Agricultural and Rural Finance Pty Limited & Anor v John Edward Atkinson & Ors

Agricultural and Rural Finance Pty Limited & Anor v John Edward Atkinson & Ors - [2010] NSWSC 635 - NSWSC 2010 case summary — Zoe

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CATCHWORDS : Contract - Unjust contracts - Proceedings constitute residue of test case having travelled through a decision at first instance (Agricultural and Rural Finance Pty Ltd v Atkinson and others) [2006] NSWSC 202, a decision before the New South Wales Court of Appeal (sub nom Gardiner v Agricultural and Rural Finance Pty Ltd) [2007] NSWCA 235 and the decision of the High Court of Australia (sub nom Agricultural and Rural Finance v Gardiner) (2008) 238 CLR 570 - Remaining issues concern defendants' Contracts Review Act and punctuality cases - Whether Act applies - Whether defendants entered into contracts in the course of or for the purpose of a trade, business or profession within the meaning of s 6(2) - Proper scope of that exclusion - Whether it covers investment contracts entered into as a matter of personal finance - Whether the farming exception contained in s 6(2) applies to the first defendant - Proper scope of that exception - Ellison v Vukicevic (1986) 7 NSWLR 104 at 111 applied - Relevant steps involved in applying s 7(1) of the Act - Framework for determining whether a contract is unjust within the meaning of s 7(1) - Point at which it is determined whether a contract is unjust - Whether the Court focuses on the particular contract or the overall transaction - Principles concerning meaning of 'unjust' under the Act - Factors contained in s 9(2) are not exhaustive - Whether, if it is established that provisions of one contract are unjust, it is possible to obtain relief in respect of a related contract - Public interest consideration under s 9(1) - Baltic Shipping Company v Dillon "Mikhail Lermontov" (1991) 22 NSWLR 1 applied - Provisions in question were not subject of negotiation, whether negotiation was reasonably practicable - Purpose of s 9(2)(b), 9(2)(c) - Whether provisions in question were particularly complex - Whether provisions in question reasonably necessary for protection of legitimate interests of second cross defendant, the indemnifier - Whether loss of indemnity was a grossly disproportionate consequence in the event of late payment of interest and principal payments - Contracts Review Act 1980 ss 4, 6, 7, 9,15, 16, Sch 1 - Onus of proof - Whether issue was decided in Gardiner Test Case - Defendants bear onus of proving punctual performance - Evidence - Probative value of evidence substantially outweighed by danger that evidence would if allowed by unfairly prejudicial to the plaintiff and/or be misleading or confusing and/or cause or result in undue waste of time - Evidence Act 1995 s 69(2)

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Agricultural and Rural Finance Pty Ltd v Atkinson and others [2006] NSWSC 202 Agricultural and Rural Finance Pty Ltd v John Edward Atkinson & Ors [2010] NSWSC 42 Agricultural and Rural Finance Pty Ltd v John Edward Atkinson & Ors [2010] NSWSC 311 Agricultural and Rural Finance Pty Ltd v John Edward Atkinson & Ors [2010] NSWSC 425 Agricultural and Rural Finance v Gardiner (2008) 238 CLR 570 Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1 Antonovic v Volker (1986) 7 NSWLR 151 Australian Guarantee Corporation Ltd v McClelland (1993) ASC 56-230 Baltic Shipping Company, The "Mikhail Lermontov" v Dillon (1991) 22 NSWLR 1 Beneficial Finance Corporation Ltd v Karavas (1991) 23 NSWLR 256 Borg-Warner Acceptance Corporation (Australia) Ltd v Diprose [1988] ANZ ConvR 57 Bridge Wholesale Acceptance (Australia) Ltd v GVS Associates Pty Ltd (1991) ASC 56-105 Broadlands International Finance Ltd v Sly [1987] ANZ ConvR 328 Central Commodities Services Pty Ltd v Hertzog (1989) ASC 55-706 Citicorp Australia Ltd v O'Brien (1996) 40 NSWLR 398 Collins v Parker (unreported, Lee J, 11 May 1984) Commercial Bank Co of Sydney Ltd v Pollard [1983] 1 NSWLR 74 Coombs v Bahama Palm Trading Pty Ltd (1991) ASC 56-097 Elders Rural Finance Ltd v Smith (1996) 41 NSWLR 296 CASES CITED : Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 Ellison v Vukicevic (1986) 7 NSWLR 104 Ford (by his tutor Watkinson) v Perpetual Trustees Victoria Limited (2009) 257 ALR 658 Gardiner v Agricultural and Rural Finance Pty Ltd) [2007] NSWCA 235 Hogan v Howard Finance Limited (1987) ASC 55-594 Holman v Deol [1979] 1 NSWLR 640 Horniblow v Napier [1955] NZLR 104 King Mortgages v Satchithanantham; Cash King Pty Ltd v Satchithanantham [2006] NSWSC 1303 Kowalczuk v Accom Finance Pty Ltd (2008) 252 ALR 55 Lander v Trigger [1999] NSWSC 1253 Lowe v JW Ashmore Ltd [1971] Ch 545 Miller Associates (Aust) Pty Ltd v Bennington Pty Ltd [1975] 2 NSWLR 506 Nguyen v Taylor (1992) 27 NSWLR 48 Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41 Riz v Perpetual Trustee Australia Ltd (2008) NSW ConvR 56-198; [2007] NSWSC 1153 Roach & Ors v Page & Ors (No. 15) [2003] NSWSC 939 Spina v Permanent Custodians Ltd (2009) 14 BPR 26,923 Tilley v Official Receiver in Bankruptcy (1960) 103 CLR 529 Wallis v Downard-Pickford (North Queensland) Pty Ltd (1994) 179 CLR 388 West v AGC (Advances) Limited (1986) 5 NSWLR 610

