WRIGHT v ANZ

THE COURT: The proceedings between the parties before Hunter J in the Commercial Division and in this Court mark the final breakdown in the relationship between the Wright family and the Bank and its predecessors which lasted for more than 150 years and had survived droughts, floods, depressions, booms and World Wars. The Wright family had been involved in pastoral pursuits in northern New South Wales since 1827.

In November 1996 the Bank commenced proceedings against seven companies (the group), Mr Phillip Wright (Mr Wright), who controlled the group, and his wife (herein the Wrights). The Bank sought judgment for its debt and judgment for possession of the nine properties owned by the group in the New England district which aggregated some 50,000 acres of freehold and 5,000 acres of leasehold. The Wrights had also owned Boonaldoon of 36,580 acres west of Moree, and a half share in Kindon of 120,000 acres in south west Queensland. Boonaldoon and Kindon were sold prior to the commencement of proceedings.

The proceedings were defended, but by the end of the 35 day trial concluded the only outstanding issues were those raised by the Wrights’ cross-claim. These centred on representations said to have been made on behalf of the Bank at a meeting on 30 June 1988 (the 30 June conversations) and confirmed by conduct until 1992. Causes of action in equitable or promissory estoppel, under s 52 of the Trade Practices Act , and in negligent misrepresentation (the representation case) were pleaded in the amended cross-claim and litigated. The Judge dismissed the cross-claim and entered judgment for $40,778,300 and for possession of the properties in favour of the Bank. The Wrights appealed and again pressed the representation case, the other pleaded claims being abandoned.

The cross-claim did not plead any cause of action in contract. In April 1998 some months before the trial the possibility of an amendment to raise such a claim was canvassed at a directions hearing, by counsel for the Wrights, but not pursued. On the eighth day of the trial a draft further amended cross-claim was handed to the Judge by senior counsel then appearing for the Wrights and leave to amend was sought. The proposed amendment pleaded “an ambulatory agreement” based on the conversations of 30 June and breaches commencing in mid-1992. A different amendment was sought in a draft tendered on the twenty ninth day of the trial. This alleged that as a result of the 30 June conversations the Bank had an implied contractual duty to act reasonably in the exercise of its rights, and breaches of that duty commencing in January 1992.

The last application for leave to amend was made on 11 November 1998 after the trial had finished in a draft included in final submissions by the Wrights. The draft alleged that each of the contracts and security documents relied upon by the Bank contained an implied term that any right or power conferred on it would be exercised reasonably (the contract case). Breaches were alleged between mid-1991 and mid-1996 in that the Bank refused to permit the Wrights’ facilities to continue after 21 June 1991 and refused to fund the group’s working capital requirements. The earlier amendments were abandoned.

The issues in the contract case were dealt with in written submissions. The Judge considered the amendment in his reserved judgment and refused it. The Wrights’ appeal also challenged the Judge’s decision on the contract case. The 30 June conversations involved Mr Wright, his son David Wright, and Mr Punch on behalf of the Bank and they formed the foundation of the representation case and were also relied on to support the contract case. The contents of these conversations were in dispute but no contemporaneous written record had been made or kept by the parties. There was a suggestion that a second bank officer, who could not be identified, had been present and had kept a note but if so it had not survived.

The Bank had conducted an annual review of the Wrights’ banking arrangements in November 1987. This was documented in a credit memorandum of 4 December signed by Mr Meers, Senior Manager Corporate of the Bank, who had overall responsibility for the accounts. The Bank refused to grant additional facilities to the Wrights for stock purchases but this was to be the subject of an interim review before 30 April 1988. The memorandum referred to Mr Wright’s “bullish outlook” and summarised his business strategy which was to continue building up the livestock on the group’s properties (3/89). The Bank suggested that he re-think his strategy and reduce borrowings by an early reduction in stock numbers. The interim review would also re-examine his strategy (3/91).

The Judge referred to the extraordinary paucity of Bank records for the first six months of 1988, but there was an interim review variation of 20 May signed by Mr Meers (59/199) which authorised a temporary increase in accommodation of $500,000 until 31 July. This was “to meet customer’s requirements to acquire additional cattle. Mr Wright is currently overseas. On his return in early June … an interim review has been requested at which time future strategies and cash flows will be reviewed”.

Mr Punch had been involved with the Wrights’ accounts between May 1986 and May 1987. On 10 June 1988 he became a Senior Corporate Banking Manager and took over the accounts previously managed by Mr Meers. Between 27 June and 1 July he visited his major customers - Namoi Cotton at Wee Waa, the Vickery family at Tamworth, and the Wrights in Armidale. The principal reason for these visits was to reintroduce himself after his absence.

Mr Nicholls, the Wrights’ employed accountant, wrote a letter to Punch dated 27 June (4/62) which enclosed a copy of the group’s financial statements and livestock returns for May. He apologised for being unable to be present at the meeting on the 30th. The letter bears a handwritten note “Recd 30/6” with what appear to be Punch’s initials. We may infer that the letter was given to Punch at the meeting because he had left Sydney by car on the 27th. The statements and returns are in evidence, as are those for June (53/8, 58/13). The June statements must have been handed over at the meeting. David Wright also produced a “Herd Structure Gross Margin Analysis - target 20,000 breeders” DAW 1 (47/5, 53/5).

