Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd

The parties 5 The applicants in these proceedings are the first applicant, Citrus Queensland Pty Ltd; the second applicant, Mr Peter Michael Tracy; and the third applicant, Sunstate Citrus Pty Ltd. 6 At all material times the first applicant was a company duly incorporated according to law, was the sole shareholder in the third applicant, and was the trustee of the Sunstate Orchards Unit Trust. 7 The second applicant, Mr Tracy, was at all material times the sole director and shareholder of the first applicant, and the sole director of the third applicant. In his statement of 17 November 2006, Mr Tracy said that he held tertiary qualifications, namely an Associate Diploma of Arts, a Post Graduate Diploma of Management, and a Masters of Business Administration. Mr Tracy also stated that his work experience was primarily in human resource management with particular emphasis on the mining industry, and that he had no experience, either professional or practical, concerning the citrus or horticultural industries. However it became apparent during cross-examination of Mr Tracy that he was also a director and principal of a company known as The RT Group Pty Ltd, which specialised in assisting the small to medium sector with business turnaround and management techniques (exhibit R21). Under cross-examination from Mr Bell QC, Mr Tracy conceded that he was in fact a "corporate doctor" whose role was to make badly performing operations perform better (TS 309 ll 31-32). 8 The third applicant was at all material times a company duly incorporated according to law and was the trustee of the Sunstate Citrus Trust. It was incorporated by Mr Tracy on 8 February 2005 for the purpose of being the operating entity for the business which was to be conducted on the orchards and Packing Shed (Peter Michael Tracy statement sworn 17 November 2006 at [97]). The third applicant entered voluntary administration on 23 June 2005. 9 It is clear that Mr Tracy was, at all times, the directing mind and will of the first and third applicants. 10 The respondents in these proceedings are the first respondent, Sunstate Orchards Pty Ltd; the second respondent, Mr Andrew Strahley; and the third respondent, Mr David Breed. 11 The first respondent, formerly Sunstate Acquisitions Pty Ltd, is a wholly owned subsidiary of Hancock FARM Company Pty Ltd (Hancock). It had originally acquired 80% of the properties in January 2001 for the sum of $5.6 million plus the cultural costs of growing the 2001 crop prior to the purchase (Andrew Colin Strahley affidavit sworn 12 July 2006 at [11]-[14]), and later acquired the remaining 20%. The primary relief sought by the applicants in these proceedings is against the first respondent. 12 The second respondent, Mr Strahley, was a director of the first respondent from 19 January 2001, and became Managing Director of Hancock in July 2003. I understand that his role included oversight of the financial and administration operations of the farms under the management of Hancock. 13 The third respondent, Mr Breed, was employed by the first respondent at the orchards from June 2003 to manage the orchards and Packing Shed. He remained an employee of the first respondent until 18 March 2005 and was subsequently employed by the third applicant until 23 June 2005. An unsigned statement of Mr Breed was filed by the applicants on 21 June 2006. Subsequently, Mr Breed swore an affidavit in these proceedings on 14 July 2006, which was filed by the respondents and tendered in evidence (exhibit R20). Mr Breed was not represented in these proceedings nor called as a witness by any party to the proceedings.

The relevant properties 14 The three properties the subject of this litigation are located in the Maryborough-Bundaberg area of south east Queensland, and are two citrus orchards and a Packing Shed ("the relevant properties"). 15 The orchard located at Tiaro ("the Tiaro orchard") had approximately 26,000 trees, including lemons and a number of mandarin varieties. The orchard located at Bundaberg ("the Bundaberg orchard") was slightly larger, with approximately 33,000 trees (predominately citrus trees including limes, lemons, mandarin varieties, navels and pomellos). There was also a small crop of mangoes at the Bundaberg orchard. 16 The Packing Shed was located just outside Maryborough (Strahley affidavit sworn 12 July 2006 at [15]-[17]).

The decision to sell the properties 17 According to evidence of Mr Strahley, in around May 2004 Hancock decided to consider various options as to the future of the relevant properties because they were not performing in accordance with Hancock's return criteria (Strahley affidavit sworn 12 July 2006 at [48]). Mr Strahley deposed further that in the ordinary course of business the Hancock properties were re-valued every 2 years, and in June 2004 a valuation report ("1 June 2004 Valuation Report") was sought from Mr Rex Neubecker of Herron Todd White Valuers ("HTW") (Strahley affidavit sworn 12 July 2006 at [49]-[55]). 18 Mr Peter Douglas, a real estate agent with Ray White Rural, was engaged from September 2004 to market the Bundaberg and Tiaro orchards and the Packing Shed for the first respondent (Peter Colin Douglas affidavit sworn 6 July 2006 at [13]). The property went to auction on 26 November 2004 and was passed in on a vendor's bid (Strahley affidavit sworn 12 July 2006 at [60]-[61]).

The preliminary discussions between the parties 19 The negotiations between Mr Tracy and the first respondent commenced in November 2004. Mr Tracy had had no previous involvement in either the citrus or horticultural industries, however his attention was drawn to the relevant properties by Mr Douglas in late November 2004 (Douglas affidavit sworn 6 July 2006 at [13]; Tracy statement sworn 17 November 2006 at [1]-[2]). Mr Tracy and Mr Douglas had known each other for several years at that time. Mr Tracy deposed that he expressed an interest in the relevant properties and Mr Douglas suggested that he would arrange a meeting between Mr Tracy, Mr Strahley and himself, and provide Mr Tracy with an information package (Tracy statement sworn 17 November 2006 at [2]-[5]). 20 In late November 2004 Mr Strahley was informed by Mr Douglas that Mr Tracy might have an interest in looking at the properties. Mr Strahley subsequently provided Mr Douglas with the 1 June 2004 Valuation Report, and information and historical data about the performance of the orchards in the form of Block Summary data (which had been created by Mr Breed for internal management purposes) (Strahley affidavit sworn 12 July 2006 at [62]-[67]; Douglas affidavit sworn 6 July 2006 at [17]). 21 Mr Douglas gave evidence that during a telephone conversation with Mr Tracy on 1 December 2004 the prospect of a meeting with Mr Strahley was discussed as well as a proposal he had received from Mr Strahley containing broad terms of sale. These broad terms of sale included: · a purchase price of $4.5 million plus cultural costs; · progressive payment with due dates in January-March 2005; and · the current management team remaining to operate the properties (Douglas affidavit sworn 6 July 2006 at [18]-[19]).

The first meeting 22 Throughout the proceedings it was clear that the key players in respect of negotiation of agreements for sale and purchase of the relevant properties were Mr Tracy and Mr Strahley. 23 The first meeting between Mr Tracy and Mr Strahley took place on 3 December 2004 (Strahley affidavit sworn 12 July 2006 at [68]; Peter Michael Tracy statement in reply sworn 26 September 2006 at [3]). Mr Douglas also attended this meeting as an observer and as the real estate agent engaged by the first respondent in respect of sale of the relevant properties. 24 Mr Tracy deposed that Mr Strahley explained that the decision of the first respondent to sell the orchards was because the company wanted to concentrate on other agricultural products (Tracy statement sworn 17 November 2006 at [7]). He also deposed that Mr Strahley told him that the lemons were selling for $70 per carton; that they needed to move quickly so as to take advantage of the high prices; that the lemons would produce $1.5 million in revenue after production costs and that the budgeted sale price for lemons was $30 per carton (Tracy statement sworn 17 November 2006 at [8]). Mr Tracy deposed that at this meeting he indicated his interest to Mr Strahley, and indicated that he would like to obtain further information (Tracy statement sworn 17 November 2006 at [9]). 25 Mr Strahley gave evidence that the matters discussed at the meeting included: · Mr Tracy said that one of his businesses was purchasing distressed assets, addressing management issues and turning the business around in order to on-sell the business; · the Board of Hancock has made the decision to sell based on past performance (the orchards had incurred losses in the 2003 and 2004 years) and the fact that citrus no longer fell within the desired portfolio; · citrus canker and its adverse impact on the performance of the orchards; · the market and pricing of fruit; · the block summary documents; · the budgeted revenue for the 2004/2005 year; · as between Mr Douglas and Mr Tracy - the possibility of Mr Tracy on-selling the Packing Shed, stripping the fruit and reselling the orchards; · that picking of the lemon crop could be started in January 2005 and that higher prices are achieved for picking early (although early picking is selective picking so incurs higher picking costs) and that you could get up to $70 per carton for grade 1 lemons; · the actual packout rates for 2004 and a notional packout rates for 2005 and the factors that influence packout rates (Strahley affidavit sworn 12 July 2006 at [69]). 26 Mr Douglas deposed that at this meeting he placed the Ray White Information Memorandum about the property (which had originally been prepared by the former estate agents for the sale of the property by tender) and the Block Summary data on the table for discussion, and that they were not there at the end of the meeting. Mr Douglas further deposed that he saw Mr Tracy put a number of documents in his briefcase during the meeting (Douglas affidavit sworn 6 July 2006 at [22]). 27 Many of the events of this meeting are the subject of dispute in these proceedings. 28 Mr Strahley also gave evidence that at this meeting he provided Mr Tracy with a folder of due diligence documents from the time that the first respondent had purchased the orchards, and that Mr Tracy took this folder with him at the end of the meeting (Strahley affidavit sworn 12 July 2006 at [70]). 29 Mr Tracy met with Mr Douglas after the meeting with Mr Strahley. Mr Tracy deposed that Mr Douglas informed him that he would need to make a conditional offer to purchase the properties to show bona fides, and that the properties represented "a good opportunity". Mr Tracy indicated that he had not finished his enquiries but that he could be interested in making a conditional offer to purchase of $4 million subject to due diligence (Tracy statement sworn 17 November 2006 at [10]-[11]).

Correspondence after the first meeting 30 On 6 December 2004 Mr Tracy sent Mr Douglas an email noting his interest in the properties, and requesting audited end of year accounts for 2002, 2003 and 2004 and the financial cash flow model (exhibit A6). In reply Mr Douglas indicated that the figures for 2003 would be sent to Mr Tracy that day, and that 2004 figures were not yet available. Mr Douglas also noted that lemon prices had continued to climb with prices of $65 and $74 (exhibit A6; Tracy statement sworn 17 November 2006 at [12]-[13]). 31 Later in the day of 6 December 2004 Mr Tracy sent Mr Douglas an email with an offer to purchase the properties, plant and equipment, water rights, know-how and fruit stock, and all other assets for $4 million "as is where is", with crop included, subject to a 14 day due diligence period and an independent report declaring the property free of canker (exhibit A8). 32 Mr Douglas forwarded Mr Tracy's email offer to Mr Strahley on 6 December 2006. Mr Strahley replied by email to Mr Douglas, who forwarded the email to Mr Tracy, indicating that the first respondent was prepared to accept an offer of $4.5 million (inclusive of the new season crop) (exhibit A9). Mr Tracy responded by email agreeing to the sum of $4.5 million, but subject to, inter alia, a guarantee by the directors of the parent company of the first respondent as to the value of the lemon crop at $1.5 million (exhibit A10; Tracy statement sworn 17 November 2006 at [17]). 33 On 7 December 2004 Mr Tracy also requested further information and another meeting with Mr Strahley.

The second meeting 34 A second meeting between Mr Douglas, Mr Tracy and Mr Strahley took place on either 9 December 2004 or 10 December 2004 (the differing recollection of the date is in my view not material) at the premises of the first respondent. At this meeting Mr Tracy deposed that the parties discussed the first respondent's budgeting process, historical expenses, marketing agreements, supplier-negotiated pricing on consumables, and the SGARA accounting methodology used by the first respondent (Tracy statement sworn 17 November 2006 at [19]). 35 Mr Strahley deposed that this meeting lasted for approximately 2 hours and involved discussion of the emails of 6 December 2004 relating to the first applicant's offer and a discussion about the bank guarantee which was requested by the first applicant. At that meeting Mr Strahley and Mr Tracy signed a copy (in duplicate) of the Confidentiality Agreement that Mr Strahley had sent to Mr Douglas on 6 December 2004 (Strahley affidavit sworn 12 July 2006 at [83]-[84]).

