Supreme Court New South Wales Medium Neutral Citation: Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1503 Hearing dates: 3 - 12 September 2014; further written submissions 7 October 2014 Decision date: 30 October 2014 Jurisdiction: Equity Division - Commercial List Before: Stevenson J Decision: Parties to make further submissions as to the future conduct of the proceedings, in the light of these reasons Catchwords: CONTRACT - whether void ab initio for want of ministerial approval under Papua New Guinea statute - application of Foreign Corporations (Application of Laws) Act 1989 (Cth) - whether plaintiff estopped from asserting contract void ab initio - proper construction of termination clause - proper construction of investment mandate - whether defendants' conduct in breach of investment mandate - whether plaintiff established damage resulting from breach of investment mandate - proper construction of exclusion clause - whether defendant entitled to rely on exclusion clause; CORPORATIONS - whether defendant obliged to hold an Australian Financial Services License for purposes of s 911A of the Corporations Act 2001 (Cth) - whether defendant provided "financial services" for the purposes of s 766A - whether defendant provided "financial product advice" for the purposes of s 766B - whether defendant dealt in a "financial product" for the purposes of s 766C - whether defendant did not deal in a financial product by reason of Corporations Regulations 2001 (Cth) reg 7.1.35 - whether defendants provided services "in this jurisdiction" for the purposes of s 911A - whether defendants entitled to derivative crown immunity - whether plaintiff lost any statutory right of rescission under s 925A by reason of unreasonable delay under s 925A(2) or affirmation under s 925A(3); MISLEADING OR DECEPTIVE CONDUCT - whether defendants engaged in misleading or deceptive conduct for the purposes of s 1041H of the Corporations Act or s 12EA of the Australia Securities and Investments Commission Act 2001 (Cth) - warranty that held all necessary licenses and authorities - whether plaintiff would not have entered contract but for misleading or deceptive conduct; CONTRACT - proper construction - whether defendants obliged to deduct GST in relation to fees rendered to plaintiff - whether defendant entitled to calculate fees by reference to undrawn fees; TORT - injurious falsehood - whether plaintiff made false and malicious statement concerning defendants' business Legislation Cited: A New Tax System (Goods and Services) Act 1999 (Cth) Acts Interpretation Act 1901 (Cth) Australian Broadcasting Corporation Act 1983 (Cth) Australia Securities and Investments Commission Act 2001 (Cth) Companies Act 1997 (Papua New Guinea) Corporations Act 2001 (Cth) Corporations Regulations 2001 (Cth) Foreign Corporations (Application of Laws) Act 1989 (Cth) Foreign States Immunities Act 1985 (Cth) Independent Public Business Corporation of Papua New Guinea Act 2002 (Papua New Guinea) Public Finance (Management Act) 1975 (Papua New Guinea) Cases Cited: ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; 309 ALR 445 Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; 217 CLR 424 Armitage v Nurse [1988] Ch 241 Associated Alloys Pty Limited v ACN 001452106 Pty Limited (in liq) (2000) 202 CLR 588 Associated Plumbing Installation Ltd v Air Niugini Ltd [2011] PGSC 31 Attorney-General v Collom [1916] 2 KB 193 Attorney-General (NSW) v Quin (1990) 170 CLR 1 Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454 Australian Crime Commission v Gray [2003] NSWCA 318 Coghlan v SH Lock (Australia) Ltd (1987) 8 NSWLR 88 Commercial Union Insurance Co of Australia Pty Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Commonwealth v Verwayen (1990) 170 CLR 394 Electricity Generation Corp v Woodside Energy Ltd [2014] HCA 7; 88 ALJR 44 Firebird Global Master Fund II Ltd v Republic of Nauru [2014] NSWSC 360 Gould v Vaggelas (1984) 157 CLR 215 Graham v Ingleby (1848) 1 Ex 651; 154 ER 277 Karger v Paul [1984] VR 161 Keboki Business Group Inc and Morobe Provinseal Gavman v Papua New Guinea [1985] PNGLR 369 Laker Airways Ltd v Dept of Trade [1977] QB 643 Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 Metropolitan Transit Authority v Waverley Transit Pty Ltd [1991] 1 VR 181 Michael Wilson & Partners Limited v Nicholls [2011] HCA 48; 244 CLR 427 Minister for Immigration and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 Newey v Westpac Banking Corporation [2014] NSWCA 319 Nicholls v Michael Wilson & Partners Ltd [2010] NSWCA 222; 243 FLR 177 Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 Palmer Bruyn & Parker Pty Ltd v Parsons [2001] HCA 69; (2001) 208 CLR 388 Plimmer v City of Wellington Corp (1884) 9 App Cas 699 P T Garuda Indonesia Ltd v ACCC [2012] HCA 33; 247 CLR 240 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Saunders v Vautier (1841) 4 Beav 115; 49 ER 282 Shepherd v Felt & Textiles of Australia Ltd (1931) HCA 359; 45 CLR 359 Taylor v Oakes, Roncoroni & Co [1922] All ER 866 at 869 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387 Wells v Minister of Housing and Local Government [1967] 2 All ER 1041 Texts Cited: J D Heydon and M J Leeming Jacobs' Law of Trusts in Australia (7th ed, 2006, LexisNexis Butterworths) Lewison and Hughes, The Interpretation of Contracts in Australia, (2012, Lawbook Co) M Davies, A S Bell and P L G Brereton, Nygh's Conflict of Laws in Australia, (9th ed 2014, Lexis Nexis Butterworths) N Seddon, Government Contracts: Federal, State and Local, (5th ed, 2013, The Federation Press) Young, Croft and Smith, On Equity, (2009, Lawbook Co) Category: Principal judgment Parties: Motor Vehicles Insurance Limited (Plaintiff) Woodlawn Capital Pty Ltd (First Defendant) Timothy Patrick Breen (Second Defendant) Timothy James McNamara (Third Defendant) Representation: Counsel: S G Finch SC with J Giles (Plaintiff) J C Kelly SC with D O'Connor (Defendants) Solicitors: Gadens Lawyers (Plaintiff) Uther Webster & Evans (Defendants) File Number(s): SC 2012/83573 Table of contents Introduction 7 The issues requiring resolution and my conclusions concerning those issues 10 Section 46B of the IPBC Act 11 Breach of contract 11 Australian Financial Services Licence 13 Misleading or deceptive conduct 14 Accessorial liability of Messrs McNamara and Breen 15 Woodlawn's claim for its fees 15 Woodlawn's claim for damages or injurious falsehood 15 The IMAs 15 The Mandate 21 The AMA 22 The Trust Deed 23 Section 46B of the IPBC Act 25 Section 7 of the FCAL Act 26 What is the consequence of no ministerial approval under s 46B? 29 Was the Minister's approval in fact obtained? 30 Is MVIL estopped from denying it had power to enter the First and Second IMAs, the AMA and the Trust Deed? 34 Conclusion as to s 46B issues 39 Termination of the agreements 39 The proper construction of cll 8.2, 8.3 and 8.4 41 The date of termination of the AMA 44 The Shepherd v Felt & Textiles of Australia Ltd point 45 Commingling of funds 48 The Proper construction of the Mandate 52 Woodlawn's trading strategy - was there a breach of the Dual Object Term? 57 (a) Performance of the Portfolio to 30 June 2011 58 (b) A change of strategy 59 Absence of risk management and acting without "care and vigilance" 64 What is the consequence of the breach of the Dual Object Term? 64 Damage 64 The exclusion of liability in cl 5 76 Does cl 5 have the effect that a breach of the IMAs or the Mandate is not an Event of Default? 77 Is cl 5 effective to release Woodlawn from liability to compensate MVIL for any damage suffered by reason of the breach of the Dual Object Term? 78 Was Woodlawn required to have an AFSL? 82 Provision of "financial services" 84 Did Woodlawn provide "financial product advice" to MVIL? 84 Did Woodlawn "deal in a financial product"? 86 Subregulation 7.1.35(1) 88 Did Woodlawn provide any services "in this jurisdiction"? 93 Is Woodlawn immune from application of Pt 7 of the Act by reason of derivative Crown immunity? 94 Conclusion as to whether Woodlawn was obliged to have an AFSL 96 Consequences of Woodlawn not having an AFSL until 29 July 2011 96 Event of Default 96 MVIL's statutory right of rescission under s 925A of the Act 96 Delay and affirmation 97 Did MVIL give a s 925A notice to terminate the IMAs and AMA within a "reasonable period" for the purposes of s 925A(2)? 102 Did MVIL affirm the IMAs and AMA for the purpose s of s 925A(3) of the Act? 105 Contractual right to terminate 106 Misleading or deceptive conduct 106 The warranty in cl 9.1(c) of the IMAs and cl 9.1(b) of the AMA 107 The letter of 6 July 2011 114 Was GST payable on Woodlawn's fees? 116 Was Woodlawn entitled to calculate fees on previously earned but unpaid fees? 119 Woodlawn's cross claim for injurious falsehood 122 Further issues 124 Judgment Introduction 1This is a dispute over funds managed by the first defendant, Woodlawn Capital Pty Ltd, on behalf of the plaintiff, Motor Vehicles Insurance Ltd ("MVIL"). 2MVIL is a company incorporated in Papua New Guinea ("PNG") under the Companies Act 1997 (PNG) and is a "Majority State-Owned Enterprise" for the purposes of the Independent Public Business Corporation of Papua New Guinea Act 2002 (PNG) (the "IPBC Act"). 3The sole shareholder in MVIL is the Independent Public Business Corporation of PNG ("the IPBC"). The IPBC is a statutory corporation that is wholly owned by the state of PNG. 4MVIL is responsible for compulsory third party motor vehicle insurance in PNG. 5Woodlawn describes itself as an "investment manager" and, at the relevant time, carried on a business providing investment management and investment advice. 6The second and third defendants, Messrs Breen and McNamara, are directors of Woodlawn. Each of them had experience in the financial services industry prior to the incorporation of Woodlawn on 26 May 2009. 7At all relevant times, MVIL was Woodlawn's only client. 8On 22 July 2009, MVIL and Woodlawn executed a document called "Investment Management Agreement" ("the First IMA"). The First IMA was expressed to have a minimum term of two years. Pursuant to the First IMA, Woodlawn agreed to invest MVIL's funds in accordance with a nominated "Investment Mandate". 9On 24 July 2009, MVIL paid to Woodlawn Papua New Guinea Kina ("K") K96,479,986 ("the Sum") to hold and invest pursuant to the First IMA. 10The Sum was in turn borrowed by MVIL from another PNG corporation pursuant to what was described as an Equity Monetisation Contract. 11The Sum was, on 24 July 2009, equivalent to something in the order of $A43.7 million. 12On 6 May 2010, MVIL and Woodlawn executed three further documents. The first was a second Investment Management Agreement ("the Second IMA") which, whilst expressed not to be retrospective, was expressed "to replace" the First IMA. The Second IMA also provided that investments were to be made in accordance with a nominated "Investment Mandate". There is no material difference between the Investment Mandates referred to in the First IMA and the Second IMA. I shall simply refer to "the Mandate". 13The First IMA thus subsisted only between 24 July 2009 and 6 May 2010. As I explain below, no complaint is now made by MVIL as to the manner in which Woodlawn dealt with MVIL's funds during this period. As the case was developed, MVIL's complaint ultimately focused on Woodlawn's dealings with MVIL's funds in July and August 2011, at which time the Second IMA was in place. The Second IMA is in some respects different from the First IMA. Accordingly, I will conduct my analysis of the parties' competing contentions by reference to the terms of the Second IMA. I will only refer separately to the "First" IMA and the "Second" IMA when it is necessary to distinguish between them. Otherwise, I will simply refer to "the IMA" or "the IMAs". 14On 6 May 2010, the parties also executed an "Asset Management Agreement" ("the AMA") and a document called "MVIL Trust" ("the Trust Deed"). Under the AMA, Woodlawn agreed to provide "asset management services" in relation to all of MVIL's "cash or investment" assets, wherever located (including the funds the subject of the IMAs). The AMA does not loom large in the proceedings, and I will refer to it only as necessary. 15Mr McNamara (rather than Mr Breen) made all decisions concerning the manner in which MVIL's funds were to be invested. He agreed he had "nothing else to do professionally" and that the management of MVIL's investment portfolio had his "complete attention". 16It is common ground that, at all relevant times, Woodlawn held the Sum, and the investments into which the Sum was converted (described in the IMAs as the "Portfolio"), on trust for MVIL. 17On 17 November 2011, MVIL sent Woodlawn a letter which, it is common ground, terminated all the agreements except the AMA. Woodlawn contends MVIL did not terminate the AMA until its solicitor sent a further letter on 13 February 2012. 18By then, the value of the Portfolio had reduced from the amount of the Sum to something in the order of $A30.5 million. This loss is primarily the product of Woodlawn's dealings with the Portfolio in the quarter ended 30 September 2011 and, particularly, in the first two weeks of August 2011. MVIL claims that Woodlawn is obliged to compensate it for this loss on various bases, discussed below. 19From that remaining sum of $A30.5 million Woodlawn has repaid MVIL something in the order of $A4.2 million. 20Woodlawn holds the balance (in the order of $A26.3 million) pending the outcome of these proceedings and claims that it is owed something in the order of $A23 million for various fees said to be payable under the Second IMA and the AMA. 21I have been greatly assisted by the written and oral submissions I have received from Mr Finch SC, who appeared with Mr Giles for MVIL, and Mr Kelly SC, who appeared with Mr O'Connor for Woodlawn. Much of what follows, especially concerning background matters, is taken with gratitude from those submissions. 22The proceedings were conducted with admirable economy, and many issues alive on the pleadings were, during the course of the hearing, either resolved or not pressed. 23Nonetheless, a large number of issues between the parties remain for determination. During argument it was agreed that I should determine the critical matters dividing the parties but leave some issues to be reconsidered and, if necessary, further argued, in the light of these reasons. After the parties have had an opportunity to consider these reasons, I will then give them an opportunity to make further submissions as to such other matters as require resolution. The issues requiring resolution and my conclusions concerning those issues 24Because of the diverse range of issues presented for determination, I will summarise, at this stage of the judgment, the issues and the substance of my decisions concerning those issues. This summary, however, should not be treated as a substitute for, or a qualification of, the detailed reasons set out in what follows. Section 46B of the IPBC Act 25MVIL contended that, by reason of s 7 of the Foreign Corporations (Applications of Laws) Act 1989 (Cth) ("the FCAL Act") it is necessary to determine the question of MVIL's legal capacity and powers to enter the IMAs and the AMA under PNG law and that, as the PNG Minister for Treasury and Finance did not approve MVIL's entry into the IMAs and the AMA under s 46B of the IPBC Act, those agreements are void ab initio and of no effect. 26My conclusions are that, for a number of reasons, the FCAL Act is not engaged and that, in any event, and as a matter of fact, MVIL has not established that ministerial approval was not given. Alternatively, I have concluded that, in all the circumstances, MVIL is estopped from contending that ministerial approval was not given. Breach of contract 27MVIL alleged that Woodlawn has acted in breach of contract in a number of respects. 28In that regard a number of issues arise as to the proper construction of the provisions in the IMAs and the AMA concerning termination. I have concluded that I should resolve those issues in MVIL's favour and that, in substance, MVIL terminated all agreements on 17 November 2011 and that such termination has effect under the IMAs and the AMA as a termination for an "Event of Default". I have concluded that it follows, on the proper construction of the relevant clauses of the IMAs and AMA (cll 8.2, 8.3 and 8.4), that Woodlawn has no entitlement to fees beyond those which were "accrued" to the date of termination. 29The most significant breach of contract alleged by MVIL is that, by investing MVIL's Portfolio in particular derivatives in July and August 2011, Woodlawn acted in breach of the Mandate. I have accepted this submission but found that MVIL has not proved what damage it has suffered as a result of such breach and that, in any event, Woodlawn is not liable for such damages by reason of an exclusion clause (cl 5) in each of the IMAs and the AMA. 30An issue also arose as to whether that exclusion clause not only releases Woodlawn from the financial consequences of a breach of the IMAs or the AMA but also has the effect of depriving MVIL of the right to terminate the agreements by reason of that breach. I have concluded that cl 5 does not have this effect. 31MVIL also contended that Woodlawn acted in breach of an implied term of the IMAs and the AMA by commingling its funds with those of MVIL. I have concluded that any such breach was "remediable" for the purpose of the relevant provision in the IMAs and AMA (cl 8.4(b)) and thus not an Event of Default. 32As Woodlawn held the relevant funds on trust for MVIL, MVIL contended that the conduct of Woodlawn said to constitute a breach of the Mandate also constituted a breach of trust and a breach of its fiduciary duty. MVIL contended that the same conduct constituted a breach by Woodlawn of its duty of care to MVIL. MVIL did not suggest these breaches have any additional consequences to the alleged breach of Mandate. Accordingly, in these reasons, I have not dealt separately with these alternative claims. 33On the pleadings, MVIL also alleged that the First IMA was partly in writing and partly oral. The oral component was particularised as follows: "To the extent that the First IMA was oral it comprised an express term that at all times during which Woodlawn was engaged to act on MVIL's behalf, MVIL's funds were to be held as to 80% in cash call accounts as to 20% invested in shares (Overarching Investment Limitation). The Overarching Investment Limitation was oral and was agreed during a conversation between Dr Mua for and on behalf of MVIL and Mr Breen for and on behalf of Woodlawn on 22 July 2009 at the time of signing of the First IMA." 34Dr Mua was then the managing director of MVIL. The only evidence that MVIL adduced concerning the "Overarching Investment Limitation" was from Mr Danny Poponawa, who was then the Chief Executive Officer of MVIL. Mr Poponawa died before the hearing. MVIL did not serve any affidavits sworn by Dr Mua. In fact Woodlawn served an affidavit by Dr Mua although, ultimately, it was not read and Dr Mua was not called. In his first affidavit Mr Poponawa deposed to the conversation between Dr Mua and Mr Breen said to have given rise to the "Overarching Investment Limitation". In later affidavits Mr Poponawa gave differing accounts of the events said to give rise to that agreement. In opening submissions Mr Finch informed me that the "80:20" case was not pressed "on a contractual basis". In fact it was not mentioned again and was, in effect, abandoned. Australian Financial Services Licence 35An issue also arose as to whether Woodlawn was obliged, at relevant times, to hold an Australian Financial Services License ("AFSL") for the purposes of s 911A of the Corporations Act 2001 (Cth) ("the Act"). 36I have concluded that Woodlawn was at all relevant times providing "financial services" for the purposes of s 911A of the Act in that it was providing "financial product advice" for the purpose s 766B(1) of the Act and dealing in a "financial product" for the purposes of s 766C of the Act. 37Woodlawn contended that it was not required to have an AFSL because it did not provide financial services in the jurisdiction, or alternatively because it was entitled to derivative crown immunity. I have rejected both of those submissions. 38An issue also arose as to whether, assuming Woodlawn was required to have an AFSL, MVIL was entitled to rescind the IMAs and the AMA under s 925A of the Act (one effect of which would be to deprive Woodlawn of any entitlement to recover fees: s 925F of the Act) and as to whether MVIL has lost any such right by reason of not exercising it within a reasonable period for the purpose of s 925A(2) or because of having affirmed the agreements for the purpose of s 925A(3) of the Act. I have concluded that MVIL lost its right to rescind under s 925A on both bases. 39By reason of not having an AFSL, Woodlawn committed a further Event of Default of the IMAs and the AMA (as it was in breach of a warranty that it held all relevant licenses and authorities). Misleading or deceptive conduct 40A further issue arose as to whether Woodlawn had engaged in misleading or deceptive conduct by reason of having falsely warranted it held all necessary "licenses and authorities". MVIL contended that, but for such conduct, it would not have entered the IMAs and the AMA and that it has suffered damage as a result. I have concluded that as Woodlawn warranted it had all requisite licences and authorities, but did not have an AFSL, it did engage in misleading or deceptive conduct, but that MVIL has not made out a "no transaction" case. 41MVIL also contended that Woodlawn had engaged in misleading or deceptive conduct arising out of a letter it wrote on 6 July 2011. I have concluded that this aspect of the case did not advance MVIL's position in any substantive way. Accessorial liability of Messrs McNamara and Breen 42MVIL also brought claims against Mr McNamara and Mr Breen for accessorial liability. I have decided to defer these issues until the parties have had an opportunity to consider these reasons. Woodlawn's claim for its fees 43Woodlawn claims fees it contends are owing under the IMAs and the AMA. 44As I have determined that Woodlawn has acted in breach of the IMAs and the AMA, and that MVIL was entitled to terminate those agreements on that basis it follows that, as I have said, Woodlawn is not entitled to any fees beyond those "accrued" at the date of termination. 45Two further issues arose in relation to Woodlawn's fees. One was whether it was obliged and entitled to charge GST on the fees under the IMAs. I have concluded that it was not. A further issue of construction arose in relation to what the parties described as the "fees on fees" issue. I have decided that issue in favour of MVIL. Woodlawn's claim for damages for injurious falsehood 46Finally, Woodlawn brought a claim against MVIL for damages for injurious falsehood arising out of a press release by the PNG Minister for Public Enterprises. I have concluded that Woodlawn's claim fails. 47I will now set out the terms of the relevant agreements. The IMAs 48As I have mentioned, by the Second IMA, MVIL and Woodlawn agreed to "replace" the First IMA. 49By cl 2, MVIL appointed Woodlawn "to manage the Portfolio". "Portfolio" was defined to mean: "...all the funds held on trust by [Woodlawn] on behalf of MVIL and Investments managed by [Woodlawn] under the [Mandate] on behalf of MVIL together with all income and accretions in respect of them or any part thereof." 50"Investments" was, in turn, defined to mean: "...assets, which may include, securities, derivatives, or other property selected and purchased by [Woodlawn] using the funds and/or realised profits or income generated within the Portfolio," 51Clause 3.1(a) provided that Woodlawn's duties were: "(1) to execute transactions that effect the investment and reinvestment of the cash, securities and other property comprising the Portfolio with power at their discretion to purchase or otherwise acquire investments and to sell, exchange, vary or transpose the same, provided that all transactions, advice and recommendations given by [Woodlawn] in relation to the Portfolio...be consistent with...the [Mandate]...; (2) keep the Portfolio under review; (3) keep proper books of account in relation to the Portfolio recording transactions made by [Woodlawn]; (4) exercise care and vigilance in carrying out its functions, powers and duties under this deed...". 52Clause 3.1(b) stated (inconsistently with the definition of "Portfolio" and with the acknowledgement in cl 9.3 set out below) that Woodlawn was not required to hold any assets "on behalf of MVIL". As I have said, despite this clause, it is common ground that at all relevant times Woodlawn held the Portfolio on trust for MVIL. 53Clause 3.1(c) obliged Woodlawn to: "...carry out its obligations under this deed to the standard that could reasonably be expected of a competent investment management professional." 54Clause 4 dealt with Woodlawn's "powers" and provided: "Powers and Limitations 4.1 For the purpose of carrying out its duties under this deed and without any further limitation, MVIL confers on [Woodlawn] all the powers necessary to transact using the assets that comprise the Portfolio. With these powers, [Woodlawn] may execute any documents as necessary and/or give instructions to any person to effect transactions within the Portfolio without further authority from MVIL. Non-exclusivity 4.2 [Woodlawn] may perform similar investment services to the services performed for MVIL under this deed for itself and/or other persons. MVIL acknowledges that [Woodlawn] may give advice and take action in the performance of its duties for other clients which may differ from advice given and action taken in relation to the Portfolio." 