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

CATCHWORDS : Test cases - Undertakings given to Court at first instance by sundry defendants agreeing to be bound on common questions by findings in test case - Court notes agreement of parties to be bound on common questions subject to particular defendants seeking to rely upon different surrounding circumstances - Test case proceedings heard at first instance, by the New South Wales Court of Appeal and ultimately by the High Court of Australia - Strike out motion in respect of certain paragraphs of defences and cross claims of continuing defendants - Plaintiff contends that paragraphs of the pleadings which are challenged are inconsistent with and contrary to the findings in the test case - Plaintiff's contention that to permit the pleadings would be to permit a breach of the undertakings given to the Court - Construing consent orders by reference to surrounding circumstances - Principles - Collateral attack upon final decisions of Court may take variety of forms - Whether litigants to be permitted by changing form of the proceedings, to set up the same case again

Australian Securities and Investments Commission Act 1989 LEGISLATION CITED : Contracts Review Act (1980) NSW Corporations Act (2001) Cth Trade Practices Act (1974) Cth

Agricultural and Rural Finance Pty Ltd v Atkinson and others [2006] NSWSC 202 Agricultural and Rural Finance v Gardiner) (2008) 270 CLR 570 Ashmore v British Coal Corporation [1990] 2 QB 338 Baines v State Bank of New South Wales (1985) 2 NSWLR 729 Codelfa Construction Pty Limited v State Rail Authority of NSW (1982) 149 CLR 337 Dinch v Dinch [1987] 1 WLR 252 Ernst & Young (a firm) v Butte Mining plc [1996] 2 All ER 623 Frackelton v Atthow (1909) 10 CLR 522 Gardiner v Agricultural and Rural Finance Pty Ltd) [2007] NSWCA 235 General Accident Fire and Life Assurance Corporation Limited v Inland Revenue Commissioners [1963] 1 WLR 421, CASES CITED : General Credits Ltd v Ebsworth [1986] 2 Qd R 162 Harvey v Phillips (1956) 95 CLR 235 Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273 Hunter v Chief Constable of the West Midlands Police [1982] AC 529 In re Frackleton v McQueen; In re a Solicitor [1910] QSR 1 Kirkpatrick v Kotis [2004] NSWSC 1265 Lacy's Settlement Trustee (General Accident Fire & Life Assurance Corp Ltd) v Inland Revenue Commissioners [1963] 1 WLR 1207 Norman v Ricketts (1886) 3 TLR 182 Reichel v Magrath (1889) 14 App Cas 665 Rogers v Wentworth (New South Wales Court of Appeal, Hope, Samuels and Mahoney JJA,18 April 1988, unreported); BC8802033 Stephenson v Garnett [1898] 1 QB 677 Thairlwall v Great Northern Railway Company [1910] 2 KB 509

TEXTS CITED : Halsbury Laws of England,the Right Honourable Lord MacKay of Clashfern, January 1991, 4th Edition, Vol 26, LexisNexus Butterworths

Agricultural and Rural Finance Pty Limited (Plaintiff) John Edward Atkinson (1st Defendant) Peter Brakatselos (14th Defendant) Geoffrey Neville Frederickson (35th Defendant) Allan Patrick Holmes (52nd Defendant) Nicholas Charles Rowe (75th Defendant) Maria Francesca Russo (78th Defendant) David James Wardle (95th Defendant) PARTIES : Jennifer Dianne Wallace (124th Defendant) Franco Giannuzzi (149th Defendant) Gavin Winston Long (172nd Defendant) Maria Michael (177th Defendant) Robert John George Miles (179th Defendant) Maria Francesca Russo (189th Defendant) Christina Spyrakis (193rd Defendant) Oceania Agricuture Limited (Second Cross Defendant)

Mr T Hale SC, Mr C Bevan, Mr B Katekar (Plaintiff) COUNSEL : Mr S Epstein SC, Ms A Tsekouras (1st, 14th, 35th, 52nd, 75th, 78th, 95th, 124th, 149th, 172nd, 177th, 189th, 193rd Defendants) Mr S Robertson (179th Defendant) Ms P Conway (Second Cross Defendant)

Evangelos Patakas & Associates (Plaintiff) SOLICITORS : Abadee Dresdner Freeman ((1st, 14th, 35th, 52nd, 75th, 78th, 95th, 124th, 149th, 172nd, 177th, 189th, 193rd Defendants) Aitken Lawyers (179th Defendant) Peter Condon & Associates (Second Cross Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

2003/92819 Agricultural and Rural Finance Pty Limited & Anor v John Edward Atkinson & Ors

JUDGMENT The state of these proceedings 1 The proceedings presently before the Court constitute the residue of a test case which has already travelled through:

i. a decision at first instance ( Agricultural and Rural Finance Pty Ltd v Atkinson and others [2006] NSWSC 202 before Young C J in Eq);

ii. a decision before the Court of Appeal (sub nom Gardiner v Agricultural and Rural Finance Pty Ltd ) [2007] NSWCA 235 before Spigelman CJ, Basten JA and Handley AJA;

iii. the decision of the High Court of Australia (sub nom Agricultural and Rural Finance v Gardiner ) (2008) 270 CLR 570 before Gummow, Hayne, Kiefel, Kirby and Heydon JJ . 2 The test case was ordered against a background where the plaintiff had commenced proceedings against 216 defendants to recover the balance of principal and interest advanced to those defendants under loan agreements in conjunction with investments made by each of the defendants in one or more of two prescribed interest projects known as the Port Macquarie Tea Tree Plantation Project No 1 and the Port Macquarie Tea Tree Plantation Project No 2. 3 Critical to the matters currently to be litigated were undertakings given to the Court at first instance by each of the defendants for whom Clayton Utz acted, to be bound on the common questions by the findings of the test case. Those undertakings were given to the Court at the time when pursuant to Part 31 rule 2 of the Supreme Court Rules, it was determined that there be decided separately from any other question in the proceedings, all the issues arising from the Gardiner Test Case. 4 In fact there were two stages when orders of the Court were made:

i. The first orders were made on 19 March 2004 before the commencement of the hearing at first instance;

ii. On the last day of the hearing the primary judge gave leave to amend the defence in the test case to plead waiver by adding paragraph 34 A. In that respect the pleading differed from that of the other defendants. There was then an amendment to the orders which noted an agreement. 5 The Orders of the Court of 19 March 2004 were relevantly in these terms:

"The Court orders, by consent and subject to written undertakings by each of the defendants for whom Clayton Utz acts to be bound on common questions by the findings of the "Gardiner Test Case" that:

Pursuant to Part 31 Rule 2 of the Supreme Court Rules, there be decided separately from any other question in these proceedings all issues arising from the following:

(a) The claim by Agricultural and Rural Finance Pty Limited against Bruce Gardiner;

(b) The cross-claim filed by Bruce Gardiner on 19 September 2003;