Correspondence after the second meeting 36 On 10 December 2004 Mr Tracy was provided with various documents by email from Mr Strahley, including: · Australian Fruit Report for 10 December 2004; · a Microsoft excel document entitled "2005 Sunstate Budget.xls"; · audited reports for 2001-2002 and 2002-2003 (unsigned); · a Microsoft excel document entitled "Sunstate Budget Nov 04". (Tracy statement sworn 17 November 2006 at [26]-[27]; Strahley affidavit sworn 12 July 2006 at [86]-[87]). 37 Mr Tracy deposed that he was concerned about the figures in the Sunstate Budget Nov 04 and as a result telephoned Mr Strahley. Mr Tracy said he was informed by Mr Strahley that the outbreak of citrus canker had resulted in lost sales of up to $500,000: further that the expenses were high because in the non-revenue season expenses still needed to be incurred, and because of an arrangement for contract packing for Abbotsleigh (Tracy statement sworn 17 November 2006 at [29]).

First inspection of the properties 38 Mr Tracy inspected the properties, including the Packing Shed at Maryborough, on 13 December 2004 and met with various employees of the first respondent at those properties including Mr Breed (Tracy statement sworn 17 November 2006 at [31]; Douglas affidavit sworn 6 July 2006 at [48]). Mr Douglas gave evidence that Mr Tracy asked a number of questions during this time, and while he did not recall the substance of the conversations, he did recall that Mr Tracy's questions were answered by Mr Breed and Mr Burns without any hesitation (Douglas affidavit sworn 6 July 2006 at [48]). 39 Mr Tracy gave evidence that around this time he was provided with a folder of documents by Mr Strahley, which contained information relevant to due diligence enquiries made by the first respondent when it purchased the orchards (Tracy statement sworn 17 November 2006 at [32]). 40 On 16 December 2004 Mr Tracy sent Mr Douglas an email outlining a number of issues that needed to be progressed to maintain due diligence (exhibit R23).

Third meeting 41 A third meeting was held on 17 December 2004 at the offices of the first respondent, attended by Mr Tracy, Mr Strahley and Mr Douglas. Mr Strahley gave evidence that at that meeting the contractual terms were discussed, as was the email from Mr Tracy to Mr Douglas of 16 December 2004, and that during this meeting Mr Tracy expressed interest in negotiating the sale of the Packing Shed before he settled the purchase of the Property (Strahley affidavit sworn 12 July 2006 at [101]-[104]). 42 During the course of this meeting, a written contract of sale of the Properties at the sale price of $4.5 million was executed on behalf of Peter Tracy Nominees Pty Ltd and the first respondent, contemplating settlement on 28 January 2005. Mr Strahley gave evidence that Mr Tracy told him that Mr Tracy wanted the income from the lemon crop included as part of the contract and as a result a clause was included in the contract that the picking of the lemon crop was to commence in the first week of January, subject to weather conditions (Strahley affidavit sworn 12 July 2006 at [101]-[104]). 43 Mr Strahley deposed that Mr Tracy said his bank would not accept a valuation of the property produced in June 2004, and that he needed to obtain another valuation by 10 January 2005 to enable settlement to proceed. Mr Strahley gave evidence that the parties discussed steps to allow Mr Tracy to obtain an expedited valuation, and that he gave Mr Tracy the contact details for HTW (Strahley affidavit sworn 12 July 2006 at [104]). 44 Mr Bailey, a director of HTW, deposed that he received a telephone call from Mr Tracy on 16 December 2004 during which Mr Tracy: · requested that he prepare a valuation of the relevant properties; · said that the crop which was worth more than $300,000; and · told him that he (Mr Tracy) had completed due diligence on the relevant properties. 45 Mr Bailey deposed that he told Mr Tracy that he could provide a valuation within 15 working days (Bailey affidavit sworn 19 July 2006 at [3]-[4]).

Events after the third meeting 46 On 20 December 2004 Mr Bailey spoke again with Mr Tracy, who said that he needed the report by 12 January 2005, and that the property was worth $8 million (Bailey affidavit sworn 19 July 2006 at [7]). Mr Bailey advised that he would do his best to provide it by 12 January 2005. 47 Mr Strahley said that shortly after the 17 December 2004 meeting, he had a telephone conversation with Mr Tracy in which Mr Tracy told him that he was looking for someone to obtain a crop status report to ascertain yields and condition of the crop. Mr Strahley gave Mr Tracy the telephone numbers for Mr Dan Papacek, an entomologist who was providing consulting services to the first respondent, and Mr John Owen-Turner, a horticulturist who had provided consulting services to the first respondent, and suggested that Mr Tracy contact them directly (Strahley affidavit sworn 12July 2006 at [105]). 48 Mr Strahley also arranged for Mr Tracy to speak with Ms Carolyn Bailey, manager of Client Accounting and Reporting, Hancock Agricultural Investment Group, in Boston Massachusetts, on 20 December 2004, so that Ms Bailey could explain the SGARA accounts system used by the first respondent (Strahley affidavit sworn 12 July 2006 at [106]). 49 Between 20 December 2004 and 22 December 2004 Mr Strahley emailed Mr Tracy the following documents: · Microsoft excel document entitled "Yield Summary.xls"; · an email authorising expenditure for continuing cultural costs on the orchard; · Microsoft excel document entitled "Carton Yield Summary.xls"; · Microsoft excel document entitled "sstrnd-nosgara.xls"; · Microsoft excel document entitled "Valuation Yield Summary 2004.xls"; · an email from Mr Strahley concerning the current lemon prices. 50 In summary, these documents contained information relevant to: · the total number of cartons of fruit picked between 1998 and 2004, with forecasts for 2005-2007; · predictions of cartons of fruit to be packed and sold in 2005; · accounts for the orchards for the financial years 2001-2002 and 2003-2004, with budgeted figures for the financial year 2004-2005; · current lemon prices; · financial year to date actual figures; and · costs savings suggestions with respect to the 2005 projections. 51 At some point, Mr Tracy instructed Tierney & Company Solicitors to act on his behalf in the transaction.

Second inspection 52 On 5 January 2005 Mr Tracy undertook a second inspection at the Packing Shed, at which time he met with Mr Breed at length. Mr Strahley was on leave on this date. Mr Tracy deposed that, during the meeting with Mr Breed, he created spreadsheets for scenarios which he titled "brilliant", "optimistic", "most likely" and "worst case". Mr Tracy deposed that Mr Breed completed these spreadsheets for him, and that Mr Tracy did not change these spreadsheets (Tracy statement sworn 17 November 2006 at [49]-[50]). 53 Following this second inspection, on 6 January 2005 Mr Breed emailed a further document to Mr Tracy entitled "Production Pricing Schedule Jan 05.xls".

Discussions between Mr Tracy and Mr John Owen-Turner 54 On 7 January 2005 Mr Tracy had a conversation with Mr John Owen-Turner, a horticultural consultant, about a number of issues. Mr Tracy deposed that the discussion included the orchards, the appointment of Mr Matthew Burns as horticulturalist at the orchards, and the role of Mr Dan Papacek in relation to pest control at the orchards (Tracy statement sworn 17 November 2006 at [76]). 55 Mr Owen-Turner kept some notes of this conversation. He deposed in his affidavit sworn 6 July 2006 that he and Mr Tracy discussed the varieties of fruits grown at the orchards, and that Murcott, Nova and Ellenor mandarin varieties should not be grown at the orchards because the orchards were coastal orchards and those varieties of fruit were susceptible to Emperor Brown Spot disease ("EBS"). Mr Owen-Turner deposed that he did tell Mr Tracy that the Nova and Murcott varieties were affected by EBS. Mr Owen-Turner also deposed that they discussed thinning, pruning, irrigation and harvesting, and a possible visit by Mr Owen-Turner to prepare a report on crop yields and the state of the fruit (John Charles Owen-Turner affidavit sworn 6 July 2006 at [9]). 56 Mr Owen-Turner's version of this conversation is contested by the applicants. 57 Mr Owen-Turner also gave evidence that on or about 18 January 2005 he telephoned Mr Tracy and asked Mr Tracy to provide him with written instructions and to gain permission from the first respondent for him to visit the orchards. Mr Owen-Turner deposed that Mr Tracy said he would do so by email that day, but no written instructions were provided by email or otherwise by Mr Tracy. Mr Owen-Turner deposed that on 19 January 2005 en route to the orchards he spoke with Mr Burns, the chief horticulturalist at the orchards, who advised that Mr Tracy had not approved a visit by Mr Owen-Turner. Accordingly, Mr Owen-Turner returned home and did not thereafter provide a report to Mr Tracy (Owen-Turner affidavit sworn 6 July 2006 at [10]-[11]).

Mr Bailey's valuation 58 On 4 January 2005 Westpac Banking Corporation faxed Mr Bailey a letter of instruction regarding the valuation requested by Mr Tracy (Bailey affidavit sworn 19 July 2006 at [8]). On the same day Mr Tracy provided Mr Bailey with a number of documents regarding the properties. Mr Bailey deposed that after reviewing these documents he determined that they were not relevant to the valuation and did not impact on the valuation report (Bailey affidavit sworn 19 July 2006 at [9]). 59 Mr Bailey inspected the properties on 11 January 2005. During the visit Mr Bailey was provided with a number of documents by Mr Breed, which Mr Bailey said he used for the valuation of the crop at $407,000. Mr Bailey deposed that he recalled that Mr Breed telephoned Mr Strahley to seek instructions as to whether information could be provided to Mr Bailey (Bailey affidavit sworn 19 July 2006 at [10]-[11]). 60 A telephone conversation subsequently took place between Mr Tracy and Mr Bailey on or around 14 January 2005 concerning the valuation of the properties. Mr Tracy deposed that Mr Bailey said during that conversation that he had inspected the property on 11 January 2005 and valued the orchards at $4.5 million (Tracy statement sworn 17 November 2006 at [77]). It was clear that a valuation this low would pose a significant problem for Mr Tracy in relation to arranging finance (Tracy statement sworn 17 November 2006 at [79]-[81]). Mr Bailey deposed that Mr Tracy said words to the effect that "Dan Papacek would be astonished if the valuation was not close to $7 million". Mr Bailey deposed that he told Mr Tracy that his valuation report had not been completed, but that the valuation would be closer to $5 million than $7 million (Bailey affidavit sworn 19 July 2006 at [12]). 61 Mr Bailey's report was completed on 17 January 2005. The total value of the relevant properties plus the crop was assessed as $4.5 million, being land at the orchards and the Packing Shed ($3,638,923), plant and equipment ($450,000) and crop ($410,000) (Bailey affidavit sworn 19 July 2006 at [14]-[15]). 62 A further version of the valuation report was later provided to the National Australia Bank on 17 February 2005 which excluded the Packing Shed at the request of Mr Tracy, and valued the remainder at $4,050,000 (Bailey affidavit sworn 19 July 2006 at [17]-[19]). 63 Mr Tracy deposed that he received the valuation report on or about 27 January 2005 (Tracy statement sworn 17 November 2006 at [91]).