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"The expression 'for the purpose of' has the meaning that the contract under consideration is entered into as an ordinary incident of the carrying on of a particular trade, business or profession then being carried on or proposed to be carried on." 28 This interpretation of the Act has been subsequently approved: see, eg, Lander v Trigger [1999] NSWSC 1253 at [53], King Mortgages v Satchithanantham; Cash King v Satchithanantham [2006] NSWSC 1303 at [133] and Wallis v Downard-Pickford (North Queensland) Pty Ltd (1994) 179 CLR 388 at p 400 (regarding a slightly different statutory context). Peden, The Law of Unjust Contracts (Butterworths, 1982) ('Peden') at 116 comments that the exclusion contained in s 6(2) 'applies to contracts with a mixed business and private purpose', giving the example of a motor vehicle used for the dual purpose of business and private use. 29 In the recent case of Ford v Perpetual Trustees, supra, Allsop P and Young JA, Sackville AJA agreeing, at [95] emphasised the need in applying subsection 6(2) to focus on the statutory language contained therein. At [98] their Honours said that '[t]he application of s 6(2) should be looked at as a matter of substance and not form'. 30 Of relevance to the present case is Central Commodities Services Pty Ltd v Hertzog (1989) ASC 55-706, where the contract in question was a mortgage entered into to secure a share in the Cypart Trust No 5, [a trust of an investment company]. At p 58, 372, Callaway AJ noted that 'although the defendant claimed that he wished to become a trader, this wish related to trading on his own account and did not relate to the investment in Cypart No 5'. Accordingly, the exclusion contained in s 6(2) did not apply. This decision provides some support for the proposition that where an investment contract is entered into as a matter of personal finance, rather than in the course of or for the purpose of a 'trade, business or profession' that relates to investing, s 6(2) will not apply. The commentary in Seddon and Ellinghaus, Cheshire and Fifoot's Law of Contract (Lexis Nexis Butterworths, 9th Aus ed, 2008) ('Cheshire') at 779 in relation to the case supports this view. 31 Ultimately, the question to be answered is whether the contracts in question were entered into in the course of or for the purpose of a trade, business or profession carried on by the defendant in question or proposed to be carried on by them. In my view the position is as follows:

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iii. In particular, "the Manager" alone must perform the covenants to be performed by "the Farmer" under the agreement to farm the allotment: see cl. 25.1. The Manager farms the tea trees, critically, not as the Farmer's agent, but rather as a principal in consideration of the right to remuneration provided for in clause 19: see clause 15.2 of the licence and management agreement. 38 The plaintiff's submission in this area was essentially that since investors only had a mere license to their allotment(s), and all of the actual operations were carried out by OAL (the manager), there was no farming undertaking proposed to be carried on by the defendants. The plaintiff also contended that the defendants' were not covered by the policy reasons that underlay the farming exemption. As to the latter point, the relevant second reading speech does not decisively resolve the matter (New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 25 March 1980 at 5860-5861). Furthermore, as outlined above, there is persuasive case law as to the scope of the exception. 39 The plaintiff's submissions in this area were not made in light of the relevant case law regarding the meaning of 'farming' under the Act. Vukicevic, extracted above, establishes that a landowner granting mining rights to a quarrying company will come within the expanded definition of 'farming' under the Act. Relevantly, there is nothing in that judgment which indicates that the landowner herself needed to engage in any activity on the land in order to come within the exception. This undercuts much of the plaintiff's submissions, which were made from the premise that the defendants, as licensees of the land who did not engage in any activity on the land themselves, could not come within the farming exception. Furthermore, in Vukicevic the relevant activity on the land was not being carried on by an agent of the landowner. Therefore, the fact that in the present case the manager was not an agent of the farmer does not have the significance contended for by the plaintiff in establishing that the farming exception does not apply. 40 In determining whether Mr Atkinson was engaged in a farming undertaking it is relevant to consider the nature of the interest that he gained upon investing in the project, bearing in mind that the relevant case law concerns a landowner granting rights to her land. The plaintiff made its final submissions (against application of the farming exception) on the basis that the defendants gained a mere license to their allotments. This follows from clause 2.1 of the license and management agreement. Other clauses of the agreement that are relevant to the present issue are as follows:

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(2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following: (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not: (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of: (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act: (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made.

