Bendigo and Adelaide Bank Limited v Adam Christopher Cairncross, Bendigo and Adelaide Bank Limited v Elite Advertising Group Pty Ltd

Does the pleading demonstrate that the lenders knew of the representations? 25Paragraph 19 makes the allegations that the lenders knew of the Product Disclosure Statement and the associated documents. The question is whether the particulars support the pleaded facts. The cross claimant approaches the matter in two ways. First it is suggested that a natural inference arises from some of the relevant facts, such as the lender being a party to relevant documents. Second it is suggested that as the attorney and agent knew of the document, that knowledge would be imputed to the principal. 26An example of the first aspect are particulars (l) to (q). What follows from those particulars is that ABL Nominees had a relationship with GSF and GSMAL which was described as "the or a preferred financier". The fact that there was such a relationship and that the documents envisaged loans from ABL Nominees in connection with Projects promoted in the Product Disclosure Statement, again supports an inference that ABL Nominees was aware of the Product Disclosure Statement. When one has regard to all the other particulars and considers them as a whole, absent any explanation the inescapable inference is that the lender knew of the issue of the Product Disclosure Statement and its contents. 27On the second aspect the criticism of the pleading is that the scope of Mr Romeo's appointment as attorney is not pleaded. Another complaint is that it is not pleaded that Mr Romeo held "the relevant knowledge". It was submitted by the defendants that the law presumes that knowledge of an agent is imputed to the principal. In NIML Ltd v MAN Financial Australia Ltd [2006] VSCA 128; (2006) 15 VR 156 at [38] - [40] the court said: "[38] ...We are concerned here with the law of agency, and whatever may be the law relating to notice in cases of liability for knowing receipt of trust property and knowing involvement in breach of trust, the law of agency, as it is stated in Bowstead [ Bowstead & Reynolds on Agency , 17th ed, (2001), Art 97 ] , is that: (1) A notification given to an agent is effective as such if the agent receives it within the scope of his actual or apparent authority, whether or not it is subsequently transmitted to the principal, unless the person seeking to charge the principal with notice knew that the agent intended to conceal his knowledge from the principal. (2) The law imputes to the principal and charges him with all notice or knowledge relating to the subject matter of the agency which his agent acquires or obtains while acting as such agent. (3) Where an agent is authorised to enter into a transaction in which his own knowledge is material, or where the principal has a duty to investigate or make disclosure, the knowledge of the agent may be attributed to the principal whether it was acquired in connection with the agency or not. [39] For present purposes, the second of those rules may be put aside. The extent of its application is uncertain and in this country its scope of operation appears limited to instances where it is the duty of the agent to communicate knowledge to the principal. Generally speaking, the idea seems to be that, where there is a duty to communicate, the consequent probability of communication is so strong that the fact of communication will be presumed (except in case of fraud). But as far as I can see Westpac was not under a duty to inform MFA of the details of each cheque. Such duty as it may have had was limited to details of cheques about which there was reason for Westpac to be suspicious and, so far as Westpac was concerned, there was no particular reason to be suspicious of cheques drawn by Burke on the account of NIML. [40] The first and third rules are applicable. The juridical basis of the first rule is the subject of debate. The better view may be that it exists to prevent the "monstrous injustice" that a principal should have the advantage of what his agent knows without also the disadvantage of it. But however that may be, it is in effect a corollary of the idea that, once a principal constitutes an agent as agent for the purposes of receiving notice, the agent becomes the principal's alter ego for that purpose. So, therefore, notice to the agent is effective as notice to the principal whether or not the agent actually communicates the notice to the principal." (Citations omitted) 28The comments of Hammerschlag J in Angelina Spina v Permanent Custodians Ltd [2008] NSWSC 561 at [106] should also be noted on this aspect. "106. The law may impute to a principal knowledge relating to the subject matter of the agency which the agent acquires while acting within the scope of his authority: Reynolds, Bowstead and Reynolds on Agency, 18th ed (2006) Sweet & Maxwell at [8-207]. Where the agent is authorised to commit the principal to a transaction, and the agent's state of mind is relevant to that transaction, the principal will be bound by the agent's knowledge: Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 at 697 (reversed on other grounds: see Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (in liq) (2003) 214 CLR 514 at 548). There may be circumstances where facts received by an agent otherwise than as agent may nevertheless be imputed to the principal, such as where the principal had a duty to make further investigation, but where the principal had no such duty this will not be the case: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [127]; Bowstead and Reynolds at [8-207]". 