Discussions between Mr Tracy and Mr Dan Papacek 64 On or about 13 January 2005 Mr Tracy had a telephone conversation with Mr Papacek about the citrus industry. Mr Papacek was an entomologist who was providing consulting services to the first respondent at the time (Tracy statement sworn 17 November 2006 at [83]; Daniel Francis Papacek affidavit sworn 6 July 2006 at [18]). Mr Papacek deposed that he and Mr Tracy discussed the following matters: · the proposed purchase of the properties by Mr Tracy; · EBS and the fact that Mr Tracy should be aware that a property at the coast would be significantly affected by diseases like EBS; · that the crops at the Tiaro and Bundaberg orchards were affected by EBS and this had affected profitability; · that the mandarin varieties Novas and Murcotts are especially susceptible to EBS; · because the orchards are on the coast the incidence of all diseases is greater because the rainfall and humidity is higher; and that coastal fruit are more prone to wind blemish because of the stronger winds and higher humidity near the coast; · wind blemished fruit has a lower market price (Papacek affidavit sworn 6 July 2006 at [18]). 65 Mr Papacek's version of this conversation is contested by the applicants.

The contract phase 66 Drafts of the contracts were exchanged between the parties during the period 18‑21 January 2005, and Mr Tracy and Mr Strahley corresponded by email on 21 January 2005 regarding purchase proposals (Tracy statement sworn 17 November 2006 at [85]-[86]). 67 Mr Strahley deposes that to the best of his recollection, on 21 January 2005 he had a telephone conversation with Mr Tracy in which: · they discussed the terms of the contract and an extension of time, and in which he advised that the first respondent was prepared to provide vendor finance in the sum of $1 million; · Mr Tracy said during that conversation that the due diligence was completed; · Mr Strahley asked Mr Tracy to put that fact in writing (Strahley affidavit sworn 12 July 2006 at [145]). 68 On 21 January 2005, Mr Strahley received a facsimiled letter from Mr Tracy formally requesting an extension of time for settlement of the transaction (exhibit A40). The letter read in part as follows: We have satisfied ourselves as to the operations of the properties. We advise that we are not in a position to provide an unconditional contract today. 69 In the letter, Mr Tracy requested an extension of time before the contract became unconditional until 11 February 2005. Mr Tracy also attached a cheque in favour of the Ray White Rural trust account for $200,000 by way of further deposit. 70 On 21 January 2005 Mr Strahley responded to Mr Tracy's letter by email confirming that an extension of time before which the contract became unconditional was granted on the basis that due diligence was completed, the $200,000 further deposit would be paid that day and the contract would become unconditional on 11 February 2005. 71 On 21 January 2005 Mr Strahley also provided Mr Tracy with the contact details of Mr Michael Sommerville, a Marketing Manager for Carter and Spencer, one of the largest fruit marketing agents within the Brisbane markets, and encouraged Mr Tracy to meet with Mr Sommerville to gain an understanding of the citrus industry marketing process and pricing (Strahley affidavit sworn 12 July 2006 at [199]). 72 On 27 January 2005 Mr Tracy caused the Sunstate Orchards Unit Trust to be established in anticipation of the purchase (Tracy statement sworn 17 November 2006 at [92]). 73 On 6 and 7 February 2005 Mr Tracy requested further financial information from Mr Strahley, namely: · the Fixed Asset Register; · the Ernst and Young audited accounts, cash flows, balance sheets and profit and loss account for 2002, 2003 and 2004; · the profit and loss cash flow for 1 July to 31 December 2004. 74 In response Mr Strahley sent Mr Tracy a document entitled "Sunstate Budget Jan05.xls" (Tracy statement sworn 17 November 2006 at [94]; Strahley affidavit sworn 12 July 2006 at [159]-[161], [168]). 75 On 8 February 2005 Mr Tracy sent Mr Breed an email (exhibit A46) with a document entitled "net cashflows 2005" as well as the document entitled "most likely scenario". Mr Tracy deposes that Mr Breed telephoned him a few days later and agreed that the "net cashflows 2005" document was consistent with the "Most Likely Scenario" (Tracy statement sworn 17 November 2006 at [95]-[96]). 76 On 8 February 2005 Mr Tracy caused the third applicant to be incorporated for the purpose of being the operating entity of the business that was intended to be conducted at the orchards and Packing Shed (Tracy statement sworn 17 November 2006 at [97]). 77 On 15 February 2005, Mr Strahley sent an email to Mr Tracy attaching the Sunstate Orchards financial documents titled "financials04.pdf"which included the profit and loss statement of the years ended 30 June 2002, 2003 and 2004, which had been forwarded to him by Ms Bailey (exhibit R31; Strahley affidavit sworn 12 July 2006 at [176]). 78 On 16 February 2005 Mr Tracy, on behalf of the first applicant, executed the Agreement for Sale for the orchards and a separate agreement for the Packing Shed. The orchard sale contract was conditional upon finance approval being obtained by 18 February 2005. Finance approval for the transaction was obtained by Mr Tracy on 18 February 2005. 79 On 17 February 2005 Mr Strahley sent an email to Mr Tracy (copied to others including Mr Breed, Mr Palfreeman and Mr Douglas) as to the procedures to be followed up to settlement and to the lines of communication with staff of first respondent (Strahley affidavit sworn 12 July 2006 at [183]). 80 On 17 February 2005 Mr Tracy received an email from Mr Strahley attaching "Sunstate Orchards P/L summary report key numbers summary (lemons)" (Tracy statement sworn 17 November 2006 at [106]). 81 In the last week of February during a meeting with Mr Strahley, Mr Tracy was informed that poor weather and labour supply problems had delayed the lemon picking. Mr Tracy deposed that he estimated at the time that this could reduce the gross sales revenue by $200,000 (Tracy statement sworn 17 November 2006 at [109]). During that same week, Mr Tracy was informed that Mr Burns, employed as a horticulturalist in the orchards, had resigned, and was leaving on 25 February 2005. Mr Tracy said that on learning of Mr Burns' resignation he telephoned Mr Burns to attempt to convince him to stay on (Tracy statement sworn 17 November 2006 at [111]). Mr Tracy gave evidence that Mr Burns told him that he had informed Sunstate of his intention to resign months earlier (Tracy statement sworn 17 November 2006 at [110]-[111]). 82 On 28 February 2005, by email to Mr Strahley (exhibit A53), Mr Tracy expressed concern at the lack of performance of the lemons, and sought advice as to the performance of the lemon crop. The email also raised the following issues: · the failure of Mr Strahley to provide details of the budget of costs for March 2005; · details of sales price and volume forecasts; · that offers to current employees would be made by 4 March 2005 on similar terms and conditions; · his disappointment that Mr Burns' resignation was not brought to his attention until after the contract became unconditional; · the intentions of management to limit or rectify the impact of EBS on the crops during January; · the failure of Mr Strahley to provide audited statements for 01/02, 02/03 and 03/04. 83 A detailed response to this email was sent by Mr James Palfreeman on 4 March 2005 (exhibit A55; Tracy statement sworn 17 November 2006 at [116]). Mr Palfreeman was Hancock's acting marketing and commodities manager, reporting to Mr Strahley. 84 In the week commencing 7 March 2005 Mr Tracy met with Mr Strahley to discuss his outstanding concerns from the 28 February 2005 email and Mr Palfreeman's response. At this stage it appears that Mr Tracy was aware that he would have difficulties settling on 18 March 2005 because the cash from sale of the lemon crop had not been as high as anticipated by him (Tracy statement sworn 17 November 2006 at [118]-[120]). 85 On 8 March 2005 Mr Tracy was provided with the TotalPak report for the end of February 2005 which disclosed sales of lemons in the amount of $208,917. This could be contrasted with Mr Tracy's expectations of sales of $500,000- $850,000 (Tracy statement sworn 17 November 2006 at [122]-[123]). 86 On 11 March 2005 Mr Tracy sent an email to Mr Strahley and Mr Douglas with further questions (exhibit A57). 87 On 12 March 2005 Mr Strahley emailed Mr Tracy a document entitled "Lemon picking history.xls" which disclosed lemon crop volumes for 2002-2005. (Strahley affidavit sworn 12 July 2006 at [197]). Mr Tracy deposed that this information was very different from that contained in an email from Mr Strahley to him on 18 February 2005 and the 2005 Sunstate Budget (Tracy statement sworn 17 November 2006 at [125]-[127]). A further email was sent on 14 March 2005 from Mr Strahley to Mr Tracy attaching a document titled "Indicative Sales Pricing" which contained an external fruit pricing market report (Strahley affidavit sworn 12 July 2006 at [198]). 88 The first respondent agreed to accept $150,000 less on settlement on the basis that the first applicant provide a crop lien in favour the first respondent for that amount. This crop lien was executed on 21 March 2005.

Completion 89 The contract was completed on 21 March 2005. On 22 March 2005 the third applicant entered into a lease agreement with the first applicant to allow the third applicant to occupy and operate the orchards. Between 21 March 2005 and 22 June 2005 the third applicant conducted an orchard business on the land and incurred trading losses of over $500,000. Administrators under Part 5.3A Corporations Act 2001 (Cth) were appointed to the third applicant on 23 June 2005.

THE CLAIMS OF THE APPLICANTS 90 The Further Amended Statement of Claim (Further Amended Statement of Claim) filed 16 November 2006 alleges, in summary, that: · misrepresentations were made as to matters including the yield of the land, the number of cartons of fruit the land produced, the prices of fruit and projected forecasts of yields and fruit prices; · the respondent failed to disclose information and documents concerning the existence of fruit diseases in the crops, the resignation of the horticulturalist Mr Burns, historical records showing agricultural performance, farm managers reports and spray records, in circumstances where there was a reasonable expectation that such information or documentation would be disclosed; · the applicant acted in reliance upon the truth of the information provided to him, and the respondents' silence concerning these matters; · the representations were misleading or deceptive or likely to mislead or deceive, and the respondents knew this; · Mr Strahley and Mr Breed aided, abetted counselled or procured, or were directly or indirectly knowingly concerned in, or party to, the conduct of the first respondent; · the applicants have suffered loss and damage as a result in the amount of $3,208,705.20. 91 In relation to these claims the applicants contend that: · as to the "future representations" in paras 12(a), 12(b), 13, 14(c), 14(d), 15, 16(a)-(f) and 17, the first respondent did not have reasonable grounds to make those representations; those representations were misleading in consequence of the matters referred to in para 19, and the applicants therefore rely on the provisions of s 51A of the Act (para 20 Further Amended Statement of Claim); and · conduct of the first respondent as alleged in paras 11 to 17A Further Amended Statement of Claim was misleading or deceptive or likely to mislead or deceive, and constituted the making of false or misleading representations concerning the character of the land and the use to which the land was capable of being put, in contravention of s 52 and/or s 53A of the Act (para 20A Further Amended Statement of Claim). 92 The respondents have helpfully summarised the conduct the subject of the applicants' claims in the following categories, with specific reference to paragraphs in the Further Amended Statement of Claim: 1. Historical representations: paras 11, 12(c) and 14(a). 2. Silence representations: paras 17A and 19A. 3. Future representations: paras 12(a),(b), 13, 14(b), (c), (d), 15, 16, 17, 20. 4. Packing Shed Records: para 19. 93 Given the number of instances of allegedly misleading or deceptive conduct, I propose to adopt this formulation. I also propose to address the issues concerning reliance raised in paragraph 18 later in this judgment. 94 However before examining each claim I propose to broadly outline the legal principles relevant to claims under ss 51A, 52 and 53A of the Act, and consider two factual issues which are relevant to the entirety of the applicants' case as pleaded, and which are also relevant to my consideration of that case. These issues are: · the credibility of evidence given by Mr Strahley and Mr Tracy, which was in many ways fundamental to this litigation; and · the evidence of Mr Breed.

CLAIMS OF THE APPLICANTS - RELEVANT LEGAL PRINCIPLES 95 In view of the complex factual dispute in this case, neither party made extensive submissions as to the legal principles relevant to claims under ss 51A, 52 or 53A of the Act. Many of these principles are well-settled, and include the following.

