New South Wales Supreme Court CITATION : Agricultural and Rural Finance Pty Ltd v Atkinson & Ors [2006] NSWSC 202 HEARING DATE(S) : 26, 27, 28, 29 July 2005 JUDGMENT DATE : 29 March 2006 JURISDICTION : Equity Division Commercial List JUDGMENT OF : Young CJ in Eq DECISION : Verdict for the plaintiff for the amount claimed. The cross claim dismissed with costs. CATCHWORDS : EQUITY [1]- Rule that party cannot rely on their own wrong to gain an advantage- Scope of rule- GUARANTEE & INDEMNITY [37]- Loan agreement for purpose of investment- Indemnity agreement in respect of loan- Construction. TRADE & COMMERCE [79]- Misrepresentation- Insufficient nexus between representation and plaintiff- Lack of reliance on misrepresentation. Australian Securities and Investments Commission Act 2001 (Cth), ss 12DA, 12DB LEGISLATION CITED : Corporations Law, ss 995, 996, 1023B, 1024, 1067 Trade Practices Act 1974 (Cth), s 52 Avondale Motors (Parts) Pty Ltd v Commissioner of Taxation (1971) 124 CLR 97 AXA Reinurance (UK) plc v Field [1996] 1 WLR 1026 Cheall v Association of Professional Executive Clerical & Computer Staff [1983] 2 AC 180 Drinkwater v Caddyrack Pty Ltd [2001] NSWSC 255 Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 59 SR (NSW) 332 Hackney BC v Dore [1922] 1 KB 431 Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 Krywood v Drinkwater [2000] NSWCA 126 Leeds & Hanley Theatre of Varieties v Broadbent [1898] 1 Ch 343 CASES CITED : Matsoukis v Priestman & Co [1915] 1 KB 681 Nina's Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613 Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 76 ALJR 436; 186 ALR 289 Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793 Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391 Sperry Rand Australia Ltd v Arrandale Properties Pty Ltd [1979] VR 409 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 Vines v Djordjevitch (1955) 91 CLR 512 Yashima v Carroll (1994) 6 BPR 13,663 Agricultural and Rural Finance Pty Limited (P/First Cross Defendant) PARTIES : Bruce Walter Gardiner (37th Defendant/Cross Claimant) Oceania Agriculture Limited (2nd Cross Defendant) FILE NUMBER(S) : SC 50063/03 P L G Brereton SC and A Vincent (P/First Cross Defendant) COUNSEL : R Smith SC and M Jones (37th Defendant/Cross Claimant) G Inatey SC and G Ellis (2nd Cross Defendant) Byrnes Lawyers (P/First Cross Defendant) SOLICITORS : Clayton Utz (37th Defendant/Cross Claimant) Colin Biggers & Paisley (2nd Cross Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST YOUNG CJ in EQ Wednesday 29 March 2006 50063/03 – AGRICULTURAL AND RURAL FINANCE PTY LTD v ATKINSON & ORS JUDGMENT 1 HIS HONOUR: The plaintiff sues to recover the balance of principal and interest advanced to each of the 216 defendants under loan agreements in conjunction with investments made by each of those defendants in one or both of two prescribed interest projects known as the Port Macquarie Tea Tree Plantation Project No 1 and the Port Macquarie Tea Tree Plantation Project No 2. 2 The No 1 Project was established by a deed of 1 April 1997 and the No 2 Project by a deed of 11 February 1998. In those deeds, the defendants are called "Farmers", though they are effectively investors and the investors completed and signed an application form attached to one of the various prospectuses which were issued. Six prospectuses were issued in all, but they were all in the same form. 3 By those application forms each defendant applied for a number of "farms" in the relevant Project on which it was proposed to carry on the business of cultivation and harvesting of tea trees and distilling oil from the tea tree leaves. By the application form each investor elected to apply for a loan from the plaintiff. In the case of Project 1 the loan was some $22,000; in the case of Project 2, $23,700 per farm. In other words, the investor invested his or her $23,700 as the case may be by putting no money into the Project but by borrowing the whole lot from the plaintiff. Each relevant defendant elected also to apply for an optional indemnity in respect of the loan. The ambit of that indemnity is a core part of the present litigation. 4 There were a series of other documents which went to make up the total congeries of rights and liabilities of the investors and others involved including a licence and management agreement with Oceania Agriculture Ltd (OAL) and with Australian Rural Group Ltd (ARG), the trustee of the scheme, now in liquidation. 5 The loan agreement with the plaintiff relevantly provides that the whole principal sum remaining outstanding becomes due and payable at the option of the plaintiff on the happening of certain events, the relevant one in the present case being that the relevant defendant ceases to carry on the business. That is, the business of cultivating and harvesting tea trees and distilling oil from the tea tree leaves on the relevant farm. 6 The Projects were terminated by operation of clause 46.4 of the respective project deeds on 5 February 2003 consequent upon the office of the trustee having remained vacant for 60 days. 7 The plaintiff says that upon termination of the Projects the defendants thereupon ceased to carry on the business as referred to in the loan agreement so that at the option of the plaintiff the loans became repayable. 8 I need to quote extensively from the agreements entered into between the parties. When a noun is shown with a capital initial letter in these quotations, it denotes a term which is defined in the relevant agreement. 9 Clause 7 of the loan agreement provides that: "… the Borrower shall have no liability to repay any part of the Principal Sum outstanding or any interest thereon if the indemnity granted under the Indemnity Agreement … is effective and enforceable in accordance with Clause 2 of the Indemnity Agreement … " 10 Clause 2 of the indemnity agreement provided for an indemnity by OAL on certain conditions. In summary these were that the borrower had punctually made all due payments of principal and interest and was not in default under the loan agreement and the circumstances set out in paragraph 2(d) applied. 11 In the case of Project 2, paragraph 2(d) is as follows (Project 1 was in almost identical terms): "(d) The borrower has ceased to carry on the Business as a result of: (i) any event described in Clause 31(a) of the Licence and Management Agreement; or (ii) any decision of the Manager and the Trustee to terminate Project 2 pursuant to the Project Deed where that decision was made as a result of any event described in Clause 31(a) of the Licence and Management Agreement; or (iii) any resolution of Farmers to terminate Project 2 pursuant to the Project Deed where that resolution was as a result of any event described in Clause 31(a) of the License and Management Agreement; or (iv) the termination of the Licence and Management Agreement as a result of the effluxion of time." 12 The plaintiff says that the defendants ceased to carry on business because of the vacancy of the office of trustee for 60 days and that was not a force majeure event as described in clause 31(a). Therefore the indemnity does not operate. 13 The above summary is taken from the address of Mr Brereton SC as his Honour then was, who with Mr A Vincent appeared for the plaintiff. I will need to look at the documents in far more detail when I come to deal with the issues. 14 By consent, the Court ordered that: "… There be decided separately from any other question in these proceedings all issues arising from the following (the 'Gardiner Test Case'): (a) the claim by Agricultural & Rural Finance Pty Limited against Bruce Gardiner; and (b) the Further Amended Cross-Claim filed by Bruce Gardiner on 26 July 2005." Ancillary orders were made so that with certain protection the other defendants would be bound by the result of determinations in the Gardiner test case. 15 Mr Gardiner was the 37th defendant and he was represented at the hearing by Mr R Smith SC and Mr M Jones. 16 By the further amended cross-claim of 26 July 2005, Mr Gardiner sued the plaintiff as first cross-defendant and Oceania Agriculture Ltd as second cross-defendant. The claims can be summarised as follows: (1) OAL is said to be obliged to indemnify Mr Gardiner from any demand made by the plaintiff to recover monies under any loan agreement. (2) That the plaintiff is not entitled to recover any principal or interest under any loan agreement. (3) The plaintiff and OAL have engaged in conduct which breaches s 52 of the Trade Practices Act , 1974 (Cth), ss 995 and 996 of the Corporations Law or 12DA and 12DB of the Australian Securities and Investments Commission Act , 2001 (Cth); the cross-claim claimed appropriate relief under the statutes at law or in equity. 17 At the hearing, Mr G Inatey SC and Mr G Ellis appeared for OAL. 18 There is no doubt that Mr Gardiner entered into four transactions of loan involving the plaintiff, viz: (a) 29 October 1997 – Ref TT081 - under which the plaintiff claims some $55,208.28 was owing at the date of trial; (b) 30 March 1998 – Ref TT094 - $27,604.15; (c) 25 June 1998 – Ref TT131 - $175,031.79; and (d) 10 May 1999 – Ref TT214 - $41,290.35. The sum total is a few dollars under $200,000. 