29This point appealed to Judge Lacava when considering the same question and after referring to the judgment of Hammerschlag J he said at [40]: "40.This, Ms Neskovcin submitted demonstrates that there is no blanket rule about attribution of knowledge of an agent to the principal. Whether of [sic] not knowledge can be attributed to the principal depends on the surrounding circumstances. What is relevant is whether or not that knowledge was within the scope of the agent's appointment. Relevant to Romeo, he executed the loan deed as an attorney for ABL. The plaintiffs submit that is a very narrow scope of appointment and it is the scope of the appointment that needs to be pleaded so that if it is alleged the plaintiffs are imputed with Romeo's knowledge it needs to be established whether that knowledge was acquired by him having acted within the scope of his agency or appointment. I agree, the relevant sub paragraph is not properly pleaded. Paragraphs 12 to 14 of the submissions in writing on behalf of the defendant attempt to address this problem in the context of what is raised by the plaintiffs concerning paragraphs 3 (g) and 3 (h) of the of the [sic] counterclaim. What is submitted in the written outline by counsel for the defendants does not answer the criticisms properly made in my view." 30In my view both the complaints are well founded and the pleading is deficient in this regard. 31However, the first approach, relying on natural inference, is at least sufficient for the matters to go forward. 32On the second part, if it can be pleaded that Mr Romeo was aware of the Product Disclosure Statement and its contents, the scope of his appointment as an attorney will no doubt be able to be considered further once there is discovery.

Do the particulars to paragraph 19 support the allegation in paragraph 22(b) that the lenders knew that Mr Cairncross would rely on the representations? 33Given particular 19 (a) and the lender's knowledge of the Product Disclosure Statement it would at least be arguable that the lender would expect that an investor might read and rely on the statement. There may be some investors who may be so keen to get the tax deduction that they may not rely on the representation. Even those investors would be likely to read the information. It could not be argued that all the investors would be so short sighted as to not wish to get back their investment as promised. In any event there is an allegation that in fact Cairncross relied on the representations and that will be an issue on the hearing.

Do the particulars to paragraph 24 support the allegation that the representations were misleading and deceptive? 34The representations are contained in paragraph 20 in these terms: " The 2007 Wine Grape Income Project Representations 20. On or about 13 March, 2007 GSMAL made representations to the effect that: (a) the 2007 Wine Grape Income Project is of a long term duration; (b) GSMAL is in a strong financial position and GSMAL is confident that sufficient funds will be available to ensure the successful completion of the 2007 Wine Grape Income Project; (c) Investors are expected to receive annual returns from their proportionate share of harvest proceeds for 20 years after the first full year; (d) the 2007 Wine Grape Income Project offers an expected long term income stream; (e) GSMAL is capable of completing the 2007 Wine Grape Income Project; (f) GSMAL has the financial strength to complete the 2007 Wine Grape Income Project; (g) Great Southern had a market capitalisation of over $1 billion and net tangible assets of over $750 million; (h) the 2007 Wine Grape Income Project offers 100% tax deductibility." 35The allegation that the representations were misleading or deceptive is contained in paragraph 24. The particulars to support the allegation are set out in Annexure B to this judgement. 36On the face of the particulars there is nothing to suggest the falsity of any particular representation. In addition particulars (ix) onwards postdate the representations. As a result of this situation the cross claimants were reduced to suggesting that the mere fact that the relevant companies collapsed and were wound up two years after the representations were made was a sufficient fact to infer, for the purposes of this application, that there would be a breach of a number of the representations, particularly those set out in 20 (b), (c), (f) and (g). 37Perhaps bearing in mind the represented length of the project, there is some substance in the claim that some of the representations are false.