Section 51A 96 Section 51A does not provide an independent cause of action separate from s 52 or other sections in Part V of the Act (Phoenix Court Pty Ltd v Melbourne Central Pty Ltd (1997) ATPR 46-179 at 54,432, cf Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513-514). Rather, s 51A provides, in summary, that where a corporation makes a representation with respect to any future matter and it does not have reasonable grounds for making the representation, the representation shall be taken to be misleading (s 51A(1)). Section 51A in that respect is a "subset of section 52": Phoenix Court Pty Ltd (1997) ATPR46-179, Sykes 88 FCR 511 at 514, Quinlivan v Australian Competition & Consumer Commission [2004] FCAFC 175 at [5]). I shall consider s 51A in further detail later in this judgment in the context of the future representations alleged by the applicants.

Section 52 97 Section 52 of the Act provides that a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. Proceedings before this Court involving s 52 claims are not infrequent and feature widely varying factual scenarios. A number of principles should be kept in mind in considering claims in the context of s 52. These include the following: 1. Section 52 of the Act requires that the relevant corporation engage in conduct that is misleading or deceptive. Section 4(2)(a) of the Act provides that: a reference to engaging in conduct shall be read as a reference to doing or refusing to do any act, including the making of, or the giving effect to a provision of, a contract or arrangement, the arriving at, or the giving effect to a provision of, an understanding or the requiring of the giving of, or the giving of, a covenant. "Conduct" is not co-extensive with "representation" in s 52 (Lockhart and Gummow JJ in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 504, Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 per Gleeson CJ, Hayne and Heydon JJ at 603, McHugh J at 622) however engaging in conduct does encompass making representations (cf McGrath; in the matter of Pan Pharmaceuticals Ltd (in liq) v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2 at [150]). 2. where a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive, it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court the nature of the alleged conduct and the circumstances which rendered the conduct misleading: McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318 (cf for example, Lahoud v Lahoud [2006] NSWCA 169 at [91], Yang v American International Assurance Co (Australia) Ltd [2008] FCA 39 at [89]). 3. where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances: Watson 49 NSWLR 315 at 318 (cf for example Christofidellis v Zdrilic [1999] FCA 39, Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 6) (2007) 63 ACLR 1 at 107, Yang FCA 39 at [89]). 4. the essential characteristic of misleading or deceptive conduct is that it contains or conveys a meaning which is false (Global Sportsman Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88). 5. there will be no contravention unless error or misconception results from the conduct of the corporation, and not from other circumstances for which the corporation is not responsible (Equity Access Pty Ltd v Westpac Banking Corporation (1990) ATPR 40-994 at 50,950; Miller's Annotated Trade Practices Act (29th ed) 1.51.5). 6. whether or not conduct is misleading or deceptive is a question of fact to be decided by considering what is said and done against the background of all surrounding circumstances (Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202). 7. The words likely to mislead or deceive add little to s 52; at most they make it clear that it is unnecessary to prove that the conduct in question actually deceived or misled anyone (Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198). Conduct will be likely to mislead or deceive if there is a real or not remote chance or possibility of misleading or deceiving, regardless of whether it is more than 50% (Parkdale Custom Built Furniture Pty Ltd 149 CLR 191 at [6], [15], Equity Access Pty Ltd ATPR 40-994 at 50,950, Global Sportsman Pty Ltd 2 FCR 82, McHugh J in Butcher 218 CLR 592 at 626). 8. silence, or failure to disclose information, can fall within the gamut of misleading or deceptive conduct in the sense that having regard to all the relevant circumstances, it constitutes conduct that has been misleading or deceptive or that is likely to mislead or deceive (Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32, 41; Fleetman Pty Ltd v Cairns Pty Ltd [2005] FCAFC 80 at [1]-[2]). 9. The conduct of a corporation must be viewed as a whole. It would be wrong to select some words or act which, alone, would be likely to mislead if those words or acts, when viewed in their context, were not capable of misleading (Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd 149 CLR 191 at 199). 10. as a general rule intention (or lack of intention) to mislead or deceive is not a necessary element of conduct proscribed by s 52 (Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228). The liability imposed by s 52 is unrelated to fault (Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd 149 CLR 191 at 197). 11. the court must decide objectively whether the conduct is misleading or deceptive or likely to mislead or deceive, and that evidence that members of the public have actually been misled is not conclusive, although it can be very persuasive (Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd 149 CLR 191 at 198-199, McWilliam's Wines Pty Ltd v McDonald's System of Australia (1980) 33 ALR 394 per Smithers J at 399 and Fisher J at 414, Equity Access Pty Ltd ATPR 40-994 at 50,950).

Section 53A 98 Turning to s 53A of the Act, that section provides, so far as relevant in the context of these proceedings: (1) A corporation shall not, in trade or commerce, in connexion with the sale or grant, or the possible sale or grant, of an interest in land or in connexion with the promotion by any means of the sale or grant of an interest in land: … (b) make a false or misleading representation concerning the nature of the interest in the land, the price payable for the land, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put or the existence or availability of facilities associated with the land; or… 99 Section 53A, unlike s 51A which is an evidentiary provision, gives rise to a separate cause of action under the Act. 100 In essence, the case of the applicants was that the respondents had acted in breach of s 52 of the Act in relation to all representations, and in breach of ss 51A and 52 in relation to the future representations. Both parties made extensive submissions on this basis. However, although the subject of these proceedings was "land" upon which orchards and a Packing Shed were located, other than pleading that: · the first respondent has acted in breach of s 53A in para 20A Further Amended Statement of Claim; and · Mr Strahley and Mr Breed had accessorial liability in relation to s 53A in para 20B Further Amended Statement of Claim, no issue was made of s 53A in these proceedings by the applicants, and no submissions were made by either party with respect to this section. I shall return to this issue later in the judgment.

EVIDENCE OF MR STRAHLEY AND MR TRACY: CREDIT 101 Mr Strahley and Mr Tracy were, obviously, the two key witnesses in these proceedings, an importance reflected in the nature of their evidence and the amount of time each witness spent subject to cross-examination. Indeed Mr Tracy was the only witness whose evidence was adduced by the applicants as to the factual events relevant to the applicants' claims. Both parties made extensive submissions as to the credit of Mr Tracy and Mr Strahley. 102 The applicants also made submissions concerning other witnesses whose evidence was adduced by the respondents. I will deal with the credit of other witnesses during the course of the judgment.

Mr Strahley 103 Counsel for the applicants described the evidence of Mr Strahley as, in summary, uncertain, evasive and unresponsive, and submitted further that Mr Strahley was not an impressive witness. I reject these submissions. In my view Mr Strahley was an impressive witness, who: · clearly had a thorough knowledge of the citrus industry, the operation of the relevant properties as a business, and performance issues relevant to those properties; and · gave responsive and frank answers in the course of rigorous cross-examination over several days. 104 In written submissions the applicants submitted that Mr Strahley gave the impression of being a witness who was "looking for the trap" in every question rather than a witness who was genuinely concerned and enthusiastic to assist the Court to determine the truth of the matters before it. I reject this submission. I find that, while Mr Strahley endeavoured to be careful in his answers, he was nonetheless attempting to properly answer questions put to him and was not attempting in any way, either in his demeanour or his oral answers, to be evasive or unhelpful. Overall I found Mr Strahley's answers clear and comprehensive over the significant length of time during which he was subject to cross-examination. 105 In their written submissions the applicants further invited me to make adverse findings as to Mr Strahley's credit in relation to evidence given by Mr Strahley as to contents of Hancock's financial statements which Mr Strahley had signed as a director, and referred me in particular to an exchange between Mr Perry SC for the applicants and Mr Strahley during cross-examination (TS 992 ll 1-44). However as I indicated to Mr Perry SC during closing submissions, in my view that the evidence given by Mr Strahley in that context indicated no more than the confusion of a company director who, when confronted unexpectedly with the need to explain and justify financial reports he or she may have signed, which reports had been prepared by an expert accountant, is unable to do so properly without a briefing from that accountant. I note that the respondents tendered evidence of an accountant who had participated in preparation of the relevant financial reports, which they submitted explained the relevant financial details and Mr Strahley's confusion. While it is perhaps regrettable that Mr Strahley as a company director was not able, during rigorous cross-examination on wide-ranging issues over five days, to properly explain the company's financial reports from several years earlier, I consider that it is not surprising in the circumstances, and that it would not be unusual for many directors in similar circumstances. It does not, in my view, necessarily mean that I should make adverse findings with respect to Mr Strahley's credit. 106 The applicants also made submissions in relation to Mr Strahley's evidence during cross-examination (TS 983-992). Leaving aside the fact that the issue of whether the vendors had called for expressions of interest in the sale of the properties during the period ending 30 June 2003 (approximately 18 months before Mr Tracy expressed any interest in the properties) was of minimal (if any) relevance in these proceedings the evidence again simply shows the confusion of the witness under cross-examination. In my view Mr Strahley, quite properly, made concessions under cross-examination where appropriate. 107 In summary, contrary to the applicants' submissions, I am not persuaded that I should draw adverse inferences in relation to Mr Strahley's evidence.

Mr Tracy 108 I consider Mr Tracy was a witness who endeavoured to be truthful in relation to his evidence. I also consider him to be an able businessman who sought to investigate the business opportunity represented by the relevant properties to the best of his ability in light of his lack of knowledge of the citrus industry. However, both the evidence and his demeanour in Court also show that he is a person of considerable determination who, once he forms a view, is loath to relinquish it or even modify it notwithstanding evidence (even compelling evidence) to the contrary. Two clear examples of this are: · Mr Tracy's insistence during the hearing that representatives of the first respondent "came up [to the properties] with the intention to destroy records, and luckily, Mr Devenny stopped them" (TS 269 ll 4-40). No reliable evidence was produced to support this very serious accusation (including no sworn evidence of Mr Devenny). I shall return to this issue later in the judgment. · Mr Tracy's insistence, until the conclusion of the proceedings, and reflected in paras 17A(c) and (d) of the Further Amended Statement of Claim, that the first respondent had caused the orchards to be either improperly sprayed (17A(c)) or sprayed contrary to good agricultural practice (17A(d)). Mr Tracy's allegations at the hearing in relation to the pesticide Rovral extended to an accusation that the first respondent had illegally sprayed the orchards (TS 305 ll 1-3, ll 21-22, 293 ll 5-24). Yet despite this very serious allegation, the claims in paras 17A(c) and (d) were abandoned by the applicants in written submissions. (In my view the decision of the applicants not to press these claims was not surprising, as there was no evidence to support the claims, and indeed I consider that the evidence of the horticulturalist, Mr Burns, at the hearing (TS 705) completely answered those claims.) 109 Second, I perceived Mr Tracy to be a witness who, to use the applicants' own expression in their written submissions in relation to Mr Strahley, was constantly "looking for the trap" in questions posed to him during cross-examination, with the result that his evidence was characterised on occasion by qualifications and an absence of genuine responsiveness. Examples of this can be seen at TS 341-342, 415 l 39, 416 l 13, and 493 ll 17-26. 110 Third, where there was a conflict between the evidence of Mr Strahley and Mr Tracy as to events which had occurred, on balance I preferred the evidence of Mr Strahley. As I have already noted, Mr Strahley had what was demonstrated during the proceedings to be a thorough understanding of the citrus industry and the relevant properties. When information was provided by Mr Strahley to Mr Tracy during negotiations for the sale of the relevant properties, it is clear that Mr Strahley would have both understood the information, and its relevance to the discussions with Mr Tracy at the time. Because of that understanding, Mr Strahley would in my view have been able to better retain memory of discussing issues with Mr Tracy relevant to the properties and the citrus industry than would Mr Tracy. In contrast Mr Tracy as at the first meeting with the respondents on 3 December 2004 had no experience of and very little (if any) understanding of the citrus industry. I observed throughout the hearing that his recollection of discussions concerning the relevant properties and the citrus industry was imperfect, and I consider that a fundamental reason for this imperfect recollection was that he simply did not appreciate the significance of what he was being told at the time. An example of this is Mr Tracy's recollection of when he first heard of the disease EBS in relation to the orchards. At the hearing Mr Tracy said that he had never heard of EBS before January or February 2005 (TS 301 ll 17-18). Yet Mr Burns deposed that he had discussed EBS with Mr Tracy in December 2004 in the context of the need to thin the fruit (TS 299-300). In my view Mr Tracy simply had not understood the implications of what he was being told by Mr Burns at that time, and therefore did not remember it. Indeed I consider that circumstances involving the provision to Mr Tracy of important information concerning either the citrus industry or the performance of the relevant properties, but of which, because of his lack of experience in that industry, he simply did not appreciate the significance at the time, was a recurring theme in these proceedings. 111 I make these findings because they are relevant to my evaluation of the evidence given by these witnesses throughout the proceedings and the substantiation (or otherwise) of the claims of the applicants. I shall return to these issues throughout the judgment.