19 In order to see whether Mr Gardiner is liable to pay this sum, or if he is, to "lay it off" against OAL, I must consider the following issues, though some of these issues involve sub-issues which will be listed when I deal with the particular issue: 1. Has Mr Gardiner ceased to carry on business for the purpose of the loan agreements with the plaintiff? 2. Is Mr Gardiner entitled to be indemnified against what is otherwise owing to the plaintiff? 3. Has OAL breached its contractual, fiduciary or statutory obligations in terminating the Projects and whether the plaintiff was knowingly concerned in and/or procured those breaches? 4. Did Mr Lloyd on behalf of OAL and the plaintiff make representations that the indemnity would apply in all circumstances save where the farmers voluntarily terminated the Projects? 5. Did the prospectuses fail to disclose matters which constituted deceptive and misleading conduct and/or breaches of the Corporations Law ? 6. What is the result of the case? 20 I will deal with each of these issues in turn. 1. Has Mr Gardiner ceased to carry on business ? 21 It is first necessary to look at the relevant documentation. 22 Project deed No 1 is between OAL, Australian Rural Group Ltd (ARG), Endwise Holdings Pty Ltd (Endwise) and Gerard Cassegrain & Co Pty Ltd (GCC). 23 Mr Gardiner submits and unless I indicate otherwise in the course of these reasons, I will accept that Endwise was owned 50% by one Claude Casssegrain and 50% by GCC. It owed the land upon which the Projects were to be developed. It granted a lease of the land to ARG which granted a sub-lease to OAL and OAL then granted a licence to each investor. 24 OAL was a wholly owned subsidiary of GCC. 25 The directors and shareholders in the plaintiff were members of the Sarks family. Claude Cassegrain married Felicity Sarks. Her father is Anthony Blake Sarks and his sons are Anthony Gerard Sarks and Richard Damian Sarks. They were directors of the plaintiff. Anthony G Sarks worked on the Projects. 26 Claude Cassegrain (CC) became a director of OAL on 27 September 2002 and later its sole director. Mr Gardiner alleges that CC also controlled the plaintiff through his wife's father and his brothers-in-law. 27 Mr Gardiner says the way the scheme worked was that each farm was sold on the basis of a management fee of $23,750 of which the investor could borrow $22,750 from the plaintiff. The investor could also borrow the first year's management fees and various other fees. For a further $250 indemnity fee, an indemnity could be purchased. In order to lend the money to investors, the plaintiff borrowed money from GCC. Monies were then paid through to AOL which then lent monies back to the plaintiff so that the plaintiff could make further loans to investors. The net effect of this round robin was that instead of receiving just under $3 million, OAL actually had funds of $188,760. Mr Gardiner says, but the plaintiff and OAL deny, that this imposed serious cash flow problems on development of the farms. 28 It is strongly hinted that one of the reasons why investors became involved in the Projects was that by borrowing monies from the plaintiff to invest in the Project which involved primary production, the investors would be able to claim a deduction of $24,000 for an outlay of about $2,000 with the borrowed funds hopefully being repaid by the produce of the farms. 29 However, as not infrequently happens with this sort of scheme, there was no such production of income. Mr Gardiner says to allow the plaintiff now to recover the loans would be providing Mr Claude Cassegrain and his associates with a windfall profit. 30 Mr Brereton SC says that all this is beside the point. The deal was at arm's length, properly documented, and when one construes the documents, one can see that Mr Gardiner is liable. 31 It is common ground that on 5 November 2002, the trustee of the scheme retired because it had suffered the appointment of administrator and the manager gave notice to the trustee to retire. In proceedings 5819 of 2002 Campbell J declared that the trustee had retired effective at 5 November 2002. All parties accept that proposition. 32 It follows that clause 46.4 comes into play which provides: "If the office of the Trustee of the Project becomes vacant and a new Trustee or Trustees is not appointed within 60 days of the vacancy occurring the Project shall terminate." 33 There is no doubt that accordingly on 4 January 2003 the Project terminated. The plaintiff says that this was because of the operation of 46.4. Mr Gardiner says that it was a result of the event in 46.4 being engineered by the activities of Mr Cassegrain and his associates for their own benefit. 34 The prospectuses mentioned that the loan facility was available as was an indemnity. In respect of indemnity, clause 2.4.5 notes that the investor has the option of taking out an indemnity and provides "Subject to compliance by the borrower with the terms of the Loan Agreement and the Licence and Management Agreement, the Indemnity can be called upon to repay amounts due to the Lender if the Farmer ceases to carry on the business as a result of certain events or if there is an amount owing to the Lender at the expiry of Project 2. A once-only indemnity fee of $250 per Farm is payable at the time of application. The Lender is a party to the Indemnity Agreement and agrees to rely solely upon the Indemnifier if the indemnity is effective and enforceable. The terms of the indemnity are set out in Section 5. The Indemnity Agreement is reproduced in full in Section 7." 35 Section 5.6 of the prospectus (quoting from that for Project 2) provides: "A Farmer who borrows from the Lender is personally liable for principal and interest on the loan. Subject to compliance by the borrower with the terms of the Loan Agreement … the Lender cannot call upon a borrower to personally pay loan interest or principal other than from the net proceeds of oil sales unless and until one of the following events occurs: (i) the borrower ceases to carry on the business of growing tea trees on a Farm; or (ii) Project 2 is terminated. If either of these events occurs the Lender may call upon the borrower to personally repay the interest and principal due on the loan. A Farmer who borrows from the Lender has the option … of entering into an Indemnity Agreement to protect the borrower against liability to the Lender under certain circumstances. The conditions upon which the indemnity is effective and enforceable are: (i) the borrower has entered into the Indemnity Agreement and paid the indemnity fee … ; and (ii) the borrower has borrowed from the Lender and has complied with the terms of the Loan Agreement and the Licence and Management Agreement; and (iii) Project 2 is terminated as a result of either an event described in Clause 31(a) of the Licence and Management Agreement (Force Majeure) or the effluxion of time." 36 The indemnity agreement is set out in 7.7 of the prospectus. Clause 2 contains the following: "The Indemnity referred to in Clause 1 shall be effective and enforceable if: (a) the Borrower has punctually paid the interest payable pursuant to Clauses 3.2 and 3.3(a) of the Loan Agreement; and … (c) the Borrower is not otherwise in default of any covenant or obligation contained in the Loan Agreement … ; and (d) the Borrower has ceased to carry on the business as a result of: (i) any event described in Clause 31(a) of the Licence and Management Agreement … ". 37 The licence and management agreement in clause 31(a), which is headed "Force Majeure", provides as follows: "The Farmer, the Licensor, the Manager and the Trustee are excused from performance of any of their respective duties and obligations under this agreement whenever and to the extent that such performance is prevented or interrupted or delayed by reason of any action or requirement of any government authority or by any wars, public disorders, acts of enemies, sabotage, strikes, lockouts, labour or employment difficulties, accidents, break-downs, fires, storms, tempest, hail, wind or events of nature or acts of God or any other causes beyond the control of the Farmer, the Manager, the Licensor or Trustee (as the case may be), but the Farmer, the Licensor, the Manager and the Trustee must at all times use all commercially reasonable endeavours to overcome or alleviate the effect of any such events as specified above." 38 Under the licence and management agreement, at least theoretically the farmer or investor was carrying on the business of primary production even though the manager was supposed to be carrying out the physical work on the investor's behalf. Clause 2.1 of the licence and management agreement provided for the grant to the farmer or investor of a licence to use the relevant allotment together with a right of access until the termination date. Clause 8 provided that the farmer will at the termination date or sooner determination of the agreement peaceably surrender and yield up to the licensor the allotment. Thus on the termination of the agreement the right of the investor to enter the property and work the allotment is terminated and accordingly he or she must at that moment cease to carry on business. 