(c) The second cross-claim filed by Oceania Agricultural Pty Limited on 13 November 2003. (the 'Gardiner Test Case'). 6 The subsequent Courts orders made in July 2005 and entered in May 2006 were as follows:

The Court orders by consent and subject to written undertakings by each of the defendants for whom Clayton Utz acts to be bound on common questions by the findings of the "Gardiner Test Case", that:

i. Pursuant to Part 31 rule 2 of the Supreme Court Rules, there be decided separately from any other question in these proceedings all issues arising from the following (the "Gardiner Test Case"):

(a) the claim by Agricultural and Rural Finance Pty Limited against Bruce Gardiner; and

(b) the further amended cross-claim filed by Bruce Gardiner on 26 July 2005.

ii. The Court Notes the agreement of the parties that, insofar as any question decided in the Gardiner Test Case extends to the proper construction of the Loan Agreements and/or the Indemnity Agreements sued on in the claim by Agricultural and Rural Finance Pty limited against Bruce Gardiner, each of the defendants is bound by the Court's determination of that question, subject to the defendant seeking to rely upon surrounding circumstances, upon which the agreement entered into by that defendant is to be construed, being different to the surrounding circumstances relied upon by Bruce Gardiner.

iii. The Court Further Notes that this does not preclude any defendant form bringing a further cross-claim based upon any representations or statements made to the defendant which induced them to invest in the Projects, subject to any available limitation point.

iv. The Court Further Notes that the defendants are not precluded from raising any contention based upon the particular circumstances of a defendant in answer to any contention that a failure to strictly comply with clauses 3.2, 3.3(a) and 4.1 of the Loan Agreements denied the defendant an entitlement to indemnify be reason of the operation of clauses 2(a) and 2(b) of the Indemnity Agreements. 7 The undertaking to be "bound on common questions" is clearly to be determined by:

ii. construed by reference to the surrounding circumstances at the time. The strike out motion 8 The approach taken by the Court has been to commence with the hearing of a strike out motion pursued by the plaintiff pursuant to UCP Pt 14.28(1) that certain paragraphs of the defences and cross claims of the continuing defendants be struck out. The plaintiff's primary position is said to rely upon sub rule 1 (c), namely that the paragraphs amount to an abuse of the process of the Court. The plaintiff also relies upon sub rules 1 (a) and (b). 9 There has not been any judicial consideration as to whether the defendants are entitled to file amended defences and cross-claims in these terms. There was insufficient time prior to the commencement of the trial, originally listed for 6 April 2010, to permit the Court to consider whether or not the defendants should be given leave to file and serve defences in the form ultimately filed on 24 March 2010. For this reason the plaintiff's position with respect to these amended pleadings was protected by the notation at paragraph 5 of the orders of 16 March 2010. The intent and effect of the notation was to recognise that the issue of whether the defendants should be permitted to rely upon the amended pleadings would be determined at the commencement of the trial. 10 The plaintiff contends that paragraphs of the pleadings that are challenged by the motion are inconsistent with and contrary to the findings in the Test Case. The contention is that to permit the pleadings would be to permit a breach of the undertakings given to the Court. 11 The proposition pursued by the plaintiff is that the test case would not have proceeded had it not been for the undertakings given by the defendants. Rather the proceedings would have been heard in the usual manner with all issues being heard together. The proposition is that the hearing of the test case on the terms ordered by the Court was a procedure to the advantageous to all parties in terms of the saving of time and costs. 12 There certainly does not appear to be any doubt but that the purpose of the orders made for the test case was that of obtaining findings in the test case on the common questions which would relieve the parties of the need to re-contest such issues in relation to the proceedings against other defendants. 13 Lest there be any doubt about one matter it is convenient to make clear that the plaintiff does not seek to prevent any defendant from pleading punctual performance. That is their prerogative under the carve-out in the Test Case orders. There is no strike out sought of any punctuality pleadings. Understanding the types of consideration for decision in relation to the notice of motion 14 The Court has been taken to each of the decisions of the Courts at first instance, the Court of appeal and the High Court in excruciatingly close detail. 15 Although the central issue concerns the undertakings noted by the Court, it should be kept in mind that:

i. After the decision of the Court of Appeal and before the hearing before the High Court, the case management of the entirety of the proceedings continued and importantly, leave was granted on 20 May 2008 to the defendants to amend their defences to plead a defence and cross claim based on the Contracts Review Act .

ii. As late as March 2010, the plaintiff has sought to add an additional ground in support of the contracts review act claim that had not been the subject of leave given in May 2008. Although the Court permitted the defendants to file this amended pleading, this was only in the context in which the plaintiff was to be permitted to agitate the matter at the commencement of the hearing. It is this additional ground which has occupied the Court in relation to Contracts Review Act considerations. The manner in which the parties have assisted the Court to follow the respective arguments 16 The plaintiffs have very usefully provided the Court with four bundles of documents colour-coded in similar fashion to the manner in which the Court of Appeal mostly operates. These materials are:

iii. Bundle 3 containing the Atkinson and Wardle pleadings;

iv. Bundle 4 containing the judgments of each of the Courts at first instance, and on appeal to the Court of Appeal and the High Court. Construing consent orders by reference to surrounding circumstances 17 In Kirkpatrick v Kotis [2004] NSWSC 1265, Campbell J observed in relation to consent orders as follows:

38 Several questions of construction of the orders arise in this application. I shall deal at the outset with some questions which relate to principles to be applied when construing orders in a contempt application.

39 The defendant submits that the orders in the present case should be looked at as a freestanding piece of prose, unaffected by any surrounding circumstances, for the purpose of deciding their construction. I reject that submission. In Rogers v Wentworth (New South Wales Court of Appeal, 18 April 1988, unreported); BC8802033 Hope JA (with whom Samuels JA agreed) said, at 18 of BC8802033: "'A consent order must.....be construed in the light of any admissible evidence of surrounding circumstances, but without direct evidence of the parties' intention:' General Accident Fire and Life Assurance Corporation Limited v Inland Revenue Commissioners [1963] 1 WLR 421 at 430 per Plowman J; affirmed [1963] 1 WLR 1207. In In re Frackelton v McQueen; In re a Solicitor [1910] QSR 1 at 6,7, Chubb J said:- "While this judgment stands, it is final and unimpeachable, and cannot, unless it is ambiguous (if even then), be explained or added to by extraneous evidence", and "the Undertaking ... is embodied in the judgment, and that is all we have to look at, and construe....." The other members of the Court did not express any view on this matter, and indeed, notwithstanding what he had said, Chubb J himself seems to have had some regard to the surrounding circumstances. When the matter was being considered by the High Court: Frackelton v Atthow (1909) 10 CLR 522, Isaacs J considered the construction which Chubb J gave to the undertaking, and without discussing any principle of construction, had regard to the surrounding circumstances and came to a different conclusion. There is nothing in this decision which would lead me to any conclusion other than that the statement of principle by Plowman J is correct, and I accept that it is." 40 Mahoney JA said, at 6-7 of BC8802033: "What is here in question is the construction of an order made by consent and embodying a compromise made between the parties. In England the view has been taken that a consent order must be "construed in the light of any admissible evidence of surrounding circumstances, but without direct evidence of the parties' intention", that evidence including "evidence as to the nature of the dispute which was compromised by" the orders: see Halsbury Laws of England , 4th ed, Vol 26, par 527, note I and the case there cited, General Accident Fire & Life Assurance Corporation Limited v IRC [1963] 1 WLR 421 at 430-1; 1207. The dispute in the present case was as to the withdrawal of the second caveat.

