Supreme Court New South Wales Medium Neutral Citation: Land Enviro Corp Pty Limited v HTT Huntley Heritage Pty Limited [2012] NSWSC 382 Hearing dates: 6 February 2012 - 16 March 2012 Decision date: 20 April 2012 Jurisdiction: Equity Division Before: Stevenson J Decision: The Third Amended Statement of Claim and the First and Second Cross Claims are dismissed. Catchwords: Trade and commerce - Trade practices - Misleading or deceptive conduct - Representations - Setting aside of consent order discontinuing proceedings - Damages for loss of opportunity to prosecute discontinued proceedings - Likelihood of success of discontinued proceedings - Fiduciary duties - Whether necessary to demonstrate ability to pursue opportunity appropriated by errant fiduciary - Laches - Entitlement to rescission - Necessity of knowledge of legal right to rescind - Affirmation - Restitutio in integrum - Intervention third party rights - Agency Legislation Cited: Fair Trading Act 1987 Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005 Cases Cited: Alati v Kruger (1955) 94 CLR 216 Boyns v Lackey (1958) SR (NSW) 395 Bullabidgee Pty Limited v McCleary [2010] NSWSC 145 Coast Estates Pty Limited v Melevende [1955] VR 433 Colonial Mutual Life Assurance Society Limited v The Producers and Citizens Cooperative Assurance Company of Australia Limited (1931) 46 CLR 41 Connectland Pty Ltd v Cardno Forbes Rigby Pty Ltd [2011] NSWCA 391 Consul Development Pty Limited v DPC Estates Pty Limited (1975) 132 CLR 373 Crabtree - Vickers Pty Limited v Australian Direct Mail Advertising & Addressing Co Pty Limited (1975) 133 CLR 72 Digi-Tech (Australia) Limited v Brand [2004] NSWCA 58 Ernest v Vivian (1863) 33 LJ (Ch) 513 Freeman and Lockyer v Buckhurst Park Properties (Mangal) Limited [1964] 2 QB 480 Harvey v Phillips (1956) 95 CLR 235 Henjo Investments Pty Limited v Collins Marrickville Pty Limited (1998) 39 FCR 546 Johnson v Perez (1988) 166 CLR 351 Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd (2008) 72 NSWLR 160 Land Enviro Corp Pty Ltd v HTT Huntley Heritage Pty Ltd [2012] NSWSC 177 Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 Molotu Pty Limited v Solar Power Limited (1989) 6 BPR 13,460 Nikolaou v Papasavas, Phillips & Co (1989) 166 CLR 394 O'Connor v S.P. Bray Limited (1936) 36 SR (NSW) 248 O'Connor v S.P. Bray Limited (1937) 56 CLR 464 Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 Perpetual Trustees Australia Ltd v Heperu Pty Ltd & Ors [No 2] (2009) 78 NSWLR 190 Pririe v Richardson [1927] 1 KB 448 Re Hoffman: Ex parte Worrell v Schilling (1989) 85 ALR 145 Sargent v ASL Developments Limited (1974) 131 CLR 634 Singh v Ginelle Pty Ltd [2010] NSWCA 310 Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691 Steve Masselos & Co v Young [2011] NSWCA 352 Streeter v Western Areas Exploration Pty Limited (2011) 278 ALR 291 Tenji v Henneberry & Associates Pty Limited (2000) 98 FCR 324 Tiplady v Gold Coast Carlton Pty Limited (1984) 8 FCR 438 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Tyco (Australia) Pty Ltd t/as ADT Security v Signature Security Group Pty Ltd [2009] FCA 1029 Warman International Limited v Dwyer (1995) 182 CLR 544 Watson v Foxman (1995) 49 NSWLR 315 Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679 Texts Cited: Carter Peden Tolhurst, Contract Law in Australia, 5th ed (2007) Concise Oxford Dictionary 11th ed Macquarie Dictionary 3rd ed Seddon and Ellinghouse, Cheshire and Fifoot's Law of Contract, 9th Australia ed (2008) Spencer Bower and Handley, Res Judicata (2009) Category: Principal judgment Parties: Land Enviro Corp Pty Limited (First Plaintiff) Sam Zdrilic (Second Plaintiff) Amy Zdrilic (Third Plaintiff) Amy Holdings Pty Limited (Fourth Plaintiff) HTT Huntley Heritage Pty Limited (First Defendant) Robert Renshall (Second Defendant) David Hickie (Third Defendant) Sentel Pty Limited (Fourth Defendant) Devubo Pty Limited (Fifth Defendant) Vocifa Pty Limited (Sixth Defendant) Michael Ansell (Seventh Defendant) Representation: Counsel: T M Jucovic QC and S A Wells (Plaintiffs) M L D Einfeld QC and M Sneddon (First, Second and Fifth Defendants) G A F Connolly (Third and Sixth Defendants) Solicitors: Kemp Strang (Plaintiffs) Middletons (First, Second and Fifth Defendants) Bartier Perry (Third and Sixth Defendants) File Number(s): SC 2007/254173 Publication restriction: Nil Judgment Introduction 1These proceedings are, essentially, concerned with three matters. 2The first matter is whether the plaintiffs have rescinded or are entitled to have set aside agreements entitled "Heads of Agreement" dated 13 May 2004 ("the Heads of Agreement") and "Deed of Non-Dilution and Merger" dated 27 August 2004 ("the Non-Dilution Deed"). 3All parties to these proceedings were parties to the Heads of Agreement, except for the seventh defendant. All parties to these proceedings were parties to the Non-Dilution Deed. 4The second matter is whether an order made by the Court on 6 September 2004 dismissing proceedings number 5396 of 2001 (the "2001 Proceedings") should be set aside. 5The first plaintiff in these proceedings, Land Enviro Corp Pty Limited ("LEC"), brought the 2001 Proceedings against, amongst others, the first defendant in these proceedings, HTT Huntley Heritage Pty Limited ("HTT"), the third and seventh defendants in these proceedings, Mr David Hickie ("Mr Hickie") and Mr Michael Ansell ("Mr Ansell") and a Mr Bruce Hulley ("Mr Hulley"). 6The third matter is whether, assuming the plaintiffs are entitled to some or all of such relief, they are entitled to damages. 7The question of damages directs attention to the likely outcome of the 2001 Proceedings, assuming the order for dismissal of 6 September 2004 had not been made. The parties - the plaintiffs 8The first plaintiff is LEC. 9The second plaintiff is Sam Zdrilic ("Mr Zdrilic"). Mr Zdrilic is a director of LEC and Amy Holdings Pty Limited ("Amy Holdings"). Mr Zdrilic is also an alternate director of HTT. 10The third plaintiff is Amy Zdrilic ("Mrs Zdrilic"), the second plaintiff's wife. Mrs Zdrilic is a director of LEC and Amy Holdings. 11The fourth plaintiff is Amy Holdings. Amy Holdings is a holder of 1/3 of the issued shares in Sentel Pty Limited ("Sentel"). 12In the proceedings Mr T M Jucovic QC appeared with Mr S A Wells for the plaintiffs. The parties - the defendants 13The first defendant is HTT. HTT is the trustee of the Huntley Trust. HTT, as trustee of the Huntley Trust, is the owner of the land described below. 14The second defendant is Robert Renshall ("Mr Renshall"). Mr Renshall is a director of HTT, as well as Sentel and the fifth defendant, Devubo Pty Limited ("Devubo"). Mr Renshall is also a director and shareholder of Renequip Pty Limited ("Renequip") and Enviro Management Service Pty Limited ("Enviro"). Both Renequip and Enviro hold units in the Huntley Trust. 15In the proceedings, Mr M L D Einfeld QC appeared with Mr Mark Sneddon for HTT, Mr Renshall and Devubo. I shall refer to those parties as the "HTT Defendants". 16The third defendant is Mr Hickie. Mr Hickie is a previous director of LEC and HTT. Mr Hickie is a director of Sentel and the sixth defendant, Vocifa Pty Limited ("Vocifa"). 17In the proceedings Mr G A F Connolly appeared for Mr Hickie and Vocifa. 18The fourth defendant is Sentel. Sentel is a company incorporated to give effect to the matters agreed in the Heads of Agreement and in the Non-Dilution Deed. Sentel holds 27.5 per cent of the shares in HTT, and of the units in the Huntley Trust. The Zdrilic, Renshall and Hickie interests have an equal shareholding in Sentel through Amy Holdings, Devubo and Vocifa respectively. 19The seventh defendant is Mr Ansell. Mr Ansell, as previously mentioned, is a party to the Non-Dilution Deed, but not to the Heads of Agreement. Mr Ansell was a defendant to and consented to the dismissal of the 2001 Proceedings. 20Sentel and Mr Ansell were not represented in and played no role in the proceedings. Mr Hulley 21Mr Hulley was a former director of LEC and HTT. Mr Hulley died on 13 November 2010. The pleadings 22The plaintiffs move on a Third Amended Statement of Claim. 23Defences have been filed to the Third Amended Statement of Claim by the HTT Defendants and by Mr Hickie and Vocifa. 24The HTT Defendants, and Mr Hickie and Vocifa brought cross-claims against the plaintiffs seeking declaratory and other relief consequential upon the matters pleaded in their respective defences. Background The Land 25The dispute concerns a disused coalmine ("the Land"). 26Prior to 29 June 1998, Powercoal Pty Limited ("Powercoal") was the owner of the Land. 27The Land comprises of 18 separate contiguous parcels, covers an area of about 420 hectares and is situated approximately 20 kilometres southwest of Wollongong, near Dapto. LEC contract with Powercoal 28LEC was incorporated on 22 April 1998 for the purpose of acquiring the Land from Powercoal and undertaking rehabilitation and development of the Land. 29At that time, the directors of LEC included Mr Zdrilic, Mr Hickie, Mr Hulley, and Mr Hulley's wife, Ms Cosima Hulley-Beck. 30On 15 May 1998, Mr and Mrs Zdrilic and Mr Hulley (and other parties) entered into a Shareholders Agreement pursuant to which they agreed to participate in a joint venture project in order to acquire, rehabilitate and develop the Land (the Project). 31On the same day, Mr Hulley entered into a Management Agreement, pursuant to which he was appointed general manager of LEC. 32Between June and August 1998, Mr Zdrilic advanced approximately $2.237 million to LEC. 33On 29 June 1998, LEC exchanged contracts with Powercoal to purchase the Land for $2.5 million and paid a deposit of $250,000 (the "LEC Contract"). 34Settlement of the LEC Contract was due to take place on 9 March 1999, following the giving of consent by the relevant Minister to the transfer of coal leases to LEC on 9 February 1999. 35Settlement did not take place on 9 March 1999. 36On 10 March 1999, Powercoal issued a Notice to Complete, calling for completion on 29 March 1999. 37In the meantime, HTT was incorporated on 11 February 1999. Mr Hulley, Ms Hulley-Beck and Mr Hickie were appointed directors. Mr Hulley's alleged role in creating difficulties for LEC 38The plaintiffs claim that whilst Mr Hulley was the director of both LEC and HTT, he made financial demands on LEC, frustrated LEC's efforts to raise funds to complete the purchase of the Land from Powercoal, pursued finance in a manner designed to exclude LEC and withheld information from LEC. 39In support of those propositions, the plaintiffs point to five letters that Mr Hulley sent Powercoal between 15 April and 7 May 1999. Three of those letters were sent on HTT letterhead. Two were sent on LEC letterhead. Mr Hulley signed each letter as a director of the relevant company. 40On 15 April 1999, Mr Hulley sent a letter dated 15 April 1999 on HTT letterhead to Powercoal which advised Powercoal that HTT had been endeavouring, unsuccessfully, to "complete an acceptable arrangement" with LEC for funds to be loaned to LEC to enable it to complete the LEC Contract. The letter stated that HTT was ready, willing and able to "complete the Contract for Sale". 41On 18 April 1999, Mr Hulley sent a letter dated 18 April 1999 on LEC letterhead to Powercoal which advised Powercoal that LEC had exhausted every possible course of action to organise funding, that a board meeting of LEC had been called to consider the appointment of an administrator and that in the event Powercoal issued a Notice of Termination of the LEC Contract, LEC had "no bona fide defence or sustainable argument against that course of action". According to the plaintiffs, this letter was sent without the knowledge or authorisation of the board of LEC. 42On the same day (18 April 1999), Mr Hulley sent a letter dated 18 April 1999 on HTT letterhead to Powercoal advising that in the event that Powercoal did issue a Notice of Termination to LEC, then HTT requested the opportunity to acquire the Land and undertake the "Mine Rehabilitation Plan". The letter stated that the directors of HTT (Ms Hulley-Beck and Messrs Hulley and Hickie) gave their undertaking to Powercoal that they were prepared to execute a contract for sale of land in identical terms to the LEC Contract. The letter also indicated the preparedness of the directors of HTT to indemnify Powercoal against any claim or litigation initiated by LEC. 43On 7 May 1999, Mr Hulley sent a letter dated 7 May 1999 on LEC letterhead to Powercoal stating that Mr Hulley was not able to indicate that LEC in its own right had the funds available to complete the purchase. According to the plaintiffs, this letter was sent without the knowledge or authorisation of the board of LEC. 44On the same day (7 May 1999), Mr Hulley sent a letter on HTT letterhead to Powercoal making a non-binding offer to Powercoal for the provision of security and maintenance resources "whilst Powercoal considers its position". 45LEC was not able to comply with Powercoal's Notice to Complete. 46On 7 May 1999, Powercoal terminated the LEC Contract. Events taking place after termination of Powercoal Contract 47On 21 May 1999, Mr Zdrilic and LEC's then solicitor, Mr Allan Brown, attended a meeting with representatives of Powercoal in the hope of persuading Powercoal to extend the time for LEC to complete the LEC Contract. 48As Mr Zdrilic was unable to provide Powercoal with evidence of LEC's ability to finance the purchase of the Land or its rehabilitation, Powercoal refused to take the matter further. 49Mr Zdrilic accepted that, at the meeting of 21 May 1999, he had unsuccessfully sought an indulgence from Powercoal. From that time, Mr Zdrilic agreed Powercoal was entitled to sell the Land to whomever it wished. 50Mr Zdrilic gave the following evidence:- Q: "So far as Powercoal was concerned, you believed at that time that was the end of it, that was as far as you could take it with Powercoal; correct? A: If Powercoal were not prepared to give us an extension of time for me to put in order what needs to be put in order, then we have to face the facts and that was the end of it. Q: And Powercoal wasn't prepared to give you that extension, was it, when you went to see them? A: That's a fair assessment." 51Mr Zdrilic also accepted that, at that time, LEC did not have the funds to complete the Contract. Furthermore, Mr Zdrilic accepted that he did not have the funds to advance to LEC to enable it to complete the purchase. 52On 1 June 1999 Mr Zdrilic appointed Mr Michael Jones as receiver and manager of LEC under a Deed of Charge that LEC gave Mr Zdrilic on 19 June 1998. 53LEC's position, so far as concerns the funding of the purchase of the Land, was summarised in two letters written by LEC's solicitor, Mr Brown, on 3 and 4 June 1999. 54On 3 June 1999, Mr Brown wrote to Mr Jones stating that:- "LEC is not in a position to seek alternative funding and proceed with the purchase". 55On 4 June 1999, Mr Brown wrote to the Office of State Revenue stating that he was the solicitor for the receiver and manager of LEC and that:- "I am also able to confirm the Receiver's advice that he does not under any circumstances propose proceeding with the purchase. LEC does not have the funds to complete the purchase nor has it been able to arrange funds for that purpose. That is the reason the contract is terminated. There is also a large deficiency between monies owed by LEC and monies available to meet its debts. There is absolutely no doubt the transfer will never be lodged for registration." HTT contract with Powercoal 56As mentioned above, HTT was incorporated on 11 February 1999. Mr Hulley, Ms Hulley-Beck and Mr Hickie were appointed directors. At that time they were each also directors of LEC. 57On 10 May 1999, three days after Powercoal terminated the 29 June 1998 contract with LEC, Mr Hulley, Ms Hulley-Beck and Mr Hickie resigned as directors of LEC. 58On 16 September 1999, Mr Brown reported to Mr Jones (the receiver of LEC) that:- "Graham Hughes of Howards advised me that he had heard that Hulley had 'disappeared off the face of the earth'. On the other hand he had also been told that he is very close to doing a deal on Huntley Mines which would see him cashed up considerably." 59Mr Zdrilic saw this letter but dismissed it as mere rumour. 60On 20 December 1999 Mr Renshall was appointed a director of HTT. 61Some six months later, on 11 April 2000, HTT exchanged contracts with Powercoal to purchase the Land for $2.5 million. This was the same amount for which LEC had contracted to purchase the property on 29 June 1998. 62That contract was completed on 17 October 2000. HTT became, and remains, the registered proprietor of the Land. The 2001 Proceedings 63LEC commenced the 2001 Proceedings by Summons filed on 6 November 2001. 64None of the defendants to the current proceedings were named as defendants to the 2001 Proceedings at this stage. 65In November 2001 the defendants to the 2001 Proceedings were Mr Hulley, Huntley Operations Pty Limited (a company associated with Mr Hulley), and Permanent Trustee Australia Pty Limited (a mortgagee of the Land). 66Amongst the relief then sought in the 2001 Proceedings was a declaration that the title to certain residential property (which had no connection to the Land) was held in trust for LEC (subject to the mortgage of Permanent Trustee Australia Pty Limited). 67Sometime in early 2002 Mr Zdrilic heard, for the first time, that HTT had purchased the Land. 68On 21 March 2002, a Statement of Claim was filed in the 2001 Proceedings. This pleaded, amongst other things, that HTT had become the registered proprietor of the Land on 17 October 2000, but did not seek any relief against HTT. 69On 11 December 2002, LEC filed an Amended Statement of Claim in the 2001 Proceedings in which HTT was joined as a defendant for the first time. Mr Hickie and Mr Ansell were also joined as defendants. 70By that Statement of Claim, for the first time, LEC sought, amongst other relief, a declaration that the Land was held by HTT on constructive trust for LEC. 71The basis upon which that relief was sought was that:- (a)after the LEC Contract was terminated, HTT had, with knowledge, made use of information and opportunities which Mr Hulley and Mr Hickie had acquired as directors of LEC; (b)HTT had received the benefit of the Land in circumstances where it knew of Mr Hulley's and/or Mr Hickie's breaches of fiduciary and statutory duties to LEC; and (c)HTT had acquired legal ownership of the Land with notice of LEC's "continuing equitable interest" in the Land and with notice of alleged breaches by Mr Hulley and Mr Hickie. 72HTT did not file a defence in the 2001 Proceedings. No affidavits were filed in the 2001 Proceedings and there was no discovery between LEC and HTT. 73By Notice of Motion dated 11 March 2003, HTT sought an order that LEC provide security for costs of the proceedings in an amount of approximately $230,000. Other defendants made similar applications for security. 74In August 2003, LEC received advice from Counsel that because LEC was in receivership, it was likely that it would be ordered to provide security for costs. 75On 11 September 2003, LEC instructed its then solicitor to offer some $82,500 for security, on a staged basis. 76It appears that this aspect of the proceedings was overtaken by settlement discussions. Certainly, the security for costs applications were never dealt with by the Court. The likely effect of the security for costs applications is considered further below in the context of the HTT Defendants' submissions as to the likely fate of the 2001 Proceedings. 77Ultimately, the 2001 Proceedings were settled by the relevant parties entering into the Heads of Agreement and the Non-Dilution Deed and by consenting to dismissal of the 2001 Proceedings. Negotiations to settle the 2001 Proceedings 78On 10 September 2003, HTT's then solicitor, Mr Brian Gillard ("Mr Gillard"), wrote to LEC's then solicitor, Mr Derek Hilliard ("Mr Hilliard"), suggesting that a meeting take place between the parties to see:- "...whether a suitable arrangement can be agreed to resolve the issues between them". 79There then commenced discussions between Mr Zdrilic and Mr Renshall (who had been appointed a director of HTT on 20 December 1999) to endeavour to settle the 2001 Proceedings. 80The broad basis of discussions that ensued was the possibility of Mr Zdrilic, Mr Renshall and Mr Hickie resolving their differences (and the 2001 Proceedings) by entering into a joint venture, in which each of them would have an interest, in relation to the further rehabilitation and redevelopment of the Land. The representations 81The plaintiffs claim that between 29 January 2004 and 27 August 2004 HTT made a series of seventeen representations. Many of the representations were allegedly made by Mr Renshall in conversations with Mr Zdrilic. The plaintiffs claim that in reliance on these representations, they entered into the Heads of Agreement, the Non-Dilution Deed and agreed to dismissal of the 2001 Proceedings. 82The plaintiffs claim that at the time of making the representations, HTT and Mr Renshall, or either of them, acted as agent for Mr Renshall's company, Devubo, and as agent for Mr Hickie and his company, Vocifa. 83Alternatively, the plaintiffs claim that HTT made the representations and that Mr Renshall was "involved" in the misleading or deceptive conduct said to arise from them within the meaning of the Trade Practices Act 1974 (Cth), s 75B ("the Act"). 84The plaintiffs claim that the representations were made at a time when HTT was involved in dealings with a New Zealand company, IBIS Investment Bank ("IBIS") and a related company, Investment Protection Cover Inc ("IPC"), as trustee for the IPC Joint Venture Trust. 85On 15 March 2004, HTT and IPC entered into an agreement called "Heads of Agreement" ("the IPC Heads of Agreement") pursuant to which it was agreed that IPC would purchase at least 51 per cent of the shares in HTT and the units in the Huntley Trust and pay out HTT's loans. It was further agreed that after the acquisition by IPC of those shares and units, IPC would be responsible for and provide all working capital in respect of the Project. 86Broadly speaking, the negotiations between Mr Zdrilic and Mr Renshall had, as their object, the settlement of the 2001 Proceedings and also the removal of a caveat that LEC had lodged on the title of the Land on 23 April 2003 ("the Caveat"). 87The idea was that the Zdrilic interests would participate in the Project by having an equal shareholding (with the Renshall and Hickie) interests in Sentel. Sentel would, in turn, hold a 27.5 per cent interest in HTT and the Huntley Trust. 88The proposed structure can be illustrated as follows:- 89As I have mentioned, the plaintiffs claim that in reliance on the representations, they entered into, inter alia, the Heads of Agreement. 90The Heads of Agreement recited that:- "The parties to these Heads of Agreement have agreed to resolve their disputes on the basis set out herein which essentially involves the formation of a new company to be known as Sentel Pty Limited ('Sentel') in which they or their nominees will equally hold together with the smaller shareholders the issued share capital and Sentel in turn will recognise their loans and hold approximately 34.75% of the issued capital of HTT and approximately 34.75% of the units in the Huntley Trust and LEC will withdraw the Caveat and otherwise surrender its claim against HTT and Hickie". 91The Heads of Agreement, in order to become effective, required a number of transactions to be entered into. A settlement of those transactions was contemplated. 92A significant obligation in Heads of Agreement was found in clause 4.7 which stated:- "HTT shall obtain sufficient finance from a new funder (estimated at but not limited to approximately $12 million) to payout [existing mortgagees] and any other creditor holding security over the Huntley Mine, and to purchase the complimentary [sic] land (...) and to prepay 6 months interest on the loans from the new funder." 93Clause 4.8 of the Heads of Agreement stated:- "The parties acknowledge that HTT will or is likely to require further debt and/or equity funding to complete the rehabilitation of the Huntley Mine (and the complimentary [sic] land) and to complete the development of that land for the best possible return..." 94A final settlement of the transactions took place on 27 August 2004. On that date the Non-Dilution Deed was executed and Short Minutes of Order providing for the dismissal of the 2001 Proceedings were signed. A Withdrawal of the Caveat was also handed over. The events leading to, and occurring on and after the 27 August 2004 settlement are considered in detail below. 95By reason of the Non-Dilution deed, Sentel's equity in HTT and the Huntley Trust became 27.5 per cent, rather than a slightly higher percentage contemplated earlier. The particular representations 96The seventeen representations fall into four broad categories. Representations as to the availability of finance and the financial position of IPC 97The plaintiffs claim the representations made were that:- (a)IPC was of financial substance; (b)IPC would become a joint venture partner with HTT, with the controlling interest in HHT; (c)IPC would purchase at least 51 per cent of shares and units in HTT and the Huntley Trust; (d)IPC would provide finance to payout existing mortgages over the Land; and (e)IPC would provide substantial sums required to effect the Project. Representations as to restrictions imposed by IPC 98The plaintiffs claim that Mr Renshall and HTT represented that IPC would not agree that:- (a)Mr Zdrilic have the right of veto at HTT board meetings; (b)Mr Zdrilic be a director of HTT at all; and (c)HTT provide security to Mr Zdrilic in respect of a loan Mr Zdrilic had made to LEC. Representations as to Mr Renshall's interest in the Huntley Trust 99The plaintiffs relied upon representations alleged to be made by HTT as to the extent to which units controlled by Mr Renshall in the Huntley Trust were available to be transferred to Sentel. In closing submissions this aspect of the claim was not pressed. Representations as at IPC representation on the board of HTT 100The plaintiffs also claimed that HTT represented that Mr Christopher Frederick ("Mr Frederick") and Mr Ken Tugrul ("Mr Tugrul"), who became directors of HTT after the 27 August 2004 settlement, were nominated by IPC to represent it on the HTT board. In closing submissions, this aspect of the claim was also not pressed. Alleged falsity of the representations 101The plaintiffs claim that each of the representations were false and were made by Mr Renshall fraudulently. It is alleged that Mr Renshall, and thus HTT, knew the representations were false and untrue, or made the representations recklessly, not caring whether they were true or false. 102The plaintiffs allege that, by making the representations, HTT engaged in conduct that was misleading or deceptive for the purposes of the Act. 103The plaintiffs also allege that HTT and Mr Renshall had a duty to LEC and to Mr Zdrilic to take care in the making of the representations and that HTT and Mr Renshall acted in breach of that duty. Subsequent events 104On 6 September 2004 orders dismissing the 2001 Proceedings were made. 105On 16 September 2004 HTT terminated the IPC Heads of Agreement. 106The plaintiffs claim that, notwithstanding HTT's termination of the IPC Heads of Agreement, HTT continued to deal with Mr Zdrilic, up to March 2005, as if the IPC deal was still on foot. 107Mr Zdrilic claims that on 8 March 2005, he learned, for the first time that the arrangements between IPC and HTT had "collapsed" on 15 September 2004. 108Mr Zdrilic claims that he, thereafter, requested further information, sought to renegotiate security from HTT, in respect of the loan owed to him by LEC, and sought to become a director of HTT. 109On 11 October 2006 LEC lodged a further caveat on the title of the Land. 110On 26 March 2007 the plaintiffs commenced these proceedings. 111The plaintiffs claim that by taking the steps referred to in the two preceding paragraphs, they rescinded both the Heads of Agreements and the Non-Dilution Deed, and seek declarations to that effect. HTT's work on the Project since 2003 112Between 2003 to the present date, HTT has worked on the Project. 113HTT has, amongst others things, conducted a landfill business whereby contaminated tailings damns have been filled with landfills from other sites for a fee. 114HTT obtained development approval on 3 December 2010 for a 18 hole golf course, sold coal on the Land, sold coal leases for a fee and a royalty of $US1 per tonne to be paid in the future upon extraction of coal. 115It was HTT's intention to construct individual residences and sell them after completion. 116According to evidence served by HTT in the proceedings, the rehabilitation of the Land is now 85 per cent complete and it is expected that the landfill operation will be completed sometime in 2012. 117In 2011, HTT submitted a revised planning proposal for rezoning of 179 hectares of the Land to allow for a low-density residential development of 438 lots surrounding the golf course. 118Wollongong City Council approved that planning proposal on 12 December 2011. The proposal was then sent to the Department of Planning for approval by the relevant Minister. 119However, as is revealed in an affidavit sworn by Mr Renshall on 22 December 2011, problems have emerged in relation to the Project. 120In that affidavit, Mr Renshall said that:- (a)in February 2007, Suncorp-Metway Limited ("Suncorp") granted HTT debt funding, secured by first mortgage over the Land, of $17.9 million for 3 years; (b)funding was used by HTT to refinance some of the costs of acquiring the Land and carrying out landfill operations on the Land to remediate the property; (c)in late 2010, Suncorp advised HTT that it was exiting the property finance market and that HTT would need to find alternate finance; (d)since 2010 HTT has tried, unsuccessfully, to obtain refinance; (e)the Suncorp facility expires on 31 March 2012; (f)if Suncorp refuses to extend the facility, and HTT cannot refinance, the Land will have to be sold; (g)HTT does not have the financial resources to undertake the development of a golf course and residential development on the Land; (h)HTT currently intends to sell the Land if and when it is rezoned for residential development; (i)in that regard the planning proposal approved by Wollongong City Council on 12 December 2011 is to be sent to the Department of Planning for consideration by the Minister for Planning and Infrastructure; (j)even if HTT is able to secure an extension of the Suncorp loan (or refinance that loan) when land filling is completed, it will be unable to make interest payments and the Land will have to be sold to repay the debt; and (k)HTT has not sought or obtained funding in respect of the potential residential and golf course development of the Land. Relief claimed 121The plaintiffs claim declarations that the Heads of Agreement and the Non-Dilution Deed have been rescinded by reason of the service of the Caveat lodged by LEC on the title of the Land on 11 October 2006, or alternatively by service of the Statement of Claim in these proceedings on 26 March 2007. 122Alternatively, the plaintiffs seek orders pursuant to the s 87(2) of the Act setting those agreements aside. 123The plaintiffs also seek to set aside an order dismissing the 2001 Proceedings made on 6 September 2004. 124The plaintiffs also claim damages. 125By reason of the order made by Barrett J in these proceedings in Land Enviro Corp Pty Ltd and Others v HTT Huntley Heritage Pty Ltd and Others (2008) 72 NSWLR 160, the damages that the plaintiffs are able to claim in these proceeds are those they have suffered by reason of their entering into the Heads of Agreement and the Non-Dilution Deed and, the consent given by them to the dismissal of the 2001 Proceedings. The plaintiffs' witnesses 126The plaintiffs called two witnesses: Mr Zdrilic and Mr Hilliard. Mr Hilliard 127At all relevant times, Mr Hilliard was a partner of the law firm TressCox (previously Tress Cocks & Maddox until 2004). Mr Hilliard assumed conduct of the 2001 Proceedings in August 2003. He acted for the plaintiffs throughout the negotiations to settle the 2001 Proceedings including in relation to the entry by the plaintiffs into the Heads of Agreement and the Non-Dilution Deed and in relation to the dismissal of the 2001 Proceedings on 6 September 2004. 128Mr Hilliard was admitted as a solicitor in 1977. In 1995 he was given specialist accreditation by the Law Society of New South Wales in the area of "commercial litigation - insolvency". 129Thus, at the time he starting acting in the 2001 Proceedings, he was an experienced solicitor. 130Mr Hilliard kept diary entries in relation to his many dealings with Mr Zdrilic and with other parties, particularly Mr Gillard, the solicitor then acting for the HTT Defendants. 131I have no hesitation in accepting the accuracy and reliability of Mr Hilliard's diary entries. Indeed, Mr Einfeld accepted that they were "unimpeachable". 132Mr Hilliard was cross-examined for approximately two days, over a three-day period. 133Overall, I thought Mr Hilliard gave his evidence honestly and openly in the face of a vigorous cross-examination. 134However, in my opinion, the cross-examination established that, at least on one occasion, Mr Hilliard's account of a conversation with Mr Zdrilic, to the extent it went further than Mr Hilliard's diary entries, was not completely reliable. 