EVIDENCE OF MR BREED 112 Mr David Breed, formerly the general manager of the business conducted at the orchards and the Packing Shed, swore an affidavit on 14 July 2006 in which he gave evidence as to, inter alia, the nature of the SmartPak records system and the reliability of information produced by that system. The affidavit was tendered by the respondent as evidence. 113 Annexed to Mr Breed's affidavit was an unsigned statement, purporting to contain comments of Mr Breed relevant to the historical packout rates and the nature of information in the SmartPak computer records system. Mr Breed swore in his affidavit that the unsigned statement had been prepared by Mr Lynch, the solicitor for the applicants, on or about 31 May 2005, following discussions between Mr Lynch, Mr Tracy and Mr Breed (Breed affidavit sworn 14 July 2006 at [74]-[80]). Under cross-examination, Mr Tracy agreed that the unsigned statement was prepared following discussions between himself, Mr Lynch and Mr Breed (TS 253 ll 26-27). 114 Mr Breed's unsigned statement was filed by the applicants on 21 June 2006. 115 Significantly, there is inconsistency between the views of Mr Breed as purportedly expressed in the unsigned statement, and the evidence in his affidavit of 14 July 2006. Mr Breed swore that he refused to sign the statement prepared by Mr Lynch, and subsequently annexed to his affidavit, because the statement was inaccurate (Breed affidavit sworn 14 July 2006 at [80]-[81]). 116 Notwithstanding the fact that Mr Breed was subpoenaed by the applicants on 21 June 2006 to appear as a witness in the proceedings (exhibit R58), he was not called as a witness by the applicants, nor by the respondents who tendered his affidavit. Nor did the applicants require Mr Breed's attendance for cross-examination. Accordingly his affidavit, which taken with the annexures thereto is substantial, was not tested in court. Further, in the absence of Mr Breed being called as a witness by the applicants, his unsigned statement was neither adopted on oath nor tested by cross-examination. 117 Evidence of Mr Breed, tested by cross-examination, would have been of great significance in this case given his position with both the first applicant and the first respondent, his apparent knowledge of the background facts and his interaction with all parties to these proceedings. However there was clearly considerable strategic thought given by both applicants and respondents to the issue of Mr Breed as a witness and the value of his affidavit (I note, for example, TS 45-50). At the end of the day Mr Bell QC for the respondents invited the Court to ignore the Breed affidavit (TS 1403 ll 6-7). 118 In my view Mr Breed's unsigned statement is of no weight in relation to any matter in dispute in these proceedings. Mr Breed is a respondent to proceedings, for whom the solicitor for the applicants had prepared a statement (which Mr Breed refused to sign) purportedly reflecting his views. To adopt the language of Batt J in CE Heath Underwriting and Insurance (Australia) Pty Ltd v Daraway Constructions Pty Ltd (unreported, Supreme Court of Victoria, 3 August 1995) In my view it is little better than a document on plain paper containing only the numbered paragraphs… 119 Further however, the applicants submitted that adverse inferences should be drawn against the respondents because the respondents tendered Mr Breed's affidavit but failed to call him as a witness. 120 Where it would reasonably have been expected that a party would adduce particular evidence but does not do so, adverse inferences may be drawn from the failure of the party to adduce that evidence: Jones v Dunkel (1959) 101 CLR 298. However I accept the submission of the respondents that: · the applicants were aware seven days prior to the commencement of the trial that the respondents did not intend to call Mr Breed, as the respondents were required to give the applicants notice of the witnesses they intended to call. · the applicants could have relied on their subpoena and required Mr Breed's attendance; and · the respondents approached Mr Breed to obtain an affidavit from Mr Breed in response to allegations in Mr Breed's unsigned statement filed in these proceedings, which allegations were put through Mr Green as the basis of that witness' assumptions. 121 To paraphrase comments of Habersberger J in Wenczel v Commonwealth Bank of Australia [2006] VSC 324 at [90], it is obvious to me that neither the applicants nor the respondents were prepared to run the risk of calling Mr Breed, helpful though his evidence would have been. 122 In circumstances where Mr Breed's affidavit is untested, little weight should be attributed to Mr Breed's affidavit in respect of any matter in dispute in these proceedings, including of course with respect to this particular claim. Further, given the circumstances I consider the more practical approach is for me to note that neither party was prepared to call Mr Breed as a witness in these proceedings. I draw no inferences against either party for their failure to call Mr Breed as a witness. 123 I now turn to the representations the subject of claims by the applicants in the Further Amended Statement of Claim.

The claim 124 In para 11 of the Further Amended Statement of Claim the applicants claimed as follows: 11. On 29 November 2004 the First Respondent represented to the First and Second Applicants that:- (a) the land produced 109,314 cartons of fruit (excluding mangoes and juicing fruit) in the 2001 Crop year with an average yield of 65-85% of total kilograms packed from 380-400 kilograms bins for first and second grade fruit in its farming of the land; (b) the land produced 293,065 cartons of fruit (excluding mangoes and juicing fruit) in the 2002 Crop Year with an average yield of 65-85% of total kilograms packed from 380-400 kilograms bins for first and second grade fruit in its farming of the land; PARTICULARS The representations were written and are contained in a document entitled Herron Todd White Valuation dated June 2004 which was an attachment to an e-mail sent by the First Respondent, by Douglas, to the Second Applicant on 29 November 2004." 125 In para 19 of the Further Amended Statement of claim the applicants claimed that these representations were misleading or deceptive or likely to mislead or deceive in that: (a) the first respondent knew that the land did not produce 109,314 cartons of fruit (excluding mangoes and juicing fruit) in the 2001 Crop year with an average yield of 65-85% because it had possession of the Packing Shed computer records which disclosed that in truth and in fact only 91,276 cartons of fruit were produced in the 2001 Crop year and the land yielded an average packout of only 36.77% for the 2001 Crop year, and (b) the first respondent knew that the land did not produce 293,065 cartons of fruit (excluding mangoes and juicing fruit) in the 2002 Crop year with an average yield of 65-85% because it had possession of the Packing Shed computer records which disclosed that in truth and in fact the land produced only 215,033 cartons of fruit in the 2002 Crop year and the land yielded an average packout rate of only 51.80% for the 2002 Crop year. 126 The respondents in the Defence to the Further Amended Statement of Claim and Cross-Claim ("the Defence") in relation to the claim in para 11: · denied that the first respondent made the representations as alleged; · denied that any representation was made by the first respondent to the first applicant; · said that on 29 November 2004, Mr Strahley sent to Mr Tracy by email a copy of a valuation report prepared by HTW which valued the properties therein as at 1 June 2004; · referred to para 7.3 of the valuation report which provides in part as follows: Production We have been provided with production figures for the 2000/2001 Crop Year which we have been advised are a reasonable guide but some information is missing. The 2000/2001 year was a poor year but produced approximately 98,154 x 18 kg cartons at an average price of $20.51/18kg/carton. The production figures for 2001/2002 and 2002/2003 have been provided in number of bins rather than number of cartons. We have set out below the production figures provided, having calculated the number of cartons based on the achieved yields: 7.3 Particular Relevant Remarks (Continued) Production Variety 2001/2002 2001/2002 Carton 2002/2003 2002/2003 Carton 2003/2004 2003/2004 Carton Price Price Price Oranges $20.00 4,433 $20.00 8,128 $20.00 8.098 Limes 11.70 768 $11.70 768 $5,53 251 Lemons $23.02 22,431 $30.00 45,453 $18.00 42,205 Imperials $12.00 23,644 $14.00 112,724 $11.00 105,784 Tangelo $18.00 4,433 $18.00 6,650 $12.00 1,744 Nova $20.00 12,500 $24.00 60,144 $16.00 48.014 Ellenor $22.00 10,635 $18.00 16.467 $12.00 16,357 Murcott $23.05 29,167 $23.00 40,933 $12.00 66,950 Ellendale $12.17 1,303 $16.00 1,798 $12.00 1,949 TOTAL 109,314 293,065 292,352

Note: The years 2003/2004 are expected yields only, as picking is not complete. These figures exclude the mangoes. All of the fruit are packed into 18 kg cartons except for Imperials which are 9 Kg cartons and also exclude juicing fruit. Yields vary from 65% to 85% of total kilograms packed in 380-400 kg bins for first and second grade fruit. The above figures extrapolate to a total production as follows: 2001/2002 2002/2003 2003/2004 Kilograms 1,754,856 4,260,654 4,301,280 Price $2,161,827 $5,943,061 $3,909,886 Price/kg $1.23 $1.39 $0.91

This reflects the decreased prices received for fruit for this season. The production for 2002/2003 and 2003/2004 has increased substantially as trees are reaching their full production potential. It appears that farm and marketing management are at a high level. · denied that the 1 June 2004 Valuation Report by itself or together with the email of 29 November 2004 conveyed to Mr Tracy that the first respondent represented to him the matters alleged in para 11; · stated that the carton production figures of 109,314 and 293,065 in the 1 June 2004 Valuation Report were for the financial years 2001/2002 and 2002/2003, not the crop years 2001 and 2002 as alleged in the further amended statement of claim. 127 As to para 19(a) and (b) the respondents: · said that the yields recorded in para 7.3 of the 1 June 2004 Valuation Report for the 2001/2002 crop years were the actuals for those years calculated on the basis expressed in the valuation; · said that the valuer calculated the number of cartons recorded in the report and recorded in para 7.3 on achievable yields; · denied that the Packing Shed data records for the 2001 crop year "disclosed that in truth and in fact" the matter alleged in sub-para 19(a) and (b); · denied that the first respondent had knowledge as alleged in para 19(a) and (b) as it did not have such knowledge.

