 May 2008, have seen matters in the way suggested, or would have told Mr Mann if she had; it would have been an astonishing and pointless indiscretion. I do not find that Ms Ku made the statement attributed to her. In my opinion it would not have had much effect if she had. 123 Within BBA, Mr Topfer, who had the power of decision, sent a message to Ms Ku on 11 June 2008 saying "don't think we will get there on Blue Hills, send me revised CAR." This was not an adverse decision; Mr Topfer still wanted to see the CAR. However it did not bode well. On 12 June 2008 Ms Louise Thurgood, an employee of BBA with responsibilities for finance, informed Ms Ku and others "we have removed Project Aqua from our cash forecast at this stage. There is a less than 50% chance it would be approved". (A12/3635) This message does not show to what period the cash forecast related. The shift in attitude discernible within BBA in June 2008 may have been related to adverse developments in the affairs of BBC, which may have made it seem less likely that BBC would ever take over the Blue Hills investments. About this time there were also adverse press reports about Babcock & Brown Ltd. 124 Mr Mann's affidavit par 45 refers to the meeting at a coffee shop attended by Mr Tulich, Mr Mann and Ms Ku on 16 June 2008. He says that Ms Ku told him "The tax issues have been resolved and I will forward details to OL on 18 June 2008". There was discussion about Babcock & Brown Limited's financial position and the adverse press reports, and general discussion including reference to the progress of the DOHA Application. Ms Ku gave a different account of the conversation and she denied that she told Mr Mann that the tax issue had been resolved. As it had not been resolved, it is very unlikely that she said that it had been. She could very well have spoken about the state of consideration of the tax issue. Statements about that subject, or statements indicating continuing attention and progress, could not be a representation about whether or not all internal approvals had been obtained. 125 Ms Ku carefully followed routines for obtaining Capital At Risk approvals. In September 2007 she obtained an approval for $450,000 for due diligence costs. She obtained an approval on 30 November 2007 for commitment of money to the APPA, but after changes in what was proposed submitted another CAR for use of $4 million including $400,000 deposit; this approval was given only on 19 December 2007 by an email timed at 11:38 am. It is very unlikely that she gave out informal assurances which would treat CAR approval as a foregone conclusion. 126 Mr Tulich's affidavit par 39 deals with Mr Tulich attending an API Retirement Seminar on 20 June 2008 at which Mr Kirsch was the keynote speaker. Mr Tulich says that at morning tea he asked Mr Kirsch what was happening with the sale and Mr Kirsch replied: "Babcock & Brown will complete the deal once the approved provider status is approved and that licences are transferred and then Babcock & Brown will settle". At a later encounter Mr Kirsch told him to stop worrying "… your deal is going ahead" and "Babcock & Brown want this deal finalised – you guys have an excellent village – we want it." Mr Kirsch gave an account of this conversation to completely different effects in which he did refer to internal approval as one of the next steps after approval from DOHA. Mr Kirsch was not cross-examined on this or on any subject. When taken to the subject in cross-examination Mr Tulich's account was not only not consistent with his Affidavit (T209-210), he did not recall significant passages. In my finding Mr Kirsch said nothing on this occasion which conveyed the approval representation. If he had done so, it could not have contributed to the loss alleged. 127 An enquiry made by Ms Ku to DOHA on 17 June 2008 showed that a decision was expected soon (A12/3672). DOHA communicated a decision on CAGCare Pty Limited as an approved provider on 23 June (A12/3678), bearing date and with effect (for some reason) as of 20 June 2008 (A12/3683). DOHA approved of the transfer of the Allocated Places by letter dated 26 June 2008 (A12/3795). The approved transfer date was 1 July 2008. 128 On 24 June 2008 Mr Osborne wrote to Mr Velez calling for completion on 1 July 2008, and specifying a sequence of dates of events before and after that date. Mr Osborne asserted (A12/3701) "the condition in clause 2.1(b) was satisfied on 19 December 2007 at the exchange of the Allocated Places Agreement at which time the negotiated documents were handed to you by the writer." Mr Osborne accepted in cross-examination that this contention was not correct (T226). In his letter Mr Osborne dealt with the measures which would follow approval and the transfer of the Allocated Places, which he expected would be obtained soon. He made careful and full statement of the steps which he expected would follow for the approvals, and gave a contemplated sequence of transactions on the assumption (which proved to be correct) that the transfer day fixed by DOHA would be 1 July 2008. He said the seller wished to complete on 1 July 2008. In his sequence the outstanding documents would be completed in a much shorter time than earlier contemplated, the last on 3 July 2008. Mr Osborne sought a meeting and discussion of the timetable later on that day. He said (A12/3703) There are a number of matters that need to be addressed as a matter of urgency if the transaction is to complete in accordance with the completion date under the Allocated Places Agreement. These include: A. The preparation of the Schedules to the documents - I will have my client do these in the course of the next two days and submit copies to you; B. A public announcement of the acquisition; C. The convening and holding of a meeting under 41J of the Retirement Villages Act; D. The outstanding issues raised in my letter of 25 January 2008; E. We require details of the Babcock & Brown entities which are to be admitted to the Partnership; F. The various mechanical issues associated with the handing over of the Business by our client to yours. In that regard our client proposes that the parties and their advisors meet some time during the course of today to discuss the timetable. 