55Clause 5 provided an "Indemnity" as follows: "[Woodlawn] seeks to assist [MVIL] in the manner set out in this deed. However, MVIL agrees that [Woodlawn] is not liable for any claims, actions, proceedings, demands, liabilities, losses, damages, costs and expenses suffered by MVIL arising out of, or in connection with, this deed or any other matter or activity referred to or contemplated by the deed, including but not limited to loss suffered by MVIL as a result of [Woodlawn's] negligence or a breach of this deed. [Woodlawn] does not warrant, represent or guarantee that any of the investment objectives stated in the [Mandate] will be achieved. MVIL agrees with [Woodlawn] (for itself and on trust for each of the related entities, affiliates, directors, officers, employees and agents of [Woodlawn] ("Indemnified Persons")) that: (a) MVIL will indemnify and hold harmless the Indemnified Persons from and against all claims actions, proceedings, demands, liabilities, losses, damages, costs and expenses arising out of, or in connection with, this deed or any other matter or activity referred to or contemplated by the deed, in which any Indemnified Person may suffer or incur loss in any jurisdiction; (b) all costs and expenses incurred by any Indemnified Person are to be reimbursed by MVIL promptly on demand, including those incurred in connection with the investigation of, preparation for or defence of, any pending or threatened litigation or claim within the terms of this Indemnity or any matter incidental thereto; and (c) no Indemnified Person will have any liability whatsoever to MVIL for or in connection with things done or omitted to be done pursuant to the deed; other than in respect of any liabilities, losses, damages, costs or expenses which are determined by a judgment of a Court of competent jurisdiction to have resulted from the wilful default or negligence on the part of the Indemnified Person. Sums already paid by MVIL under this Indemnity but which fall within this proviso will be reimbursed in full. MVIL will notify the Investment Manger if MVIL becomes aware of any claim which may give rise to a liability under this indemnity. Without prejudice to any claim MVIL may have against [Woodlawn], no proceedings may be taken against any director, officer, employee or agent of [Woodlawn] in respect of any claim MVIL may have against [Woodlawn]. This Indemnity will continue after the termination of this deed." 56Clause 6 provided that Woodlawn was entitled to be paid fees in accordance with the Mandate. 57Clause 8 provided for termination as follows: "8.1 Term (a) This deed commences as of and from the date of its execution and, subject to clause 8.3, continues at least until 27 July 2016 (Initial Term). (b) Unless either of the parties elects to terminate the deed, in accordance with clause 8, prior to expiry of the Initial Term, this deed will renew for a further 5 years after the Initial Term (Further Term) on the terms set out in this deed. (c) In the event that this deed is renewed under clause 8.1(b), all references to the 'Initial Term' in the deed will mean the 'Further Term', unless the context requires otherwise. 8.2 Right to terminate Subject to clauses 8.3 and 5, this deed remains in force until terminated by MVIL giving to [Woodlawn] not less than 28 Business Days' written notice of termination or by [Woodlawn] giving to MVIL not less than 28 Business Days' written notice of termination or such lesser period of notice as the parties agree. Neither party may invoke termination without reasonable cause. 8.3. Early termination If MVIL terminates this deed in accordance with clause 8.2, any outstanding fees payable under the [Mandate] up to the termination date, plus investment management, administration and foreign exchange hedging fees calculated for the period commencing on the termination date up until expiry of the Initial Term based upon the value of the Portfolio on the termination date will be payable to [Woodlawn] by MVIL within 14 days of termination. If at any time, MVIL withdraws any Investment from the Portfolio prior to expiry of the Initial Term, [Woodlawn] will be entitled to include the value of the withdrawn Investment (as at the date of withdraw) when calculating the value of the Portfolio for the purposes of determining the investment management, administration and foreign exchange hedging fees payable by MVIL in any period. 8.4 Event of Default Either party (Non-defaulting Party) may terminate this deed at any time by written notice to the other party (Defaulting Party) if: (a) the Defaulting Party fails to pay any money payable under this deed within 28 Business Days after receiving a written demand for money due but unpaid; (b) the Defaulting Party fails to perform or observe any other undertaking, obligation or agreement expressed or implied in this deed and that failure is material in the context of this deed and is not, in the opinion of Non-defaulting Party, remediable; or (c) the failure described in clause 8.4(b) is, in the opinion of the Non-defaulting party, remediable, and the Defaulting Party does not remedy the failure within 28 business days (or a longer period determined by the Non-defaulting party) after receipt by the Defaulting Party of a notice from Non-defaulting party specifying the failure ...or (k) any of the warranties given by the Defaulting Party in this deed are or become untrue. 8.5 Claims and Transactions Termination of this deed does not affect any: a) transaction properly entered into prior to termination; b) claim by [Woodlawn] in respect of accrued fees incurred in respect of the period to termination; c) other claim which either party may have against the other; or d) the indemnity given to [Woodlawn] in this deed." (emphasis in original) 58 By cl 9.1(c) Woodlawn warranted that, amongst other things: "...that it will, at all times during the term of this deed, be the holder of all licences and other authorities required to be held under all applicable legislation governing the activities of [Woodlawn]...". 59By cl 9.3 MVIL acknowledged that: "...the Portfolio is held on trust by [Woodlawn] in accordance with the Trust Deed." 60Clause 11 provided that: "No failure to exercise and no delay in exercising any right, power or remedy under this deed will operate as a waiver." 61Clause 14 provided that the IMA was governed by the laws of New South Wales and that the parties submitted to the non-exclusive jurisdiction of the courts of NSW. The Mandate 62Clause 1 of the Mandate set out the "strategies" that Woodlawn "will use as a guide in pursuit of the Investment Aims" and that: "[Woodlawn] and MVIL...recognise that in [sic] terms defining a strategy this document may only be used as a reference to the strategy at the time of signature as the nature of investing in capital markets is such that the strategy may, from time to time have to change. A strategy may also change is [sic: if] the objectives of [MVIL] change." 63The Mandate provided for the following "Investment Aims": "The aim of [MVIL] in requesting [Woodlawn] to manage the Portfolio is that [MVIL] wishes to ... (b) Receive a regular income stream from Investments with a yield greater than the S&P/ ASX200 Index; (c) Benefit from capital growth; (c) Benefit from a lower volatility than the S&P/ASX200 Index". 64The "Investment Strategy" was stated to be: "In order to achieve the Investment Aims, [Woodlawn] implements a multi strategy approach, investing and trading securities on a range of local and at times global financial markets. The strategy aims to build a core of long term value positions creating the potential for long term capital growth. These are overlaid with related derivatives; to both hedge market volatility, and enhance returns. Additionally, related and non related special situations, and derivatives are utilized [sic] to further enhance Portfolio returns whilst aiming to further decrease volatility. [Woodlawn] will employ a semi-quantitative approach looking at 'bottom up', global macro and statistical models. Differing approaches are applied to different markets, with methods ranging from fully discretionary to using a hybrid systematic approach. Achieving the objectives of capital growth, with enhanced income, and incremental wealth creation through consistent returns, whilst preserving capital with strict risk management, are the cornerstones of the strategy. Strict management controls and systems ensure all investments are subject to the vigorous risk management ideology that minimises and avoids unnecessary risk. [Woodlawn] reserves the right to change or alter the investment strategy from time to time. If the investment strategy varies considerably in any way [Woodlawn] will notify [MVIL] in writing within 7 days of this occurring." 65The Mandate provided for a "Performance fee", an "Investment Management Fee", an "Administration Fee" and a "Foreign Exchange Hedging Fee". As I discuss below, during the course of the hearing, the parties resolved all but three issues concerning these fees. The AMA 66Pursuant to cl 2(a) of the AMA, MVIL appointed Woodlawn to "advise on and where appropriate manage" the "Portfolio" which, in this agreement was defined to mean all of MVIL's assets "which would be regarded as either cash or investments". The AMA "Portfolio" thus included the funds the subject of the IMAs together with all of MVIL's other cash or investment assets (wherever located). 67Clause 3.1 of the AMA defined Woodlawn's duties as including: "(1) performing, or supervising the performance of, the day to day investment and administration of the Portfolio; (2) advising MVIL on the management of its Portfolio". 68Clause 5 of the AMA provided for an "indemnity" in the same terms as that found in the Second IMA. 69Clause 8 of the AMA contained a termination clause in the same terms as that in the Second IMA and was thus stated to continue until "at least" 27 July 2016 (called the "Initial Term"). 70Clause 9.1(b) contained the same warranty as to "licences" and "other authorities" as is contained in cl 9.1(c) of the IMA (see [58]). 71There was annexed to the AMA an "Asset Management Mandate" to which it is not necessary to refer separately. The Trust Deed 72The Trust Deed was executed on 6 May 2010 but was expressed to have a "commencement date" of 27 July 2009. 73Clause 2 provided that: "(a) On and from the Commencement Date, [Woodlawn] has held and continues to hold the Trust Property as bare trustee on trust for [MVIL] and the beneficial owner of [MVIL] to the Trust Property shall be vested in [MVIL] absolutely. (b) [Woodlawn] must at the request and cost of [MVIL] transfer the Trust Property to [MVIL] for its sole and absolute benefit or otherwise deal with the Trust Property as the Beneficiary directs." 74"Trust Property" was defined to include the "Portfolio" (which was defined to have the same meaning as in the Second IMA) together with: "(b) any other money or any property that any person gifts, transfers, assigns, or vests to [Woodlawn] to be held upon the trust created by this document; (c) any other property acquired by [Woodlawn] arising out of holding the Trust Property; (d) all income or distributions which are received in respect of the Trust Property; and (e) if the Trust Property is sold, the net proceeds of sale of the Trust Property". 75Clause 3.1 provided that Woodlawn's obligations were to: "(a) hold the Trust Property on behalf of [MVIL] absolutely; (b) exercise voting rights and any other right attaching to the Trust Property; and (c) deal with or transfer the Trust Property, as [Woodlawn] considers appropriate or where directed by [MVIL]." 76Clause 5.2(b) provided that Woodlawn could: "[I]nvest in any form of investment, whether authorised by law or not, which [Woodlawn] decides." 77Clause 5.3(a) provided that: "The Trustee may...apply...any monies available for investment to or in any form of investment as the Trustee decides, to the intent that the Trustee has the same powers in all respects as it were the beneficial owner, including the power to vary or transpose investments." 78Clause 5.3(b) provided that: "The Trustee may...make any investment in the name or under the control of the Trustee...jointly or in common with other persons...including the Trustee (or any one or more of them) in its personal capacity or any other capacity." 79Clause 5.50 was headed "Trustee's power not affected by its own involvement" and provided: "Despite any rule of law or equity to the contrary, the Trustee has the fullest power to exercise...all of the powers and discretions contained in this document or otherwise conferred by law, even if: (a) the Trustee, or any director or shareholder of the Trustee: (i) has or may have a direct or personal interest (whether as trustee of any other trust, in its personal capacity, as a director or shareholder of any company, or otherwise) in the mode or result of exercising that power or discretion; or (ii) may benefit either directly or indirectly as the result of the exercise of that power or discretion; or (b) the Trustee is the sole trustee". 80Clause 5.11(a) provided that in the "execution of the trusts and powers contained in this document" Woodlawn could: "[A]ct personally and charge and be paid from the Trust Property a reasonable remuneration for so acting". Section 46B of the IPBC Act 81Section 46B of the IPBC Act is in the following terms: "A Majority State Owned Enterprise shall not, except with the approval of the Minister...upon the recommendation of the Managing Director, enter into any contract involving the payment or receipt of an amount, or of property to a value, (or both) exceeding K1,000,000". 82The "Minister" referred to in s 46B is the PNG Minister for Treasury and Finance. 83MVIL claimed that the Minister did not approve its entry into the IMAs and AMA and that, accordingly those purported agreements were void ab initio. 84Issues arise as to whether, in light of the provisions in s 7 of the FCAL Act, it is necessary to consider PNG law at all (and thus to consider whether s 46B approval was given), whether such approval was in fact given, and whether MVIL is estopped from contending it was not. 85The "Managing Director" referred to in s 46B is the managing director of the IPBC (see ss 2 and 23 of the IPBC Act). 86I infer from an affidavit sworn by Mr Erastus Kamburi, the Chief Legal Officer of IPBC since 23 January 2012, that Mr Masket Iangalio was the managing director of IPBC at the time that the First IMA was executed and that Mr Glen Blake was the managing director of IPBC at the time that the Second IMA and the AMA were executed. As will emerge below, Mr Blake was certainly the managing director of IPBC in May 2011. Neither Mr Iangalio nor Mr Blake was called to give evidence. Their absence was not explained. Section 7 of the FCAL Act 87MVIL submitted that, by reason of the choice of law rules set out in s 7 of the FCAL Act, consideration must be given to PNG law to determine whether MVIL had the "legal capacity and powers" to enter the IMAs and AMA. 88I do not accept that submission for the following reasons. 89Section 7 of the FCAL Act is, relevantly, in the following terms: "(1) The section applies in relation to the determination of a question arising under Australian law (including a question arising in a proceeding in an Australian court) where it is necessary to determine the question by reference to a system of law other than Australian law. ... (3) Any question relating to: (a) the status of a foreign corporation (including its identity as a legal entity and its legal capacity and powers); or .... (h) the validity of a foreign corporation's dealings otherwise than with outsiders; is to be determined by reference to the law applied by the people in the place in which the foreign corporation was incorporated." 90MVIL is a "foreign corporation" for the purpose of the FCAL Act. 91MVIL contended that s 7 of the FCAL Act is engaged and that, accordingly, "any question relating to" its "status" (including its "legal capacity and powers") is governed by PNG law, including s 46B of the IPBC Act which MVIL contends, is to be characterised as a law affecting its "legal capacity and powers". 92Section 7 of the FCAL Act is only engaged where "a question arises" under Australian law and where "it is necessary" to determine that question "by reference to a system of law other than Australian law" (see s 7(1)). 93The relevant question is whether MVIL had a "legal capacity" or "power" to enter the IMAs and the AMA. That question is to be determined by the proper law of the contract (see M Davies, A S Bell and P L G Brereton, Nygh's Conflict of Laws in Australia, (9th ed 2014, Lexis Nexis Butterworths) at [19.50]). 94Each of the IMAs and the AMA provided that it was governed by the law of NSW. The parties thus agreed that the proper law of the agreement is NSW. 95In those circumstances, I accept Woodlawn's submission that it is not "necessary to determine any question concerning the agreements by reference to a system of law other than" that of NSW (cf Nicholls v Michael Wilson & Partners Ltd [2010] NSWCA 222; 243 FLR 177 per Lindgren AJA (with whom Basten and Young JJA agreed) at [357] and [359]; overturned by the High Court without criticism of this aspect: see Michael Wilson & Partners Limited v Nicholls [2011] HCA 48; 244 CLR 427). 96For that reason alone, the choice of law provision in s 7 of the FCAL Act is not engaged. 97In any event, even if s 7 of the FCAL Act is engaged, I do not accept that s 46B of the IPBC Act relates to any of the "questions" referred to in s 7(3) of the FCAL Act. Only two of those questions were the subject of submissions before me; those in ss 7(3)(a) and (h) set out above. 98Section 7(3)(a) is directed to questions relating to a foreign corporation's "status" and the parenthetical reference in s 7(3)(a) to a foreign corporation's "legal capacity and powers" must be seen in that context. In those circumstances, although my attention was not drawn to any authorities dealing with this, my opinion is that s 7(3)(a) is directed to, relevantly, those aspects of a foreign corporation's "legal capacity and powers" that touch on its "status" as a corporation; that is the source of that "legal capacity" and those "powers". I do not see s 7(3)(a) as being concerned with the manner in which that capacity or those powers may be exercised. 99Section 46B provides that a MSOE, such as MVIL, "shall not" without Ministerial approval "enter into" certain contracts; those involving more than K1 million. The section says nothing of MVIL's ability to enter contracts involving a smaller sum. The language of s 46B is that of statutory prohibition, not of the grant of a statutory right. It does not provide the source of MVIL's power or legal capacity to contract. MVIL is a company incorporated under the PNG Companies Act 1997 and its power to enter contracts derives from s 155 of that Act, and from its own Constitution. 100The effect of s 46B is merely to regulate the manner in which MVIL's power and capacity to contract may be exercised (see Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454 where the High Court came to such conclusion in relation to a similarly worded provision in the Australian Broadcasting Corporation Act 1983 (Cth); per Mason CJ, Deane and Gaudron JJ at 457 and Brennan and Dawson JJ at 461). 101For that reason, in my opinion, s 7(3)(a) is not engaged. 102Section 7(3)(h) is clearly not engaged as MVIL's dealings in this case were with an "outsider". What is the consequence of no ministerial approval under s 46B? 103Further, even if s 46B does relate to MVIL's "legal capacity and powers", it is by no means clear to me that the effect of s 46B is that, absent ministerial approval, the relevant agreements are void. 104MVIL drew attention to a decision of the PNG Supreme Court of Justice in Associated Plumbing Installation Ltd v Air Niugini Ltd [2011] PGSC 31 per Cannings, Makail and Kawi JJ. The issue in that case was whether a contract for the sale by Air Niugini of land in Port Moresby to Associated Plumbing was void by reason of the fact that Air Niugini had not obtained ministerial approval under s 46B, but also under s 46F of the IPBC Act. 105The Court concluded (at [17]) that: "Therefore, it was important that the parties had to comply with the requirements of sections 46B and 46F of the IPBC Act, because a failure to do so would render the contract null and void." 106However, their Honours did not advert to what appears to me to be an important distinction between s 46B and s 46F of the IPBC Act. 107Section 46B requires that a Majority State Owned Enterprise, or MSOE (such as MVIL or Air Niugini) obtain ministerial approval for "any contract" involving payment or receipt of an amount exceeding K1 million. Section 46F requires that a MSOE obtain approval from IPBC itself for the sale of lease of any land or plant for a consideration exceeding K1 million. Further, s 46G of the Act requires that a MSOE obtain IPBC's approval for capital expenditure exceeding K1 million. Significantly, each of ss 46F and 46G provide, in terms, that contracts or arrangements entered without the requisite approval are "void". Section 46B contains no such provision. 108The Court in Associated Plumbing did not advert that distinction, no doubt for the reason that approval under s 46F was called for; absent that approval the contract was plainly void by operation of the express provisions of s 46F. 109It is by no means clear to me that the same conclusion would follow, as a matter of PNG law, by reason of want of ministerial approval under s 46B. Was the Minister's approval in fact obtained? 110MVIL's case was that no ministerial approval was given, and that its entry into the IMAs and the AMA was ultra vires, with the consequence that each of those agreements was void ab initio. 111MVIL accepted that it carried the onus of making out this startling proposition. 112The possible consequences of there being no ministerial approval to the agreements are serious indeed. MVIL is the party best placed to prove whether approval was given. In those circumstances, Woodlawn submitted that I would require "clear and convincing proof" before reaching the conclusion for which MVIL contended. That may overstate matters a little, but I would certainly be reluctant to draw such a conclusion by inference from equivocal material. 113MVIL adduced affidavit evidence from Mr Kamburi to the effect that he had searched IPBC's records and that, having made that search "I know that IPBC does not possess any records" of any recommendations made by either Mr Iangalio or Mr Blake to the Minister, or any approvals by the Minister in respect of the IMAs or the AMA. 114In his oral evidence, Mr Kamburi said that, at the relevant time, there was no "formal register" of ministerial approvals at IPBC and that he had searched the "running files" of IPBC, together with the records kept by the Chief Operating Officer of IPBC, but had found no record of any request for, or a grant of s 46 approval for the IMAs or the AMA. Mr Kamburi said that he did not have access to the books and records of the Minister. 115MVIL also adduced evidence on this topic from Mr Poponawa. 116In one of his affidavits, Mr Poponawa asserted that, as at March 2011 "IPBC Approval had not been obtained in respect of the...First IMA, Second IMA and AMA". In the same affidavit Mr Poponawa also said that he did not recall being informed that MVIL had sought, or was waiting for "IPBC Approval to either the Second IMA or the AMA". As I have mentioned, Mr Poponawa died before the hearing. 117This evidence points, albeit by no means decisively, to the conclusion that no ministerial approval was given (although, of course, Mr Poponawa's evidence could not be tested). 118On the other hand, on 3 May 2011 Mr Blake, by then the managing director of IPBC, wrote a letter to Woodlawn which points strongly in the other direction. 119Mr Blake's letter was in these terms: "I refer to the above and advise that the Motor Vehicle Insurance Ltd (MVIL) is a Majority State Owned Enterprise (MSOE) in which the State or the Independent Public Business Corporation (IPBC) or both of them together, hold interests in assets or share capital exceeding 50%. ... Section 46B provides as follows: 'A majority state owned enterprise shall not, except with the approval of the Minister referred to in Section 61 of the Public Finance (Management) Act 1975 upon the recommendation of the Managing Director, enter into any contract involving the payment or receipt of an amount, or of property to a value (or both) exceeding K1,000,000.00'. Thus, it is our view that IPBC has been given the legal mandate to approve any transaction involving the payment or receipt of an amount, or property to value (or both) exceeding K1,000,000.00. It is also a requirement that the approval of the Minister for Treasury must be given. This legal mandate is in line with the stated aims and objectives of IPBC and also provides for the achievement of fiscal responsibility and forms part of the regulatory duties and powers of IPBC. Therefore as a shareholder of MVIL, I am requesting that Woodlawn Capital Ltd provide for the benefit of IPBC, all details of the transactions that Woodlawn Capital Ltd has made in respect of the K96,479,986.00 that MVIL had been deposited into Woodlawn Capital Ltd's account on the date of inception. In addition, it would also be appropriate if these details contain all investment management agreement between MVIL and Woodlawn Capital Ltd or any other documentation relating to the [Mandate]; Investment Report to 31 December 2010 and any returns received on the underlying investments and the degree of leverage to end of April 2011. Please note that we require full disclosure of all these activities by close of business tomorrow, 4th of May 2011." 120This letter was written almost two years after MVIL and Woodlawn had executed the First IMA and a year after MVIL and Woodlawn executed the Second IMA and the AMA. Mr Blake did not assert, in this letter, that ministerial approval had not been obtained. On the contrary, he recited that IPBC "has been given the legal mandate to approve" transactions such as the IMAs and the AMA and demanded "details of the transactions" that Woodlawn had made in respect of the Sum. 121IPBC would only have an interest in demanding these "details" if it had exercised that "legal mandate". It appears to me improbable in the extreme that Mr Blake would have expressed himself this way if either he (or perhaps his predecessor) had not recommended that ministerial approval be given to the relevant transactions. 122Thus, Mr Blake's letter suggests, strongly, in my opinion, that ministerial approval was given. 