Does the pleading demonstrate that the lenders knew the representations were misleading and deceptive? 38Knowledge is not necessary for the first statutory count under the Corporations Act and is not pleaded in that respect. It is pleaded in respect of the claims under the Contracts Review Act and the unconscionability claims under the Trade Practices Act (or the Australian Consumer Law ) and the ASIC Act . It also was pleaded in respect of the fiduciary claim. 39Knowledge is a necessary ingredient in the fiduciary claim but not necessarily for the other two types of claims. However the likelihood of success as to the trade practices claims, without such knowledge, is slim. 40Another aspect of this matter is that all the relevant pleadings refer to the knowledge in terms "knew or ought to have known". The notion of "ought to have known" is a reference to the kind of constructive knowledge referred to by Lord Esher in English and Scottish Mercantile Investment Company Ltd v Brunton [1892] 2 QB 700 at 707-708: "When a man has statements made to him, or has knowledge of facts, which do not expressly tell him of something which is against him and he abstains from making further inquiry because he knows what the result would be - or, as the phrase is, he "wilfully shuts his eyes" - then judges are in the habit of telling juries that they may infer that he did know what was against him." 41In Consul Development Pty Ltd v DPC Estates Pty Ltd at 412 to 413 Stephen J said the following: "In my view the state of the authorities as they existed before Selangor did not go so far, at least in cases where the defendant had neither received nor dealt in property impressed with any trust, as to apply to them that species of constructive notice which serves to expose a party to liability because of negligence in failing to make inquiry. If a defendant knows of facts which themselves would, to a reasonable man, tell of fraud or breach of trust the case may well be different, as it clearly will be if the defendant has consciously refrained from enquiry for fear lest he learn of fraud. But to go further is, I think, to disregard equity's concern for the state of conscience of the defendant. The most common operation of the doctrine of constructive notice is in dealings in real property where for centuries investigation of title has been the usual concern of business 'in dealing with real property, as in other matters of business, regard is had to the usual course of business; and a purchaser who wilfully departs from it in order to avoid acquiring a knowledge of his vendor's title is not allowed to derive any advantage from his wilful ignorance of defects which would have come to his knowledge if he had transacted his business in the ordinary way' ( Bailey v. Barnes , per Lindley L.J.). In such a case negligence in making inquiries may constitute constructive notice. Perhaps too, in the transaction of banking business a usual course has evolved so that the same may be said of bankers. But the courts have been markedly reluctant to extend the application of the doctrine of constructive notice. In Milne v. James , Griffith C.J. said that it was now settled that the doctrine ought not to be extended and both Barton and O'Connor JJ. in separate judgments quoted in full the observations of Lord Esher M.R. in English and Scottish Mercantile Investment Co. v. Brunton , in the course of which he said, speaking of the doctrine of constructive notice: 'Of late years, after the doctrine had been invented and put into form, the Chancery Judges saw that it was being carried much farther than had been intended, and they declined to carry it further. In a series of cases Lords Cottenham, Lyndhurst, and Cranworth, Lord Justice Turner, and the late Master of the Rolls, Sir George Jessel, have said that the doctrine ought not to be extended one bit farther; all the Judges seem to have agreed upon that. In Allen v. Seckham, I pointed out that the doctrine is a dangerous one. It is contrary to the truth. It is wholly founded on the assumption that a man does not know the facts; and yet it is said that constructively he does know them.' Joseph v. Lyons provides an instance in which both Cotton L.J. and Lindley L.J. refused to apply to a pledge of chattels the doctrine of constructive notice, a doctrine which each regarded as having already been pushed too far. Lindley L.J., in Manchester Trust v. Furness, vigorously attacked the attempted extension of constructive notice to commercial transactions, regarding it as appropriately confined to dealings with land and estates; like views were subsequently expressed by the Court of Appeal in Greer v. Downs Supply Co. " (Citations omitted) 42Once again it is the particulars to paragraph 19 that are used to support the claims of knowledge. 43There is an allegation in paragraph 28 (d) that with knowledge of the representations and knowledge that the borrowers would be induced by the representations to apply to borrow money, ABL made no enquiry as to the accuracy or veracity of the representations. 44In my view the particulars to paragraph 19, apart from 19 (g), do not support the allegation that the lenders had the relevant knowledge. 45In respect of 19 (g) there are no details that suggest Mr Romeo had knowledge of a relevant falsity. The fact that he was the finance manager of GSMAL and also responsible for the operations of GSF in providing finance facilities says nothing about his knowledge of a particular falsity or such matters in general. 46I note that no factual or legal basis for the existence of the alleged duty in paragraph 28 (d) on the part of ABL to enquire as to the accuracy or veracity of the representations is identified. If one relied on the constructive notice authorities there is nothing in the particulars to paragraph 19 which suggests that the lender wilfully shut its eyes to the truth of the representations in the sense that if they enquired they would find out that they were false. Therefore constructive notice does not assist.