39 Accordingly, there seems to me little problem in finding that Mr Gardiner has ceased to carry on business within the meaning of the relevant document. This is reinforced by the fact that Mr Gardiner in evidence said that he had not visited the farm since 1998 and was not aware of any harvest or other significant event to deal with on the farm. 40 The discussion by Gibbs J in Avondale Motors (Parts) Pty Ltd v Commissioner of Taxation (1971) 124 CLR 97 at 102 would reinforce this view. 41 As Mr Brereton submits, the loans are thus repayable unless Mr Gardiner is entitled to an indemnity. 2. Is Mr Gardiner entitled to an indemnity? 42 A number of sub-issues arise under this issue, viz: (a) On whom is the onus of proving the indemnity is effective? (b) Did Mr Gardiner punctually make repayments so as to comply with one of the conditions of the indemnity? (c) What is the significance of the expression "or any other causes beyond the control of the Farmer" in clause 31(a) of the licence and management agreement? (d) Was OAL's denial of indemnity a breach of its obligation of good faith? (e) Does the rule that a person cannot rely on his own misconduct affect the position? (f) Were any representations made by Mr Lloyd which affect the plaintiff or OAL? (g) Does the rule that neither party shall prevent the contract from operating affect the result? I will deal with each of these in turn. 43 (a) The plaintiff and OAL say that the plaintiff must succeed on the debt claim unless Mr Gardiner establishes that the indemnity applies. Mr Gardiner says that in this case, on the proper construction of the loan agreement the obligation of Mr Gardiner to repay imposed by clause 2.1 of the loan agreement was subject to clause 7 and clause 7 was an agreement that the borrower had no liability to repay if the indemnity was effective and enforceable. The argument is that this is virtually a condition precedent to the liability under clause 2.1: Vines v Djordjevitch (1955) 91 CLR 512 at 519-521 is cited. 44 I find it hard to read clause 7 in that way. The word "provided" which usually (but not always) is used in a document where there is a condition precedent, is not used. Rather, there appears to be a primary assumption of liability which is not to apply if certain things occur. To my mind the onus of proof is on Mr Gardiner. However, I do not consider that it is likely that this is going to affect the result of the litigation. 45 (b) Clause 2 of the indemnity agreement provides that the indemnity will be effective and enforceable if: (a) the borrower has punctually paid the interest payable … ; and (b) the borrower has punctually paid the reductions of the principal sum set forth in clause 4.1 of the Loan Agreement; and (c) the borrower is not otherwise in default… ; and (d) the borrower has ceased to carry on the business as a result of: (i) any event described in clause 31(a) of the Licence and Management Agreement; or … . 46 OAL says that the evidence bears it out, that in respect of loan TT081 Mr Gardiner made his payment due 30 April 1998 on 26 June 1998, his payment for 31 July 1998 on 26 August 1998 and his payment due on 31 October 1998 on 12 November 1998. 47 In respect of loan TT094, the payment due on 30 September 1998 was made on 12 November 1998, that for 31 December 1998 on 18 January 1999 and that for 31 March 1999 payment was made on 1 April 1999. In respect of loan TT214, the payment due on 19 June 1999 was made on 5 October 1999 and that for 31 May 2000 was made on 8 June 2000. 48 There was no default with loan TT131. 49 I have taken what I have just set out from OAL's outline of submissions. The transcript at pages 32 and following shows further default with respect to interest on loan TT094 which Mr Gardiner admitted. There is little point in detailing any further defaults. 50 There is no doubt at all that Mr Gardiner did not punctually pay what was due under the loan agreement. True it is that some payments were only one or two days late, but an obligation to pay punctually has been held in cases associated with covenants in leases or mortgages. In Leeds & Hanley Theatre of Varieties v Broadbent [1898] 1 Ch 343, the English Court of Appeal held that payment "punctually" meant payment on the day fixed for payment and payments after that date was not good payment and this has been followed ever since; see eg Sperry Rand Australia Ltd v Arrandale Properties Pty Ltd [1979] VR 409. 51 The only answer to this complaint is that performance has been waived. The alleged waiver seems to be said to have arisen because after 27 October 1998 Mr Gardiner says that there was an arrangement with Ms Vanessa Edwards, the financial controller of the plaintiff, that Ms Edwards would send Mr Gardiner a reminder before any payment was due and she failed to do so. 52 Ms Edwards denies this and I would accept her denial. Secondly, if I was wrong in this, it is common ground that Mr Gardiner asked to speak to Ms Edwards' superior Mr Lloyd and Mr Lloyd did in fact ring him. This tends to suggest that any arrangement made with Ms Edwards was not a final arrangement. Thirdly, Mr Gardiner in fact endorsed one of the bills "Vanessa, my apologies, I now have all future payments scheduled in my diary" which tends to suggest there was no such conversation, and fourthly, even if there was such a conversation it would be very debatable if it could have any effect either because of authority of Ms Edwards or because, as in the case of Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 59 SR (NSW) 332, waiver has no part to play where the fact of punctual performance is one of the matters to be established before a right comes into existence or a right continues to exist. 53 Under clause 2 of the indemnity agreement, all four matters must be established before the indemnity is valid and enforceable. Because of the failure to pay punctually, Mr Gardiner can only succeed on the large loan, TT131. 54 (c) It will be remembered that clause 31(a) is headed "Force Majeure" and operates distributively excusing, inter alia, the investor, the licensor, the manager and the trustee from performance whenever and to the extent that such performance is prevented or interrupted or delayed by reason of any action or requirement of a government authority or by any wars, public disorders, acts of enemies etc "or any other causes beyond the control of the Farmer, the Manager, the Licensor or Trustee (as the case may be)." Clause 2 of the indemnity agreement notes that the indemnity is effective and enforceable if "… (d) the Borrower has ceased to carry on the Business as a result of: (i) any event described in Clause 31(a) of the Licence and Management Agreement … ". 55 Accordingly, one must determine what is meant by the words "any event" and also what the words "as a result of" denote. 56 It should be noted that it is not necessarily so that every noun or phrase in clause 31(a) is an event. Clause 2 only picks up events described in that sub-clause. 57 It is clear that wars, public disorders, acts of enemies, sabotage, strikes, lockouts, accidents, breakdowns, fires, storms, tempest, hail, wind are events. There are problems with calling labour or employment difficulties an event. There are problems with respect to the words "events of nature or acts of God". There are even greater problems with "or any other causes beyond the control of the Farmer .. ". Clause 31(a), however, ends with the words "alleviate the effect of any such events as specified above". 58 The prime meaning of event, a word derived from the Latin "evenire" (e = ex = out; and venire = to come) is outcome. The phrase "costs follow the event" uses the word in its original sense. A derived meaning is, according to the Oxford English Dictionary, "an incident, occurrence … ", in the doctrine of chances, "any one of the possible (mutually exclusive) occurrences, one of which must happen under stated conditions, and the relative probability of which may be calculated". It tends to be used in this sense in insurance law. 59 In AXA Reinsurance (UK) plc v Field [1996] 1 WLR 1026, the House of Lords had to consider an insurance policy which set a limit for each and every loss arising out of one event. Loss was suffered because of the negligence of a Mr Outhwaite who, as underwriter, wrote a number of insurance policies with run-off contracts of reinsurance in a negligent manner. Arbitrators held there was only a single loss arising out of one event, namely, Mr Outhwaite's negligence in writing the contracts without conducting the necessary research. Lord Mustill, with whom the other four law lords agreed, said at p 1035 that losses caused by something and losses arising out of an event are different expressions. He said: "In ordinary speech, an event is something which happens at a particular time, at a particular place, in a particular way. … A cause is … something altogether less constricted. It can be a continuing state of affairs; it can be the absence of something happening." 60 The specific matters mentioned in 31(a) are all quite clearly events. However, "any other causes beyond the control of … " is not an event, it is a cause. 61 Of course, as Macready AsJ pointed out, when giving judicial advice in an earlier stage of this matter, proceedings 3501 of 2002, the view might be held that an event could be an occasion which would occupy a period of time such as the Great Depression or the Second World War. However, even that extended contemplation of an event would not make the "any other cause" clause to my mind an event. 