129 In their reply of 24 June 2008 (A12/3699) Mr Velez' firm denied that Condition 2.1(b) was satisfied as claimed. He said "Accordingly, the buyer is currently under no obligation to proceed to completion of the transaction as subject to the APP Agreement." However Mr Velez later showed continuing contemplation that the transaction overall might be completed. This exchange of correspondence dealt in terms of asserted contractual obligations, and in my opinion Mr Velez's position was indisputably correct. The condition precedent 2.1(b) in the APPA had not been satisfied, and there was no obligation to fulfil it. In their reply Mr Velez' firm, amongst other things, pointed to the need for time to hold a resident's meeting and requested an extension of the proposed transfer day to 1 September 2008. 130 Mr Osborne when declining this extension and suggesting an extension to 15 July 2008 did not acknowledge or deal appropriately with the need for more time to comply with the State law; he limited himself to calling for discussion on that. Mr Osborne made no later reference in correspondence to the Schedules which he said his clients were to prepare. When asserting on 26 June 2008 that the vendors were entitled to call on CAGCare to complete the APPA and related agreements Mr Osborne made no proposal for completing these documents. His firm rejection of the view that CAGCare was under no obligation to complete and his call for completion were unqualified, and no difficulty about the form of the documents was referred to. The Heads of Agreement and their qualification on entry into binding arrangements were not referred to. 131 Mr Mann spoke by telephone to Mr Kirsch on 25 June 2008 (A12/3790). Mr Mann expressed his dissatisfaction with Mr Velez' letter of 24 June in irate terms: his file note says (A12/3790): I was somewhat irate and said to him we have been gentlemanlike, we have been businesslike. They have messed us around and there has been no focus. We are on our way to see Michael Osborne and we are proceeding now - as far as we are concerned there is an agreement however their solicitor wrote an inane stupid and obtuse letter to say there was no agreement (which Gorm confirmed) but said that the letter merely wanted to provide them with more time because they didn't have any time to devote to this matter. I said the agreement that we signed originally after it has been questioned by me as to why would we be so stupid to compile all the agreements if they meant nothing. He said well those agreements are ok but it is just' because of their tax problems that those agreements are not ok. 132 Correspondence between solicitors continued. On 26 June Mr Osborne in a letter to Mr Velez's firm said (A12/3792): 6. The meeting at the offices of your client at which the exchange of the Agreement took place was attended by at least (from the Seller) Curtis Mann, Maurice Tulich and the writer, and from the Buyer by Gorm Kirsch, Christine Ku, Mark Hector, Peter Velez and yourself. Curtis Mann asked Peter in the presence of those in the room if the agreements required further amendment and his response was they did not. There was an atmosphere of formality about the meeting and on the conclusion of the exchange there were congratulations followed by champagne and lunch. There were further celebrations in January. 7. That this occasion was vested with such significance was because of the appreciation by the participants that the "deal" was done, that is, agreement had been reached on agreements acceptable to both the Buyer and the Seller to effect the acquisition of the Village and the Facility and the business operations associated with them. Save for the formal execution and exchange of those agreements (which was deferred at the request of your client) the condition in clause 2.1(b) was satisfied at that meeting. …. Subject to the above, our clients accept the transfer of the allocated places on 1 July 2008 will not be possible because the agreement between the transferor and the transferee will not by then have been completed. We propose an extension of 14 days to Tuesday 15 July 2008. Please advise if this is acceptable. Paragraphs 6 and 7 are the first articulation of reasons why it was suggested that the condition precedent had been fulfilled. In my opinion that articulation itself shows that it had not been fulfilled. 133 Mr Osborne's firm agreed to the extension of the transfer date by letter of 30 June 2008 (A12/3799) and DOHA approved the extension to 15 July. The plaintiffs commenced these proceedings on 9 July 2008, relations became combative and they have remained so. With the commencement of litigation prospects of internal approvals, exchange of contracts or any other progress evaporated. An outcome in which the condition precedent was satisfied, both sides agreed to necessary modifications, the draft documents were recast and were carried forward to contractual relationships was far from certain. There had not been real progress towards that outcome when the plaintiff commenced these proceedings. 