DAW 1 projected a steady build-up of the group’s breeding cows from 7,933 at that time to a peak of 14,997 on 1 July 1994. It also projected sales of livestock in the 1989, 1990, 1991 and 1992 financial years of $2,594,269, $2,846,478, $2,107,773 and $2,881,058 respectively before a major increase to $5,496,829 in the 1993 year with similar figures projected thereafter. There was no reference to other income, outgoings, nett cash flow, or profits. As at 30 June 1988 the group owed the Bank $10,885M, a significant increase from $2.2M in 1983, but modest compared with the debt of $32.6M on 21 June 1991.

The Judge noted that the evidence of Mr Wright and David Wright of the 30 June conversations was “extremely lengthy and detailed” (red 76), while Punch’s recollection was “quite limited” (76). Punch said that there had been no mention of a 10 year plan or strategy which involved the building up of the breeding herd on the Wrights’ properties. The corollary was that no assurances of Bank support of the kind alleged by the Wrights had been given. The Judge found that the Wrights “endeavoured to give their evidence truthfully” (76). He also had no doubt that at this meeting the Wrights disclosed to Punch a major change in their grazing operation which involved building up the group’s breeding herd from some 8,000 to 20,000 head over a 5 to 10 year period (76, 96), but said that no criticism of Punch’s credibility was to be inferred.

He made a number of significant comments on the Wrights’ evidence about the 30 June conversations. He concentrated on the substance and not the detail of their evidence (77, 95). He noted that Mr Wright’s account of the 30 June conversations in his statement of 2 March 1988 ran to 12 pages and contained more detail than his affidavit of 19 November 1996. David Wright’s statement of 2 March included 10 pages covering those conversations. The Judge said that “the detailed nature of their recollections of the content of this discussion presents something of a challenge in the absence of any contemporaneous record in the form of minutes that may have assisted the exercise” (96-7).

He said that the statement attributed by David Wright to Punch that the Bank wanted to support the family in the growth of its enterprise as this would be beneficial to both parties was difficult to reconcile with the internal memoranda of the Bank over the previous 12 months (100). It is particularly difficult to reconcile with the Bank’s refusal the previous October to allow increased borrowings for cattle purchases. The Judge described DAW 1 as “basic” (98), and David Wright’s discussion of it as “simplistic” (99, 101) and commented that Punch “with some justification” had pointed to the improbability of him giving the undertakings attributed to him on the strength of such a document (101). The Judge made further findings as follows: “I am also satisfied that, in brief outline, [the] strategy was explained to Punch, much along the lines evidenced by David Wright. I am also prepared to accept that Wright sought the Bank’s support for this programme in the sense that the Bank understood the plan which the Wrights were contemplating. In that context I accept that he referred to the possibility that unseasonal conditions and other trading vicissitudes could require temporary financial assistance from the Bank. I am also prepared to accept that Wright informed Punch that [they] would not follow this course without Bank approval” (102).

The Judge said that Mr Wright was keeping the Bank informed of significant management decisions. He found that the Wrights obtained the general imprimatur of the Bank for the change in the group’s commercial strategy to the point where the group could confidently anticipate the provision of loan funds by the Bank, upon acceptable commercial terms, to facilitate the implementation of that strategy; that blips of financial set-backs would be met sympathetically by the Bank in the provision of adequate working capital and concluded, with some emphasis, “but no more than that” (106). He continued (107): “If one has regard to a) the circumstances in which the June meeting was held, … b) the absence of any forewarning to the Bank of the group’s strategy outlined by the Wrights at the June meeting; c) the absence from that discussion of any dollar figures which could have given any inkling of the magnitude of the increased indebtedness that the Wrights may have had in contemplation; d) the simplistic nature of the financial analysis presented by David Wright at the June meeting; e) the very concept in that analysis of a gradual breeding herd build-up from natural increase on the group’s existing holding; f) the magnitude of the commitments later undertaken by the group, I think it flies in the face of reality to construct on Punch’s statements at the June meeting a case of reliance sufficient to found an equitable estoppel against the Bank in relation to those commitments”.

The Judge considered the later conduct of the parties to see whether it was of assistance in determining what had occurred at the meeting. Later that year the Wrights sent the Bank a detailed cash flow budget for consideration at the annual review. On 20 October Nicholls forwarded adjustments by facsimile which included a schedule of livestock numbers said to be of possible “assistance in the assessment of the current livestock plan”. The stock schedules and cash flow budget showed total livestock sales of $5,079,210 and purchases of $2,029,500 (4/10). The projected sales included cattle to the value of $4,633,310 (4/8). DAW1 presented at the meeting on 30 June, only a few months earlier, had projected cattle sales for the 1989 year of only $2,594,269.

An alternative budget dated 19 October showed cattle purchases being brought forward from May 1989 to November 1988 (4/82) but the same figure for livestock sales. A lengthy diary note dated 21 October signed off by Punch and Armstrong recorded a visit by David Wright that day to seek increased funding of up to $2.1M as provided for in the cash flow budget, reducing between January and June to $1.1M. An increase of $1.7M was approved until 31 December. The diary note did not refer to any long term strategy or to the meeting of 30 June.

Wright gave a detailed description of the events at the annual review on 23 November. The Judge accepted the substance of his evidence but not the detail as this “would be beyond normal recollection” (113). The review was the subject of an 8-page diary note by the Bank (4/74). This referred to a debt reduction programme which would result in total debt falling by $2,231,000 at year end. The agreed budget provided for livestock sales of $5,123,370. Under the heading “Strategy” the diary note recorded: “Now that full stocking levels have been reached the group will … be in a position to rely upon natural increases for restocking of cattle herds”.