135In cross-examination, particular attention was placed on Mr Hilliard's account of a conversation he had with Mr Zdrilic on 13 February 2004 in which, according to his affidavit, Mr Zdrilic made reference to a "big funder (...) coming along". Those words are significant, as they are ones Mr Zdrilic attributed on a number of occasions to Mr Renshall, in particular in connection with the Second Representation (discussed below), which, according to Mr Zdrilic, was made at around this time. 136There is no indication in Mr Hilliard's diary note of any such words being used; the diary note simply referred to "refinance". In that, and other respects, Mr Hilliard ultimately agreed that he had "filled in the blanks" created by the "cryptic recording of words and phrases" in his diary note, but "not from direct recollection of what was said at the time". 137However, by and large, I found Mr Hilliard's evidence of his recollection of events reliable. In particular, as will emerge below, I accept his account of important events occurring during the 27 August 2004 meeting. Mr Zdrilic 138To a large extent, the plaintiffs' claims depend on the evidence of Mr Zdrilic. 139Many of the representations relied on by the plaintiffs were allegedly made orally by Mr Renshall to Mr Zdrilic. 140In relation to two critical representations (the Second Representation, allegedly in around February 2004, that "the big funder will take control of the project as they will put a lot of money in", and the Seventeenth Representations, allegedly made at the 27 August 2004 meeting as to monies to be advanced by the "new funder" shortly thereafter) Mr Zdrilic did not assert his recollection was assisted by any contemporaneous note. 141In relation to other representations, Mr Zdrilic referred to notes he said he made at or around the time of the relevant conversations. Some of those notes have the appearance of contemporaneity. Others look more like notes made after the conversation as a summary of what was said, or at least of what Mr Zdrilic took from the conversation. 142Mr Zdrilic accepted that some of his diary notes reflected his own "gloss" or "thoughts" about what had been said or his "best understanding or impression" of what was said. 143Mr Zdrilic has had a long involvement in the matters the subject of this litigation. His involvement dates back to, at least, his entry into the 21 April 1998 Heads of Agreement. 144It is clear from the evidence that Mr Zdrilic has invested a good deal of money, a good deal of time and a good deal of his energy into the matters with which these proceedings are concerned. He has also engaged in two significant pieces of litigation, including the present litigation, in his pursuit of a remedy in respect of the wrongs of which he complains. 145The HTT Defendants submitted that:- "[Mr Zdrilic's notes] were written by a man looking at matters through 'rose-coloured glasses'. The Huntley project became Mr Zdrilic's passion. (...) His enthusiasm for the project was over-riding. As a matter of probability, the Court may properly regard Mr Zdrilic as a person who largely heard what he wanted to hear. His file notes should be seen in that light". 146I consider there is substance in this submission. 147I also bear in mind what McLelland CJ in Eq said of the fallibility of memory in Watson v Foxman (1995) 49 NSWLR 315, at 319:- "[H]uman memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience." 148Mr Zdrilic was cross-examined for five full days. Mr Zdrilic's recollection of events was thoroughly and painstakingly tested in the course of that cross-examination. 149Having observed Mr Zdrilic carefully during his cross-examination, I do not believe that he gave any answer to a question that he knew to be false. 150However he did demonstrate an inclination to assert the improbable, and deny the obvious. 151For example, Mr Zdrilic deposed that on 20 December 2003 he said to Mr Renshall that, as at 12 March 2004, the amount owed to him by LEC "will be $5,481,723" and that another "big amount" of monies owing to him "is the $400,000 I paid to acquire an additional 10% equity". 152In cross-examination, Mr Zdrilic was asked how, as at 20 December 2003, he was able to calculate that his loan, with interest, would be $5,481,723 as at 12 March 2004. 153Mr Zdrilic asserted that he had a "worksheet" at home that enabled him to do this calculation. 154His attention was drawn to a note that he sent Mr Renshall on 10 February 2004 which contained a number of calculations. Those calculations included that his "main loan and accrued interest" was $5,481,723 and that the amount concerned with "purchase from Chris Bates 10% in LEC" was $400,000. 155Nonetheless, Mr Zdrilic maintained that he had done the calculation on 20 December 2003 and, further, denied discussing that figure with Mr Renshall on 10 February 2004. 156It is obvious that the figures came from Mr Zdrilic's 10 February 2004 note to Mr Renshall and that he used that note to reconstruct the 20 December 2003 conversation. 157Another example arises in relation to the Second Representation. 158In his affidavit evidence, Mr Zdrilic said this occurred "sometime between 18 February and early March 2004" when Mr Renshall allegedly telephoned Mr Zdrilic and said "the big funder will take control of the project as I will put a lot of money in". Consistently with Mr Zdrilic's affidavit evidence, this representation is pleaded as having occurred "between 18 February 2004 and early March 2004". 159However, in cross-examination, Mr Zdrilic asserted, for the first time, that he could now "pinpoint" 28 February 2004 as the date upon which this conversation took place. Mr Zdrilic said he was able to do this because he could recall that he rang Mr Renshall immediately after receiving a letter dated 27 February 2003 from HTT's then solicitor, Mr Gillard. Mr Zdrilic said he did not like what he had read in Mr Gillard's letter and "I got in touch with Mr Renshall the next day. I think it was a Saturday". 28 February 2004 was indeed a Saturday. 160But, elsewhere in his affidavit evidence Mr Zdrilic had given a detailed account of the conversation that he claimed to have with Mr Renshall on Saturday 28 February 2004. In that account Mr Zdrilic certainly mentions protesting to Mr Renshall about Mr Gillard's letter. But he made no mention, in that account of the conversation, of any statement to the effect that "the big funder will take control of the project etc". 161Mr Zdrilic said that he had recalled that the "big funder" conversation took place on 28 February 2004 "when I was doing one of my affidavits" and that the reason he had not specified 28 February 2004 (rather than "between 18 February 2004 and early March 2004") was that:- "I think this was mentioned in my much much earlier affidavit and I put it that way and I thought, again, changing one affidavit to the next didn't look right to me to change it, so I was telling the story any way and I decided to leave it as it is". 162The "much much earlier affidavit" to which Mr Zdrilic referred was one he swore in an interlocutory application in these proceedings. 163I think it clear that, in fact, Mr Zdrilic had no recollection that the "big funder" conversation took place on 28 February 2004 (as opposed to some other date in the range pleaded). His account as to how he could "pinpoint" the date as being 28 February 2004 is not possible to reconcile with his evidence as to the conversation he did have with Mr Renshall on that day. 164In the context of the case as a whole, nothing turns on whether this conversation took place on February 2004 or between 18 February 2004 and early March 2004. 165However, Mr Zdrilic's insistence that he could "pinpoint" the date is illustrative of his inclination to make assertions where his memory did not justify the assertion. 166A further example arises from an email Mr Zdrilic sent to Mr Renshall on 21 July 2004 in which he said:- "Now that it appears the funder will not be available at the time when all these things were supposed to take place we must go back to what was envisaged at the very beginning and that is that Zdrilic, Hickie and Renshall or if you prefer Zdrilic and Renshall as directors of HTT with unanimous decisions made." (emphasis added). 167As will emerge later in this judgment, this email is of some significance in the case. 168In his affidavit evidence, Mr Zdrilic said that, the day after the email was sent, he had a conversation with Mr Renshall in which he said:- "However, the important thing is that as the funder is not available as yet, we need to change the constitution of HTT to make sure that no decision at board level or member level can be made without my agreement." (emphasis added). 169It seems to me that Mr Zdrilic's email makes clear that he was speaking prospectively and was lamenting the fact that it appeared that the funder "will not" be available "at the time when all these things were supposed to take place". 170However, in his account of his conversation with Mr Renshall there had been a subtle, but significant, change to what he alleges he was saying. Thus, in the conversation, his evidence was that he was merely speaking of funds being "not available as yet". 171Mr Renshall denied having a conversation to this effect with Mr Zdrilic. I think it likely, as Mr Einfeld put to Mr Zdrilic, that Mr Zdrilic reconstructed the 22 July 2004 conversation based upon his 21 July 2004 email. In doing so he has, perhaps subliminally, embroidered his recollection to change his comment as to the lack of availability of funds being prospective to being merely a statement of the then current position. 172There were other examples like this. 173My conclusion is that, although I did not regard Mr Zdrilic as a dishonest witness, the manner in which he gave his evidence leads me to the conclusion that I should treat his evidence with great care. The HTT Defendants' witnesses 174The HTT Defendants called four witnesses: Mr Renshall, Mr Moir, Mr Frederick and Mr Gillard. Mr Renshall 175Mr Renshall was cross-examined for more than three days. 176In closing submissions, no attack was made on Mr Renshall's credit. 177I thought Mr Renshall gave his evidence openly and honestly, although it emerged during the cross-examination that Mr Renshall's recollection of many events during the relevant period was poor. 178The cross-examination also revealed that, in relation to some conversations that Mr Renshall denied in his affidavit evidence, the true state of his recollection was that he simply could not say whether the conversations took place or not. Other witnesses called 179The HTT Defendants also called Mr James Moir (a solicitor then employed at Swaab Attorneys, who acted for IBIC and IPC), and Mr Chris F (referred to above). 180No criticism was made of the manner in which these two witnesses gave their evidence. I thought they were both trying to give the best of their recollection in a disinterested manner. I accept their evidence. 181The HTT Defendants also called Mr Gillard who, as I have said, was acting in their interests during 2004 (and, indeed, in these proceedings for a time). As I will discuss below in relation to the events of 27 August 2004, I have concerns about some of the evidence Mr Gillard gave. Mr Hickie and Vocfia 182Although Mr Hickie swore an affidavit in the proceedings, he was not called as a witness. Some relevant legal principles 183Before turning to a detailed consideration of the facts, I shall set out some of the legal principles which are relevant to the issues to be determined in the proceedings. 184To a large extent, my summary of the principles derives from the submissions of the parties. Representations as to future matters 185Most of the representations that are pressed are representations as to future matters. 186Where representations are made as to a future matter, the plaintiffs rely upon the provisions of s 51A of the Act. Section 51A was at the relevant time in the following terms:- "(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) For the purposes of the application of subsection (1) in relation to a proceedings concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not have had reasonable grounds for making the representation. (3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead." 187The approach of the court in relation to this section is discussed in Digi-Tech (Australia) Limited v Brand [2004] NSWCA 58 at [91]-[93] and [107]. At [93] the Court quoted the following statement made by McHugh JA in Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679 and described it as having "self-evident" force:- "S[ection] 51A must be taken to have abolished the distinction between a promise and a representation with respect to a future event. A promise to do something in the future is to be regarded as a representation that it will be performed. It will be deemed misleading, therefore, unless the corporation proves that it had reasonable grounds for making the promise." 188Section 51A(2) imposes a burden upon HTT to adduce evidence that it had reasonable grounds for making the representations. What is reasonable imports an objective criteria. 189The Fair Trading Act (1987) is pleaded against Mr Renshall and Mr Hickie. Section 41 of the Fair Trading Act is in different terms in that it expressly reverses the onus of proof and leads to the same result in the case against them. 190Section 41 is in the following terms:- "(1) For the purposes of this Part, where a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the person does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) The onus of establishing that a person had reasonable grounds for making a representation referred to in subsection (1) is on the person." Rescission - generally 191The plaintiffs claim that they have rescinded the Heads of Agreement and the Non-Dilution Deed by, first, service of the Caveat lodged on the title of the Land on 11 October 2006 and, second and alternatively, by service of the Statement of Claim in these proceedings on 21 March 2007. 192The plaintiffs claim to be entitled to rescind those agreements by reason of the alleged fact that they were induced to enter into those agreements by the representations pleaded. 193As I have mentioned, the plaintiffs claim that the representations were false, were made by Mr Renshall fraudulently, were misleading or deceptive and were made in breach of a duty to take care. 194There was no dispute before me that, all other things being equal, if the plaintiffs were able to make out the falsity of the representations, and reliance upon them leading to entry into the Heads of Agreement and the Non-Dilution Deed, that there would be an entitlement to rescission. 195In addition to challenging whether the representations had been made in the terms alleged, the defendants contended that the plaintiffs had not relied on any representation made by HTT when entering into the relevant agreements and that the representations were not, in any event, causative of any loss. 196The HTT Defendants contended that, in the alternative, assuming that a right to rescission had arisen, such right had been lost by reason of the plaintiffs' affirmation of the agreements. 197There is an issue in the proceedings as to whether the HTT Defendants have pleaded affirmation. I shall return to this question later in these reasons. 198In that regard, an issue has arisen as to whether, in the case of fraud, it was necessary that the plaintiffs know of their legal right to rescind (as opposed to the facts giving rise to that right) before losing a right to rescind by reason of affirmation (there being no suggestion that the plaintiffs were aware of such a legal right until shortly before they purported to rescind). Rescission - affirmation - generally 199There was no dispute between the parties as to the general principle applicable. That principle is summarised in Carter et al, Contract Law in Australia, 5th ed (2007) at 18-47/18-48:- "Following a representor's misrepresentation, the decision to rescind rests with the representee. Because the decision to rescind is a matter of choice (election), the representee is perfectly entitled to elect to affirm the contract. The rule is that once such an election has taken place, rescission ceases to be available: affirmation is a bar to rescission. The basis of the rule is that 'rescission' and 'affirmation' are mutually exclusive rights: it is a condition of the enjoyment of either one that the other be abandoned. Affirmation may be express or implied. The former occurs when there is a conscious choice by the representee to affirm the contract. The latter occurs when the choice is inferred on the basis of what the representee has said and done. In essence, the basis for inferring (or imputing) affirmations is a finding that the representee has behaved in a way which is consistent only with an election in favour of affirmation having been made. Analysis of the restriction requires a consideration of the elements of affirmation. As in the case of rescission, an election must be made in clear and unequivocal terms, and so an election to rescind or to affirm will not be found unless there are clear and unequivocal words or conduct. The representee must also have sufficient knowledge to make the election. (...) The question of election does not arise until the party misled acquires knowledge that the representation was false. The representee is entitled to believe the representation, at least until there is some cause for suspicion, and usually beyond that stage. Accordingly, mere partial information giving some cause for suspicion will not suffice, and a right to rescind may exist notwithstanding the lapse of a considerable time since the making of the contract." (citations omitted) Rescission - knowledge of a legal right to rescind 200The decision of the Full Court of the Supreme Court of Victoria in Coast Estates Pty Limited v Melevende [1955] VR 433 is authority for the proposition that, where a misrepresentation is fraudulent, it is necessary that the defrauded parties should have known of the right to rescind before affirmation will arise. 201In that case Sholl J said:- "In my opinion, the law is this. Assuming that rescission is still possible...and that the defrauded party fully knows, or possibly and correctly assumes, the falsity of the representations which induced the contract then... ...if the defrauded party does not know that he has a legal right to rescind, he is not bound by acts which on the face of them are referable only to an intention to affirm the contract, unless those acts are 'adverse to' the opposite party, i.e., unless they involve something to the other party's prejudice or detriment, as, e.g., if the defrauded party goes into possession of property sold to him by the contract, or accepts some other benefit thereunder. This is a form of estoppel, for the other party has in such a case acted to his prejudice upon a representation, made by the defrauded party's conduct, that the latter is going on with the contract. The law does not require the representor in such a case to inquire of the representee whether he knows his legal rights." 202This correctness of this conclusion has been doubted by the authors of Contract Law in Australia (at 15-48) although not by Seddon and Ellinghouse, Cheshire and Fifoot's Law of Contract, 9th ed (2008) at 11.50. 203In the earlier case of O'Connor v S.P. Bray Limited (1936) 36 SR (NSW) 248 at 262 Jordan CJ concluded that knowledge of the legal consequences of facts was not necessary in order that there be affirmation. That decision was reversed by the High Court (in O'Connor v S.P. Bray Limited (1937) 56 CLR 464) but this proposition was not doubted. 204Mr Jucovic pointed out that O'Connor v Bray Limited was a case involving damages for personal injuries (not a fraud case) and that what Sir Frederick Jordan said was obiter. 205Nonetheless, as Pincus J said in Re Hoffman: Ex parte Worrell v Schilling (1989) 85 ALR 145 at 151, it is "weighty authority". 206The matter was discussed by Mason J in Sargent v ASL Developments Limited (1974) 131 CLR 634 at 658. His Honour said:- "If a party to a contract, aware of a breach going to the root of the contract, or of other circumstances entitling him to terminate the contract, or of other circumstances entitling him to terminate the contract, though unaware of the existence of the right to terminate the contract, exercises rights under the contract, he must be held to have made a binding election to affirm. Such conduct is justifiable only on the footing that an election has been made to affirm the contract; the conduct is adverse to the other party and may therefore be considered unequivocal in its effect. The justification for imputing to the affirming party a binding election in these circumstances, though he be unaware of his alternative right, is that, having a knowledge of the facts sufficient to alert him to the possibility of the existence of his alternative right, he has acted adversely to the other party and that, by so doing, he has induced the other party to believe that performance of the contract is insisted upon. It is with these considerations in mind that the law attributes to the party the making of a choice, though he be ignorant of his alternative right. For reasons stated earlier the affirming party cannot be permitted to change his position once he has elected. Whether any distinction should be drawn between this class of case and fraudulent misrepresentation (...) need not be determined. However, it should be kept firmly in mind that the doctrine of election is of general application and that no good purpose is to be served by drawing distinctions in its various applications unless considerations of justice make it necessary or expedient so to do." 207In Re Hoffman Pincus J considered the above authorities and concluded at 151-152:- "In my respectful opinion, the question whether knowledge of the actual right to rescind is essential in fraud cases is still open, as was said in Sargent's case ... Although it is true that the authorities are at variance, the better view appears to be that (as was the case, in the opinion of Jordan CJ, in 1936) the weight of authority favours the existence of the general rule that, where knowledge is necessary to make an election effective, it is knowledge of the facts giving rise to the right to elect, not knowledge of the right itself, which must be proved. For a number of reasons I prefer to apply that principle, even in a fraud case: it accords with the general rule as to the relevance of knowledge of the law, it removes the necessity of an awkward examination, in many cases, of what legal advice has been received, it has the virtue of simplicity alluded to in the passage quoted from Sargent's case (...) and, lastly, it does not altogether deprive the defrauded party of his remedy, as damages remain available." 208I agree with Pincus J that the better view is that that knowledge of a legal right to rescind is not necessary, even in a fraud case, provided that the knowledge of the party otherwise entitled to rescind, of the facts giving rise to that right is so clear that an election not to rescind is manifest. 209It appears to me that this view more closely accords to the matters that Mason J in Sargent said "should be kept firmly in mind". 210This view also accords with that expressed by Young J (as his Honour then was) in Molotu Pty Limited v Solar Power Limited (1989) 6 BPR 13,460 at 97,475 and by the Full Court of the Federal Court in Tiplady v Gold Coast Carlton Pty Limited (1984) 8 FCR 438 at 451. Rescission - restitutio in integrum 211There was no dispute between the parties about the following principles, which are usefully summarised in Cheshire and Fifoot's Law of Contract at 11.53:- "...it is a prerequisite of rescission for misrepresentation that the parties can be returned, at least substantially, to the status quo prior to the contract. This is done by the making of such orders as are necessary to achieve substantial restitution (...) The common law requires precise restitution but equity only requires substantial restitution (...)" 212The leading case is Alati v Kruger (1955) 94 CLR 216. 213Where the parties cannot be returned, substantially, to their pre-contractual position, restitutio in integrum is not possible and a purported rescission will be invalid, notwithstanding what would otherwise have been the representee's right to rescind. Rescission - intervention of third party rights 214The HTT Defendants also submit that the plaintiffs are not entitled to rescind because the rights of third parties have intervened. 215The plaintiffs did not dispute that rescission would not be available if this was so, as a matter of fact, but submitted that, again, the defendants had not pleaded this as a defence to the claim that the relevant agreements had been rescinded. I shall return to this below. Setting aside consent orders 216The plaintiffs identify four independent grounds upon which consent orders can be set aside. 217There was no dispute before me as to these principles. I shall summarise them briefly. Inherent power - fraud 218First, the court has an inherent power to set aside a judgment or order that is procured by fraud: Wentworth v Rogers (No 5) (1986) 6 NSWLR 534. In that case, Kirby P described (at 538B) proceedings brought to set aside a judgment for fraud as being "equitable in origin and nature". Inherent power - consent orders 219Secondly, the Supreme Court also has an inherent power to set aside a judgment or order entered by consent, without the requirement for a showing of fraud. 220In Harvey v Phillips (1956) 95 CLR 235 at 243-244, the High Court said the following:- "The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like. The rule appears rather from positive statements of the grounds that suffice (cf. Halsbury's Laws of England, vol. 26, 2nd ed., pp. 84, 85); but there is a dictum of Lindley L.J. which is distinct enough: '. . . nor have I the slightest doubt that a consent order can be impeached, not only on the ground of fraud but upon any grounds which invalidate the agreement it expresses in a more formal way than usual . . . To my mind the only question is whether the agreement on which the consent order was based can be invalidated or not. Of course if that agreement cannot be invalidated the consent order is good': Huddersfield Banking Co. Ltd. v. Henry Lister & Son Ltd." (emphasis added) 221The Supreme Court's inherent power to set aside a judgment entered by consent is exercisable by reference to the principles as laid down in Harvey v Phillips: Singh v Ginelle Pty Ltd [2010] NSWCA 310, per Campbell JA at [35] (Beazley JA and Handley AJA agreeing). This power was also referred to by Handley JA in his judgment in Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691 at 696G to 697C. In his text, Spencer Bower and Handley, Res Judicata (2009), his Honour at p 244 [17.04] cited this decision (and Harvey v Phillips) as authority for the proposition that a judgment:- "... entered by consent (...) can be set aside on any ground, including fraud, on which a court can set aside a contract." (at 192) 222I have been referred to the decision in Perpetual Trustees Australia Ltd v Heperu Pty Ltd & Ors [No 2] (2009) 78 NSWLR 190. That case concerned an application to set aside a judgment that had been entered after a hearing on the merits. The application was based on additional or fresh evidence that had become available, based on which allegations of misrepresentations prior to and at the trial had been made. It was not contended that the misrepresentations were fraudulent. 223The Court of Appeal (Allsop P, Campbell JA and Handley AJA) made reference to the Court's power to set aside a judgment procured by fraud (discussed above) and continued:- "There is no support in the decided cases for holding that perfected orders can be set aside for innocent misrepresentation." 224The plaintiffs submit, and I accept, that that statement must be read in the context of that case, in which there had been a judgment after a hearing on the merits. I do not think the Court intended to express a principle applicable to consent orders (perfected or otherwise), because, as demonstrated above, the decided cases do support the proposition that consent orders can be set aside for innocent misrepresentation - on the basis of the equitable jurisdiction to set aside contracts for innocent misrepresentation. Some of those cases were decided by Campbell JA and Handley AJA. 225The Court of Appeal (Macfarlan and Whealy JJA) in Connectland Pty Ltd v Cardno Forbes Rigby Pty Ltd [2011] NSWCA 391 at [5] has recently referred to Harvey v Phillips in dismissing an application for leave to appeal against a consent judgment said to have been induced by a misrepresentation. The Court concluded at [6] that the applicant did not have an arguable case that the representation relied on was erroneous. It was not suggested by the Court that the applicant would need to show fraud to succeed in the appeal. 226Consequently I accept that, fraud, and more particularly fraudulent misrepresentation, is not required to be shown in order to enliven the inherent power described in Harvey v Phillips. The passage from that case extracted above reveals that it is the status of the agreement which determines the status of a consent order reflecting or manifesting that agreement. As Lindley LJ observed in the Huddersfield Banking case referred to by the High Court in Harvey v Phillips, the consent order is simply a formal manifestation of the agreement. 227The relevant principle does not discriminate between the means by which the agreement may be invalidated. The material consideration is whether or not the agreement is to be invalidated. Once it is, then the consent is liable to be set aside. 228It follows that if the Heads of Agreement and the Non-Dilution Deed are invalidated by force of an order made under s 87(2) of the Act, then the consent orders filed in Court on 6 September 2004 would also be set aside. Rule 36.15(1) 229Thirdly, the Court has power under r 36.15(1) of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") to set aside a judgment or an order if it is shown that it was given, entered or made irregularly, illegally or against good faith. 230In Perpetual Trustees Australia Limited v Heperu Pty Limited & Ors [No 2], the Court said at [16] that the focus of the rule is on the giving, entry or making of the judgment or order. 231What is required for the application of the "against good faith" limb in r 36.15(1) of the UCPR, is some impeachment of the intention or behaviour of a person who procured a consent order, at the time it is made. 232The plaintiffs seek to impeach the behaviour of the defendants as involving conduct in contravention of s 52 of the Act in connection with the making of the Heads of Agreement, the Non-Dilution Deed and their formal embodiment in the consent orders of 6 September 2004. Rule 36.15(2) 233Fourthly, an order may also be set aside if the parties to the proceedings consent: UCPR, r 36.15(2). Section 80 of the Act authorises the Court to direct things to be done: Tyco (Australia) Pty Ltd t/as ADT Security v Signature Security Group Pty Ltd [2009] FCA 1029. 234The plaintiffs contend that pursuant to s 80 and s 87 of the Act, the defendants to these proceedings ought be restrained from relying upon, and the parties to the 2001 Proceedings be directed to consent to the setting aside of, the consent orders filed on 6 September 2004. The availability of funds 235Thirteen of the seventeen representations pleaded concern the availability of funds to HTT in relation to the Project. 236Accordingly I will now consider the evidence concerning the availability of funds, and the state of knowledge that Mr Renshall and Mr Zdrilic had about that matter. 237In the course of considering this evidence, I shall also consider the representations pleaded in relation to this subject and generally. The position in mid 2003 238I have referred above to the Caveat lodged by LEC on the title of the Land on 23 April 2003. The interest in the Land claimed by the Caveat was described as "Constructive Trust". 239Mr Renshall said that the Caveat "rendered Huntley virtually incapable of refinancing". 240In mid 2003 this was a problem because HTT was in default in relation to two of its secured creditors. 241One of those secured creditors was Greater Pacific Capital Limited ("GPC"). 242On 24 May 2003 GPC sent HTT a notice stating that HTT's $2 million facility limit had been exceeded, that the outstanding balance as at 22 April 2003 was $2,233,565 and requesting action to "restore this facility" by repaying capitalised interest of $418,617 and paying an amount of $700,000 in reduction of the principal. 243On 29 May 2003 another secured creditor of HTT, the Commonwealth Bank of Australia ("CBA") made a demand for repayment by 30 June 2003 of loan facilities totalling $2,973,164. 244It will be recalled that, at this time, the 2001 Proceedings were pending. 245On 12 August 2003 there was a discussion between Mr Gillard and Mr Hilliard about HTT's need to refinance the CBA and GPC debts. On that date Mr Hilliard made a note that "details of new financier" were to be provided. 246I have referred above to Mr Gillard's letter of 10 September 2003 suggesting a meeting to endeavour to resolve the 2001 Proceedings. That letter also stated that HTT had been taking steps for refinancing of its loans "with various lenders". 247On 18 October 2003 Mr Zdrilic met with Mr Renshall. According to Mr Zdrilic, this was the occasion on which the question of a "big funder" having an involvement in the Project was first discussed. 248Mr Zdrilic claims Mr Renshall said:- "I am working on getting a DA for 500 blocks, a golf course, a hotel on top of the property at the foot of the escarpment and other things. I have held talks with a big funder who will take equity in the project". 249Mr Renshall denied saying the words attributed to him and said that what he said was:- "I am in contact with some people to refinance the project, look both at debt and equity". 