Agricultural and Rural Finance Pty Ltd v Atkinson

Background 2The defendants in these proceedings were investors in two primary production projects concerned with the growing of tea trees known as the Port Macquarie Tea Tree Plantation Project No 1 and the Port Macquarie Tea Tree Plantation Project No 2, which were established by a company known as Oceania Agriculture Ltd (OAL). For the purpose of investing in the projects, the defendants borrowed money from ARF pursuant to standard form loan agreements (the Loan Agreements) and entered into standard form indemnity agreements (the Indemnity Agreements) with OAL by which OAL agreed to indemnify the investor against the investor's liability to repay principal and interest to ARF. 3Clause 2 of the Indemnity Agreement relevantly provided: The Indemnity referred to in Clause 1 shall be effective and enforceable if: (a) the Borrower has punctually paid the interest payable pursuant to Clauses 3.2 and 3.3(a) of the Loan Agreement; and (b) the Borrower has punctually paid the reductions of the Principal Sum set forth in Clause 4.1 of the Loan Agreement; and ... 4Clause 7 of the Loan Agreements provided: The Lender acknowledges and agrees that the Borrower shall have no liability to repay any part of the Principal Sum outstanding or any interest thereon if the indemnity granted under the Indemnity Agreement as defined in the Project Deed is effective and enforceable in accordance with Clause 2 of the Indemnity Agreement in respect of that Principal Sum. 5The projects failed, and, in these proceedings, ARF sought to recover the amounts that it lent to each of the defendants. 6The Court adopted a procedure by which the proceedings against one of the borrowers, Mr Gardiner, would be treated as a test case (the Gardiner Test Case); and many of the other defendants, including those who now remain in the proceedings, agreed to be bound by the results of the Gardiner Test Case. 7Ultimately, ARF was successful against Mr Gardiner in the High Court in respect of three of the four loans it had advanced to Mr Gardiner: see Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570. Those three loans were ones in respect of which it was held that Mr Gardiner had not "punctually paid" all of the interest payments and reductions of the principal sum required under the relevant Loan Agreements. 8Following the High Court appeal, a number of cases remained to be determined. The outcome of those cases depended on whether it could be said that the relevant investors had punctually paid amounts payable by them. A number of those investors also sought to raise other defences. Broadly speaking, those defences fell within two categories. First, there were defences alleging that the relevant Loan Agreements were unfair contracts within the meaning of the Contracts Review Act 1980 (NSW) (the CRA) and that relief should be given under that Act in respect of them. Secondly, Mr Wardle and the 149th defendant, Mr Giannuzzi (Mr Wardle's accountant), raised a defence that ARF was estopped from asserting that amounts owing by him were not punctually paid. 9The remaining issues were heard by Einstein J. At the commencement of the hearing, ARF filed a motion seeking to strike out certain paragraphs of the defences and cross-claims, which raised the defence under the CRA and the estoppel defence raised by Mr Wardle and Mr Giannuzzi, on the basis that those defences were inconsistent with the agreement of the relevant defendants to be bound by the results of the Gardiner Test Case. Einstein J held that the estoppel defence and part of the defence based on the CRA should be struck out on that basis: Agricultural and Rural Finance Pty Ltd v Atkinson [2010] NSWSC 311. In a later judgment, Einstein J also rejected certain evidence said to be relevant to what remained of the defence based on the CRA: Agricultural and Rural Finance Pty Ltd v Atkinson [2010] NSWSC 425. He then proceeded to hear the remaining substantive issues in the case. 10In a judgment delivered on 17 June 2010 (Agricultural and Rural Finance Pty Ltd v Atkinson [2010] NSWSC 635), Einstein J rejected what remained of the defence based on the CRA. He also held that none of the remaining defendants had paid amounts owing by them punctually, and, as a result, they were not relieved of the liability to repay their respective loans by cl 7 of their Loan Agreements. In reaching that conclusion, he held that the Gardiner Test Case had determined that the borrowers bore the onus of proof that they had paid punctually and that the remaining defendants could not depart from that determination. He also rejected an argument said to be based on a rule (referred to as the "postal rule") that payment was made when the payments were posted to ARF. Lastly, his Honour made findings on when the payments in question were received, which were based largely on the records of ARF and his acceptance of evidence given by Ms Edwards concerning those records. 11The remaining defendants appealed. The Court of Appeal delivered its judgment on 26 April 2012: see Wardle v Agricultural and Rural Finance Pty Ltd [2012] NSWCA 107. The leading judgment was given by Campbell JA (with whom Barrett JA and Sackville AJA agreed), who relevantly summarised his conclusions at [17] in the following terms: The issues that arise in this judgment, and the conclusions I have come to concerning them, are: 1. Whether the judge was correct in the construction he placed on the separate trial order and undertakings pursuant to which the Gardiner Test Case was conducted, and in particular the extent to which matters decided in the Gardiner Test Case bound the Appellants. I have concluded that the judge incorrectly construed the order and undertakings, by attributing to the Gardiner Test Case more extensive consequences than were justified. 