134 The actions taken on behalf of the plaintiffs when DOHA's favourable decision became known about 24 June were not well considered. Mr Osborne made a firm demand by a letter dated 26 June 2008 directed to Mr Clarke, who was Mr Velez's assistant solicitor, asserting entitlement to call on BBA to enter into and complete the agreement and related agreements tabled at the 19 December 2007 meeting (A12 3783). There was no proffer of the Schedules, which would contain information required to complete the agreements, which was available to the plaintiffs. There was no enquiry about the unnamed entities. The condition precedent in clause 2.1(b) was referred to and set out, but it was asserted that "save for the formal execution and exchange of those Agreements (which was deferred at the request of your client) the condition in clause 2.1(b) was satisfied at that meeting [i.e. 19 December 2007]." There were generalised assertions about the events of 19 December 2007, but no real reason was offered why it was said that the condition had been satisfied. The statement that formal execution and exchange of Agreements had been deferred at the request of BBA, while perhaps alluding to the change of arrangements expected with BBC, was lamentably incomplete because it did not refer to the plaintiffs' tax scheme for the attainment of which formal execution and exchange was not appropriate. Relationships had entered a markedly combative phase. Mr Osborne's correspondence became distinctly aggrieved and combative in tone, full of demand and exigency, not mediated by any indication of co-operative movement towards completion, such as producing the Schedules or information for Schedules from the plaintiffs' resources. There was no rational approach to what was necessary, and there was no rational acknowledgement of the need to fulfil condition precedent 2.1(b); that subject was left with the standing contention that it had been fulfilled on 19 December 2007. It must be said that that contention was absurd; and there was no real attempt to make it good in advocacy before me. 135 Notwithstanding these demands BBA was free to act, as it always had been, by making an assessment of its own interests in deciding whether further agreements would be entered into to acquire the Village and the Manor. Mr Tyndale and Ms Ku continued in that direction, proceeding to complete the CAR to obtain sufficient funds for completion; and sent it to Mr Topfer for approval. This CAR incorporated the modified structure of proposed loan agreements which Mr Klendjian was prepared to approve in his endorsement of the CAR; this differed significantly from the Loan Agreement document as drafted to 19 December 2007, which would have required to be redrafted. Further it would have been necessary that a subsidiary of CAGCare Pty Ltd be formed and introduced as the lender. If there had been an internal approval of the CAR, redraft of the Loan Agreement and other steps would have been necessary before the conditions of approval could be complied with. However Mr Topfer did not ever reply. He left Ms Ku and her CAR unanswered, from which I infer that he decided against approval at some time early in July 2008. 136 On 9 July 2008 the plaintiffs commenced the present proceedings, claiming specific performance, again without producing Schedules or making any other concrete contribution towards making specific performance possible. The parties moved from negotiations to the much more guarded and wary relationship between opposing litigants. With litigation the prospect that there would ever be agreement and fulfilment of the condition precedent vanished forever. BBA was not in all practicality going to commit a lot of capital to an incompletely defined purchase from someone who was suing it. The Court responded with alacrity, appointing a hearing for four days to commence on 11 August 2008, but the plaintiffs were unable to proceed then and after some debate before Rein J the hearing was adjourned. Meanwhile of course the transfer date which DOHA had agreed to extend to 15 July 2008 passed. After the "long stop" date provided for by the APPA as varied passed on 31 August 2008 CAGCare gave notice of termination, stating that clause 2.1(b) had not been satisfied, and demanded return of its deposit. The plaintiffs replied, asserting that the termination did not take effect but constituted a repudiation which was not accepted, and again demanding performance. The plaintiffs demanded performance by BBIPL of its Performance Guarantee obligations on 29 September 2008, one day before the last available day. On 9 September 2009 the plaintiffs stated they accepted the repudiation and withdrew the claim for specific performance. Since then the plaintiffs' principal claim has been for damages. 137 In my finding BBA remained sincerely attached to the project of acquiring Blue Hills Village and Manor until a very late stage; the first indications that BBA's enthusiasm was waning came only on 11 June 2008, and before then there were no such signs. This intention survived the events in February 2008 where it became clear that BBC would not be the purchaser; this turn of events led BBA and its officers, the team led by Mr Tyndale including Ms Ku, to direct their attention to holding and warehousing the asset until BBC was disposed to take it. This involved BBA in a new need to finance the project for a significant period. There were clear prospects of large economic advantages for BBA, and also for Ms Ku and Mr Tyndale, if the contemplated transactions ended successfully. Until the litigation in July Ms Ku remained sincerely attached to furthering the project, and gave detailed and close attention to the project and to obtaining CAR approval. BBA's pursuance of the business was sincerely intended; but not to the exclusion of any adverse commercial consideration which might emerge. 