The last page stated “Mr Wright is now in a position to capitalise on his strategy of building herd numbers”, and contained two references to the proposed debt reduction. There was no reference to any long term strategy or to the meeting of 30 June.

In January 1989 the Wrights moved to full ownership of Melrose Meats, a Brisbane abattoir, and Armitage was advised of this by telephone on 25 January. The call from Mr Wright is documented in a diary note of that date (4/101). The acquisition of slaughtering facilities had been part of the Wrights’ strategy mentioned in the 30 June conversations, but this diary note did not refer to any strategy or to that meeting. Armitage had not been present at that meeting and could be expected to refer to the 30 June conversations if they had been mentioned by Mr Wright.

On 31 January a letter recording the facilities agreed at the annual review was sent to the Wrights by Punch (4/106). The letter indicated that overdraft accommodation of $200,000 had been granted until 15 March, and that a terminating bill facility of $1.3M had been extended to 30 June 1989 “with a repayment arrangement to be discussed prior to maturity”. There was no reference to any long term strategy, or to the 30 June conversations. The documentary evidence between January 1989 and June 1991 contained occasional references to the Wrights’ strategy but no reference to the 30 June conversations.

The Judge found that the subsequent conduct of Mr Wright could not reasonably be equated with the 10 year plan outlined during the 30 June conversations, although it reflected a general strategy of expansion. He thought that, according to the plan, the proposed acquisition of backgrounding properties and entry into a major supply contract would have occurred late in the 10 year period after the build-up of the breeding herd had been completed (103). Mr Biscoe SC, senior counsel for the appellants, criticised this finding, and the further finding (114) that the group’s involvement with Melrose was “well outside the group’s representation case”. We read this as a finding that the Wrights did not rely upon the Bank or the 30 June conversations in increasing their investment in Melrose. So understood the finding, in our judgment, was clearly correct.

The most important reference to the Wrights’ strategy was in a credit memorandum dated 9 September 1991 prepared by Armitage shortly after Punch had ceased to have any contact with the group’s account. The memorandum relevantly stated (79): “ Recent History of Developments To appreciate the current circumstances which are having an adverse impact on the financial position of the client it is considered appropriate to provide a history of our relationship and what is currently driving David Wright to achieve his ultimate goal of [the group] being a very large fully integrated “cattle factory” with close liaisons with major players in the beef industry worldwide. Pre 1988 Family history is well documented at BIR previously placed on file. During 1988 the P A Wright & Sons Pty Ltd Group (PAW) was looking at opportunities to reduce the impact of adverse seasonal conditions and the increasing influence that offshore markets were expected to have on Australian beef producers. At that time PAW was a very well respected, highly influential and successful farming enterprise with operations revolving around the family properties and the Hereford stud here as well as the “Beefmaker” breed developed by PAW. 1988 Cognisant of the foregoing the total herd structure of PAW, comprising some 20,000 head, began to be altered. This change was to move away from being principally a cattle fattening operation to a breeding operation capable of producing 25,000 head pa and thus becoming a major force in not only the beef industry in the New England area but nationally. The long term plan was for a fully integrated cattle breeding fattening and killing operation capable of supplying a high quality product for end users in the domestic and export markets. Projected timing for completion of this change in structure was four years and PAW is nearing optimum herd numbers at present. The projected herd size including retention of cattle fattening capacity to provide cash flow for operations, necessitated the acquisition of not only additional cattle, but substantial landholdings”.

The memorandum shows that the Bank was aware of Mr Wright’s long term plan, but it contains no indication that they were aware that the Wrights claimed that it had been underwritten by Punch in the 30 June conversations, or that he had purported to give any commitments binding the Bank. Armitage gave this evidence about the sources of the information in that credit memorandum (79): “The information which I recorded under the heading ‘Pre-1988’ in the credit memorandum, reflected information which I had gleaned from the file and from my discussions with other accounts officers concerned with the accounts and perhaps from the Wrights in relation to that period. The information recounted under the heading ‘1988’ was partly from the same source and partly represented what I had learnt when I first became acquainted with the accounts in early 1989 and I was furnished with the herd restructuring program going over some four years. The reference to that project being timed for completion in four years, reflects the period which was included in the herd restructure spreadsheets which were shown to me in early 1989. The number of cattle and the proposed number for production set out in this paragraph represent the figures which I believe were first given to me (at least approximately) in early 1989”.

On 21 June 1991, when the group’s total debt to the Bank stood at $32.6M, Punch sent an urgent fax to Mr Wright which outlined the Bank’s concerns and required repayment of a temporary overdraft of $2M by the stipulated expiry date of 30 June (6/268). On 25 June Mr Wright called on Punch and Vaughan at the Bank for a “full and frank discussion” which was recorded in summary form in a diary note (6/271). As a result the Bank agreed to extend the date for repayment of the temporary overdraft. There was no reference in the diary note to the 30 June conversations and Mr Wright did not claim in evidence that he had referred to them. In an internal memorandum of 3 October 1991 Armitage wrote (10/152): “The relationship with this long standing group has become severely strained due to our inability to come to grips with the factors that influenced the substantial change in the direction of this group. This change in direction/strategy commenced in 1988 and the full impact of those changes were not fully understood by the Bank”.

Mr Armitage had not been at the meeting of 30 June and had not been made aware that it was of any importance but the change in direction/strategy referred to was obvious and was reflected in the very great increase in the Bank’s debt.