250Mr Zdrilic made a note of this meeting that made reference to Mr Renshall "working on getting a DA for 500 blocks". The note made no reference to a "big funder". 251In cross-examination Mr Zdrilic accepted that, at this stage, the existence of a "big funder" was not important to him and that his focus was more on Mr Renshall's mention of 500 blocks. He said "that hit my mind, I knew that was huge". He asserted that Mr Renshall had mentioned the "big funder" in passing. 252Mr Zdrilic said he had a further conversation with Mr Renshall on 28 November 2003 in which Mr Renshall said:- "I will get a big equity funder to take a stake by buying all the little shareholders. I will form a new company and put you and I and one or two others in it plus our loans and interest". 253Mr Renshall denied saying this. He said he said something to the effect:- "The task at hand is to finalise a debt and equity facility in order to progress the project. That may require both debt and equity and will involve purchasing some of the units of the smaller investors. (...) It will be handy to have a big brother come in and take equity in the project". 254Mr Zdrilic made a note of this conversation as follows:- "He will form new co & put me & him + one or two in it + our loans incl interest. He will get big equity funder to take a stake by buying all the little shareholders". 255Mr Zdrilic's note refers to a "meeting" with Mr Renshall at the Harbour View Hotel in North Sydney. The form of Mr Zdrilic's note suggests it was not written during this "meeting". 256The note makes clear that whatever Mr Renshall said about funding for the Project, he was speaking prospectively. 257Mr Zdrilic accepted that this was so and agreed that it was quite possible that, at this stage, Mr Renshall "might still be in a state of negotiation with the funder". 258Mr Zdrilic accepted that if Mr Renshall was speaking in terms that he "will get a big equity funder" it must follow that he did not already have one. 29 January 2004 - the First Representation 259The first of the seventeen representations pleaded by the plaintiffs ("the First Representation") concerned Mr Renshall's interest in the Huntley Trust and was allegedly made on 29 January 2004. 260In closing submissions, the plaintiffs indicated that this representation was not pressed. IBIS comes on the scene 261On 30 January 2004 Mr James Hanna ("Mr Hanna"), writing "for the President" of IBIS wrote to Mr Renshall at HTT:- "Thank you for meeting me on Tuesday and showing me around the site with Chris Frederick. IBIS is interested in becoming your partner to develop the site. We would provide capital for the acquisition of a 51% interest in the project and provide working capital to cash flow the staged development of the project Infrastructure and Buildings". 262The next day, 31 January 2004, IBIS wrote (again under Mr Hanna's signature) to Mr Renshall regarding "the sale of interest in Huntley Heritage development":- "In order for us to enter into a Heads of Agreement with your company we need to complete Preliminary Due Diligence and in order to obtain Board preliminary approval to hire consultants we need from you the following Information and to arrange various meetings". 263There was then set out information required including "your ideas on a joint venture structure". 264At or around this time IBIS provided Mr Renshall with a bundle of documents entitled IBIS "Financial Projections" and the document entitled IBIS "Business Profile". 265The "Business Profile" described IBIS as a "small building society" the directors of which were planning to "rebirth it as a full trading bank in New Zealand with Overseas Branches in both Australia and the Cook Islands offering its customers and clients a wide range of 'face to face' and 'internet' Financial Services". 266Amongst the "services" to be provided were "Superannuation Fund Management" services through an entity to be known as "MySuper". In that regard it was stated:- "MySuper will offers Is [sic] Superannuation Management Trust. The Trust will grow its Funds Under Management (FUM) and Funds Under Advice (FUA) by acquiring Financial Planning, Financial Dealership, Accounting and Taxation Planning Businesses. FUM and FUA will be invested into a variety of programs operated by the IPC Investment Trust". 267The "Financial Projections" set forth projected balance sheets and profit and loss statements for various entities and trusts. 268There were projections for the "IPC Joint Venture Trust" which described that trust's "source of investment capital" as being debentures subscribed to by the MySuper Trust of some $758 million. 269Mr Renshall said that he could not recall examining these documents carefully. He said he recognised that they were projections and were aspirational in nature. 270The plaintiffs submitted:- "The financial projections were of an extravagantly optimistic nature based upon an assumption that 'IBIS Investment Bankers' could prospectively increase its assets from a nil base to a approximately $724 million by June 2005 through a series of prospective ventures". 271That appears to me to be a reasonable description of the document. James Hanna 272As mentioned, Mr Hanna signed both the 30 and 31 January 2004 letters from IBIS. 273Mr Hanna signed the 30 January 2004 letter "for President" and the 31 January 2004 letter "IBIS Property Department". 274There is, in evidence, a business card describing Mr Hanna as a "principal" of IBIS. 275Mr Frederick gave evidence that Mr Hanna had introduced himself to Mr Frederick as the "President of IBIS Bank New Zealand" and that he gave Mr Frederick a business card that stated that position. 276Unbeknown to the parties, Mr Hanna was then, and was at all relevant times, an undischarged bankrupt. 277Mr Hanna was not called as a witness in the proceedings. 278However, many other witnesses gave evidence of conversations with Mr Hanna. 279That evidence was admitted only to prove what Mr Hanna said, and not as evidence of the truth of what Mr Hanna said. Christopher Frederick 280IBIS's letter of 30 January 2004 referred to a site meeting attended by Messrs Renshall, Hanna and Frederick. 281Mr Frederick gave evidence in the proceedings. I have referred to him in my discussion about the credit of witnesses. 282He said he was introduced to Mr Hanna in around January 2004 and that between then and September 2004 he worked under Mr Hanna's supervision "as a consultant of IBIS in attempting to establish business for IBIS in Australia". 283Mr Frederick held units in the Huntley Trust. 284On 27 August 2004, as part of the settlement effected that day, he became a director of HTT. James Moir 285IBIS's letter of 31 January 2004 referred to "our key personnel" as including Mr Frederick Swaab and Mr James Moir. 286Mr Swaab was the principal of Swaab Attorneys. So far as the evidence reveals, he did not play a significant role in the events with which this case is concerned. He did not give evidence. 287Mr Moir was an employee of Mr Swaab. Mr Moir gave evidence and I have referred to him above in my discussion of the credit of witnesses. 288Mr Frederick introduced Mr Moir to Mr Hanna. 289On 10 February 2004 IBIS (by Mr Hanna) retained Swaab Attorneys as its solicitors in Australia. 290Mr Moir acted for IBIS (and IPC) until September 2004. During that time he also acted for HTT in relation to its search for finance. The "Sunday meeting" 15 February 2004 291On Sunday 15 February 2004, Mr Zdrilic and Mr Renshall had a meeting at which, according to Mr Zdrilic, the "true agreement" between them was reached. 292Mr Zdrilic claimed the "true agreement" was that, as a part of the overall settlement of the 2001 Proceedings, he, Mr Renshall and Mr Hickie would each have a place on the board of HTT, and that decisions between the three men would have to be unanimous thus giving each, in effect, power of veto. 293This alleged agreement is significant in a number of ways. 294First, it is relevant to the alleged Third and Fourth Representations (which were to the effect that the "new funder" would not countenance Mr Zdrilic on the board of HTT: see below). 295Secondly, as we shall see, it is relevant to Mr Zdrilic's reaction to the revelation in mid July, that no funding was in place at that time. 296Mr Zdrilic gave an account of the conversation in his affidavit. 297However, I consider a more reliable guide to what was said to be found in the email Mr Zdrilic sent to Mr Hilliard on the following day (16 February 2004), in which he referred to his conversation with Mr Renshall and said he had obtained "some more information for you to put in the 'draft'." 298At that time, Mr Hilliard was preparing an earlier draft of what became the 13 May 2004 Heads of Agreement. 299Relevantly, Mr Zdrilic's email read as follows:- (1) "A new company will be formed to operate through a trust, and this company will have 3 shareholders, namely - Devubo Pty Limited ATF The Renshall Family Trust, Vocifa Pty Limited ATF The Hickie Family Trust and (a company still to be formed) ATF The Zdrilic Family Trust". [The "company still to be formed" was ultimately Amy Holdings]. (2) Each of the companies will hold one share each in the new company. (3) The new company will hold 27.75% in [HTT] and the other 72.25% is owned by a number of smaller investors who could number a few dozen and I think most of these were found by Renshall as part of his getting an initial interest in the project. (4) The new company will have 3 directors Robert Renshall, David Hickie and Sam Zdrilic - secretary can be Renshall. All decisions have to be unanimous. (5) The new company will recognise $5.5m loan to Sam's new company (...) (7) Because there are many small shareholders we need directors on the [HTT] board to be Renshall, Hickie and Zdrilic. I do not particularly wish to be on that board but I do not think there is any way to make sure that adverse decisions are made to my detriment [sic - presumably Mr Zdrilic meant to say "not to my detriment")]. Again the decisions need to be unanimous and secretary can be Renshall. (8) Because the new company has only 27.75% shareholding there should be an agreement between the small shareholders and the 27.75% owners that no decision can be made at shareholder level without the agreement of the 27.75% shareholders or at least say 93% which basically means we all have to agree - not sure if this is possible. (...) The important thing here from my point is to make sure that I am protected and that there is not something behind the scene where I can be adversely affected. Renshall has many small shareholder friends (...) In other words some sort of warranty needs to be given that there is not something there that I am not aware of that may impact on the agreement thereby adversely affecting me". 300As I have mentioned, Mr Zdrilic gave an account of the 15 February 2004 meeting in his affidavit. However, it was different from his email in two important ways. 301First, in the email Mr Zdrilic said that the board decisions of HTT "need to be unanimous". He did not assert in the email that Mr Renshall had agreed to this. In his affidavit account of the conversation Mr Zdrilic said that he had proposed unanimity and that Mr Renshall had simply said "yes that is fine". 302Similarly, in his affidavit account of the meeting, Mr Zdrilic had said that Mr Renshall had also responded "yes that is fine" to Mr Zdrilic's proposal that "the new company will have veto rights of the decisions of HTT". In his email, Mr Zdrilic had said (at paragraph 8) that he was "not sure if this is possible". 303As I have stated, I consider Mr Zdrilic's email to be a more reliable account of what occurred. 16 February 2004 meeting 304Following IBIS's letters of 30 and 31 January 2004, a meeting took place on 16 February 2004 attended by Messrs Renshall, Hanna, Moir and Frederick. 305According to Mr Moir's note of the meeting, one matter that was discussed was:- "IBIS - to buy 51% - control project - settle upon DA - IBIS to be involved - due diligence - settle in a few months". 306This note makes clear that, as early as 16 February 2004, IBIS was expressing interest in acquiring a 51 per cent stake in the Project. 307The note also suggests that someone said there would be a due diligence and that IBIS would "settle upon DA". 308This reference to "settle upon DA" is consistent with evidence Mr Moir gave that Mr Hanna told him that IBIS would only invest in the Project once all planning and development approvals were in place. 309Mr Moir agreed that his file note suggested that Mr Hanna had said something like that at the meeting of 16 February 2004. 310Mr Renshall said he had no recollection of this, or of Mr Hanna ever saying that the IBIS finance was subject to planning and development approval. 311However, Mr Moir's note and the evidence points to the probability that something was said on 16 February 2004 to this effect. 312Furthermore, it seems clear Mr Renshall told Mr Zdrilic that any advance by IBIS was conditional on development approvals. 313On 2 March 2004 Mr Hilliard made a note of a conversation with Mr Zdrilic in which Mr Zdrilic was speaking of "discussions with Renshall". 314One of the matters Mr Hilliard noted was "Funds conditional on re-zoning". 315This must have been something Mr Renshall told Mr Zdrilic. 316This is a very significant matter. It shows that, at all relevant times after in or about 2 March 2004, Mr Zdrilic knew that any funding from the New Zealand "big funder" was subject to this condition. Mr Zdrilic's evidence of his understanding of the availability of funds must be seen in this light. 317Mr Moir also said that, at the meeting of 16 February 2004, Mr Hanna said:- "We're currently looking at a number of financiers to fund the project". 318This must have made clear to Mr Renshall that IBIS was not contemplating using its own funds to invest in the Project, and was looking for "financiers". 319At the meeting Mr Moir mentioned Mr Don McKenzie who he described as "a high net worth individual", who may be interested in investing in the Project. 320Mr Moir's note recorded that there was a discussion of Mr McKenzie advancing $8 million to IBIS "to buy preference shares" and that $7 million of that sum would go "into Huntley" and $1 million would go "into IBIS Super Trust". 321Mr Moir's note also recorded HTT's position so far as concerns its secured creditors:- "CBA currently $3.2 was $2.925 - bring it down to $2.5m 2nd m/ge - no money lent - AmRe supplied env[ironmental] bond for $650k... GPC - (...) over limit for around 6 months". 322It is clear that HTT was in urgent need for a refinancing of its obligations. Mr Moir's 20 February 2004 memorandum 323By 20 February 2004 the proposal that Mr McKenzie would lend IBIS $9 million for the purpose of investment in the Project had developed. 324By around mid March 2004 (at around the time HTT entered into the IPC Heads of Agreement, referred to below) Mr McKenzie had lost interest and made no investment in the Project. 325However, on 20 February 2004 Mr Moir sent Mr McKenzie a memorandum, a copy of which was sent to Messrs Renshall, Hanna and Frederick. 326The memorandum referred to a proposed "principal sum" of $9 million and stated:- "The interest rate will be 20% per annum. The loan term will be say 28 days after the masterplan for the land issues, with a minimum of 12 months and a maximum of 18 months. If the masterplan has not issued within 18 months and Ibis's charter does not allow it to commence funding of the project, Ibis and the landowner will still have the obligation to refinance the land so you are paid out". 327This memorandum thus suggested that "Ibis's charter" did not allow it to advance funds until a "masterplan" was issued. 328Attached to the memorandum was a schedule which showed how it was contemplated that Mr McKenzie's proposed $9 million advance would be allocated, including:- * a reduction of the CBA first mortgage over the Land of $700,000; * repayment of the GPC third mortgage over the Land of $3 million; and * a deposit into the "MySuper Trust" of $1.083 million. 329The latter sum was referred to in a letter sent by Mr Hanna to Mr Moir on 27 February 2004, referred to below. 27 February 2004 - Mr Hanna's letters to Mr Moir - IBIS access to funds 330On 27 February 2004 Mr Hanna sent two letters on IBIS letterhead to Mr Moir. 331The first letter set out "three reasons" that IBIS had "for developing the Huntley project", including that:- (1) "IBIS needs a large sight [sic] that has a coal and gas claim of at least 100m tonnes of soft coal (...) for export to China... (2) IBIS has for over 2 years been looking for a site for a new private University and Upper High School for local and overseas students... (3) Rutherford University sees itself as a University Village..." 332In his second letter Mr Hanna said:- "As you know we intend to use $1m of [McKenzie's] money to invest into the MySuper Trust which will secure access to approximately $50m of funds under management out of which we can refinance Mr McKenzie's mortgage. It is for this reason that IBIS can totally commit to the Huntley project". 333This statement reflects what was evidently said at the meeting of 16 February 2004 concerning the proposed use of $1 million of the $8 million then proposed to be advanced by Mr McKenzie "into IBIS Super Trust". 334This reflects what the plaintiffs described as Mr Hanna's "model for doing business" namely, proposals for the acquisition of superannuation funds or funds under management which could be applied within the IBIS group of companies and trusts. 335On the plaintiffs' submission, neither IBIS nor IPC ever had funds of its own which it was prepared to commit to the transactions the subject of these proceedings. 336The plaintiffs' submit that the evidence reveals that, at all relevant times, IPC was seeking funds from others, that at no stage did IBIS or IPC have funds of their own to commit to the venture and, that they needed to obtain the funds from third parties which they could in turn provide to HTT. 337As I have mentioned, this must have been apparent to Mr Renshall as a result of the comment made by Mr Moir, at the 16 February 2004 meeting by Mr Hanna, that:- "We're currently looking at a number of financiers to find the project". 338This much may be accepted. The question is what Mr Renshall made of what was told to him by or on behalf of IBIS and IPC concerning the likely availability of funds so sourced, and what he said to Mr Zdrilic about such matters. 339Ultimately, in my opinion, it must have become clear to Mr Zdrilic that the funds promised from IBIS/IPC were to come, if at all, from a third party. 18 February to early March 2004 - Second Representation 340The plaintiffs allege that Mr Renshall orally represented that:- "A funder with substantial resources will inject substantial funds into and take control of HTT's project". 341According to Mr Zdrilic's affidavit evidence, this conversation took place sometime between 18 February 2004 and March 2004 when Mr Renshall said:- "The big funder will take control of the project as they will put a lot of money in. We cannot do what we want such as have a veto power. Another $5.5m will look bad on the balance sheet of the funder." 342Mr Zdrilic made no note of this alleged conversation. 343Mr Renshall denied the conversation and said:- "I did not promise that any funding beyond the $9 million proposed in the drafts would be forthcoming". 344Mr Renshall was evidently referring to the $9 million the subject of the discussions with Mr McKenzie. 345As mentioned above, in cross-examination, Mr Zdrilic said that he could now "pinpoint" that this representation was made on 28 February 2004. 346He said he was able to "pinpoint" this date as he could recall that the conversation occurred on the Saturday after he received a copy of a letter which Mr Gillard sent Mr Hilliard on 27 February 2004 (referred to below). 347Mr Zdrilic said that he remembered this at the time he was preparing his affidavit but did not specify 28 February 2004 as the date as this would have been inconsistent with an earlier affidavit he had sworn in which he had given evidence of this statement but in which he had not specified 28 February 2004 as being the relevant date. 348He said that:- "I think this was mentioned in my much much earlier affidavit and I put it that way and I thought, again, changing one affidavit to the next didn't look right to me to change it, so its telling the story any way and I decided to leave it as it is". 349A difficulty with this evidence is that, in his second affidavit, Mr Zdrilic had given evidence of a conversation he had with Mr Renshall following receipt of Mr Gillard's letter of 27 February 2004. According to the account, Mr Zdrilic complained about the terms of Mr Gillard's letter of 27 February 2004 but made no reference to the alleged Second Representation. 350As I mentioned earlier, it seems quite clear that Mr Zdrilic's recollection of this conversation having occurred on 28 February 2004 cannot be right. 351He preparedness to "pinpoint" 28 February 2004 as the date of the conversation causes me to approach Mr Zdrilic's evidence about this matter with great care. 352As I have set out above, Mr Hilliard gave affidavit evidence that on 13 February 2004, Mr Zdrilic had told him that "a big funder is coming along to take out the smaller unit holders". This is language similar to that attributed to Mr Renshall by Mr Zdrilic in the alleged Second Representation. 353However, as I have explained, Mr Hilliard agreed that in giving this evidence he was "filling in the gaps" and that he did not have any recollection of Mr Zdrilic using these words. In those circumstances, Mr Hilliard's evidence is not, in my opinion, corroborative of that of Mr Zdrilic concerning this representation. 354So far as concerns funding, Mr Hilliard's note of 13 February 2004 says simply "Re-finance $8m", evidently recording something Mr Zdrilic stated. The note records other elements of the proposed settlement of the 2001 Proceedings, including the idea of a "newco" with three equal shareholders obtaining an interest in HTT and the 2001 Proceedings being "put on hold" or "discontinued". 355Whatever was said by Mr Renshall to Mr Zdrilic, Mr Zdrilic did not think it important enough to be made the subject of a note, or a report to Mr Hilliard (apart from what was said on 13 February 2004). 356In the absence of any note made by Mr Zdrilic about this alleged representation, or by Mr Hilliard recording anything said to him by Mr Zdrilic about it (beyond what I set out above), and in the light of Mr Zdrilic's plainly wrong assertions about being able to "pinpoint" when the conversation took place, I am not satisfied that Mr Renshall said anything to Mr Zdrilic at this stage about a prospective funder that led Mr Zdrilic have any particular state of satisfaction about the availability of a "funder". 357The HTT Defendants accept that Mr Renshall and Mr Zdrilic discussed many times the prospect that a New Zealand funder was proposing to participate in the Project, with the intention of taking equity in HTT and making advances to facilitate rehabilitation and development of the Land. 358What the HTT Defendants dispute is whether Mr Renshall (or anyone else) ever represented that such a New Zealand funder, or any other funder, had committed itself in any binding way to do so. 359In relation to this alleged representation, the HTT Defendants accept that Mr Renshall may well have informed Mr Zdrilic at around this time that he was having discussions with a New Zealand funder, which hoped to or might inject funds into and take a controlling interest in the Project. After all, discussions to this effect had taken place on 16 February 2012. 360However, the HTT Defendants submit, and I accept, that any statement made at this time was only one of expectation or aspiration. 361I am not satisfied that, at this time Mr Renshall said anything to Mr Zdrilic which conveyed that a funder with substantial resources "would" take control of the project or "would" inject substantial funds into the Project. 362Further, if anything was said by Mr Renshall at this early stage about a funder, it could only have been at such a high state of generality that Mr Zdrilic could not reasonably have relied on it. 27 February 2004 - Third Representation 363The alleged Third Representation arises from the letter that Mr Gillard sent Mr Hilliard on 27 February 2004. 364The alleged representation is that the new funder had the following specific requirements for its funding:- * Mr Zdrilic could not be appointed a director of HTT; * HTT could not provide security for LEC's debt to Mr Zdrilic of $5.5 million; and * the new company of which Messrs Zdrilic, Renshall and Hickie were to be directors (ultimately Sentel) could not have a veto right. 365Mr Gillard's letter to Mr Hilliard read:- "Our client is not in a position to negotiate a number of the concessions your client seeks on the basis that it is restricted by the requirements of incoming financiers. In particular, our client cannot concede a directorship of our client to Mr Zdrilic, security as set out in clause 3.7, or the veto right as set [sic] in clause 3.9". 366The references to clauses 3.7 and 3.9 were to the draft Heads of Agreement that Mr Hilliard had prepared. These clauses provided that HTT would grant the "New Co" "acceptable security" for, inter alia, the amount of $5.5 million owed by LEC to Mr Zdrilic (clause 3.2) and for a covenant from HTT not to take any action to dilute the "New Co's" shareholding in HTT without the "New Co's" prior consent (clause 3.9). 367Mr Renshall said that Mr Hanna had told him that he had made enquiries about the history of the Project and that he believed he needed to make a "clean sweep". 368In his affidavit Mr Renshall said that, shortly after being introduced to Mr Hanna, he had had a meeting with him during which the following exchange took place:- Mr Renshall: "We have previously had trouble refinancing the project and the current claim by LEC will not make it any easier. Sam Zdrilic is behind the company. He claims to have an interest in the site. We may well have to do a deal with him whereby we buy him out or give him a share in the project. I don't think we will be able to raise enough funds to buy him out so we are discussing giving him a share." Mr Hanna: "If he's been trouble in the past, there's a fair chance he'll be trouble in the future. We can't have him in a position of influence." 369Mr Renshall said that in around mid February 2004 Mr Hanna said to him:- "I've made my own enquiries with the council and the EPA. You've gone some way to repairing the damage done by Hulley. However, we need to show all the government authorities that there are new owners and a new team. I want us to have a clean break from the past. I don't want Bruce Hulley, Sam Zdrilic or any of those guys involved going forward." 370In cross-examination, Mr Renshall said:- "And I had said to Mr Hanna that we were in a situation of disagreement or negotiations with Mr Zdrilic, that his caveat was about claiming the Land and Mr Hanna had the view there again that he wanted a clean start and wanted to keep with existing directors". 371Mr Frederick also gave evidence of a conversation he had had with Mr Hanna in early February 2004 to the following effect:- Mr Hanna: "What is the issue with this caveat which has been lodged over the land?" Mr Frederick: "The caveat was lodged by LEC, which is a company owned by Sam Zdrilic, one of Hulley's old partners. Those are the guys that originally had the site and are responsible for the previous problems. There was no proper management structure in place to run the site. That is why eventually the site was shut down by the EPA". Mr Hanna: "We have clean up that mess. I don't want Hulley, Ansell or Zdrilic or any of the guys from the old guard in anyway associated with the project in the future. They are all out (...) we need new management going forward. It's our decision who stays and goes as we are bringing in the money. We will decide who and what is good for the site." 372Mr Frederick said that he passed this on to Mr Renshall. 373So far as concerns HTT "providing security" for LEC's debt to Mr Zdrilic, Mr Frederick said he had a conversation with Mr Hanna in around mid February 2004 to the following effect:- Mr Frederick: "Rob told me that Zdrilic wants around $5.5M acknowledged by HTT as a loan to Zdrilic." Mr Hanna: "On what basis? To who is the money currently owed and what is it for?" Mr Frederick: "I think the money is currently owed by LEC to Zdrilic. It's for an investment Zdrilic made in LEC for the project years ago. We don't have any documentary evidence of the money or what it was used for." Mr Hanna: "It's an investment, not a loan to Huntley. If his debt is to be acknowledged why not acknowledge debts to all of the other small investors in HTT? We can't agree to that." 374Mr Frederick said that he also relayed this to Mr Renshall. 375Neither Mr Renshall nor Mr Frederick were challenged in cross-examination about these conversations. 376In those circumstances my conclusion is that Mr Gillard's letter, which obviously reflected Mr Renshall's instructions to him, correctly stated the "requirements of incoming finance is" and it was thus neither misleading or deceptive or in any other way properly the subject of complaint. 377In any event, as emerges below, Mr Zdrilic did become a director of HTT, albeit as an alternate to Mr Renshall. Nonetheless, he attended board meetings concurrently with Mr Renshall. 11 March 2004 - Fourth Representation 378This representation was that the new funder was "unlikely to accept" Mr Zdrilic as a director of HTT. 379This representation arises from an email which Mr Gillard sent Mr Hilliard in which he stated:- "...it is unlikely the new funder will accept Sam [Zdrilic] as a director or a 5 man Board". 380For the reasons outlined in relation to the Third Representation, Mr Gillard's statement that it was "unlikely" that the new funder would accept Mr Zdrilic as a director of HTT reflected Mr Hanna's position and was thus neither misleading nor deceptive. 15 March 2004 - IPC Heads of Agreement 381On 15 March 2004, HTT and IPC entered into the IPC Heads of Agreement. 382According to Mr Moir, this document was drafted, principally, by Mr Hanna. 383The agreement is highly conditional in nature. 384The agreement's essential terms were that:- * IPC would purchase at least 51 per cent of the "Shares" (a term not defined in the agreement but presumably a reference to the shares in HTT and the units in the Huntley Trust) and would advance $7.66 million for that purpose (clause 2.1); * IPC would purchase the "Shares" no later than 42 days after a "rezoning approval" was achieved allowing what is set out in annexure "D" to the agreement. Annexure "D" was described as an "Indicative Project" and contained what was described as a "Brief Description of Proposed Project" (clause 3.2(a)); * IPC was to provide "proof that it has the Funds required to settlement the Purchase of the shares in the Business" (clause 3.2(b)). "The Business" was defined to mean the business of HTT "which is Mining, Land Fill and Development of the rest of the unused Site"; * IPC was to be "responsible" for providing "all working capital required to operate the Business" and to "meet all subsequent costs associated with the operation of the Business over and above the Revenue earned from the Clean Fill operation, the Sale of Coal - wash and Coking Coal" (clause 3.3); * IPC and HTT were to use their best endeavours to obtain an "Interim Loan" for $9 million which was to be used to make the payments referred to in annexure "G" which included the amounts for which Mr McKenzie's proposed loan of $9 million was to be used (namely, reducing the amount owing by HTT to CBA by $300,000; payment of the amount owing by HHT to GPC, estimated at $3 million, and; a deposit to the MySuper Trust of $1.03 million) (clause 4.2); * there was to be a due diligence period (clause 3.1); * the arrangements were subject to numerous "Further Agreements" (clause 5); and * the payments were to be made within 180 days of the date of the agreement, that is by 9 September 2004 (clause 6 - the "Sunset Clause"). 385Mr Renshall said that his understanding of the agreement was that:- * IPC would advance money to acquire 51 per cent of the shares in HTT and the units in the Huntley Trust for $7.6 million; * IPC would also advance $9 million to payout the existing mortgagees of HTT secured over the Land (in accordance with annexure "G" to the agreement); and * both payments were to be made by the Sunset Date of 9 September 2004. 386As I have set out, one of the terms of the IPC Heads of Agreement obliged IPC to provide proof that it "has the Funds required to settle the Purchase of the share in the Business". 387The plaintiffs submit that, in fact, IPC had no funds of its own which it was prepared to commit to the transaction. 15 March 2004 - Fifth Representation 388Mr Renshall allegedly made this representation on 15 March 2004 orally to Mr Zdrilic on the same day as the IPC Heads of Agreement. 389The representation pleaded is that the new funder would:- * spend $85 million on the Project; * do everything necessary to complete the Project to rehabilitate and develop the Land; and * be in charge of the Project. 390According to Mr Zdrilic, Mr Renshall said:- "The funder will spend $85 million to do everything at Huntley including building a golf course, tennis courts and education facilities. The funder will be in charge and have control. They have their requirements". 