123It seems likely that Mr Blake was well aware of the requirements of s 46B. A minute of a meeting of the board of directors of MVIL held on 20 August 2009 (shortly after execution of the First IMA) recorded that: "With regard to the Equity Monetisation Contract, the Managing Director advised that he had met with Glen [sic] Blake of IPBC regarding the ratifying of the EMC. The Managing Director informed the Board that Glen [sic] Blake had informed him that he had accepted the commercial nature of the transaction and that the directors were exercising their fiduciary responsibilities to protect the Company's financial position but expressed concern at the need for compliance with approval requirements...". 124The Equity Monetisation Contract, or EMC, referred to in this minute is the transaction pursuant to which MVIL borrowed the Sum entrusted to Woodlawn (see [10] above). Evidently, the IPBC had to "ratify" the EMC and Mr Blake was closely connected to that process. It seems unlikely in the extreme that, in those circumstances, he was not aware of the requirements of s 46B. 125As Woodlawn point out, there is nothing in s 46B which requires the recommendation of IPBC's managing director, or the approval of the Minister, to be in writing. MVIL submitted that it was improbable that there was an oral recommendation and approval, of which there is no written record, let alone that such oral recommendations and approvals occurred twice (for the First, and then the Second IMA). That may be so. But I am left in a position where I am simply unable reach a conclusion either way. 126Certainly, in the face of Mr Blake's letter, and absent any other evidence on the topic, particularly from Mr Blake himself or his predecessor Mr Iangalio (see [86] above), I am not prepared to conclude that approval was not given. 127In my opinion, MVIL has not shown, on the balance of probabilities, that ministerial approval was not obtained. For that reason alone, I do not accept MVIL's contention that it lacked power to enter into the relevant agreements. Is MVIL estopped from denying it had power to enter the First and Second IMAs, the AMA and the Trust Deed? 128In final submissions, Mr Finch accepted that: (a)at all material times it represented to Woodlawn that it did have, or would have, the power to enter into the IMAs and the AMA and that each of those documents would be or was valid and binding; (b)at no time did it inform Woodlawn that s 46B approval was required for the IMAs or the AMA; and (c)Woodlawn would have acted differently had it been told of the need to obtain s 46B approval. 129Both Mr Breen and Mr McNamara gave evidence, not challenged in cross-examination, and in any event inherently probable, that they assumed that MVIL had all necessary authority to enter into the IMAs and the AMA and would not have caused Woodlawn to enter into the agreements had they known that ministerial approval was outstanding. 130If it is a fact that ministerial approval was not obtained, then, as Woodlawn has submitted, MVIL entered into each of the agreements and enjoyed the services provided by Woodlawn well knowing it did not have the requisite ministerial approval. 131In those circumstances, Woodlawn contends for an estoppel by encouragement or expectation of the kind referred to by Brennan J in Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; 164 CLR 387 at 428-29. 132Such an estoppel will arise where: (a)one party (here Woodlawn) assumed or expected that a particular legal relationship would exist with another party (here MVIL) and that other party would not be free to withdraw from that relationship; (d)the second party induced the first to adopt the assumption or expectation; (e)the first party acted, or abstained from acting, in reliance on the assumption or expectation; (f)the other party knew or intended that the first party do so; (g)the first party's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (h)the second party has failed to avoid that detriment. 133In my opinion, each of those elements is present in this case. 134Woodlawn has assumed, or expected, that MVIL had obtained all necessary approvals and that it was entering into valid and binding contracts with MVIL. MVIL has induced Woodlawn to adopt that assumption or expectation (by not informing Woodlawn that any necessary consent was outstanding). Woodlawn has acted in reliance on that assumption or expectation (by rendering services under the agreements which it would not have done had it been informed that it would not be paid for those services in accordance with the terms of the agreements). MVIL knew or intended that Woodlawn would so act. Woodlawn has suffered or will suffer detriment if the assumption or expectation is not fulfilled. MVIL has failed to avoid that detriment. 135MVIL raises two points in response to this submission. 136First it submitted that Woodlawn has not suffered detriment because it is entitled to a quantum meruit if the IMAs and AMA are unenforceable or void and will therefore be paid reasonable remuneration for the work performed. 137In my opinion, there are two answers to this submission. First, the fact that Woodlawn would have to resort to a quantum meruit if, as is necessary to assume for purpose of dealing with this submission, the IMAs and AMA are ineffective, and void ab initio, is itself a detriment. MVIL represented that it had power to enter into the agreements and that they were valid and binding. In that event, Woodlawn would be entitled to fees in accordance with its contractual entitlements. That may well be more than such amount as Woodlawn is entitled to under a quantum meruit. Indeed that is precisely MVIL's contention; MVIL contends that Woodlawn's fees are excessive. Further, Woodlawn would have to go to the trouble and expense of establishing the factual basis of a quantum meruit. 138Second, and more fundamentally, the detriment that Woodlawn has suffered as a result of its reliance on the representation made by MVIL is entering into the agreements in the first place. The unchallenged evidence of Mr McNamara and Mr Breen is that, but for the representation, they would not have caused Woodlawn to enter the agreements. That, in my opinion, is a sufficient detriment. Woodlawn has entered the agreements, incurred operating expenses and carried out work for which it will receive either nothing if the agreements are void and Woodlawn is obliged to repay the fee it has been paid, or such amount as is recoverable on a quantum meruit (in which event, on MVIL's own case, Woodlawn would recover less, indeed far less than its contractual entitlements). 139MVIL also contends that an estoppel cannot run in the face of the statutory proscription in s 46B of the IPBC Act. 140The general principles are summarised in Young, Croft and Smith, On Equity, (2009, Lawbook Co) at [12.130]: "Generally speaking, the operation of statute cannot be negated or constricted by estoppel. This means that, ordinarily, it is not possible for an estoppel to give validity to a transaction or state of affairs rendered invalid by statute. However, the application of this rule is premised on the statute conferring a public right or being otherwise in the public interest, and the principle that 'an individual cannot waive a matter in which the public have an interest', Graham v Ingleby (1848) 1 Ex 651 at 657; 154 ER 277 at 279; cited in Commonwealth v Verwayen (1990) 170 CLR 394 at 486)". (citations otherwise omitted) 141As I have said (at [94] above), the IMAs and the AMA are governed by the law of NSW. I very much doubt that the doctrine described the preceding paragraph has any application in relation to foreign statutes such as the IPBC Act. 142In any event, the learned authors continue: "If the authority is entering into a contract, transferring property or otherwise conducting itself in dealings that would ordinarily be governed by private law, the authority is said to be acting in a 'proprietary', 'private' or 'operational' capacity and an estoppel may arise." 143The authority cited from the latter proposition is Gummow J in Minister for Immigration and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 at 214 where his Honour said that where a public body enters into contracts it will, "in general, be subject to the ordinary private law rules dealing with contract, tort and property". 144As Dr Seddon states in Government Contracts: Federal, State and Local, (5th ed, 2013, The Federation Press) at [5.25]: "There is no reason why estoppel should not be argued against a government or government instrumentality when it engages in ordinary commercial or other conduct." (citing Australian Crime Commission v Gray [2003] NSWCA 318; Commonwealth v Verwayen (1990) 170 CLR 394; Metropolitan Transit Authority v Waverley Transit Pty Ltd [1991] 1 VR 181; Attorney-General (NSW) v Quin (1990) 170 CLR 1 at 18 (Mason CJ); Laker Airways Ltd v Dept of Trade [1977] QB 643 at 707 (Lord Denning MR); Plimmer v City of Wellington Corp (1884) 9 App Cas 699; Attorney-General v Collom [1916] 2 KB 193 at 204) 145Furthermore, in Keboki Business Group Inc and Morobe Provinseal Gavman v Papua New Guinea [1985] PNGLR 369 it was found that the government could not argue it was not bound to a contract due to irregularities in the delegation of authority. Pratt J noted, in obiter, the comments of Lord Denning in Wells v Minister of Housing and Local Government [1967] 2 All ER 1041 at 1044: "[A] public authority cannot be stopped from doing its...duty, but I do think it can be estopped from relying on technicalities." 146In this case my opinion is that MVIL was acting in a "proprietary" or "private" or "operational" capacity. It entered into the IMAs and the AMA with Woodlawn as part of its commercial operations. Thus, in my opinion, it is subject to the operation of "ordinary private laws" which, in this case, includes estoppel. Conclusion as to s 46B issues 147For those reasons, my conclusions as to the s 46B issues are as set out at [26] above; namely that the FCAL Act is not engaged, and that in any event MVIL has not established that ministerial approval was not given. Alternatively, MVIL is estopped from contending that ministerial approval was not given. Termination of the agreements 148On 17 November 2011, MVIL sent a letter to Woodlawn headed: "Repatriation of MVIL Funds under Management and Termination of Investment Mandate [sic] Agreement". 149The letter was written by Mr Moses Koiri, the Acting Chief Executive Officer of MVIL and stated: "I advise the new Board of Directors appointed by the shareholder of MVIL, the Independent Public Business Corporation...met on 12 November 2011 and resolved that the funds under management by your firm be repatriated within 14 days of receipt of this letter. The funds should be transferred to the MVIL Bank Account [details of which were provided]. As this will also bring the Investment Mandate [sic] Agreement to an end, I would ask you to advise if there are any outstanding fees to be settled so this matter can be amicably finalized [sic]." 150The letter did not give any reason for the termination of the "Investment Mandate Agreement". MVIL now asserts an entitlement to rescind the IMAs and AMA under cl 8.4 by reason of an Event of Default and pursuant to s 925A of the Act in the circumstances set out below. 151The letter referred to "the" "Investment Mandate Agreement". Later correspondence shows that Mr Koiri was only aware of the First IMA, and not of the Second IMA nor, apparently, the AMA. Nonetheless, Woodlawn does not dispute that the letter was effective to terminate the Second IMA. Woodlawn does dispute that the letter was effective to terminate the AMA. 152Woodlawn replied on 29 November 2011. In that letter Mr Breen wrote that: "Woodlawn currently has two agreements in place with MVIL; ▪ Investment Management Agreement, with a term that concludes on 27 July 2016; and ▪ Asset Management Agreement, with a term that concludes on 27 July 2016 (together the Agreements). For present purposes, each Agreement is substantially the same in the way it deals with termination and the consequences of termination. We have assumed that it is your intention to terminate both Agreements." 153Woodlawn then made various assertions about the formal requirements for termination (none of which are now relevant) and stated: "Once we have received the completed termination notice and redemption request and all additional documentation detailed above, we will redeem the balance of funds, net outstanding fees (see below), to the designated bank account(s) within 28 days as is detailed in the terms of the Agreements". 154Mr Breen then estimated the outstanding Investment Management Fee and Asset Management Fee under the IMA as being $A5,981,672 and $A10,554,456 (excluding GST) respectively and the fees due under the AMA as $A2,278,964 (including GST). 155MVIL responded on 6 January 2012 with a further letter signed by Mr Koiri. That letter made clear Mr Koiri's ignorance of the Second IMA when he wrote: "In the second paragraph of your letter you say that the term of Woodlawn's investment agreements with MVIL conclude on 27 July 2016. That is wrong. The term of the agreement, described in clause 8.1 as the Initial Term, ended on 22 July 2011, two years after the agreement was signed." 156Mr Koiri's letter of 6 January 2012 continued by asserting that "there are no termination fees payable" and demanding that "the total sums in MVIL's investments with Woodlawn are to be transferred, without any deduction, to MVIL's bank account...". 157On 13 February 2013, MVIL's solicitors wrote a letter which referred, in terms, to the Second IMA and the AMA. It is common ground that, on any view, this letter had the effect of terminating the AMA. 158In these circumstances, a number of issues arise concerning termination. The first is the proper construction of cll 8.2, 8.3 and 8.4 of the Second IMA and the AMA. The issue of construction is whether a termination under cl 8.4 for cause (that is, relying on an Event of Default), as opposed to a termination under cl 8.2 (an "Early Termination") prevents Woodlawn from claiming fees beyond the termination date. The second issue is whether the effect of MVIL's letter of 17 November 2011 was to terminate the AMA, as well as the IMAs. The third is whether the operation of the doctrine in Shepherd v Felt & Textiles of Australia Limited (1931) 45 CLR 359 has the effect that, assuming the existence of an Event of Default on 17 November 2011, the absence of reference to it in MVIL's letter prevents MVIL from characterising the termination as an Event of Default termination under cl 8.4, as opposed to an Early Termination under cl 8.2. The proper construction of cll 8.2, 8.3 and 8.4 159Clauses 8.2 and 8.3 deal with Early Termination. Clause 8.2 gives MVIL a right to terminate by giving not less than 28 business days' notice. Although cl 8.2 appears only to give MVIL a "right to terminate", the last sentence of cl 8.2 states that "neither party may invoke termination without reasonable cause". Clause 8.3 provides that if MVIL terminates pursuant to cl 8.2 then MVIL must pay Woodlawn not only "any outstanding fees payable...up to the termination date" but also investment management, administration and foreign exchange hedging fees (but not a performance fee) "up until expiry of the Initial Term". 160Clause 8.4 provides for termination on the occurrence of an Event of Default but is silent as to the fees that are payable to Woodlawn in that event. 161MVIL accepted that, upon termination by MVIL under cl 8.2 or 8.4, Woodlawn would be entitled to retain fees already paid by MVIL to it, as any such termination would not be a termination ab initio. In my opinion, the concession is well made. I would go further and hold that, upon a termination by MVIL under either cl 8.2 or 8.4, Woodlawn would be entitled to retain fees payable to it up to the date of termination. This conclusion is compelled, in my opinion, by the provision in cl 8.5(b) that termination of the IMAs or AMA did not affect any claim by Woodlawn for "accrued fees". 162The issue that divided the parties was whether, upon a termination under cl 8.4, Woodlawn would also be entitled to its investment management, administration and foreign exchange hedging fees up to the expiry of the Initial Term (as is the case under an "Earlier termination" under cll 8.2 and 8.3). 163The matter is, of course, to be determined objectively by reference to what a reasonable person would have understood the terms to mean; see for example, most recently Newey v Westpac Banking Corporation [2014] NSWCA 319 at [84] per Gleeson JA (with whose conclusions Basten and Meagher JJA agreed) citing the familiar cases of Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40]. 164The most recent statement by the High Court on the question is in Electricity Generation Corp v Woodside Energy Ltd [2014] HCA 7; 88 ALJR 44 where French CJ, Hayne, Crennan, Kiefel JJ said at [35]: "...this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'." (citations omitted) 165Clause 8.3 provided, in terms, that if MVlL effected an Early Termination (that is, one with "reasonable cause" but not arising out of an Event of Default by Woodlawn) then Woodlawn was not only entitled to "outstanding fees", but also to investment management, administration and foreign exchange hedging fees, calculated to the expiry of the Initial Term (that is to 27 July 2016). 166However, in dealing with termination for an Event of Default, the parties have made no provision for the payment to Woodlawn of any fees (in the event that it is the party in default) beyond what is provided in cl 8.5(b) for "accrued fees". 167That suggests to me that the parties did not intend that, in those circumstances, Woodlawn would be entitled to anything more. It would be a commercially curious, if not irrational result if Woodlawn could recover its investment management and like fees (all of which are calculated by reference to the value of the Portfolio) to the expiry of the Initial Term in the event that MVIL was entitled to terminate for breach. The result would be that Woodlawn could, with effective impunity, breach its obligations under the agreements secure in the knowledge that, nonetheless, its fees were recoverable as if there had been no breach; and no matter how far in the future may be the expiry of the Initial Term, nor how egregious the breach. I cannot accept that the parties intended this result. The language they have used suggests a contrary conclusion. 168In my opinion, reasonable business people in the position of the parties would understand, from the absence of any such entitlement in cl 8.4, that if MVIL could terminate the IMAs or the AMA because of an Event of Default on the part of Woodlawn, Woodlawn would not be entitled to any fees beyond those "accrued" at the date of termination. 169In my opinion, reasonable business people in the position of the parties would not expect, absent specific provision, that were MVIL entitled to terminate as a result of a default by Woodlawn, Woodlawn would be entitled to investment management and other like fees from termination until 27 July 2016. 170Accordingly, my opinion is that, on the proper construction of the IMAs, if MVIL was entitled to terminate under cl 8.4 by reason of an Event of Default on the part of Woodlawn, Woodlawn has no entitlement to fees beyond those that have "accrued" at termination. The date of termination of the AMA 171MVIL's 17 November 2011 letter did not refer, in terms, to either the IMA or the AMA. Instead it referred to "the Investment Mandate Agreement". 172The question which arises is whether the 17 November 2011 letter should be construed as being a notice by MVIL to terminate all of the agreements then on foot between it and Woodlawn. 173Neither the IMA or the AMA prescribe any "indispensable condition" for the effective exercise of a notice of termination (to adopt the words of Lord Steyn in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749 at 767) other than that the notice be in writing, and if under cl 8.2 be "not less than 28 Business Days". A notice under cl 8.2 could be given "at any time". In fact MVIL's letter of 17 November 2011 demanded "repatriation" of the funds within 14 days. Before me, Woodlawn did not seek to make anything of that aspect of the matter. 174In my opinion, the question of construction of the letter should be approached objectively. As Lord Steyn said in Mannai Investment Co Ltd "the issue is how a reasonable recipient would have understood the notices" and in that regard "the notices must be construed taking into account the relevant objective contextual scene" (at 767); see also Lord Hoffmann at 780 and Lord Clyde at 782. 175In my opinion, a reasonable business person in the position of Woodlawn would have read MVIL's letter of 17 November 2011 as purporting to terminate all of the agreements between them. 176This is precisely how Woodlawn did read the letter. Thus Mr Breen stated in Woodlawn's letter of 29 November 2011 that "[w]e have assumed that it is your intention to terminate both Agreements". Mr Breen gave similar evidence in cross-examination. 177In those circumstances my opinion is that MVIL's letter of 17 November 2011 was effective to terminate both the Second IMA and the AMA. The Shepherd v Felt & Textiles of Australia Ltd point 178As I have said, MVIL's letter of 17 November 2011 did not express any reason for the termination. 179The letter did not assert that Woodlawn was in default. It also enquired as to whether there were "any outstanding fees to be settled so this matter can be amicably finalized [sic]". 180Woodlawn submitted that the letter was a "notice which asserts a right of early termination without any allocation of default" and thus purported to be a notice under cl 8.2 (for "Early Termination) of the IMA, and not under cl 8.4 (for an Event of Default). 181In those circumstances, Mr Kelly submitted: "What MVIL now seeks to do is to not only assert an alternative basis for termination, but one which has the added characteristic that it is of a different type, and it would, if so, take the termination out of the category under which Woodlawn is entitled to its accrued rights, and treat the termination as a termination under cl 8.4. That's not justifiable in terms of the principle in Shepherd v Felt & Textiles. All Shepherd v Felt & Textiles tells us is [that] you can rely upon a reason to justify dismissal [sic; termination], even though you didn't know about it at the time. That's quite a different kettle of fish to one in which you seek to alter accrued rights after the event of termination by now purporting to terminate not only for different reasons but on a different legal basis." 182Woodlawn thus submitted, in effect, that, on its proper construction, MVIL's letter of 17 November 2011 was an Early Termination notice under cl 8.2 of the IMAs and AMA, and not an Event of Default notice under cl 8.4 and that nothing which fell from the High Court in Shepherd v Felt & Textiles permitted MVIL to now rely on the existence of any Event of Default. 183I do not accept this submission. 184First, I see the enquiry in the letter as to "outstanding fees" as being neutral. The reference to "outstanding fees" is as apposite to "accrued fees" (to which Woodlawn is entitled in any event) as it is to investment management and other like fees to the end of the Initial Term (to which Woodlawn is, in my opinion, only entitled in the event of a termination otherwise than for default). 185It is true that in Shepherd v Felt & Textile the Court's primary concern was to refute the argument that a party cannot, after specifying an invalid ground, rely on a valid ground of which it was unaware at the time of termination. Thus, Dixon J (at 378) cited with approval the observations of Greer J in Taylor v Oakes, Roncoroni & Co [1922] All ER 866 at 869: "It is a long established rule of law that a contracting party, who, after he has become entitled to refuse performance of his contractual obligations, gives a wrong reason for his refusal, does not thereby deprive himself of a justification which in fact existed, whether he was aware of it or not". 186However, other members of the Court expressed the principle more broadly. Thus Rich J said (at 371): "The question is whether the defendant was entitled to do what it did, not whether the reason why it exercised the rights it in fact had was a good or bad one". And Starke J (at 373): "If there were, in fact, any circumstances in existence at the time of the termination of the agreement which could have justified the respondent in so terminating it, then it may justify the termination by subsequent proof of those circumstances". (citations omitted) 187Here, if there was an Event of Default it would be open to MVIL to terminate under cl 8.2 of the IMAs or AMA (Early Termination for "reasonable cause") or, under cl 8.4. 188However, as I have said, neither clause prescribes any condition to be satisfied for the exercise of the notice of, apart from the requirement in cl 8.2 that not less than 28 business days' notice be given. As I have said, Woodlawn did not seek to make anything of the fact that MVIL's letter of 17 November 2011 sought repatriation of the funds within 14 days, rather than 28 days. Indeed, if any suggestion of election could arise from MVIL's demand for repatriation of the funds in 14, rather than 28 days, it is that it was making demand under cl 8.4 (which specifies no time limit), rather than cl 8.2. 189Such misapprehensions as the author of the letter may have had are, in my opinion, not relevant to the question of what legal consequences flow from the sending of the letter. MVIL is now entitled to rely upon whatever ground was available to it to terminate the agreements, including such Event of Default of Woodlawn as may have existed on 17 November 2011 (whether or not known to the author of the letter, or to MVIL as a corporation). 190If, in fact, Woodlawn was in default under the IMAs or the AMA on 17 November 2011, MVIL was entitled, in my opinion, to such remedy as was available to it under the IMAs and AMA arising from such default. That is, in that event, MVIL was entitled to have terminated under cl 8.4 and is to be taken to have done so. Commingling of funds 191The evidence revealed two circumstances in which funds held by Woodlawn on trust for MVIL were commingled with Woodlawn's own funds. 