The breaches of the implied term relied on in the contract case, as particularised in this Court by Mr Biscoe included the following: “2. 21.6.91 and During the drought requiring reduction of thereafter overdraft from $4 million to $3.5 million by 15.11.91 and to $2.5 million by 31.12.91 other than out of surplus cashflow 3. 26.3.92 and During drought requiring reduction of thereafter overdraft from $3 million to $1.3 million by 31 October 1992 other than out of surplus cashflow 4. 11.9.92 and During drought requiring reduction of overdraft thereafter to $2 million by 31.10.92 other than out of surplus cashflow 5. Late 1991 Further or alternatively to 2-4, failing to capitalise -93 interest during drought 6. 26.3.92 and Requiring sale of assets thereafter 7. 21.10.92 During drought introducing and maintaining the and 50-50 arrangement where half gross income went thereafter in reduction of bank debt and half towards payment of essential creditors”.

These “breaches” were also relied upon as unjust departures by the Bank from assurances given by Punch in the 30 June conversations on which the Wrights claim to have relied. However at the time they failed to provoke any claim from the Wrights that the Bank was going back on any such assurances.

On 2 February 1996 the Bank wrote to the Wrights (21/326) demanding payment of an interest instalment of $242,934.34 due on 5 February. It was not paid on the due date and this default triggered further demands of 6 February for payment of the overdue interest by 8 February (21/328) and of 9 February (21/329) for payment by 13 February of the overdraft of $5,965,322.61.

The demand dated 2 February provoked a 36 page letter from Mr Wright dated 6 February (1/307), which was settled by senior counsel (not Mr Biscoe). It gave their version of events since 1990, and made a number of claims based on the conduct of the Bank. It did not refer to the 30 June conversations, and did not assert that the Bank had acted, or was acting, contrary to assurances given by Punch during those conversations. The Wrights first relied on the 30 June conversations in Mr Wright’s affidavit of 19 November 1996, but this was more than 8 years after that meeting.

Mr Biscoe SC based his submissions in support of the appeal on the Judge’s finding that the Wrights had endeavoured to give their evidence truthfully, and claimed that his other findings involved an acceptance of the substance of their evidence. On this basis the Court was invited to conclude that the factual basis for the representation case had been established. We cannot accept these submissions. The Judge’s finding that the Wrights were honest witnesses must be respected, but he did not make any general finding that their evidence was reliable. His repeated statements that he had concentrated on the substance of their evidence rather than the details explains his finding that the Wrights were honest, but is not a finding that the substance of their evidence was reliable.

It is clear that the Judge did not find, and did not intend to find, that the Wrights’ evidence about the 30 June conversations was sufficiently reliable to support their representation case. He said (77): “The approach I have adopted, to such detailed evidence by the Wrights of unrecorded conversations which took place several years ago is to ascertain the substance or thrust of those discussions rather than to accept as reliable the details of those discussions”.

His crucial finding already referred to (106) was that the Wrights obtained the general imprimatur of the Bank for their new strategy to the point where they could confidently anticipate the provision of additional loan funds on acceptable terms and that financial set-backs would be dealt with sympathetically, “but no more than that”. This involved the rejection of their evidence about the commitments given by Punch during the 30 June conversations and their evidence that they had relied on them. That finding, without more, was really the end of the representation case.

On 16 May 1990 the Wrights purchased Boonaldoon for $14M which was fully funded by the Bank. Its decision to lend this amount followed a detailed submission by the Wrights supported by 10 year budget projections on a stand alone and group basis. On 11 April Armitage sent a facsimile to David Wright seeking additional information to enable the Bank to respond to the group’s application for funding for the acquisition. The letter sought additional budgets including combined P A Wright & Sons Boonaldoon - Worst Case Prolonged Drought Scenario. It acknowledged that a P A Wright & Sons - Worst Case Prolonged Drought Scenario budget had already been provided but stated that the combined budget was “necessary to progress the application” (9/236-7). It seems however that the worst case scenario budget that had been received was that which inflated costs by 5% a year and assumed unchanged income.

David Wright responded by letter on 17 April (9/238) which referred to “information that arrived previously” and stated that “the notes attached refer to each of these pages and explain how this budget was compiled”. An index of this material and explanatory notes (9/240-2) and the tables and schedules are in evidence (53/161-194). The letter referred to the risk of drought and stated that this would occur one year in five on a conservative basis, and could be met by planting forage oats as a winter crop and by the use of cotton seed as fodder. It seems clear that a combined budget - worse case prolonged drought scenario was not provided to the Bank (53/161-194).

On 17 April Punch prepared and signed off a 12 page credit memorandum which concluded by recommending 100% bank funding for the purchase of Boonaldoon (9/246). The memorandum dealt with the risk of drought. On page 10 it provided: “ Budgets - 10 Year Projections (PAW ) Additional to that provided at CM 15/3/90 PAW have undertaken an assessment of their possible performance given a prolonged drought situation and based on their peak carrying capacity through such a situation the total group also evidences debt servicing/amortisation capabilities inclusive of Boonaldoon” (emphasis supplied)

and on p 12: “Whilst it can be argued that in a prolonged drought situation property/stock values would reduce, thereby reducing the bank’s security ratios, it is proposed to make continued provision of facilities subject to maintenance of security/loan ratios of at least one hundred and thirty percent (130%) during the currency of facilities provided by the Bank. It should however be noted that PAW had provided 10 year projections based on average carrying capacities of existing operations as well as Boonaldoon (see comments elsewhere herein) and even in these circumstances interest serviceability is maintained and principal reductions achieved resulting in full clearance of Group borrowings within an eight year period. The Bank’s involvement is therefore assessed as safe”.