391Mr Zdrilic made a note included:- "One time Renshall one time Sam. The funder will spend $85M to do everything, inclg build golf course, tennis, education, etc etc. (Only thing will be left is houses but they will be in the plan as well...)" 392The note made no reference to the funder being "in charge of the Project". The part of the note dealing with the funder spending "$85M" does not have the appearance of a note made during the conversation. The first item on the note ("One time Renshall one time Sam") forms no part of the alleged representation but records a matter with which Mr Zdrilic was most concerned at this time, namely his position on the HTT board. 393Mr Renshall denied making this representation and said that:- "I did not represent to Mr Zdrilic that any funding beyond $9 million would be advanced". 394Again, it seems Mr Renshall was speaking of the $9 million "Interim Loan" referred to in the IPC Heads of Agreement. 395The note made by Mr Zdrilic does point to the probability that Mr Renshall said something in this conversation about the possibility of a funder spending $85 million. 396But Mr Zdrilic accepted, in cross-examination, that he did not believe, based upon what he claims Mr Renshall said to him, that HTT had then obtained a binding commitment to advance $85 million. What Mr Zdrilic understood from Mr Renshall was that Mr Renshall was having discussions with a funder about proposals, not commitments, to advance funds. 397Indeed, he agreed that he knew that there was no commitment from any funder to provide $85 million at this stage. 398Further, the draft Heads of Agreement being prepared by Mr Hilliard on Mr Zdrilic's behalf at this time, referred to HTT obtaining a loan of approximately $9 million (not $85 million). 399For these reasons I think it plain that, whatever Mr Renshall said on 15 March 2004 was not relied upon by Mr Zdrilic as representing a statement as to a commitment of funds, or at all. 16 March 2004 - Sixth Representation 400The plaintiffs claim that the next day, a further representation was made that:- * the new funder had approval from a bank in New Zealand for its funding; * the new funder would spend millions of dollars on the Project; and * it was in the best interest of both HTT and LEC to settle the 2001 Proceeding immediately so as not to jeopardise the deal between HTT and the new funder. 401Again, the representation was alleged to have taken place in a conversation between Mr Zdrilic and Mr Renshall. 402Mr Zdrilic claims Mr Renshall said:- "The funder has approval from the bank in New Zealand. The funder will spend millions of dollars. Let's sign the deal and not jeopardise getting this funder as they are hard to get." 403Mr Zdrilic made a note which was substantially to this effect and included:- "They have approval from Bank in New Zealand"; and "Robert says they are going to spend hundreds of millions of dollars". 404Mr Zdrilic's note does have the appearance of one made contemporaneously with his conversation with Mr Renshall. 405In his affidavit evidence, Mr Renshall denied making this statement, and said that he said:- "Look, the mine has been closed for some years and you would have to spend extraordinary amounts to open it up again for commercial operations. We are not going to see any of that sort of revenue for some years. If we are lucky we can get someone investing and hope that the revenue comes later". 406However, in cross-examination he did not adhere to this denial and did not dispute that he said the words attributed to him by Mr Zdrilic. 407This conversation took place the day after HTT entered into the IPC Heads of Agreement which document did contemplate, albeit subject to many conditions, that IPC would spend "millions" on the Project. 408In those circumstances, I am satisfied that Mr Renshall did say words to the effect deposed to by Mr Zdrilic. However, what was said on this occasion (together with whatever was said on the occasion of the Fifth Representation) was overtaken, in my opinion, by events shortly thereafter. 23 March 2004 - Seventh Representation 409This representation is that:- * HTT had an arrangement with the new funder whereby the new funder would provide a loan of $12 million instead of $9 million; and * the new funder was a company called "IBIS Pty Limited". 410This representation is alleged to have been made by Mr Renshall during a meeting at Mr Hilliard's office attended by Mr Renshall, Mr Zdrilic, Mr Hilliard and Mr Gillard. 411According to Mr Zdrilic, Mr Renshall said:- "The funder will provide a loan of $12.0m instead of $9.0m. We can get for the funder 64% equity. The funder would like to have 70% equity. The funder will pay $1.20 for each $1.00 to the smaller shareholders/unit holders. The funder is IBIS Pty Limited". 412Mr Zdrilic's note of the conversation reads:- "Loan now $12m instead of $9m (...) The funder would like to have 70% and Robert thinks he can get 60%". 413Mr Zdrilic's note appears to be one taken contemporaneously with his conversation with Mr Renshall. It shows that whatever Mr Renshall may have said a week or so earlier about "$85 million", Mr Zdrilic now understood that the amount now under discussion was $12 million. 414Mr Hilliard attributed the relevant words to Mr Gillard, rather than Mr Renshall, and said that Mr Gillard said:- "We're going to get $12 million to payout CBA in full. The funder will take a charge to secure its $12 million loan. Plus it will be a shareholder. The funder is paying $1.20 per share to unit holders". 415Mr Hilliard's note of the meeting refers to "funds $12 million to payout CBA in full". His note also says that "they want to be a shareholder" (rather than "will be" a shareholder). 416Mr Gillard said that he said something to the effect:- "The proposal points are:- 1) percentage shareholding for funder is 60 percent odd and 2) funder is to provide debt funding of between $9 million and about $12 million." 417Mr Gillard's note of the meeting read:- "Points = (1) % shareholding funder 60 odd % (2) debt funding $ 9 mill  [approximately] $12 mill". 418Mr Renshall recalled that what he said was:- "The funder is required to invest $12 million, rather a $9 million originally envisaged". 419The significant point about this conversation is that what was being spoken of was a proposal that a "funder" was to advance $12 million rather the lower figure of $9 million. Thus, as I have said, whatever was said to Mr Zdrilic earlier in the month about a funder "spending $85M on the Project" or spending "millions of dollars on the Project" was overtaken by a specific figure of $12 million. Drafts of the proposed Heads of Agreement being prepared by Mr Hilliard during March reflect this. Earlier drafts impose an obligation on HTT to cause $9 million to be borrowed. Later drafts refer to an obligation on HTT to raise $12 million. 420Further, it is clear from Mr Zdrilic's evidence that he regarded these discussions as referring to proposals or aspirations, rather than any representation of commitment. 421In cross-examination Mr Zdrilic said that he was not sure what he thought of this conversation in terms binding commitment but agreed that he appreciated that nothing was yet "fixed in stone". 25 March 2004 - Eighth Representation 422Again, this representation is alleged to have been made orally by Mr Renshall to Mr Zdrilic. 423The representation alleged is that the new funder would advance $4 million on 26 March 2004 (that is, the very next day) on a six month loan basis in order to payout the loan owed by HTT to GPC and also to facilitate the purchase of land adjacent to the Land, known as the Cook Land. 424Mr Zdrilic's account of the conversation with Mr Renshall was:- "GPC (...) is putting pressure to be paid out or they will liquidate the company. Tomorrow the new funder will put in $4.0m for 6 months to pay GPC $4.0m which includes the purchase of Cook land. The new funder is undertaking due diligence on the project". 425Mr Zdrilic's note reads:- "I rang Renshall (...) He said GPC is putting pressure to get paid out or they will liquidate the company. So tomorrow or Friday 26/3/04 the new funder will put in $4m to pay GPC and to pay $700,000 CBA to bring the loan $300,000 approx below limit (...) The $4m includes payment for the Cook land (60 hectares). He said this was the biggest individual parcel of land in all of Huntley". 426Mr Renshall denied the conversation but agreed he said:- "GPC are requesting that they be paid out or they will appoint a receiver. We are attempting to obtain interim finance to payout GPC and the Commonwealth Bank. The funds are to be provided in accordance with the Heads of Agreement with IPC." 427In cross-examination, Mr Zdrilic said he did not give any thought as to whether what he claims Mr Renshall said amounted to a binding commitment. 428Mr Renshall said the funds would arrive "tomorrow" (that is 26 March 2004). Mr Zdrilic agreed that he understood that to mean that the funds would have to arrive the next day. 429Mr Zdrilic agreed that he knew that, the next day, $4 million had not arrived. 430Mr Zdrilic said that Mr Renshall had given him an explanation for that delay, which he had accepted, and that "we moved forward". 431Thus, it seems clear, except perhaps for a period of 24 hours from 25 March 2004, Mr Zdrilic could not have relied upon whatever it was that was said to him by Mr Renshall. 432In any event, Mr Zdrilic agreed that what he came to know the next day, that is 26 March 2004, was that the amounts owing by HTT to CBA and to GPC were to be paid out, but not by the New Zealand funder. 433Rather, the funds were to be advanced by a company known as DTC No 1 Pty Limited ("DTC"). 434Thus if, as Mr Zdrilic's note suggests, he was told on 25 March 2004 that "tomorrow" $4 million would be advanced by "the new funder", he must have appreciated, when DTC suddenly came on the scene the next day, either that the "new funder" had not come up with the money after all, or that it was sourcing loan funds from a third party. The first "expensive" loan - the DTC advance 435On 26 March 2004 HTT entered into an agreement with DTC. 436So far as the evidence reveals, from Mr Zdrilic's point of view, DTC came on the scene out of the blue. There is no reference, prior to 26 March 2004, to DTC in any document tendered in the proceedings. In Mr Zdrilic's evidence, all references prior to 26 March 2004 had been to "the new funder". 437The DTC loan was the first of three loans that the parties referred to as the "expensive loans". 438The DTC loan was for $6.8 million. It was used to pay the amount then owing by HTT to CBA (approximately $3.29 million), and the amount owing by HTT to GPC (approximately $3.095 million), together with certain fees and expenses. It will be recalled that CBA and GPC had been pressing for payment since mid 2003. 439The DTC loan was for a term of six months (expiring on 26 September 2004) at an interest rate of 25 per cent. 440There is no evidence of what role, if any, IBIS or IPC played in the negotiation of the loan to HTT from DTC. All that is revealed is that IBIS guaranteed repayment to DTC of the loan. 441On 26 March 2004 Mr Hilliard executed a "Caveator's Consent" to the mortgage granted by HTT to DTC over the Land. 442Mr Zdrilic was fully aware of this and said that "of course" he knew that DTC was different from any "big funder" spoken of by Mr Renshall. 443On 26 March 2004 Mr Hilliard wrote to Mr Zdrilic:- "I refer to our discussions earlier today and confirm that, on behalf of LEC, as caveator, I have consented to discharge of mortgages in favour of the Commonwealth Bank and Great [sic] Pacific Capital Limited and registration of a mortgage in favour of DTC No 1 Pty Limited in respect of an advance of $6.8 million(...) A meeting has been arranged with Brian Gillard and Robert Renshall in my office at 3pm on Monday 29 March 2004. The purpose of the meeting is to obtain full disclosure of the way in which [HTT] holds its interest in the land and its relationship with the proposed new funder which will be lending the $12 million referred to in the draft Heads of Agreement". 444The fact that Mr Hilliard saw the purpose of the proposed 29 March 2004 meeting as being to obtain "full disclosure" of HTT's relationship with "the proposed new funder" it makes clear, in my opinion, that whatever Mr Renshall had thus far said to Mr Zdrilic (whether by reason of the alleged Second, Fifth, Sixth, Seventh or Eighth Representations), Mr Zdrilic was relying on Mr Hilliard to establish the final position on his behalf and on behalf of LEC. 29 March 2004 meeting 445This meeting was attended by Messrs Zdrilic, Hilliard, Renshall and Gillard. 446The meeting led to what Mr Hilliard described on 6 April 2004 as a "close to...final version" of the proposed Heads of Agreement between the parties. 447Clause 3.6 of that draft Heads of Agreement provided that:- "HTT shall obtain sufficient finance from a new funder (estimated at but not limited to $12 million) to payout DTC No 1 Pty Limited and American Re (...)". 448It was also at this meeting of 29 March 2004 that Sentel was named as the proposed "New Co" (although, Sentel was not incorporated until 30 June 2004). 29 April 2004 - Ninth Representation 449This representation, again alleged to have been made orally in a conversation between Mr Renshall and Mr Zdrilic, was that an injection of funds by the new funder in the sum of $50 million to $70 million was available subject only to the new funder obtaining a banking licence to bring the funds into Australia. 450Mr Zdrilic claims Mr Renshall said:- "The $577,000 borrowing (including interest) is to buy units of unit holders by HTT that was supposed to be paid by our Joint Venture Partner. The Joint Venture Partner did not yet get the banking licence to be able to bring into Australia $50m, $60m or $70m. Units purchased will be held in escrow for the funder. The loan of $6.8m and $577,000 is guaranteed by the Joint Venture Partner. If the Joint Venture Partner does not pay all the money for the units purchase by HTT (which will be held in Escrow) the units will then be owned by HTT." 451The reference to a "$577,000 borrowing" was a reference to a proposed loan by Frenkail Pty Limited to HTT in that amount. This was the second of the "expensive loans". I shall refer to it further below. 452Mr Zdrilic made a note of the conversation. Critically it says:- "Robert says joint venturer did not get Banking licence yet & that some things to be done with our reserve bank to be able to bring in $50m, $60m, $70m". 453In his affidavit evidence, Mr Renshall denied making the representation although he agreed he did say:- "We are borrowing $577,000 to pay ten percent deposits to the small shareholders when they sign the agreements to transfer the units to the funder". 454However, in cross-examination Mr Renshall retreated from this denial and, ultimately, did not deny saying any of the words attributed to him by Mr Zdrilic. 455Assuming that Mr Zdrilic's note is a reliable guide as to what Mr Renshall said, the alleged representation appears to me to be no more than a statement by Mr Renshall of his understanding that the "Joint Venturer" had not yet got whatever "licence" was needed from the Reserve Bank to bring funds into Australia. 456It was not suggested to Mr Renshall that this was not his understanding. 457In my opinion, this falls short of a representation that any particular amount of money was available to be advanced, let alone would be advanced. The second "expensive" loan - the Frenkail Pty Limited mortgage 458On 14 May 2004 HTT granted a mortgage to Frenkail Pty Limited ("Frenkail") over the Land to secure an advance of $577,000. 459The term of the advance was three months. It was thus repayable on 14 August 2004. 460Several weeks earlier, on 29 April 2004, Ms Penny Evans (a partner at TressCox), reviewed the draft loan agreement underlying the Frenkail mortgage and wrote to Mr Zdrilic:- "The terms seem very harsh from the borrower's perspective. The main purpose of the loan appears to be to enable HTT Huntley to pay 10% deposits to enable the purchase by HTT Huntley of units in the Huntley Trust... You will see the advance is $577,000 for a term of 3 months. The interest is prepaid at $75,000, being a rate of about 52% pa." 461On 13 May 2004 Mr Hilliard executed a Caveator's Consent to the registration of the Frenkail mortgage. The third "expensive" loan - the Goncalves mortgage 462On 12 May 2004 HTT granted Ms Maria Goncalves ("Goncalves") a mortgage over the Land to secure a loan of $175,000. 463The term of this loan was three months (repayable 11 August 2004) with an interest rate of 60 per cent per annum. 464On 13 May 2004 Mr Hilliard signed a Caveator's Consent on behalf of LEC to the registration of this mortgage. 465Thus, on the eve of the execution of the 13 May 2004 Heads of Agreement (as to which see below), Mr Zdrilic was aware HTT had entered the 26 March 2004 mortgage with DTC, the 12 May 2004 mortgage with Ms Goncalves and was about to enter (on 14 May 2004) the mortgage with Frenkail. 466These mortgages were secured loans which were highly disadvantageous from HTT's point of view. 467They were each for a short term and at high levels of interest (25 per cent, 52 per cent and 60 per cent respectively). 468Mr Zdrilic must have known from the fact that HTT was resorting to loans of this nature to, amongst other things, refinance existing secured creditors, that HTT had not yet secured any commitment from IBIS, IPC or any other "big funder". 13 May 2004 Heads of Agreement 469It was against this background that the plaintiffs entered into the Heads of Agreement with HTT, Mr Renshall, Mr Hickie, Devubo and Vocfia. 470The Heads of Agreement represented a compromise of the 2001 Proceedings whereby the Zdrilic interests, through Amy Holdings, would in effect, obtain a 1/3 interest in Sentel through which they would secure an interest in HTT, the Trust, and thus the Land and the Project. 471In this regard, it was agreed that a new company (Sentel) would be formed to hold 37.75 per cent of the shares in HTT and units in the Huntley Trust. 472Through their family trust corporate trustees (Amy Holdings in the case of Mr and Mrs Zdrilic, Devubo in the case of Mr Renshall and Vocifa in the case of Mr Hickie) the Zdrilic, Renshall and Hickie families would each hold 330 of 1,200 issued shares in the new company. 473At this stage, it was envisaged that certain "smaller shareholders" would hold the remaining 210 shares in the new company. Ultimately, by reason of the Non-Dilution deed executed on 27 August 2004, it was agreed that Amy Holdings, Devubo and Vocifa would be the only shareholders in Sentel and would each hold 1/3 of the shares. 474As I have set out above (see paragraphs 76 and 77), by clauses 4.7 and 4.8 it was provided that:- "HTT shall obtain sufficient finance from a new funder (estimated at but not limited to approximately $12 million) to payout DTC (No 1) Pty Limited and American Re and any other creditor holding security over the Huntley Mine, and to purchase the complimentary [sic] land (...) and to prepay 6 months interest on the loans from the new funder." (4.7) and; "The parties acknowledge that HTT will or is likely to require further debt and/or equity funding to complete the rehabilitation of the Huntley Mine (and the complimentary [sic] land) and to complete the development of that land for the best possible return". (4.8). 475The Heads of Agreement also provided that:- * Sentel would agree to pay Mr Zdrilic $5.5 million (being the agreed amount of the loan due by LEC to Mr Zdrilic) (clause 1.6); * LEC would discontinue the 2001 Proceedings against HTT and Mr Hickie on the basis that the parties would "grant and receive mutual releases" (clause 2.1); * LEC would withdraw the Caveat (clause 2.2); and * Mr Zdrilic would be made an alternate director of HTT with Mr Renshall, and would attend HTT board meetings by rotation with Mr Renshall (clause 4.9). 476The Heads of Agreement did not specify by what time HTT was obliged to "obtain" the finance referred to in clause 4.7. Nor did the Heads of Agreement specify, in terms, when, in relation to the obtaining by HTT of finance, or at all, LEC would discontinue the 2001 Proceedings or withdraw the Caveat. 477Did the parties intend that LEC would withdraw the Caveat and discontinue the 2001 Proceedings at the same time that HTT obtained finance pursuant to clause 4.7 of the Heads of Agreement to payout DTC and the other secured creditors over the Land? 478The Heads of Agreement does not say so in terms. 479The recitals to the Heads of Agreement, which I have set out earlier, suggest that the parties intended that the entry into the proposed structure, set out at paragraph 84 above, would occur simultaneously with the withdrawal of the Caveat and the discontinuance of the 2001 Proceedings. But the recitals make no reference to the obtaining of finance by HTT. 480The guiding principal is that stated by the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40]:- "This court, in Pacific Carriers Limited v. BNP Paribas [(2004) 218 CLR 451], has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understanding of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to the contract are to be understood as referring to what a reasonable person would have understood by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." 481It is by no means clear to me that a reasonable person in the position of HTT would have understood, from the language used in the Heads of Agreement, that its obligation to obtain finance was to be performed simultaneously with the other obligations imposed on the parties by the Heads of Agreement. 482In any event, as which will see below, Mr Hilliard adopted the position that it was appropriate to adopt a "2 Stage" approach to settlement of the transactions referred to in the Heads of Agreement. I shall return to this aspect later in these reasons. Were the plaintiffs induced to execute the Heads of Agreement by the representations made prior to 13 May 2004? 483In my opinion, for the reasons I have outlined above, nothing conveyed to Mr Zdrilic in the circumstances of the Third and Fourth Representations (concerning Mr Zdrilic's position on the HTT board and the recognition of liability for his loan to LEC) was either misleading or deceptive. What was conveyed as to the funder's position was, on the evidence, in truth the funder's position. 484Nor did what was said about those matters induced the plaintiffs to execute the Heads of Agreement. After all, despite what Mr Zdrilic had been told about the funder's attitude to Mr Zdrilic being on the HTT board, at the end of the day he was given a place on the board. 485Further, for the reasons I have explained above, I cannot accept that what was conveyed to Mr Zdrilic by Mr Renshall in the circumstances the subject of the alleged Second, and Fifth to Ninth Representations (concerning the availability of funds) induced Mr Zdrilic to commit the plaintiffs to the Heads of Agreement. 486To the extent that the plaintiffs allege these representations were misleading or deceptive because they conveyed that there was a commitment from a funder to advance monies, I do not accept that there was any such representation. 487Otherwise, the circumstances as revealed to Mr Zdrilic throughout March to May 2004 must have made clear to him that HTT's dealings with the proposed funder were at a stage where HTT could do no more than promise, as it did in clause 4.7 of the Heads of Agreement, that it would, within an unspecified time in the future, obtain finance from "a new" funder. 488At the time of entering into the Heads of Agreement, Mr Zdrilic knew that, faced with a threat from GPC to appoint a receiver, HTT was obliged to resort to an expensive, short term loan from DTC. 489Mr Zdrilic also knew that HTT had made, or was about to resort to even more expensive, term borrowings, over an even shorter term from Ms Goncalves and Frenkail. 490In my opinion, it must have been obvious to Mr Zdrilic from those circumstances, and from the terms of clause 4.7 of the Heads of Agreement itself (that HTT "shall obtain" funding estimated at $12 million from the unnamed "new funder"), that it was entirely up in the air whether any such funding would be forthcoming. 491I find that the plaintiffs were not induced to enter the Heads of Agreement by reason of any of the Second to Ninth Representations. First "proof of funds" letter 492On 24 May 2004, Mr Renshall wrote the first of a series of letters which the parties have referred to as the "proof of funds letters". 493On HTT letterhead, Mr Renshall wrote to Mr Moir:- "I have been asking since signing the JV agreement for IBIS to give us something to show they can complete this deal. I believe we have been very patient in this regard". 494Mr Renshall agreed that, at no time, did he tell Mr Zdrilic about this, or any of the subsequent "proof of funds" letters. 26 May 2004 - Tenth Representation 495This is the first alleged representation to be made after entry into the 13 May 2004 Heads of Agreement. 496The representation alleged is:- "That the new funder would advance funds to HTT in about one month's time to enable HTT to refinance its current high interest loans in the total sum of approximately $9 million." 497The representation is alleged to have arisen from a conversation between Mr Zdrilic and Mr Renshall in which, according to Mr Zdrilic, Mr Renshall said:- "The big funder will replace the expensive loans in about one month's time". 498On 26 May 2004, Mr Zdrilic made a note that recorded Mr Renshall saying words to this effect. 499Mr Renshall did not dispute making this statement. 500Whatever basis Mr Renshall may have had for making this statement, it was quickly overtaken by events. 501On 5 June 2004, Mr Hilliard had a conversation with Mr Gillard in which he enquired as to when Mr Zdrilic could "have a meeting with the funder". 502According to Mr Hilliard's note, Mr Gillard's response was that such a meeting could take place "once the documents are signed off" and that:- "We don't want what has been negotiated with the funder to be undone by [Mr Zdrilic]". 16-18 June 2004 - Eleventh Representation 503This representation is that the shares and units held by the "little" shareholders and unit holders in the Huntley Trust (which held a 71.34 per cent interest in the Project) would be transferred to the new funder in the near future. 504The representation is said to derive, first, from a letter Mr Gillard sent Mr Hilliard on 16 June 2004 in which he said:- "No 'remaining small shareholders' elected to continue participating in the project and the remaining shareholding and unitholding will be taken up by the financier in the near future". 505The representation is also said to derive from a conversation Mr Zdrilic said he had with Mr Renshall. Mr Zdrilic made a note (which was signed by Mr Renshall "sighted as agreed") in which it was stated that "what would happen later when financier comes in" was that Sentel would hold 28.66 per cent of the shares in HTT and that the "funder" would hold the remaining 71.34 per cent. 506Arising out of the conversation that Mr Zdrilic had with Mr Renshall that led to that note, Mr Zdrilic sent an email to Mr Hilliard dated 18 June 2004, in which he referred to his meeting with Mr Renshall and said "this is what I can tell you to move things along". 507What followed in the email was a discussion as to the current position in regard to the shares in HTT and units in the Huntley Trust, in the course of which Mr Zdrilic said:- "What happens when a funder is found?... This all seems ok if the Funder comes along but what if Funder does not come along and we have a different scenario (...) You should know it is not 100 % sure that the funder we have in mind will come good but Renshall is working on other funders as well". 508Plainly, at this point, no matter what had been said to him before, Mr Zdrilic had serious doubts about whether any funder (even the one "we have in mind") would deliver, whether by acquiring the units of the "little'" shareholders, or at all. 509Three days later, on 21 June 2004 Mr Zdrilic wrote to Mr Hilliard:- "Further to my email to you of 18/6/04 where I was contemplating what would happen if funder not in place at same time as all the rest of things that need to be done. I just spoke to Robert Renshall who is very confident that funder will come good and it is geared to happen on 3/7/04". 510What this shows, in my opinion, is that, as at mid June 2004 Mr Zdrilic could recognise that there was no commitment from any funder "we have in mind" and was contemplating the possibility that that funder would "not come along". 511Evidently he raised that concern with Mr Renshall who did no more than to express confidence that the funder "will come good" and that he expected this would happen by 3 July 2004. 512As we shall see, 3 July 2004 came and went without funding being in place. Second "proof of funds" letter 513On 23 June 2004 Mr Renshall wrote the second of his "proof of funds" letters. 514This letter was addressed to the "IPC Joint Venture Trust" and marked to the attention of Mr Moir and stated:- "As you are aware, clause 3.1(b) of the Heads of Agreement dated 15 March 2004 between Huntley and IPC requires IPC to show proof that it has the funds the complete the transaction. Huntley has repeatedly asked James Hanna of IPC and all connected with the agreement including yourself for this evidence. Despite these repeated requests, the information has still not been forthcoming. Huntley requires that proof of funds be shown, and the breach of clause 3.1(b) be rectified within 15 days of the date of this letter." IPC Due Diligence 515Mr Hanna's letter of 31 January 2004 from IBIS to HTT foreshadowed that IBIS would conduct due diligence before advancing funds. 516There is evidence to suggest that some form of due diligence took place. 517On 5 May 2004 Mr Frederick made a note that Mr Hanna had set aside a week to do work on IPC's due diligence on HTT. 518On 6 May 2004, Mr Moir sent an email to Mr Renshall setting out certain matters that Mr Hanna was said to require "to complete the due diligence". 519The list included access to HTT's business offices for the purpose of a review of all of HTT's financial and other records, a copy of HTT's 12 month business plan including income and expenditure projections, copies of income tax and financial statements and executed share transfer agreements from 51 per cent of the shareholders in HTT and 51 per cent of the unit holders in the unit trust. 520Mr Moir concluded that Mr Hanna was:- "Under timing constraints and would appreciate the information today, so that all issues with the NZ Reserve bank can be sewn up". 521On 23 June 2004 a meeting took place between Messrs Renshall, Moir, Hanna and Frederick. 522Arising out of that meeting Mr Moir prepared a letter dated 24 June 2004, addressed to Mr Hanna, in which he stated:- "I have received signed contracts from unitholders to sell their units in the Huntley Unit Trust to Ibis, with a total number of units in the Trust covered in those signed agreements making up at least 51% of the equity in the unit trust; and [HTT] has provided all of the due diligence information set out in the agreement dated 15 March 2004 between HTT and Ibis". 523Mr Moir said, and I accept, that he would not have composed this letter if he did not believe its contents were true. 524The inference I draw is that it reflects matters discussed at the meeting of 23 June 2004 (at which Mr Renshall was present) and points to the conclusion that, as at 23 June 2004, Mr Renshall had been told something to the effect set forth in the letter. Mr Gillard calls for withdrawal of the Caveat 525It will be recalled that, pursuant to clause 2.2 of the 13 May 2004 Heads of Agreement, LEC agreed to withdraw the Caveat that, on 23 April 2003, it had lodged on the title of the Land. 526The Heads of Agreement did not, in terms, state by what date this was to occur. 527In early July 2004, Mr Gillard commenced agitating for the immediate withdrawal of the Caveat. 528On 6 July 2004 he wrote to Mr Hilliard's employee, Mr Simon Bennett:- "I am instructed that [other documentation called for by the Heads of Agreement] should not delay the delivery by your client of the Withdrawal of Caveat(...) As stated, we are expecting the Withdrawal of Caveat to be ready for delivery today. Please advise immediately of any issue which might delay the Withdrawal". 529As things turned out, the Withdrawal of Caveat was not handed over by LEC until the settlement of 27 August 2008. The fact that Mr Gillard was agitating for its immediate delivery is relevant to what occurred on and after 27 August 2004 once the Withdrawal of Caveat was handed over. 530Not surprisingly, Mr Zdrilic's instructions to Mr Bennett, as recorded in Mr Bennett's file note of 6 July 2004 were that:- "Caveat w/drawn if funder comes up with his obligations (at the same time as caveat w/drawn)". July 2004 - Funder not in place 531Also on 6 July 2004, Mr Gillard had a conversation with Mr Bennett in which, according to Mr Bennett's note, Mr Gillard said:- "Have lost the funder". 532Mr Gillard's comment "have lost the funder" was, it seems, reflected in a letter that Mr Bennett sent to Mr Gillard two days later on 8 July 2004 in which he stated:- "[Mr Zdrilic] has advised me that as the funder is not yet in place he needs to be appointed as a full Director of HTT. Additionally HTT's constitution should be amended such that all decisions of Directors are unanimous and all decisions of members must be made with a minimum 80% majority. This is of particular importance to [Mr Zdrilic] whilst there is no funder in place. Could you please forward me a copy of the constitution of HTT so that I can make the necessary adjustments". 533This communication is important in two respects. 534First, it makes clear that, as at 8 July 2004, Mr Zdrilic knew that there was "no funder in place". 535Second, Mr Zdrilic's reaction to that situation was not to assert that the lack of a committed funder was inconsistent with any representations made earlier to him by Mr Renshall or inconsistent with HTT's obligations under the 13 May 2004 Heads of Agreement. 