62 Again clause 31 is headed "Force Majeure". That is an expression with a relatively definite meaning. It derives from the Code Napoleon and, whilst wider than "vis major" or act of God (Matsoukis v Priestman & Co [1915] 1 KB 681 at 685-7), almost always denotes some physical or material restraint imposed by an external actor: Hackney BC v Doré [1922] 1 KB 431 at 437. 63 Clause 31(a) itself gives examples of typical actions which would come within force majeure, namely wars, public disorders, acts of enemies, sabotages etc and whilst it is difficult to say that these constitute a genus, they do give the flavour to the sort of event which is contemplated and an act of another party outside the control of the first party does not seem to me to fall within the genus. 64 Thirdly, the event, if it be an event, which brought about the ceasing of carrying on business was the termination of the Project. 65 Finally, Mr Brereton submits that termination itself cannot be an event within the meaning of clause 2. Grammatically, this must be so. 66 I accept the argument put by the plaintiff that termination causes the farmer's obligation to change, but does not inhibit performance of the obligations which survive. Termination of the Project is not an event which prevents a farmer from performing his obligations under the licence and management agreement. This is reinforced by sub-paragraphs (ii), (iii) and (iv) of clause 2(d) of the indemnity agreement which specifically referred to termination. 67 Finally, if all the above is erroneous, then Mr Gardiner would need to provide evidence that what has happened was beyond his control. He has not done so. His evidence was that his action group comprised a majority of farmers by number and value, thus his group controlled a meeting of farmers and there is no explanation as to why the group did not pursue the replacement of the trustee. 68 All this adds up to my not being satisfied on the construction argument that Mr Gardiner is entitled to an indemnity. 69 (d) I now pass to the good faith case. 70 Mr Gardiner's contention is that it was an implied term of the loan agreement that the plaintiff would exercise its contractual rights and powers in good faith. Such a term is alleged to arise by implication both as a matter of business efficacy and as a matter of law. 71 There has been some flirting in the authorities in Australia as to whether one might imply into a contract a term that the parties would deal with each other in good faith. In pre-tender preliminary contracts that view has gained some strength; see eg Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151, but generally the importation from New York law of such a term does not fit neatly into the structure of Australian contract law: Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84, 96-7. 72 Whilst it goes without saying that of course every contracting party enters into a contract expecting everyone else to fulfil their obligations and that they will not double-cross each other, the present set of legal documents were very comprehensive in their scope and purported to cover all aspects of the parties' relationships. Moreover, the parties realised that the attraction of the investment was, amongst other things, the generous tax deductions that were available, and that whilst the indemnity agreement minimised risks, the tax deductions would have been jeopardised had the risks been removed altogether. 73 I agree with the plaintiff's submission that there is no reason to superimpose an additional "good faith" term and business efficacy does not require it. In this I believe I am in tune with what Kirby and Callinan JJ said in Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 76 ALJR 436 at 452-3 and 482; 186 ALR 289, 312 and 327. 74 (e) There is certainly a rule that a person cannot rely on his or her own misconduct to gain an advantage. As I said in Drinkwater v Caddyrack Pty Ltd [2001] NSWSC 255 (affirmed by the Court of Appeal as Krywood v Drinkwater [2000] NSWCA 126), this maxim is used in about 8 different senses. So far as the law of contract is concerned, the operative versions of the rule are (using the numbers I used in the Drinkwater decision): (3) Where a contract of sale says that it is to become void if something does not happen a person whose fault brings about the non-happening of the event cannot rely on it and the contract is only voidable at the option of the innocent party: Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, 441. (4) If liquidated damages are payable on the non-happening of a certain event by a certain day then a person who has done an act which must substantially delay completion cannot seek liquidated damages: SMK Cabinets v Hili Modern Electrics Pty Ltd [1984] VR 391. (7) If a person can terminate contract A if contract B comes to an end, then the liberty to terminate contract A is only to be exercised if it is not the fault of the person giving the notice that contract B came to an end: TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130. 75 The submission made by counsel for Mr Gardiner does not quite fit into these categories but that, of course, does not disqualify it from consideration. The submission is that clause 5.1(c) of the loan agreement is to be construed in accordance with the well established rule that a party cannot be permitted to take advantage of its own wrong. Various well-known cases are cited for that proposition including as of this moment the latest decision of the Court of Appeal in Ruthol Pty Ltd v Mills (2003) 11 BPR 20,793 at 20,814. What I take this submission to mean is that the parties did not intend the plaintiff to treat the amount owing under the loan as becoming immediately repayable upon the borrower ceasing to carry on business if the reason for the borrower ceasing to carry on business was the fault of the plaintiff. 76 The clause in the loan agreement could very well have that construction. On the assumption that the clause is so construed, I will examine the allegations that the plaintiff is, in relying on the fact that the borrower ceased to carry on business, taking advantage of its own wrong. 77 Mr Gardiner's submission that the plaintiff's wrong has two aspects, one, that on or after 27 September 2002, Claude Cassegrain was a director of OAL together with Mr A G Sarks and others. Mr A G Sarks is admitted by OAL's defence, to have engaged in conduct the substance of which was effectively designed to bring about termination of the Projects; see para 26(hh)(iii) of OAL's defence. He engaged in a determined course designed to persuade farmers, and otherwise if they did not agree, which they did not, to wind up the Projects. He acted on and was party to OAL's breach of duty to the farmers. The second aspect is that the plaintiff was a creature of Claude Cassegrain. It did his bidding. 78 The defence to amended first cross-claim filed 24 February 2005, admitted that Mr A G Sarks, in his capacity as a director of OAL, engaged in the conduct admitted in response to paras (iii), (ix), (x), (xiii), (xiv), (xvi), (xvii), (xx), (C, D, E and G) and (xxi) of para 28(jj) of the cross-claim. In essence this was: (a) on 19 December 2001 at a meeting of farmers Mr Sarks and another director of OAL supported a resolution which the farmers rejected to wind up the Project; (b) on 11 June 2002, OAL sought to arrange for the trustee to obtain judicial advice as to whether the trustee was entitled to terminate the Projects; (c) on 16 August 2002, OAL and the plaintiff executed a further deed purporting to rescind a deed of 18 January 2000 which had assigned the benefit of loans owing by farmers to the plaintiff to OAL; (d) on 18 September 2002, Mr Sarks, on behalf of OAL, informed ASIC that it was in the interests of farmers that the Projects be terminated; (e) on 27 September 2002, Claude Cassegrain became a director of AOL; (f) on 27 September 2002, OAL's directors resolved that the manager should form the opinion that the Project should determine; (g) On 15 October 2002, OAL advised farmers that the fall in tea tree oil prices had made the Projects commercially unviable and they should be determined; (h) in the periods of 13 November to 26 December 2002, OAL took steps intended to ensure that no new trustee was appointed including: (i) advising two potential trustees who had indicated interest to act as trustee that litigation was on foot; (ii) failing to itself act as trustee; (iii) refusing to consent to the appointment of Teys Custodians Ltd to act as trustee. 79 I must confess that I cannot see how any of these matters constitute any wrong within the meaning of the maxim. In this connection it should be noted that the "wrong" under the authorities must be the cause of the non-fulfilment of the condition now being sued upon: Nina's Bar Bistro Pty Ltd v MBE Corporation (Sydney) Pty Ltd [1984] 3 NSWLR 613; Yashima v Carroll (1994) 6 BPR 13,663, 13,665. Furthermore, the wrong must be a breach of duty, "that is owed to the other party under the contract": Cheall v Association of Professional Executive Clerical & Computer Staff [1983] 2 AC 180 at 189. 