It seems from this memorandum, the fax of 11 April, and the letter of 17 April that the Wrights had undertaken some assessment of their position in a prolonged drought situation which was referred to in discussions with Armitage.

The Judge commented that favourable projections of this kind, even on a worse case basis, were common in the forecasts provided by the Wrights from time to time in support of increased facilities up to 1991. Expressions of Bank support for the group’s expansion should be viewed in the context of those favourable projections (128).

On 20 April Armitage signed off a diary note (9/266) which recorded the comments of Punch and himself on the response of the Credit Department (4/249) to their credit memorandum of 15 March (4/241). It contained the following comments on the drought risk: “Our discussions with client at annual review revealed that in a drought situation a fallback arrangement was achievable in the short term which allowed for the immediate sale of cattle and sheep to leave the principal Hereford and Beefmaker herds - residual herd numbers being sufficient to sustain the level of debt evident at commencement of drought situation” (9/267).

There is no reason for rejecting the accuracy of the statements about the risk of drought to the Wrights and the Bank made by Armitage in his memoranda of 17 and 20 April.

A further property, Thorpleigh, was acquired in September 1990 for $1.2M fully funded by the Bank with settlement on 21 November that year.

After reviewing the evidence about the events in 1990, the Judge found that the decisions taken that year by the Wrights were consistent with the general thrust of the strategy revealed in the 30 June conversations but “in no realistic sense” were they made in reliance on those conversations. “The only real reliance was that which led the Wrights to look to the Bank for the required facilities … rather than some other institution” (119). This was another finding which involved the rejection of the Wrights’ evidence of their reliance on the 30 June conversations.

David Wright gave detailed evidence about the events at the annual review meeting in February 1990. The Judge accepted its substance but said “I think one has to be careful about the detail into which he goes, by reason of the fact that it relates to conversations that took place several years ago … of which he had no contemporaneous record” (123-4). He also had “some hesitation” in accepting that there was a reference back to the 1988 conversations, but said that to the extent that there was any such reference, it was in the nature of historical background (124).

Settlement of the Boonaldoon purchase on 16 May coincided with rapidly developing negotiations between the Wrights and Coles with a view to reaching agreement on a beef supply contract to Coles. On 10 June a detailed proposal was submitted by the Wrights (134). Agreement in principle was reached on the terms in Coles’ letter to David Wright of 31 July which contemplated an initial supply of approximately 500 cattle and 5,000 lambs per week as boned and boxed beef and lamb (139) although the arrangement for the supply of lamb did not proceed.

The impact of the new relationship with Coles on the group’s budget and existing arrangements with the Bank were discussed by David Wright with Punch on 1 August (140). The sale of steers to reduce debt by $5M, which had been provided for in the Bank’s facility letters of April, was abandoned as the stock would be needed to satisfy Coles’ requirements (141, 146). The group also needed substantial additional funding from the Bank (143, 146, 148). Further discussions between the Wrights and the Bank took place at an important meeting on 14 November 1990 (143), which discussed the group’s requirements for additional working capital (143).

The regular annual review took place on 27 February 1991 and was focussed on the group’s need for working capital in order to be able to fulfil Coles’ requirements. The Bank remained concerned about the precarious nature of the arrangement with Coles (161).

On 15 March 1991 Coles wrote to Mr Wright expressing dissatisfaction with the arrangement stating that “as from 2 weeks from Monday 18 March 1991 our company will cease purchasing boxed beef from your company”. Mr Wright advised the Bank of this development but the notice of termination was withdrawn shortly afterwards as confirmed by Coles’ letter of 4 April (161).

During the whole of this period the group were unable to provide reliable financial information to the Bank because of the difficulty in costing the product supplied to Coles. Punch’s diary note of 21 May 1991, which was confirmed by the evidence of David Wright, stated that the group had been unable to put in place an appropriate methodology for producing monthly accounts in the feed lot and this had held up the production of meaningful reports for the group.

Important meetings between the Wrights and the Bank took place on 27 May, 11 and 12 June, and 1 August 1991 (165, 167). The Judge had no doubt that the level of financial reporting by the group in late 1990, and during the first half of 1991, had been inadequate mainly due to the difficulties in identifying the costs to the group associated with the requirements of the Coles’ contract (168). Throughout this period the negotiations with Coles were continuing and this was still the case in November (176).

An important meeting between the Wrights and the Bank took place on 17 January 1992 which discussed the difficulties being faced by the group in the continuing drought conditions and the increased cost this had occasioned in the supply of beef to Coles. The Wrights were still pursuing long term arrangements with that company (178). The Judge was satisfied that the supply of boxed beef to Coles at that time was a losing proposition for the group (179). During early March 1992 a fixed term contract with Coles was still being negotiated (182). Finally on 1 April the group sustained a serious blow when Mr Wright was informed by Coles that it was “not prepared to proceed further with negotiations for the proposed boxed beef supply arrangement” (186). Shortly afterwards Coles forced a price reduction on the group from $4.75 per kilogram plus freight to $4.02 per kilogram delivered, which involved a substantial loss to the group over the ensuing 3 months while the arrangements with Coles were run off (187).