In Australia, the general principles have been referred to by the High Court in Harvey v Phillips 95 CLR 235. In that case, the Court referred to the circumstances in which, and the principles upon which, a consent order embodying a compromise may be set aside: at 243-4. The Court did not, in terms, equate the consent order to the compromise on which it was based. It cited with approval a dictum of Lindley LJ in Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273 at 280 where his Lordship said that "a consent order can be impeached, not only on the ground of fraud but upon any grounds which invalidate the agreement it expresses in a more formal way than usual .... To my mind the only question is whether the agreement on which the consent order was based can be invalidated or not". In that case the Court was not directly concerned with the construction of the compromise agreement or the evidence to which reference might be made in the interpretation and construction of it. The observations of Chubb J in In re Frackleton v McQueen; In re a Solicitor [1910] QSR 1 at 6-7, may perhaps suggest that regard may be had only to the terms of the order: the terms of the other judgments and of the judgments of the High Court: 10 CLR 522; do not, I think, deal directly with the question.

The view expressed in General Credits Ltd v Ebsworth [1986] 2 QdR 162 by de Jersey J: at 164 et seq; does not suggest any such limitation. See generally Baines v State Bank of New South Wales (1985) 2 NSWLR 729.

In interpreting and construing the compromise agreement, the Court would not be limited to the mere terms of it. It would be entitled to go to the admissible surrounding circumstances. Those circumstances would include, inter alia, the nature of the dispute and that in respect of which the dispute existed. The Court therefore could know that the dispute which the parties compromised was one in relation to, as they believed, the second caveat. Therefore, in my opinion, the compromise, insofar as it referred to "the caveat", would be construed to refer to the second caveat. If it be proper, in construing the compromise agreement, to take into account such evidence, it must be proper to refer to it in interpreting and construing the consent order. It would not be contemplated that the consent order would be construed differently from the compromise which it was to carry into effect." 41 While this decision in Rogers v Wentworth (New South Wales Court of Appeal, 18 April 1988, unreported) is binding upon me and provides authority for using surrounding circumstances to construe a consent order, there are also other cases, which were not relied upon by the judges who decided Rogers v Wentworth , which lead to the same conclusion. In Dinch v Dinch [1987] 1 WLR 252 Lord Oliver of Aylmerton (with whom Lord Keith of Kinkel, Lord Templemen, Lord Griffiths, and Lord Goff of Chieveley agreed) said, at 263: "One has, as it seems to me, simply to look at the order and any admissible material available for its construction and determine what the Court intended - or, in the case of the consent order, what the parties intended - to effect by the order." (emphasis added)

His Lordship also said, at 264: "In the instant case, the consent order, on its face and in the light of the issues which were clearly before the Court , is not, in my judgement, capable of being construed in any other sense than as finally and conclusively determining the rights of the parties in the property…" (emphasis added). 42 The availability of surrounding circumstances as an aid to construction of a consent order was accepted by Robert Walker J (as his Lordship then was) in Ernst & Young (a firm) v Butte Mining plc [1996] 2 All ER 623, at 634, 636… 45 The type of surrounding circumstances which can be used are those which can be used to construe a contract, in accordance with the principles laid down by Mason J in Codelfa Construction Pty Limited v State Rail Authority of NSW (1982) 149 CLR 337 at 352. 18 I accept that as a consequence it is permissible to approach the question of construction in accordance with the principles Spigelman CJ referred to at [7], [8] and [9] in the decision of the Court of Appeal. These import the understanding of the reasonable person. 19 The plaintiff has drawn on these observations in support of its contention that the current exercise is to determine what the Court intended and what the parties intended to achieve by the undertakings extracted at the time when the test case orders were made. 20 This area is one of some significant difficulty because clearly there must have been some intent behind the so called 'carveouts':

that is to say, the entitlement of defendants seeking to rely upon surrounding circumstances, upon which the agreement entered into by such defendants were to be construed, being different to the surrounding circumstances relied upon by Gardiner. [see also the carveouts provided for in paragraphs 3 and 4 of the party's agreements backed by written undertakings.] 21 The parties have differed in their respective arguments concerning the precise relevant findings of one or other of three tribunals which dealt with the test case. :

i. Generally speaking be plaintiff has highlighted matters which it contends cannot be permitted to be further litigated by the remaining defendants for the simple reason that those defendants are bound by the rulings of one or other of the three Courts which have ruled on the issues

ii. The defendants have sought to draw the Courts attention to suggested differences in the findings of one or other of the test case tribunals, said to point up the fact that the defendants are within their clear entitlement at this further stage of the litigation, to litigate particular matters. Their contention is that nothing in the undertakings [which they accept remain on foot] mandates the granting of the plaintiffs strike out application. The four broad categories the subject of the plaintiffs challenge 22 The four broad categories the subject of challenge are as follows:

iv. The prospectus limb of the Contracts Review Act defence. The context and the surrounding circumstances 23 As the plaintiff has contended, the context and surrounding circumstances in which the undertakings and orders are to be construed include the following:

i. The proceedings involved claims against defendants all arising out of the same subject matter

ii. The claim by the plaintiff in each case was the same, namely, the recovery of sums advanced on the loan agreements associated with the two projects;

iii. The clear assumption was that in most cases the issues raised by the defences and cross-claims would be the same;

iv. As a consequence a test case was likely to determine whether the defendants had any defence to the claim and if so, what their defence was;

v. Due to the commonality of the defences a test case had the advantage of resolving most of the issues without the need to conduct 216 different cases;

vi. A test case would be desirable if it bound the parties to the findings of the test case;

vii. The 184 defendants represented by Clayton Utz were prepared to give undertakings to enable the test case to proceed. 24 I further accept that it clearly was not in the contemplation of the parties that if issues were decided adversely to Mr Gardiner in the test case the remaining defendants who gave undertakings might avoid the consequences of such a judgment by relying upon defences in different terms to those in the test case. 25 It was against that background that defendants gave the undertakings which were in these terms:

"I undertake to be bound by the findings of the Gardiner Test Case." (emphasis added) 26 It is clear from the introductory words to the judgment/order of 29 July 2005 and paragraph 1 (Green Tab 7) that the common questions in all of the cases, the subject of the undertakings, were those referred to in paragraphs (a) and (b) of the order namely, the issues raised by the claim against Mr Gardiner and the cross-claim. 27 It is notable that paragraph 1 does not refer to the defence filed by Bruce Gardiner. The common issue under paragraph 1(a) was the claim by ARF, namely, that each of the defendants is liable under the loan agreements. 28 It was clearly assumed that the defendants would file defences in the same terms as Mr Gardiner. This is was what occurred after Young J gave judgment on 29 March 2006. 29 On a proper construction of the Orders of 29 July 2005, the "common questions" and "all issues arising from... the Gardiner Test Case" were all issues other than those identified in paragraphs 2, 3 and 4. 30 Unless a defendant was able to come within the exception, or "carve out", of paragraphs 2, 3 or 4 the outcome of the Test Case would determine the outcome of the claim against him, her or it. 31 As the plaintiff has contended a comparison of the Gardiner pleadings with the defence and cross claim of the Clayton Utz defendants establishes that the pleadings are almost identical. There are some minor differences in dates. Some defendants subscribed in relation to the first prospectus and others in relation to the second prospectus. Some subscribed in respect of both. There are some minor differences in relation to the particulars of events relied upon. Some defences rely upon representations by other defendants. As the plaintiff has contended this does not affect the substance of the defence which was that the plaintiff was estopped from asserting that the proper construction of the Indemnity Agreement was other than in accordance with the representation pleaded (at [26] and [30] in the Test Case. 32 The relevant pleading was in the following terms:

26. In the alternative, in or about June 1997, ARF and OAL represented to the defendant that if an investor were not in default, the indemnity provide for in the Indemnity Agreement would apply to indemnify a farmer in circumstances where the projects terminated as a result of any reason other than the farmers' electing to terminate the projects.

The representations were express and oral. They were made by Stephen Lloyd on behalf of inter alia ARF and OAL at an investment seminar held at the office of Ord Minnett in Sydney in or around June 1997, which was attended by the defendant. At the seminar Mr Lloyd said words to the effect of those identified in paragraph 26.

27. ARF and OAL made the representations in paragraph 26 above with the intention that the defendant should act upon it entering into: (a) a Licence and Management Agreement with OAL and ARG in respect of Project 1;

(b) a Loan Agreement with ARF in respect of Project 1; and

(c) an Indemnity Agreement with OAL and ARF in respect of Project 1.

28. In fact, in reliance upon the representation alleged in paragraph 26, the defendant did: (a) enter into a Licence and Management Agreement with OAL and ARG in respect of Project 1;

Licence and Management Agreements dated 29 October 1997 and 30 March 1998.

(b) enter into a Loan Agreement with ARF in respect of Project 1;

Loan Agreement dated 29 October 1997 and 30 March 1998.

(c) enter into an Indemnity Agreement with OAL and ARF in respect of Project 1.

Indemnity Agreements dated 29 October 1997 and 30 March 1998.

29. In the circumstances, ARF is estopped from asserting that the proper construction of the indemnity agreement is other than in accordance with the representations to the same effect:

The representations were express and oral and were made by Stephen Lloyd on behalf of inter alia OAL and ARF either during a telephone conversation between the defendant and Stephen Lloyd in late 1997, or during a visit to the Project site by the defendant in January 1998, in response to specific questions from the defendant. Further representations were made by Stephen Lloyd on behalf of inter alia OAL and ARF in conversations in or about March 1998 in response to questions from the defendant. These further representations were made following an audit by the Australian Taxation Office upon the defendant's investment in the projects. 33 The assumption which underlined the orders for the separate hearing of the Test Case was that the defences of the defendants giving the undertakings would be substantially the same as those in the test case. This assumption was well founded. The defences and cross-claims only differed from the Gardiner pleadings in minor matters of detail. 34 The defence of Mr Wardle, 95th defendant, dated 30 June 2006 (Blue Tab 5) can be compared with Mr Gardiner's further amended defence of 29 July 2005 (Green Tab 2):

ii. Apart from the dates, the pleading in paragraph 26 is identical although there are some differences in the particulars. The representation was made by Mr Wardle's accountant, Mr Gianuzzi;

iii. Paragraph 27 in Mr Wardle's defence is different and does not appear in Mr Gardiner's defence. This is an alternate pleading to paragraph 26 to take into account the allegation that, at the Ord Minnett seminar, Mr Lloyd made representations to Mr Gianuzzi, who in turn passed them onto Mr Wardle;

iv. Paragraphs 29 and 30 of Mr Wardle's defence are in substantially the same terms as paragraph 30 of Mr Gardiner's defence. The only differences are in the particulars and the fact that, in the case of Mr Wardle, the representation was said to have been made by Mr Lloyd to Mr Gianuzzi who then passed on to Mr Wardle. In Mr Gardiner's pleading the representation was made directly by Mr Lloyd to Mr Gardiner;

v. Mr Gardiner's defence contains the amendment at paragraph 34A which Young CJ in Eq permitted on the final day of the hearing. There is an equivalent paragraph in Mr Wardle's defence;

vi. Otherwise, the defences of Mr Wardle and Mr Gardiner are the same;

vii. The cross-claim of Mr Wardle filed 30 June 2006 (Blue Tab 6) are in all relevant respects identical to Mr Gardiner's cross-claim (Green Tab 2). 35 A comparison between Mr Atkinson's defence filed 11 July 2006 (Blue Tab 1) with Mr Gardiner's defence (Green Tab 2) establishes much the same. The differences are only in the particulars of paragraphs 26 and 30 and the dates referred to in paragraph 30. The cross-claims are the same. Thumbnails sketching some matters of particular importance 36 Mr Epstein SC appearing for the active defendants, made the following observations:

i. that the relevant High Court consideration was only in relation to the first and second loans;

ii. that whereas Young J had found for the plaintiff on all of the 4 loans, the orders of Basten JA [ with who's orders the Chief Justice agreed] entered judgment for Agricultural against Gardiner in an amount of $31, 616.35. [in other words these orders meant that Gardiner owed no obligation to pay any amount to ARF for the reason that all payments under loan contracts 1, 2 and 3 were punctually made for the purposes of clause 2 (a) and (b) of the indemnity agreements :

See conclusions of Basten JA at paragraph 268] 37 He further contended that:

i. No question of the applicability of the postal rule was agitated before the High Court;

ii. Hence the active defendants remain entitled to agitate this claim. 38 Mr Epstein submitted that Gardiner "fundamentally failed because whatever characterisation … whether waiver, election, estoppel, the fact was that he could only point to things which happened after he defaulted or which were sufficiently equivocal to constitute a variation of his obligation for future payments." 39 I accept that this admission is unfounded for the following reasons:

i. It is factually wrong. As Gardiner's defence [34A] shows (Green Tab 2), he relied on both pre- and post-due date conduct. The conduct relied on, as at 16 July 1998 and 27 October 1998 was pre-due date conduct as there was still time to pay punctually when it occurred.