80 There is no evidence of conduct on behalf of the plaintiff which would constitute a wrong, which wrong brought about the cessation of business. Any admission in OAL's cross-claim is only an admission as against OAL. I cannot with respect see this submission as taking the case any further at all. 81 (f) I now have to deal with the effect of the alleged representations by Mr Lloyd. 82 Mr Gardiner says that he was induced to enter into the loan agreements by Mr Lloyd, then managing director of OAL, who made representations as to the manner in which the indemnity would operate. The defence says that Stephen Lloyd, on behalf of both the plaintiff and OAL at an investment seminar held at the office of Ord Minnett in Sydney about June 1997, said words to the effect that the indemnity agreement would apply to indemnify a farmer in circumstances where the projects terminated as a result of any reason other than the farmers electing to terminate the Projects. The defence then alleges that the representation was made with the intention that it be acted upon, that Mr Gardiner acted in reliance on it, entered into the loan indemnity agreement, and in the circumstances the plaintiff is estopped from asserting that the proper construction is otherwise. 83 Mr Gardiner, in his affidavit, said in paras 11 and following that at the invitation of Mr Atkinson, a co-defendant, he attended two investor seminars at the offices of Ord Minnett Securities Ltd. There were two presenters at the seminar, Mr Atkinson and Mr Lloyd. Mr Atkinson said words to the effect, "OAL, the indemnifier, will repay the loans to the lender, ARF, if the Project is terminated as a result of any cause beyond the control of the farmer." The Ord Minnett representative then asked Mr Lloyd, "Is that a correct interpretation?" to which Mr Lloyd replied, "Yes, it's effective except in the unlikely event that farmers decide to vote to terminate all the Projects." Later on in the meeting Mr Lloyd repeated that statement on at least two further occasions. 84 These passages were objected to by counsel for the plaintiff and counsel for OAL. 85 In accordance with usual practice in this Division, written objections were filed before the hearing and I made provisional rulings on the evidence which I announced on the first day of the hearing. My provisional ruling was to reject this material. Mr Smith SC for Mr Gardiner sought to review those rulings indicating that the utterances of Mr Lloyd were most important for his estoppel case. Mr Brereton for the plaintiff, said that whilst Mr Lloyd was an officer of OAL, he was never an officer of the plaintiff and there was just no basis at all for affixing the plaintiff with any liability for what Mr Lloyd said. In the end, I said at p 16 of the transcript that it was better to treat Mr Gardiner's evidence as all being in evidence and working out its relevance and weight later. 86 Mr Brereton did not cross-examine on the statements. 87 In para 30 of the defence, Mr Gardiner says that the representations were repeated by Mr Lloyd sometime in 1998. Mr Inatey SC for OAL did vigorously cross-examine on the evidence that Mr Gardiner presented on this matter and Mr Gardiner was forced to admit that the particulars given in his defence about this matter to which he had sworn, were incorrect. 88 I cannot find sufficient nexus between what Mr Lloyd said at an investment seminar and the lender to found any estoppel against the lender. Although the lender played a vital part in the scheme, it was not one of the principal actors in the drama. Mr Lloyd was not employed by it and I cannot see how, on the evidence that was adduced, it can be said that the plaintiff is to be estopped by anything that Mr Lloyd may have said. 89 I will consider the effect, if any, of what Mr Lloyd said as against OAL in section 4. 90 By amendment made late in the piece, it was put that "It was a term of the Loan Agreements executed by the cross claimant in respect of each of the projects that [the plaintiff] would take no steps itself or to co-operate with any third party to cause the cross claimant to cease to carry on business to bring about an entitlement on the part of [the plaintiff] to determine the Loan Agreements". (See 31A of final version of the cross claim). This was called the "prevention term". 91 It is not necessary to discuss this point as the same result must follow for the same reasons as I considered when dealing with the alleged implied term of good faith. 92 It follows that the plaintiff is entitled to a verdict on its claim. 93 I now pass to the cross-claim. 3. The question here is whether OAL breached any of its fiduciary or contractual obligations towards Mr Gardiner 94 The allegations are summarised in para 43 of Mr Gardiner's list of submission topics. Thus "The substance of that failure was that a determined effort to take steps to bring about termination of the Projects by the conduct referred to in this document, so as to ensure that the Projects terminated and so that ARF (as ARF and OAL wrongly believed) would be in a position to recover loans from the farmers. Part of that conduct was the admitted failure by OAL to itself take steps after ARG retired as trustee, to take the simple step of itself acting as trustee which had that been taken, the Projects would not have terminated." [ARF was the plaintiff, ARG, the trustee] 95 There is no doubt that under the Project deeds, OAL covenanted as manager, inter alia, "to perform its functions and exercise its powers under the Project Deed in the best interests of Farmers and not in the interests of itself or the Trustee if those interests are not the same as those of Farmers generally." This is one of the covenants required by the Corporations Regulations. Additionally, independently, or so as to augment the contractual obligation, the manager, according to Mr Gardiner, was a fiduciary in relation to the performance of its duties with the Projects in relation to the farmers. 96 There is no need in the instant case to deal with the difficulties that may occur where a contractual promise and a fiduciary duty overlap. Generally speaking my view is that one prefers the contractual duty and that the equity involved in breach of fiduciary duty only enters the scene if the remedy for breach of the contractual duty is plainly insufficient. In the instant case it really does not matter. 97 The facts in support of the allegation are to a great degree not in dispute. 98 On 25 October 2002, OAL gave notice to the trustee pursuant to clause 37.1 of the Project deeds requiring the trustee to retire on midnight 27 October 2002. 99 The office of trustee under each Project deed became vacant on 5 November 2002; indeed, Campbell J has so declared. 100 By 4 January 2003, no new trustee had been appointed. 101 It follows that under clause 46.4 of the respective Project deeds, each Project terminated on that day. 102 Mr Gardiner said that at the very least, OAL could have appointed itself as trustee. Counsel for OAL objected to this, pointing to the final sub-paragraph of clause 37.1 of the Project deeds that "on the retirement of the Trustee under this clause the Manager shall be entitled to appoint in writing some other Person approved under section 1067 of the Corporations Law to be the Trustee … and until the appointment is complete the Manager may, subject to approval under section 1067 of the Corporations Law, act as Trustee of the Project … ". 103 Section 1067 was repealed in 1999. It provided that ASIC or its predecessor had to approve a deed and in subsection 3 it approved the trustee. No one argued the effect of the repeal, and indeed the parties at the time and during the hearing proceeded on the basis that it still governed these Projects. 104 It is quite clear that that OAL had not been approved by ASIC as a trustee and that OAL's objection that it was just not a simple matter of OAL becoming the trustee is made out. 105 There is another way of approaching this matter which leads to the same result. The paragraph I have cited says that the manager is to appoint "some other person" and until that appointment is complete this is the only time the manager may act as trustee, again subject to the approval of ASIC or its predecessor. 106 Accordingly, it does not seem to me that there is much mileage for the cross-claimant in saying that the manager could have appointed itself as trustee. 107 As to the other allegations, it is necessary to look at the chronology on and after the retirement of the trustee on 27 October 2002. On 5 November 2002, the administrator of the trustee gave notice to the farmers that it had retired as trustee. Anthony Sarks placed an advertisement in The Land seeking a trustee to be approved by ASIC on or before 26 December 2002. On 12 November 2002, an application for appointment as trustee by OAL was withdrawn by Claude Cassegrain. 108 On 13 November 2002, OAL received notice from Australian Rural Finance & Investment Co Ltd expressing interest to act as trustee. On 20 November 2002, OAL wrote to the proposed trustee noting that there was litigation on foot and suggesting there be communication between the lawyers for the parties. On 21 November 2002, Aus Forest Ltd indicated that it might seek to become the trustee, and on 28 November 2002 OAL faxed Aus Forest a similar letter indicating that litigation was on foot. On 2 December 2002, Australian Rural Finance & Investment Co Ltd indicated that it did not intend to take on the trustee position. 