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Where the Court has to apply a standard as general as what is "unjust", it cannot be confined by such reasons as if they were rules. I do not understand McHugh JA to have put forward these observations as rules. Rather, the observations are to be understood, correctly, as identifying relevant considerations entitled to significant weight. The factors contained in s 9(2) of the Act are not exhaustive 60 Recently in Spina v Permanent Custodians Ltd (2009) 14 BPR 26,923, Young JA, Tobias and Campbell JJA agreeing, noted at [80] that '… in making its decision, s 9(1) of the Contracts Review Act mandates the Court have regard to the public interest and to all the circumstances of the case. Subsection (2) is merely a list of the major factors to be considered'. See further Cheshire at 779 where the s 9(2) cases are described as 'a guide rather than an exhaustive definition', citing substantial authority. 61 Notwithstanding this, analogous situations are a useful guide in determining whether a contract is unjust, and in maintaining consistency in the application of the Act: Spina at [105]. 62 It is also necessary to remember that the mere fact that a party to a contract can point to circumstances that fall within the words of one or more paragraphs in s 9(2) of the Act does not mean that there is an arguable case for relief under the Act: Hogan v Howard Finance Limited (1987) ASC 55-594 at 57, 539 (Hope JA, Street CJ agreeing); Australian Guarantee Corporation v McClelland (1993) ASC 56-230 at 58, 389. The "agreements" in respect of which relief is sought and their operation 63 In this part of the case it is necessary to bear in mind the precise contractual provisions in respect of which relief is sought. The defendants plead that each of clauses 2(a) and 2(b) of the indemnity agreement was "a provision of a contract" which was unjust at the time it was made within the meaning of s. 7(1). Relief is also sought with respect to clause 7 of the loan agreement (Atkinson defence [31(b)]. 64 It is instructive to review how the relevant provisions operated. Using the loan agreement of Mr Atkinson dated 26 June 1997 as an example, Orange Tab 5, it can be seen that:

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(b) The Borrower has punctually paid reductions of the Principal Sum set forth in clause 4.1 of the loan agreement… 68 Clauses 2(a) and (b) are clear in their terms and provide that the indemnity is only "effective and enforceable if the Borrower has 'punctually paid' the interest and reductions of principal pursuant to Clauses 3.2, 3.3(a) and 4.1 of the loan agreement". 69 If this occurred the indemnity agreement would be "effective and enforceable", and accordingly, under Clause 7 of the loan agreement, the Borrower would have no liability to repay any outstanding principal or interest. Conversely, if the relevant payments were not 'punctually paid' the indemnity would not be 'effective and enforceable'. 70 I accept the plaintiff's submission that while the detail of Projects 1 and 2 might have some complexity attached to them, there was nothing particularly complex about clauses 2(a) and (b) of the indemnity agreement and clauses 3.2, 3.3, 4.1 and 7 of the loan agreement. 71 The plaintiff submitted that although it was not pleaded, the defendants' case involved an implicit contention that clauses 3.2, 3.3(a), 4.1 and 7 of the loan agreement were, in combination with clause 2(a) and 2(b) of the indemnity agreement, also unjust at the time the loan agreement was made. The real issue here appears to be that the defendants only pleaded that clauses 2(a) and 2(b) of the indemnity agreement were unjust, but then sought relief in respect of clause 7 of the loan agreement. It would ordinarily seem proper for the defendants to plead that all the provisions in respect of which they sought relief were unjust (that finding being a pre-requisite to the gaining of relief). The fact that, as these reasons outline, it is permissible to have regard to the wider transaction in determining whether a provision of a contract is unjust, does not alter this position. Furthermore, on one reading of s 15 of the Act, which allows the Court to have regard to other contracts which in combination with the impugned contract constitute an arrangement, it is still necessary to plead the specific contract(s) in respect of which an application for relief under the Act is made. Against this, it may be possible to grant relief in respect of one contract where another contract has been held unjust under the ancillary powers available under s 8 and Sch 1, paragraph 1, of the Act: see Peden at 147-148. It is this possibility that the defendants' case - contending that the indemnity and loan agreements should both be rewritten because clauses 2(a) and 2(b) of the indemnity agreement are unjust- seems to rely on. 72 However, ultimately this issue does not affect the final result, since even on the broadest possible reach of the defendants pleadings, it has not been established that any of the provisions in question were unjust. The Contracts Review Act case as pleaded 73 Of course the active defendants were selective in determining which of the matters identified in section 9 of the Act were relied upon. These matters were carefully chronicled in the 10 May reasons [at 15 and following]. 74 Additionally the defendants' final submissions on a number of occasions blithely eschewed the fact that a large number of those submissions in relation to the Contracts Review Act were simply outside the scope of the pleading and were contrary to the rulings of 21 April and 10 May. An example is to be seen in the section entitled 'the Penal Operation of the scheme', at paragraph 216-and following. 75 Dealing with the permissible pleaded defences it seems clear enough that they were only reliant on the matters in ss. 9(1)(b), 9(2)(b), (c), (d), (g) and (l) of the Contracts Review Act. Application of the relevant parts of s 9 in the facts of the present case 76 I now turn to examine the relevant considerations under s 9 in light of the facts of the present case in order to determine whether the provisions in question were unjust. The public interest: Section 9(1)