138 Intense attention was given to understanding and if possible overcoming the perceived CGT problem when noticed early in April 2008. The perception that there was a risk that $24 million of the money laid out would not be included in the cost base calculation, increasing liability for capital gains tax by many millions of dollars, would have brought consideration to a quick end if there had not been strong attachment to the project. I find that the detailed attention given to the CGT problem was genuine; indeed there was no evidence that the conduct of that business was not sincerely intended. 139 Mr Topfer was not an officer of CAGCare, and was to make a decision on behalf of BBA which had no contractual obligation. BBA was in a position of commercial risk and commercial interest which Mr Topfer was wholly at liberty to weigh up. By the end of June 2008 BBA was receiving combatively expressed demands for completion of the transaction, on documents which had not been settled, and the demands were not reasonably accommodated to the difficulties and to what needed to be done to comply. This is hardly likely to have moved BBA in the person of Mr Topfer to decide to enter more deeply into the relationship or to commit large sums of capital to it. 140 What the reasonable commercial endeavours in clause 2.2(a) are to be directed towards includes fulfilment of condition precedent 2.1(b) and entry into the agreements which would fulfil clause 2.1(b): that is, agreements on terms acceptable to CAGCare (and also to BHVLM). The obligation to use reasonable commercial endeavours is not an obligation to find some terms which are acceptable. It is plain, and the language of clause 2.2(a) in my reading recognises that reasonable commercial endeavours might be made but that the outcome might not be achieved. 141 Counsel gave me extensive references to case law in which obligations to exercise best endeavours, reasonable endeavours and similar expressions had been considered. These are not terms of art and can only be applied in relation to the contractual document in which they appear, the acts and events with which it deals and the object to which the endeavours are to be directed. In Cl 2 there is the word "commercial" which I have not seen in any of the case law cited. "Commercial" excludes any conduct which is not commercially motivated, and limits the field of action so as to exclude personal antipathy or other considerations which are not commercial in character. The obligation to use reasonable commercial endeavours is an obligation not to act capriciously, not capriciously to omit to act and not to act without some sound reason. The endeavours are commercial endeavours; as always in commerce, commercial endeavours are endeavours in pursuit of one's own interests; perhaps interests shared with others, but still one's own. The limits of reasonable commercial endeavours involve a judgment about what one's commercial interests are. The obligation is more qualified than an obligation to use best endeavours, or reasonable endeavours; but such obligations do not take the actor out of an entitlement to consider his own interests. I have been assisted by discussion in Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41 at 143 – 144 (Dawson J). As Dawson J said at 144 of "best endeavours": "Clearly that leaves room for a balancing of interests and does not require the elimination of any conflict." 142 If the terms available were not acceptable to CAGCare for a commercial reason, or there are no acceptable terms, not entering into transaction documents was not a breach of clause 2.2(a). Deciding against the transaction for reasons of spite, antipathy or some other reason extraneous to commerce would produce breach of clause 2.2(a); deciding against agreement, or not reaching the point of decision for a commercial reason would not breach the obligation. 143 The condition precedent and the reasonable commercial endeavours obligation are not interdependent; if there was a breach of the reasonable commercial endeavours obligation the consequences are damages; the condition precedent has effect nonetheless. If CAGCare had prevented the condition precedent from being fulfilled by intended action or deliberate breach of some other contractual obligation for that purpose, reliance on the condition precedent might not be available to CAGCare. Nothing in the facts could support that outcome. 144 In my finding reasonable commercial endeavours did not require CAGCare to press BBA to allocate capital without making the modifications to the Loan Agreement and related documents which Mr Klendjian had decided, after full consideration, were appropriate. 