109 On 6 December 2002, Huntley Consultancy Pty Ltd proposed that it become the trustee on the basis that it would acquire the shares in ARG Management Ltd and the trustee role be transferred to that company. 110 On 25 July 2002, ARG, the trustee filed a summons in this Court, 3801 of 2002, seeking judicial advice as to the possible termination of the Projects. 111 This summons was served on the representatives of the investors. There was delay whilst there was debate as to whether the representative defendant should be an investor or an action group. In the end result, the orders sought by the trustee were opposed. 112 In those proceedings, on 17 December 2002, Campbell J declared that the trustee had retired as at 5 November 2002. 113 On 23 December 2002, OAL wrote to the farmers advising that as a result of Campbell J's decision, all monies owing under the loan agreements would become due and payable on 4 January 2003. 114 On 30 December 2002, Clayton Utz, the solicitors for Mr Gardiner and others, sent a letter to OAL concerning the appointment of Teys Custodians as trustee with a copy to Mr Jessop of Hunt & Hunt. Mr Jessop replied to this letter on 3 January noting that Teys was not an approved trustee and that in his view approval by ASIC would take at least two months. 115 No trustee was appointed by 4 January 2003 and on 6 January 2003 notices of demand were issued to farmers. From at least about October 2002 there was a farmers' action group that was well established and the majority in both number and value of farms were members of the group. The group, as its name would imply, was formed to advance the interests of farmers and Mr Gardiner, Mr Atkinson and other defendants were prominent members of it. 116 The "facts" about the events of October 2002 to January 2003 which I have set out in the preceding paragraphs, I have taken from the chronology which was prepared by Clayton Utz, the solicitors for Mr Gardiner. 117 That chronology also shows, however, that from early 2001 OAL had been making it quite clear that the price per ton of tea tree oil had fallen to $15 whilst the Projects were put together on the basis that the price would be $50 per ton. On 8 May 2001, OAL advised ASIC that the Projects were approaching exhaustion of available funds. OAL advised ASIC that if it were not released from the condition of its dealer's licence it would not be able to continue as manager and if there were no manager it would call a meeting to wind up the Projects. 118 On 20 June 2001, OAL wrote to ASIC advising that there appeared to be no alternative but to commence to wind up the Projects, and on the same day it wrote to farmers that the manager and trustee believed that there would be no alternative but to wind up the Projects. There was then correspondence between Mr Atkinson on behalf of a group called the Port Macquarie Tea Tree Plantation Group to ASIC, and at a meeting with ASIC, Mr Atkinson was advised that expert advice was that tea tree oil would not recover above $20 per ton. 119 On 31 July, Mr Claude Cassegrain wrote to farmers noting that if the farmers did not pay their management fees to OAL it would not have sufficient funds to continue to maintain and undertake harvesting. Mr Cassegrain put a proposal that he would buy out investors in the Projects. This came to nothing and Mr Cassegrain complained that Mr Atkinson had white-anted his proposal. 120 On 6 November 2001, OAL advised that it no longer had resources to continue operations and recommended that the Projects be wound up. On 7 December 2001, Mr Atkinson sent a memorandum to farmers seeking to oppose the winding up of the Projects at the proposed meeting of 19 December. Indeed, at that meeting voting was against resolutions to wind up the Projects. 121 A Mr Brown gave evidence on behalf of Mr Gardiner. He was put forward as an agricultural expert and the purport of his evidence was that it would not cost anywhere near the estimate of GCC and OAL to maintain the tea trees in some type of hibernation whilst the price rose again. 122 Mr Brown freely acknowledged that he did not visit the site and performed an exercise at his desk in Sydney. 123 I do not consider that Mr Brown's view should be adopted. The weight of the evidence is that it would be costly to maintain the crop even in a hibernation condition and that with the crop producing no income and many of the farmers declining to pay their levies, it was not feasible for the maintenance of the tea trees to be continued. 124 Mr Inatey further put that the vacancy in the position of trustee was in any event not beyond the control of the farmers. Mr Gardiner's Solicitors, Clayton Utz, knew that the trustee was in difficulties on 27 September 2002 because an administrator was appointed on that day and notice was given to everybody concerned on 29 September 2002. 125 Document 905 is a copy of an email produced by ASIC dealing with the telephone calls that were made on 7 November 2002. Mr Atkinson had rung ASIC, referred to the resignation of the trustee and complained about OAL and Claude Cassegrain who was said to have engineered the termination of the Projects. Mr Atkinson reportedly said that 85% of the investors had got together to fight an attempt to end the Projects, their solicitor was Dean Jordan of Clayton Utz and that they were talking to Teys and Huntley who were said to be keen to become new trustees. 126 ASIC then got in touch with Mr Jordan and Ms Croft at Clayton Utz, the latter alleged to be an ex-officer of ASIC. In a letter of 18 December 2002, apparently authored by Ms Croft who described herself as "special counsel", Clayton Utz informed ASIC that their clients had been negotiating with Huntley Consultancy Pty Ltd seeking an indication as to whether Huntley would be approved by ASIC and noting that Clayton Utz may have to approach the Court if approval could not be provided in time. 127 It accordingly appears quite clearly that the solicitors for the investors were well aware of the potential situation from September and, one assumes on instructions, did not take any concrete steps until 30 December to see if a substitute trustee acceptable to ASIC could be appointed. 128 Likewise, the action group organised by Mr Atkinson which used the vehicle of a company, Tea Tree Investors Ltd, was also in conversations with potential trustees. 129 However, the general attitude of Mr Gardiner, his associates and solicitors was to oppose vigorously everything that the "other side" did in order to prevent the termination of the Projects, but they stopped short of taking any positive action themselves to avoid the termination until it was obviously too late to do so. 130 As an example, on 20 September 2002, Clayton Utz filed a statement of claim with Mr Atkinson as plaintiff in this Division of the Court (proceedings 4717 of 2002) seeking declarations that all the claims of the "other side" as to termination of the Projects were erroneous (see Exhibit AX 854). It was the existence of these proceedings, when communicated to potential trustees that appears to have put them off seeking appointment. 131 Correspondence went back and forth during the first half of 2002 including a search for a new manager. 132 It is clear from all this material that the investors were given ample notice that the Projects were unviable from 2001 principally because the Projects were to run for approximately 17 years with the profits from the sale of the tea tree oil being used to continue to run the business. When the price of tea tree oil fell from $50 to $15 or $20, this was no longer practicable. The position was not helped by some farmers, including Mr Gardiner, not paying their fees or at least not paying them to the full. 133 There seems to be little doubt that there was some financial gain to be had by those behind the plaintiff including Mr Claude Cassegrain if business ceased and the loans were to be called up, especially if they were to be called up without the benefit of the indemnity. 134 There is no secret about the fact that some monies which investors might reasonably have supposed would be used in the Projects found their way via round robin transactions back into the hands of the plaintiff or Mr Cassegrain, but the bulk of the material suggests that this was not the cause of the Projects failing but rather it was the dramatic fall in the price of tea tree oil. 135 I do not consider that Mr Gardiner has established that anything OAL did in and about what happened in having the trustee retire and not replaced breached any contractual or fiduciary duty. 4. The effect of Mr Lloyd's representations as against OAL 136 I have mentioned in section 2(f) the alleged representations by Mr Lloyd which in that subsection I found to be of no moment because they could not be sheeted home to the plaintiff. The question now is whether Mr Gardiner has sheeted them home to OAL, whose officer, it appears Mr Lloyd was. 137 Mr Lloyd via the vehicle of one of his companies, is a defendant to these proceedings. Mr Lloyd did not give evidence. 138 I have set out the alleged representations in section 2(f). 