Submissions of the parties 128 In summary, the applicants submitted as follows: · the 1 June 2004 Valuation Report contained a written statement as to the actual crop performance of the orchards in 2001 and 2002 and was given to Mr Tracy with the authority of the first respondent. · properly construed, this constituted the making of a statement that the orchards actually achieved the stated crop performance during 2001 and 2002. · the representation was made to a potential purchaser in the course of the purchaser making enquiries about the subject matter of the sale. · evidence of the reliance by the applicants by the representation in the 1 June 2004 Valuation Report may be found in para 6 of Mr Tracy's statement sworn 17 November 2006, which states "On 29 November 2004 Douglas e-mailed me a copy of a Herron Todd White ('HTW') valuation of the orchards dated June 2004 (J48)". · the respondents knew that the production figures for 2001 and 2002 referred to in the 1 June 2004 Valuation Report were not the actual crop production that the orchards had produced for those years but rather were derived by Mr Neubecker utilising packout rates provided to him by Mr Breed. · the respondents knew, by reason of their possession of the TotalPak and SmartPak records, that the actual historical crop performance of the orchards for the period 2001 and 2002 was substantially poorer than recorded in the 1 June 2004 Valuation Report ·the respondents knew, by reason of their possession of the TotalPak and SmartPak records, that the actual historical packout rates for the crop performance of the orchards in 2001 and 2002 was an average packout percentage of 36.77% for 2001 and 51.8% for 2002 compared to the range of packout rates of 65-80% provided by Mr Breed to Mr Neubecker. · the respondents knew these matters when they authorised the provision of the 1 June 2004 Valuation Report to the applicants on 29 November 2004. · the respondents' act in providing the applicants with a document which they knew contained false crop production figures is misleading or deceptive particularly in the context of inquiries by a potential purchaser. · the respondents made a misleading or false representation as to the characteristics of the orchards and the use to which the orchards were capable of being put. · Mr Strahley conceded (TS 980 ll 24-37, 1059 ll 4-8) the fundamental importance of giving Mr Tracy, as a prospective purchaser, accurate and comprehensive data pertaining to yields and packout rates for the period 2001 through the end of 2004. 129 The respondents submitted in summary as follows: · No representation as alleged by the applicants was made to the applicants. · The first respondent conveyed nothing beyond communicating that a valuation as at 1 June 2004 had been obtained from HTW. · The production "figures" recorded in cl 7.3 of the valuation under the heading "Production" refer to the production figures for "2000/2001" and "2002/2003". The valuer recorded that the production figure for the "2001/2002 crop year" had been advised as a reasonable guide that that information was missing. The 2001/2002 year was said to be a poor year. · The table relevantly sets out the production for "2001/2002", "2002/2003" and "2003/2004" in financial years. So much is plain on the face of the document itself. The "Note" on p 24 of the report records "The Year 2003/2004...". · If there had been a reference to the 2001 or 2002 crop year than that would be stated as 2001 crop year or 2002 crop year, which was the calendar year. · The yield calculations were undertaken by the valuer. They were not yields for either the 2001 or 2002 crop years. · The report did not represent an "average yield of 65-85% of total kilograms packed from 390-400 kilogram bins for the first and second grade fruit". The report stated that "The Year 2003/2004 are expected yields only..." and "Yields vary from 65% to 85%". This was clearly a general observation of the valuer. · No facts were established from which it could be concluded that the alleged representations were misleading. · In any event, it was clear from the evidence of Mr Tracy that the applicants were not led into any error by para 7.3 of the 1 June 2004 Valuation Report. · Mr Tracy was provided with the "Block Summaries" which recorded yields and packout rates for the crop years 2002 to 2004. · Mr Tracy was provided with a Yield Summary which recorded historical yields for the crop years 1998 to 2004 (exhibit A17). · The applicants obtained their own valuation from Mr Bailey of HTW in January 2005 before entering into the contracts to purchase the orchards and the Packing Shed on 16 February 2005. · There is no sufficient basis on the evidence for the court to conclude that the alleged representation was misleading or deceptive or that there was any reliance on the alleged representation.

Consideration 130 The alleged misrepresentations were made in: · an email from Mr Douglas to Mr Tracy sent 29 November 2004 with the subject "FW: June Valuations"; and · the 1 June 2004 Valuation Report. 131 The email was sent by Mr Douglas to Mr Tracy without message, but on its face embodies an email from Mr Strahley to Mr Douglas of the same date and with the same subject, and features earlier correspondence between Mr Strahley and a third party featuring the same documentation. 132 It is not in dispute that the 1 June 2004 Valuation Report was prepared by Mr Rex Neubecker. 133 The Executive Summary to the report provided: 1.1 Instructions We have been instructed by Mr Andrew Strahley of Hancock Farm Company Pty Ltd (ABN 7109107621) to assess the market value of "Sunstate Orchard" which is located at Tiaro, Maryborough and Bundaberg. Our valuation has been prepared for asset purposes for Hancock Farm Company Pty Ltd and it may be relied upon by RABO Australia Limited for mortgage security purposes. The interest being valued is the unencumbered fee simple including: a) Land, buildings and cold room facility. b) All irrigation allocations, pumping plant and irrigation system. c) All citrus trees but excluding crop. d) Plant and equipment. e) Crop as at 30/6/2004 (discounted to reflect price uncertainty, profit and risk and the costs of bringing the crop to market). 134 The 1 June 2004 Valuation Report is 36 pages in length, divided into 12 sections, namely Executive Summary, Title Details, Town Planning, Locality and Services, Land Description and Development, Structures, Valuation Considerations, Plant and Equipment, Crop, Comparative Market Data, Valuation Approach, and Valuation. 135 A significant proportion of the material in the 1 June 2004 Valuation Report was descriptive, with some interpretative comments by the authors of the report. 136 This particular claim of the applicants is referable to para 7.3, headed "Particular Relevant Remarks", which falls within Ch 7 of the report "Valuation Considerations". Chapter 7 of the report contains material specifically referable to the properties being valued as well as more general information relevant to the valuation, including for example information supplied by third parties.

"Packout rates" and "Yield" 137 The accuracy of packout rates and yield referable to citrus production were core issues in the context of this claim. 138 The term "packout rate" refers to the proportion of delivered fruit which is packed for consumption as fresh fruit following a process of sorting of fruit, with the best fruit - usually grade 1 and grade 2 fruit - going to the high margin fresh fruit sector, and the remainder going to processing for juice at a price much less favourable to the fruit grower than for sale of fresh fruit. As a general proposition, the higher the packout rate for fruit, the more profitable the sale of the fruit for the grower. Grade 1 or grade 2 fruit at the relevant orchards was, according to the evidence of Mr Strahley, packed into either cartons or hat bins for delivery to the appropriate market (Strahley affidavit sworn 12 July 2006 at [33]). (Mr Neubecker, who prepared the 1 June 2004 Valuation Report, used the terms "yield of cartons" and "packout rates" synonymously (TS 771 ll 35-39, 778 ll 8-13), as did Mr Bailey in his evidence (TS 824 ll 4-9).) 139 These terms are in turn distinguishable from the more general term "yield" which means the weight of fruit referable to a particular source, for example a tree or an area of land, as referred to for example in evidence by Mr Strahley (TS 1056 ll 8-9) and Mr Owen-Turner (TS 889 ll 4-8, ll 39-42).

Relevant evidence 140 In his statement of 17 November 2006 Mr Tracy gave evidence that Mr Douglas had emailed him a copy of the 1 June 2004 Valuation Report. In relation to this report, Mr Tracy said under cross-examination: · he read the 1 June 2004 Valuation Report when he received it (TS 347 ll 27-28), and his complaint arose when he read the report with the production information (TS 256 ll 46-48). · the tenor of his claim in para 11 was that inaccurate information had been provided by Mr Strahley to Mr Neubecker for incorporation into the 1 June 2004 Valuation Report, which report had subsequently been forwarded to Mr Tracy (TS 255 ll 45-48, 256 ll 1,10-13). · he realised that the information given by Mr Strahley earlier, including the information in the 1 June 2004 Valuation Report, was inaccurate after he had received information from Mr Breed (TS 249 ll 3-5). This information included the Historical Packouts.xls document originally emailed by Mr Breed to Mr Strahley on 11 May 2004. · he relied on the information in the 1 June 2004 Valuation Report (TS 257 ll 14-17). · in the Further Amended Statement of Claim Mr Tracy articulated the numbers which, in his opinion, were correct (TS 353 ll 28-31). · although this was not in any of his statements, he had pieced together the fact that the information provided by Mr Strahley to Mr Neubecker for incorporation into the 1 June 2004 Valuation Report was inaccurate (TS 352 ll 29-32). · although he was aware that the information in para 7.3 of the 1 June 2004 Valuation Report was apparently incomplete, he had not asked Mr Strahley about information which, on its face, was apparently missing from para 7.3 of the 1 June 2004 Valuation Report (TS 356 ll 2-7). 141 Mr Strahley gave evidence that: · the Packing Shed computer record system used during the Crop years 2001, 2002 and 2003 was the SmartPak system, however he was concerned about the reliability of the information recorded in that system and reports generated by it. In January 2004 the SmartPak system was replaced by the TotalPak system (Strahley affidavit sworn 12 July 2006 at [40]). · He had received a document from Mr Breed titled "Historical Packouts.xls", being historical packout data for 1998, 1999, 2000, 2001, 2002 and 2003 based on information recorded in the SmartPak system. Mr Strahley considered that the information in the "Historical Packouts.xls" document was unreliable because: o it relied significantly on a manual input of information which could give rise to inaccuracies in information reported (Strahley affidavit sworn 16 July 2006 at [40]); o the extraction of data from the SmartPak system and insertion of the data into an Excel spreadsheet resulted in information which was varied in content, format and accuracy of figures (Strahley affidavit sworn 12 July 2006 at [41]); o there were clear inaccuracies in the Historical Packouts.xls including: ▪ the Bundaberg 2001 Murcott packout rate was recorded as 187.71% ▪ the Bundaberg 2003 Navels packout rate was recorded as 115.81% ▪ there was no reference in the data to the quantity of fruit that went to juice (Strahley affidavit sworn 12 July 2006 at [42]) o the Senior Accountant with Hancock in Brisbane advised that the absence of support documentation for data produced by the SmartPak system indicated that the data could not be the subject of reliance (Strahley affidavit sworn 12 July 2006 at [42]; TS 1051 ll 22-28, 1058 ll 16-17); · Mr Strahley could not recall asking Mr Breed at the relevant time to revisit the accuracy of the historical data produced by the SmartPak system, however Mr Strahley gave evidence that he was in constant verbal communication with Mr Breed (TS 1055 ll 11-19) and it is likely that such a request was made verbally. Mr Breed subsequently produced the Block summary data which Mr Strahley later emailed to Mr Douglas. · In May 2004 Mr Strahley was particularly concerned in relation to the deficiencies in the SmartPak system when he was preparing information to be provided to the Hancock board of directors (Strahley affidavit sworn 12 July 2006 at [42]). · In the ordinary course of the business of Sunstate Orchards the relevant properties were revalued every two years by an external valuer (Strahley affidavit sworn 12 July 2006 at [49]). · As part of the valuation in June 2004 he forwarded to Mr Neubecker the price and volume of fruit expressed in bin numbers for 2001/2002, 2002/2003 and 2003/2004, as he was not satisfied with the reliability of the packout rates in the summary data sent to him by Mr David Breed (Strahley affidavit sworn 12 July 2006 at [52]). · It was not apparent to him that the bin numbers for 2001/2002, 2002/2003 and 2003 he had provided to Mr Neubecker were unreliable (Strahley affidavit sworn 12 July 2006 at [52]). This information was by calendar year, the price column denoted the price per carton, not bin, and the number of cartons to come out of a bin would depend on the variety of fruit (Strahley affidavit sworn 12 July 2006 at [53]). 142 Mr Neubecker said in his statement of 22 July 2006 that, in completing the table in para 7.3 in the 1 June 2004 Valuation Report, he had applied the percentage of the yield of cartons to each citrus variety for the periods 2001/2002, 2002/2003 and 2003/2004, as provided by Mr Breed. At the hearing, Mr Neubecker gave evidence that the yields, or packout rates, for those periods were indicative rates only (TS 780 ll 13-23), and actually those for the 2003/2004 years applied across the earlier years (TS 779 ll 1-2, 786 ll 26-27). 143 According to Mr Neubecker, both in his statement and under cross-examination (for example, TS 787 ll 20-29), this was because Mr Strahley had provided Mr Neubecker with bin numbers of fruit, which Mr Neubecker had calculated and converted to carton numbers employing 2003-2004 packout rates for the purposes of producing the valuation report (TS 781 ll 24-45, 782 ll 9-10). Mr Neubecker deposed that he wanted historical details of carton numbers of fruit rather than bin numbers, for greater accuracy in producing his report (TS 777 ll 17-21). Mr Neubecker also deposed that he understood that historical information could not be provided by the first respondent or Mr Strahley because of difficulties with computer software on which historical crop data was stored (TS 764 ll 39-46, 768 ll 1-4).