ii. The rationale for Gardiner failing is not limited to this temporal problem (that the breach by failing to pay by the due date had already occurred). It also related to lack of authority to bind ARF. Ms Edwards had no authority to bind it (none of the continuing defendants rely on conduct by her) (see Young CJ in Eq at [52]- Red Tab 1). Mr Lloyd had no authority to bind ARF as he never worked for it and was not one of its officers (Young CJ in Eq at [88] - red Tab 1) and there was no agency relationship between ARF and OAL (Young CJ in Eq at [80] - Red Tab 1). Also see Handley JA at [388] (Red Tab 2).

iii. ARF had no power to alter the requirements of cl. 2 of the indemnity agreement without OAL's approval and OAL had no power to extend the due date for payment on behalf of ARF as it was not a party to the loan agreement (see High Court at [63]-[66] - Red Tab 3).

iv. This explains why the High Court said that Gardiner failed even if he had proved all the factual allegations made in his defence [34A]: see High Court at [94] (Red Tab 3).

v. Hence no variation in the individual circumstances of any other defendants will gainsay their defences to a failure to pay punctually. The mismatch between the parties and the absence of any obligation to pay punctually in the indemnity agreement means that all of their defences are doomed to fail if held to the High Court's interpretation of the loan and indemnity agreements (High Court [63]-[66] - Red Tab 3).

The Court of Appeal 40 At the time of the hearing of the appeal before the Court of Appeal on 9-22 February 2007, the pleadings in the Gardiner test case and the other Clayton Utz defendants were essentially the same. 41 The Court of Appeal gave judgment on 6 September 2007. The effect of that judgment was (had it not been overturned on appeal) that all defendants would have succeeded on the pleadings other than those who came within the circumstances of the fourth Gardiner loan (where there was an admitted lack of punctuality). High Court 42 Other than the amendment made pursuant to the leave given by myself on 19 May 2008 to permit the pleading of the Contracts Review Act as a defence, the defences at the time of the hearing before the High Court and at judgment in that Court remained in their original form. 43 As a consequence of the High Court's judgment on 11 December 2008, on 6 March 2009 Hammerschlag J ordered a verdict for the defendants based upon the filed defences in respect of the (approximately 66) defendants who had made wholly punctual payments on all of their loans. 44 The plaintiff has sought to summarise in broad terms the ratio in the High Court. To my mind this summary represents a fair reading of the High Court decision and it is adopted in what follows:

i. In broad terms the judgment of the High Court decided two issues, namely:

(a) The proper construction of the meaning of "punctually paid" within the meaning of clause 2 of the indemnity agreement in the context of clauses 3.3 and 5.1 of the Loan Agreement; and

(b) The application of the principles of estoppel, waiver and election to the obligation of "punctual payment" under the Loan Agreement and "punctually paid" in clause 2 of the Indemnity Agreement.

ii. "Punctual payment" of interest and principal in clause 5.1 of the Loan Agreement and "punctually paid" in clause 2(a) and (b) of the Indemnity Agreement is referable to the dates by which interest and principal must be paid under clause 3.3(a) and 4.1 of the Loan Agreement. Clause 2(a) and (b) of the Indemnity Agreement says so in terms.

iii. The ratio of the decision of the High Court as to the meaning of "punctual payment" and "punctually paid" is:

(a) "Each loan agreement fixed times for payments of interest and repayments of principal" [34] "by using the words "punctually" or "due and punctual", each clause looks to the way in which the obligation to pay has been performed. That requires consideration of what the Borrower has done, not what the Lender has done in response to the fact of payment." [34]

(b) This is, by implication, adopting what Basten JA and Handley A-JA had held, that is "payment of principal or interest after the due date was not payment "punctually"". [30]

(c) The right under clause 5 of the Loan Agreements permitting acceleration of payment of the balance is predicated upon there being fixed times for performance. [36]

(d) How the Lender treated the payment and whether it treated payment as punctual is not relevant to whether the Borrower had punctually paid or had not punctually paid for at least two reasons:

(1) First, it is at odds with the general principle of construction that "it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made". [35] (2) Secondly, the Loan Agreements and Indemnity Agreements were important constituent documents in a publicly marketed investment scheme under which the tax advantages depended upon the investment being seen as a commercial venture in which the loans were not "non-recourse" loans. "That being the position, there is even less reason to suppose that the liability of the Borrower to repay money lent should depend upon the unfettered discretion of the Lender."[38]

iv. For these reasons the Borrower did not pay punctually and " subject to the plea of waiver , the Indemnity Agreements made in respect of those loans were not "effective and enforceable".[39]

v. Punctual payment means payment actually made in compliance with the fixed times for payment under the agreement and does not include:

(a) Payments not paid punctually due to OAL's alleged error in not following Mr Atkinson's direction to pay commissions owing to him by the due date (the set-off defence ); or

(b) Payment posted by the due date but not received by the due date, even if ARF advised that payments could be made by posting to ARF (the postal rule ).

vi. Mr Gardiner's case on waiver centred on paragraph 34A of his defence which the High Court set out at [47], and which is at Green Tab 2 page 9. Some of the defaults under the first and second Loan Agreements occurred before the alleged conversation of October 1998 between Mr Gardiner and Ms Edwards referred to in the particulars. Some occurred after (High Court [43]). But it was not necessary to resolve these temporal relationships (High Court [44]). Even if the facts were as Mr Gardiner alleged them to be, none of the three senses in which he alleged there was a waiver (that is, election, forbearance, abandonment) was made out (High Court [94]).

vii. Central to this conclusion were the following findings in the High Court, namely:

(a) The statement in the 2 June 1999 letter that it would accept late payments and the acceptance of the late (and un-accelerated) payments may well have lead to ARF being estopped from exercising its right to accelerated payment under clause 5 of the Loan Agreement: [63];

(b) But "ARF's election not to accelerate did not deny the fact of breach by the Borrower. On the contrary, the premise for analysis of these events as an election by the Lender is that the Borrower had not made due and punctual payment": [63];

(c) The Borrower's obligation for performance was imposed by the Loan Agreements, to which OAL was not a party. The Borrower's obligation for punctual payment was not owed to OAL. The Borrower's failure to pay punctually gave OAL no claim against the Borrower for breach of the Loan Agreement. It was not an obligation that OAL could waive: [65].;

(d) "The Indemnity Agreements assumed the existence of the obligation to pay punctually and attributed consequences according to whether the obligation was met": [66]. But the Indemnity Agreement did not oblige the Borrower to pay punctually. The Borrower owed OAL no obligation other than to pay the indemnity fee: [66]. OAL was not in a position where it could make any choice under clause 5 of the Loan Agreement by insisting upon future performance of the Loan Agreements and accelerating the time for discharge of those agreements by requiring repayment of all that was outstanding: [66];

(e) There were no rights that OAL had against the Borrower which it could waive. 45 In the Test Case the defendant failed on the issue of election, waiver and estoppel for at least two distinct reasons. The defence of estoppel had been pleaded at paragraphs 26 to 33 and waiver at 34A. The two reasons were:

i. The defence of estoppel relied upon the representations of Mr Stephen Lloyd (paragraphs 26, 30). Both in relation to the estoppels defence and the Trade Practices claim, the Court of Appeal found that there was no basis for the contention that Mr Lloyd had any authority to bind the plaintiff in any representations that he made. He was not an employee or agent of the plaintiff: see the judgment of Handley JA at [377] to [401]; Spigelman CJ at [136]; see also the decision of Young CJ in Eq. at [80], [88], [136].

ii. The proper construction of the Indemnity Agreement and the Loan Agreement: see decision of the High Court.