The Judge held that the events of mid 1990 demonstrated “the insignificance of the June meeting upon which so much reliance has been placed by the Wrights” (139) because the financial projections submitted to the Bank leading to the acquisition of additional properties and stock, including those on a worst case or conservative basis, were financially attractive both on a stand alone and group basis. An important meeting took place on 14 November 1990. Mr Wright and David Wright again gave extensive and detailed evidence of the discussions and again the Judge said that he accepted the substance of their evidence but doubted the accuracy of their recollection of the emphasis placed on the 30 June conversations or the group’s 10 year plan (144).

Mr Biscoe sought to obtain corroboration for the Wrights’ evidence of the 30 June conversations from the undisputed evidence of what occurred in the period up to June 1992. The events however are equivocal and the documents do not contain any clear support for the Wrights’ evidence as to the content of the 30 June conversations, or their reliance on them in their dealings with the Bank.

The Judge said that he had no cause to doubt the veracity of any of the witnesses on the basis of their presentation in the witness box but added “in the case of the Wrights I think their evidence of discussions in such detail challenged their actual capacity to recall events” (145).

The representation case failed at the trial because the statements which the Judge found were made by Punch during the 30 June conversations (106) were vague and general. They were not sufficiently clear to found an equitable estoppel (107), and the Judge was not satisfied that the Wrights had relied on those statements which he found to have been made, when making the decisions which resulted in the massive increase in the debt to the Bank (107), other than their decision to look to the Bank for the necessary finance rather than some other institution (119).

The appellants’ submissions on the representation case centred on the proposition that the Judge having accepted “the substance” of the Wrights’ evidence, erred in failing to find, consistently with that finding, that all the ingredients of an equitable estoppel had been made out. In our opinion the Judge’s judgment, properly understood, did not involve any such acceptance of the Wrights’ evidence. He explained what he meant by his acceptance of the substance of the Wrights’ evidence in his specific findings. These covered the content of the representations and assurances given by Punch (“the Wrights sought and obtained the general imprimatur of the Bank … but no more than that” (106)), and the “only real reliance” by the Wrights was that they were led to look to the Bank and not elsewhere for additional finance (119).

The substance of the Wrights’ evidence which the Judge accepted went no further. If the Judge had intended to find that representations and assurances had been made by Punch during the 30 June conversations along the general lines stated in the Wrights’ evidence, and in addition to find that they had relied on those representations and assurances during 1990 and 1991, he should have found that the representation case was made out, at least as at June 1991, but he found to the contrary.

Mr Biscoe’s principal submission invited the Court to reverse the judgment of the trial Judge because it was vitiated by a fundamental inconsistency between his finding that the substance of the Wrights’ evidence should be accepted, and his conclusion that the elements of an equitable estoppel had not been established. When due regard is had to the detailed findings earlier referred to, and his expressed doubts about the reliability of the detail of the Wrights’ evidence, it is clear that there is no such fundamental inconsistency. The reasons for judgment must be read as a whole.

No real attempt was made to challenge the detailed findings of the Judge. It was not asserted that those findings, particularly those involving the evidence of the Wrights, were not protected by the principles applied in Abalos v Australian Postal Commission (1990) 171 CLR 167, or that they were glaringly improbable, or even inconsistent with facts incontrovertibly established.

The Judge’s findings, properly understood in the sense indicated, are protected from appellate interference. The failure to raise the claims in the representation case over a number of years when the relationship between the parties was under strain, and again in Mr Wright’s letter of 6 February 1996 (1/307) when the relationship had finally broken down, would, in any event, have made findings in favour of the Wrights about the 30 June conversations glaringly improbable or even contrary to facts which were incontrovertibly established. The appeal against the rejection of the Wrights’ representation case must fail in the light of Judge’s factual findings.

The Judge found, as a further reason for rejecting the representation case that the failure of the group’s negotiations with Coles for a long term contract, together with the devastating effect of a severe drought commencing at the end of 1991 and continuing in varying degrees through to 1995, were responsible for the group’s desperate financial situation from 1992 onwards (140). He concluded that the Bank should not bear any responsibility to the group in respect of its dealings with Coles. He considered it quite unrealistic to attribute the group’s decision to embark on that venture to any reliance upon any support of the Bank other than in accordance with the terms of its facilities. He said that the 30 June conversations should not be treated as a foundation for that commercial decision and “no basis for the group’s representation case can be reasonably extracted from the evidence of the communications between the parties during 1990. In brief the group’s representation case, in my view, is unfounded” (149).

Particular findings which led to this conclusion included the following: the group’s involvement with Coles moved far too quickly for its financial health and it did not have its costs of supply to Coles under control (165); the Bank’s conduct did not cause any breakdown in supply leading to the loss of the Coles’ contract (184); none of the matters relied upon in the group’s case against the Bank had any measurable causative effect on the ultimate breakdown of the negotiations with Coles (204); the price increase to Coles in February 1992 insisted on by the Bank did not play a measurable role in the decision of Coles to terminate supply; and Coles remained unconvinced independently of that price increase of the cost benefits to it (220). He said (205): “… contemporaneous records were all one way in evidencing the basis for the breakdown of the negotiations as resting in the failure of the Wrights to satisfy Coles that their proposal had substantial cost benefits when compared with the supply of beef in carcass form”.

The Judge therefore concluded that if the group were permitted to run a loss of expectation case in contract, notwithstanding its failure to support that case by the filing of statements of evidence quantifying such loss, that claim would fail (225). The findings which underpin this conclusion depend partly on the Judge’s assessment of the documents, and partly on his assessment of the witnesses. The documents either support or are consistent with his findings which cannot be disturbed. The Judge noted that the Wrights’ evidence about their dealings with the Bank during the first half of 1992 when their relationship with Coles was at a critical stage was “difficult to reconcile with the records” (185, 186). The appellants’ written submissions on the Coles issues, which were based on the acceptance of the evidence of Mr David Wright and Mr Trinder, in preference to that of other witnesses from Coles, in particular Beattie and Maloney, failed to make any case for appellate interference with the findings of the Judge on those issues.