536Rather, Mr Zdrilic sought to reinstate the arrangements (his place on the board of HTT with a power of veto) advocated in his email of 15 February 2004 to Mr Renshall, referred to above. Third "proof of funds" letter 537Two days later, on 10 July 2004, Mr Renshall sent the third of his "proof of funds" letters to IPC. 538This letter was marked to Mr Hanna's attention (copy to Mr Moir) and read:- "As you are aware, clause 3.1(b) of the Heads of Agreement dated 15 March 2004 between Huntley and IPC requires IPC to show proof that it has the funds to complete the transaction. I note that no proof of funds or any other demonstration of your capacity to complete the agreement has not been provided. This failure constitutes a default under the heads of agreement. I therefore put you on notice of Huntley's intention to terminate the agreement if proof of funds is not provided and the default is not rectified within 15 days. Huntley requires that proof of funds be shown, and the breach of clause 3.1(b) be rectified, within 15 days of the date of this letter". 539As I have mentioned, Mr Renshall agreed he did not show Mr Zdrilic any of the "proof of funds" letters. 540At around this time, Mr Frederick said to Mr Renshall:- "They have assured me that proof of funds will be forthcoming". 541Mr Renshall replied:- "That's great but when do I get proof of funds?" 542In cross-examination, Mr Renshall agreed that from 10 July 2004, his position was that, unless IPC provided proof of funds by 15 September 2004, he intended to cause HTT to terminate the IPC Heads of Agreement. 543On or about 20 July 2004 Mr Renshall had the following conversation with Mr Frederick:- Mr Frederick: "Rob you don't have to worry about them, there is plenty of money behind the scenes". Mr Renshall: "The money better be there, because I can't do the deal with Zdrilic if it is not". 544However, it is clear that, at this time, Mr Zdrilic was well aware that no funding was in place. 545This is made quite clear from the correspondence referred to above and also by an email Mr Zdrilic sent to Mr Renshall on 21 July 2004 in which he stated:- "All the documents were to be prepared and signed including the lifting of the caveat at the same time as the funder puts the money in and signs what needs to be signed. Things have not occurred as stated or planned and that is not due to anything done or not done from my end. Now that it appears the funder will not be available at the time when all these things were supposed to take place we must go back to what was envisaged at the very beginning and that is that Zdrilic, Hickie and Renshall or if you prefer Zdrilic and Renshall as directors of HTT with unanimous decisions made. The constitution of HTT to be changed to accommodate the directors unanimous vote and to accommodate the fact that Sentel needs to give approval for any decision. When the funder is ready a decision will then be made that is good for all concerned and you will be the one who will make suggestions and recommendations because you know what is going on better than anybody". 546As I have mentioned above, in his affidavit evidence, Mr Zdrilic asserted that he had a conversation with Mr Renshall the next day, 22 July 2004, in which he spoke of the terms of this email in slightly different terms. 547In my opinion, Mr Zdrilic's email is a far more reliable guide to his communication with Mr Renshall at this time. 548The evidence does not reveal from what source Mr Zdrilic learned that "the funder" was "not in place" or "will not be available". 549But it must have been from Mr Renshall. Mr Gillard had made clear to Mr Hilliard on 5 June 2004 that Mr Zdrilic was to have no direct communication with the funder. And Mr Bennett's letter to Mr Gillard on 8 July 2004 suggests the information did not come from Mr Bennett, Mr Hilliard or Mr Gillard. 550Thus, although Mr Renshall did not tell Mr Zdrilic about his "proof of funds letters", Mr Zdrilic knew (I would infer from Mr Renshall) the true position: no funding was in place. 26 July 2004 - Twelfth Representation 551This representation is said to arise from a conversation between Mr Hilliard and Mr Gillard outside court on 26 July 2004. 552The representation alleged is that:- * the new funder would be in a position to provide funds and enter into a commercial transaction with HTT within three weeks. 553Mr Hilliard's evidence (which was not contested) was that Mr Gillard said:- "The funder will be in a position to provide the funds and enter into its commercial transactions with Huntley within three weeks". 554Mr Hilliard's note of that day reads:- "Funder - 3 weeks time". A two-stage settlement? 555The next day, 28 July 2004, Mr Hilliard wrote to Mr Zdrilic confirming what Mr Gillard had said to him the day before, and raised the possibility of the ultimate settlement of the transactions occurring in two stages. 556Mr Hilliard said:- "I am informed by Brian Gillard that the funder will be in a position to provide the funds and enter into its commercial transactions with HTT within 3 weeks. It makes sense that the overall settlement be in two stages with your interests being protected via the Withdrawal of Caveat being held by TressCox until the second stage of settlement takes place. The two stages proposed are:- 1. settlement between you and the other parties prior to the funder coming on board (with the Withdrawal of Caveat being withheld); and 2. settlement with the funder with the Withdrawal of Caveat being handed over conditional upon the funds being provided (not less than $10,000,000) and David Hickie and Michael Ansell resigning as directors of HTT. During the first stage you will become the alternate director for Robert Renshall. I see no difficulty in you not being a director during the intervening period given that you have not been a director of HTT in the past. By holding a Withdrawal of Caveat your interests are protected." 557In the same letter, Mr Hilliard proposed that amongst the documents to be prepared to affect settlement would be a:- "Letter by TressCox to HTT undertaking to hand over Withdrawal of Caveat upon the funder making funds available and David Hickie and Michael Ansell resigning as directors of HTT". 558Around that time Mr Hilliard prepared a first draft of that letter. Relevantly the draft letter (which I shall call the "TressCox Caveat Undertaking") read:- "In consideration for the settlement taking place we hereby undertake to hold an original Withdrawal of Caveat(...)with such Withdrawal of Caveat to be delivered to Mr Brian Gillard(...)at the time of, (or if they do not occur simultaneously) or upon the last to occur of the following events:- 1. The provision of approximately $12,000,000 by the 'new funder' to HTT pursuant to clause 4.7 of the Heads of Agreement; 2. The resignation of David Hickie and Michael John Ansell and any other director of HTT, other than Robert Michael Renshall; and 3. The appointment by the 'new funder' referred to in clause 4.7 of the Heads of Agreement, of two or more directors to the board of HTT". 559Items 1, 2 and 3 in the TressCox Caveat Undertaking were the essential elements of what Mr Hilliard described as "Stage 2" of the settlement. This, and subsequent iterations of the TressCox Caveat Undertaking thus contemplated that "Stage 2" might not occur simultaneously with "Stage 1". One circumstance in which this could occur would be if the parties were ready to implement Stage 1, but not Stage 2 (for example, because funds were unavailable). 560On 2 August 2004, Mr Hilliard sent Mr Gillard a proposed index of the documents to be dealt with at settlement. The index listed documents to be handed over at "Stage 1" and documents to be handed over at "Stage 2". 561Included in the documents to be handed over at Stage 1 were Short Minutes of Order dismissing the 2001 Proceedings. 562Included in the documents to be handed over at Stage 2 were the Withdrawal of Caveat and the TressCox Caveat Undertaking. 563Subsequent iterations of Mr Hilliard's index were, relevantly, to the same effect and show that from early August, Mr Hilliard (and thus Mr Zdrilic) were planning to hand over the Short Minutes of Order as part of Stage 1 of the settlement. 564Mr Hilliard gave oral evidence that:- "I have always anticipated that there will be one settlement in stages" and that:- "...there would be two stages to one settlement". 565Mr Hilliard said that when he drafted the TressCox Caveat Undertaking he thought that:- "...the events would take place in a very short space of time at the same settlement, same occasion." 566However he agreed that it was "hypothetically possible" that Stage 2 might not happen until months after Stage 1. 3 August 2004 - Thirteenth Representation 567This representation is that:- * Mr Renshall would approach the new funder to finalise arrangements and documentation for the funding (expected to exceed $12 million) and a transfer of equity to the new funder; and * these arrangements would be completed in the next two weeks. 568This representation arises from a letter sent by Mr Gillard to Mr Hilliard dated 3 August 2004. 569Mr Gillard's letter of 3 August 2004 read:- "Robert Renshall will now approach the new funder to finalise arrangements and documentation for the funding (expected to exceed $12,000 [sic]) an equity take up of the unitholders position. We would except those arrangements to come into place in the next two weeks". 570It is common ground that the reference to "$12,000" was intended by Mr Gillard to be $12 million. 571In cross-examination, Mr Renshall said that he was "hoping" (rather than "expecting") that this is what would happen. Sydney Finance Co Pty Limited 572Also on 3 August 2004, Mr Frederick made contact with a Mr Peter Clayton concerning a meeting about a "letter of offer for Huntley". 573Mr Frederick said that Mr Clayton was associated with Sydney Finance Co Pty Limited ("Sydney Finance"). 574Sydney Finance was one of a number of financiers with whom Mr Frederick, Mr Moir and Mr Hanna were negotiating concerning possible finance for HTT. 575On 12 August 2004 Mr Moir sent Mr Renshall a "2nd mortgage offer" from Sydney Finance. 576Mr Moir's email read:- "As discussed, attached is the 2nd mortgage offer. David [Hickie] has already signed it and I have drawn a trust cheque from available funds to pay the application fee ($5,000). The establishment fee payable to Sydney Finance Co P/L is 1%, however, we had to go through a couple of people to get to them and the total brokerage is 5%(...) I am seeing the Sydney Finance guy at 12 noon today. I have asked him to have the lender's lawyers instructed asap so that documentation can be ready this week (ideally). The site visit is expected to be tomorrow and I will keep you informed of developments." 577There was a PDF attachment to that email which, I would infer, was the "2nd mortgage offer". 578That document is not in evidence as Mr Renshall was not able to locate it. 579Although this email describes the establishment of $5000 as being "1%" (suggesting a loan of $500,000), the evidence was that the loan proposed from Sydney Finance was to be $4.5 million. 580This assumes significance in light of later events. Accordingly, I shall set out here Mr Renshall's evidence as to his understanding in relation to the proposed $4.5 million loan. $4.5 million from Sydney Finance 581Mr Renshall said in cross-examination that Mr Hanna told him, on dates he could not recall, that approximately $4.5 million was available through Sydney Finance and that, at some time, Mr Hanna told him that the loan had been "put in place". Mr Renshall said he believed the $4.5 million was "going forward". 582Mr Renshall said he understood that the loan would be made to HTT and secured by a second mortgage to be given by HTT to Sydney Finance over the Land. 583Mr Renshall said that:- "We paid an application fee with Sydney Finance for a loan, and that was my understanding from Mr Hanna that that was going ahead." 584Mr Renshall said:- "I saw it as a short term funding proposal which at that time, together with the 6.8, gave us a majority of the debt funding we required to fulfil part of the IPC Heads of Agreement. It wasn't perfect, otherwise we would have made it 5.2 and then it would have been $12 million. But that's by the by." 585The "6.8" to which Mr Renshall referred was the DTC loan of $6.8 million. Mr Renshall's point was that if the "short term funding proposal" represented by the proposed advance from Sydney Finance was $5.2 million (rather than $4.5 million) then the total of "short term" funds advanced would be $6.8 million plus $5.2 million = $12 million - the figure referred to in clause 4.7 of the Heads of Agreement. 586I accept that this evidence reflected Mr Renshall's state of mind. The "expensive loans" fall due 587On 12 August 2004 the Goncalves debt ($175,000) fell due. Interest continued to accrue on that loan at 60 per cent per annum. 588On 14 August 2004 the Frenkail loan ($577,000) fell due. Interest continued to accrue on that loan at the rate of 52 per cent per annum. Settlement date selected 589At some stage, Friday 27 August 2004 was selected as the date upon which the transactions referred to in the 13 May 2004 Heads of Agreement would be settled. 590The events which occurred on the days leading up to 27 August 2004, namely 24, 25 and 26 August 2004, are of critical significance in this case and require careful consideration. 24 August 2004 - Fourteenth Representation 591The pleaded Fourteenth Representation is that the new funder would advance $4.5 million to HTT on the settlement of the matters set out in the Heads of Agreement. 592This representation is alleged to have been made orally on 24 August 2004 by Mr Gillard to Mr Hilliard. 593According to Mr Hilliard, Mr Gillard said:- "The new funder will be providing a sum of approximately $4.5 million on settlement". 594Mr Hilliard's note of the statement reads:- "DRH to write to BG re: $4.5m & borrowings of $12m". 595In cross-examination Mr Hilliard said:- "I believed I was being told that we don't have $12m for the settlement, we only have $4.5". 596Mr Gillard said:- "I do recall clearly that I said in words generally to the effect 'the funder will be providing about $4.5 million' and I recall that prompted him to say in words generally to the effect 'I thought you were getting $12 million. DTC lent $6.8 million - how does $4.5 million fit in?' I said in words to effect 'I do not know - I will find out' and I then wrote the words set out in Item 1 of my file note". 597Mr Gillard's file note reads:- "Conference Derek. DTC No 1 P/L lent $6.8 mill. How does $4.5 mill fit in?" 598The $4.5 million to which Mr Gillard referred was, evidently, the amount of the contemplated advance from Sydney Finance. 599This conversation between Mr Gillard and Mr Hilliard appears to be the first occasion on which Mr Hilliard, and thus Mr Zdrilic, was aware that $4.5 million (rather than the $12 million referred to in clause 4.7 of the 13 May 2004 Heads of Agreement) would be provided on settlement. 600Mr Gillard's response to Mr Hilliard's question as to how the $4.5 million "fitted in" must have made clear to him that Mr Gillard had limited knowledge about the matter. 601Mr Hilliard followed the matter up in a letter he wrote to Mr Gillard the next day, 25 August 2004, in which he said:- "During(...)discussions Mr Gillard indicated that the 'new funder' would be providing a sum of approximately $4.5 million on settlement. Mr Sam Zdrilic, on his own behalf, and on behalf of Sentel Pty Limited is concerned that this is not the amount contemplated by clause 4.7 of the Heads of Agreement". 602In that letter Mr Hilliard also asked the following questions (to which I shall return below):- 1. "What amount will the new funder provide on settlement? What is the break-up between loan and equity? 2. How will the monies provided by the new funder on settlement be applied? Please provide a detailed list of payees and amounts; 3. In respect of monies to be provided by way of loan funds, please advise the terms of the loan including interest rate and repayment date; 4. In respect of any monies to be provided in the future by way of loan, will there be a facility agreement between the new funder and HTT Huntley Heritage Pty Limited? If so, please provide a copy of the draft facility agreement..." Mr Ping Huang 603On the same day Mr Ping Huang ("Mr Ping") wrote a letter ("the Ping Letter") to Mr Moir on the letterhead of Investment Business Corporation (iBC) Group Pty Ltd ("IBC"). 604The letter read:- "This letter is to confirm that Investment Business Corporation Group Pty Ltd. (iBC Group) will invest A$40 million into the Huntley project subject to the successful review by iBC Group. This money will be invested by no later that 10 September 2004 and will be used to refinance loans and to complete the purchase of units in the Huntley Trust". (emphasis added). 605Mr Moir sent Mr Gillard a copy of the Ping Letter the next day, 25 August 2004. 606Mr Renshall was not able to say precisely when he received the letter but it must have been at or around that time. Mr Renshall's "proof of funds" conversation with Mr Hanna 607Also on the same day Mr Renshall had a conversation with Mr Hanna to the following effect:- Mr Renshall: "I have requested proof that the funds are available in three separate letters without receiving a response. Will the funds be available soon?" Mr Hanna: "Yes, the funds will be ready in the next few days". Mr Renshall: "Well, I'd like some assurance the funds are on the way". Mr Hanna: "I'll get Ping to confirm his commitment in writing and get James Moir to give you a copy. In any case there should be $4.5 million coming in a few days". 608Mr Renshall agreed that, when referring to the $4.5 million in this conversation, Mr Hanna made no reference to Sydney Finance. However, as set out above, Mr Renshall said that on other occasions, the dates of which he could not recall, Mr Hanna had said the $4.5 million was available through Sydney Finance. 609Mr Hanna's reference to getting "Ping to confirm his commitment in writing" either reflected, or led to, the Ping Letter. 25 August 2004 - Fifteenth Representation 610This representation is said to arise from a conversation between Mr Zdrilic and Mr Renshall on 25 August 2004. 611The representation pleaded is that:- * the funder would be putting $18 million into the Project, of which $10 million was the purchase of equity; * $4.5 million would be paid on settlement and the balance of the $18 million would be paid on 15 September 2004; * the new funder had organised funding in the sum of $40 million which would be advanced in stages. 612Mr Zdrilic said, during a telephone conversation, that Mr Renshall said:- "The funder will be putting in $18.0m of which $10.0m is equity. If the funder wants to put in $4.5m then so-be-it as the rest will be paid on 15 September 2004. I don't want to rock the boat. The funder has already organised $40.0m which will come in stages. The re-zoning and the plans to Council will be happening soon." 613Mr Zdrilic's note of his conversation with Mr Renshall reads:- "Spoke to R Renshall He said he will try to meet me on Friday before the meeting re settlement. I suggested we meet before so he can fill me in on things. He said the Funder will be putting in $18m of which $10.0m approx will be equity and the rest loans. He does not want to rock the boat - if Funder wants to put in $4.5m (the rest will be on 15/9/04) then so be it. HTT has an agreement how much equity will be paid & how much loan. The funder has already organised $40m but the availability of those funds comes in stages. Firstly $4.5m will be used to payout American Re insurance as they have become the 1st mortgagee. Then little loans will be repaid & part of $6.8m. The rest of equity and loan will be paid on 15/9/04". 614Mr Zdrilic's note commences with scattered points that appear to have been made during the conversation. The date "15/9" appears, as does the figure "$18m". The latter figure is linked by an arrow to notes "$7-8m Loans $10.0 Eq". Those figures include "$6.8m" (the amount of the DTC loan, about to fall due), and "$700,000", although not "4.5m" or "40m". 615The text set out above appears to have been written separately, at some time after the actual conversation. 616Ultimately, Mr Renshall did not dispute the substance of what Mr Zdrilic said about this conversation. He said he could not remember what was said. 617Mr Hilliard made a note of what Mr Zdrilic told him about this conversation which, relevantly, reads:- "He spoke to Robert Renshall There is a document between HTT & Funder Loan $4.5m Eventually $18m $10m - equity $8m - loans Balance of monies to be paid 15/9/04". 618Mr Hilliard's note did not refer to "$40m". Mr Hilliard's note suggests that Mr Zdrilic told him that the amount ultimately to be advanced was "18m" - hence the use of the word "eventually" in relation to that figure. 619Mr Hilliard's note also makes clear that Mr Zdrilic told him that Mr Renshall had said that there was a document dealing with the relationship between HTT and "the funder". 620Mr Einfeld submitted that, when considering Mr Zdrilic's note of this conversation, I should take particular care to take into account the possibility that Mr Zdrilic had not recorded exactly what was said by Mr Renshall but, rather, Mr Zdrilic's "gloss" of the conversation. 621Mr Einfeld reminded me of the oft quoted words of McClelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319:- "Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of prevision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word of phrase, or condition." 622According to Mr Zdrilic's note, Mr Renshall said:- * the funder "will be" putting in $18 million; * $4.5 million of that $18 million might (the word "if" was used) be put in prior to 15 September 2004; * the $4.5 million "will be" used to payout the existing first mortgagee American Reinsurance; * the balance of $18 million "will be" be put in by 15 September 2004; and * the funder had "already organised" $40 million which will be available "in stages". 623The combination of Mr Zdrilic's and Mr Hilliard's notes lead me to conclude that Mr Renshall did tell Mr Zdrilic that that the funder would "eventually" advance $18 million and that such advance would be made by 15 September 2004. 624The reference in both diary notes to "15/9/04" (Mr Zdrilic's note refers to that date twice) leads me to conclude that Mr Renshall specified this date in his conversation with Mr Zdrilic and that Mr Zdrilic thought it important enough to convey to Mr Hilliard. 625These were representations as to future matters. The onus was on the HTT Defendants to adduce evidence that Mr Renshall had reasonable grounds to make these statements. 626There is no evidence at all explaining how Mr Renshall could have represented that $18 million would be advanced. 627Nor is there any evidence explaining on what basis Mr Renshall stated that $18 million would be advanced by 15 September 2004. 628That date is, or is approximately, the "sunset date" under the IPC Heads of Agreement. It may be that it was for that reason that Mr Renshall nominated this date. However, he did not say so. 629My conclusion is that no reasonable basis for the making of these statements concerning the $18 million has been established. It follows that they were misleading or deceptive. 630The combination of Mr Zdrilic's and Mr Hilliard's notes also leads me to conclude that Mr Renshall did say something to Mr Zdrilic about $4.5 million being advanced. 631Mr Zdrilic's note that Mr Renshall said that he did not want to "rock the boat" and that Mr Renshall said something to the effect that "if the funder wants to put in $4.5 million, then so be it" appears very much to be an occasion on which Mr Zdrilic was endeavouring to capture Mr Renshall's exact words. 632On Mr Renshall's own account of it, the day before Mr Hanna had told him that $4.5 million "should be coming in a few days". I do not see a statement by Mr Renshall that, in effect, if the funder wanted to put in $4.5 million shortly, then "so be it", was inconsistent with that earlier statement. 633This was another statement as to a future matter. 634However, on this occasion, I think Mr Renshall did have reasonable grounds to make this statement. 635He had been told (and in my view had no reason to doubt) that Mr Hickie had signed a loan offer form for a $4.5 million advance and that HTT had paid a fee to Sydney Finance. He had been assured by Mr Hanna that the $4.5 million "should be coming in a few days". Accordingly, in my opinion Mr Renshall's statement about this figure was not misleading or deceptive. 636Based on Mr Zdrilic's note, I am also satisfied that Mr Renshall said something about funder having "organised" $40 million. 637To "organise" is to "make arrangements or preparations for" something (Concise Oxford Dictionary 11th edition) or to "obtain; get; make" (Macquarie Dictionary 3rd edition). 638Mr Zdrilic's note suggests that Mr Renshall had qualified the statement that the funds were "organised". 639Mr Zdrilic's note says that Mr Renshall qualified each statement about the $40 million by saying "but the availability of those funds comes in stages". In Mr Zdrilic's rendering of the conversation in his affidavit he said something slightly different. He said that Mr Renshall had said that the $40 million "will come in stages". 640It appears to me most likely that whatever Mr Renshall said about the $40 million, he made clear that although the funds had been "organised", they were not yet "available". 641The reference in this note to the funder having "organised" $40 million must have conveyed to Mr Zdrilic that, so far as Mr Renshall knew, it was necessary for the funder to make arrangements or preparations for the advance and was thus not using its own funds. Rather, it was "organising" funds from a third party. 642So far as the IBC loan of $40 million was concerned, Mr Renshall's evidence was as follows:- * the only document he saw concerning the proposed IBC loan was the Ping Letter of 24 August 2004; * he knew that Mr Ping was associated with IBIS but did not know what the relationship was; * he did not know whether IBC was bound to provide funds to IPC; * on the other hand, he did not know that IBC was not bound to provide such funds; * he believed that Mr Moir had done some due diligence in respect of Mr Ping's capabilities; * he had seen from Mr Ping's letter that IBC's proposed loan was subject to a successful review by the IBC group of IPC and that until that review had been completed to the satisfaction of IBC, there was no assurance that IBC would advance the $40 million; * he made no enquiry before 27 August 2004 as to the state of that review; * he only had a vague idea of the state of the review; * he understood that whether or not funds would be made available would depend entirely upon a business decision to be made by Mr Ping; * he understood that in the Ping Letter of 24 August 2004, IBC had only "given an indication" of the availability of funds; but * nonetheless, he did understand that IBC's review would be successful as he knew IBC had access to the "due diligence that IPC had". 643It seems to me probable that Mr Renshall's statement that funder had "organised" $40 million was based on his reading of the Ping Letter, and nothing more. 644That letter was addressed to Mr Moir (as IBIS/IPC's solicitor) and did suggest that IPC had made some arrangements or preparations for the loan, and had obtained or got an offer of finance and had in that sense "organised" it. 645The letter stated that such arrangements were "subject to review by IBC Group". Nonetheless, the state of play was such that it was reasonable, in my opinion, for Mr Renshall to describe the funds as have been "organised". 646Mr Renshall's statements that the "organised" funds would become "available" (whether in "stages" or otherwise) was a statement as to a future matter. 647Based on the matters set out above, I am satisfied that Mr Renshall had a reasonable basis to predict that the funds would be available. 648Although his knowledge of the stage to which the process had progressed was vague, he did understand that IBC was conducting a due diligence in respect of HTT and had access to the same due diligence material to which IPC had had access. There is no reason to suggest that Mr Renshall doubted IPC's satisfaction with what it had seen during its due diligence in respect of HTT or that IBC would come to a different view. 649In any event, I am not satisfied that whatever was said to Mr Zdrilic about the $40 million weighed heavily on his mind. 650There is no mention in Mr Hilliard's note of the $40 million. This suggests to me that either Mr Zdrilic did not mention the figure to Mr Hilliard at all, or if he did, he did not put sufficient emphasis on it to cause Mr Hilliard to make a note. Either way, the absence of any reference to the $40 million in Mr Hilliard's note suggests to me that it was not a matter that was of decisive significance to Mr Zdrilic. 26 August 2004 - Sixteenth Representation 651This alleged representation arises from a letter Mr Gillard sent to Mr Hilliard on 26 August 2004 in response to Mr Hilliard's letter of 25 August 2004, referred to in the preceding paragraph. 652The representation alleged is that:- * the new funder had arranged to draw $4.5 million to HTT at settlement on 27 August 2004; * the funds advanced by the new funder would be used in part to pay out the first, third and fourth mortgagees of the Land and to meet expenses and further funding for the Project; * the new funder was still operating on the basis of the 13 May 2004 Heads of Agreement which required funding of $12 million; and * the further funding from the new funder was believed to be relatively assured. 653The format of Mr Gillard's letter of 26 August 2004 was as a response to the numbered questions in Mr Hilliard's letter of 25 August 2004. 654Mr Gillard wrote:- "We are instructed to reply as follows (using your paragraph numbering as appropriate): 1. The funder has arranged for a draw down of $4.5 million for tomorrow for which purpose James Moir on behalf of the funder [sic]. The funds will be entirely loan funds. 2. The funds will be used for the purpose of paying out the 1st, 3rd and 4th mortgage loans (that is, American Re, Frenkail and Goncalves), which have become due. The funds will also be used for meeting expected expenses and funding further development of the project. 3. We do not yet have these details. 4. The funder is still operating on the basis of the Heads of Agreement which requires funding for $12 million comprising the retirement of the DTC No. 1 Pty Limited loan (approx. $7 million), the purchase price of the Cook land and costs (approx. $3 million) and estimate [sic] funding and other expenses and other working capital (approx. $2 million)(...) The further funding is believed to be relatively assured depending on HTT being able to demonstrate meeting the funder's requirements(...) We confirm our arrangements to attend at 2pm tomorrow and have arranged for James Moir to attend at that time for furtherance of arrangements with his client". 655Mr Renshall said he instructed Mr Gillard to write this letter on the basis of:- * his conversation with Mr Hanna on 24 August 2004; * the Ping Letter of 24 August 2004; and * the terms of the IPC Heads of Agreement. 656There are a number of observations to be made about this letter. 657First, it is clear that words are missing from the end of the paragraph numbered "1" in the letter. Although Mr Gillard denied this, it is clear to me that the words that are missing are words to the effect "will attend the settlement" so that the paragraph numbered "1" should have read something like:- "The funder has arranged for a draw down of $4.5 million for tomorrow for which purpose James Moir on behalf of the funder will attend the settlement". 658This reading of the letter is consistent with the last paragraph, in which Mr Gillard confirmed that Mr Moir would attend the settlement at 2pm "tomorrow" (that is 27 August 2004) "for furtherance of arrangements with his client". 659In my opinion, notwithstanding Mr Gillard's evidence to the contrary, the letter conveyed, and was intended by Mr Gillard to convey, that Mr Moir would attend the settlement on 27 August 2004 with $4.5 million. 660Second, Mr Gillard's statement that the further funding was believed to be "relatively assured" must be read in light of the fact that Mr Gillard was not able to provide the "details" sought in Mr Hilliard's question "3", namely the terms of loan funds, including interest and repayment dates. 27 August 2004 - the settlement 66127 August 2004 was a Friday. 662Mr Gillard gave evidence that, at some time during the morning, Mr Renshall told him that, contrary to what was foreshadowed in Mr Gillard's letter addressed to Mr Hilliard of 26 August 2004, Mr Moir would not be attending the settlement scheduled for 2pm that day. 663Mr Gillard said nothing to this effect in the two affidavits he swore. The evidence only emerged during the cross-examination of Mr Gillard. Mr Gillard was the last witness to be called. 664No doubt, for this reason, such proposition was not put to Mr Renshall in cross-examination. 665Mr Renshall, who gave evidence before Mr Gillard, said he could not recall whether he was expecting Mr Moir to be present at the settlement. 666In advance of the settlement, Mr Gillard met Mr Hilliard at around noon. 667The solicitors exchanged letters both dated 27 August 2004. 