192The first was on 5 May 2011, on which date Woodlawn issued an invoice to MVIL for $150,000 "Management Fees to 31/12/10". 193On the same day, by error, Woodlawn withdrew $1,500,000 (rather than $150,000) from MVIL's account and transferred that sum to its own account. 194On 28 June 2011, Woodlawn returned the difference, $1,350,000, to MVIL's account with the narration "Rtn 5 May Difference 28-Jun". 195The second was on 8 August 2011, when Woodlawn withdrew $32,135,206.14 from MVIL's account. The sum was paid into Woodlawn's account with Suncorp Metway Limited. On the same day, $5,000,000 of that sum was transferred to another MVIL account. The next day, 9 August 2011, a further $5,000,000 was transferred to another MVIL account. The balance remained in the Woodlawn account and was not returned to MVIL's account until 15 September 2011 (as to $21,790,000) and 19 September 2011 (as to $219,708.70). 196Mr McNamara said that these events were "caused by banking errors and were promptly corrected by Woodlawn". 197Woodlawn accepted that there was no evidence as to whether the erroneous payment of $1,500,000 instead of $150,000 on 5 May 2011 was a "banking error" caused by Woodlawn or by Woodlawn's bank. 198As to the payment on 8 August 2011, Woodlawn submitted that the evidence showed that the error was caused by its bank, Suncorp, and not by it. 199Mr Breen said in cross-examination that: "The $5 million was the result of a foreign exchange transaction. It did not leave the account. It was a transaction where the Kina was transacted into Australian Dollars...we had discovered that the balance of the funds had been put into an incorrect account." 200Woodlawn also relied upon the transcript of a telephone conversation between Mr Breen and a Suncorp representative, made on 8 August 2011, in the following terms: Suncorp representative: "So after I take the equivalent of 5 thousand, eh 5 million sorry out of it, just I'm just gonna put the rest back on term deposit for that original date which is the 19th August. Mr Breen: Yep, that's fine yep." 201I find this evidence to be equivocal. First it speaks only of one amount of $5,000,000, whereas two amounts of $5,000,000 were transferred on 8 and 9 August 2011. Second, I do not see that this evidence points to the conclusion that the relevant error was Suncorp's, rather than Woodlawn's. 202As MVIL submitted, any explanation for the transfers was within Woodlawn's knowledge and ability to prove. I accept MVIL's submission that Woodlawn has not proved what occurred. Either Mr McNamara or Mr Breen could have given evidence as to precisely how the errors occurred. I am not prepared to draw an inference in Woodlawn's favour in those circumstances: see Commercial Union Insurance Co of Australia Pty Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419 per Handley JA. 203However these "errors" occurred, their result was that funds that Woodlawn was holding in trust for MVIL were mixed with its own funds. It is a fundamental duty of a trustee to not to mix trust funds with its own funds (see J D Heydon and M J Leeming Jacobs' Law of Trusts in Australia (7th ed, 2006, LexisNexis Butterworths) at [1720] and Associated Alloys Pty Limited v ACN 001452106 Pty Limited (in liq) (2000) 202 CLR 588 at [34] per Gaudron, McHugh, Gummow and Hayne JJ). 204In those circumstances, MVIL submitted that Woodlawn had acted in breach of an obligation implicit in the IMA and had thus committed an Event of Default for the purpose of cl 8.4(b) of the various agreements. 205I do not accept that submission as, in my opinion, the commingling of funds, however it occurred, did not amount to an Event of Default within the meaning of cl 8.4(b) of the IMAs. 206An Event of Default occurs under that clause if, relevantly, Woodlawn: "...fails to perform or observe any other undertaking, obligation or agreement express or implied in this deed and that failure is material in the context of this deed and is not, in the opinion of Non-defaulting Party, remediable." 207Assuming that the commingling I have described amounts to a failure by Woodlawn to observe an obligation implied in the IMA, and assuming it to be "material", it was plainly "remediable" and has been remedied. 208It is true that the exception in cl 8.4(b) only arises if the relevant failure is "in the opinion of" (in this case, MVIL) "remediable". 209It is also true that cl 8.4(c) contemplates the possibility that the non-defaulting party becoming aware of a potentially "remediable" failure and provides for the defaulting party to be given an opportunity to remedy same (see [57] above). That did not arise in this case because Woodlawn became aware of the problems and remedied them without notifying MVIL. MVIL was thus deprived of the opportunity of forming any opinion as to whether the failures could be remedied. 210However, even if it had the opportunity, MVIL could not possibly have come to the view that these failures were not "remediable". Reasonable business people in the position of the parties would understand, in my opinion, that the non-defaulting party referred to in 8.4(b) could only form an opinion that a particular failure was not remediable if it approached the question "in good faith" and "upon real and genuine consideration" (to adopt language used in a similar, albeit not identical, context by McGarvie J in Karger v Paul [1984] VR 161 at [164]) Further, in my opinion, reasonable business people in the position of the parties would understand the exception in cl 8.4(b) to mean that a failure would only be otherwise than "remediable" if a reasonable person in the position of the "Non-defaulting Party" would come to that conclusion. 211For those reasons, my opinion is that the commingling of funds did not constitute an Event of Default within cl 8.4(b). The Proper construction of the Mandate 212Clause 3.1 of the IMAs provided that Woodlawn's duties included: (1)executing transactions to effect the investment of the Portfolio in a manner which: "...must, at all times, be consistent with...the [Mandate]"; and (2)exercising "care and vigilance" in carrying out "its functions, powers and duties under this deed". 213The Mandate stated, in cl 1(b), that it "sets out the strategies that [Woodlawn] will use as a guide in pursuit of the Investment Aims". 214Clause 2 of the Mandate set out the specified "Investment Aims" ("the Aims") and cl 3 "The Investment Strategy" ("the Strategy"). 215The Aims were, relevantly, to: (a)receive a regular income stream from investments with a yield greater than the S&P/ASX200 Index; (b)benefit from capital growth; and (c)benefit from a lower volatility than the S&P/ASX200 Index. 216It was common ground that there was no inconsistency between these aims (especially (a) and (c)) and that techniques could be adopted to achieve both an income stream greater than the ASX200 Index but with a volatility lower than that index. 217MVIL accepted that the Aims were "aspirational" and did not constitute a promise that the "aims" would be achieved. Indeed, as MVIL accepted, cl 5 of the IMA stated, in terms, that Woodlawn did not "warrant, represent or guarantee" that any of the "investment objectives" (which I read as being synonymous with the Aims) would be achieved (see [55] above). 218The debate before me focused on the contractual significance of the Strategy. The components of the Strategy that are central to the dispute between the parties are those concerning the use of derivatives and the implementation of risk management. 219So far as concerns derivatives, the Mandate stated: "The strategy aims to build a core of long term value positions creating the potential for long term capital growth. These are overlaid with related derivatives; to both hedge market volatility, and enhance returns. Additionally, related and non related special situations and derivatives are utilized to further enhance Portfolio returns whilst aiming to further decrease volatility." 220So far as concerns "risk management" the Mandate stated: "Achieving the objectives of capital growth, with enhanced income, and incremental wealth creation through consistent returns, whilst preserving capital with strict risk management, are the cornerstones of the strategy. Strict management controls and systems ensure all investments are subject to the vigorous risk management ideology that minimises and avoids unnecessary risk." 221The Mandate stated that the "strategies" were ones that Woodlawn would use "as a guide in pursuit of the Investment Aims". 222The critical question is whether the parties intended by the recitation of these strategic aims, and the statement as to how derivatives were to be employed, to provide limitations on Woodlawn's power to invest or whether they provided no more than a "guide" (the word used in cl 1(b)) from which Woodlawn was free to depart, at its discretion. 223The question is what a reasonable business person would have understood these words to mean. What must be considered is the language used, the mutually known surrounding circumstances and the commercial objects to be secured by the document in question (see [163] & [164] above). 224In my opinion, reasonable business people in the position of the parties would understand from the language used in the Mandate that the parties intended the terms of the Mandate to constitute a constraint on the manner in which Woodlawn would manage MVIL's Portfolio. 225Thus the parties agreed in cl 3 of the IMA that Woodlawn had a "duty" to make investments from the Portfolio which, although at its discretion, "must" be consistent with the Mandate. They also agreed in cl 3 of the IMA that Woodlawn had a "duty" to "exercise care and vigilance" in doing so. Although, in the Mandate itself, the parties described the strategies as a "guide", they also stated that the strategies were a guide that Woodlawn "will" (not "might" or "may") use to achieve the "Investment Aims". 226The fact that the parties described the document as a "Mandate" suggests it was intended by them to be an authority within the terms of which Woodlawn was to act. If Woodlawn's discretion was to be without any restraint, it is hard to see why the parties would have bothered to agree to a "Mandate" at all. 227Further, the fact Woodlawn stated in the Mandate that "strict risk management" was one of the "cornerstones of the strategy" and that "strict management controls and systems" ensured that investments were subject to a "vigorous risk management ideology" that "minimises and avoids unnecessary risk" suggests that the parties did not intend that Woodlawn's discretion was entirely at large. 228The surrounding circumstances known to the parties included that MVIL had given Woodlawn authority to invest on its behalf a very significant amount of public funds. The commercial object of the arrangement was that Woodlawn would manage the Portfolio in a way that benefited MVIL. It is unlikely that, in those circumstances, the parties intended that Woodlawn's investment discretion be entirely uncontained. 229In those circumstances, my opinion is that a reasonable business person in the position of the parties would have understood the language used in the IMA and the Mandate to provide limitations on the manner in which Woodlawn would deal with MVIL's funds. 230The precise nature of those limitations (their "metes and bounds", to adopt an expression used on MVIL's behalf in submissions) is, however, not entirely clear. As was submitted on behalf of MVIL "to lawyers' eyes, parts of the [Mandate] may appear to be ill drafted". Mr McNamara drafted the Mandate. The language chosen is his, and includes nomenclature with which, I would infer, he was more familiar than those at MVIL. To the extent that there is any ambiguity in the Mandate so far as concerns Woodlawn's powers and duties, the document should be construed contra proferentum (for example, Lewison & Hughes, The Interpretation of Contracts in Australia, (2012, Lawbook Co) at [7.08]). 231The Strategy was stated to have as its aim the building of "a core of long term value positions" to create "the potential for long term growth". Those "long term value positions" were to be "overlaid" with "related derivatives, to both hedge market volatility, and enhance returns". Similarly, "related and non related" derivatives (as well as "special situations") were to be utilised to "further enhance" Portfolio returns "whilst aiming to further decease volatility" (emphasis added). 232There is an aspirational flavour to these statements, which make it hard to see what precise obligations the parties intended Woodlawn to have. 233Ultimately, MVIL submitted that this language set out the objective purpose that Woodlawn was obliged to adopt when using derivatives. Although I have not found the matter easy of resolution, I have come to the conclusion that I should accept this submission. 234Thus, in my opinion, reasonable business people in the position of the parties would understand the words in the Strategy to constrain Woodlawn's discretion, so far as concerns derivatives, so that it could only acquire derivatives if its objective purpose in doing so was to achieve both of the elements set forth in the strategy, namely the enhancement of returns and hedging, or decreasing of market volatility. That is, the parties intended that Woodlawn's discretion be constrained so that derivatives could only be acquired by Woodlawn with the objective of achieving both of these outcomes. 235In my opinion, reasonable business people in the position of the parties would not have understood the words used by MVIL and Woodlawn to permit Woodlawn to exercise its investment discretion to acquire derivatives which, taken as a whole, had as their object only to enhance returns. 236For those reasons, my conclusion is that it was a term of the Mandate, and thus the IMA, that Woodlawn was not entitled to invest in derivatives unless it did so with the dual objects to which I have referred. It follows that Woodlawn would act in breach of the Mandate if it invested in derivatives with the object only of achieving one of those goals. 237I shall refer to this term of the Mandate as the "Dual Object Term". 238In order to comply with the Dual Object Term, it was necessary that Woodlawn acquire derivatives in circumstance where its objective purpose was as I have stated. Compliance with that term did not, however, require that such purpose actually be achieved. 239MVIL's case is that, during July and August 2011, Woodlawn acquired derivatives with the object only of enhancing portfolio returns, and that such derivatives did not have effect as a hedge against volatility and were not acquired by Woodlawn with any such object. Such derivatives were bound to cause loss if (as happened) the market fell. In those circumstances MVIL contends that Woodlawn acted in breach of the Dual Object Term and that it has suffered damage as a consequence. 240So far as "risk management" is concerned, my opinion is that a reasonable business person in the position of the parties would have understood the words set out at [64] and [220] above as requiring Woodlawn to have at all times, some "systems" or "controls" to manage the risk of loss to MVIL's Portfolio. I do not see this as having any practical consequences in the case beyond those arising from the Dual Object Term, although, as I have said, the language used by the parties as to "risk management" and the like, points towards an intention by the parties that there be a constraint on Woodlawn's investment discretion. Woodlawn's trading strategy - was there a breach of the Dual Object Term? 241MVIL adduced expert evidence from Mr Robert Risk, a financial assets trader in Australia specialising in derivative trading and financial investment. 242Mr Risk's reports dealt with what he described as the "First Period" from the date of the First IMA (22 July 2009 to 30 June 2011) and the "Second Period" (from 1 July 2011 to 30 September 2011; that is the third quarter of 2011). 243Although MVIL's pleaded case, and its case in its opening written submissions ranged wider, as developed in the course of cross-examination of Mr Breen and Mr McNamara, and as articulated in closing submissions, MVIL's case focused on the Second Period and, in particular, on the period from 1 July 2011 to 15 August 2011. 244Before dealing with that period, I shall turn briefly to the performance of MVIL's Portfolio in the period leading up to 30 June 2011. (a) Performance of the Portfolio to 30 June 2011 245It will be recalled that the amount initially transferred by MVIL to Woodlawn (the Sum) was K96,479,986. 246In its Quarterly Report for September 2010 Woodlawn reported to MVIL that the value of the Portfolio at 30 September 2010 was K100,518,108, an increase of 1.83 per cent over the preceding quarter and 4.19 per cent from inception. 247Woodlawn described the "Asset Classification" as "Defensive" and reported: "In our first year we have outperformed the Australian Share market (ASX200) which we use as our benchmark. The MVIL Portfolio had a gain of 4.19% versus an ASX200 decline of 0.48%...[o]ur incremental growth and low volatility of returns are two key performance factors we strive for. The Portfolio continues its defensive basis...[l]iquidity is the key to the strategy and all positions are liquid; tradeable on regulated global exchanges." 248On 31 March 2011, Woodlawn reported that MVIL's Portfolio was valued at K102,752,980 and that of that figure, K93,855,217 (some 94 per cent) was "Fixed Interest, Cash and Collateral". 249In its Quarterly Report for June 2011 Woodlawn reported to MVIL that the value of the Portfolio at 30 June 2011 was K96,865,140, a decrease of 3.35 per cent over the quarter and an increase of 0.04 per cent since inception. 250The Quarterly Report did not nominate "Asset Classification" but Woodlawn reported that: "...the Portfolio has continually progressed and has incrementally grown against the backdrop of volatile global investment markets. The Multi Strategy approach remains in place with a focus on highly liquid investments with the aim of generating a return irrespective of the movements of global investment markets." (b) A change of strategy 251In or about late June 2011, Woodlawn adopted a change of strategy. 252Mr Risk described that change as follows: "...Woodlawn's trading of the Fund leading into the Second Period exposed MVIL to substantial risk. Woodlawn's trading in this Second Period was dominated by Leveraging the size of the Fund's Exposure to the market through the use of Derivatives. In particular, Woodlawn caused MVIL to have large negative Notional Exposure to a falling market through: (a) The purchase of...Future Contracts; (b) The selling of...Index Put Options; and (c) Equities in predominantly resource focused companies and the selling of OTM Equity Put Options". 253Mr McNamara caused Woodlawn to position the fund at the beginning of July 2011 with a net long notional exposure to equity markets of approximately $A38 million made up of the following positions: "● Long APU1 (ASX Sept Future Contracts) of $24.8mn AUD; ● Short ESU1 (S&P500 Sept Future Contracts) of $1.08mn AUD (using AUD/USD FX of 1.0712 at 30 June); ● Short S&P/ASX200 Sept Index Puts, long Notional Exposure to market of $12mn AUD; and ● Short S&P500 Index Puts, long Notional Exposure to the market of $4.46m AUD." 254On the last trading day in July 2011, Mr McNamara had caused MVIL's exposure to the market to be as follows: "● APU1 ( ASX200 Sept Future Contracts) long 344 Future Contracts or $38.2mn AUD; ● ESU1 (S&P500 Sept Future Contracts) short 17 Future Contracts -$0.995mn AUD; ● Short S&P/ASX200 Sept and Dec Index Puts, notional long Exposure to market of $50.7mn AUD; ● Long S&P500 Index Puts, positive Notional Exposure to market falls of $13.3mn AUD; ●HSIU11 (HIS Sept Future Contracts) short 8 Future Contracts or $1mn AUD; and ● Long HSI Index Puts, Notional Exposure to the market of $7.9mn AUD." 255This combination of purchased futures contracts and sold put options exposed MVIL to considerable gains if the market rose, but considerable losses if the market fell. 256Between the close of the market on 1 August 2011 to the close of market on 8 August 2011, the Australian stock market dropped 11.34 per cent. 257Mr Risk said that this was the result of global markets reacting to "fear of contagion in the European sovereign debt crisis", concerns over "debt ceiling issues" in the United States, and Standard & Poor's downgrading of the United States' credit rating from AAA to AA+ at the close of business on Friday 5 August 2011. 258Throughout this period, Mr McNamara remained confident that the market would rally. 259Thus, in his affidavit evidence Mr McNamara identified the investments at [253] and [254] as being those "principally responsible for the September quarter losses" and said: "I was the officer of Woodlawn who was responsible for assuming those positions. I did so because I had confidence in the strength of the Australian economy and its markets at a time of global weakness. If I had had the benefit of hindsight at the time, I would have taken reverse positions and been hailed as a hero. In the events which happened, my confidence in the strength of the Australian economy and its markets was not justified and I lost my client money. That unhappy experience comes with the territory." 260 Arising out of that paragraph, Mr McNamara gave the following evidence: "Q. You extract Mr Risk's remark that...these positions created...an exposure to gain if the market rose but exposure to loss if the market fell? A. Yes. Q. That's true? A. Yes. Q. ...it would not matter if the market fell less than the global background markets. You needed to get a gain if the market actually rose, not just to fall as far. Do you see what I am getting at? The statement is clear that you get an exposure to gain if the market rises? A. Yes, I accept that. Q. You don't get a gain if the market falls? A. Not in that particular instance, no. Q. Even if the market falls less than the global [market] that's what we are talking about then? A. Yes. Q. You would still then make a loss. It must be that you took a decision as the officer responsible that in your judgment, taking into account no doubt the survey that you did looking around, that the market would rise otherwise you must have been deliberately exposing the fund to loss? A. I think, yes I accept that. I accept that." 261The detail of Mr McNamara's trading activities is complex. It is not however necessary to recount that detail, as it is clear that, taken as a whole, the derivatives that Mr McNamara caused Woodlawn to acquire on behalf of MVIL in the period from the beginning July 2011 to 15 August 2011 were acquired with the sole object of the enhancement of returns (and then only if the market rose). Mr McNamara did not cause Woodlawn to acquire those derivatives with the object of hedging market volatility. 262In final submissions, I had the following exchange with Mr Kelly: HIS HONOUR: "Do you accept that the derivatives used in July and August, that is purchasing futures and selling put options, only had as their object to enhance returns and not to hedge? MR KELLY: I think objectively one would need to see it that way. That's not to say that subjectively the manager would necessarily agree. I mean, if one looked at a particular contract and it was a put contract for a particular amount in a particular period, objectively it can be said to work this way and not that way and about that there can be no argument." 263In my opinion, it follows from Mr McNamara's evidence that the position I suggested to Mr Kelly was not only correct "objectively"; it was also what Mr McNamara intended. 264Mr McNamara caused Woodlawn to take what MVIL described as a "directional" position which was the same as the shares underlying the derivatives acquired; that is a position that would benefit from a gain in the ASX200 and lose from a fall in the ASX200. 265Mr McNamara agreed that none of the positions outlined above was a hedge or provided protection against market volatility and that he caused Woodlawn to take these positions because of his view about what the market was likely to do. 266Of course, Mr McNamara's objective was that the fund would profit from these positions. But his judgment as to what the market was likely to do turned out to be wrong. In any event, it does not matter whether Mr McNamara's judgment was right or wrong. What is relevant is that he caused Woodlawn to engage in trading which only had the purpose of enhancing returns and not hedging against volatility. 267In its Quarterly Report for September 2011, Woodlawn reported the fund status in terms of Australian dollars, rather than PNG kina. Woodlawn reported that the value of the fund as at 30 September 2011 was $A30,641,320, being a loss of 19.55 per cent for the quarter and a loss of 19.23 per cent since inception. 268As I have said, Mr McNamara accepted that the principal cause of the September 2011 Quarter loss was the acquisition of the derivatives which I have described. Mr McNamara's object or purpose in causing Woodlawn to acquire those derivatives was solely to enhance MVIL's Portfolio's returns. It was no part of McNamara's object or purpose that these derivatives hedge or decrease market volatility; indeed they were incapable of having such an effect. 269The acquisition of these derivatives was thus a breach of the Dual Object Term. Absence of risk management and acting without "care and vigilance" 270Arising from the same matters, MVIL also submitted that Woodlawn had acted in breach of a term of the Mandate said to arise from the provisions as to "risk management" to which I have referred at [64] and [220] above and the contractual duty of "vigilance" to which I have referred at [51] and [212]. 