139 Mr Gardiner, as I have said, in his cross-claim repeated paras 26 and following of his defence. It alleged representations by Stephen Lloyd at an investment seminar at the offices of Ord Minnett about June 1997, but then para 30 of the defence said: "Further, in or about late 1997 to March 1998, OAL or ARF confirmed the representation pleaded in paragraph 26, by making further representations to the same effect. Particulars The representations were express and oral and were made by Stephen Lloyd on behalf of inter alia OAL and ARF either during a telephone conversation between the defendant and Stephen Lloyd in late 1997, or during a visit to the Project site by the defendant in January 1998, in response to specific questions from the defendant. Further representations were made by Stephen Lloyd on behalf of inter alia OAL and ARF in conversations in or about March 1998 in response to questions from the defendant. These further representations were made following an audit by the Australian Taxation Office upon the defendant's investment in the projects." 140 Mr Gardiner was vigorously cross-examined by Mr Inatey on the particulars to para 30. A problem for Mr Gardiner was that whilst paras 42 and following of his affidavit of 22 October 2004 detailed the site visit that he made to the Projects on 15 January 1998, there was not a word in that affidavit about confirmation of Mr Lloyd's representations. It is probably significant that this was the only visit to the farms before the end of 1999 by Mr Gardiner. 141 Another problem was that although in the defence there is uncertainty as to whether the confirmation of the representations took place on the telephone or at the site of the tea tree farms, by the time he swore his affidavit, Mr Gardiner was certain that it was during the inspection of the farms. 142 Another piece of evidence that bears on this issue is that there was a meeting on 19 December 2001 of the investors. Mr Gardiner said that Mr Stoker, then a director of OAL, read a prepared statement and then took questions from the floor. The theme of the address was that as a result of the current price of tea tree oil and the unlikely chances of an immediate increase in the price, the Projects were not sustainable and there was no alternative but to terminate them. A farmer asked, "What effect would the proposed resolution to wind-up the farms have on the indemnity?" Mr Stoker said the indemnity would not apply and this had been advised to farmers in a letter by Claude Cassegrain. 143 Mr Atkinson then said, "This is not a correct construction of the working of the Indemnity, as this termination would be a circumstance beyond the control of the farmers. There is also a breach of the manager's fiduciary duty to the farmers, as the manager would be claiming payments from farmers resulting from its failure to perform its duty as manager." 144 Mr Gardiner says that neither Mr Sarks nor Mr Stoker replied to Mr Atkinson's comments but the body of farmers supported and applauded his statement and the resolutions to wind up were overwhelmingly defeated. In hindsight, the applause was based on wishful thinking that Mr Atkinson's statement was correct. I do not believe it was correct and that Mr Stoker and Mr Sarks gave due warning in December 2001 of the position that they and their colleagues were taking about the indemnity. They were not believed because the farmers did not want to believe them and preferred to believe Mr Atkinson. 145 However, Mr Inatey asked Mr Gardiner why, when he heard Mr Stoker say that the loans would be called up, he did not raise the matter of Mr Lloyd's representations made at the Ord Minnett seminar and again on site. His answer was that he didn't believe it was relevant at the time, that Mr Atkinson had jumped in before he did and that what Mr Atkinson said was in accord with the mood of the meeting. Mr Inatey made the point to the witness that it was quite extraordinary not to say something because if there had been those representations, what Mr Stoker was saying was quite contrary to what had been previously represented. 146 Mr Gardiner's credit was attacked. 147 I must confess I was not particularly impressed with Mr Gardiner as a witness. My suspicion about the representations are reinforced by the fact that Mr Lloyd did not give evidence when his company was instructing the same firm of solicitors as represented Mr Gardiner. 148 Mr Smith says that there was no reason to call Mr Lloyd because there was no challenge to Mr Gardiner's recollection of what happened at the seminars, or indeed on site. Furthermore no questions were put to Mr Gardiner in cross-examination as to the Ord Minnett meeting and this must have been because neither counsel had instructions of any matter which they could legitimately put to Mr Gardiner that what he was saying did not occur. 149 Again, what happened at the December 2001 meeting tends against the representations being made, but it is not sufficiently strong for one to come to that view. 150 I accordingly need to accept that Mr Lloyd uttered words such as Mr Gardiner now recalls. 151 However, it must be remembered that Mr Gardiner was an experienced investor. He was to a great degree guided by Mr Atkinson, his tax adviser, and he had his eye on the tax advantages that this scheme would offer. 152 At T59-60, Mr Inatey put to Mr Gardiner in cross-examination that when he went to the meeting at Ord Minnett he had formed his own view from reading the prospectus as to how the indemnity would operate and Mr Gardiner agreed with that. He then put to Mr Gardiner that he understood that when Mr Stewart asked the question of Mr Lloyd which brought forth the alleged representation, "Mr Stewart was seeking … Mr Lloyd's opinion as to how he thought the indemnity would be construed". Mr Gardiner agreed with that proposition and then Mr Inatey said: "Q. And you understood that Mr Lloyd was expressing his opinion as to how he thought the indemnity would be construed? A. That's correct." 153 Mr Inatey put that anything that was said by Mr Lloyd as to the meaning and effect of the indemnity was no more than expressions of his opinion and was so understood by Mr Gardiner. There was no evidence that Mr Lloyd either did not hold those beliefs or had no adequate foundation for those beliefs. Mr Gardiner read the words and formed his own view. 154 Mr Brereton made similar submissions but also made submissions on correspondence between Mr Gardiner and the Australian Taxation Office. 155 Mr Brereton cross-examined Mr Gardiner at some length as to his experience and how he had treated the prospectus. Mr Gardiner is a chartered accountant. He has been a member of the Institute of Chartered Accountants since 1975 and he was a member of the Australian Stock Exchange from 1988 to 1997. He has an LLB from Sydney University gained in 1985, a Master of Commerce with Honours from the University of New South Wales gained in 1977 and a B Com from the University of New South Wales granted in 1974. Since 1974 he has worked in finance, stock-broking or as an administrator of a solicitor's firm. 156 Mr Brereton asked him at T22: "Q. And you brought all your training as an accountant and your legal training to the exercise of reading the prospectus? A. That's correct." He also said that he discussed the Project with other people at Clayton Utz, a firm of solicitors for whom he was then working. 157 Mr Brereton put to him (T24): "Q. And you were also conscious, were you not, that the taxation status of the Project was something that was under review by the Australian Tax Office? A. That's correct. Q. And you were conscious, were you not, that the deductibility of expenditure associated with the investment depended, amongst other things, on there being a real commercial risk associated with the investment; didn't you? A. There had yes, a commercial risk, plus a farmer had to show an interest in the Projects. Q. Before your first investment in the Project as you have told us you read carefully the prospectus? A. That's correct. Q. And you read carefully such other documentation as Mr Atkinson provided you in connection with the proposed investment? A. That's correct." 158 Mr Brereton then took Mr Gardiner through the parts of the prospectus which clearly indicated that intending investors should seek independent advice. He understood that the investment was speculative. 159 Mr Brereton then asked about a document which is in the combined tender documents Folder 3 behind Tab 37 which is some handwritten notes of Mr Gardiner preparatory to replying to a questionnaire from the Australian Taxation Office. 160 One of the notes Mr Gardiner had made was, "What effect extend questionnaire to indemnity". When asked about this at T43, Mr Gardiner said: "I was aware that the Tax Office was concerned about non-recourse loans and Part 4A of the then Tax Act and I wanted to make sure that in Steve Lloyd's mind the way that the documents had been constructed, that this would not cause any concerns to the ATO." 161 Mr Gardiner agreed that there was a need to show the Tax Office that there was a commercial risk even for investors who had taken out an indemnity. At T45 Mr Brereton asked: "Q. And is what Mr Lloyd told you was that the documents drawn would in most circumstances result in there being no recourse but that there was some circumstances in which there remained a real contingent risk? A. Correct." 