Was provision of the 1 June 2004 Valuation Report "engaging in conduct"? 144 I find that the 1 June 2004 Valuation Report was given to Mr Tracy by Mr Douglas at the meeting of 3 December 2004 with the authority of the first respondent. It was provided to him as a potential purchaser of the relevant properties. In my view it is not possible to do otherwise than draw the conclusion that, in authorising the provision of the report to Mr Tracy, the first respondent was "engaging in conduct" within the meaning of s 52, and making representations referable to the contents of the 1 June 2004 Valuation Report. 145 However, I do not consider that, in authorising the provision of the 1 June 2004 Valuation Report to Mr Tracy, the first respondent acted in breach of s 52 as claimed by the applicants in para 20A of the Further Amended Statement of Claim. I form this view for the following reasons, namely: · any representation in the 1 June 2004 Valuation Report was as to financial years, not Crop Years as claimed by the applicants; · I am not satisfied that the representations in the 1 June 2004 Valuation Report were misleading or deceptive, because I am not satisfied that the Historical Packouts.xls was accurate; · any representations in the 1 June 2004 Valuation Report were qualified; · any representations in the 1 June 2004 Valuation Report were superseded by the subsequent production by the first respondent of the Block Summary data to Mr Tracy.

1. Financial years 146 First, the applicants in para 11 of the Further Amended Statement of Claim have made reference to Crop Years whereas para 7.3 of the 1 June 2004 Valuation Report detailed production in financial years, with the result that the claim of the applicants with respect to representations as to Crop Years in the 1 June 2004 cannot be substantiated.

2. Misleading or deceptive 147 In any event however, leaving aside for the moment the issue of which years were relevant, I am not satisfied that the representations in para 7.3 of the 1 June 2004 Valuation Report were misleading or deceptive as alleged by the applicants. As is clear both from the pleadings and Mr Tracy's evidence, a fundamental aspect of this claim is that the historical data in para 7.3 was misleading or deceptive, because the true historical position in respect of packout rates and orchard production could be found in data generated in 2004 by the SmartPak system into such documents as the "Historical Packouts.xls" (exhibit A32). As I have already explained, the applicants bear the onus of proving that the historical data in the table in para 7.3 was misleading or deceptive. In short, I am not satisfied that the material in the Historical Packouts.xls document was accurate, and that as a result the material in para 7.3 of the 1 June 2004 Valuation Report was misleading or deceptive. I form this view because: · The claims by the applicants in paras 19(a) and (b) as to the "true" production figures are not substantiated. I will deal specifically with the claims in para 19 in detail later in the judgment. · I accept the evidence of Mr Strahley that he had serious concerns as to the reliability of reports generated by the SmartPak system, including data in respect of Crop years 2001, 2002 and 2003 and the Historical Packouts.xls, for the reasons he gave in his evidence and which I summarised earlier in this judgment. · I find that the most likely reason for the production of the Block Summary data was that Mr Strahley did not consider the data in, inter alia, the Historical Packouts.xls to be accurate. Notwithstanding submissions by the applicants that there was no substance to Mr Strahley's concerns in relation to the historical data (I note, for example, the submission of Mr Perry SC at TS 1053 ll 1-18) I am unable to identify any ulterior motive for what appears to have been the rejection by Mr Strahley of the accuracy of the information with respect to, among other things, historical packout rates several months before negotiations commenced with Mr Tracy. · There is nothing in the evidence of Mr Neubecker, an experienced valuer familiar with the properties since 2000, to indicate that he was in any way surprised by Mr Strahley's concerns as to the lack of accuracy of the SmartPak data. · I note that Mr Breed commented in his affidavit (Breed affidavit sworn 14 July 2006 at [13]) as to the inaccuracy of information in the SmartPak computer system. · It was clear from the evidence of Mr Strahley elicited under cross-examination that he needed accurate information as to historical data in mid-2004 as there was the possibility that the first respondent would commence an action for misrepresentation against the entity which had originally sold it the relevant properties in 2000 (but which proceedings did not appear to eventuate) (for example, TS 1038 ll 30-35, 1039 ll 9-12, 1053 ll 41-47). The most likely explanation for Mr Strahley and the first respondent disregarding the historical information generated by SmartPak, including the Historical Packouts.xls is that Mr Strahley, for the reasons expressed, did not consider that information accurate.

3. Qualified representations 148 If I am wrong in relation to my finding as to the lack of accuracy of the material upon which the applicants base this claim (in particular the Historical Packouts.xls) in my view the applicants nonetheless fail in this claim because the data in para 7.3 of the 1 June 2004 Valuation Report was heavily qualified to make it plain that the figures were only an estimate rather than a representation as to absolute accuracy of that data. In particular, the paragraph under the heading "Production" reads: We have been provided with production figures for the 2000/2001 Crop Year which we have been advised are a reasonable guide but some information is missing. The 2000/2001 year was a poor year but produced approximately 98,454 x 18kg cartons at an average price of $20.51/18kg carton. The production figures for 2001/2002 and 2002/2003 years have been provided in numbers of bins rather than numbers of cartons. We have set out below the production figures provided, having calculated the number of cartons based on the achieved yields.... (emphasis added) 149 As the evidence has demonstrated, the data in para 7.3 was produced as a result of calculations of the valuer, Mr Neubecker, based on information as to the price and volume of fruit supplied by the first respondent, and following conversations between Mr Neubecker and Mr Breed. Mr Neubecker gave evidence that, in applying the figures that Mr Breed had given him for the 2003/2004 financial years across the years 2000/2001, 2002/2003 and 2003/2004 and cross-checking those figures with the information provided to him by Mr Breed (in particular, indicative yields) and his earlier valuation report, he considered that the information he had included in the 1 June 2004 Valuation Report was accurate (TS 779 ll 4-7, 780 ll 13-15). 150 The derivation of the production figures and the method of calculation were clearly explained in the valuation report and are consistent with the evidence of both Mr Neubecker and Mr Strahley. 151 It is clear from considering this data in the context of preparing the 1 June 2004 Valuation Report that Mr Neubecker did not have detailed and exact information with respect to production. Rather, he presented what he perceived to be a careful estimate of expected yields for 2003/2004 as well as historical production figures for financial years (not Crop years as claimed by the applicants) based on the incomplete information before him which had been supplied by the first respondent. Similarly, by forwarding to Mr Tracy, as an interested potential purchaser, a copy of the 1 June 2004 Valuation Report with a view to providing an overview of the properties by an independent valuer, Mr Strahley and the first respondent were, at most, making a representation that the data in para 7.3 was a careful estimate of historical production figures and no higher. This did not somehow translate - as claimed by the applicants - into an unequivocal representation by either Mr Strahley or the first respondent that the data represented the unequivocally accurate position, which is the claim of the applicants. Given that the 1 June 2004 Valuation Report was provided by Mr Strahley (via Mr Douglas) to Mr Tracy, this is obviously not a case in that class where information is merely being passed on about property by an intermediary without any belief in its truth or falsity (cf John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR 41-249) However to say that a potential vendor's provision of a report by a valuer containing highly qualified estimates of production constitutes, without more, an unequivocal adoption and confirmation of those estimates as fact is simply incorrect in the circumstances of this case.

4. Block summary data (exhibit R30) 152 Finally, and in any event, as is clear from the cases in this area, the conduct of the first respondent and of Mr Strahley must be considered as a whole (Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd 149 CLR 191 at 199, Butcher 218 CLR 592 at 605, 622). Even if, contrary to my findings, the data in para 7.3 of the 1 June 2004 Valuation Report were misleading or deceptive, subsequent to the provision of that report the respondent claims that Mr Tracy was provided with the following documents, namely: · Yield Summary which recorded historical yields for the crop years 1998 to 2004 (a document entitled "Yield Summary.xls" (exhibit A17); and · Block Summary data which recorded historical information, including yields and packout rates, for the crop years 2002-2004 and with a forecast component for 2005-2007 (exhibit R30). 153 Although the applicants claim that the Yield Summary.xls was misleading or deceptive a similar claim is not made in relation to the Block Summary data. It is not in contention in these proceedings that an accurate representation of historical production figures, including packout rates, can be found by construction of the Block Summary data. 154 In this regard I adopt the comment of the learned author of The Law of Misleading or Deceptive Conduct (2nd ed) (Colin Lockhart, LexisNexis Butterworths, Australia 2003) [3.18] at 70-71: The effect of "statements made in the course of complex negotiations" will therefore usually be assessed by examining the conduct in its entirety rather than by determining the truth or falsity of individual statements in isolation. That inquiry may reveal that the meaning of the impugned statement is qualified or clarified by accompanying remarks, that "later statements replace those made earlier or affect or modify them in some way" or that subsequent examination dispels the conduct's initially misleading effect. (footnotes omitted) 155 So, for example, as observed by Sheppard J in Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 at 541: Obviously the evidence needs to be looked at as a whole and put in context. There may be cases in which it will be found that later statements, whether written or oral, replace those made earlier or affect or modify them in some way... 156 If the respondents provided Mr Tracy with the Block Summary data during negotiations for purchase of the relevant properties, then even if I am wrong in my previous findings concerning the representations with respect to historical production in the 1 June 2004 Valuation Report, I consider that the information in the Block Summary data effectively replaced those representations, with the result that Mr Tracy was in full possession of accurate information prior to entering the contract to purchase the relevant properties. 157 A crucial issue in the proceedings, however, was whether the first respondent provided Mr Tracy with the Block Summary data on 3 December 2004 as the respondents claimed. Mr Tracy claimed that he did not receive it from the first respondent or Mr Strahley at any time (Tracy statement in reply sworn 26 September 2006 at [4(e), (f)]). 158 Mr Tracy's evidence in relation to the Block Summary data is at odds with the evidence of Mr Strahley, and of Mr Douglas who was acting on behalf of the first respondent in these transactions. 159 Mr Strahley deposed that: · On 30 November 2004 he sent an email to Mr Douglas attaching Block Summary data (Strahley affidavit sworn 12 July 2006 at [65]). · At a meeting on 3 December 2004 between Mr Strahley, Mr Tracy and Mr Douglas, Mr Strahley and Mr Tracy discussed the Block Summary data; all three men made reference to the Block Summary documents; Mr Douglas and Mr Tracy asked a number of questions about the Block Summary data and asked him why the historical packout rates were poor; and to the best of his recollection Mr Tracy wrote some notes on the bar graphs in the Block Summary data (Strahley affidavit sworn 12 July 2006 at [69(e)]). 160 Mr Douglas deposed that: · On 30 November 2004 he received an email from Mr Strahley, attaching Block Summary data (Douglas affidavit sworn 6 July 2006 at [17]). · Prior to the meeting on 3 December 2004 between Mr Strahley, Mr Tracy and Mr Douglas, he printed two copies of the Block Summary data (Douglas affidavit sworn 6 July 2006 at [21]). · he arrived at the meeting with the Block Summary data document and another document, the Information Memorandum, to have them available to be provided to Mr Tracy, and placed them on the table at the meeting. During the course of the meeting, Mr Strahley photocopied some documents and gave them to Mr Tracy, and at the end of the meeting Mr Tracy put documents and a folder supplied by Mr Strahley in his briefcase. Nothing was left on the table. Mr Douglas left the meeting with Mr Tracy and took no documents with him (Douglas affidavit sworn 6 July 2006 at [22]). · To the best of his recollection Mr Tracy and Mr Strahley looked at and discussed the contents of the Block Summary data as well as other documentation (Douglas affidavit sworn 6 July 2006 at [25(a)]). 161 I have considered the evidence of Mr Tracy, Mr Strahley and Mr Douglas in relation to whether Mr Tracy was provided with the Block Summary data. In my view Mr Tracy was provided with the Block Summary data at the meeting of 3 December 2004 by Mr Douglas, who had received it from Mr Strahley by email prior to the meeting for the purpose of providing it to Mr Tracy. I also accept the evidence of Mr Strahley and Mr Douglas that the document was discussed at this meeting. I prefer the evidence of Mr Strahley and Mr Douglas to Mr Tracy in respect of the provision and discussion of the Block Summary data. 162 I make this finding for the following reasons.