668Mr Hilliard's letter said:- "Notwithstanding the fact that clause 4.7 of the Heads of Agreement has not been complied with yet and will not have been complied with at the conclusion of the proposed settlement to occur today our clients, in the spirit of working together for the commercial success of the project and as a sign of their continuing goodwill, are prepared to proceed with today's settlement and to this end have accepted the insertion of clause 8.4 to the draft Deed of Non-Dilution and Merger [which provided that each party accepted that there had been substantial compliance with and no breach of the Heads of Agreement]. We note that you do not yet have detail [sic] of the terms of the proposed loan including interest rate and repayment date. We do not accept that a director of HTT would arrange a loan of $4.5 million without knowing these basic conditions. We require to be informed about them at 2pm today, if not before (...) The failure to have $12 million (approx) available from the new funder at settlement to discharge all current liabilities of HTT is a matter of concern. Nevertheless, LEC, in the spirit of cooperation and goodwill, has instructed us that the Withdrawal of Caveat be made available today, for the settlement provided that the various prerequisites to settlement (...) are fulfilled". 669Mr Hilliard's letter was written in light of Mr Gillard's letter of 26 August 2004 and on the assumption that $4.5 million (rather than $12 million) would be available on settlement. 670Nonetheless, the letter indicated a preparedness on Mr Hilliard's behalf (and thus Mr Zdrilic's behalf) to "proceed with today's settlement" notwithstanding that clause 4.7 of the Heads of Agreement (pursuant to which HTT was obliged to "obtain sufficient finance from a new funder" to payout HTT's secured creditors) "had not been complied with yet and will not have been complied with at the conclusion of the proposed settlement to occur today". 671The letter is significant for a number of reasons. 672First it indicates to me that whatever had been said, to this point, about the availability of funds was overtaken by the announcement in the letter. 673The letter announced that the plaintiffs proposed to proceed to settle, notwithstanding the fact that, on their case, the one matter that mattered most to them (the availability of funds) had not and was not going to occur. 674Not only that, the plaintiffs indicated that they proposed to consent to the proposed clause 8.4 of the Non-Dilution Deed which was in the following terms:- "Notwithstanding the terms of the Heads of Agreement, the parties accept that each party has substantially complied with the obligations under the Heads of Agreement and that there is no subsisting breach to which this part currently applies." 675There was thus to be a waiver of any non-compliance with the terms of the Heads of Agreement including, critically, clause 4.7. 676Further, although this is not stated in terms in the letter, the letter made clear that there was indeed to be a "2 Stage" settlement and that Mr Hilliard accepted that a critical aspect of "Stage 2" (pursuant to which HTT would comply with the balance of its obligations under clause 4.7 of the Heads of Agreement - namely to provide the balance (over and above $4.5 million) of the estimated $12 million required to pay out HTT's secured creditors) would not occur on 27 August 2004. 677Further, Mr Hilliard was proposing to hand over the Withdrawal of Caveat (an integral part of "Stage 2"). 678As will emerge shortly, the matter was made even clearer when it became apparent, two hours later, that no funds at all were to be provided on 27 August 2004. 679It is plain that, at this stage, Mr Hilliard expected that Mr Moir would attend the settlement on behalf of the "new funder". He made a note of "parties expected to attend" which included Mr Moir. 680Mr Gillard's letter raised two matters. 681First it enclosed a copy of an early draft of the 15 March 2004 IPC Heads of Agreement. I shall return to this below. 682Second Mr Gillard said:- "As previously indicated, the arrangements with the funder are not finalized and are subject to commercial negotiations concluding. Our client believes that on conclusion of those negotiations funds in accordance with the Heads of Agreement between our parties will be available but that a commercially acceptable substituted arrangement substantially in accordance with the terms of clause 4.7 of the Heads of Agreement will satisfy the requirements of that Agreement. In any case our client will rely on clause 8.4 of the Deed of Non-Dilution and Merger in relation to that issue". 683What Mr Gillard meant by his expression "as previously indicated" was not explored in cross-examination. So far as the evidence reveals, this letter comprised the first occasion on which any suggestion was made to the plaintiffs that arrangements with the funder were "not finalised" and were "subject to commercial negotiations concluding". 684At 2.00pm Messrs Gillard, Renshall and Hickie attended Mr Hilliard's office for the settlement. Mr and Mrs Zdrilic were also present. 685At the outset, Mr Gillard announced that:- "The money is not ready." 686Not only that, but, as Mr Gillard and Mr Renshall were expecting, but Mr Hilliard and Mr Zdrilic were not, Mr Moir was not present. 687According to Mr Zdrilic, Mr Gillard said the money was not ready because of "technical issues that have nothing to do with HTT". 688Mr Gillard denied this and said that he gave no explanation for Mr Moir's non-appearance, and that none was sought. 689Mr Hilliard gave evidence of the following conversation:- Mr Hilliard: "I expected James Moir to be present with the $4.5 million. I've also got the Withdrawal of Caveat for him." Mr Gillard: "James Moir won't be attending this settlement. I will be having a separate settlement with him at which time I will hand over the Withdrawal of Caveat". Mr Hilliard: "I thought I'd be handing the Withdrawal of Caveat direct to James Moir. The conditions to be satisfied before I hand over the Withdrawal of Caveat are set out in my draft letter to HTT" [Mr Hillard was referring to the TressCox Caveat Undertaking]. Mr Gillard: "I'll give you an undertaking to give it to him". 690Mr Gillard disputed that Mr Hilliard had said "the conditions to be satisfied before I hand over the Withdrawal of Caveat are set out in my draft letter to HTT" but otherwise he did not dispute the conversation. Indeed he said he clearly recalled saying that he would give Mr Hilliard an undertaking to give the Withdrawal of Caveat to Mr Moir. 691Mr Hilliard also said that he had a number of questions to ask about the draft IPC Heads of Agreement enclosed with Mr Gillard's letter of 27 August 2004. 692Mr Renshall asked to look at the draft and then told Mr Hilliard that it had been superseded and that Mr Moir had the final version. 693Mr Hilliard made some notes in respect of the draft agreement he had been given including, in respect of clause 3.1(b) (which was in the same form as in the final document):- "Has IPC provided proof of its Financial position?" 694Mr Hilliard agreed that his perusal of the draft agreement made it obvious to him that the document:- "Contained no obligation imposed upon the New Zealand funder to provide any money any time soon". 695The HTT Defendants relied on this evidence as demonstrating that, whatever may have been said by Renshall to Mr Zdrilic, it was by now clear that HTT had no committed funder. 27 August 2004 - The Seventeenth Representations 696It was in these circumstances that, during the settlement meeting of 27 August 2004, the Seventeenth Representations were allegedly made. 697Those representations were as follows:- * that the new funder would advance $4.5 million "next week" and that the balance of the $12 million would be paid on 15 September 2004; * the new funder would by 15 September 2004 put in $12 million by way of loan funds which would cover the existing loans of $7 million, the Cook Land purchase for $3 million, and other things for $2 million; * on top of the $12 million loan advance, the new funder would pay $6.5 million to the "small investors" for their units; * the new funder would take a 71.25 per cent equity stake by purchasing all of the shares in HTT and units in the Huntley Trust other than those held by Sentel; * finalisation of the deal and the advancement of funds was assured; * there was no impediment to funds being advanced by the new funders; * the funds were definitely going to be advanced to HTT by the new funder; * the new funder had plenty of money; * the new funder was obliged to advance the funds; * it made no difference whether the funds were advanced by the new funder today or next week because HTT had an agreement with the new funder that the $12 million would be advanced by 15 September 2004; * Mr Frederick and Mr Tugrul were the directors nominated by the new funder to represent the new funder on the board of HTT; and * Mr Frederick resided in New Zealand. 698In final submissions, Mr Jucovic said that the last two representations (concerning Messrs Frederick and Tugrul) were not pressed. 699The balance of the representations concerns the availability of funds. 700According to Mr Zdrilic's evidence, Mr Renshall made the representations orally, for the most part in one continuous monologue. 701Mr Zdrilic made no note of the alleged representations. 702Mr Renshall denied making the representations. In particular he denied:- (a)saying that the project would progress at a "fast pace". He said that "nothing in property development happens at a fast pace"; (b)saying the various figures attributed to him; (c)giving any assurance that the funding would be forthcoming. 703Mr Renshall said he had no control over the funding. 704Mr Renshall said he did recall saying something to the effect:- "There has been a delay in the funding. I except that will be remedied shortly." 705Mr Renshall said that in making that statement he relied upon his conversation with Mr Hanna on 24 August 2004, the Ping Letter and the terms of the IPC Heads of Agreement. 706In his evidence, Mr Hilliard made no reference to Mr Renshall having made representations of the kind alleged by Mr Zdrilic. 707On the contrary, Mr Hilliard said that his conversation with Mr Gillard, set out above, occurred "at the outset" of the 27 August 2004 meeting. 708Mr Hilliard said that, after that exchange took place there was a preliminary review of documents for settlement during which period Mr Renshall "apparently made a number of telephone calls to Michael Ansell trying to locate him to attend the meeting". 709Thus, although Mr Hilliard referred to his recollection of what Mr Renshall was doing that afternoon, he made no mention of any statements of the kind attributed by Mr Zdrilic to Mr Renshall. 710In these circumstances, I am not satisfied that any of the representations alleged by Mr Zdrilic were made. 711For reasons I will explain below, I do accept that Mr Hilliard left the settlement of 27 August 2004 believing that there would be a further settlement, at some time in the future, between Mr Gillard and Mr Moir at which time $4.5 million would be handed over (in exchange for a Withdrawal of the Caveat). However, for reasons I will explain, this was based upon an undertaking given by Mr Gillard to Mr Hilliard and not based upon anything Mr Renshall said. The settlement proceeds 712Whatever was said, and notwithstanding the absence of Mr Moir or any funds from IPC or any other party, Stage 1 of the settlement (as envisaged by Mr Hilliard) proceeded. 713The Non-Dilution Deed was executed, the Short Minutes dismissing the 2001 Proceedings were executed and minutes of board meetings and other documents were executed. 714The result was that the structure referred to at paragraph 72 above was established whereby the Zdrilic family (through Amy Holdings) became an equal 1/3 shareholder (with Messrs Renshall and Hickie) in Sentel, and thus, in turn, acquired a 27.5 per cent interest in HTT and in the Huntley Trust. 715Not only that, but Mr Hilliard delivered to Mr Gillard the Withdrawal of Caveat notwithstanding that no funds were handed over and that, according to Mr Hilliard's plans, this was to only occur at Stage 2 of the settlement and only in exchange for funds. 716This occurred in the circumstances set out below. Mr Renshall's state of mind 717I have set out above the evidence so far as concerns Mr Renshall's state of mind as to the availability of funds from Sydney Finance (the $4.5 million) and IBC/Mr Ping (the $40 million). 718In cross-examination, Mr Renshall maintained that his belief was that the funds from IPC "were coming". 719He said:- "I just stated our position. Mr Zdrilic could make his own decisions of whether he settled or whether he didn't settle". 720Mr Renshall's attention was drawn to an email he sent to Mr Rutherford at IBIS, on 1 October 2004 (by which time, as will be explained below, it was clear there was no prospect of obtaining funds from IBIS or IPC) in which he stated that:- "At all times during our agreement I gave you the benefit of the doubt as to your ability to write a cheque". 721In cross-examination, it was suggested to Mr Renshall that this statement showed that he always did have a doubt as to whether IBIS/IPC could "write a cheque". 722It was suggested to Mr Renshall that the fact that he had sent the various "proof of funds" letters and, as he agreed, intended from 10 July 2004 (the date of the last such letter) to terminate the IPC Heads of Agreement if funds were not to hand by 15 September 2004, showed that he was never confident that funds would arrive. 723Mr Renshall said that that letter was written "with some angst" but that:- "I always thought that they'd be able to do it one way of the other." 724I accept this evidence. In my opinion, Mr Renshall's email to Mr Rutherford was written in the heat of the moment and did not reflect his state of mind as at 27 August 2004. The undertaking in relation to the Withdrawal of Caveat 725As set out above, at the outset of the meeting on 27 August 2004, in response to Mr Hilliard's statement that he had expected Mr Moir to be present with $4.5 million, Mr Gillard told Mr Hilliard that he would have a "separate settlement with Mr Moir at which time I will hand over the Withdrawal of Caveat". 726In my opinion, it was implicit in Mr Gillard's statement that there would be a "separate settlement", that Mr Gillard would receive funds (namely the $4.5 million) in exchange for the Withdrawal of Caveat. If Mr Gillard planned merely to deliver the Withdrawal of Caveat to Mr Moir, or deal with the Withdrawal of Caveat at Mr Moir's direction, the result would not, in my opinion, be a "settlement". 727In my opinion, this is confirmed by the terms of a written undertaking that Mr Gillard gave Mr Hilliard concerning the Withdrawal the Caveat. 728That undertaking read:- "I, Brian James Gillard, hereby undertake to deliver Withdrawal of Caveat provided to me in relation to Caveat numbered 9550269 for the purpose of delivery to Swaab Attorneys in relation to the funding as set out in paragraph numbered 2 of my letter to you of 26 August 2004" (emphasis added). 729The "funding as set out in paragraph number 2" of Mr Gillard's letter of 26 August 2004 was that funding necessary to pay out the American Re, Frenkail and Goncalves mortgages together with further "expected expenses". 730In this context, Swaab Attorneys were the solicitors for the funder. 731In my opinion, an undertaking to deliver the Withdrawal of Caveat "in relation to" the funding as described, required delivery of the Withdrawal of Caveat for the purpose of facilitating the provision of that funding. 732Indeed, Mr Gillard said that the undertaking:- "(...) was drafted on the spot towards the end of the meeting. It was intended to make sure I delivered the withdrawal of the caveat to Mr Moir for the purpose of securing the $4.5 million worth of funding". 733In my opinion, this was borne out by a note that Mr Hilliard made at the settlement meeting of 27 August 2004 in a "to do" list he compiled at the end of the meeting. 734Mr Hilliard's note read:- "BG to write to DRH/TC confirming settled with James Moir". 735This note confirms Mr Hilliard's understanding that once, pursuant to his undertaking, Mr Gillard had delivered the Withdrawal of Caveat to Mr Moir in exchange for funding, Mr Gillard would then write to Mr Hilliard "confirming settlement" with Mr Moir. 736The "settlement" that Mr Gillard was to "confirm" could only occur if funds were exchanged for the Withdrawal of Caveat. 737Mr Gillard said that:- "It wasn't made clear to me that is what he intended (...) I don't think I [undertook] to write to him at all (...) I had no intention of writing to him about a settlement with Mr Moir". 738The transcript records Mr Gillard using the word "understood" rather than "undertook". However, the context makes clear that Mr Gillard said "undertook". 739In my opinion, Mr Gillard must be mistaken in his recollection. There was no reason for Mr Hilliard to write the note on his "to do" list unless it reflected not only his understanding but also Mr Gillard's agreement. 740I find, consistently with the terms of the undertaking given by Mr Gillard to Mr Hilliard, and consistently with Mr Hilliard's note, that Mr Gillard undertook to deliver the Withdrawal of Caveat to Mr Moir, to exchange it for $4.5 million, and to then write to Mr Hilliard confirming that he had "settled" with Mr Moir. 741That Mr Hilliard understood there was to be a separate "settlement" between Mr Gillard and Mr Moir is also confirmed by events immediately after the 27 August 2004 meeting concluded (at around 8pm). 742Mr Hilliard then rang Mr Moir and the following conversation took place:- Mr Hilliard: "I expected that you would be attending the meeting today for the settlement with Robert Renshall and Brian Gillard". Mr Moir: "I thought you knew I had arranged with Brian Gillard that we would do a separate settlement following your settlement?" Mr Hilliard: "No I wasn't aware of that. I expected that I would be giving the Withdrawal of Caveat direct to you. However, Brian Gillard has undertaken that he will deliver it to you. I assume that you will then be lodging it with the RG's?" Mr Moir: "Yes, I will be attending to the formalities of the discharges and lodging the Withdrawal of Caveat." Mr Hilliard: "Brian Gillard has given me a copy of the draft Heads of Agreement between HTT and IPC. Robert Renshall tells me that it is a draft which has been superseded and that you have the original." Mr Moir: "Yes. That must be an earlier version. I have the original which is dated 15 March 2004." Mr Hilliard: "Can you provide a copy of that to me?" Mr Moir: "Yes." (emphasis added) 743During the settlement (at around 6.30pm) Mr Moir sent Mr Hilliard an email concerning the 15 March 2004 IPC Heads of Agreement and confirming that the intention of that document was that IPC would take a 51 per cent controlling interest in the Project via the Huntley Trust and that the Huntley Trust would be the "joint venture vehicle" under that Heads of Agreement. 744In his reply (sent at 8.47pm) Mr Hilliard said:- "Thanks for that. We have just completed the settlement. Would you please give Brian Gillard a copy of the agreement dated 15 March 2004 when he sees you for your settlement to give to me". (emphasis added) 745The emphasised words show clearly, in my opinion, that Mr Hilliard was contemplating that there would be a "settlement" between Mr Gillard and Mr Moir. 746There is no reference in the oral communications between Messrs Hilliard, Gillard and Moir to when the further "settlement" would take place. 747Mr Hilliard did not assert, in his evidence in chief, or under cross-examination, that Mr Gillard had made any statement to him about when the "settlement" with Mr Moir would take place. 748Mr Hilliard did say, in answer to a question I asked, that based on something that had been said to him on 27 August 2004, he understood that the $4.5 million would be paid to HTT over the "next week or so, indeed the next week". 749However, an expectation on the part of Mr Hilliard, as at 27 August 2004, that the $4.5 million would arrive "the next week" is irreconcilable with Mr Hilliard's and Mr Zdrilic's conduct during that next week. 750That conduct is also impossible to reconcile with the proposition that Mr Hilliard and the plaintiffs were induced to consent to the dismissal of the 2001 Proceedings on the basis of anything said on (or indeed before) 27 August 2004 concerning the availability of funds or the prospect of $4.5 million arriving "next week" or at all. 751I will return to that aspect of the matter shortly. I pause to note that 27 August 2004 was a Friday. The "next week" ended on Friday 3 September 2004. Stage 1 and Stage 2 752I have mentioned that on 28 July 2004 Mr Hilliard advised Mr Zdrilic that settlement of the transactions contemplated by the 13 May 2004 Heads of Agreement would proceed in two stages. 753The first stage involved settlement "between you and the other parties prior to the funder coming on board" and involved execution of board minutes, directors' consents, members' application for shares, execution of share transfers, execution of the Non-Dilution Deed, and most significantly, execution of the Short Minutes of Order dismissing the 2001 Proceedings. 754Stage 2 involved "settlement with a funder". At this stage it was proposed that Mr Hilliard would hand over the TressCox Caveat Undertaking and the Withdrawal of Caveat in exchange for letters from Messrs Hickie and Ansell resigning as directors of HTT and, most significantly the provision of funds. 755Absent funds, Mr Hilliard could have insisted that only Stage 1 proceed and that the Withdrawal of Caveat not be handed over until funds were provided. 756It is hard to see on what basis Mr Gillard and Mr Renshall could have resisted that course. 757What happened however, notwithstanding that no funds were to hand, was that Mr Hilliard agreed that not only would Stage 1 proceed, but also part of Stage 2, namely the handing over of the Withdrawal of Caveat. 758I am satisfied that Mr Hilliard was induced to part with the Withdrawal of Caveat because of the terms of the undertaking given to him by Mr Gillard and because of the statement made by Mr Gillard that he would hand over the Withdrawal of Caveat to Mr Moir at a "separate settlement" at which, Mr Hilliard correctly inferred settlement $4.5 million would be handed over. 759But I am not satisfied that this had anything to do with the execution by the plaintiffs of the Non-Dilution Deed, nor the execution by Mr Hilliard of the Short Minutes concerning the dismissal of the 2001 Proceedings. 760Those documents were to be executed and handed over as part of Stage 1. 761I find no suggestion in the evidence that execution of these documents was contingent in any way on the production of funds. 762Indeed, Mr Hilliard's letter of 27 August 2004 made clear that he (and thus the plaintiffs) were "in the spirit of working together for the commercial success of the project and as a sign of continuing goodwill" prepared to proceed with the settlement, even to the extent of handing over the Withdrawal of Caveat, despite the fact that (as Mr Hilliard and the plaintiffs then understood it) $4.5 million (rather than $12 million) was to be advanced to HTT. 763Thus Mr Hilliard's letter indicated the plaintiffs would, for these reasons, proceed with both Stages 1 and 2. 764When it turned out that no funds (not even the $4.5 million) were to be handed over on 27 August 2004 the decision by Mr Hilliard to proceed with Stage 2 was made on the basis of Mr Gillard's undertaking and assurance about the "separate settlement". 765My finding is that Mr Hilliard and the plaintiffs proposed to proceed with Stage 1 in any event, and did so. 766Although Mr Hilliard had, as I have set out above, anticipated that, all other things being equal, Stages 1 and 2 would take part as one settlement, that is not how things worked out on the day. 767The events of the following week make this clear. The lodgement of the Withdrawal of Caveat 768Notwithstanding the terms of his undertaking, Mr Gillard did not deliver the Withdrawal of Caveat to Mr Moir "in relation to the funding" as set out in his letter of 26 August 2004, or at all. 769Mr Gillard said:- "On the Monday [30 August 2004] I think I called [Mr Moir] and asked him, 'I have got the caveat, can I come down?', and he said - we had a discussion, some short discussion, and it was agreed that when, after I had gone up to the Supreme Court with the settlement consent orders that I would go to the Land Titles Office and lodge it for him. The client was ignorant of those arrangements". 770Mr Gillard's reference to going to the Supreme Court "with the settlement consent orders" is reference to the fact, on 30 August 2004 he attended the Court Registry "re approval of short minutes". This is recorded in Mr Gillard's time costing printouts. 771Thereafter Mr Gillard personally attended what he described as the Land Titles Office (now Land and Property Information), and lodged the Withdrawal of Caveat for registration. 772Mr Gillard did not deliver the Withdrawal of Caveat to Swaab Attorneys or Mr Moir. He did not, as he told Mr Hilliard he would, have a "separate settlement" with Mr Moir at which he handed over the Withdrawal of Caveat. He did not exchange the Withdrawal of Caveat for the foreshadowed cheque for $4.5 million. He simply complied with Mr Moir's direction to lodge the Withdrawal of Caveat at the Land Titles Office. 773In my opinion, he thereby acted in breach of his undertaking to Mr Hilliard. 774However, in my opinion, for the reasons I have set out above, this had nothing to do with the decision of Mr Zdrilic to cause the plaintiffs to enter the Non-Dilution Deed. Nor did it have anything to do with Mr Hilliard and Mr Zdrilic's decision to commit LEC to the Short Minutes of Order. Final version IPC Head of Agreement Produced 775On 1 September the final version of the IPC Heads of Agreement was produced to Mr Hilliard and to Mr Zdrilic. 776Mr Zdrilic agreed that he had sought to look at this agreement, because it would show the arrangements between HTT and the funder. 777It will be recalled that on 25 August 2004 Mr Hilliard had made a note that Mr Zdrilic had told him that:- "There is a document between HTT & Funder". 778Mr Zdrilic said that he did not look at the document with great care but that he did notice the provision in annexure "A" to the document stipulating that settlement of the transactions with the New Zealand funder would not take place until 28 days after the issue of a development approval. It will be recalled that as early as 2 March 2004 Mr Zdrilic had told Mr Hilliard that Mr Renshall had told him that funds were "conditional on re-zoning". 779Mr Zdrilic knew that there had been no re-zoning and yet he was neither dismayed or surprised to read this. 780In these circumstances the HTT Defendants submit:- "Mr Zdrilic's indifference to the arrangements between HTT and its funder reveals the reality - on 27 August, no representation was made which conveyed (expressly or impliedly) any assurance (as distinct to hopes) that funds would come in the short term; moreover, if any such assurance had been given, Mr Zdrilic certainty did not rely upon it in settling the substantive transactions." 781It seems to me there was substance in these submissions. 782Mr Hilliard also read the final version of the IPC Heads of Agreement and saw that IPC's acquisition of its interests in HTT might not take place until re-zoning and agreed that:- "...a large sum of money that might be paid from the New Zealand funder to Huntley - to HTT under this agreement might not be paid until a long way down the track...or ever, if there was no re-zoning." Consent orders made 6 September 2004 783As I have mentioned, 27 August 2004 was a Friday. Accordingly, if IPC was to make available $4.5 million "next week" that would have to occur between Monday 30 August and Friday 3 September 2004. 784Mr Hilliard's time costing records contain a entry for Thursday 2 September 2004:- "Telephone to Sam Zdrilic discussing plan to finalise other claims and litigation". 785Mr Hilliard agreed that this entry referred to his proposed attendance on the following Monday, 6 September 2004, at court to hand up the Short Minutes dismissing the 2001 Proceedings. 786Mr Hilliard gave the following evidence in cross-examination:- Q: "... when you discussed with Mr Zdrilic the plan to finalise litigation you told him in fact that you were proposing to hand the short minutes or order to the court so that the court could make orders in accordance with it; would that be right?" A: "I don't recall the content, but I don't disagree with what you put to me." 787On Monday, 6 September 2004 Mr Hilliard attended court with Mr Gillard. The orders dismissing the 2001 Proceedings were made. 788Mr Hilliard said that he had no reason to doubt that the settlement he expected to take place between Mr Gillard and Mr Moir would take place. 789But Mr Hilliard agreed that, at the time he consented to the dismissal of the 2001 Proceedings, he did not ask Mr Gillard or Mr Moir whether the "settlement" had taken place. 790It also follows that Mr Hilliard consented to the dismissal of the 2001 Proceedings without receiving from Mr Gillard the confirmation of settlement from Mr Moir that he recorded in his "to do" list on 27 August 2004. 791Not only that, but Mr Hilliard could not recall Mr Zdrilic making any enquiry, between 27 August and 6 September 2004, as to whether the $4.5 million had been paid. 792Mr Hilliard gave the following evidence, some of which I have referred to above:- Q: "At the end of the day on 27 August 2004 the position that had come about was that Mr Moir had not turned up and that no funds had been paid over the HTT?" A: "That's correct." Q: "But you understood, based upon something which had been said at the settlement, that $4.5 million would be paid to HTT over the next week or so, indeed the next week?" A: "Yes." Q: "So what was said as you understood it at the settlement was that the $4.5 million would be paid next week?" A: "Yes." Q: "And 27 August 2004 was a Friday?" A: "Yes." Q: "And you gave Mr Gillard the withdrawal of caveat?" A: "Yes." Q: "And he gave you an undertaking?" A: "Yes." Q: "And the undertaking was that he would give it to Mr Moir?" A: "Yes." Q: "At a subsequent settlement?" A: "Yes." Q: "As it was described to you?" A: "Yes." Q: "And you expected, did you, that Mr Gillard would, in exchange for giving the withdrawal to Mr Moir, receive funds?" A: "Yes." Q: "That is, the $4.5 million said to be payable to HTT in the next week?" A: "Yes." ... Q: "And what you were expecting was Mr Gillard would write to you confirming that he had settled and that he had received the $4.5 million?" A: "Yes." Q: "Then come 6 September, you went to court with Mr Gillard and joined with him in having the 2001 Proceedings dismissed?" A: "Yes." Q: "And you told Mr Einfeld yesterday that you did that without checking to see whether, between 27 August and 6 September, the $4.5 million had been paid?" A: "Yes." Q: "Did you between those two dates, 27 August and 6 September, have any discussion with your client, Mr Zdrilic, about whether or not the $4.5 million had been paid?" A: "I don't recall having such a conversation." 793Mr Hilliard was expecting there to be a "settlement" between Mr Gillard and Mr Moir. He expected that at that settlement, Mr Gillard would hand to Mr Moir the Withdrawal of Caveat handed over on 27 August 2004. He expected Mr Gillard would write to him confirming when that had occurred. He had heard nothing from Mr Gillard. He certainly did not know that Mr Gillard had already lodged the Withdrawal of Caveat but, more relevantly to the present point, he must have assumed, based on what Mr Gillard had told him, that as at 6 September 2004, there had been no settlement and that no funds had been advanced by the funder to HTT. 794Yet Mr Hilliard proceeded to consent to the dismissal of the 2001 Proceedings. Mr Hilliard said that he never doubted that the funds would be forthcoming. So much may be accepted. But by now he had seen the final version of the IPC Heads of Agreement and understood that it provided HTT with no assurance of imminent funding. What is clear is that he did not see the absence of any confirmation that the funds had arrived as being any impediment to the dismissal of the 2001 Proceedings. 795Mr Hilliard was then a very experienced solicitor. He was an accredited specialist in commercial litigation. Had Mr Hilliard believed or understood, as a result of what occurred on 27 August 2004, that the dismissal of the 2001 Proceedings was subject in any way to the provision of funds, it is inconceivable that he would have simply consented to such dismissal without checking that funds had arrived. 796Mr Zdrilic gave evidence that sometime on 6 September 2004 he telephoned Mr Renshall "to find out where things were at as so far as funding was concerned". He said that Mr Renshall said something to the effect:- "Sam, I'm sorry but the funder is still not quite ready. It's taking a little longer than we anticipated. It should only be a week away". 797The evidence does not reveal whether this call took place before or after the orders dismissing the 2001 Proceedings had been made. Whenever it was, what is clear is that Mr Zdrilic made no protest about the further delay. 798He did not assert that what Mr Renshall had said was inconsistent with anything said earlier, including on 27 August 2004, or that LEC had, or was about to, consent to the dismissal of the 2001 Proceedings on the basis of anything said then, or earlier, about funding. 