271It follows, in my opinion, from my conclusions as to Woodlawn's breach of the Dual Object Term that it also failed at the relevant time to have in place any "system" or "control" to manage the risk of loss to MVIL's Portfolio and that it acted otherwise than with care and vigilance. However, I do not see this as having any consequences beyond those that flow from the breach of the Dual Object Term. What is the consequence of the breach of the Dual Object Term? 272Three questions arise. First, whether MVIL has proved what loss it has suffered as a result of the breach of the Dual Object Term. Second, whether the effect of cl 5 of the IMAs is that this breach did not constitute an Event of Default for the purpose of cl 8.4 of the IMAs. Third, whether the effect of cl 5 of the IMAs is to release Woodlawn from any other liability it might otherwise have by reason of this breach of the Dual Object Term. Damage 273MVIL accepts that although the measure of damages for breach of contract, breach of trust, breach of fiduciary duty and breach of general law duty is different, the measure of damage in this case will be the same in each of these causes of action. Mr Finch submitted that I could "shortcut the analysis by looking at them all under the heading 'Breach of Contract'". 274The matter for consideration is thus whether MVIL has shown what damage it suffered by reason of Woodlawn acting in breach of the Dual Object Term. That is, what position would MVIL have been in had Woodlawn acquired derivatives in the critical period with the object not only on enhancing returns, but also of hedging against market volatility. 275MVIL also accepted, for the purpose of its submission concerning damages, that: (a)it suffered no compensable loss prior to 30 June 2011; (b)its loss arose from the positions taken by Woodlawn with the derivatives that I have discussed above from the beginning of July to mid-August 2011; (c)the worst of MVIL's loss was suffered in the first two weeks of August 2011 as MVIL's position was "wholly closed by soon after 15 August". 276MVIL submitted that its loss should be assessed over the period from either 30 June or 31 July 2011 (preferably the former) to 31 August or 30 September 2011 (again, preferably the former). 277In its Quarterly Report for the quarter ended September 2011, Woodlawn reported to MVIL that: (a)MVIL's Portfolio had dropped in value by 19.55 per cent over the quarter; (b)the ASX200 index had dropped by 13 per cent over the same period; (c)BHP stock had dropped by 20 per cent over the same period; (d)the Nikkei Index had fallen 11.4 per cent over the same period; and (e)the HangSeng Index had dropped by 21.5 per cent over the same period. 278For the purpose of calculating its claim for damages, MVIL proposed what it described as "the correct alternative universe (that is, had Woodlawn performed the contract, not been negligent etc)". MVIL submitted: "The proper counter factual (that is the contract had been adhered to or not negligent trading etc) is either neutral performance or the ASX200, or somewhere in between. Mr Risk's evidence is that losses should have been avoided or minimised, avoiding the worst of the loss in the first two weeks of August 2011. Taking those parameters the loss is as follows: 30 June 2011 Commencement Date Fund Loss to fund ASX200 ASX200 change ASX200 on fund Loss 30 Jun $38,087,373 4607.966 31 Aug $28,570,312 $9,517,061 4296.548 -6.76% $2,574,706 $6,942,355 30 Sept $30,641,320 $7,446,053 4008.599 -13.01% $4,955,167 $2,490,855 31 July 2011 commencement Date Fund Loss to fund ASX200 ASX200 change ASX200 on fund Loss 31 Jul $35,592,498 4424.646 31 Au $28,570,312 $7,022,186 4296.548 -2.89% $1,030,439 $5,991,747 30 Sept $30,641,320 $4,951,178 4008.599 -9.40% $3,346,742 $1,604,435 279The figures under the heading "Loss to fund" represent the actual loss to the Portfolio from 30 June or 31 July 2011 to 31 August or 30 September 2011. 280The figures under the heading "ASX200 on fund" represent "the loss to the fund if had it fallen by the same percentage as the ASX". 281The figure under the heading "Loss" is the loss to the fund over and above that suffered by the ASX 200. 282MVIL submitted: "Once the correct start and finish dates are selected, on MVIL's analysis the 'Loss to fund' column on the above table marks the high end of the loss recoverable, and the 'Loss' column the low end." 283MVIL accepted that this analysis was subject to the effect of the exclusion of liability clause, which I deal with below. 284This submission invites me to find that, had Woodlawn complied with its contractual obligations during the critical period, that is had it acquired derivatives with the objective purpose of both enhancing returns and also hedging volatility it would have, at best, protected the fund from any loss at all (the "neutral performance" to which MVIL refers) or, at worst, would have caused the fund to suffer a loss no worse than that suffered, overall, in the ASX200. 285I cannot see how, on the evidence before me, I could come to that conclusion. 286The evidence establishes that the first two weeks of August 2011 were, as Woodlawn has submitted, a "turbulent period of world economic history". 287Woodlawn described the situation as follows: "It is common ground that after Standard & Poor's down-graded the credit rating of the United States from AAA to AA+ the previous Friday, what followed, starting with the early opening markets such as Australia and continuing in the manner of a Mexican wave all around the world was a dramatic loss of value on all equity and financial markets during Monday 8 August 2011. It is also common ground that, on the opening of Australian markets, on Tuesday 9 August 2011, the effect of the previous day's events on world markets produced a free fall during the first hour or more in which 5.5% of value was lost - and many investment managers, including Woodlawn, exited on margin calls rather than risk cash - followed by a rebound and the ASX200 finishing the day ahead." 288Somewhat less colourfully, Mr Risk described the situation in the following terms: "114. In June and July of 2011, market sentiment and economic news was very negative with many market participants suggesting that European and indeed global markets would not be able to digest the debt levels that had been accumulated by the respective countries. By the end of June 2011, it was clear that Europe and the US were still struggling to manage the fallout from the Global Financial Crisis. The US had embarked on two rounds of quantitative easing, releasing billions of dollars into the US economy in an attempt to kick start the economy. 115. By June 2011, the second US quantitative easing had finished and there were major concerns that the US was running out of money and as to its inability to stimulate its own economy. Republicans and Democrats were arguing over the US debt ceiling and the Federal Reserve was struggling to come up with a new financial tool to stimulate the economy. Uncertainly and with it, the Volatility of the financial markets, were again on the rise. 116. In Europe the economic climate was more dramatic. By June 2011 Greece was unable to pay its debts, money sent by the EU to bail out the Greek economy a year earlier had been spent and there was no improvement in Greece's economic situation. Greece was asking for another 100 billion Euro's [sic] to pay its debts. There was concern in the market that Greece's failure to meet payment on its debts would lead to default and its expulsion from the Euro zone. Concerns were growing that a Greek exit from the Euro would in turn lead to a domino effect with other EU countries defaulting on their debts and leaving the Euro currency system. It was suggested by some financial commentators that these defaults would have catastrophic economic consequences that could possibly bring down the entire world economy. 117. This was a period of heightened economic concern and volatility. Globally markets struggled to contain the fear as economic news in June 2011 to September 2011 became more negative in nature and market movements mirrored these fears. The S&P/ASX200 dropped 13% during July 2011 to September 2011 and the S&P500 dropped 13.9%. Market participants were generally looking for the best way to lower their risk Exposure as the economic news rapidly became more negative. 118. The Australian market, while not suffering from the same Exposures and debt levels as other economies also felt the effects of the global economic downturn. The funding costs of our major banks were again on the rise across international debt markets. Struggling to borrow money abroad, which was a large source of Australian bank funding, meant interest margins for the banks were squeezed and consequently mortgage rates would remain high for the average Australian." 289In his report, Mr Risk gave this evidence: "[54] In my opinion, to benefit from lower Volatility than the S&P/ASX200 a Portfolio consistent with competent professional practice would need to: (a) Consist of Equities which have historically low Volatility over the long term. Ordinarily this will include Equities on the S&P/ASX50. (b) Be properly diversified. In my experience, one sector (for example the commodities sector) could be exceptionally volatile; while at the same time the financial sector might have considerably lower Volatility. Diversification across the Financial Markets helps limit a Funds exposure to a particular volatile sector. (c) Exclude Speculative Equities. Although Speculative Equities are not defined to a definite list, in my experience Speculative Equities will often include Equities in the commodities, biotech or technology sector. This is illustrated in Appendix E; which shows the ASX200 Small Cap Resource Index Volatility versus the S&P/ASX200 Index Volatility. (d) Utilise Protection Strategies in a timely and cost effective manner. ... [63] The simplest way to protect a Long Position is to: (a) Buy a Put Option; (b) Buy a Put Spread; or (c) Create a Synthetic Short position." 290Mr Risk went to on explain the workings of each of those instruments, in theory. As I set below, in cross-examination, Mr Risk emphasised the virtues of purchasing put options (rather than, as Woodlawn did, selling put options) as a means to hedge loss. However, Mr Risk did not, at any stage in his report, indicate what particular put options (or put spreads, or synthetic short positions) a prudent funds manager could and would have put in place, or had in place, in the first two weeks of August 2011; let alone, as Woodlawn has pointed out, at what cost, and with what precise result. 291In response to my enquiry as to the evidence available (from Mr Risk or otherwise) as to precise steps or strategies Woodlawn should have employed during the critical first two weeks of August 2011 to achieve either a "neutral performance"(that is, no loss to the fund) or a loss no greater than that suffered by the ASX200, MVIL drew attention to the following passages from Mr Risk's report: "[150] In my opinion, Woodlawn's trading strategy was not one of competent or careful Trader during the Second Period especially in light of the negative economic news at that time. The potential was for the market to go down even further than it did, because in my opinion, the market was nearing pressure points similar to during the GFC. With Volatility spiking it was difficult to argue that the Australian market would not become embroiled in an aggressive sell off (as happened through 2008 and early 2009). Yet, Woodlawn positioned its trades entirely for an improbable global share market rally. Consequently, Futures Positions, Equity Options Positions, Index Options Positions and the Equity Positions of the Fund (of mainly commodity and energy names) were all exposed to the falling market. At this time the Fund's actual and leveraged Notional Exposure was very large, exceeding the total value of the Fund. ... [181] Option and Futures Contract positions incurred severe losses during the Second Period. A large majority of these Options and Future Contract were quickly closed out or Margin closed out in the first two weeks of August. Had the ASX200 Future Contracts positions been hedged with OTM Put Options [which Mr Risk described as a put option which had a strike price more than the price of the underlying contract at the time of execution] the majority of losses would not have been incurred. The hedge positions could have been maintained throughout the volatile markets and benefitted from any subsequent moves upward in the financial markets leading to capital growth. ...the use [by Woodlawn] of Derivatives was speculative in nature and not used as a Hedge to manage risk. That strategy is not consistent with building long term value positions or creating a potential for long term capital growth. ... [187] In my opinion Woodlawn failed to undertake its duties with the due care, skill and diligence that is expected in the finance industry of a competent Trader. A competent Trader managing MVIL's Fund should understand risk, and would use skill and care to ensure that risk Exposures created by open positions were minimal through adhering to strict risk management procedures and policies. Woodlawn should have understood the changing dynamics of the financial market throughout the middle of 2011 to ensure that during the Second Period when there was heightened Volatility any Exposure to large negative market moves were removed or at the very least kept to a minimum." (emphasis added) 292This evidence made clear Mr Risk's criticisms of the manner in which Mr McNamara managed MVIL's Portfolio during the September 2011 quarter, but, apart from the passage in Mr Risk's [181] that I have highlighted, Mr Risk does not suggest a particular course that Mr McNamara could have followed which would have yielded either a "neutral" performance or one no worse than that suffered by the ASX200. I understand Mr Risk to mean, in the highlighted passage, that had Mr McNamara arranged for the ASX futures contracts set out at [253] and [254] above to be hedged with "OTM Put Options" then the "majority" of MVIL's losses would not have occurred. But Mr Risk does not specify what put options should, or could have been acquired; or when they should have been acquired; or at what strike price; or when they should have been exercised; or with what likely result. All that Mr Risk says is that, had there been an adoption of a process described in these general terms, "the majority" of loss would not have occurred. 293In cross-examination Mr Risk gave this evidence: Q. "...but in the events which happened in the market indeed markets worldwide, it wouldn't matter which market you were in, in which security, of what type. All of these markets as a result of this calamitous event followed essentially the same path of rapid loss, did they not? ... A. Woodlawn sold put options. If you had put options protecting your portfolio then your decision here would not need to be made because you would be able to absorb that. That would be a partial loss, so as the market fell your performance wouldn't directly correlate with this move in the market. Q. I don't think I've made my question clear enough. It wouldn't matter what financial product you were in, in these market circumstances they are all adversely affected? A. No, that's not correct. If you own put options... Q. Can you identify for me a financial product, for want [of] a better description, that would not have suffered in these circumstances? A. This is what I'm saying. A put option gives you the right to sell or sell cash at a high price if the market was to fall, and if you own put options here you would make money or if you own equity and a put option you would lower your volatility so the performance of your portfolio would not [be] reflected by this move. HIS HONOUR Q. Is that laying off the risk? A. Yes, that's right. So if you owned a $10 million portfolio...of equities you could actually go out and buy a put option on $10 million, and as the market falls that option makes you money and gives you the ability to be able to put the stock. Q. Because you exercise... A. You can exercise it or at the very least it would cushion this loss. MR KELLY Q. That's the same thing as a stop loss order or a hedge. It's just an opposite transaction to provide you with an exit in the event of an adverse movement. That's what it boils down to? A. It does at a future time, that's right. At the very same time it allows you on a day like that where the market has fallen substantially you are not as concerned about the move because you have that option in place. It's like owning house insurance. It protects you at extreme times. Q. It causes you loss between 2 o'clock and 3 o'clock on the same day when you've got an inversion and the market goes in the opposite direction? A. But you're quite happy with that because the percentage of money you've spent to protect your portfolio is very small. So when the market bounces you get your value back on your portfolio. Q. Is this right, what you're talking about is an exercise of judgment? A. Risk management. Q. Judgment when it comes to balances the range of risk in the circumstances in which you are managing the particular portfolio? A. It's a risk management tool. It's about capital preservation. You don't enter these products if you don't have a position on it. If you have money in the bank you don't need to worry about that, but when you start playing in the equities markets, and this is what I do for a job, we have an obligation to our clients that if we're running their money our mandate is very similar to the mandate here where our clients want capital preservation and lower than market volatility. So as such we actively buy put options that protect us in the instance that this would occur. Q. On the other hand, if the market moved in the opposite direction you'd lose on those hedges and put options? A. And those are a very small portion of your return, that's right. That's why we manage this risk through the use of these products. You can pick levels where you can choose as much insurance or as little insurance as you like. Q. According to your managerial judgment? A. According to your mandate, I would suggest." (emphasis added) 294In that evidence, Mr Risk repeated his view that Mr McNamara should have acquired put options, but said that all this would achieve would be to "absorb" or "cushion the loss", "lower your volatility" and that there would be a "partial" loss (see the passages I have emphasised). 295MVIL made the following submissions based on that evidence: "That evidence demonstrates that adopting the strategies [Mr] Risk considered to be consistent with competent practice by using derivatives would have protected MVIL from loss commensurate with the fall in the market. The alternative counter-factual universes are available on the evidence. Neutral performance [that is no loss at all] adopts the use of derivatives as protecting against the loss while not adopting any gain from being able to hold positions through, for example, 8 August. That counter-factual is available on the evidence. The other counter-factual assumes in effect no protective measures other than investing in a basket of securities matching or which was a close proxy for the ASX200 Index. In that sense it is favourable to Woodlawn in allowing for losses which should have been avoided by adopting protective measures [Mr] Risk considers should have been adopted, but otherwise accords with the [Mandate]". 296I do not accept those submissions. 297 First Mr Risk has expressed his opinions in terms of what a "competent trader" would do and with conduct "consistent with competent professional practice" whereas the critical question is what would have occurred had Woodlawn complied with the Dual Object Term. Further, Mr Risk's report reveals that he was instructed to assume that Woodlawn was "obligated" to manage the fund in accordance with the Aims (see [11] of his first report) whereas, in final submissions before me, MVIL accepted that the Aims were "aspirational" and did not constitute a promise by Woodlawn that they would be achieved. 298In any event, I do not see Mr Risk's evidence as establishing that, had Mr McNamara adopted Mr Risk's "strategies...consistent with competent practice" the result, on the probabilities, would have been to protect MVIL from any loss at all, or limit its loss to that suffered by the ASX200 Index (that is 13 per cent over the quarter). Mr Risk's opinions are expressed at a high level of generality and without reference to what particular steps, consistent with the Mandate as I have construed it, it is said Woodlawn should have taken. MVIL may well have been better off had Mr McNamara adopted Mr Risk's strategies and hedged the ASX futures with stop loss contracts; but I am not able to say, on this evidence, by how much. 299I accept Woodlawn's submission that Mr Risk's propositions are generic; none has specific content, let alone content with sufficient precision to establish a reliable "counter-factual". Mr Risk did not express any opinion as to the precise set of steps, or the precise strategy which could have been adopted (particularly in the first two weeks of August 2011) to achieve either a neutral performance or a tracking of the ASX200. And no such steps or strategy were put to Mr McNamara. 300Mr Risk agreed that 8 and 9 August 2011 were the single largest loss making days in the history of world financial and equities markets for the preceding 10 years. The market was down 11.5 per cent over the course of the previous few days; and after the United States lost its AAA credit rating, the ASX made a loss of $35 billion in share value. 301As Woodlawn submitted: "On Black Tuesday [9 August 2011] the ASX200 fell rapidly during the morning and recovered to close higher than the previous day. During the downward movement on that day, a point was reached at which Woodlawn decided that the Fund's exposure should be closed out with a crystallized loss of $642,000 rather than put in cash to meet a margin call... . That turned out to be an error of judgment because the ASX200 bottomed out later in the day then recovered to close at a figure higher than previous day's close - but Mr Risk did not identify any earlier, or other, point at which he would have had a put option in place and closed out the risk with a better result." 302In effect, MVIL asked me to conclude that Woodlawn could not have complied with, and discharged its contractual and general law duties, without at least confining the loss to the fund to that suffered, overall, by the ASX200. 303I see no basis upon which I could, on the evidence before me, come to that conclusion; or, indeed to any conclusion as to what loss MVIL has suffered that it would not have suffered in any event during critical weeks in August 2011, even with Mr Risk at the helm. The exclusion of liability in cl 5 304The Second IMA and the AMA contained, in cl 5, an "Indemnity" which I have set out above at [55]. For convenience, I will repeat the critical terms: "5 Indemnity [Woodlawn] seeks to assist [MVIL] in the manner set out in this deed. However, MVIL agrees that [Woodlawn] is not liable for any claims, actions, proceedings, demands, liabilities, losses, damages, costs and expenses suffered by MVIL arising out of, or in connection with, this deed or any other matter or activity referred to or contemplated by the deed, including but not limited to loss suffered by MVIL as a result of [Woodlawn's] negligence or a breach of this deed. [Woodlawn] does not warrant, represent or guarantee that any of the investment objectives stated in the [Mandate] will be achieved. MVIL agrees with [Woodlawn] (for itself and on trust for each of the...directors...of [Woodlawn] ("Indemnified Persons")) that: ... (c) No Indemnified Persons will have any liability whatsoever to MVIL for or in connection with things done or omitted to be done pursuant to the deed; other than in respect of any liabilities, losses, damages, costs or expenses which are determined by a judgment of a Court of competent jurisdiction to have resulted from the wilful default or negligence on the part of the Indemnified Persons... Without prejudice to any claim MVIL may have against [Woodlawn], no proceedings may be taken against any director, officer, employee or agent of [Woodlawn] in respect of any claim MVIL may have against [Woodlawn]." 305The "Indemnity" in the Second IMA was drawn in terms considerably stronger, from Woodlawn's point of view, than the corresponding clause in the First IMA. 306In the First IMA the second sentence of cl 5 read: "[Woodlawn] accepts no liability or responsibility in the event that its endeavours are unsuccessful and targets stipulated in the [Mandate] are not met." 307In cl 5 of the First IMA there was no sentence corresponding with the third sentence appearing in cl 5 of the Second IMA (commencing "[Woodlawn] does not warrant, represent or guarantee..."). 308A number of issues of construction arise. Does cl 5 have the effect that a breach of the IMAs or the Mandate is not an Event of Default? 309The first is whether the clause has the effect of releasing MVIL from all consequences of any breach by it of its obligations under the IMAs and the AMA. 310In that regard, Woodlawn submitted: "There is no cause to read the words "not liable for any claims" down to monetary claims. Those words are wide enough to embrace a claim of right, such as a claim to be entitled to terminate the Second IMA for default under cl 8.4." 311I do not accept this submission. If it were correct, it would render otiose the particular provision made later in the IMAs and the AMA (in cl 8 of each document) for termination (discussed above). There would be no point in the parties providing for "Events of Default" in cl 8.4 (particularly those in cl 8.4(b) and (k)) if the effect of cl 5 was that Woodlawn was "not liable" to have the relevant contract terminated by reason of such events of default. The parties cannot possibly have intended this result. 