2. Whether the judge was in error in striking out defences whereby borrowers contended that they had paid punctually if they had put a cheque into the post by the date on which the debt fell due. I conclude that although the judge's reasons for striking out these defences should not be accepted, his conclusion was correct. I conclude that there is no general rule of law whereby, if the parties to a transaction contemplate that the post might be used for communication between them, a document is treated as being notionally in the hands of the recipient as soon as it is posted. I conclude that the payments that the Appellants were obliged to make to ARF were not made at the time an appellant posted a cheque to ARF for the purpose of making that payment. 3. ... 4. Whether, when ARF sues a borrower for debt, the borrower bears the onus of proving that a payment has been made punctually, or ARF bears the onus of proving that the payment was not made punctually. I conclude that the borrower bears the onus. In consequence I conclude that the judge's findings that certain payments were not made punctually have not been vitiated by the judge adopting an incorrect onus of proof. 5. .... 6. Whether the judge was in error in striking out a defence that alleged that ARF had waived strict compliance with provisions of the Loan Agreement requiring payment to be made punctually, or was estopped from denying that payment had been made punctually. I conclude that he was in error in striking out the estoppel defences, but that no separate purpose is served by the waiver defence and it should remain struck out. 7. Whether the judge was in error in striking out part of the defence under the Contracts Review Act. That part of the defence contended that the contracts on which ARF sued were unjust because the prospectus, pursuant to which investors made investments in the prescribed interest schemes, did not disclose a material fact. The undisclosed fact was that when an investor borrowed money from ARF and paid it to OAL, OAL did not keep it for the purpose of operating the scheme but rather lent it back to ARF, which then lent it to another borrower, a process that went on repeatedly. I have concluded that the judge was in error in striking out this defence. 8. Whether the judge was in error in evidentiary rulings that were dependent in part on relevance to the Contracts Review Act defence. I have concluded that those rulings should be set aside. 9. .... 12The Court made the following orders, which were formally made on 30 April 2012: (1) Appeal allowed. (2) Set aside the judgments in the court below against each Appellant. (3) Enter judgment for Mr Holmes, with costs of the hearing at first instance. (4) Grant leave to Mr Wardle and Mr Gianuzzi to replead paras [28]-[31] of the Further Amended Defence by inserting into those paragraphs the particulars that had previously been in [27] of the Further Amended Defence, modified to make clear that Mr Lloyd is alleged to have been acting on behalf of both ARF and OAL. (5) Cross-appeal dismissed with costs. (6) Remit to the Equity Division for further hearing ARF's claim against each of the Appellants other than Mr Holmes. (7) Reserve further consideration of what other orders should be made to give effect to these reasons for judgment. ... 13The parties could not agree on the terms of the further orders that should be made. Consequently, following written submissions, the Court of Appeal delivered a second judgment on 30 November 2012 dealing with that question: Wardle v Agricultural and Rural Finance Pty Ltd (No 2) [2012] NSWCA 388. The orders made at that time were extensive. It is not necessary to set them out in full. However, the orders included the following: In the appeal (2011/236264) (3) The orders made by Einstein J on 29 April 2010 be set aside insofar as - (i) they struck out the following parts of the pleadings: (a) Brakatselos' Defence, sub-para 29(ba) (i)-(ix) and (xviii)(aa); (b) Federicksen's Defence, sub-para 27(ba) (i)-(ix) and (xviii)(aa); (c) Rowe's Defence, sub-para 26(ba) (i)-(ix) and (xviii)(aa); (d) Russo's Defence, sub-para 27(ba) (i)-(ix) and (xviii)(aa); (e) Wardle's Defence, paras 27-32 and sub-para 33(ba) (i)-(ix) and (xviii)(aa); (f) Wallace's Defence, sub-para 27(ba) (i)-(ix) and (xviii)(aa); (g) Giannuzzi's Defence, paras 24, 25, 28-33 and sub-para 34(ba) (i)-(ix) and (xviii)(aa); (h) Long's Defence, sub-para 34(ba) (i)-(ix) and (xviii)(aa); and (ii) they made the costs order in clause 3 of those orders ... (5) The order made at first instance on 9 June 2011, dismissing the Appellants' cross-claims, be set aside. ... (8) Subject to orders as to costs already made, reserve to the judge who decides the remitted hearing the question of how the costs of the first trial should be borne. 14A further judgment was delivered by the Court of Appeal on 11 July 2013 (Wardle v Agricultural and Rural Finance Pty Ltd (No 3) [2013] NSWCA 207; (2013) 303 ALR 298) which corrected minor errors in the orders made on 30 November 2012. 15ARF contends that, as a result of the orders made by the Court of Appeal, the only substantive issues that remain to be determined on the remitter are the defences based on the CRA and, in the case of Mr Wardle and Mr Giannuzzi, the estoppel defence. On the other hand, the defendants contend that the Court of Appeal set aside the orders made by Einstein J. As a result, they say they are free to raise any issue that falls within the scope of the original pleadings that has not been determined by the Court of Appeal. In particular, they contend that they are free to re-litigate the issue whether they paid punctually and specifically the question when payment was received by ARF. They accept that, in doing so, they are bound by the conclusions reached by the Court of Appeal. So, for example, they are bound by the Court of Appeal's conclusion concerning the postal rule and the onus of proof. However, they contend that the Court of Appeal made no finding concerning the timing of receipt, that Einstein J's orders that depended on that finding have been set aside and that therefore they are free to reargue that question.

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