799Mr Zdrilic's conduct is only explicable on the basis that nothing said to him by Mr Renshall or otherwise concerning funding was relevant to his decision to consent to the dismissal of the 2001 Proceedings. Conclusions as to the plaintiffs' entitlement to rescind the Heads of Agreement and Non-Dilution Deed and set aside the 6 September 2004 orders 800In these circumstances I find that no case has been made that the representations on which the plaintiffs relied provided a basis on which they were entitled to rescind either the Heads of Agreement or the Non-Dilution Deed. 801Nor do I find any basis on which the 6 September 2004 orders should be set aside. 802Insofar as representations were made, and insofar as they were misleading or deceptive, for the reasons I have set out in detail above, they were not causative of the plaintiffs entering into the Heads of Agreement or the Non-Dilution Deed, or consenting to the dismissal of the 2001 Proceedings. 803I find no basis whatsoever to conclude that Mr Renshall behaved in any way dishonestly or fraudulently. 804Although I have found that Mr Renshall engaged in misleading or deceptive conduct on 25 August 2004 by representing to Mr Zdrilic that the "funder would be putting $18 million into the Project", that is because of the absence of evidence of a reasonable basis to make that representation. I do not find, and could not find, that he made that representation knowing it to be untrue, or being recklessly indifferent to its truth. Why would Mr Zdrilic proceed with the settlement, and the making of the 6 September orders, absent funds? 805So why, in the absence of funds, would Mr Zdrilic proceed to settle the commercial transaction and consent to the dismissal of the 2001 Proceedings? 806There are a number of reasons why Mr Zdrilic, and thus the plaintiffs, would proceed with the settlement, and the dismissal of the 2001 Proceedings notwithstanding that the funds had not arrived. 807The first is that, as the HTT Defendants submit, and I accept, Mr Zdrilic was passionate in his long held belief that the HTT Project would generate substantial profits for him. 808The result of the arrangements given effect to on 27 August 2004 was that Mr Zdrilic had succeeded in his long-term objective of obtaining an interest in the Project. 809Further, part of the arrangement was that Sentel would assume responsibility to pay to Mr Zdrilic an amount equivalent to the amount owed to them by LEC. LEC was in receivership and no ability itself to cause this money to be repaid. 810Further, on 26 August 2004, Mr Hilliard had written to the LEC receiver stating:- "We confirm our previous advise that the settlement produces as good a result as could be obtained by being successful in the litigation and that is why we recommended such settlement." 811Faced with that advice, there was every reason for Mr Zdrilic to proceed with Stage 1 of the settlement, and thereby achieve an equal interest with the Renshall and Hickie interest in Sentel, and thereby a significant interest in the Land and the Project notwithstanding the fact that funding to HTT was not yet in place. Subsequent dealings between HTT, Mr Renshall and IBIS/IPC 812On 4 September 2004, Mr Renshall wrote a further "proof of funds" letter to IPC, marked to the attention of Mr Hanna:- "Please be advised that the heads of agreement between [IPC] and [HTT] expires on the 15/9/04 and no extensions will be granted. On numerous occasions during the past 4 months I have asked for a demonstration of funds and proof (please see 3.1-b of agreement) that you can complete this agreement. This has not been forthcoming. Furthermore I have asked for the work done by the list of consultants at a cost of $160,000 to be forwarded to us and that has not been received. [HTT] will take action to recover those funds and damages should the agreement not been finalised." 813On 16 September 2004 Mr Renshall wrote to IPC terminating the 15 March 2004 Heads of Agreement. His letter read:- "Further to our letter dated 10/07/04, I note that IPC has failed to complete on the due date and has not responded to the letter. IPC has offered Huntley no excuses for its failure to complete, has given Huntley no date when it may be able to complete and has still failed to show it has funds to complete. In the circumstances, Huntley has little alternative but to terminate the agreement dated 15th March 04 and this letter constitutes formal notice of that termination. Huntley reserves its right to take legal action for false and misleading conduct by you on a number of issues." 814Heated correspondence between Mr Renshall and IPC followed. 815On 22 September 2004 Mr Renshall wrote to Mr Hanna:- "Please note any action taken by you in any way against the Huntley project will initiate criminal proceedings against you for fraud including the misappropriation of $160,000 which was to be paid to an agreed list of consultants but was in fact put into your bank account. We will be using all of the people you have mentioned and 6 others who are on public record as describing you as a fraud as witnesses together with a raft of false and misleading documents not to mention your failure to disclose you are an undischarged bankrupt. As for putting funds into My Super, which does not even have a bank account and no assets I am sure that will make wonderful reading..." 816This correspondence reveals that, by 22 September 2004, Mr Renshall had become aware that Mr Hanna was an undischarged bankrupt. The evidence does not reveal precisely when Mr Renshall learned this. It was not suggested to him that it was any time before 6 September 2004, the date on which the 2001 Proceedings were dismissed. 817The tone of Mr Renshall's letter suggests the information was just to hand, as was whatever prompted Mr Renshall to refer to "others" on the record as describing Mr Hanna as a "fraud" and to a "raft of misleading documents". Mr Renshall said he could not remember when, or from whom he obtained this information but said his misgivings about Mr Hanna arose around mid September. I am satisfied Mr Renshall had no such misgivings before then. 818On 1 October 2004, in the email to Mr Rutherford, referred to earlier in these reasons, Mr Renshall said:- "Please be advised I have no intention of doing any deal with Ping in relation to Huntley. The only reason Ping and I spoke was because he was supposed to supply proof of funds. How someone running a $2 company out of the front of an old house in Concord can speak for $40 million I believe is far fetched at best. I believe the people you have working on this project, yourself and James Hanna aside, have only their own interests at heart and were very quick to offer alternatives after 15/9. I do not include Chris Frederick in this group who I can guarantee has b [sic] a supporter of yours. I have seen nothing but a long line of spivs who do not have any money or credibility. We are well underway with the debt funding and I presume you do not have the equity funding ($6.5m) to complete"... The continued involvement of Mr Zdrilic 819It is necessary to consider Mr Zdrilic's conduct after 6 September 2004. 820This is for two reasons. 821The first is that examination of that conduct confirms, in my opinion, that he was not, and thus the plaintiffs were not, induced by any representation made by the defendants to enter into the Heads of Agreement and the Non-Dilution Deed, or consent to the dismissal of the 2001 Proceedings. 822Although on one occasion, to which I will refer below, Mr Zdrilic referred to representations concerning "providing about $12.0m to pay off the existing loans", he did not assert that but for that representation he would not have entered the transactions and consented to the orders. Indeed, he said that the delay in funding was "not the end of the world". 823Second, such conduct is relevant to the HTT Defendants' contention that the plaintiffs affirmed the relevant contracts and were for that reason not entitled to rescind them. 824It will be recalled that the plaintiffs did not purport to rescind either the Heads of Agreement or the Non-Dilution Deed until 11 October 2006 (when LEC lodged a further caveat on the title of the Land) or alternatively, on 26 March 2007, when the plaintiffs commenced these proceedings. Was affirmation pleaded? 825Mr Jucovic submits that the defendants have not pleaded affirmation as an answer to the plaintiffs' claim for declarations that they have rescinded the Heads of Agreement and the Non-Dilution Deed. 826It is true that the defendants have not, in terms, pleaded affirmation. 827The defendants have denied that service by the plaintiffs of the 11 October 2006 caveat and of the Statement of Claim in these proceedings constituted rescission. 828The plaintiffs have also pleaded an estoppel said to arise by reason of LEC not taking steps to institute these proceedings until approximately three years after the dismissal of the 2001 Proceedings. 829No submissions have been addressed to me in relation to the estoppel plea and I understand it not to be pressed. 830Nonetheless it was alleged that:- "The Plaintiffs under principles of estoppel, waiver or election are precluded in the circumstances from seeking to challenge, inter alia, the 13 May 2004 Heads of Agreement and the [6] September Consent Order." 831The defendants also plead:- "Further in the alternative, consequent upon, inter alia, those matters pleaded herein, the Plaintiffs are not entitled in any event to set aside or rescission of either the Heads of Agreement or the Deed of Non-Dilution as:- (i) restitutio in integrum is not possible; and (ii) consequent upon the extensive delay - in the order of three years - in the Plaintiff seeking the remedy of rescission or otherwise seeking to challenge, inter alia, the Heads of Agreement and the [6] September 2004 Consent Order." 832Thus, although the defendants have not pleaded affirmation in terms, they have pleaded that the plaintiffs were not entitled to rescind the Heads of Agreement or Non-Dilution Deed by reason of delay and have also pleaded, admittedly in a different context, "waiver or election", which notions are at the heart of the doctrine of affirmation. 833Mr Einfeld opened the case upon the basis that the HTT Defendants would contend that the plaintiffs had affirmed the Heads of Agreement and the Non-Dilution Deed and the case was conducted upon that basis. In particular cross-examination of Mr Zdrilic covered, among many other issues, the plaintiffs alleged affirmation of the relevant agreements. 834Mr Jucovic points to UCPR r 14.14(2) which provides:- "In a defence (...) a party must plead specifically any matter: (a) that if not pleaded specifically, may take the opposite part by surprise, or (b) that the party alleges makes any claim, defence or other case of the opposite party not maintainable..." 835In view of the reference in the pleadings to "waiver or election" I find it difficult to accept that the plaintiffs had been taken by surprise by the defendants' contention that rescission is precluded by affirmation. 836However I accept that the defendants' failure to plead affirmation does constitute a breach of UCPR r 14.14(2)(b) in that the question of affirmation is a matter that the defendants allege make the plaintiffs' claim for rescission "not maintainable". 837The authorities establish that, notwithstanding non-compliance with this rule, the court may, in a proper case, give effect to defences which are not pleaded: Pririe v Richardson [1927] 1 KB 448 at 453. 838This matter was heard over a period of almost six weeks. As I have mentioned, the cross-examination of Mr Zdrilic took five days. One matter about which Mr Zdrilic was cross-examined was affirmation. In all the circumstances I do not think that the plaintiffs have been prejudiced by the defendants' agitation of that issue, notwithstanding that fact that is was not specifically pleaded. Affirmation - events from September 2004 839The evidence makes clear that, for almost two years after September 2004, Mr Zdrilic continued to be actively involved in the Project notwithstanding the fact that, to his knowledge, IBIS/IPC funding was not forthcoming. 840Mr Zdrilic's evidence was that he did not become aware of HTT's termination of the 15 March 2004 IPC Heads of Agreement until March of 2005. 841Nonetheless, he did know that, despite whatever was said at the settlement on 27 August 2004, no funds were forthcoming from IPC or IBIS. Not only that, but Mr Zdrilic was aware that funding was sought, and obtained, from other sources. 842On 16 September 2004, the day on which HTT terminated the 15 March 2004 Heads of Agreement, Mr Zdrilic had a conversation with Mr Renshall. 843Mr Zdrilic made the following note of the conversation:- "Robert said that before the joint venture partners consisted of 2 parties. Mr Ping is one of them who is ready to put in $40.0m but the other party IPC was not really putting any money so moving forward we will be dealing with Mr Ping [sic] side. Settlement will be done on Friday or Monday. St George will put money depending on valuation which is being done now. Robert wants to get enough so that money owing to Sentel by HTT about $3.0m can be repaid". (emphasis added). 844Although he initially denied it, Mr Zdrilic ultimately accepted that what his note showed was that he knew, as at 16 September 2004, that IPC was not "putting any money in" but St George would put money in depending on a valuation. 845In his affidavit evidence about this conversation, Mr Zdrilic attributed to Mr Renshall the words "The Joint Venture Party is still coming" (which words have no reflection in the diary note) but attributed to Mr Renshall no words corresponding to the note he made that Mr Renshall said "the other party IPC is not really putting any money". 846I do not accept that the conversation occurred as Mr Zdrilic deposed in his affidavit. It must have been clear to Mr Zdrilic, as a result of this conversation, that IPC was no longer to be in the picture, and that any funding for HTT was to come from other sources. 847On 21 October 2004 Provident Capital Limited ("Provident") sent HTT an "indicative" letter stating that it would consider advancing $6 million to HTT and 10.99 per cent interest for 24 months. 848Four days later, on 25 October 2004 Mr Zdrilic attended a board meeting of Sentel. 849The board minutes stated:- "Robert said Funder has not yet settled. Funder will settle provided...[inter alia] ... DA is approved... Proof of funds - Robert said Funder has loan approval with Provident Capital - St George was to provide some funding but they have pulled out. We are two weeks short of Funding settlement... Robert said Funder will be providing between $9.2 and $9.3m - all depends on interest. Robert said the Funder is negotiating directly with the small unit holders to acquire their units... Robert said loans are still there and we are paying 4% a month on the small loan - this is a short-term loan and needs to paid out quickly. The bigger loan has been extended to the 31/12/04 and we are currently paying 25% pa.... Sam said he would like the accountant to prepare a quarterly profit and loss and progressive figures - this was agreed... Sam suggested that we have a formal Directors Meeting of HTT. Robert suggested this be postponed until Funder comes through with the money... Sam, Robert and David have agreed to open up a Bank Account - all three shall be signatories and each to contribute $1,000.00 to open the account". 850Whatever entity Mr Zdrilic understood to be the "funder" at this stage, it could not have been IPC. And Mr Zdrilic knew that, whoever it was, had a "loan approval" from Provident. Further, what was said at the meeting reaffirmed what Mr Zdrilic already knew, namely that funding was contingent on development approval. 851But there was no protest from Mr Zdrilic; no suggestion that he had been misled or that what was occurring was inconsistent with anything said on 27 August 2004, or at all. Rather Mr Zdrilic applied himself to progressing the venture: suggesting preparation of accounting reports, suggesting a board meeting of HTT; and participating in the opening of a bank account for Sentel. 852On 10 November 2004, Mr Zdrilic sent an email to Mr Renshall in relation to the "agenda for Sentel Pty Limited directors meeting on Monday 15/11/04". One of the "points for this meeting" listed by Mr Zdrilic was:- "Latest on the funding situation". 853Again, Mr Zdrilic was playing an active role, as a director, of Sentel implementing the arrangements set in place on 27 August 2004, knowing funding for HTT was not in place and yet making no complaint. 854On 16 November 2004 Mr Zdrilic made a note that Mr Renshall:- "...said that the Funder is coming with the replacement of the two smaller loans tomorrow - i.e. on the 16/11/04 and anyway all the money for Funder will be in place before Christmas. (My concern is that all the time he is giving me different dates and different story)". 855Mr Zdrilic was expressing "concern" but not that he had been misled by any earlier representation by HTT or Mr Renshall or that HTT was in breach of its obligations under clause 4.7 of the Heads of Agreement. Rather, his concern was about the lack of precise information about the incoming funder. 856On 1 December 2004 Mr Zdrilic sent an email to Mr Renshall which said:- "A couple weeks ago I rang James Moir to get the signed copy of the agreement between the Funder and HTT but my call was not returned probably because James does not have to talk to me which I understand as he does not act for HTT or Sentel. I still want [to] have a signed copy after all this time... I think that it is time that I meet the people from the Funder side so that I can see directly what is happening and to get a feel what these people are all about and assess for myself their intentions. You mentioned that the two smaller loans have been replaced - can I have a copy of the loan agreements for my file. Is there anything else that the Funder needs from us before providing the rest of the agreed money and has the Funder finalised the acquisition of the units from the smaller unitholders." 857This certainly shows that Mr Zdrilic was still speaking in terms of "the Funder" (although by now he must have known it was not IPC). Mr Zdrilic was also expressing a desire to "meet the people from the Funder side". 858But he was not complaining that misrepresentations had been made to him or that HTT was in breach of its obligations under the Heads of Agreement. He was also aware that "the two smaller loans" (which I would infer to be the Frenkail and Goncalves loans) had by then been refinanced. 859On 9 December 2004 Mr Zdrilic attended a board meeting of Sentel. 860The minutes of that meeting read:- "Robert mentioned that David Brodie (Head of Planning) would like to be fully briefed on all that is going on with the site - he will also help us with the DIPLAR. They would like to know if he could buy the hospital site. Sam was not aware that this could be possible before the settlement of the land. But Robert said we can sell section by section and obtain a deposit - all deals can be done on contingent on zoning [sic]. Then when the funder comes in it will be a bonus as we have started the ball rolling". 861This minute shows that, as at 9 December 2004, Mr Zdrilic was content to wait until the "funder comes in". 862On 17 December 2004 Mr Zdrilic sent a further email to Mr Renshall in which he complained that his requests for information were not being met. He said:- "As you are aware we have negotiated and signed an agreement to work together and stop further legal costs on both sides. I have taken a huge reduction from 50% holding in LEC directly and indirectly to less than 10%, agreed that the interest on my loan is now 10% instead of 20% and other substantial expenses including legal fees were foregone. This was done on the basis of your many representations on behalf of HTT as a director of HTT. Some of those representations included the Joint Venture Funder buying the 'smaller unit holders and shareholders' in HTT and providing about $12.0m to pay off the existing loans and prepay interest on those loans for about six months." 863At this point in the email, Mr Zdrilic is making reference to what appears to be the Eleventh and Thirteenth Representations, or something similar. 864However Mr Zdrilic went on to say:- "I made a point that I would like to see the Funder representatives and that we should hold a HTT directors meeting. Again you stayed silent on this which means you are not really interested. If you have any concerns about me knowing things it can only mean one thing and that is that something is wrong. If there is a delay about something happening like the Funder not providing the money because certain things on our side have not been fulfilled it is not the end of the word but I like to know what we have not done - I just want to be informed. My understanding at the moment is that more rehabilitation needs to be done before the Funder will provide the money - that is the extent of my knowledge." 865Mr Zdrilic asked for "copies of loan agreements between HTT and lenders" and for some further particular information including "the terms of the Funder funding" and the "latest with the Funder equity purchase of 'smaller' unit holders and shareholders". 866This shows that Mr Zdrilic was well aware that the funding that HTT had in the Heads of Agreement promised to raise was not to hand and was expressing dissatisfaction about the amount of information being provided. 867But he was also expressing the view that it was "not the end of the world" if the lack of funding was a result of things "on our side" not being "fulfilled". 868On 18 January 2005 HTT entered into a Deed of Loan with Provident. The loan was for an amount of $6 million at an interest rate of 10.99 per cent over a two-year term. 869Mr Zdrilic became aware of this loan, at the latest, on 22 February 2005 when he attended a directors meeting of Sentel. 870At that meeting, according to the minutes:- "Robert asked Sam to think about the prospect of Huntley not taking off and having a plan B. This is only because if for some reason we do not get re-zoning we need to make money out of the site." 871Mr Zdrilic knew that any funding from "the New Zealand funder" was conditional on re-zoning. Thus if, contrary to what I have found, Mr Zdrilic still believed that IPC or IBIS was "the funder" he was aware that Mr Renshall was raising the serious possibility of HTT not getting re-zoning and the need to consider a "plan B" in that event. 872The minutes also record that:- "We have two loans: 1. Provident $6m - interest 10.9% - fixed interest - 2 years only 2. DTC $4.5m - 25% interest" 873Thus Mr Zdrilic was aware not only of the Provident loan but also that the DTC loan had been reduced from $6.8 million to $4.5 million. 874The following month, on 8 March 2005 Mr Zdrilic claimed that he heard from Mr Frederick, for the first time, that (to use the words in Mr Zdrilic's note):- "New Zealand Funder deal collapsed on 15/9/04". 875As I have said earlier, in my opinion, Mr Zdrilic knew, from the terms of his conversation with Mr Renshall on 16 September 2004, that IPC "was not really putting any money" into the Project. Further, by this stage, Mr Zdrilic knew that Provident had advanced $6 million. In those circumstances, it is hard to see what significance Mr Zdrilic could sensibly attach to Mr Frederick's statement. 876Certainly, although he denied it, the evidence shows that Mr Zdrilic made no complaint to Mr Renshall until, at the earliest, August 2006. 877Mr Zdrilic was asked what he did after finding out (allegedly for the first time) on 8 March 2005 that the "New Zealand funder deal collapsed on 15/9/04". 878He said:- 'What I did, I intensified my efforts in trying to get as much information as I possibly could about what the hell was going on at Huntley (...) I was trying to get as much information as possible. I was trying bit by bit, knowing what they have done, so I had to be careful, how I was going to do it, so I tried to get as much information as possible to learn what is going on (...) First of all, I was trying to organise meetings, which was very difficult because always someone was late. I was trying to organise the meetings bit by bit, I tried to become a full director knowing now I am in total trouble because I have no veto power, I am not a director. I tried to become a director, I tried to get my $5.5 million loan put back into HTT and they would be first steps." 879But examination of the documentary record after 8 March 2005 does not corroborate these assertions by Mr Zdrilic. 880On the very day that Mr Frederick told Mr Zdrilic that the "New Zealand funder deal collapsed", Mr Zdrilic circulated an agenda for a meeting of directors of HTT (which he suggested take place on 17 March 2005). He suggested that there be included on the agenda:- "...general business including an update on funding, coal, re-zoning, accounts, tax returns etc" 881Mr Zdrilic asserted that he put these matters on the agenda because:- "I wanted to know what is going on so that I can then see what next step I was going to take (...) maybe taking legal action (...) I said I had to find the information to see then what my legal rights are, what I can do. First of all I had to be informed." 882I do not accept this evidence. It is obvious from the form of Mr Zdrilic's email that he was proposing an agenda of matters to be considered at a meeting of HTT in the normal course with a view to progressing the Project; not with a view to obtaining information to be used in future legal proceedings. 883On 15 April 2005 Mr Zdrilic sent an email to Mr Renshall suggesting that money be deposited into the Sentel bank account. Mr Zdrilic, Mr Renshall and Mr Hickie had agreed, at the Sentel board meeting of 25 October 2004, to open that bank account. Mr Zdrilic's email appears to be a routine suggestion to keep the funds in the bank account. 884On 27 May 2005 Mr Zdrilic sent an email to HTT's accountant, Mr Bill Bartlett ("Mr Bartlett"), telling him that he was sending to him by express post some share and unit transfer forms in relation to HTT and the Huntley Trust. Mr Zdrilic agreed that he did this for the purpose of having Mr Bartlett deal with the share and unit transfers from himself and Messrs Renshall and Hickie into Sentel. He agreed that this was for the purpose, in May 2005, of putting into effect some of the things required by the Heads of Agreement and the Non-Dilution Deed. 885In the email Mr Zdrilic also told Mr Bartlett that Sentel had recently exercised some options to acquire units in the Huntley Trust. 886On 30 June 2005 Mr Zdrilic wrote to Mr Renshall:- "You may remember we were thinking of calling the directors meeting of [HTT]. There are still a few things to be sorted out to do with shares and units. I thought that perhaps you and I meet first and go over a few things including the latest on the funding situation to get rid of that high interest rate that we are paying. If you are not making too much progress we should have a look at the people I know and how we could bring them in. However, as I said before we need to have our shares and units fixed up together with anything else that needs looking over before we can introduce these people..." 887Once again Mr Zdrilic was suggesting that he and Mr Renshall "sort out" details regarding the HTT shares and Huntley Trust units. He referred to the "funding situation" without complaint or assertion of prior misrepresentation or breach of agreement. 888On 21 July 2005 Mr Zdrilic made a note of a conversation with Mr Gillard. He said:- "I rang B Gillard to talk to him about the fixing and bringing up to date shares and units in HTT." 889Mr Zdrilic recorded Mr Gillard as saying:- "The best thing to do is to find the Funder and agree that somehow the Funder will buy all the small unit holders or at least most of them. (emphasis in original)" 890Mr Zdrilic's note continues:- "He said no funder will come in unless they have 51% or more." 891This makes clear that, as at 21 July 2005, Mr Zdrilic was not only aware that no funder had "come in" but that no funder had yet acquired 51 per cent or more of the shares in HTT or units in the Huntley Trust. These are the matters that were the subject of the representations complained of in these proceedings, notably the Eleventh Representation. Mr Zdrilic's note reveals that he knew that, as late as July 2005, the events the subject of these alleged representations had not come to pass. 892Almost a year later, on 30 June 2006, Mr Zdrilic attended a meeting of the directors of HTT. At that meeting Mr Zdrilic complained about the involvement of Mr Frederick and Mr Tugrul in HTT and said:- "I do not want to come to meetings and have 3 people against me. I want to get involved and get swamped with the work." 893The "three people" to whom Mr Zdrilic was referring to were Messrs Renshall, Frederick and Tugrul. Nonetheless, Mr Zdrilic was expressing enthusiasm for getting "involved" and being "swamped with the work". Mr Einfeld described this statement as a "unequivocal affirmation" by Mr Zdrilic of the Heads of Agreement and Non-Dilution Deed. I agree. 894Mr Zdrilic made no complaint about the events of 2006 until a meeting of the directors of HTT on 16 August 2006. Even then, Mr Zdrilic's complainant was only in muted terms when he said to Mr Renshall and Mr Hickie:- "Ok obviously it seems to me that you guys play the game pretty well when we came to the agreement. So this was all in the back of your minds." 895Nonetheless, Mr Zdrilic continued to be involved in the venture. On 13 September 2006 he sent an email to Mr Frederick (with a copy to Mr Renshall and Mr Tugrul) in which he said:- "...I appreciate the work that you say you are doing and Robert is doing and others are doing. But this does not change the fact that I should be involved as well and have information to enable me to make proper business comments. You have all decided to keep me out as was made obvious by David Hickie at the last meeting on 16/8/06. At that meeting a comment was made that I am talking too much about my loan yet in recent emails I did not mention the loan at all and still I am not getting the information that I have requested and that everybody agreed that I will get and soon (...) One of the things that I have observed over time and I mentioned it in my previous correspondence is that we should have a system of proper reporting on a regular basis (...) In summary I'm trying to get the information that I have been trying to get for a long time. I simply want to know the position of the company. I wanted to assist with the obtaining of finance to get rid of these expensive loans but I cannot get my contacts involved because I am not given information to be able to explain to these people the true position of the company." 896This email, sent a little over a month before lodgement of the Caveat on 11 October 2006 (relied upon as constituting rescission of the Heads of Agreement and the Non-Dilution Deed), makes no complaint about any conduct of HTT or Mr Renshall referrable to those documents. 897On the contrary, at this stage, Mr Zdrilic's complaint was that he was not being given sufficient information about the venture that those documents established. 898Approximately a month later, on 11 October 2006, LEC lodged a caveat on the title of the Property. That caveat claimed an interest in the Land described as:- "Constructive trust and/or equitable charge". 899The facts relied upon were, in effect a draft pleading which included an assertion that the Heads of Agreement were "void ab initio". 900The "draft pleading" revived the complaints earlier made in the 2001 Proceedings, and also alleged that, prior to entering the Heads of Agreement and the dismissal of the 2001 Proceedings, the following representations were made to LEC and Mr Zdrilic:- (a) "that funding for the project was imminent; (b) that funding would come from a big funder from New Zealand and the new NZ funder would be HTT's partner in the Joint Venture Project; (c) that the funder would put money in to pay out all existing loans. The loans would be at normal commercial rates; (d) that some existing loans were at high rates and would be replaced by the new funder; (e) that the funder would put in other substantial money as necessary; (f) that the funder would take control of the project; (g) that the funder would pour in millions of dollars into the project; (h) that the funder was very wealthy; (i) that the funder would provide funding without delay; and (j) that the funder would purchase most, if not all, units in the Huntley Trust held by smaller unit holders ie. All units except those units held by Sentel." 901There is no hint in the material of these allegations having been made before the date of the lodgement of the Caveat. 902There was debate before me as to whether the lodgement of the Caveat did amount to an act of rescission. 903It is not necessary to resolve that debate. It is common ground that the commencement of these proceedings in March 2007 did amount to a purported rescission and that no relevant event occurred between the lodgement of the Caveat and the commencement of proceedings. Affirmation - conclusion 904Assuming that the representations pleaded were made and were relied on and, contrary to my findings, led to the entry by the plaintiffs into the Heads of Agreement and Non-Dilution Deed, I think it clear from this analysis of the events from September 2004 that, as the HTT Defendants have submitted, the plaintiffs and Mr Zdrilic persistently, and over an extended period, engaged in conduct and evinced intentions which were consistent only with affirmation of the agreements, thereby disentitling themselves to rescission. 905On 16 September 2004 Mr Zdrilic became aware of the fact that IPC was no longer to provide funding. At the very latest, in March 2005, he became aware that arrangements between HTT and IPC had been terminated in September 2004. 