312I accept MVIL's submission that the clause is not directed to the question of whether or not a breach of the relevant agreement occurred but, rather, to Woodlawn's liability to MVIL in relation to any such breach. The clause is directed to "loss" that MVIL might suffer by reason of Woodlawn's "negligence" or a "breach of this deed" by Woodlawn and provides that Woodlawn is not to be liable to any "claims", "actions", "proceedings" and the like concerning such loss. Is cl 5 effective to release Woodlawn from liability to compensate MVIL for any damage suffered by reason of the breach of the Dual Object Term? 313MVIL submitted that the clause, which comprises an indemnity as well as a release, should be construed strictly and drew attention to the familiar observations of the High Court in Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; 217 CLR 424 at [17] - [23] per Gleeson CJ, McHugh, Gummow, Hayne and Haydon JJ. 314However, as the authors of Lewison and Hughes, The Interpretation of Contracts in Australia, (2012, Lawbook Co), point out at [7.08.5] the "principle" that contracts of indemnity are to be construed strictly should not be pressed too far. The authors draw attention to the observations of Lord Oliver in Coghlan v SH Lock (Australia) Ltd (1987) 8 NSWLR 88 at 92: "But these principles do not, of course, mean that where parties to such a document have deliberately chosen to adopt wording of the widest possible import that wording is to be ignored." 315Here, the language used by the parties is very wide. 316MVIL accepted, as the words of cl 5 obliged it to do, that Woodlawn "is not liable" for "any claims" "arising out of, or in connection with, this deed or any other matter or activity referred to or contemplated by the deed". 317MVIL relied upon those words to submit that the exclusion of liability was limited to liability arising from conduct "authorised" by the relevant document and that an "unauthorised" dealing, in particular, dealings in breach of the Mandate, were not caught by the release. 318I do not accept that submission because the clause goes on to provide that the release is to include (although is not limited to) loss suffered by MVIL as a result of Woodlawn's "negligence or a breach of this deed". That part of the clause was not in the First IMA and was added to cl 5 by the Second IMA, bespeaking an intention of the parties that the ambit of the release in cl 5 be broadened to exclude Woodlawn's liability for "any" loss arising from its negligence and, critically, a "breach of this deed". 319It is thus wide enough, in my opinion, to exclude what would otherwise be Woodlawn's liability to compensate MVIL to any loss it has suffered by reason of Woodlawn's breach of the Dual Object Term. 320The clause goes on to provide that Woodlawn does not "warrant represent or guarantee" that any of the "investment objectives" (in the Mandate, which I have construed as the Investment Aims referred to in the Mandate - see [217] above) would be achieved and to provide that no "Indemnified Persons" (which include Woodlawn and Messrs Breen and McNamara) will have "any liability whatsoever to MVIL for or in connection with things done or omitted to be done pursuant to the deed" otherwise than in respect of loss caused by "wilful default or negligence". 321Subject to the question of "wilful default or negligence", which I discuss below, I cannot see any basis on which I could read down the release in cl 5. It is drawn in the widest possible terms. 322It is certainly wide enough to release Woodlawn from such liability it might otherwise have to MVIL for such loss arising from what I have found to be Woodlawn's breach of the Dual Object Term, and thus the Mandate (assuming, contrary to my findings, that MVIL has established loss); whether that liability be characterised as breach of contract, breach of fiduciary duty, breach of trust or breach of general law duty. The first three of those breaches is a "breach of this deed", and the fourth is "negligence". 323It is also wide enough, in my opinion, to cover such loss as MVIL has suffered as a result of MVIL's commingling of MVIL's funds with its own. That conduct was a breach of trust; but the Second IMA characterises the funds invested by MVIL with Woodlawn as trust monies - see the definition of "Portfolio" referred to at [49] which, unlike the corresponding definition in the First IMA, speaks of "all funds held on trust" by Woodlawn. Further, cl 9.3 of the Second IMA (unlike its predecessor in the First IMA) states, in terms, that Woodlawn holds the Portfolio on trust for MVIL (pursuant to the Trust Deed). MVIL submitted that the commingling was a breach of an obligation "implied in this deed" for the purposes of it being an Event of Default for the purposes of cl 8.4(b) of the Second IMA. It must follow that the commingling was a "breach of this deed" and thus caught by cl 5. It is well recognised that exemption clauses in a trust deed can have a wide operation and exempt a trustee from all liabilities as long as the trustee has not acted dishonestly or in bad faith: Armitage v Nurse [1988] Ch 241 at [250] - [252] per Millett LJ. 324It is common ground that the clause would not be an answer to any loss MVIL could show arising from claim for misleading or deceptive conduct under s 1041H of the Act or its analogues. 325Clause 5 does not, however, release Woodlawn from the consequences of its "wilful default or negligence". 326My attention was not drawn to any authority dealing with such an expression. 327In my opinion the expression should be read distributively so that the word "wilful" governs both "default" and "negligence". Thus Woodlawn would be liable for any wilful default or wilful negligence. 328There is no suggestion of "wilful default" in this case. 329MVIL submitted that the expression "wilful negligence" should be construed to mean negligent conduct arising from deliberate acts. I do not accept that submission. In my opinion the expression "wilful negligence", especially when contained within the composite expression "wilful default or negligence" means conduct akin to recklessness; that is the negligent conduct engaged deliberately and without regard to whether or not it was in breach of contractual or other duty. 330MVIL does not suggest that Woodlawn or Messrs Breen and McNamara behaved in this way. It is clear they did not. Mr McNamara committed Woodlawn, and thus MVIL, to the loss making positions in first two weeks of August 2011 because of his judgment, which he accepts turns out to be wrong, that the market would rise, not fall. I have found that conduct to have constituted a breach of the Dual Object Term of the Mandate. It was not, however, an example of "wilful default or negligence". Was Woodlawn required to have an AFSL? 331As I have mentioned, MVIL alleges that, at all relevant times, Woodlawn was obliged to hold an AFSL. 332Woodlawn did not apply for an AFSL until 24 June 2011 (some two years after it had entered to the First IMA and over a year after it entered into the Second IMA and the AMA). Woodlawn was granted an AFSL on 29 July 2011. 333If Woodlawn was obliged to hold an AFSL, it was in breach of the warranty it gave MVIL in cl 9.1(c) of the IMAs and the corresponding clause in the AMA that it would at all times be the holder of legislatively required licences and authorities (see [58] and [70] above). 334MVIL alleges that a further consequence of Woodlawn not having an AFSL until 29 July 2011 is that it was, on 17 November 2011, entitled to exercise the statutory right of rescission contained in s 925A of the Act in respect of the IMAs and the AMA. 335Section 911A of the Act provides that: "...a person who carries on a financial services business in this jurisdiction must hold an [AFSL] covering the provision of the financial services". 336Section 924A of the Act provides that the statutory entitlement to rescind under s 925A of the Act arises where a "person" (called "the client") is a party to an agreement with another person (called the "non-licensee") "that constitutes, or relates to, the provision of a financial service by the non-licensee" if: (a)"the agreement is entered into in the course of a financial services business carried on by the non-licensee"; and (b)the non-licensee does not hold an AFSL "covering the provision of the financial service". 337There are some qualifications to that statutory entitlement to rescind, to which I will return below. 338However, if MVIL was entitled to rescind the IMAs and the AMA under s 925A of the Act, the consequence is that both those agreements are unenforceable by Woodlawn and that Woodlawn has no entitlement to recover "by any means" (including on a quantum meruit) any fee to which they would otherwise be entitled under those agreements (see ss 925E and 925F of the Act). 339The question of whether MVIL was entitled to rescind under s 925A depends on whether the IMAs or the AMA "constituted" or "related to" the provision by Woodlawn of "financial services" to MVIL. 340That, in turn, depends on whether those agreements were entered into in the course of a "financial services business" carried on by Woodlawn. If Woodlawn was carrying on a "financial services business" questions arise as to whether such business was carried on "in this jurisdiction", whether Woodlawn is entitled to derivative Crown immunity and whether MVIL has elected to affirm the agreements and thereby lost any entitlement to rescind under s 925A of the Act or to exercise any contractual right of termination. Provision of "financial services" 341The first matter to be considered is whether Woodlawn was carrying on a "financial services business". 342Section 766A of the Act provides, relevantly, that a person "provides a financial service" if that person provides "financial product advice" within the meaning of s 766B of the Act or "deals in a financial product" within the meaning of s 766C of the Act. Did Woodlawn provide "financial product advice" to MVIL? 343Section 766B(1) of the Act, provides that: "...financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that: (a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or (b) could be reasonably be regarded as being intended to have such an influence." (emphasis in original) 344Woodlawn submitted that its business under the IMAs was not to make "recommendations" or "statements of opinion" intended to influence MVIL in making decisions in relation to financial products. Woodlawn submitted that, as trustee, it made all the decisions about investments without at any time making a recommendation or expressing any opinion for the purpose of MVIL itself making any such decision. 345Woodlawn submitted that MVIL had "confided to" it the investment making process. 346I do not accept this submission. 347The IMAs provided that Woodlawn's duties included the giving of "advice" and "recommendations" which were to be consistent with the Mandate. 348Further, under the AMA, MVIL appointed Woodlawn "to advise on and where appropriate manage" the Portfolio (cl 2(a)). 349Pursuant to cl 3.1(a)(2) of the AMA, part of Woodlawn's duties was to advise MVIL "on the management of its Portfolio". 350The evidence shows that, in fact, Woodlawn did provide recommendations and statements of opinion. 351Mr Breen drafted a document called "Investment Advisory" dated 4 June 2010 which, he said, summarised the manner in which MVIL made investment decisions. Under the heading "Investment Process" that document read: "Investment Proposals are presented to either Management, [Woodlawn] or the Investment Manager. Investment Proposal is discussed and reviewed by the Investment Committee. If the Investment Committee deems there is merit in the proposal it will be passed to [Woodlawn] for analysis and opinion." 352Mr Breen gave this evidence in respect of that document: Q. "Did it occur in respect of any single investment that you can recall, that this process of seriatim the proposal being presented, then discussed, then passed to you for your analysis and then a recommendation back again, then a decision to the board and the other procedural steps. Do you recall that happening on any single occasion? A. Yes, it happened on a number of occasions. Q. When were they? A. There was a proposal in relation to a loan to the National Development Bank where that process was followed fully. There was a proposal to invest in Colonial Life Insurance in Fiji where this process was followed. There was a proposal [to] divest part of one of their subsidiaries [where this] policy and procedure was followed. There [were] many times that this procedure was followed and this process was followed. I don't understand why you would say that it wasn't when we have documents that show that it was." 353Mr Breen's evidence shows that, consistently with the text of the IMAs and the AMA, Woodlawn did make recommendations, or give statements of opinion to MVIL intended to influence it in making a decision as to particular financial products. 354It thus did, in my opinion, give MVIL "financial product advice". Did Woodlawn "deal in a financial product"? 355Section 766C(1) provides that "applying for or acquiring a financial product" or "disposing of a financial product" (amongst other conduct) constitutes "dealing" in a financial product. 356Woodlawn accepted that it had engaged in such conduct. 357However, s 766C(3) provides that, with some irrelevant exceptions: "A person is taken not to deal in a financial product if the person deals in the product on their own behalf." 358Woodlawn contended that this exception in s 776C(3) was enlivened as, although it at all times acted as trustee, it nonetheless dealt with "financial products" on its own behalf and as principal. 359Woodlawn was not able to point to any authority for the proposition that a trustee who deals in financial products does so on its own behalf. 360I do not accept the submission that this is so. In my opinion the correct position is as outlined in MVIL's submissions as follows: "As a matter of language everything Woodlawn did with the fund as investment manager and as trustee was on behalf of MVIL. The phrase 'own behalf' is not apt to mean a trustee acting in that capacity. In point of principle it is a necessary element of a trust that the trustee be under a personal obligation to deal with the trust property for the benefit of the beneficiaries: Heydon and Leeming 'Jacobs' Law of Trusts in Australia' (7th edn) at [110]. That obligation is inconsistent with Woodlawn dealing on its 'own behalf'. Expressed in the negative, one action a trustee cannot take is to deal with trust property on the trustee's 'own behalf'." 361In my opinion s 766C(3A) does not compel a contrary conclusion. 362Section 766C(3A) provides: "For the purpose of subsection (3), a person (the agent) who deals in a product as an agent or representative of another (the principal) is not taken to deal in the product on the agent's own behalf, even if that dealing, when considered as a dealing by the principal, is a dealing by the principal on the principal's own behalf." 363That subsection is to the effect that a dealing as an agent "agent or representative" of another is not an exception to the proscription in s 766C. As MVIL submitted: "It may be accepted that a trustee is not merely an agent of the beneficiary, but that is because a trustee has powers and obligations to the beneficiary in addition to all the powers and obligations of an agent. It can be apt to describe a trustee as the representative of the beneficiary. Whether that proposition is always correct, the effect of s 766C(3A) is to demonstrate, non- exhaustively, the type of relationship in which the first person is not dealing on his or her 'own behalf'." 364On behalf of Woodlawn it was submitted that it would be odd that the mere fact that a person was acting as a trustee had the consequence that, if they bought or sold a "financial product" they would be required to have an AFSL. The example was given of a solicitor acting for a deceased estate who bought and sold shares belonging to the estate. But the requirement to have an AFSL is only engaged to a party who "carries on a financial services business" (see s 911A of the Act). The solicitor acting as an ad hoc trustee would not normally be carrying on a financial business and thus would not need an AFSL. In any event, solicitors are exempt from the operation of s 766C by reason of reg 7.1.35A of the Corporations Regulations 2001 (Cth) ("the Regulations"). 365In this case, Woodlawn is carrying on a financial services business, albeit for one client only (MVIL) and as trustee for that one client. I see nothing alarming about the conclusion that, in the circumstances, by buying and selling financial products for the one client, Woodlawn is acting on that client's behalf and not upon its own behalf. 366Woodlawn submitted that, in any event, the effect of Regulation 7.1.35 was that, despite the terms of s 766C of the Act, Woodlawn did not deal in financial products. 367I do not accept that submission, for the reasons that follow. 368Section 766C(7) of the Act provides that the Regulations may prescribe conduct that is taken to be, or not to be, "dealing" in a financial product. Regulation 7.1.35 369Regulation 7.1.35 is in the following terms: "(1) For subsection 766C(7) of the Act, conduct is not taken to be dealing in a financial product if: (a) the conduct is of a kind: (i) mentioned in paragraph 766C(1)(a), (d) or (e) of the Act; or (ii) mentioned in paragraph 766C(1)(b) of the Act, where it is the issue of a beneficial interest in a financial product, that arises from conduct that would constitute providing a custodial or depository service but for the operation of regulation 7.1.40; and (b) the conduct is carried out by a person ( person 1 ) in relation to a product that person 1 holds on trust for, or on behalf of, another person ( person 2 ) and the holding of that financial product would not constitute the provision of a custodial or depository service because of paragraphs 7.1.40(a), (b), (c), (d), (g) and (i). (2) Subregulation (1) does not apply to conduct carried out by person 1 in relation to a financial product that is held under a custodial arrangement as defined in section 1012IA of the Act unless: (a) person 2 is an associate of person 1; or (b) the financial product is held in the manner mentioned in paragraph 7.1.40(d)." 370The structure of reg 7.1.35 is awkward. Subregulation 7.1.35(1) describes a circumstance in which conduct is not to be taken to be "dealing" in a financial product; that is it creates an exception to the general rule in s 766C of the Act. Subregulation 7.1.35(2) then creates an exception to that exception; and contains two further exceptions to that exception. Subregulation 7.1.35(1) 371Subregulation 7.1.35(1) provides that conduct is not to be taken to be "dealing in a financial product" if three conditions are satisfied. 372The first is that the conduct is of a kind referred to in, amongst other subsections, subsections 766C(1)(a) or (e) of the Act (see subregulation 7.1.35(1)(a)); that is the acquisition or disposing of a financial product. It is common ground that this condition is satisfied as Woodlawn was engaging in such conduct (and thus "dealing" in a financial product - see [355] and [356] above). 373The second condition is that the conduct was carried out by a person in relation to a product that such person "holds on trust" for another person (subregulation 7.1.35(1)(b)). Again, it is common ground that this condition is satisfied, as Woodlawn held the Portfolio on trust for MVIL. 374The third condition is that the holding of that financial product would not constitute the provision of a "custodial or depository service" because of any of subregulations 7.1.40(a), (b), (c), (d), (g), and (i). It is common ground that this condition is satisfied as Woodlawn's conduct would not constitute the provision "custodial depository services" because subregulation 7.1.40(c) provides that a "provider" that has "no more than 20 clients in aggregate for all custodial or depository services that they provide" does not provide "custodial depository services" (for the purposes of s 766E of the Act). Woodlawn had only one client; MVIL. 375Thus, it is common ground that subregulation 7.1.35(1) is engaged and that its effect, taken alone, is that, notwithstanding s 766C of the Act, Woodlawn's conduct is not taken to be dealing in a financial product. 376However, subregulation 7.1.35(1) must be read in light of subregulation 7.1.35(2) which, as I have mentioned, creates an exception to the exception constituted by subregulation 7.1.35(1). Subregulation 7.1.35(2) 377Subregulation 7.1.35(2) applies if, first, the relevant product is held under a "custodial arrangement" as defined in s 1012IA of the Act (see the chapeau to subregulation 7.1.35(2)). 378Section 1012IA of the Act defines a "custodial arrangement" as: "...custodial arrangement means an arrangement between a person (the provider) and another person (the client) (whether or not there are also other parties to the arrangement) under which: (a) the client is, or is entitled, to give an instruction that a particular financial product, or a financial product of a particular kind, is to be acquired; and (b) if the client gives such an instruction, a person (the acquirer), being the provider or a person with whom the provider has or will have an arrangement, must (subject to any discretion they have to refuse) acquire the financial product, or a financial product of that kind; and (c) if the acquirer acquires the financial product, or a financial product of that kind, pursuant to an instruction given by the client, either: (i) the product is to be held on trust for the client or another person nominated by the client; or (ii) the client, or another person nominated by the client, is to have rights or benefits in relation to the product or a beneficial interest in the product, or in relation to, or calculated by reference to, dividends or other benefits derived from the product." (emphasis in original) 379Accordingly, an arrangement is not a "custodial arrangement" unless, amongst other things, the relevant client is "entitled to give an instruction that a particular financial product, or a financial product of a particular kind, is to be acquired" (see subsection (a) of the definition in s 1012IA of the Act). 380In my opinion, that condition is satisfied in this case. 381The only provision upon which MVIL relied to establish that the arrangements between it and Woodlawn were "custodial arrangements" was cl 3.1(a) of the IMAs. 382I have set cl 3.1(a) out at [50] above but, for convenience, will repeat it here: "The duties of [Woodlawn] will be: (1) to execute transactions and effect the investment and reinvestment of the cash, securities and other property comprising the Portfolio with power at their discretion to purchase or otherwise or acquire investments and to sell, exchange, vary or transpose the same, provided that all transactions, advice and recommendations given by [Woodlawn] in relation to the Portfolio must at all times, be consistent with [the Mandate]". (emphasis added) 383In that regard MVIL submitted: "Paragraph (a) of the definition is satisfied because MVIL was entitled to give instructions as to the particular 'financial products' or types of 'financial products' to be acquired. That entitlement follows from the obligation imposed on Woodlawn to, or the explicit expectation that Woodlawn would, provide advice and recommendations in clause 3.1(a)(1) of the IMAs. Provision of advice and recommendations is inutile unless MVIL was entitled to give an instruction to buy, sell or not buy or sell "the financial products" or types of "financial products" the subject of the advice or recommendation. That is reinforced as, absent an express limitation on MVIL's right, it is objectively improbable that MVIL gave up any entitlement to give instructions to Woodlawn as to how to deal with MVIL's property." 384I see nothing in cl 3.1(a)(1) of the IMAs which entitles MVIL to "give instructions" as to particular financial products to be acquired. On the contrary, the clause makes clear that although Woodlawn is to provide advice and recommendations to MVIL, and must manage the Portfolio consistently with the Mandate, its power of purchase and acquisition is (as the clause says) at its discretion. 385However, the Trust Deed does give MVIL the power to "direct" Woodlawn as to how to deal with the "Trust Property", which includes the Portfolio (see [74] above). Clause 2(b) of the Trust Deed provides that Woodlawn must transfer the Trust Property to MVIL if MVIL so requests (reflecting the "rule" in Saunders v Vautier (1841) 4 Beav 115; 49 ER 282) and must "otherwise deal" with the Trust Property as MVIL "directs" (see [73] above). Clause 3.1 of the Trust Deed provides that Woodlawn "must" deal with the Trust Property as it considers appropriate "or where directed" by MVIL (see [75] above). Those provisions have the effect, in my opinion, that MVIL was "entitled" to give an instruction to MVIL to acquire a "particular financial product" for the purposes of s1012IA of the Act. 386For those reasons, my opinion is that the financial product is held under a "custodial arrangement" and thus subregulation 7.1.35(2) is satisfied. 387Subregulation 7.1.35(2)(a) and (b) provide that subregulation 7.1.35(2) does not have effect if either of the two matters in subregulation 7.1.35(2)(a) or (b) apply. It is, however, common ground that they do not. As to subregulation 7.1.35(2)(a) it is common ground that MVIL is not an "associate" of Woodlawn. As to subregulation 7.1.35(2)(b) it is common ground that the relevant financial products were not held as security and that, accordingly, subregulation 7.1.40(d) did not apply. 388For those reasons, my conclusion is that Regulation 7.1.35 is not engaged and therefore Woodlawn did "deal" in a financial product. Did Woodlawn provide any services "in this jurisdiction"? 389By reason of s 911A of the Act, the requirement to hold an AFSL only applies to a person who carries on a financial services business "in this jurisdiction". 390Woodlawn submitted that because MVIL, a PNG corporation, was "always outside the jurisdiction", any financial services performed by Woodlawn for MVIL were also outside the jurisdiction. 391I do not accept that submission. 392As MVIL has submitted, the question is not where Woodlawn supplied services to its client, MVIL, but where Woodlawn carried on the "financial services business". It is clear that Woodlawn carried on its "financial services business" in Australia. Woodlawn bought and sold securities and derivatives in Australia. Those were largely Australian instruments. Woodlawn's offices were located in Australia. It conducted its business in Australia. Further, as MVIL has pointed out, the effect of the affidavit evidence of Mr Breen, Mr McNamara and Mr Poponawa was that, other the occasional attendance at meetings in PNG, Woodlawn performed the AMA (formulating advice and often giving advice) in Australia. 