145 Even if it had been established that there had been a breach of clause 2.2(a) such breach had no effect on the course of events and on not entering into agreement. Until 24 and 26 June 2008 when DOHA's decisions became known, and until the condition precedent in cl 2.1(a) was fulfilled entry into agreements would achieve nothing. When DOHA's approvals became known CAGCare and BBA in the person of Ms Ku were in a high state of activity leading towards obtaining a commitment of capital by BBA. CAGCare had no capital of its own and the primary commercial endeavour required of it was to seek commitment of capital by BBA. Although many expressions by plaintiff's counsel and witnesses appeared to assume that BBA was bound by clause 2.2(a), that is plainly not so; the reasonable commercial endeavours obligation bound only CAGCare. Ms Ku made a whole-hearted and thorough attempt to obtain the commitment of capital, and her CAR was supported by a number of other persons within BBA's organisation by the time it was submitted on 30 June; and her activity in support of it continued afterwards. It was not successful, and without a commitment of capital it could have been commercially deranged for BBA, CAGCare or any other company and perilous for their directors to enter into any agreements. 146 The plaintiffs' senior counsel observed on the events of June 2008 that nothing in them indicated that there was any relevant matter of disagreement, controversy or dispute between the parties. Quite to the contrary, the CAR included a significantly modified form of proposal and agreement; if it had been approved further negotiation would have been required, and if this modification had not appeared in the CAR there would have been no prospect of approval, as Mr Klendjian would not have agreed and his agreement was a practical necessity. 147 The plaintiffs' senior counsel put forward very detailed analysis of the manner in which the business of the Group was managed from time to time, and of the points at which he contended there had not been reasonable commercial endeavours. The need to obtain involvement and commitment of BBC was an overwhelming realistic consideration, known to both parties by and before 19 December 2007. When BBC was known not to be interested, consideration of other means of financing the transaction and completing it was well within the scope of reasonable commercial endeavours; and there was time to pursue them while DOHA considered the application. Ms Ku's attention, when this development emerged, to other ways of progressing the transaction was an exemplification of reasonable commercial endeavours, not a breach of such an obligation. Intense and detailed consideration of the CGT problem was an exercise of reasonable commercial endeavours; it was necessary to undertake this in support of the essential project of obtaining a decision by BBA to commit capital. The plaintiffs joined in the endeavours to find a resolution to the perceived CGT problem. This consideration required inquiries to a number of people, resources which cost money, outside advice and detailed attention to modifications of what had earlier been considered, if some acceptable outcome was to emerge. Another course which could have been taken was to treat the prospect of a large Capital Gains Tax liability as a complete obstacle to be receded from, not an obstacle to be negotiated. In my judgment it would be incorrect to treat all this attention as not consistent with reasonable commercial endeavours. However if it is the correct view that the only commercial endeavours which should have been under consideration related to the transaction documents in the form which they took on 19 December 2007, that view would have required that when the CGT difficulty was perceived, internal approval should have been refused. 148 I am satisfied that there was no breach of cl 2.2(a) at any time. As CAGCare has incurred no liability, the first defendant BBIPL has incurred no liability under the Performance Guarantee. BBIPL's indemnity liability is co-extensive with CAGCare's liability. The machinery requirements relating to a demand in Clause 2.2(a) have a practical effect of limiting BBIPL's liability to an amount demanded in a written demand, which could only be made within a period which closed on 30 September 2008. A demand in fact was made on 29 September 2008, but has no effect. 149 Ms Ku referred to the transaction at one point in a draft CAR (T 273.1 - .3, 274.14.18) as an option. This was a passing reference, not an expression of an overall view held by her or BBA of the transaction, and she behaved in relation to the transaction as if she had a strong commitment to it. From the point of view of CAGCare and of the obligation of CAGCare, it was not an option. From the point of view of BBA, which had no contractual obligation about whether or not it would decide to furnish CAGCare with capital, the transaction could only proceed at the decision of BBA: this could be called an option. 150 The loss and damage alleged to flow from each of the three representations (see C46, 53 and 60) is that "the plaintiffs lost the opportunity for seeking alternative purchasers of the retirement Village and Manor in a falling market" and also consultants' costs of entering into and performing obligations under the APP agreement. In view of the terms of the representations alleged and the times when they were alleged to have been made I understand they allege an opportunity lost on 19 December 2007 when the APPA was entered into. Mr Tulich also spoke in evidence of a lost opportunity to return the property to the market at some stage in the first half of 2008; he said that the effect of this was not available to him because of his exclusive dealing obligation. The exclusive dealing obligation was accepted in the Heads of Agreement and was not imposed on 19 December 2007. 