Case management issues 47At the forefront of these claims is the fact that the proceedings have been on foot for a year, during which the defendants have tried to formulate an appropriate cross claim which will be allowed to proceed. In this period the lender has not had the benefit of their money but interest is an obvious answer to this complaint. Much is made of a number of times that the defendants have tried to formulate a claim for the purposes of obtaining leave to file or amend a claim, or avoiding a strike out. 48Several of these were involved in the one hearing before Einstein J and it is to be appreciated that the matter before me is in respect of a substantially different cross claim. 49I do not think that in the context of the proper case management of a case such as the present it would be more appropriate to dismiss the application and leave the defendants to an application for preliminary discovery. 50I have carefully read the Victorian decision of his Honour Judge Lacava that comes to a different conclusion. With respect to his approach I think, having regard to the nature of the calamities involved, that the focus should be upon seeing whether there is some substance in the claims that warrants further investigation. 51Although there are some valid criticisms of the first statutory count, plainly in my view it should go forward. The claim under the Contracts Review Act is one which does not need knowledge to succeed. It also should go forward. The claims for unconscionability are ones which, on the face of it, could hardly be maintained without them pleading knowledge of the falsity of the representations, which cannot be done. There is nothing in the circumstances of Mr Cairncross that would attract the intervention of the Court. They should not proceed. 52In respect of the fiduciary claim, absent knowledge, it cannot proceed. 53I give leave to the defendants to file a cross claim and commercial list cross claim statement in accordance with the principles set out in this judgment within 14 days of this judgment. Subject to any submissions, I order the defendants to pay the cross defendants' costs of the motions.

ANNEXURE A 19. At all material times GSF and ABL Nominees knew of the issue and distribution of the 2007 Wine Grape PDS, the Promotion Document, the 2007 Wine Grape Application for Investment, the Application for Term Finance, the Direct Debit Request and the Term of Loan Deed and that the 2007 Wine Grape PDS contained representations in relation to the 2007 Wine Grape Project. Particulars The fact that GSF and ABL Nominees knew or ought to have known of the issue and distribution of the 2007 Wine Grape PDS, the Promotion Document, the 2007 Wine Grape Application for Investment, the Application for Term Finance, the Direct Debit Request and the Term of Loan Deed is to be inferred and imputed from the following facts, matters and circumstances: (a) as matter of law the issue of any managed investment product is taken to occur in the course of a business of issuing financial products and a regulated person (such as GSMAL) must give a Product Disclosure Statement for a financial product to potential investors if the regulated person offers to issue the financial product to the potential investor (Part 7.9 Corporations Act , 2001); (b) Mr Young was a director of GSMAL from 11 August 1998 to 22 July 2008 and was a director of GSF from 29 June 1998 to 4 July 2008; (c) Mr Young was the Managing Director of the Great Southern Group of companies; (d) Mr Rhodes was a director of GSMAL from 30 June 2005 and a director of GSF from 10 April 2001; (e) Mr Rhodes was the General Manager of the Great Southern Group of companies and had responsibility for overseeing all facets of the Group's operations, including financial, corporate and administrative functions; (f) Mr Young and Mr Rhodes were members of the executive committee of the Great Southern Group, which was responsible for all areas of corporate strategy and the operational performance of the Great southern Group (including GSF) and which monitored the performance yields of the Projects; (g) Mr Romeo was at all material times, the Finance Manager of GSMAL and