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99 Relevant here is the High Court's judgment in the Gardiner Test Case at [37]. In that paragraph, the High Court accepted that OAL had a direct financial interest in punctuality on the basis that this determined whether it was liable on the indemnity, and therefore whether or not it had a contingent liability on its balance sheet. 100 The High Court was not considering the present issue as required by s 9(2)(d) of the Act. However, in light of the High Court's finding, it is appropriate to regard one of OAL's legitimate interests - when applying s 9(2)(d) of the Act - as whether it remained liable on the indemnity. To protect this interest OAL needed to set criteria by which its liability under the indemnity would be determined. On one view, the chosen criteria of the indemnity being conditional on punctual payment was reasonably necessary for the protection of OAL's legitimate interest in ensuring certainty as to its contingent liabilities. As the plaintiff contended, under the alternative way in which the defendants suggested the indemnity could have operated, OAL's contingent liabilities would be determined by ARF's discretion. 101 It is useful here to consider Peden who notes at 128 that 'the [s 9(2)(d)] criterion contemplates a balancing of the protection of the legitimate interests of all parties to the contract'. He further notes that conditions which may be not reasonably necessary included 'penalty provisions which impose additional obligations upon a party for breach which are wholly disproportionate to the loss or damage caused by the breach'. 102 As outlined above, the defendants pleaded that ARF and OAL's interests could have been legitimately protected if the borrower paid interest for the period in which a payment was late, and the indemnity remained enforceable. Implicitly, this was a contention that arrangement would be more proportionate to the loss suffered by OAL and ARF (which was characterised as being out of funds for the relevant period). 103 The defendants' contentions give no weight to the legitimate interest of OAL in whether it remained contingently liable under the indemnity. Ultimately, it cannot be said that the relevant provisions were not reasonably necessary for the protection of the legitimate interests of OAL. 104 Furthermore, it seems straightforward that both OAL and ARF and the investors had a legitimate interest in the scheme being tax deductible. The plaintiff essentially submitted that the structure of the indemnity agreement as interpreted in the Gardiner Test Case - which meant that the loans were not 'non-recourse' - was necessary in order to protect this interest. 105 On the issue of tax deductibility in the Gardiner Test Case the High Court at [38] left Spigelman CJ's observations in place. At [89] Spigelman CJ noted that the characterisation of the loans as 'non-recourse' would increase the risk of rejection of tax deductibility but would not be determinative. However, the observations of Spigelman CJ at [81] make clear that the characterisation as 'non-recourse' did not simply turn on whether the investors could be held personally liable for repayment of the loans. Accordingly, this point does not appear to assist the plaintiff's case in this area. In any case, it does not alter the overall conclusion in relation to this part of the pleading.

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"in numerous respects Ms Edwards' oral evidence demonstrated the inaccuracy of her written evidence in a way clearly demonstrating her remoteness from the authorship of that written evidence. She took no proper care to satisfy herself of the accuracy of what she was asked to swear to and her credibility in giving non-partisan evidence from her personal knowledge alone was thereby fatally compromised". 133 This was a serious allegation, suggesting Ms Edwards was not the real author of the affidavit but merely went along with the person who drafted the affidavit. 134 The plaintiff objected to the defendants' attack on Ms Edwards on the basis that it had not been put to her in cross-examination. In my view, this submission has some real substance, which is apparent from a comparison of the final attack and the cross-examination (as occurs in these reasons). However, in one sense this is beside the point since these reasons, bearing in mind the defendants final attack, accept Ms Edwards as a witness of credit. 135 The defendants' contention that Ms Edwards was not the author of her own affidavit but merely went along with the person who drafted the affidavit was not squarely put to her and should have been. See Odgers Uniform Evidence Law, 5th ed at [1.2.4440]; Allied Pastoral Holdings Pty Ltd v FCT [1983] 1 NSWLR 1 at 23. The defendants did in several instances put to Ms Edwards that she was careless in the preparation of her affidavit: 387.44-48, T391.21, but this differs substantially from an allegation that she was not the author of it. 136 A second related point in the defendants' final attack was that Ms Edwards chose to, or was induced to, exaggerate in her affidavit evidence. The basis of the submission was her use of the word "invariably", in relation to her entry of receipt of payments in the Excel spreadsheet on the same day that payments were received by ARF. The defendants drew on the fact that Ms Edwards was forced to concede that the word "invariable" was an overstatement (transcript page 393, lines 33-5) and that it was actually a matter of "usual practice" (transcript page 393, lines 37-8). 137 Furthermore, the defendants submitted that the proposition as to the "invariable" practice was obviously unsustainable, since Ms Edwards was not at work for OAL on every single day during the relevant period. In cross-examination the defendants pursued this contention, and it was established that Ms Edwards was a full time employee of OAL from August 1997 to March 2001. She worked continuously other than annual leave or sick leave, and did not always take four weeks annual leave in every calendar year (not all her annual leave was used up by the end of her employment in March 2001, and was instead paid as part of her severance). She did take sick leave: 326.34-49. She was not often away for any length of time: 393.17. 138 In my view nothing in the defendants' attack relating to the fact that Ms Edwards only gave evidence of a 'usual procedure' alters the finding that, as a witness of credit, her evidence supports the plaintiff's records being correct unless shown otherwise. It can be noted here that the plaintiff did not put its final case higher than a 'usual procedure'. 139 Another point in the defendants' final attack was that Ms Edwards' evidence - principally here they seemed to be referring to alleged concessions under cross examination - showed the following:

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c. In relation to Mr Holmes, his counsel drew on the fact that VAE2 records the cheque in question as having been received on 24 October 1997. Essentially, as is explained elsewhere in these reasons, the plaintiff sought to bank the cheque on that date but the ANZ Bank would not accept the deposit. Accordingly, the cheque was sent back to Mr Holmes with a relevant form, and only received by the plaintiff in a valid form, that it could bank, after the relevant due date. The defendants counsel highlighted that Ms Edwards deposed that she treated Mr Holmes' payment as having been non-punctual once she became aware of this sequence of events, but in re-examination could not explain why the entry in the spreadsheet had been left as 24 October 1997 (see T400.3). Similarly, in a letter dated 13 November 1997 (at VAE1 page 380) Ms Edwards had given Mr Holmes confirmation that his cheque was received on 24 October 1997, and the conditions of his loan agreement had been complied with. These errors are not accepted as undermining the general finding that Ms Edwards is a witness of credit. Furthermore, as these reasons outline elsewhere, ARF only received a valid cheque from Mr Holmes after the due date, and he therefore does not have a valid punctuality defence. 144 As has been made plain, the defendants' attack on the credibility of Ms Edwards - and therefore the reliability of the plaintiff's records - is rejected. Ms Edwards is accepted as a witness of credit, and the plaintiff's records are accepted as reliable unless shown otherwise. The defendants' evidence Australia Post material 145 Very late in the proceedings the active defendants sought to tender material produced by Australia Post pursuant to a subpoenas issued by the plaintiff. The plaintiff objected to this material being admitted into evidence. The Court heard both parties on the issue and made plain that a decision would be made and in due course announced when the final judgment was handed down. 146 I am firmly of the view that the Australia Post material should not be permitted into evidence for a number of reasons:

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(c) cause or result in undue waste of time The defendants' attempted inference regarding collection of the post by the plaintiff 148 As outlined elsewhere in these reasons the onus is on the defendants to establish that the cheques were received by the due date. Ms Edwards gave evidence of collecting the post on a daily basis. In final submissions, the defendants contended for an inference that when Ms Edwards collected the mail each day she did so before mail was sorted and delivered into the post office box. That is, that each day she was collecting the previous day's mail. The point of this submission was to establish that the plaintiff's records could not be taken as proof of the date at which payments reached the plaintiff's post box (and therefore should be taken as received). Rather the records were said to only be evidence of the date on which the payments were collected from the post box and processed by the plaintiff. This submission was never put to Ms Edwards. It was never suggested that each morning she was collecting the previous day's mail or that she was unable to see that that morning's mail had been sorted through the open back of the post box as she emptied it. 149 The defendants bear the onus to establish when the mail was delivered. They led no evidence of when (in terms of the time of day) deliveries are made to Port Macquarie and when the mail is placed in the post office box. Had the defendants sought to cross-examine to support the contention they now raise it may have been apparent that there is no substance in this contention. 150 Moreover the Court has been asked to speculate about when the post was sorted at the Port Macquarie Post Office when this was a matter for proof by the defendants. The inference suggested by the defendants is rejected. The evidence in relation to particular defendants John Edward Atkinson - 1st defendant 151 Mr Atkinson is an accountant and has been in practice for 19 years. He has a Bachelor of Economics and a Bachelor of Laws. He had both qualifications in 1997. Part of his professional practice is the preparation of clients' tax returns and the giving of taxation advice: T642. 152 Mr Atkinson was responsible for his own introduction to the Port Macquarie Tea Tree Projects. He was a tax accountant who introduced a number of his clients to the Projects and was also a person authorised to market the scheme for OAL as he was an authorised representative of OAL in respect of these prescribed interests schemes under the Corporations Law.