[It is convenient to adopt the convention of describing the High Court's decision on estoppel, election and waiver together as 'the estoppel decision'] 46 Hence the plaintiff in accepting or agreeing to accept payments that were not punctual was electing not to exercise the right to accelerate the time for repayment. This election did not deny the fact of breach by the Borrower (paragraph 63). Rather the defence of election, waiver and estoppel was advanced on the assumption that the Borrower had not made due and punctual payment. 47 In short, the ratio of the High Court's decision is that:

i. There is no "punctual payment" under clause 5 of the Loan Agreement and a payment is not "punctually paid" within the meaning of clause 2(a) and (b) of the Indemnity Agreement if it is not paid on or before the date required under clause 3.3(a) and 4.1 of the Loan Agreement;

ii. Any representation or conduct by ARF (or OAL) about accepting late payments, whether made before or after the due date, and the acceptance of late payments, could only found an estoppel with respect to ARF's rights under clause 5 of the Loan Agreement. They could not effect the question of whether the indemnity is "effective and enforceable" under clause 2 of the Indemnity Agreement. The Prospectus 48 In the Test Case the cross-claim pleaded that the prospectuses in Projects 1 and 2 were misleading and deceptive. Both Young CJ in Eq. and the majority in the Court of Appeal found that they were not: see Young CJ in Eq. [176], [177]; Handley JA [431], [432], [435], [451], [468] - [472]; Spigelman CJ [137]. Perhaps more importantly for present purposes the plaintiff was not liable for any misrepresentations made by OAL in the Prospectus: Young CJ in Eq. [80], [88], [180]; in the Court of Appeal Handley JA [388], [389]; Spigelman CJ [136]. Returning to Estoppel, Waiver and Election 49 Using the amended defence of the first defendant, Mr Atkinson, as an example it can be seen at paragraphs 27 to 29 that the basis of the pleading is:

i. Directly contrary to the ratio of the majority decision in the High Court referred to in paragraphs 12 and 13 above. It contends that the plaintiff's acceptance or agreement to accept non-punctual payments somehow affects OAL's entitlements under the Indemnity Agreement.

ii. Directly contrary to the finding of the Court of Appeal in that it pleads that Mr Lloyd was authorised to bind the plaintiff. 50 Mr Epstein's central proposition is to draw a distinction between:

i. The trial judge's decision that Mr Lloyd had no authority to make particular representations on behalf of ARF [this finding being endorsed by Handley JA];

ii. The now contention that the extent of Mr Lloyd's authority in relation to other particular representations requires to be litigated because of the differences between the different types of representation. 51 Mr Epstein's contention was that notwithstanding the Justice Handley [and majority of the Court of Appeal] finding that Mr Lloyd was not proven to be the agent of ARF [in that he was not shown to have had that companies authority for the purposes at an investment seminar rewriting the terms of the loan agreement which was proffered to intending investors through the medium of the prospectus], that is not to say that he was not the agent of ARF for any purpose on any other occasion. 52 In this regard it is necessary to return to the proper construction in the circumstances of the original consent orders. In my view the clear intent of those orders and undertakings was to bind those giving the undertakings to findings of fact of the type now in focus. 53 At paragraphs 377-391 Handley JA made the following observations in relation Mr Gardiner's estoppel and misleading and deceptive conduct cases against ARF and OAL:

The appellant pleaded in paras 26-9 of the further amended defence (Red 35-7) that in June 1997 he attended an investment seminar held at the offices of Ord Minnett in Sydney. Representations made by Mr Lloyd to that meeting are alleged to estop ARF from disputing that on the termination of the Project for any reason OAL's indemnity would operate to indemnify any investor against his liability under the loan agreement unless the investor had himself brought about that termination.

The appellant's wife entered into a Licence and Management Agreement with associated loan and indemnity agreements in respect of one farm in Project 1 in June 1997 and she and the appellant entered into such agreements in respect of two farms in October and a further farm in March 1998 (the investments in Project 1).

In June 1998 the appellant and his wife entered into such agreements in respect of seven farms in Project 2, and in May 1999 he entered into such agreements in respect of two further farms (the investments in Project 2).

Paragraphs 27 and 28 of the defence alleged that the representations at the investment seminar in June 1997 (the first representations) were made with the intention of inducing the appellant to make investments in Project 1 and that in reliance on those representations he had done so.

Paragraph 30 of the defence alleged that "in or about late 1997 to March 1998" Mr Lloyd confirmed the first representations by further representations to the same effect. The particulars alleged that these had been made on behalf of OAL and ARF "either during a telephone conversation … in late 1997 or during a visit to the Project site … in January 1998 in response to specific questions" from the appellant and again in or about March 1998 in the context of the investigation by the Australian Tax Office (ATO) (the later representations).

Paragraph 31 of the defence alleged that the later representations were made with the intention of inducing the appellant to make investments in Project 2 and para 32 alleged that he made such investments in reliance on the first and later representations (both representations).

Paragraph 33 of the defence alleged that by reason of the matters pleaded in paras 26-32 ARF was estopped from asserting that the proper construction of the indemnity agreement was otherwise than as represented.

Thus the defence of estoppel against ARF in respect of the investments in Project 1 was based on the first representations, and in respect of the investments in Project 2 was based on both representations.

Paragraphs 16-22 of the appellant's further amended cross-claim against ARF and OAL incorporated paras 26-28, and 30-32 of his defence and alleged that the conduct pleaded in paras 26 (the first representations) and 30 (the later representations) was misleading and deceptive or likely to mislead and deceive in contravention of s 52 of the Trade Practices Act, s 995 of the Corporations Law, and s 12DA of the Australian Securities and Investments Commission Act 1989 (the ASIC Act). These sections are relevantly in identical terms. The particulars of para 22 of the cross-claim referred to s 51A of the Trade Practices Act and its equivalents in the other Acts (misleading and deceptive conduct case).

Thus the misleading and deceptive conduct case against ARF was based on the first representations for the investments in Project 1 and on both representations for the investments in Project 2.