was also responsible for the operations and functions of GSF in providing finance facilities to investors and securitisation of its loan portfolio. Mr Romeo was at all material times also an attorney and/or agent of ABL Nominees and as such his knowledge of the affairs of GSMAL and GSF were at all material times the knowledge of ABL Nominees; (h) GSF was established to act as a lender of monies to scheme members who wished to invest in schemes promoted by GSMAL; (i) GSMAL relied upon funds advanced by, inter alia, GSF and ABL Nominees to investors to provide the capital for the Projects; (j) In an agreement between GSF, ABL Custodian Services, ABL Nominees and other companies dated 25 June, 2004 (the Loan Sale Servicing Deed ): (i) GSF offered for sale rights under loan agreements in respect of loans provided by GSF to investors to finance investments in GSMAL managed Schemes; (ii) Clause 1.2 of the Loan Sale Servicing Deed defined "Loan Agreement" to include: "in relation to a Loan (defined to mean any debt owing by a debtor to the seller under a Loan Agreement from time to time), the agreement that evidences the terms of, or any obligations under, the Loan which agreement is, in relation to an Interest Free Loan, contained in a Prospectus"; (iii) GSF warranted that there had been no fraud, dishonesty, misrepresentation, misleading or deceptive conduct or negligence on its part or to the best of its knowledge or belief in connection with the marketing, distribution or making of loans. (k) The 2007 Wine Grape Application for Investment, the 2007 Application for Term Finance and the 2007 Term of Loan Deed included loan options, set out loan conditions, included a direct debit request and authority which the 2007 Wine Grape PDS requested to be signed and submitted with the investor's application form; (l) Page 8 of the 2007 Wine Grape PDS Contained the following statement: Finance Options Finance is available to Growers from Great Southern Finance Pty Ltd, a wholly owned subsidiary of Great Southern Plantations Limited. Short-term interest free financing is available as well longer and interest finance to approved Growers. Financing Options may also be available from preferred financiers of GSMAL. (m) Page 89 of the 2007 Wine Grape PDS contained the following statement: Interest Free Finance By ticking the interest free loan box at section five of the Application Form on page 94 or 98 of the PDS and signing the Application Form, Applicants are making application to Great Southern Finance Pty. Ltd. ("the Lender") to borrow an amount equal to the amount shown on section five of the Application Form, on the following terms and conditions: (n) Page 90 of the 2007 PDS contained the following statement: Debiting your account 1.1 By signing a Direct Debit Request, you have authorised us to arrange for funds to be debited from your account. You should refer to the Direct Debit Request and this agreement for the terms of the arrangement between us and you. 1.2 We will only arrange for funds to be debited from your account as authorised in the Direct Debit Request. 1.3 lf the debit day falls on a day that is not a business day, we may direct your financial institution to debit your account on the following business day. If you are unsure about which day your account has or will be debited you should ask your financial institution. (o) Clause 5 of the 2007 Application for Term Finance contained the following statement: We, the Borrower and the Guarantor: (a) agree to GSF (in its capacity as lender under the proposed loan or as agent for ABL where ABL is the lender under !he proposed loan) and ABL where ABL is the lender under the proposed loan (each a Collector), seeking or obtaining a consumer credit report containing information about me/us from a credit reporting agency for the purpose of assessing my/our application for commercial credit. This consent commences from the date of this agreement and continues until the credit covered by this application ceases; (g) each acknowledges that subject to the provisions of the Privacy Act, we may access information the Collector holds about us at any time by contacting: (i) GSF on 1800 258 348 If