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162 Mr Atkinson sought to make the payment of the $729.17 principal instalment on loan TT077 partly by cheque for $379.17 by him dated 29 October 1997 received by ARF on 10 November 1997 and the balance of $350 out of the commissions owing to Structured Securities (his company) by OAL, claimed to be in the sum of $9,100. The balance of the $9,100 in commissions from OAL to Structured Securities, namely, the sum of $8,750, was directed by Mr Atkinson to be applied by OAL to meet Mr Atkinson's principal instalment obligation under TT007 which was due on 31 October 1997. 163 The Excel spreadsheet (Ex VAE2) records the payment of $729.17 as having been paid on 10 November 1997. However, the plaintiff contended - as outlined below - that only the part of the payment which Mr Atkinson paid by cheque had been received on that date, and the balance of the payment had only been paid on 6 March 1998. 164 Mr Atkinson made the second and following instalments in respect of Loan TT077 by way of a direct debit system, by which Mr Atkinson's counsel submitted that he had paid those instalments a month early. Accordingly, it was asserted that all of these payments were punctual. However, I did not understand Mr Atkinson's counsel to suggest that the direct debit arrangement had any bearing on the punctuality of the first instalment due on 30 November 1997. Instead Mr Atkinson's counsel contended that OAL had paid the relevant amount on Mr Atkinson's behalf before this due date, and the documentation in March 1998 was merely created to record what had already occurred: T739.35-45. 165 Both parties made their submissions in relation to loan TT077 by reference to the relevant correspondence, which was as follows. Mr Atkinson had sent a cheque dated 29 October 1997 and a short note to Mr Rob Henry, which reflected the payment arrangement outlined above, whereby Mr Atkinson would pay the amounts owing to ARF partly by cheque and the remainder from commission fees owing to his company, Structured Securities, by OAL. ARF's records show this was received on 10 November 1997. 166 By letter of 6 March 1998 (Exhibit P17) Mr Rob Henry of OAL requested Mr Atkinson put a form of words supplied by Mr Henry on Mr Atkinson's letterhead and date it 29/10/97 (reflecting the date of Mr Atkinson's original direction as to payment). Mr Henry stated that the purpose of the request was 'to finalise our [ie OAL's] records' regarding Mr Atkinson's direction of 29 October 1997. The form of words supplied by Mr Henry were a formal way of stating the payment arrangement that Mr Atkinson had earlier agreed with OAL, as outlined above.

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167 Mr Atkinson duly replied to Mr Henry by letter - containing the suggested form of words - dated 29 October 1997 but faxed on 6 March 1998 (VAE1 p. 28). Mr Atkinson agreed, as is perhaps obvious, that the faxed letter he sent Mr Henry on 6 March 1998 had been sent as a result of Mr Henry's letter of 6 March 1998. 168 By letter dated 12 March 1998 Mr Henry informed Mr Atkinson 'The commission[s] listed above have been paid and allocated to the principal reductions of your farms as requested'. 169 Additionally, the document at VAEI p58 entitled 'Commission Agents, agent 001', which appears to form part of OAL's records, records that Mr Atkinson's commissions were paid to a third party (namely ARF), consistently with Mr Atkinson's request, on 6/3/98. 170 The parties disagreed as to how the above outlined correspondence was to be interpreted. The plaintiff contended that it reflected that Mr Atkinson had only paid the full instalment in relation to TT077 due on 30 November in March 1998. Mr Atkinson's counsel suggested that the March 1998 documentation was created simply to record what had occurred before the due date: 739.35-45. 171 The plaintiff sought to drawn on an alleged concession, where under cross-examination Mr Atkinson stated that he presumed by 6 March 1998 OAL had not paid the sum it was to pay on his behalf: T650.20. However, the totality of Mr Atkinson's cross-examination indicates that he maintained the position that the payment had been made by OAL on time and the later correspondence was merely recording what had occurred. 172 Furthermore, the plaintiff contended that Mr Atkinson's counsel had put in cross examination of Ms Edwards that the sum of $350 of the principal instalment due on 30 November 1997 was not paid on 10 November 1997 but on 6 March 1998: T378.31. A close examination of the transcript and the documents being referred to reveals that Mr Atkinson's counsel was in fact referring to the principal payment of $8,750 due in respect of loan TT007. Admittedly, that payment and the $350 in respect of loan TT077 were jointly the subject of Mr Atkinson's direction for OAL to pay commissions owing to him to ARF. In any case, this point does not alter the conclusion reached below on all of the evidence. 173 In the plaintiff's Tender Bundle in reply at p228 there appears a deposit slip of the plaintiff, dated 9 March 1998, which records the deposit of two cheques by OAL with a combined total of $9,100. The description in the plaintiff's deposit book for one cheque, for the sum of $8,750, was "OAL - Principal Loan Reduction TT007". The description for the second cheque, for the sum of $350, was "OAL - Part Pay (1st) TT077". 174 Furthermore, a review of the relevant copies of the plaintiff's deposit book in its Tender Bundle in reply shows that there was no cheque for $9,100 paid on or about 10 November 1997 by OAL. The only relevant cheque which appears is that of Mr Atkinson for $379.17 on the plaintiff's deposit slip of 11 November 1997.