393The fact that its client was abroad is, in my opinion, irrelevant. Is Woodlawn immune from application of Pt 7 of the Act by reason of derivative Crown immunity? 394Woodlawn submitted that it is: "...in any event immune from application of Part 7 of the [Act] because, if it is an agent of MVIL, it is an agent of an agent, instrumentality or authority of the Crown in right of PNG; Part 7 does not extend to a foreign State; and, as an agent of such a State (if an agent it be), Woodlawn is entitled to derivative immunity." 395Woodlawn submitted that MVIL is thus not a "person" for the purposes of ss 911A, 766B or 766E of the Act and submitted that: "The absence of any mention of foreign States [in the Act], supports a finding that there was no intention to bind the Crown in right of PNG...by the provisions of Part 7 of the [Act] even if their agents carry on business in this jurisdiction, let alone when the entirety of the business consists of acting as a trustee acting for and on behalf of that foreign State or its agent or instrumentality." 396I do not accept that submission, substantially for the reasons advanced on behalf of MVIL. 397First, in my opinion, each of Woodlawn and MVIL is a "person" for the purposes of the Act. The Act does not, relevantly, define "person" although that expression includes a body politic or body corporate (see s 2(c) of the Acts Interpretation Act 1901 (Cth)). 398The fact that MVIL is ultimately owned by the sovereign state of PNG does not, in my opinion, have the effect that it ceases to be a body corporate. As MVIL submitted, a body corporate does not cease to be a body corporate because its ultimate shareholder is not a body corporate. 399Second, Crown immunity is a doctrine that applies to the domestic sovereign. Immunities of a foreign state are based on foreign sovereignty. Crown immunity is directed to immunity from the operation of laws. Sovereign immunity is directed to immunity from jurisdiction of foreign courts: see P T Garuda Indonesia Ltd v ACCC [2012] HCA 33; 247 CLR 240 at [19] and Firebird Global Master Fund II Ltd v Republic of Nauru [2014] NSWSC 360 per Bathurst CJ at [62] and Basten JA at [231]. 400In Australia, the question is governed by the Foreign States Immunities Act 1985 (Cth). 401Section 9 of that Act provides that: "Except as provided by or under this Act, a foreign State is immune from the jurisdiction of the courts of Australia in a proceeding." 402That immunity extends to a "separate entity of a foreign state" (see s 22) which includes "an agency or instrumentality of a foreign state" (see s 3) such as MVIL. 403However, the immunity does not apply where the foreign state, or its agency, submits to the jurisdiction (see s 10(1)). MVIL has not only submitted to the jurisdiction of this Court by agreement (clause 14 of the IMAs: see [61] above) it has, by commencing these proceedings, actually invoked that jurisdiction. 404Further, the immunity does not extend to proceedings concerning a "commercial transaction" (see s 11(1)), which expression is defined in terms which are sufficiently broad to encompass the IMAs and the AMA (see s 11(3) which defines "commercial transaction" to include "a contract for the supply of goods or services"). 405Accordingly, MVIL is not entitled to foreign state immunity. Woodlawn cannot be in a better position. Conclusion as to whether Woodlawn was obliged to have an AFSL 406For these reasons, my conclusion is that Woodlawn: (a)was providing "financial product advice" for the purposes of s 766B of the Act; (b)was dealing with "financial product" for the purposes of s 766C(1) of the Act; (c)was carrying on a financial services business in Australia; (d)is not entitled to derivative Crown immunity, and thus was at all relevant times obliged to hold an AFSL. It did not do so until 29 July 2011. Consequences of Woodlawn not having an AFSL until 29 July 2011 Event of Default 407It follows that the warranty Woodlawn gave in cl 9(1)(c) of the IMAs and 9.1(b) of the AMA (that it held all requisite licences and authorities) was false and that Woodlawn thus committed an Event of Default under cl 8.4(k) of those documents. One consequence of that is that Woodlawn is not entitled to be paid any fees beyond those "accrued" at the date of termination (see [170] above). MVIL's statutory right of rescission under s 925A of the Act 408It also follows that s 924A of the Act is engaged (see [336] above) and that Subdiv B of Div 11 of Pt 7.6 of the Act (including ss 925A, 925E, 925F of the Act) apply to the IMAs and the AMA. 409As the requirements of s 924A of the Act were satisfied (see [336] above) the statutory right of rescission under s 925A of the Act arose. Section 925A(1) provides: "(1) Subject to this section, the client may, whether before or after completion of the agreement, give to the non-licensee a written notice stating that the client wishes to rescind the agreement." Delay and affirmation 410However, the entitlement to rescind under s 925A of the Act is qualified by ss 925A(2) and (3) which are in the following terms: "(2) The client may only give a notice under this section within a reasonable period after becoming aware of the facts entitling the client to give the notice. (3) The client is not entitled to give a notice under this section if the client engages in conduct by engaging in which the client would, if the entitlement so to give a notice were a right to rescind the agreement for misrepresentation by the non-licensee, be taken to have affirmed the agreement." 411Questions arise as to whether MVIL purported to rescind the IMAs and AMA more than a reasonable time after becoming aware of facts entitling it to rescind for the purpose of s 925A(2), and as to whether MVIL "affirmed" the IMAs and AMA for the purposes of s 925A(3). 412I have mentioned that Woodlawn applied for an AFSL on 24 June 2011. 413On 6 July 2011 Mr Breen wrote to Mr Poponawa at MVIL as follows: "I am writing to you in relation to the Investment Management (IM) and Asset Management Agreements (AM) which are in place between Woodlawn Capital and MVIL. Under the Australian regulatory framework the provision of financial services is regulated by the Australian Securities and Investment Commission (ASIC). For an Australian company to provide financial services it is required to either (i) hold its own Australian Financial Services License (AFSL), or (ii) be an Authorised Representative of a third party AFSL holder. Initial legal advice received by Woodlawn Capital, and an ASIC review indicated that Woodlawn Capital met its licensing requirements. However, subsequently, Woodlawn Capital has received further separate legal advice which indicates that its initial authorisations may not have met all of ASICs licencing [sic] obligations. This legal advice also suggests that the initial licensing arrangements under which Woodlawn Capital was operating may affect the enforceability of the IM and AM Agreements. As such we thought it best to bring this to your attention both verbally and in writing so that MVIL was aware of this matter. Subsequent to this new legal advice, Woodlawn Capital has immediately implemented authorisation changes to remove may licensing ambiguity and made itself a Corporate Authorised representative of an appropriate AFSL holder; i.e. option (ii). Additionally, Woodlawn Capital has also submitted an application for its own AFSL, option (i), and we are of the opinion that this will be granted in the next month or two. Once we have received our AFSL we will advise you in due course. Should you have any queries in relation to this letter, please feel free to contact me." 414Mr Breen's letter speaks of bringing to MVIL's attention the AFSL matter "both verbally and in writing". 415Mr McNamara and Mr Breen met with Dr Mua and with Mr Poponawa on 7 July 2011, on which occasion Mr Breen's letter of 6 July 2011 was discussed. 416Mr Breen gave this evidence about that discussion: "49 During the course of the above discussion, I said words to the effect, 'We have received some legal advice about the need for Woodlawn to have an Australian Financial Services Licence. We thought the question had been answered some time ago after ASIC raised it with us and did not require us to have one. I think that is because we act as your trustee and invest your money, we are not dealers in securities. But now the lawyers think we may need one. I am not quite sure why. I have set out my understanding of the position in my letter.' The discussion then turned to the contents of the letter of 6 July 2011. 50 At one point during the course of the discussion, words to the following effect were said, I said: 'As you can see from my letter, we are concerned that our agreements with MVIL may not be enforceable if Woodlawn needs an AFSL but does not have one. We do not want there to be any uncertainty in our business relationship. We want all of our agreements with MVIL to carry on as usual, so we are fast-tracking the issue of a licence. But it is up to you. What do you want us to do?' Dr Mua said: 'We are happy with the work you have done for us. From what you say, you will be getting a licence soon. We have not suffered any harm, so I see no reason why we should change anything.' Mr Poponawa said: 'I agree. Things should continue as they are, business as usual. It would be very disruptive to change our contracts.' I said: 'Thanks, we appreciate your faith in us. Australia's financial services licensing is very difficult to understand. Even the lawyers seem to have difficulty'." 417Mr McNamara gave the following account of the discussion: "84 At the conclusion of the 7 July 2010 [sic; 2011] meeting, we had a conversation in the [sic] to the following effect: Dr Mua: 'We are happy with the work that Woodlawn has done for MVIL, you have been of great assistance managing our assets. We understand that any issues with the license will be remedied. If there has been a breach, it has not left MVIL out of pocket so we see no reason to interfere with the contracts that are in place. We would like all of our agreements to continue.' Mr Poponawa: 'I agree. Things should continue as they are.' Mr Breen: 'Thanks. Our financial services licensing requirements are very difficult to understand, even for lawyers'." 418Neither Mr Breen nor Mr McNamara were challenged about this conversation in cross-examination. 419The following exchange occurred during cross-examination of Mr Breen: Q. "Your prior solicitors had told you that it was not a matter of may, it was that you did need an AFSL, that you always needed one and that the contract could be rejected if you didn't have one? A. They advised us that in May 2011, yes. Q. But you didn't tell your client that, did you? A. We had lost confidence in that legal advisor and sought a second opinion. Q. And what you told your client was that these things may be accurate, is that right? A. Yes. Q. Did you tell him anything different orally or is this the extent of your correspondence about it? A. We also discussed it orally and I believe it was very close to the letter... Q. Did you have any more advice about whether you needed an AFSL by the time you wrote this letter? A. We had received our further advice from Baker & McKenzie just prior to drafting this letter. Q. Hadn't they advised you that you did require an AFSL? Isn't that why it was admitted in the pleading? A. There was suitable ambiguity from Bakers and they said that we may require an AFSL, but it was best to get one to ensure that there was no further ambiguity." (emphasis added). 420MVIL submitted that Mr Breen's evidence in this passage that "we also discussed it orally and I believe it was very close to the letter" amounted to a concession that his affidavit evidence (at [416] above) was not correct. I do not accept that submission. I do not see Mr Breen's statement in cross-examination as being inconsistent with his affidavit evidence. In any event, it was not suggested in cross-examination that his affidavit evidence was untrue. 421In his affidavit evidence, Mr Poponawa said that, at the meeting of 7 July 2011, neither Mr Breen nor Mr McNamara referred to Mr Breen's 6 July 2011 letter. As Mr Poponawa died before the hearing his evidence could not be tested. For that reason, Mr Poponawa's evidence must be approached with some caution. Mr Breen's letter foreshadowed bringing the AFSL issue to MVIL's attention "verbally" which points to the probability that, as Mr Breen and McNamara depose, this occurred. Further, as I have said, it was not suggested to either Mr Breen or Mr McNamara that Mr Poponawa's evidence was correct, and that in truth the 6 July 2011 letter was not discussed on 7 July 2011. 422Furthermore, as Woodlawn points out, there are other reasons for approaching Mr Poponawa's evidence with care. For example, in his affidavit evidence of 7 June 2013, Mr Poponawa gave evidence that he "read the 6 July letter at or about the time I received the letter" and that at the 7 July 2011 meeting, neither Mr Breen or Mr McNamara had "referred or spoken about the 6 July 2011 letter", suggesting familiarity with the letter prior to the meeting. However, in his affidavit of 10 March 2014 (sworn after Woodlawn had served their evidence) Mr Poponawa stated that either Mr McNamara or Mr Breen "handed the letter to [Dr] Mua and me at the end of the meeting." 423Further, in his affidavit evidence he denied all knowledge of the Second IMA and the AMA, notwithstanding the fact that he was present at a meeting of MVIL's Investment Committee of 4 June 2010, and MVIL Board meetings of 15 June and 13 July 2010, where those agreements were ratified. 424He also deposed to conversation between Dr Mua for MVIL and Mr Breen said to give rise to the "Overarching Investment Limitation" (see [34] above). In later affidavits, Mr Poponawa gave differing accounts of the events said to give rise to that agreement. There was no support in any of the contemporary documents for the existence of any such agreement. Although it was a vital part of MVIL's case as pleaded, reliance on it was abandoned by MVIL during opening submissions and it was not mentioned in cross-examination or during final submissions. 425In those circumstances, I am not persuaded by Mr Poponawa's evidence to reject Messrs Breen's and McNamara's unchallenged evidence about the conversations on 7 July 2011. I am satisfied the conversations occurred as Messrs Breen and McNamara deposed. Did MVIL give a s 925A notice to terminate the IMAs and AMA within a "reasonable period" for the purposes of s 925A(2)? 426The effect of s 925A(2) of the Act is that MVIL could only exercise a right to terminate the IMAs and the AMA under s 925A if it gave such a notice within a "reasonable period" of becoming aware "of the facts entitling [it] to give the notice". 427The "facts" are those referred to in s 924A of the Act (for example, see ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; 309 ALR 445 per Jacobson, Gilmour and Gordon JJ at [1422] - [1426]). 428MVIL submitted that, in this case, "to in effect start time running MVIL had to know both that (a) Woodlawn required an AFSL and (b) Woodlawn did not have an AFSL". 429In my opinion, MVIL became aware of both these matters in July 2011, both from Mr Breen's letter of 6 July 2011 and from the 7 July 2011 conversations. 430It is clear that MVIL thereby became aware that, at the time it entered into the IMA and AMA, Woodlawn did not have an AFSL. Woodlawn said as much, and stated that it had taken steps to obtain an AFSL. 431As to the requirement that Woodlawn have an AFSL, Mr Breen's letter stated that an Australian company providing financial services "is" required to hold an AFSL. It was, in my opinion, implicit in that statement that Woodlawn was providing financial services. 432It is true that his letter suggested that recently the advice showed that Woodlawn "may" not have met all of its licensing obligations and that this "may" affect the enforceability of the IMAs and the AMA. Similarly, on 7 July 2011, Mr Breen said that Woodlawn had received advice that it "may" need an AFSL and that the relevant agreements "may" not be enforceable "if" Woodlawn needed an AFSL. 433However those statements, combined with the revelation by Woodlawn to MVIL that Woodlawn was in the process of applying for an AFSL must have made clear to Dr Mua and Mr Poponawa, and thus to MVIL, that Woodlawn required an AFSL. 434In my opinion, MVIL was thereby put on notice of the facts which entitled it to give a notice under s 924A namely that IMAs and the AMA had been entered into in the course of a financial services business carried on by Woodlawn (Mr Breen said as much in the second paragraph of his letter), and that Woodlawn did not have, but required, an AFSL at the time it entered those agreements. 435The response of MVIL, through Dr Mua and Mr Poponawa was clear and decisive: "things should continue as they are, business as usual". 436If MVIL was to act on Woodlawn's revelation concerning the AFSL, and exercise its rights under s 925A of the Act, it was necessary in my opinion that it act promptly. 437Otherwise, Woodlawn would continue to make investments and incur fees on the assumption that, as Dr Mua and Mr Poponawa said, it was to be "business as usual". 438In fact, as it happens, Mr McNamara implemented the change of strategy, to which I have referred above, at around this time. It was not, however, suggested to him in cross-examination that there was any connection between these events. 439Mr McNamara gave evidence that following the meeting with MVIL on 7 July 2011, Woodlawn continued to manage the Portfolio; bought and sold securities from time to time, and rendered services to MVIL under the agreements. Mr McNamara gave unchallenged evidence that he and Mr Breen heard nothing from MVIL, or anyone else on its behalf, concerning "the licencing issue". 440Mr McNamara also gave this unchallenged evidence: "Woodlawn would not have continued to perform work for MVIL after 7 July 2011 if we had been told that any of our agreements with MVIL were at an end or that Woodlawn would not be paid for its work. Had Woodlawn been told on that or on any other date that MVIL wished to bring the AMA , the First or Second IMA or the Trust to an end, or that Woodlawn would be working for nothing because it was not entitled to be paid its agreed fees, for any reason at all, Woodlawn would have stopped work, save for whatever work may be legally required of it in the discharge of its duty to account as trustee of the Fund." 441It was not until 17 November 2011, more than four months later, that MVIL sought to terminate the agreements. 442It is not clear what prompted MVIL to send its letter of 17 November 2011. In that letter, Mr Kouri referred to the fact that there was a "new Board of Directors". 443Mr McNamara gave evidence of reading in the press and seeing on television at this time competing claims by Sir Michael Somare and Mr Peter O'Neill to be the legitimate Prime Minister of PNG and of the running of parallel administrations by those individuals. Mr McNamara also gave evidence of hearing, in September 2011, of litigation in the PNG National Court between IPBC and MVIL and that Dr Mua had "lost his job". 444It may be that it was these events that prompted MVIL to seek "repatriation" of its funds on 17 November 2011. It may be, on the other hand, that it was revelation of the impact on the Portfolio of the trading during the quarter ended 30 September 2011 that prompted MVIL to act. These matters were not explored in the evidence. 445There is no suggestion in the evidence that Woodlawn's belated application for an AFSL played any role in MVIL's decision. 446Whatever may have been the reason for the delay, MVIL did not act within a reasonable time after becoming aware of the relevant facts. 447For that reason, my opinion is that either on, or shortly after 7 July 2011, MVIL lost its right of rescission under s 925A. Did MVIL affirm the IMAs and AMA for the purpose s of s 925A(3) of the Act? 448For the same reasons, my conclusion is that MVIL affirmed the IMAs and the AMA. 449As MVIL has submitted, affirmation occurs where a party has to elect between inconsistent rights with knowledge of the facts giving rise to a right to rescind: Sargent v ASL Developments Ltd (1974) 131 CLR 634. 450Contrary to MVIL's submissions, my conclusion is that by 7 July 2011 MVIL did know all the relevant facts and that faced with inconsistent rights (to rescind or not) it chose that "things should continue as they are, business as usual". It thereby affirmed the agreements. 451For that further reason, my opinion is that MVIL lost its right to rescind the IMAs and AMA under s 925A. Contractual right to terminate 452For completeness, I should add that Woodlawn did not submit that MVIL had lost its contractual right of termination. There was no dispute that MVIL was entitled to terminate the agreements under ordinary contractual principles. Misleading or deceptive conduct 453MVIL contends that Woodlawn engaged in misleading or deceptive conduct in two respects, both of which arise from the fact that, as I have found, at all relevant times Woodlawn was obliged to hold an AFSL. Any such misleading or deceptive conduct will be a contravention of s 1041H of the Act or s 12DA of the Australia Securities and Investments Commission Act 2001 (Cth) because the relevant conduct is in relation to a "financial product" or a "financial service". 454The first aspect of MVIL's claim of misleading or deceptive conduct arises from Woodlawn's warranties in cl 9.1(c) of the IMAs and cl 9.1(b) of the AMA that it held all requisite licences and authorities. 455The second aspect arose from Woodlawn's letter to MVIL of 6 July 2011, to which I have referred (see [413] above). The warranty in cl 9.1(c) of the IMAs and cl 9.1(b) of the AMA 456As I have mentioned, by cl 9.1(c) of the IMAs and cl 9.1(b) of the AMA, Woodlawn warranted to MVIL that: "...it will, at all times during the term of this deed, be the holder of all licences and other authorities required to be held under all applicable legalisation governing the activities of [Woodlawn]...". 457I have held that, at all relevant times, Woodlawn was obliged to hold an AFSL. It did not do so until 29 July 2011. 458It follows that at the time the warranties were given, they were false and that, by giving the warranties, Woodlawn engaged in misleading or deceptive conduct. 459MVIL submitted that, had the warranties not been given, and had Woodlawn disclosed that it needed, but did not have, an AFSL (or, I assume, had MVIL otherwise become aware of these matters), it would not have entered any agreement with Woodlawn and would thus not have suffered the loss it attributes to Woodlawn's conduct in breach of the Dual Object Term, or at all. 460I have referred to the letter that Mr Breen wrote to Mr Poponawa at MVIL on 6 July 2011 (see [413] above) and to the conversation which occurred between Mr Breen, Mr McNamara, Dr Mua and Mr Poponawa on 7 July 2011 (see [416] to [417] above). 461In an affidavit Mr Poponawa deposed: "Prior to the 6 July 2011 letter Woodlawn had not at any point during the management of Funds raised any issues in regard to its licensing obligations, nor did I know anything about Australia Financial Services Licences. Had I known Woodlawn required an Australia Financial Services Licence, but did not have the licence and was taking no steps to obtain the necessary licence when Woodlawn first proposed to provide its financial services to MVIL, I would have recommended to the MVIL board against engaging Woodlawn." (emphasis added) 462Woodlawn submitted that: "That piece of evidence is not evidence of what MVIL would have done. It is evidence of what Mr Poponawa would have done - and it leaves open the question of what MVIL, by its board of directors, or chief executive officer, Dr Mua, would have done. Would the board [have] not gone ahead at all or merely delayed commencement of the First IMA while the question of an AFSL was raised and Woodlawn took any steps that were acquired to obtain one? Mr Poponawa does not say [that he] would have recommended to the board against engaging MVIL had Woodlawn been 'taking steps' to obtain a licence - which is consistent with the unchallenged response of he and Dr Mua in the conversation of 7 July 2011." 463On the other hand MVIL submitted that the conclusion that MVIL would not have entered into any agreement with Woodlawn at all, had Woodlawn revealed that it required but did not have an AFSL, was inherently probable and drew attention to the familiar observations of Wilson J in Gould v Vaggelas (1984) 157 CLR 215 at 236: "If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation." 464MVIL submitted: "In this case the representation (a) is of a character which is likely to be relied on and (b) was included as one of few warranties in each agreement demonstrating the objective materiality of the representation. A Gould v Vaggelas type inference is available, and should be drawn consistent with Mr Poponawa's evidence." 465The matter for consideration is what MVIL would have done had Woodlawn disclosed, prior to entry into the First IMA on 22 July 2009, that in order to carry out the services contemplated by the First IMA, it required, but did not have an AFSL; or had MVIL otherwise become aware of those matters. 466The only evidence to which my attention was directed indicative of Mr McNamara's and Mr Breen's actual state of mind in 2009 concerning the need for Woodlawn to hold an AFSL emerges from an exchange of correspondence between Mr McNamara and ASIC in December 2009 (some six months after MVIL and Woodlawn entered the First IMA). 