the lender of the proposed loan is GSF; or (ii) GSF on 1800 258 348 or ABL on (08) 8300 6470 if ABL is the lender of the proposed loan; (p) On page 2 of the 2007 Application for Term Finance under the heading Checklist for Applicants the following statement appears: The applicants and guarantors are not required to sign the loan deed attached to this application (and other documents connected with, or related to, the loan deed) as the loan deed will be completed and signed by the lender (or the lender's attorney) as attorney for the applicants and guarantors pursuant to Part 6 of this application. (q) Clause 6 of the 2007 Application for Term Finance contained the following statement: 6 POWER OF ATTORNEY (a) By signing this finance application, the Borrower and the Guarantor (if any) (Appointor) agree to appoint: (i) where Great Southern Finance Pty Ltd (GSF) is the lender under the proposed loan, GSF and each director, company secretary and attorney of GSF, jointly and severally; or (ii) where ABL Nominees Pty Ltd (ABL) is the lender under the proposed loan, each of ABL and GSF and each director, company secretary and attorney of ABL or GSF, jointly and severally to be attorney for the Appointor (Attorney) on the terms specified herein and to exercise the powers as follows; (iii) to enter into and execute a loan deed or loan deeds in the form attached to this finance application ( Loan Deed ) on behalf of the Appointor. A loan deed will be in the same form as the loan deed attached to this finance application despite any formatting changes to the document; (iv) to date the Loan Deed and complete the blank spaces in the schedule thereto consistent with the provisions of this finance application; (v) to make and initial any necessary alteration to the Loan Deed which are not prejudicial to the interests of the Appointor in the considered opinion of the Attorney; (vi) to do anything in relation to the property secured under the Loan Deed which the owner of that property would be entitled to do; (vii) to make, do and sign all acts, deeds and things as may be necessary to procure the stamping and registration of the Loan Deed with the power to instruct the Attorney's solicitors to assist the Attorney in this regard; and (viii) to enter into and execute on the Appointor's behalf, any documents connected with, or related to, the Loan Deed. (r) The 2007 Term of Loan Deed contained the following: This Deed Is made on day of 200 Between the following parties If the proposed loan has been approved by GSF, the Lender under this loan deed is GSF. If the proposed loan deed has been approved ABL, the Lender under this loan deed is ABL

1. Great Southern Finance Pty Ltd ACN 009 235 143 Of 16 Parliament Place West Perth, Western Australia (Lender) OR
2. ABL Nominees Pty Ltd CAN 106 755 521 Of level 5, 169 Pirie Street, Adelaide, South Australia (Lender) [delete as applicable] and
3. The Borrower described in item 1 of the Schedule (Borrower) and
4. The parties (if any) Described in item 11 of the Schedule (Guarantor) Recitals A. GSMAL has established the Projects in accordance with the relevant Product Disclosure Statement relating to each Project. B. The Borrower has decided to participate in each Project specified in item 2 of the Schedule to carry on the relevant Business. C. The Lender will finance a portion of the Borrower's interest in each Project on the terms and conditions set out in this Document. (s) GSF and ABL Nominees depended or relied on the 2007 Wine Grape PDS as part of its business of lending money to investors; (t) ABL Nominees was the or a preferred financier of GSMAL for the purpose of the 2007 Wine Grape PDS; (u) ABL Nominees was intending to take security by way of a charge over rights and interests of investors in the 2007 Wine Grape Income Project offered by GSMAL; (v) The Loan Deed was purportedly signed by Mr Young in his capacity as director and Mr Rhodes in his capacity as secretary of GSF purportedly as the attorney for Elite Advertising. (w) The Loan Deed was purportedly signed by Mr Romeo and Graeme Perich as the duly appointed attorneys for ABL Nominees. (x) Further particulars will be provided after discovery.