Although the further amended defence was verified the later representations in October 1997 were never proved, and the appellant conceded that there was no relevant phone conversation in 1997. He gave affidavit evidence about his meeting with Mr Lloyd at the site in January 1998 but did not say that the later representations were made either on that occasion or in March (Black 72-6). He gave affidavit evidence of the later representations being made by Mr Lloyd on the telephone in May in the context of the ATO investigation (Blue 1/16-18). He conceded in cross-examination that the relevant particulars in his defence were incorrect (Black 73, 74-5), but then said that the later representations were made at the site meeting in January, and during the ATO investigation in May (75). The Judge appears to have rejected the appellant's evidence about the later representations during his visit to the site in January (Red 162 para 140).

The Judge found that the first representations were made by Mr Lloyd (para [150]), but he had not made them on behalf of ARF (para [88]). Mr Inatey SC for OAL challenged the first finding and Mr Smith SC for the appellant the second. The Judge said the appellant was an unimpressive witness and criticised aspects of his evidence but his evidence about the first representations was not challenged in cross-examination or contradicted. The Judge's acceptance of this evidence must necessarily have been based, at least in part, on his assessment of the appellant's demeanour. The finding that the first representations were made cannot be disturbed.

Mr Lloyd was the managing director of OAL at the time but had no formal position with ARF. OAL did not dispute its responsibility for the representations if they were made, but ARF did and the Judge found that there was not a sufficient nexus between Mr Lloyd's conduct at the investment seminar and the lender ARF to found any estoppel against the latter.

ARF knew, through Mr Sarks, that Mr Lloyd was attending investment seminars to promote the scheme with loans from ARF and indemnities from OAL. Mr Lloyd was actively involved in funding ARF so it could make loans to investors and worked closely with it for that purpose. However ARF's knowledge and OAL's role as ARF's banker does not make ARF responsible for Mr Lloyd's representations.

Unless there is independent evidence of authority an agent's representations are not evidence against the putative principal. It was said that Mr Lloyd "offered" the loan and indemnity agreements to prospective investors who attended the seminar, but this is not correct. He issued invitations to treat. The prospectus required intending investors to complete and lodge the attached application forms and this was an offer to OAL on the terms of the prospectus. Mr Lloyd did not make offers on behalf of ARF at the seminar and agency cannot be established on that basis. 54 The short position is that the trial judge had held that:

i. Mr Lloyd was the agent of OAL has employed by OAL;

ii. Mr Lloyd was not the agent of ARF as he was not employed by ARF;

iii. There was no relationship between ARF and OAL of principal and agent. 55 Each of these findings was upheld in Court of Appeal by those judges who dealt with the matter 56 Returning to the characterisation/construction of consent orders by reference to surrounding circumstances, in my view it is tolerably clear that by permitting the test case to go forward in a form which included evidence of the type referred to by Handley JA, in general terms all parties agreed to be bound by factual findings concerning the part played by Mr Lloyd in making sundry representations but not on behalf of ARF. 57 The active defendants, notwithstanding that they may wish to now raise other aspects of Mr Lloyd's alleged conduct, are seen to have given up any such rights by agreeing to the form of the original undertakings. The consent orders must be construed in the light of the admissible evidence of surrounding circumstances. In interpreting and construing the undertakings the Court is not limited to the mere terms of the undertakings, but is entitled to take into required the admissible surrounding circumstances which include the nature of the dispute and that in respect of which the dispute existed. The parties intended to be bound by findings generally in relation to Mr Lloyd's alleged conduct carrying with it questions of his reliability and credit. They cannot now revisit these parameters. 58 To reiterate the finding:

i. I accept that that any special circumstances may be raised in defences under the carve-outs in pars 2-4 of the Test Case orders (Green Tab 7).

ii. However, those special circumstances are subject to the findings which affect all defendants because they relate to the proper interpretation of standard form transaction documents (including the loan and indemnity agreements).

iii. That is, defendants with special circumstances cannot plead a defence which relies on a different interpretation of their loan or indemnity agreement to that which the High Court gave for Gardiner, especially in the High Court at [63]-[66] - Red Tab 3. Set off arrangement 59 The first defendant, Mr Atkinson, pleads in paragraph 24 of his defence a set off arrangement with respect to commissions. This pleading is contrary to the ratio of the High Court's decision in that:

i. It accepts in relation to the matters pleaded in Particulars (i), (ii) and (iii) the payments were not made on the due date. It alleges that the payments were not punctual due to the failure of OAL to carry out instructions of Mr Atkinson.

ii. It alleges that late payments were accepted by the plaintiff (but again this can only go the issue of the application of the acceleration clause).

iii. It relies, in Particular (ii), on agreements reached with Mr Lloyd on behalf of the plaintiff; it having been found that he was not an agent of the plaintiff. Waiver 60 At paragraph 27 of Mr Wardle's March 2010 defence he pleads waiver. 61 The particulars (i)-(vi) relate to representations concerning punctual payment. For the reasons explained above, on the basis of the High Court's decision, these are matters which can only go to ARF's entitlement to exercise its rights under clause 5 of the Loan Agreement. These are irrelevant to the question of whether the indemnity by OAL is "effective and enforceable" under clause 2 of the Indemnity Agreement. 62 Maria Russo and Franco Giannuzzi have pleaded defences of waiver and estoppel in similar terms to Mr Wardle. 63 Mr Fredericksen 's defence is no longer pressed. Estoppel 64 In Mr Wardle's March 2010 defence he pleads estoppel at paragraphs 28-32. The particulars relied upon are those set out in the waiver defence at paragraph 27. 65 For the reasons that the waiver defence is inconsistent with the High Court's decision, so also are the defences of estoppel. What is pleaded can only go to ARF's rights under clause 5 of the Loan Agreement. Atkinson paragraph 24 66 For the reasons earlier referred to, a payment of principal or interest after the due date is not "punctual payment." 67 The particulars to paragraph 24 of Mr Atkinson's defence makes it plain that the payments were not made on or prior to the due date but that there was an excuse or reason for that, namely, the failure on the part of OAL to follow Mr Atkinson's instruction that it, OAL, pay to ARF the sums due out of the sales commissions said to be owing by OAL to Mr Atkinson's company, Structured Securities Pty Limited. The defence is most clearly stated in the last sentence of particular (iv):