906Mr Zdrilic knew that HTT had not organised the funding referred to in clause 4.7 of the Heads of Agreement and yet he continued to participate in the affairs of both HTT and Sentel in furtherance of the joint venture established by the Heads of Agreement and the Non-Dilution Deed. 907For that reason, and assuming that the plaintiffs otherwise had a right to rescind the Heads of Agreement and the Non-Dilution Deed, in my opinion they have lost that right by reason of their affirmation of the agreements. 908The position in terms of potential relief under s 87 of the Act is no different. The Court, exercising its statutory powers will normally be guided by the principles applicable to the equitable remedy of recession: Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 at 535; Henjo Investments Pty Limited v Collins Marrickville Pty Limited (1998) 39 FCR 546 at 564; Tenji v Henneberry & Associates Pty Limited (2000) 98 FCR 324. Where, as here, the plaintiffs have repeatedly affirmed their contracts, relief by way of rescission ought not be granted in equity or under s 87: Bullabidgee Pty Limited v McCleary [2010] NSWSC 145 at [63] - [67]. Restitutio in integrum 909The plaintiffs submit that restitutio in integrum is possible. 910The plaintiffs submit that:- (a)Devubo and Vocifa could have their units reassigned; (b)Mr Renshall and Mr Hickie could have their debts reassigned; (c)the plaintiffs "could" (although the plaintiff's submissions do not reveal whether they "would") accept orders under which they would no longer enforce the debt of $5.5 million against Sentel and under which they would hold the benefit of their shares in Sentel for the benefit of either HTT, Mr Renshall, Mr Hickie, Devubo and Vocifa or as they may direct; and (d)so far as the units transferred by interests associated by Mr Hulley and Mr Ansell are concerned, Sentel could be directed to hold these units for the benefit of the relevant transferees. 911It appears to me that there is an air of unreality about these submissions. Accepting that substantial restitution is sufficient in equity, I cannot see how, at this remove, HTT could be put back in the position that it was at the date of the Heads of Agreement and Non-Dilution Deed or even at the date of the purported rescission. 912Since 2004 HTT has continued to develop the Project and, on any view of the evidence, expended substantial amounts. That work had led to the position outlined at [110] to [119] above. 913I accept the HTT Defendants' submission that:- "Adjustment of the interest of the parties after 8 years is for practical purposes now impossible. It is not just a matter of transferring shares or units. Vast amounts have been spent by HTT, just allowance for which (certainly from LEC) would be illusory. There is no manner in which these events could be unravelled such as would permit the parties to be restored in any measure to their former positions." Third party rights 914The HTT Defendants also submit that rescission could not be permitted because the rights of third parties have intruded. 915Again, Mr Jucovic submits that the defendants in answer to the rescission claim did not plead this matter. 916It is true that the defendants in answer to the claim for rescission did not, in terms, plead the plea in respect of third party rights. 917However, it is pleaded in relation to the (not pressed) claim of estoppel. 918That pleading was particularised as follows:- "Various third party rights were created - including in this three years period [sic] between 2004 and 2007 and to the knowledge of the First and Second Plaintiffs - and thus would be adversely affected if the Plaintiffs were permitted to have set aside, rescinded or otherwise be held not viable to, inter alia, the Heads of Agreement and the [6] September 2004 Consent Order." 919The exchange of supplementary submissions between the parties relevant to these issues suggests that the plaintiffs had no difficulty in meeting the particular contentions advanced by the HTT Defendants in relation to them. 920In those circumstances, it does not appear to me that the plaintiffs are prejudiced by the defendants relying upon this plea as an answer to the claim for declarations for rescission. 921The HTT Defendants submitted that:- (a)As part of the settlement of the 2001 Proceedings on 27 August 2004, Mr Hulley and Mr Ansell transferred to Sentel their shareholdings in HTT and their units in the Huntley Trust (held through their companies Sadar Nuristan Holdings Pty Ltd and Wyndham Capital Pty Ltd respectively); (b)Mr Hulley died in 2010 and neither his Estate nor Mr Ansell (formally a party) has participated in these proceedings. There is no evidence as to whether the former owners would voluntarily receive back their shares and units or as to how their shares or units might be cancelled or redeemed without disturbing the interests of other shareholders and unit holders; (c)Since the settlement of the 2001 Proceedings in 2004, a number of units in the Huntley Trust have been acquired by unrelated third parties with no interest in these proceedings and with no prior interest in the Huntley Land or the present dispute; (d)Those parties acquired their units after LEC had relinquished its claim to a constructive trust over the Land by way of its consent to the dismissal of the 2001 Proceedings; and (e)The rights of unit holders under the Trust Deed of the Huntley Trust to redemption of their units by way of appropriation of some of the Land (in particular, unit holders who acquired units in the Huntley Trust after 2004) would be prejudiced in the event that LEC were allowed to resurrect a claim over the Land by means of orders for rescission of the Heads of Agreement and Non-Dilution Deed or for the setting aside of the orders of 6 September 2004. 922In response to paragraphs (a) and (b) of these submissions, the plaintiffs submit that there is no evidence that the companies associated with Mr Hulley and Mr Ansell would be adversely affected. It is submitted that any shares and units in HTT would be held by Sentel for their benefit and could be re-transferred to them. However, in my opinion, it is not the point that there is no evidence that their relevant companies would be adversely affected. The point is they are affected and that there is no evidence that the former owners of the units would wish to be restored to their position. 923As to the HTT Defendants' arguments in (b) to (e), the plaintiffs argue that there is no pleading of a bone fide purchaser for value without notice and no evidence to show that the interest of these parties have been adversely affected. 924Again, it seems to me this is not the point. Third parties have changed their position. They may or not be adversely affected. The fact that they are affected at all is a reason why rescission should not be allowed. 925My conclusion is that the intervention of third party rights is a further reason to deny the plaintiffs rescission. Damages 926LEC and Mr and Mrs Zdrilic claim damages against HTT, Mr Renshall, Mr Hickie, Devubo and Vocifa. 927The damages claimed are that:- (a)LEC has lost the opportunity of pursuing its claim in the 2001 Proceedings; (b)alternatively (and assuming that the Court did not grant rescission of the Heads of Agreement and the Non-Dilution Deed) LEC has lost the value of its causes of action against HTT and Mr Hickie arising under the facts pleaded in the 2001 Proceedings; (c)Mr and Mrs Zdrilic have suffered a reduction of their interest in the Project to 10 per cent via the 1/3 holding of Amy Holdings in Sentel; (d)Mr and Mrs Zdrilic have lost the value of the loan owed to them by LEC; and (e)Mr Zdrilic has lost the opportunity of being apart of the decision making process of HTT. 928In view of the findings I have made, my conclusion is that none of the plaintiffs have suffered damage as a result of any conduct of the defendants. 929However, extensive submissions were made by Mr Jucovic and by Mr Einfeld concerning the first and second heads of the damage claim, namely the loss suffered by LEC as a result of its inability to pursue the 2001 Proceedings. 930I have come to the conclusion that the plaintiffs have not made out a basis to set aside the 6 September 2004 order pursuant to which the plaintiffs consented to the dismissal of the 2001 Proceedings. It follows, of course, that in my view, it was the plaintiffs' consent to the dismissal of those proceedings, not any conduct of the defendants, that has resulted in LEC losing the opportunity to pursue the 2001 Proceedings. 931However, out of deference to the extensive submissions made by Mr Jucovic and Mr Einfeld about the value of LEC's lost opportunity, I shall address the issues raised by those submissions, albeit briefly. The 2001 Proceedings - damages for loss of opportunity - generally 932The damages (if any) suffered by LEC arising from the loss of opportunity to prosecute the 2001 Proceedings must be determined at the date when the 2001 Proceedings would have come on for hearing - that is the "notional date for hearing" of the 2001 Proceedings: Johnson v Perez (1988) 166 CLR 351 at 368; Nikolaou v Papasavas, Phillips & Co (1989) 166 CLR 394 at 403-404; Steve Masselos & Co v Young [2011] NSWCA 352 at [48-50]. 933In Nikolaou v Papasavas, Phillips & Co, Wilson, Dawson, Toohey and Gaudron JJ said at 404:- "That loss would ordinarily be quantified by the trial judge taking a broad brush approach to the several matters that in a particular case may require to be resolved - the likely date when (...) the action would have come to trial, the evidence that would or should have been available to the plaintiff at that time, the relevant principles of law then governing the assessment of damages (...) in order to arrive at a figure representing the loss suffered by the plaintiff when his action against the defendant was dismissed." Were the 2001 Proceedings bound to fail? 934It will be recalled that, in the 2001 Proceedings, LEC claimed that HTT held the Land on constructive trust for LEC and claimed, amongst other relief, an account of profits. 935As I set about in paragraph 71 above, the basis upon which that relief was sought was that:- (a)after the LEC Contract was terminated, HTT had, with knowledge, made use of information and opportunities which Mr Hulley and Mr Hickie had acquired as directors of LEC; (b)HTT had received the benefit of the Land in circumstances where it knew of Mr Hulley's and/or Mr Hickie's breaches of fiduciary and statutory duties to LEC; and (c)HTT had acquired legal ownership of the Land with notice of LEC's "continuing equitable interest" in the Land and with notice of alleged breaches by Mr Hulley and Mr Hickie. 936The background to the 2001 Proceeding is set out early in this judgment, including:- (a)LEC's entry into the LEC Contract with Powercoal on 29 June 1998 (paragraphs 28 to 37 above); (b)Mr Hulley's alleged role in subverting LEC's interest under the LEC Contract (paragraphs 38 to 45 above); (c)Powercoal's termination of the LEC Contract (paragraph 46 above); (d)the statements made by LEC's then solicitor, Mr Brown, as to LEC's inability to fund the purchase from Powercoal (paragraphs 54 to 55 above); (e)the entry by HTT into the contract with Powercoal on 11 April 2000, and its completion on 17 October 2000 (paragraphs 56 to 62 above); and (f)the progress of the 2001 Proceedings (paragraphs 63 to 77 above). 937Mr Einfeld submitted that the 2001 Proceedings were bound to fail for three reasons:- (a)first, the security for costs applications referred to in paragraphs in 73 to 75 above were bound to be successful, would have resulted in orders being made with which LEC could not comply and would bring the proceedings to an end; (b)second, a plea of laches was bound to made by HTT, and was bound to be successful; and (c)third, the claim against Mr Hulley, and thus against HTT, was bound to fail because Mr Hulley, the alleged errant fiduciary, had not caused HTT to acquire anything at LEC's expense for the reason that LEC could not and, Mr Einfeld submitted, did not wish to, pursue the purchase from Powercoal of the Land. 938In addition, Mr Einfeld submitted that there was no evidence before the Court to enable the Court to come any conclusion as to what damages LEC would have recovered from HTT in the 2001 Proceedings assuming, contrary to his submissions, that those proceedings had gone to trial and would have been successful. 939In these proceedings, the evidence relied upon by LEC to prove what damages it would have recovered in the 2001 Proceedings were the report of Dr Rodney Ferrier of 21 December 2010 and his subsequent report. 940For the reasons set forth in my Judgment of 5 March 2012 ([2012] NSWSC 177) I rejected the tender of Dr Ferrier's report (and subsequent related reports). 941I shall deal with each of Mr Einfeld's submissions in turn. The security for costs applications 942The various security for costs applications were listed for hearing before a Master on 22 and 23 September 2003. It appears that the applications were not prosecuted because settlement discussions commenced, leading ultimately to the dismissal of the 2001 Proceedings on 6 September 2004. 943On 22 September 2003, the applications for security by Mr Hulley and Mr Ansell were dismissed. The applications by HTT and Mr Hickie remained on foot. 944Mr Einfeld submitted that it was likely that the remaining applications would have been determined by around May 2004, and that neither LEC nor Mr Zdrilic were in a position to meet any security for costs orders at that time. 945However, there is no reason to think that the security applications would have been dealt with during the pendency of settlement discussions. It seems to me probable that the security for costs applications would only have been pressed if and when settlement discussions broke down and LEC resumed prosecution of the 2001 Proceedings. 946It does not seem likely that would have occurred much before August 2004 and that it is probable, therefore, that any security for costs applications would have been dealt with some time during the financial year ended 30 June 2005. 947The evidence reveals that, at least towards the end of that financial year, Mr Zdrilic had available to him sufficient funds to meet any security for costs application. 948Even if the security application had been brought on before such funds were available to Mr Zdrilic, the likely result would have been that the 2001 Proceedings would have been stayed (rather than dismissed). Any such stay would have been removed upon payment of the security ordered. 949The evidence does make clear, in my opinion, that Mr Zdrilic would have caused LEC to prosecute the 2001 Proceedings to the full extent that Mr Zdrilic's financial position allowed. 950I therefore conclude that the probabilities are that, although the security applications may have caused some delay in the 2001 Proceedings, they would not have brought them to an end. Laches 951Mr Einfeld submitted that, alternatively, the 2001 Proceedings would have failed because the defendants would have pleaded laches and that such pleading was bound to defeat the claim. 952Powercoal terminated the LEC Contract on 7 May 1999. HTT contracted with Powercoal to purchase the Property on 11 April 2000. That contract was completed on 17 October 2000. LEC commenced the 2001 Proceedings on 6 November 2001. In January 2002 Mr Zdrilic became aware of the purchase by HTT of the Land. LEC joined HTT as a defendant to the 2001 Proceedings on 11 December 2002. Throughout this period Mr Zdrilic understood that HTT was undertaking work to rehabilitate the Land at considerable expense. 953In these circumstances Mr Einfeld referred me to the observations of Murphy JA in Streeter v Western Areas Exploration Pty Limited (2011) 278 ALR 291 at [635]:- "The doctrine of laches comprehends two themes. One is delay implying not just quiescence, but rather acquiescence and assent, and the other is delay involving prejudicial change of circumstances." 954Mr Einfeld placed particular emphasis on the second strand and drew my attention to the remarks of Kindersley VC in Ernest v Vivian (1863) 33 LJ (Ch) 513 at 517 (cited with approval by Hardie J in Boyns v Lackey (1958) SR (NSW) 395 at 403-404 and by Murphy JA in Streeter at [644]):- "Now, if a person has a just right to mines of which he is not in possession, against those who are in possession of and working them, and if he claims to be the rightful owner (the person in possession being aware of his rights or supposed rights), if such owner, not being prevented by fraud or concealment stands by for a long period of time whilst those in possession are working the mines, this Court will not lend him assistance (...) it is not equitable to allow him to wait until it is ascertained that the persons in possession have succeeded or may have been ruined, and if the subject result in profit, to ask him to put that in his pocket, if in loss, to repudiate the loss." 955Mr Einfeld argued that the words of Kindersley VC are an apt description of Mr Zdrilic's conduct in this case. 956On the other hand Mr Jucovic pointed to material that shows that Mr Renshall and HTT were expecting Mr Zdrilic to make a claim in respect of the Land from as early as January 2000. 957Mr Jucovic also pointed out that LEC did not obtain access to Mr Hulley's five letters of April and May 1999 (referred to in paragraphs 39 to 44 above) until they were produced on discovery in the 2001 Proceedings towards the end of 2002. Mr Jucovic submitted that it was the production of those letters that led to the 11 December 2002 amendment joining HTT to the 2001 Proceedings. A reading of the Amended Statement of Claim on 11 December 2002 reveals that, indeed, the five letters are central to the plea against HTT. 958In these circumstances, it appears to me that, at this remove, I am not able to come to any final view about the likely outcome of a laches plea in the 2001 Proceedings. I certainly cannot come to the conclusion that such a plea was bound to succeed. Pleadings 959I should note that Mr Jucovic protested that the defendants have not pleaded that the 2001 Proceedings were bound to fail because of the security for costs applications, or by reason of laches. Again, Mr Jucovic relied on in UCPR r 14.14. 960Although it is not necessary for me to express any view about this matter, it seems to me that these matters should have come as no surprise to the plaintiffs. The plaintiffs' claim was that LEC had, by reason of the events of 2004 and, in particular, the dismissal of the 2001 Proceedings on 6 September 2004, lost the opportunity to prosecute the 2001 Proceedings. In those circumstances I would have thought that it obvious that the plaintiffs had to prove that LEC could have, and would have prosecuted the 2001 Proceedings to trial and would have achieved success at that trial. In those circumstances it should have been obvious to the plaintiffs that the defendants would raise arguments such as these by way of answer. The merits of the 2001 Proceedings 961Mr Einfeld submitted that, leaving aside the "procedural" matters referred to above, as a matter of substance, the 2001 Proceedings were bound to fail because the errant fiduciary, Mr Hulley, had not caused HTT to acquire any benefit at LEC's expense for the reason that LEC could not, and did not wish to acquire the interest in the Land ultimately obtained by HTT. 962In support of this argument Mr Einfeld relied upon the statement made by the High Court in Warman International Limited v Dwyer (1995) 182 CLR 544 at 557 that a fiduciary must account for what has been acquired "at the expense of the trust". 963Mr Einfeld relied upon the fact that LEC was not able to raise funds to complete the LEC Contract and pointed to the evidence which I have outlined at paragraphs 47 to 55 above and in particular, Mr Zdrilic's evidence that he accepted that from 21 May 1999 Powercoal was entitled to sell the Land to whoever it wished. Mr Einfeld also relied on the letters of Mr Brown of 3 and 4 June 1999 in which Mr Brown said that LEC was not in position to fund the purchase. 964However, it appears to me that this submission does not reflect a fair reading of what the High Court said in Warman International Limited v Dwyer. 965The relevant principle was stated at 562:- "...it is firmly established that the liability of a fiduciary to account for a profit or gain made in breach of fiduciary duty does not depend upon the person to whom that obligation is owed suffering a loss or injury; and it is ordinarily immaterial to the fiduciary's liability to account that the person to whom the fiduciary obligation is owed could not have earned that profit or gain. The courts have always insisted on compliance by fiduciaries with strict and rigorous standards with a view to ensuring that they do not expose themselves to a conflict of interest and duty. The point is that that fiduciary is not entitled to make a profit out of, or by reason of, a fiduciary position without the knowledge and assent of the person to whom the fiduciary duty is owed". (citations omitted) 966Earlier, at 557, the Court stated:- "It has been suggested that the liability of the fiduciary to account for a profit made in breach of the fiduciary duty should be determined by reference to the concept of unjust enrichment, namely, whether the profit is made at the expense of the person to whom the fiduciary duty is owed, and to the honestly and bona fides of the fiduciary. But the authorities in Australia and England deny that the liability of a fiduciary to account depends upon detriment to the plaintiff or to the dishonestly and bona fides of the fiduciary" (citations omitted). 967Further, the Court drew attention to the remarks of Gibbs J in Consul Development Pty Limited v DPC Estates Pty Limited (1975) 132 CLR 373 at 394 where His Honour stated:- "Where the rule applies, the liability of the person in the fiduciary position does not depend on the fact that the person to whom the duty is owed has suffered injury or loss". 968The passage in Warman upon which Mr Einfeld relied followed from this passage and was in the following terms:- "The stringent that the fiduciary cannot profit from his trust is said to have two purposes: (1) that the fiduciary must account for what has been acquired at the expense of the trust, and (2) to ensure the fiduciaries generally conduct themselves 'at a level higher than that trodden by the crowd'." (at 557; emphasis added; citation omitted). 969However, as Mr Jucovic submitted, the latter statement is not a statement of the rule, but rather of the purpose of the rule. 970That is made clear by a passage which appears in the Judgment immediately following that upon which Mr Einfeld relied:- "Thus, it is no defence that the plaintiff was unwilling, unlikely or unable to make the profits for which an account is taken..." (at 558; citations omitted). 971In those circumstances, in my opinion, it would not have been necessary for LEC to prove, in the 2001 Proceedings, that it could have itself acquired the Land, or made profit from its development, provided it could show that, as it pleaded, Mr Hulley, in breach of his fiduciary obligations to LEC, caused HTT to do so at its profit. 972I am not able to reach any firm conclusion as to whether, on the merits of the case, LEC would have succeeded in the 2001 Proceedings. No submissions were addressed to me on that question. What I can say is that, in my opinion, they were not bound to fail. Amount recoverable in the 2001 Proceedings 973As I have mentioned, the plaintiffs sought to prove what damages LEC would have recovered in the 2001 Proceedings by tendering reports of Dr Ferrier. 974For the reasons set forth in my Judgment in these proceedings on 5 March 2012 ([2012] NSWSC 177) I rejected the tender of Dr Ferrier's reports. 975In light of that development, the plaintiffs sought to establish what financial recompense LEC would have recovered in the 2001 Proceedings by a calculation of "HTT's financial gains of owning and exploiting the Land" for the financial years 30 June 2000 to 30 June 2011. The analysis compared "cost to date" with "net asset value" for each financial year and described the difference between those figures as being the "financial gain to date". 976However, as Mr Einfeld pointed out, the calculation depended upon a dramatic increase in the "net asset value" of HTT from $2.861 million for the year ended 30 June 2003 to $22.95 million for the year ended 30 June 2004. 977That increase was based on nothing more than a "Directors Valuation" of the Land at $21 million as at 30 June 2004 (compared to a valuation of $3.3 million for the financial year ended 30 June 2003, described as "Freehold land - at cost"). 978There is no evidence before me to justify that "Directors Valuation". The figure probably came from a valuation performed by Mr John Dignan on 18 August 2003. However that valuation has only been admitted as evidence of the fact that Mr Dignan expressed the opinion set forth in it and not evidence of value. The HTT Defendants served an affidavit by Mr Dignan seeking to prove the valuation, but did not read it. The plaintiffs foreshadowed themselves reading Mr Dignan's affidavit but, in the face of objection, did not do so. 979Therefore, a fundamental plank of the plaintiffs' calculation is absent. 980It follows that the basis of the plaintiffs' calculations as to HTT's "financial gains" from the Project has not been made out. 981There is no other evidence before me as to what account of profits or other financial remedy LEC would have recovered in the 2001 Proceedings and thus no material upon which I could base any assessment as to the value of the chance lost to LEC as a result of the dismissal of those proceedings on 6 September 2004. Agency - Mr Hickie/Vocifa 982I have mentioned earlier that the plaintiffs claim that HTT and Mr Renshall made the pleaded representations as agent for Mr Hickie and Vocifa. 983In view of my conclusions as to the substance of the plaintiffs' claim, it is not necessary for me to express any opinion about this matter. 984However, and again in deference to the submissions made on this issue, I shall deal with it, although again, briefly. 985In the written submissions the plaintiffs stated:- "The plaintiffs do not contend that Mr Renshall and HTT were the agents of Mr Hickie and Vocifa generally or for all purposes. They accept that the agency had its limits. However, even if the authority of Mr Renshall and HTT was limited to acting as a conduit - communicating information for and on behalf of Mr Hickie and Vocifa - as submitted by them, that would be enough to fix them with the legal responsibility for the representations of HTT and Mr Renshall." 986The plaintiffs particularised the claim of agency against Mr Hickie and Vocifa as follows:- (a) "At all material times, Renshall was a director and shareholder of Devubo and represented it in the negotiations with LEC and Zdrilic; (b) HTT and Renshall conducted the negotiations with LEC and Zdrilic on behalf of Hickie and Vocifa; (c) In the course of the negotiations, Renshall represented that he represented Hickie and his interests in the negotiations; (d) Further: (i) the negotiations involved Hickie ceasing to be a director of HTT, becoming a co-director with Renshall and Zdrilic in a new company, transferring his 12.5% interest in the Huntley Trust (12.5% of units in the Trust were held by Vocifa) to the new company and the fixing of the amount of loan funds owed by HTT to Hickie and/or Vocifa; (ii) Renshall conducted all negotiations with LEC and/or Zdrilic in relation to the matters set out in (i) above; (iii) Devubo, Hickie and Vocifa entered into the Heads of Agreement dated 13 May 2004 and the Deed of Non-Dilution and Merger on 27 August 2004 on terms negotiated between Renshall and LEC and/or Zdrilic; (iv) Hickie was at all material times a director and shareholder of Vocifa, which company held Hickie's interests in HTT's project." 987As to particular (c), Mr Jucovic accepted that a representation by Mr Renshall of his asserted authority to negotiate on behalf of Mr Hickie would not be sufficient to establish agency. Any such representation would have to come, expressly or implicitly, from Mr Hickie: Freeman and Lockyer v Buckhurst Park Properties (Mangal) Limited [1964] 2 QB 480 at 503: Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 at [36]. 988The only evidence of any representation by Mr Renshall emerged in the course of Mr Connolly's cross-examination of Mr Zdrilic when he said:- "I am not sure that he used the word agent but he said to me many times, when we didn't agree on a certain point, he said 'I will come back to you I will have to check with David Hickie'." 989The substance of the plaintiffs' case against Mr Hickie was that Mr Hickie had a direct interest in the negotiations that Mr Renshall was conducting with Mr Zdrilic and yet it was Mr Renshall, not Mr Hickie, that conducted those negotiations with Mr Zdrilic. 990Thus, it was argued, as Mr Hickie did not involve himself in those negotiations, he must be taken to have authorised Mr Renshall to make the representations of which complaint is made. 991The plaintiffs relied upon what was said by Gavan Duffy CJ and Starke J in Colonial Mutual Life Assurance Society Limited v The Producers and Citizens Cooperative Assurance Company of Australia Limited (1931) 46 CLR 41 at 46-47:- "We apprehend that one is liable for another's tortious act 'if he expressly directs him to do it or if he employs that other person as his agent and the act complained of is in the scope of the agent's authority'. It is not necessary that the particular act should have been authorized; it is enough that the agent should have been put in a position to do the class of acts complained of. And if an unlawful act done by an agent be within the scope of his authority, it is immaterial that the principal directed the agent not to do it." (citations omitted). 992There was debate before me as to the point at which Mr Hickie's "position" had been negotiated. Mr Connolly argued that that position had been reached by 6 February 2004 as, by then, the draft Heads of Agreement provided all that Mr Hickie wished to achieve, namely that:- (a)the Renshall, Zdrilic and Hickie interests in HTT be placed in the new entity (to be Sentel); (b)Mr Zdrilic would cease to prosecute the 2001 Proceedings (in which Mr Hickie was a defendant); and (c)the proposed holding entity would acknowledge the loans of each of Messrs Renshall, Zdrilic and Hickie. 993Mr Connolly submitted that negotiations thereafter simply refined those fundamental matters and, significantly, led to a result that Mr Hickie most certainly did not want, namely Mr Zdrilic's position as an alternate director of HTT. 994Whether or not Mr Hickie's "position" had been achieved by 6 February 2004, it seems to me that the most that can be said is that Mr Hickie was content to allow Mr Renshall to put to Mr Zdrilic his position in relation to the various elements which, ultimately, found their way into the Heads of Agreement. 995In that regard I see force in the submission that Mr Hickie put Mr Renshall in a position from which it was reasonable for Mr Zdrilic to infer that Mr Renshall had Mr Hickie's authority to negotiate such terms; see Crabtree -Vickers Pty Limited v Australian Direct Mail Advertising & Addressing Co Pty Limited (1975) 133 CLR 72 at 78. 996But there is no suggestion that Mr Hickie had any involvement in the dealings with any proposed funder. There is no evidence that Mr Hickie was involved in the negotiations between HTT and Mr Renshall and IBIS/IPC or that Mr Zdrilic thought Mr Hickie had any such involvement. 997In those circumstances, I cannot see how Mr Zdrilic could reasonably have inferred that the representations allegedly made to him by Mr Renshall concerning the availability of funds (as opposed to negotiation of the terms of the Heads of Agreement) were made on behalf of Mr Hickie. 998For that reason, my opinion is that HTT and Mr Renshall were not acting as Mr Hickie's agent for relevant purposes, that is to say for the purposes of making the representations as to the availability of funds. 999Certainly, so far as concerns the critical events of 25, 26 and 27 August 2004, apart from being present at the meeting of 27 August 2004 (although only for part of the meeting), there is no suggestion that Mr Hickie had the slightest involvement in HTT's discussions with potential funders or in the formulation of whatever opinions and representations were passed on to Mr Zdrilic during that period. The result 1000The result is that, in my opinion, the plaintiffs' claims fail. 1001I am not satisfied that the representations pleaded induced the plaintiffs to enter the Heads of Agreement, or the Non-Dilution Deed, or to consent to the dismissal of the 2001 Proceedings. 1002I am therefore not satisfied that the plaintiffs were, or are, entitled to rescind either the Heads of Agreement or the Non-Dilution Deed, or to have the orders of 6 September 2004 set aside. 1003Even if the plaintiffs were, on 27 August 2004 or later, entitled to rescind the Heads of Agreement and/or the Non-Dilution Deed, any such right has been lost because the plaintiffs have affirmed the agreements, because restitution in integrum is not possible, and because the rights of third parties have intruded. 1004The Third Amended Statement of Claim should be dismissed. 1005It follows that the issues in the cross-claims do not arise for consideration. They should be dismissed. 1006Prima facie, costs must follow the event. 1007I will hear submissions from the parties as to the precise orders that should be made. ********** Amendments 05 February 2014 - Paragraph numbering error Amended paragraphs: 131 and 132 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. Decision last updated: 06 February 2014