ANNEXURE B Particulars (i) The harvest yields for the Great Southern Plantations 1994 managed investment scheme (being ARSN 092 782 735), the Great Southern Plantations 1995 managed investment scheme (being ARSN 092 782 155) and the Great Southern Plantations 1996 managed investment scheme were lower than had been forecast and disclosed to investors in those schemes. (ii) GSL and/or GSMAL engaged Allens Arthur Robinson and KPMG to provide advice on the sale of the Great Southern Plantations 1994 managed investment scheme harvest to a related entity of GSL at a price higher than would have been derived through the harvesting, processing and Freight on Board sale of the timber resource. (iii) GSL and/or GSMAL received advice from Allens Arthur Robinson and from KPMG and intended to incorporate a company to purchase the harvest at above market prices in order to top up returns to investors. (iv) On 16 March, 2005 Great Southern Export Company Pty Ltd (ACN 113 408 549) ( GSEC ) was incorporated (with Mr Young and Rhodes consenting to be directors) to facilitate the harvesting and sale of timber. (v) In or around March/April 2005, the Australian Agribusiness Group (the AAG) provided a report as to the affairs of GSL which contained the following statements: " 5.2 Yield Estimates of returns outlined in the prospectuses for all past projects have used growth rates of 25-30m3/ha/yr or 15-00m3/ha after 10 years. About 6 years ago Great Southern recognised that there may be shortfalls in yield for its earlier projects and consequently started purchasing resources to include in the pool for investors for the older projects... 5.6 Likelihood of achieving the forecast returns for previous projects The net returns achieved by Investors depend strongly on yields being achieved close to forecasts and harvesting costs being maintained at the levels achieved for the recent harvest of the 1994 Project. Yields in older plantations are likely to be less than forecast, even after supplementary actions by management. This will impact on returns... While not all the plantations have been harvested yet, great Southern has informed AAG that the returns from the 1994 Project will be in the order of 5.0-5.5% Internal Rate of Return (IRR) before any consideration of tax of the application fee or income." (vi) At a board meeting of GSL held on 28 April 2005, the directors of GSL were provided with a board paper concerning the harvest yield from the Great Southern Plantations 1994 managed investment scheme which indicated that the yield would not provide a return to growers of the quantum suggested to them at the time when they first invested. (vii) In May 2005 the board of directors of GSL (including Mr Young and Mr Rhodes) were provided with a document relating to a proposed transaction involving Great Southern Export Company Pty Limited (GSEC) which contained statements to the following effect: (A) returns from the 1994 scheme may have a commercial impact on current and future sales; (B) whilst a lower return is defensible given the reasons outlined . . . it could nonetheless affect the confidence of current investors and advisors, which may impact sales; (C) the [top up] amount contemplated is not significant, particularly in the context of the NPAT [net profit after tax]; and (D) the proposed payment will increase investor confidence in the ability of Great Southern to manage a forestry project to deliver a reasonable outcome. This will result in additional sales of GS Group projects, which in turn will increase profits to the benefit of shareholders. (viii) In July 2005 GSEC acquired the rights to purchase the harvest timber from growers and the amount paid was higher than would have been derived through the harvesting, processing and Freight On Board sale of the timber resource. The effect of the transaction was to "top up" the return to investors/growers from the harvest so as to maintain a desired rate of return in the market and to address comingling of woodchips as scheme property and the impact of GST. The cash amount of the top-up payment was in the order of $4m. (ix) An ASX announcement by GSL on 18 May 2007, disclosed that GSL had provisioned for bad and doubtful debts of $778,000 in respect of the halfyear ending 31 March 2007. GSL's half-yearly financial statements for the period ending 30 September 2007, contained statements to the effect that provisioning had increased by that date to $5,731,000. GSL's half yearly financial statements for the period ending 31 March 2008 contained statements to the effect that provisioning had increased by that date to $37,237,000. An ASX announcement made on 26 May 2008 contained a statement to the effect that Mr Rhodes characterised the increase in provisioning as "disappointing and unacceptable" and attributed it to the quality of excising loans and loan approval and collection processes. By September 2008, the provision for bad and doubtful debts had increased to $55,600,000 which figure represented 46% of total "term trade receivables". (x) On or about 7 February, 2007 the Federal Government announced that the Australian Taxation Office had reconsidered its interpretation of current tax laws with the consequence that investors in non forestry investments would no longer be allowed to claim up front deductions for their project fees, with effect from 30 June 2007. (xi) After 7 February 2007 GSL's share price dropped and sales in Managed Investment Schemes promoted by GSL dropped. (xii) On 16 May, 2009 administrators were appointed to GSMAL, GSF and GSL. (xiii) On 18 May, 2009 receivers and managers were appointed to GSMAL and GSF. (xiv) On 19 November, 2009 the creditors of GSMAL, GSL and GSF resolved to wind up those companies. (xv) The 2007 Olives Income Project has not been completed. (xvi) The 2007 Olives Income Project will not be completed by GSMAL. (xvii) The 2007 Olives Income Project will not be completed. (xviii) The 2007 Olives Income Project will not provide income. (xix) Further particulars will be provided after discovery.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 November 2011