"Any failure to pay the amount of $29,400.00 due to ARF by 31 October 1998 was due to the failure of OAL to carry out the instructions of the defendant by that date." 68 What is pleaded is irrelevant to the issue of whether the payments were punctually paid, except to the extent that the pleading as particularised assumes that the payments were not punctually made. 69 For the reasons earlier stated, this pleading is directly contrary to the ratio of the High Court's decision. Postal rule 70 The active defendants have contended that importance lies in the fact that Mr Gardiner did not plead the postal rule defence. That however misses the point. It was determined against him that time is of the essence of the loan agreements in the Court of Appeal (Spigelman CJ dissenting) and in the High Court (unanimously) (first finding). 71 Furthermore, the High Court (upholding Handley JA in dissent) held that the due date for payment cannot be postponed unless there is a variation of the loan agreement supported by consideration or an estoppel based on detrimental reliance on conduct by ARF prior to the due date (second finding). 72 I accept that to permit the defendants to now plead a common law rule that allegedly treats posting of a cheque as performance of an obligation to pay by the due date involves a collateral attack on these two findings. 73 It also involves a breach of the undertaking to be bound by these two findings. 74 Paragraph 25 of the May 2010 defence of Maria Russo is an example of the pleading of the so-called "postal rule". 75 Again, the defence presupposes that the cheque was not received by ARF on or before the due date, but was posted on or prior to the due date. 76 The "postal rule" is concerned with determining who bears the risk of a cheque lost in transit. It is not a rule about deemed time of payment for the purposes of a loan contract which makes time of the essence. 77 It will be observed that in pleading the postal rule at paragraph 25, Ms Russo does not allege any variation of the terms of the Loan Agreement or any estoppel. The contention is that, by reason of her receipt of ARF's letter of 18 June 1998 inviting her to make her payment by posting a cheque to it, the mere act of posting the cheque amounted to payment under clauses 3.3(a) and 4.1 of the Loan Agreement. 78 It is clear from the authorities in relation to the postal rule that it is a rule based upon agreement or contract. See, for example, Thairlwall v Great Northern Railway (1910) 2 KB 509 where, at 515, Bray J said in relation to the principle laid down in Norman v Ricketts:

"The principle there laid down is that the parties, debtor and creditor, can agree to make and accept payment of the debt in some form other than cash, and that when the creditor asks his debtor to send the amount due by post, then if the debtor sends a cheque for the amount by post the risk of loss in transit falls on the creditor, and the posting is equivalent to payment." 79 The letter of 18 June 1998 did not constitute a variation of the Loan Agreement. It is clear that the Loan Agreement was not being varied and that the Loan Agreement set out all of the obligations of the parties. 80 The pleading of the postal rule is inconsistent with and contrary to the decision of the High Court: see especially at [32]-39], [49], [63]-[67] (Red Tab 3). If the payment was received after the due date then the payment cannot be punctual. Authority of Mr Lloyd 81 The authority of Mr Lloyd to bind ARF was an issue raised in the Gardiner Test Case. It was a prominent issue, and an issue within the meaning of order 1 of the Orders and undertakings: Green Tab 7. 82 Mr Lloyd's authority was raised in the Gardiner Test Case at:

i. Representations made by him prior to contract: Green Tab 2, paragraph 26;

ii. After the making of the first Loan Agreement and before the making of the second Loan Agreement: paragraph 30 (Green Tab 2);

iii. In relation to post-contractual matters, in particular, about the punctuality of loan payments: paragraph 34A (Green Tab 2). 83 In his judgment at [88] (Red Tab 1), Young CJ in Eq found that Mr Lloyd was not employed by ARF. This must be linked with his Honour's observation at [147] that Mr Lloyd did not give evidence when his company was instructing the same firm of solicitors (Clayton Utz) as represented Mr Gardiner. 84 In the Court of Appeal, Handley JA (Red Tab 2) at [377]-[400], made findings on Mr Lloyd's lack of authority, with which the Chief Justice agreed at [136]. 85 Authority was clearly a contested issue on which findings were made and by which the defendants who gave undertakings are bound. The allegation that Mr Lloyd had authority on behalf of ARF was central to the pleading of waiver in paragraph 34A of the Test Case defence. The plaintiff's opposition to the entitlement of the active defendants to plead paragraph (ba) as part of the contracts review act pleadings 86 I accept that the conditions for relief under the Contracts Review Act are different to those invoked with respect to prospectus liability by Mr Gardiner under the Corporations Act. 87 I further accept that in terms of the 29 July 2005 consent order and associated undertakings, there were no "findings" on "issues arising" in the Gardiner Test Case with which the Contracts Review Act claims are inconsistent. 88 The plaintiffs have contended that the active defendants (ba) pleading is a generic pleading and is not different to the surrounding circumstances relied upon by Mr Gardiner. They have further contended that the active defendants have not in their affidavits deposed to any particular circumstances personal to them, other than their experience in financial matters (which is not referred to in the pleading) 89 It seems correct for the plaintiff to contend that:

i. The allegation in (xviii) is said to arise from the matters pleaded on Blue Tab 1 pages 13-17 which in substance involve a repetition of the misleading prospectus case pleaded and lost in the Test Case: see Green Tab 3 paragraphs 26(a), (b), (c), (d), 27(a), 28(d), (f), (g), (k), (l), (m), (u), (v).

ii. The defendants acknowledge that paragraph (ba) is based upon the allegations in the Gardiner prospectus case (see Transcript 163/2).

iii. Further it does appear that the defendants will be seeking to re-run that failed case but doing so by seeking relief under a different statute ("a different statutory regime": see T163/17). 90 In Hunter v Chief Constable of the West Midlands Police [1982] AC 529 Lord Diplock said this at pages 541 to 542:

"My Lords, collateral attack upon a final decision of a Court of competent jurisdiction may take a variety of forms. It is not surprising that no reported case is to be found in which the facts present a precise parallel with those of the instant case. But the principle applicable is, in my view, simply and clearly stated in those passages from the judgment of A L Smith LJ in Stephenson v Garnett [1898] 1 QB 677, 680-681 and the speech of Lord Halsbury LC in Reichel v Magrath (1889) 14 App Cas 665,668 which are cited by Goff LJ in his judgment in the instant case. I need only repeat an extract from the passage which he cites from the judgment of A.L. Smith LJ: '… the Court ought to be slow to strike out a statement of claim or defence, and to dismiss an action as frivolous and vexatious, yet it ought to do so when, as here, it has been shewn that the identical question sought to be raised has been already decided by a competent Court.'

The passage from Lord Halsbury's speech deserves repetition here in full: "… I think it would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again.'" 91 Only 9 years later in Ashmore v British Coal Corporation [1990] 2 QB 338, the Court of Appeal [Lord Donaldson MR with whose reasons Stuart-Smith and Farquharson LLL agreed] dealt with sample cases selected from numerous similar claims against the same employers. The head note before the Court of Appeal includes the following:

Held, dismissing the appeal, that the categories of conduct rendering a claim frivolous, vexatious or an abuse of the process were not closed but depended on all the relevant circumstances of the particular case, public policy and the interests of justice being very material considerations... 92 Notwithstanding that the Contracts Review Act defence (ba) is put forward under a different regime to that invoked with respect to prospectus liability by Mr Gardiner under the Corporations Act, the principled exercise of the material discretion is to refuse leave being granted to the active defendants to plead defence (ba). The way forward 93 The parties will be given an opportunity to address in terms of the way forward. *****************

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