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175 Ultimately, the plaintiff's deposit slips, in the context of the other evidence, enable it to establish that OAL only paid ARF on behalf of Mr Atkinson (for the sum referable to his commissions) in March 1998. Therefore, in respect of the instalment due for Loan TT077 on 30 November 1997 Mr Atkinson was not punctual. His punctuality defence in respect of that loan fails. Loans TT159 & TT189 176 Loans TT159 and 189 required the payment of principal on or before Friday, 30 October 1998, namely the sum of $9,800 due under loan TT159 and $19,600 (two farms) due under TT189, being a total of $29,400. Mr Atkinson sought to make these payments by directing OAL to pay to ARF the sum of $29,400 from commissions due from OAL to Structured Securities (Mr Atkinson's company). 177 Under cross-examination, Mr Atkinson acknowledged that the cheque by OAL for payment of the sum of $29,400 was not drawn by OAL until 2 November 1998: 647.35-37. The payments were due on 30 October 1998, and therefore Mr Atkinson's punctuality defence with respect to these two loans fails. 178 The receipt by ARF of the cheque from OAL in the sum of $29,400 in respect of the principal repayments due for loans TT159 and TT189 are recorded as being received that day in the Excel Spreadsheet (Ex VAE2 pp. 13-14), namely, 2 November 1998 and also recorded in the ARF receipt dated 2 October 1998 a copy of which is at pages 92 and 113 of Exhibit VAE1 (Ms Edwards testified that the receipt should have read 2 November 1998, which is consistent with Mr Atkinson's evidence). There is nothing to suggest that this cheque was processed otherwise than in accordance with the normal procedure of which Ms Edwards gave evidence. The evidence of Mr Atkinson cannot be said to cast doubt upon the accuracy of the plaintiff's records. Peter Brakatselos - 14th defendant 179 ARF alleged that Mr Brakatselos did not fulfil his punctuality obligations under the loan agreement entered into on 24 November 1997 (TT082) in respect of two farms. 180 The plaintiff claimed repayment from Mr Brakatselos of the outstanding principal and interest accrued on loan TT082 in the amounts set out in Annexure B to the plaintiff's final submissions, namely, as at 1 May 2010 the sums of $31,708 principal and $53,779.78 interest. Accountant/Introducer and Occupation 181 Mr Atkinson's company, Structured Securities, introduced Mr Brakatselos to Project 1 in respect of which he borrowed the monies from the plaintiff which are the subject of Loan TT082. 182 Mr Brakatselos has identified his occupation as follows:

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2nd principal instalment of $4,375 under loan TT082 Date Due: Sunday, 31 May 1998 Received by ARF: Monday, 1 June 1998 (1 day late). 186 Mr Brakatselos elected to pay his principal instalment by way of four quarterly payments of $4,375 each. At issue is the payment of $4,375 which was due on 31 May 1998 but received by the plaintiff on 1 June 1998. The Excel Spreadsheet (Ex VAE2) records the plaintiff's receipt of that payment on 1 June 1998. Further, the receipt by the plaintiff of the cheque was also recorded by a handwritten note made by one of the plaintiff's staff on a copy of the schedule provided to Mr Brakatselos: VAE1 pp 177. 187 The 31 May 1998 due date was a Sunday. The payment was, therefore, due on Friday, 29 May 1998. 188 On 2 December 1997 (VAE1 Vol 1 p. 174) the plaintiff wrote to Mr Brakatselos reminding him that he had elected to pay the principal reduction of $17,500 on his loan of $45,000 by quarterly instalments of $4,375. A schedule was attached showing the due date for payment. It showed that the second quarterly payment was due on 31 May 1998. 189 At VAE1 p. 77 there is a copy of that schedule with the second quarterly payment highlighted. The inference is that Mr Brakatselos sent his cheque with that photocopy of the schedule. On the photocopy was recorded a handwritten notation "cheque received 1/6" and "banked 2/6". There is no suggestion or any evidence that this notation was anything other than in the ordinary course of business and contemporaneous. 190 This is the same date that the Excel Spreadsheet records that this instalment payment was received by the plaintiff. The plaintiff's bank deposit book (PTB4 p 978) and bank statements (PTB4 p. 1028) show that the cheque was banked on 2 June 1998. 191 In his punctuality affidavit of 9 September 2008, Mr Brakatselos did not depose to loan TT082 as being a loan in respect of which he had made punctual payment. The affidavit referred only to loans TT073 and TT188. 192 It was not until his affidavit of 22 September 2008 that he filed a punctuality affidavit with respect to loan TT082. At paragraph 6 of that affidavit he said that, on 27 May 1998, he "sent to the plaintiff by post a cheque in favour of ARF for the amount of $4,375 being payment for my second instalment of principal". A copy of that cheque butt is annexed to this affidavit and marked annexure "A". The cheque butt is dated 27 May 1998, which was a Wednesday. Mr Brakatselos, therefore, contends that he posted the cheque on Wednesday 27 May 1998 and that it, therefore, should have arrived on the due date, two days later, namely Friday 29 May 1998. 193 In fact, Mr Brakatselos drew two cheques that day. He did not refer to this in his affidavit of 22 September 2008. He did so, however, in his affidavit of 18 March 2010. The cheque that he drew in favour of the plaintiff was drawn on his personal account. There were insufficient funds to meet the cheque. He, therefore, drew a cheque on his joint business account to be paid into his personal account in order to cover the cheque in favour of the plaintiff (affidavit 18/3/10 [11], T156.35-547.22). 194 Mr Brakatselos does not suggest that he has a clear recollection of writing the cheque. His evidence that he posted the cheque on 27 May 1998 is based upon the date on the cheque butt and his usual practice (T545.30-546.10). Understandably he does not recall what time of day he wrote the cheque: T548.14. He was employed by Microsoft, where Mr Brakatselos asserts mail was cleared by Microsoft staff from an internal mail tray at 3 o'clock in the afternoon (T539.15). There is no evidence that he placed the cheques in the post before 3.00 pm. 195 Whether or not the cheque was placed in the mail tray for collection before 3 o'clock on Wednesday, 27 May 1998 or after, the fact remains that on the evidence before the Court, the cheque was not received in the post by the plaintiff until Monday, 1 June 1998. 196 The plaintiff suggested it may also have been the fact that Mr Brakatselos posted the covering cheque prior to sending the cheque to the plaintiff: T547.31. He denied this. Mr Brakatselos' counsel submitted that this was an impermissible inference since if his motive in issuing the "covering cheque" was to ensure that additional cleared funds were actually in the account from which the cheque to ARF was paid, it would naturally be expected that he would have to wait a number of days before writing the second cheque. If Mr Brakatselos had wanted to ensure additional cleared funds were available in his account before he wrote the cheque to ARF, certainly the delay in receipt of the cheque by ARF would have been greater than one day. 197 In any event that controversy can be put to one side. Mr Brakatselos' submission really rested on acceptance of a) the contention that he posted the letter on Wednesday 27 May 1998 and b) an inference which his counsel sought to draw as to the usual course of post, based on the inadmissible Australia Post material and c) an inference sought to be drawn about when post was delivered to and sorted at Port Macquarie (which these reasons reject for reasons outlined elsewhere). As regards the first factor, there were significant doubts raised about Mr Brakatselos' recollection, outlined below. 198 Under cross-examination Mr Brakatselos pointed out that he had evidence which showed 'the covering cheque' was paid out of one of his accounts and into another account from which the cheque to ARF was to be drawn on 29 May 1998. However, this evidence does not assist his overall contention that the cheque posted to ARF was received by 29 May 1998. It only provides inferential support for the finding that, if as he contended both cheques were posted together, the cheque to ARF was posted on 27 May 1998. Even if this is accepted, it does not undermine the plaintiff's contention that on the evidence of its records, the cheque was only received on Monday 1 June 1998. The reminder letters 199 In its reminder letter of 16 July 1998 (VAE1 pp. 179-180), the plaintiff attached a schedule showing that the payment due on 31 May 1998 was received on 1 June 1998. Mr Brakatselos did not dispute the accuracy of this record. 200 Again, in its reminder letter of 27 October 1998 (VAE1 pp. 185-186) the plaintiff attached a schedule which again showed the 31 May 1998 payment was made one day late. Mr Brakatselos did not dispute this either. 201 Mr Brakatselos said that he would have picked up such a discrepancy in the course of preparing his tax returns and that, whilst he focused on the due date of the next payment, he either ignored or cannot remember seeing the entry immediately above it which identified the plaintiff's receipt of the principal instalment on 1 June 1998 (which was late). The plaintiff drew on Mr Brakatselos' evidence under cross-examination at T549.30-551.31, contending that his answers cast serious doubt over his recollection of events and his belief and knowledge of his claim to being punctual in respect of this late payment. This submission is of some substance. Essentially, Mr Brakatselos' repeatedly asserted that he was particularly careful in ensuring punctual payment, however he could not explain how he had not noticed the entry recording him as non-punctual, for example when reviewing the schedule to prepare tax returns. 202 The receipt of the cheque was recorded in the handwritten note by an ARF staff member referred to above as received on "1 June 1998". It was recorded as having been received in the Excel Spreadsheet that day. There is nothing to suggest that this cheque was processed otherwise than in accordance with the normal procedure of which Ms Edwards gave evidence. Ultimately, the evidence of Mr Brakatselos cannot be said to cast doubt upon the accuracy of the plaintiff's records.

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