151 BHVML was contractually bound to CAGCare by the APPA which could not be completed without DOHA approvals, and provided the period to 30 June 2008 for those approvals to be obtained, soon extended by agreement to 31 August 2008. If the Partners had changed their course before then and withdrawn from dealings with BBA and sold or attempted to sell the Village and Manor to someone else they would have precipitated a breach of contract by BHVML. Further, the exclusive dealing provision in the Heads of Agreement bound the Partners and as a practical matter could not be departed from by BHVML. Mr Tulich was aware of this and said so in his evidence. Any alternative course to continuing to deal with the defendants would have involved the plaintiffs or some of them in breach of contract and possible liabilities. With these disincentives to alternative action it should not be found that the conduct complained of, if it was misleading or deceptive, caused the plaintiffs or any of them to lose any opportunity which was practically available to them, or to incur any loss which they had a real opportunity to avoid. 152 If the disappearance of the possibility that the proposed arrangements would ever be entered into and the proposed sale would ever be completed is conceived of as a loss to the plaintiffs, or as damage to them, which I do not accept, the loss and the damage arose out of events which, although they could not be foreseen in detail, could be clearly contemplated as possible outcomes of the complicated arrangements which the parties made, and proposed to make, by 19 December 2007. In terms of the APPA, possible outcomes in which all internal approvals would not come into existence within the time extended to 31 August 2008, given the complete control which each party had over the existence of internal approvals, and over the step of entering into executed agreements stipulated in the Heads of Agreement, were perfectly obvious at all times, and neither party had any right to feel aggrieved or even surprised if some such outcome occurred. An analysis in which the plaintiffs suffered loss or damage by any representation made to them by Mr Velez or Ms Ku or otherwise on behalf of the defendants, and that the loss or damage was the result of misleading or deceptive conduct in which the defendants engaged, is a wrong analysis. 153 It is my conclusion that the plaintiffs did not suffer any loss or damage at all, whether or not caused by conduct, representations or misrepresentations of defendants. The end result contemplated simply did not emerge. The Heads of Agreement made it clear that there was no intention to enter into legal relationships except with all relevant internal approvals and on exchange of executed documents. These things did not happen. There was no contractual obligation to make them happen. There was no misleading or deceptive conduct causing the plaintiffs to act on the basis that they would happen. The outcome, while not one that anyone expected or desired, was readily foreseeable; no contract was made apart from the APPA and that had no relevant effect because its condition precedent was not fulfilled. 154 Evidence relating to damages was led at the hearing but I deferred consideration and submissions in detail of damages, as I intended to take this up, as necessary, after coming to conclusions on liability. 155 Although the pleadings allege breaches of Clauses 2.2(b) to (e) relating to the conduct of the application to DOHA for approval with a transfer these allegations were not developed at the hearing and no basis for them was shown. The plaintiffs in their pleadings claimed that there had been a breach of the implied term requiring the contracting party to do all such things as are necessary on his part to enable the other party to have the benefit of the contract; see Secured Income Real Estate (Australia) Limited v St Martins Investment Pty Limited (1979) 144 CLR 596 at 607-608 (Mason J), Mason J's observations show the implication is readily made to support performance of a fundamental obligation, and may in some circumstances be made to entitle the other contracting parties to a benefit although not fundamental to the contract. It is not possible in the present case to identify a fundamental obligation, or any obligation to which the implied term could be said to be ancillary. It was not a contractual obligation of CAGCare to bring about completion of all the contemplated transactions; quite otherwise, CAGCare itself was not obliged to take the Allocated Places unless the condition precedent was fulfilled, and CAGCare's part in fulfilling it was no higher than using reasonable commercial endeavours. In my opinion the plaintiffs cannot rely on the implied term. 156 For these reasons I will give judgment for the defendants, with costs. CAGCare is entitled to the deposit and interest, and I will make a declaration and directions accordingly. 157 ORDERS: (1) On the plaintiffs' claim, give judgment for the defendants with costs. (2) On the cross-claim, declare that the cross-claimant CAGCare Pty Ltd is entitled to the deposit of $400,000 and interest thereon paid on 19 December 2007 and held as stakeholder by Osbornes lawyers pursuant to clause 4.2(d) of the Allocated Places Purchase Agreement. (3) Direct that the cross-defendant Blue Hills Village Management (Liverpool) Pty Ltd direct Osbornes Lawyers to pay over the deposit and interest to the cross-claimant. (4) Order that the cross-defendant pay the cross-claimant's costs of the cross-claim. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.