The Judge then turned to consider whether the Bank had acted reasonably in its dealings with the Wrights after June 1991. The Judge said that there was little or no room for criticising the conduct of the Bank after the termination of negotiations with Coles on 1 April 1992, particularly that aimed at debt reduction by the group, if necessary by a sale of some of its properties and livestock (187, 188-9). He found that the manner in which the Bank addressed the need of the group to dispose of assets during 1992 “was reasonable and consistent with the facility letter of 2 January 1991” (198). The Wrights had recognised the need to sell stock during a drought at the time of the 1990 annual review (9/267).

On 27 January 1993 Mr Jeffrey James, a partner of Ernst & Young who had been appointed to review the financial position of the group, reported to the Bank recommending the disposal of some of the group’s properties. The Judge found that thereafter “the Bank’s position was impregnable insofar as it sought a) to implement in an orderly way a rationalising of the group’s enterprise by the sale of selected properties with the object of reducing indebtedness to the bank; b) to control deterioration in the group account … by requiring the sale of livestock” (225-6). He further found that the Bank’s general approach to the reduction of debt fell squarely within its entitlement to enforce the terms of its facilities as documented in its letter of 2 January 1991 (226). He did not regard the sale of cattle during July 1993 as the result of any unreasonable conduct on the part of the Bank (230).

The Judge also found that the Bank’s treatment of the group account during 1994 was reasonable given the deferment of the sale of properties other than Kindon and South West Rocks and the increase in the overdraft facility of $1.2M allowed during the third quarter until 15 February 1995 (234). These findings are supported by statements in letters Mr David Wright wrote to Mr Daraius Bilimoria of the Bank during that year. On 8 May 1994 he wrote (14/161): “As you are aware, we have been pursuing a number of options to substantially reduce debt through restructuring the group’s assets which initiatives have been hampered due to the prolonged drought and poor market conditions ... With the Bank’s support, and despite the impact of drought and resulting impact on profitability, the enterprise is now one of the twenty largest beef cattle producers in Australia and arguably has the most fertile and productive herd”.

On 20 September 1994 he again wrote to Bilimoria enclosing draft copies of the 1994 financial statements for each entity in the group. He said (14/341): “Accumulated losses in recent years and subsequent borrowing levels have resulted in a situation where the gearing of the enterprise means it is highly vulnerable to movements in commodity prices, interest rates and the effect of drought. This fact has been apparent to both ourselves and the ANZ for some time. As a consequence, major asset rationalisation has already occurred and additional debt reduction is necessary for the enterprise to safely service its liabilities and reduce debt through normal trading activity … A decision taken in 1988 to move from a breeding and fattening enterprise to breeding only has seen growth in breeding females rise from 8,500 at the beginning of ’88 to 20,000 at the end of this calendar year. This decision made with the support of the Bank, forecast a reduction in cash flow whilst female offspring were retained to enable this growth to occur. This substantial increase in breeding females has not been without cost to the enterprise as during this period of herd growth the enterprise has experienced five years of severe drought. Not including the effect of reduced cash flow due to herd building, the drought has cost over $10,000,000 in lost profits due to feeding costs, deaths and reduced sale values through drought affected cattle weights and prices. Despite the effects of the drought and contrary to the majority of other cattle operations, P A Wright & Sons has been able to maintain very high fertility levels, achieve substantial market premiums for its livestock at the time of sale and has significantly increased the size of its breeding herd … The enterprise is now in a position to capitalise on its 1988 decision however we cannot emphasise more strongly our desire to reduce our level of debt … As already discussed, despite the reduction in cash flow through drought and herd building and its effect on profitability, the enterprise has completed its growth in breeding females and 1995 will see an additional 3,000 or a total of 13,000 head of cattle being sold”.

The Judge commented that David Wright’s statement about the condition of the group’s breeding herd in that letter “sits uncomfortably alongside a forced sale of females as a result of the Bank’s debt reduction requirements” (234), which was of course the claim being made on behalf of the Wrights during the trial. He made a similar comment about the following statement in a letter that Hudson wrote to Bilimoria on 10 November 1994, which forwarded revised cash flow budgets for November and December: “We should also point out at this time that despite some incidental losses as a consequence of the drought, we have been fortunate to have been able to maintain our breeding herd intact” (15/34).

Mr David Wright’s three page letter of 23 September 1994 to Messrs Yacoel and Bilimoria of the Bank stated(14/373): “We wish to sincerely thank you for the flexibility and support provided by the Bank during this difficult time … we cannot emphasise enough how grateful we are for the Bank’s understanding under the current circumstances … We assure the Bank we are determined to diligently pursue all possible avenues to reduce the level of liability … We understand the need to live within our limit and to reduce debt … We again thank you for your invaluable support and co-operation”.

The Judge said that it would be unreasonable to take “those statements literally” (235), referring perhaps to Mr Wright’s letter to Bilimoria of 25 January 1995, but probably to similar statements by David Wright in his letters of 20 and 23 September 1994 and Mr Wright’s earlier letter of 21 December 1994. It was no doubt appropriate to discount the expressions of gratitude conveyed in those letters, but there is no reason to ignore statements of fact about the state of the group’s breeding herd, or the implied acknowledgment that the Bank had been conducting the accounts in accordance with the terms of the facilities and the commercial arrangements.