162 Mr Gardiner attempted to say that the only risk was all the farmers taking actions to terminate the Projects, but under further cross-examination by Mr Brereton conceded that that was going to be very highly unlikely. 163 The conclusion that one would draw from Mr Gardiner's evidence was that he was scared that if an investigation was taken into the indemnity side of the arrangement, there may be problems because he felt that in practice, the loan was non-recourse but the documents had to show a contingent risk in order for the tax deductions to flow. He appeared to be a little comforted in the fact that the letter from the Tax Office appeared to be a form letter (because it named the wrong enterprise) and came from the Townsville office which appears not to be feared as much as some other offices by taxpayers with investment schemes. However, he told the Tax Office that after the initial presentations and a detailed review of the prospectus he decided that he would invest in the plantation. There was no mention about the indemnity or the representation, but that is understandable because it was the very last thing he wanted to tell the Australian Tax Office about. 164 Mr Gardiner says that he subscribed particularly for the additional two farms in Project 1 on Mr Lloyd's representations as to the indemnity, but on the whole of the evidence, that should not be accepted. Indeed, the authorities make it quite clear that judges are quite justified in discounting assertions by people in hindsight that they would not have entered into a transaction but for a particular utterance of a person on the other side of the record. 165 Question 8 of the Tax Office's questionnaire was: "If you did take up the loan offered by the Project, would you have participated in the Project if the loan facility had not been available and on what basis … ". Mr Gardiner gave the answer "Probably yes but note the interest rate was extremely competitive at 7.75% …". 166 Mr Brereton put to Mr Gardiner at T50: Q. When your mind was uninfluenced, and I am not necessarily suggesting there is anything dishonest about this, but when your mind was uninfluenced by this litigation your answer, absolutely truthfully to the Tax Office, was that whether or not the loan was available, you probably would have gone ahead, correct? A. That's correct. Q. And if you would have gone ahead regardless of whether or not the loan was available, it follows as day follows night that the indemnity would have made no difference in that context, doesn't it? A. It would have made no difference if I hadn't taken the loans, that's correct." 167 It seems to me when one looks at the whole of the material which I have just surveyed, assuming that Mr Lloyd did utter the words complained of, they were not relied on by Mr Gardiner in going through with the transaction. 168 Accordingly this part of the cross-claim fails. 5. Issues relating to the Prospectuses 169 Paragraphs 32 and following of the final version of the cross-claim say that neither the prospectus nor the supplementary prospectus disclose various funding arrangements between members of the Cassegrain family and their companies and that there was thus a material omission in contravention of ss 995 and 996(1) of the Corporations Law as was in force in 1997. Furthermore, or alternatively, there was an infringement of ss 1023B and 1024 of the Law. 170 The relevant documents are letters of 27 June 1997, board minutes and accounts of OAL for the period July to September 1997 and a letter from OAL to the Australian Tax Office of 6 May 1998. 171 The first letter is written by Claude Cassegrain as director of Endwise Holdings Pty Ltd addressed to the directors of OAL dated 27 June 1997. The letter in essence says that Endwise has incurred expenditure in the formative stages of Tea Tree Project. It acknowledges that it has no present legal right to require repayment from OAL. However, it expects that OAL will repay the costs as and when cash flow from the Tea Tree Project allows and suggests that this claim be taken up in OAL's accounts for 30 June 1997. 172 A similar letter was written by Mr Cassegrain as managing director of Gerard Cassegrain & Co Pty Ltd (GCC). The OAL financial report of July 1997 notes that expenses incurred by GCC are to be transferred to OAL subject to agreement by OAL and appropriate terms of payment being agreed. 173 The board of OAL agreed to this on 28 August 1997. For audit purposes, on 15 September 1997 Endwise noted that it was owed $29,401.85 by OAL and GCC gave a similar confirmation letter for $751,349.34. 174 A letter from OAL signed by Mr Lloyd to the Townsville branch of the Australian Taxation Office of 6 May 1998 said, inter alia, that there were loan funds between OAL and the plaintiff but - "There were no other loan agreements between the parties or other member of the group in the year ended 30 June 1997. However, loans did exist in the books as follows: …. (b) OAL owed GCC $751,349 and Endwise $29,401 as at 30 June 1997 which related to services provided and costs incurred by GCC and Endwise on account of OAL between the date upon which OAL commenced business (November 1996) and 30 June 1997 … Subsequent to 30 June 1997 GCC and Endwise each agreed that they would not demand repayment of their respective loans to OAL before 30 June 2000. This arrangement was put in place to ensure that OAL would not be forced to repay the loans until it could afford to repay … ". 175 Mr Inatey makes the point that there is absolutely no evidence that either GCC or Endwise ever made any request for the repayment of those loans. 176 Mr Humphreys, a chartered accountant, gave evidence for Mr Gardiner. He had examined the books and records of OAL and the plaintiff for the purpose of this litigation. His report says that as at 30 June 1997, GCC and Endwise claimed reimbursement for expenses incurred by them in relation to the Tea Tree Projects. Mr Inatey points out that the acceptance by the directors of OAL of this claim only occurred on 28 August 1997 so that it could not be the case that as at the issue of the first prospectus in April 1997 or the supplementary prospectus of 6 August 1997 that there was a mis-disclosure. 177 In any event the evidence is that Mr Gardiner did not read or rely on the supplementary prospectus. 178 So far as the second prospectus of February 1998 is concerned which relates to the second of the two Projects, it is true that Mr Gardiner had read this prospectus. He read the disclosure of the non-current liability of $780,000.00 to GCC and associated companies. The complaint is that the second prospectus did not disclose that that non-current liability had been repaid in part. It is said to have been repaid in part because of Mr Humphreys' evidence that the books showed that although no particular designation was given to some transactions, the net effect of inter-group transactions in the 1997/1998 year was that $543,000.00 passed from OAL to GCC or associated entities. 179 Mr Gardiner or his wife bought nine more farms after the second prospectus. There is, however, insufficient material to find that the fact, if it be the fact, that part of the loans were repaid during 1997/98 had any effect whatsoever on Mr Gardiner's decision to invest. As I have found the facts, ss 1023B and 1024 of the Corporations Law have no part to play in this case and there is no breach of s 995 or s 996 that is relevant to the cross-claim. 180 I accordingly do not need to go into the argument as to whether the plaintiff should be affixed with liability for any misstatement in the prospectus. My preliminary view is that Mr Brereton's submissions that it is not are correct. 6. The result of the case 181 The result is that there should be a verdict for the plaintiff for the amount claimed. 182 I regret that it has taken me so long to produce a judgment in this complicated matter, but because of that it has become necessary to recalculate the amount due to the plaintiff. The matter should accordingly stand over for short minutes to be brought in. 183 The cross-claim fails. 184 It seems to me, with respect, that the litigation has mainly come about because Mr Gardiner and his associates have taken the attitude, in my view wrongly, that the indemnity applied whenever there was a termination of the scheme otherwise than through their fault and that they then got carried away with what they consider to be suspicious activities going on within the Cassegrain group. Having looked at the material very closely for the purpose of these reasons, the scheme failed basically because the price of tea tree oil dropped dramatically and it was no longer feasible for the proceeds of the sale of oil to continue to fund the farming. 185 The cross-claim must be dismissed with costs. 186 Thus I publish these reasons and stand the proceedings over to Tuesday 11 April 2006 at 9.30 am for short minutes to be brought in. 187 Those minutes should include a provision for the ongoing conduct of the proceedings so far as the other defendants are concerned. They should also provide for the exhibits to be handed out (including the 15 volumes of documentary exhibits). Even if there is to be an appeal or contested issues with respect to some of the remaining defendants, it would be better for these exhibits to be held in a solicitor's office. ********************** 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.