467On 7 December 2009, ASIC wrote to Mr McNamara at Woodlawn: "I am writing to you as sole director of Woodlawn, as it has come to the attention of ASIC that Woodlawn may be carrying on a financial services business without holding an Australian Financial Services Licence ("AFSL"). You should be aware by now that from 11 March 2004, the [Corporations] Act requires any person carrying on a financial services business to hold an AFSL or be an authorised representative of a person holding an AFSL." 468Mr McNamara replied on 18 December 2009: "Woodlawn is a privately owned and operated Australian company. Woodlawn was introduced to an offshore wholesale institutional investor on the basis Woodlawn would act as its agent and invest in the Australian financial markets on the investor's behalf. The majority of the funds were invested in cash, with the balance in equities and derivatives. All securities trading has been conducted through licensed brokers. At the time of the engagement, I did obtain advice that as Woodlawn and I were only acting as the Australian agent for the investor, we were not likely to require an Australian Financial Services Licence. On receipt of your letter, I sought fresh legal advice which indicated an AFSL may be required notwithstanding the activities were limited to acting as the agent of the one offshore institutional investor. On receipt of this advice, I immediately arranged for myself to be appointed a representative of Australian Mutual Holdings Limited...("AMHL"). A copy of the appointment letter is attached. AMHL has also been provided with a copy of your letter and this response." (emphasis added) 469The "appointment letter" referred to in the last paragraph of Mr McNamara's letter was not in evidence before me. I infer from the terms of Mr McNamara's letter that Australia Mutual Holdings Ltd was a company related in some way to Woodlawn that did hold an AFSL. 470It was not suggested to Mr McNamara in cross-examination that he did not "at the time of the engagement" with the "offshore wholesale institutional investor" (obviously MVIL) obtain the "advice" referred to in the second paragraph quoted above, or that he did not "on receipt of your letter" obtain the "fresh legal advice" referred to in the third paragraph. 471Several months later, on 15 February 2010, Mr McNamara wrote to Mr Sean Robertson, a partner of McCullough Robertson, solicitors of Brisbane, enclosing "agreements between Woodlawn Capital and Motor Vehicles Insurances Ltd" (which I assume to have been the First IMA and the Mandate). 472Mr McNamara continued: "Additionally regarding the AFSL licensing process, at your convenience, could you provide ● an estimate of initial set up costs and times, ● estimated ongoing costs, ● costs to close (if required). At this stage we will be dealing with only wholesale clients and it is most likely they will all be domiciled offshore. I am unsure as to whether we require licenses to both advise and deal?" 473On 17 February 2010 McCullough Robertson sent Woodlawn what appears to be a proforma letter setting out details of the process involved in the application for an AFSL and providing a fee estimate. There the matter appeared to rest until May 2011. 474Email correspondence between Mr Breen and Mr Robertson in May 2011 reveals that a dispute arose as to whether or not Mr Robertson had earlier (I would infer in 2009 or 2010) advised Woodlawn of the need to obtain an AFSL. The evidence suggests that, in May 2011, Mr Robertson advised Messrs Breen and McNamara that Woodlawn "have always needed an AFSL". On the other hand, Mr Breen referred to "your revised opinion" and your "current opinion" which he said had come as a "great shock" to Mr McNamara and him. I am not able to reach any conclusion as to the rights or wrongs of that dispute. Evidently, it led Woodlawn to obtain the advice of Baker & McKenzie which, in turn, led to Woodlawn applying for an AFSL in June 2011. 475Mr McNamara's correspondence with ASIC in December 2009, and his enquiry of Mr Robertson in February 2010 suggests to me that Mr McNamara was alive to the issue of whether Woodlawn required an AFSL. His letter to ASIC of 18 December 2009 suggests, indeed reveals, that he had sought advice about the matter "at the time of the engagement" with MVIL, and "on receipt" of ASIC's letter of 7 December 2009. In his email to Mr Robertson of 15 February 2010, Mr McNamara expressed uncertainty as to the need for an AFSL. 476In those circumstances, I could not conclude that Mr McNamara would have knowingly committed Woodlawn to the provision of services to MVIL for which an AFSL was needed, without taking steps to ensure that Woodlawn had an AFSL. The contrary was not put to him in cross-examination. 477In those circumstances, in order to consider the hypothetical question of what would have happened had the issue of the need for an AFSL arisen prior to entry by Woodlawn into the First IMA (whether by disclosure by Woodlawn or otherwise), it would not in my opinion be realistic to assume, as is implicit in Mr Poponawa's evidence, that not only was it revealed that Woodlawn needed an AFSL but that Woodlawn "was taking no steps to obtain the necessary licence" (see [461] above). 478Further, it would be necessary to consider all the circumstances that led to MVIL considering Woodlawn's appointment as its investment manager, in order to understand what motivated MVIL to consider Woodlawn's appointment in the first place, and thus place in context the likely impact of the hypothetical revelation that Woodlawn needed, but did not currently have, an AFSL. I was not taken to any such evidence and no submissions were addressed to me on this topic. Obviously enough, for one reason or another, MVIL was persuaded that its best interests lay in appointing Woodlawn. In those circumstances I consider that I should assume that the parties were otherwise inclined to enter into the First IMA, that is to say that MVIL was otherwise content to appoint Woodlawn to manage its Portfolio. 479Further, what am I to assume to be the circumstances in which the question arose? What am I to assume Mr McNamara or Mr Breen would have said about the need to obtain an AFSL? Presumably, Mr McNamara would have referred to the advice that, in his letter to ASIC of 18 December 2009, he stated that he had obtained "at the time of the engagement". I can only speculate what would have been said about that, and how that would have influenced MVIL's decision making process. These matters were not explored in cross-examination. 480I am not able to conclude in these circumstances that, had the question of the necessity for Woodlawn to have an AFSL arisen prior to the execution of the First IMA, Mr Poponawa would simply have recommended to the Board of MVIL against appointing Woodlawn, or that the Board would have so decided. 481It seems to me to be just as likely, indeed more probable that, had the question arisen, Woodlawn and MVIL would have acted as they did in July 2011; namely Woodlawn would have given an explanation of the advice it had received to date and, undertaken to seek an AFSL if necessary, and MVIL would have been content to proceed on that basis. 482If that be wrong, and if revelation to MVIL that Woodlawn needed, but did not have, an AFSL would have led MVIL to decide not to engage Woodlawn (that is, if there had been "no transaction"), the question arises as to what position MVIL would now be in. 483In that regard MVIL submitted: "The alternative universe (what would have happened if the misleading or deceptive conduct had not happened) is that MVIL [would] not have dealt with Woodlawn, and would not have signed the IMAs and related agreements. It is acknowledged though that MVIL would have retained a competent manager which would have charged reasonable fees. It should also be assumed that [the] broker would have complied with MVIL's aims and constraints. Accordingly the alternative universe is one in which MVIL's funds invested with an aim to do a little better than the ASX200 whilst avoiding the sorts of derivate exposures in which Woodlawn engaged." 484This submission invites me to engage in an exercise similar to that which arises in relation to MVIL's damages claim in respect of Woodlawn's breach of the Dual Object Term. 485Mr Risk did express the opinion that Woodlawn's combined administration, investment management and foreign exchange administration fee of 4.5 per cent of the value of the Portfolio was "excessive". Mr Risk opined that these fees were considerably higher than industry practice in the period from 2009 to 2011; which are normally in the vicinity of 0.4 - 1.2 per cent per annum extending to 1.2 - 2.0 per cent per annum for more specialised funds (albeit in the context of his assumption that it was a term of the Mandate that 80 per cent of MVIL's funds be retained on cash deposit; a proposition now abandoned by MVIL - see [34] above). 486Otherwise, this submission asks me to assume that any other "competent manager" would have caused MVIL's Portfolio to weather the storm in the financial markets of July and August 2011 without sustaining any loss greater than that suffered by the ASX200. For the reasons I have set out in relation to MVIL's damages claim for breach of the Dual Object Term, my conclusion is that the evidence is insufficient for me to reach such a conclusion. The letter of 6 July 2011 487MVIL alleges that Woodlawn's letter of 6 July 2011 (which I have set out at [413] above) was misleading as it "conveyed uncertainty about whether Woodlawn required an AFSL and the consequence of not having an AFSL". 488MVIL made the same submission about the statements made by Mr Breen and Mr McNamara to Dr Mua and Mr Poponawa on 7 July 2011 (assuming, as I have found, that those conversations took place). 489MVIL contends that Woodlawn's statement in the letter that "an ASIC review" had indicated that Woodlawn had "met its licensing requirements" and that Mr Breen's statement (at [416]) that "ASIC raised" with Woodlawn the need for an AFSL licence "and did not require us to have one" was misleading. 490As I have said, on 7 December 2009, ASIC wrote to Woodlawn stating that "it is has come to the attention of ASIC that Woodlawn may be carrying on a financial services business without holding" an AFSL. 491Mr McNamara replied by his letter of 18 December 2009. There is no evidence of any response from ASIC to this letter. In those circumstances it may not have been accurate for Mr Breen to say in Woodlawn's letter of 6 July 2011 that there had been "an ASIC review" the result of which was that Woodlawn had "met its licensing requirements" or that ASIC "did not require" Woodlawn to have an AFSL. 492MVIL also alleged that it was misleading for Woodlawn to say, in its letter that its "initial legal advice" was that Woodlawn had met its licensing requirements. However, as I have said, McNamara was not challenged in cross-examination about his statement in his 18 December 2009 letter about taking advice "at the time of the engagement". 493Woodlawn's reference in its letter of 6 July 2011 to having "subsequently" received "separate legal advice" was evidently a reference to advice it received from Baker & Mackenzie in or about June 2011. 494The only significance that MVIL attached to this conduct was as follows: "The significance of putting the misleading or deceptive conduct this way is only if MVIL is held to otherwise have lost its s 925A right because of delay. Accordingly if the Court has already rejected delay as a defence to the s 925A argument, this part of the case may be ignored. The real point of this exercise is that Woodlawn should not be permitted to rely on any alleged delay it caused or contributed to so as to defeat MVIL's claim. This is a concept the Court may already have grappled with in the context of s 925A as set out above. The second element of the misleading or deceptive conduct case simply gives statutory force to the conduct relied. Accordingly the consequence is not a claim for damages, but the source of power preventing Woodlawn from relying on its own conduct alleging delay". 495I understood this submission, which was barely developed orally, to mean that assuming that I were to find that MVIL has lost its right to rescind under s 925A of the Act (as I have - see [447] and [451] above) then MVIL's delay in not terminating the agreements until 17 November 2011 could be explained or justified by reference to the matters I have set out above concerning the 6 July 2011 letter. 496The question which arises is as to whether MVIL would have acted differently if, on 6 and 7 July 2011, Woodlawn had given a more fulsome account of the position; in particular whether MVIL would have terminated the agreements then, rather than on 17 November 2011. 497I am not satisfied that revelation of the "true" position would have made any difference to MVIL's actions. 498As I have discussed above, it is by no means clear what prompted MVIL to send its termination letter of 17 November 2011. I am not satisfied that a more complete statement by Woodlawn of its position so far as concerns its AFSL in July 2011 would have caused MVIL to terminate earlier. Was GST payable on Woodlawn's fees? 499This is the first of two discrete issues which arise concerning the calculation of the Woodlawn's fees (assuming they are recoverable). A number of other such issues were resolved by the parties during the course of the hearing. The question of the date of termination of the AMA (see [171] - [177] above) also touches on the question of calculation of fees. 500Woodlawn included GST of $2,690,534 in its tax invoices for fees. It has remitted to the Australian Tax Office that part of the fees paid to it by MIVIL as represented GST. 501At all relevant times, Woodlawn acted as a trustee of MVIL's funds, and thus held the funds on trust for MVIL ("the Trust"). The Trust arose from the terms of the Trust Deed, the acknowledgment in cl 9.3 of the Second IMA that Woodlawn held the Portfolio on trust for MVIL, and the definition of Portfolio itself in the Second IMA (which referred to "all funds held on trust" by Woodlawn "on behalf of" MVIL). 502So far as concerns the AMA, Woodlawn accepts that GST was not payable in respect of services rendered to MVIL outside Australia. The controversy between the parties was confined to the question of whether GST was payable for the services rendered by Woodlawn under the IMA. 503The issue that divides the parties is whether the services supplied by Woodlawn pursuant to the IMAs and the AMA were made "to" MVIL, or "to" the Trust. 504The "GST Act" (A New Tax System (Goods and Services) Act 1999 (Cth) provides: (a)GST is payable on, relevantly, "taxable supplies" (s 7-1); (b)a party makes a "taxable supply" if that party makes the supply "for consideration" unless such taxable supple is "GST-free" (s 9-5); (c)"supply" is "any form of supply whatsoever" including the "provision of advice or information" and a "financial supply" (s 9-10); and (d)a supply that is "made to a non-resident who is not in Australia when the thing supplied is done" is an example of a "GST-free supply" (s 38-190, and Item 2 of the table thereto). 505If the supply was "to" MVIL, a "non-resident" for the purposes the GST Act, then the supply is "GST-free" for the purposes of the GST Act (see ss 7-1, 9-5, 9-10 and 39-190, and Item 2 of the table thereto). 506In my opinion, examination of the IMAs reveals that Woodlawn "supplied" its "advice" and "financial supply" to MVIL. 507Thus: (a)by cl 2(a) MVIL appointed Woodlawn "to manage the Portfolio on the terms set out" in the IMAs; (b)Woodlawn undertook the duties set forth in cl 3.1 of the IMAs, which duties were plainly owed to MVIL; (c)clause 4.2 of the IMAs stated, in terms, that the services under the IMAs were "performed for MVIL"; (d)although Woodlawn was entitled to take its fees from the monies held by it on trust (cll 5.2, 5.3 and 5.4 of the Mandate which state the fees may be "withdrawn from the Portfolio" and cl 5.11 of the Trust Deed to which entitles Woodlawn to be paid "from the Trust Property"), MVIL (and not "the Trust") was the party obliged to pay those fees (for example, cl 6.1(a) of the IMA); (e)the release and indemnity in cl 5 of the Second IMA is from MVIL; and (f)the party entitled to terminate the Second IMA is MVIL. 508The Mandate itself also demonstrates that the services were provided "to" MVIL. Thus, the "Investment Aims" were expressed to be those of MVIL, and "The Investment Strategy" was expressed to be one to be adopted by Woodlawn "in order to achieve" those "Investment Aims". 509On 22 July 2014, Woodlawn received a private ruling from the ATO to the effect that GST was payable on the services it supplied to MVIL under the IMAs and the AMA. 510It is common ground that the Private Ruling is not binding on Woodlawn or the Commissioner of Taxation. The form of the Private Ruling suggests that although the ATO was provided with a copy of the Mandate and the Trust Deed, it was not provided with a copy of the IMAs itself. Perhaps for that reason, the Private Ruling proceeds upon the assumption that the relevant supply was by Woodlawn "to the Trust". The Private Ruling thus proceeds on what I regard to be a false basis. 511For these reasons, my conclusion is that GST was not payable in respect of the services rendered by Woodlawn under the IMAs. As I have mentioned, it is common ground that GST was not payable in respect of the services rendered by Woodlawn under the AMA to the extent that those services dealt with property beyond that the subject of the IMAs (that is to say property outside Australia). 512I will invite submissions as to what consequences flow from this conclusion including as to whether the deduction by Woodlawn of GST was an Event of Default. Was Woodlawn entitled to calculate fees on previously earned but unpaid fees? 513Two questions of construction arise. 514The first is in relation to the cll 5.3, 5.4 and 5.5 of the Mandate (which deal with the calculation of Woodlawn's Investment Management Fee, Administration Fee and Foreign Exchange Hedging Fee). 515Each of those clauses is in the following terms: "In consideration for [Woodlawn] providing the services specified in this deed, [Woodlawn] is entitled to [the relevant fee] at the rate of [the relevant amount] % per annum on the gross Portfolio value (before fees) determined on the last day of each month. This fee accrues daily, is payable monthly and will be withdrawn from the Portfolio by [Woodlawn] within 7 days from the last day of the relevant month, or as otherwise determined by [Woodlawn] in its absolute discretion, in accordance with this deed." 516It is common ground that, by reason of the second of the two paragraphs in these clauses, Woodlawn had a discretion as to whether or not to withdraw its fees from the Portfolio within seven days of the last day of the month in question. 517What is contentious is the role played by the words "(before fees)" in the first paragraph. 518The effect of the two paragraphs is that the relevant fee "accrues daily" but is "payable monthly" and is to be "determined on the last day of each month". 519In my opinion, reasonable business people in the position of the parties (see Electricity Generation v Woodside referred to at [164] above) would understand the effect of the words "(before fees)" to be that the relevant fee was to be calculated on the last day of each month by reference to the "gross Portfolio value" on that day without deduction of the fee to be calculated for that month. That is not a surprising result, as the subparagraphs are directed to the question of how to calculate the relevant fee for that month. 520I do not, however, consider that reasonable business people in the position of the parties would have intended that Woodlawn could increase the amount of fees payable to it by simply exercising its discretion not to withdraw its fees from the Portfolio for a particular month, and thereby inflate the value of the Portfolio for the purpose of calculation of its fees for the next month. 521Accordingly, my opinion is that reasonable business people in the position of the parties would consider that although fees for the month in question should be calculated by reference to the "gross Portfolio value" without deduction of the fee to be calculated for that month, such fees would be calculated after deduction of fees paid, or payable, for earlier months (whether or not Woodlawn had actually withdrawn those fees from the Portfolio). 522A second, and similar, question of construction arises in respect of Woodlawn's Performance fee. 523Clause 5.2 of the Mandate provides that: "[Woodlawn] is entitled to receive a performance fee from MVIL of 20% of the New Profit. This fee accrues daily, its payable quarterly and will be withdrawn from the portfolio by [Woodlawn] within 7 days from the last day of the relevant quarter, or as otherwise determined by [Woodlawn] in its absolute discretion, in accordance with this deed." 524One of the integers in the calculation of "New Profit" is "Return" which is defined as follows: "Return means, in respect of the investment activities of the Portfolio and for a Quarter, the amount (which may be negative) of all realised and unrealised gains (including interest accrued on investments, and before deduction of Administration and Investment Management Fees) less [a number of matters]". 525Again, the debate between the parties as to the role played by the words "before deduction of Administration and Investment Management Fees". 526By parity of reasoning with my conclusions concerning the Investment Management and Administration Fees themselves, my conclusion is that reasonable business people in the position of the parties would have intended the words "before deduction of Administration and Investment Management Fees" to have the effect that Woodlawn's Performance Fee for the relevant quarter would be calculated by reference to the value of the Portfolio without deduction for the Administration and Investment Management Fees due to Woodlawn for the three months of that quarter; but after deduction of such fees paid, or payable, for earlier quarters. 527In my opinion, cll 5.2 to 5.5 of the Mandate should be construed accordingly. Woodlawn's cross claim for injurious falsehood 528Woodlawn's claim for injurious falsehood arises from a "Public Statement" made by Sir Mekere Morauta, then the Minister for Public Enterprises, on 23 November 2011. 529That public statement was in the following terms: "The Minister for Public Enterprsies, Sir Mekere Morauta, said National Executive Council had endorsed changes to the board of MVIL Limited. The new members are Mr Bonny Igime, Mr Steven Pim, Ms Veronica Waieng, Dr Bangi Kumdim and Mr John Tuka. In announcing the appointments, Sir Mekere stressed that no Public Enterprise chairman would be an executive chairman. 'Reports that executive chairman have been appointed are wrong. 'These new appointments are part of the O'Neill-Namah Government's reforms of IPBC and its Public Enterprises, and I look forward to working with them. 'One of the new board's first jobs will be to recover about K96 million missing from MVIL.' Sir Mekere said the money was the proceeds of the sale of 530,105,100 shares in Bank South Pacific which were owned by MVIL. The sale, to an Australian company called Nominees Niugini Limited, is now the subject of a police investigation. MVIL sold the shares when under the control of the former Minister for Public Enterprises, Arthur Somare, and the former IPBC management. Proper processes had not been followed, and the sale is in breach of Section 45B of the IPBC Act and Section 110 of the Companies Act. The sale was not approved by the IPBC board, as required, and there was no shareholders' resolution approving the sale, as required. The new IPBC board has instructed MVIL to rescind the sale contract, called an Equity Monetisation Contract Agreement. IPBC has begun legal proceedings against MVIL and Nominees Niugini. The money is being held in an account owned by a company called Woodlawn Capital, at the Commonwealth Bank in Lismore, New South Wales. Sire Mekere today called on the former managing director of MVIL, Dr John Mua, to help recover the money. 'Dr Mua could save the nation a lot of money by assisting us in the recovery of the K96 million and its return to IPBC. 'For the nation to recover the money through court proceedings would be expensive and time-consuming. I would like Dr Mua to help us avoid this'." (emphasis added) 530It is common ground that the elements of the tort of injurious falsehood are as stated by Gummow J in Palmer Bruyn & Parker Pty Ltd v Parsons [2001] HCA 69; (2001) 208 CLR 388 at [52], namely: "(1) a false statement of or concerning the plaintiff's goods or business; (2) publication of that statement by the defendant to a third person; (3) malice on the part of the defendant; and (4) proof by the plaintiff of actual damage (which may include a general loss of business) suffered as a result of the statement." 531Woodlawn contends that the statement was made by MVIL because, first, MVIL is an instrumentality of the Crown in right of PNG, and second, that Sir Mekere was the Minister of State with responsibility for MVIL. Third, Woodlawn submitted that: "The statement was published by MVIL. It is an instrumentality of the Crown in right of PNG. Sir Mekere Morauta was the Minister of State with responsibility for MVIL. The terms of the statement make it clear that the author is acting for an on behalf of MVIL in revealing that it had been the victim of corruption, denouncing the parties involved and demanding assistance on its behalf to recover the 'missing money'." 532In my opinion there is no substance in this submission. MVIL did not publish the statement. The Minister did. 533There is no evidence before me to suggest that MVIL played any part in the preparation, production and publication of the statement. The evidence does not enable me to conclude that Sir Mekere was "acting for and on behalf of MVIL". Assuming the Sir Mekere was the Minister of State responsible for MVIL, it does not follow that MVIL is responsible for statements made by him. Further issues 534After the parties have had an opportunity to consider these reasons, I will invite submissions as to the future course of the proceedings. ********** Amendments 01 April 2015 - Quote at par 55: third last sentence of quote inserted 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: 01 April 2015