In view of the continuing drought conditions during 1995 the Judge considered that the sale of livestock by the group after March that year was reasonable (238), and substantial sales during this period had been contemplated by Mr David Wright in his letter to Bilimoria of 20 September 1994 (above).

The appellants claimed that the Bank had acted unreasonably in restricting further credit, and requiring the sale of stock and properties in order to reduce debt. However there was no evidence that the Bank’s debt had been significantly reduced during most of this period. A revised bar chart in the Bank’s case (31/158) showed a modest reduction in total Bank debt in June 1993, followed by an increase in November which made the total debt higher than ever. The charts also show a substantial reduction in September 1994, followed by modest increases in November 1994 and May and August 1995, which partially reversed the September reduction.

In supplementary written submissions filed after the conclusion of the oral argument in this Court, the appellants sought leave to adduce further evidence dealing with the limits on the Bank’s facilities and the total debt on a daily basis between 21 June 1991 and 28 June 1996. The Bank did not object to this additional evidence which should therefore be received. Tables A, B and C cover the facility limits in force from time to time as notified to the group and demonstrate the existence of errors in the Bank’s bar chart (31/158). However these are only of marginal relevance.

The important material is in Table D, which sets out the daily balances. This too shows that the Bank’s bar chart contained errors, but the correct figures actually assist the Bank’s case. On 21 June 1991 the group’s limits totalled $28,800,000, but the actual balance of the debt was $31,517,405. The overall limit was increased to $30M on 8 December but the balance was then $31,052,929. The daily balances remained consistently above $32M after 3 September 1992, above $33M after 24 September 1993, above $34M after 19 November 1993, and above $35M after 7 February 1994 until the proceeds of the sale of Kindon were received on 28 April. During the whole of this period the so-called limit on all facilities granted to the group was $30M.

Following the sale of Kindon the debt was reduced to $30,370,334 and the limits to $24,693,000. The debt remained below $30M from 15 July 1994 to 3 October, but after 1 December it remained above $31M, after 1 February 1995 it remained above $32M, and it fluctuated between $32M and $34M until 4 January 1996. It then remained above $34M until 22 April 1996 when it fell to $29,607,773 following the sale of Boonaldoon. The actual debt was substantially in excess of the applicable limits throughout this period.

As counsel for the Bank submitted in its written submissions in reply, this material confirmed that the Bank’s various requirements for reductions in debt, through cattle sales if necessary, were not met and the actual total level of debt was not reduced until the sale of Kindon in 1994 (14/116). Cattle sales prior to that date were necessary to avoid the total debt level increasing even further.

There was much correspondence between the parties and within the Bank about facility limits and debt reductions, but not a great deal of debt reduction except on those two occasions when properties were sold. The total debt fluctuated, practically on a daily basis, throughout this period, as income was banked and cheques were paid, but such fluctuations do not assist the appellants’ case.

The Judge refused the Wrights’ application for leave to amend the cross-claim to add claims in contract. The proposed amendments (73-4) appear to raise claims for breach of contract by the Bank which sound only in damages. There was no application to amend the defence. There were many problems facing the Wrights in this application, not least the very late stage at which it was made.

The Judge disposed of the application by deciding that the Wrights had not established that the group had suffered expectation losses which called for quantification so that any amendment to plead a case in contract would be futile. He also found that the Bank acted reasonably and within the terms of its facility letters in its actual dealings with the Wrights after June 1991. From time to time the Bank had made unreasonable statements and demands but these had been withdrawn or were not pressed or in the result had done no significant harm to the business interests of the Wrights. These findings, insofar as they were based on the oral evidence, cannot be disturbed and there is no ground for interfering with findings based on the documents. It follows that the appeal against the decision to refuse the amendment fails.

The last substantial contention for the appellants was that the Bank had behaved unconscionably in not disclosing to the Wrights during 1990 and 1991 the negative views of its credit department about the wisdom of the Bank increasing its exposure to the group. The cross-claim did include a general allegation that the Bank had been guilty of unconscionable conduct, but the particulars did not include any allegation of non disclosure or any allegation of misrepresentation in relation to the difference of opinion within the Bank between the officers administering the group accounts and the credit department.

The appellants’ written submissions claimed that the Bank’s conduct towards the Wrights between April 1990 and June 1991 was unconscionable because of this non disclosure, and as a result the Bank induced the Wrights to enter into very substantial transactions with it which greatly increased their exposure to the Bank. The doubts within the credit department during this period did not prevent the Bank entering into and honouring its obligations under the various facilities in accordance with their terms. Punch had actual authority to commit the Bank to those facilities. Moreover the non disclosure did not make any statement by a bank officer a half truth so as to be false or misleading.

This claim was not relied on in the written submissions for the Wrights at the trial and was not dealt with by the Judge in his reasons for judgment. It was raised for the first time in the amended notice of appeal filed by leave on 16 December 1999. Mr Thomson for the Bank argued persuasively that the Bank would be prejudiced if the claim were now to be entertained as the issue was not litigated at the trial, and the Bank could have called further evidence on the point. This new ground lacks prima facie merit and in any event is not the type of new point which can be entertained for the first time on appeal. See Suttor v Gundowda Pty Ltd (1950) 81 CLR 418.

All grounds of appeal having failed, the appeal must be dismissed with costs.