4(a) Disclosure and assistance by the first respondent and Mr Strahley 163 First, the substance of Mr Tracy's claim in relation to this issue, as was clear from his answers under cross-examination (see in particular TS 380 ll 42-45) was that Mr Strahley deliberately kept from Mr Tracy the truth about the historical production figures including packout rates. However in my view such conduct on the part of Mr Strahley would have been totally inconsistent with the level of Mr Strahley's disclosure to Mr Tracy in relation to the properties, and the assistance provided by Mr Strahley to Mr Tracy during the negotiations to purchase the property. Examples of such disclosure and assistance include the following: · Mr Strahley was clearly comfortable with Mr Tracy inspecting the properties and meeting with various employees of the first respondent at any time (Tracy statement sworn 17 November 2006 at [31]; Douglas affidavit sworn 6 July 2006 at [48]). Mr Douglas deposed that Mr Tracy asked a number of questions during his inspection of the properties, and recalled that Mr Tracy's questions were answered without any hesitation on the part of Mr Breed and Mr Burns (Douglas affidavit sworn 6 July 2006 at [48]). · Mr Strahley gave Mr Tracy the telephone numbers for Mr Dan Papacek and Mr John Owen-Turner, both of whom provided consulting services to the first respondent, and suggested that Mr Tracy make contact with them directly to ask any questions about the orchards (Strahley affidavit sworn 12 July 2006 at [105]). · Mr Strahley arranged for Mr Tracy to speak with Ms Carolyn Bailey, manager of Client Accounting and Reporting, Hancock Agricultural Investment Group, in Boston Massachusetts, on 20 December 2004, so that Ms Bailey could explain the SGARA accounts system used by the first respondent. (Strahley affidavit sworn 12 July 2006 at [106]). · Mr Strahley provided Mr Tracy with the contact details of Mr Michael Sommerville, a Marketing Manager for Carter and Spencer to assist Mr Tracy (Strahley affidavit sworn 12 July 2006 at [199]). · Between 20 and 22 December 2004 Mr Strahley emailed Mr Tracy the following documents: ▪ Microsoft excel document entitled 'Yield Summary.xls' ▪ Microsoft excel document entitled 'Carton Yield Summary.xls' ▪ Microsoft excel document entitled 'sstrnd-nosgara.xls' ▪ Microsoft excel document entitled 'Valuation Yield Summary 2004.xls' ▪ information concerning lemon prices and market reports · Mr Strahley deposes that he told Mr Tracy about the existence of citrus canker and its adverse effect on the orchards (Strahley affidavit sworn 12 July 2006 at [69]). · Mr Tracy was provided with a folder of documents by Mr Strahley, relevant to the first respondent's due diligence enquiries (including the 2000 valuation, soil tests, environmental audits and management plans) when it originally purchased the orchards (Strahley affidavit sworn 12 July 2006 at [70]). · It is clear from the evidence that Mr Strahley made the Block Summary data available to Mr Douglas, who was the real estate agent liaising with Mr Tracy in relation to the properties. · On 15 February 2005, Mr Strahley sent an email to Mr Tracy attaching the Sunstate Orchards financial documents titled "financials04.pdf"which included the profit and loss statement of the years ended 30 June 2002, 2003 and 2004, which had been forwarded to him by Ms Bailey (exhibit R31) (see also Strahley affidavit sworn 12 July 2006 at [176]). 164 In addition to this conduct, there are other clear incidents where it appears that both Mr Strahley and the first respondent through Mr Strahley were actively seeking to assist Mr Tracy and behave towards him in an open and facilitative manner in the lead up to settlement of the properties, for example: · Mr Burns, the first respondent's horticulturalist, gave evidence that he met with Mr Tracy prior to Christmas 2004, when he mentioned the EBS disease to Mr Tracy. Mr Burns deposes that if Mr Tracy had asked him any questions about the orchards or any matter within his expertise he would have answered to the best of his ability (Matthew David Burns affidavit sworn 11 July 2006 at [68]). · Mr Strahley introduced Mr Palfreeman to Mr Tracy in what appeared to be a genuine endeavour to assist both Mr Tracy and Mr Palfreeman (James Palfreeman affidavit sworn 6 July 2006 at [8]-[11]). Despite suggestions from Counsel for the applicants that Mr Palfreeman could not possibly have been of any use to Mr Tracy, I accept Mr Strahley's view of Mr Palfreeman as "...an articulate young man with an MBA who was very analytical and that was - part of his project - or officer role, marketing role in the office was doing a lot of assessing, benchmarking and commodity research for (the respondents)" (TS 1113 ll 13-16). · Mr Palfreeman was given the responsibility of communicating with Mr Tracy on behalf of the first respondent after exchange of contracts, which also involved communicating with the Packing Shed any request for information from Mr Tracy (Palfreeman affidavit sworn 6 July at [17]). · Mr Palfreeman deposed that he had been instructed by Mr Strahley in March 2005 prior to settlement to leave all working sheets such as spray records, water usages and stock control and all Totalpak files complete for Mr Tracy, and, in light of the fact that Mr Tracy was purchasing the relevant assets and not the business, only remove Sunstate and Hancock Farm documents (Palfreeman affidavit sworn 6 July 2006 at [22]-[23] and annexure JP-03). · Mr Strahley introduced Mr Tracy to Mr Terry McMahon of Abbotsleigh Orchard, which was an orchard similar to the Bundaberg and Tiaro orchards in size, location, and varieties of fruit. The only purpose of such introduction was to allow Mr Tracy to discuss relevant issues of mutual interest with Mr McMahon (TS 1226 ll 25-35). 165 In summary, this conduct is not consistent with an allegation that either the first respondents or Mr Strahley were seeking to withhold information from Mr Tracy.

4(b) Evidence of Mr Douglas 166 The second reason for my finding that the Block Summary data were provided to Mr Tracy arises from the role, and evidence, of Mr Douglas. The evidence clearly demonstrates that Mr Strahley had forwarded the Block Summary data to Mr Douglas on 30 November 2004. Mr Douglas was the principal real estate agent responsible for the sale of the properties, and at that time liaising with Mr Tracy as a potential purchaser of the properties. In my view it is perfectly reasonable that, at that stage of the negotiations, Mr Strahley should have provided documentation relevant to the properties and their performance to the real estate agent who was in direct contact with a potential purchaser, rather than seek Mr Tracy's email address or other contact details to provide him directly with the material. Mr Tracy and Mr Strahley did not meet personally prior to 30 November 2004, and there was no direct email contact between Mr Tracy and Mr Strahley prior to that time (TS 381 ll 10-12, 382-383). 167 Further, the fact that Mr Strahley had provided the Block Summary data to Mr Douglas indicates candour in relation to provision of this information. Clearly, neither Mr Strahley nor the first respondent were attempting to conceal the Block Summary data from the real estate agent who was in direct contact with Mr Tracy, and for whose benefit it appeared Mr Strahley provided Mr Douglas with the Block Summary data. 168 Finally in relation to this issue I note that Mr Douglas was a credible witness who, on the evidence, had nothing to gain from concealing information from Mr Tracy with whom he had been acquainted for several years at the time of the transaction to acquire the relevant properties (TS 307 ll 43-48, 308 ll 1-5). It is unlikely that Mr Douglas would be party to a conspiracy of withholding relevant information from Mr Tracy when the evidence indicates that Mr Douglas was provided the information by Mr Strahley for Mr Tracy as a potential purchaser. In their written submissions, the applicants made reference to the allegedly "murky and sinister arrangements" between Mr Strahley and Mr Douglas (including the claim that they were old school friends). This submission is curious in light of the much more contemporary and long-standing relationship between Mr Douglas and Mr Tracy. In my view the applicants' submission as to "murky and sinister arrangements" between Mr Strahley and Mr Douglas is unconvincing. Mr Douglas' undisputed evidence was that he had attended the same school as Mr Strahley, but that Mr Strahley was two classes above him. There is no evidence at all that they were friends at school, or had any relationship other than that, at an early time in their lives, many years prior to these events, they were two students concurrently at the same school. Mr Douglas' evidence, which I accept, was that after completing school he had not seen Mr Strahley again until twelve months before the sale of the relevant properties. In my view there were no "murky and sinister arrangements" between Mr Strahley and Mr Douglas, or indeed any arrangements which impact on Mr Douglas' credit. 169 Mr Douglas' evidence: · that he had been forwarded the Block Summary data by Mr Strahley; · that he had printed a number of copies of the data and took them with him to the meeting with Mr Strahley and Mr Tracy, with a view to providing the Block Summaries to Mr Tracy at that meeting; and · that he did provide the Block Summary data to Mr Tracy at that meeting, is completely feasible in the circumstances. I also accept Mr Douglas' evidence, as well as Mr Strahley's evidence, that Mr Strahley and Mr Tracy discussed the Block Summaries during the meeting of 3 December 2004, and that when the meeting concluded Mr Douglas left with no papers.

4(c) Preference 170 The third reason I make this finding with respect to the Block Summary data relates to whose evidence I prefer as between Mr Strahley and Mr Tracy. I have already explained my reasons why I prefer the evidence of Mr Strahley to that of Mr Tracy where there is a conflict in their versions of events. Specifically in relation to the Block Summary data, I consider that, while Mr Tracy may honestly have deposed that he did not receive that data on 3 December 2004, it is more likely that the data was produced and discussed but Mr Tracy did not appreciate the significance of it at the time in the context of the volume of other information he was receiving at that meeting. I note, and accept, an oral submission of Mr Bell QC during the proceedings, where Counsel said: in assessing the evidence your Honour will contrast it with the position Mr Tracy was in at the time: who was he; what sort of figures was he interested in? Block summaries of oranges and apples and rubbish like that isn't the sort of thing that would have interested him. He's a corporate doctor. Things that interest him are figures, profits, cash flows. And so one can understand why he may not have brought those documents provided to him into focus. (TS 595 ll 36-42) (emphasis added) 171 Indeed, Mr Tracy conceded during cross-examination that his interest in the relevant properties was their future profitability (TS 311 ll 43-44), and the applicants submitted this in writing at the conclusion of the trial (applicants' written submissions p 70 at [11]). 172 On balance I consider that Mr Tracy was provided with the Block Summary data at the meeting of 3 December 2004, and that the document was discussed at the meeting as Mr Strahley described. 173 Finally, as I have already indicated, I consider that the claim of the applicants in paras 19(a) and (b) as to the "true position" are not substantiated. I will deal specifically with the claims in para 19 in more detail later in the judgment 174 The claims of the applicants in para 11 were not substantiated. While, as a result, I do not need to consider issues of reliance by the applicants on the material in the 1 June 2004 Valuation Report, in view of the extensive submissions made in relation to reliance on the material I shall deal with the issue separately later in the judgment.

The claim 175 In para 12(c) of the Further Amended Statement of Claim the applicants claimed as follows: On 3 December 2004 the First Respondent represented to the First and Second Applicants that: ... ... (c) lemons were selling for $70.00 per carton but the First Respondent's budgeted sale price for lemons was $30.00 per carton; PARTICULARS The representations were oral and were made in a conversation between the First Respondent, by the Second Respondent, and the Second Applicant at the First Respondent's premises at 145 Eagle Street, Brisbane. 176 In summary, the respondents in the Defence: · denied that the first respondent made any representations to the first applicant as alleged (para 9(1) Defence), and that in any event the allegation was embarrassing and irrelevant as there was no allegation that the statement or representation was false or misleading or deceptive or was likely to mislead or deceive; · said that, at the meeting of 3 December 2004, Mr Strahley told Mr Tracy that the earlier the lemon crop is picked the higher the obtainable prices and a price of $70 per carton of 1st grade lemons might be achievable for the earlier picked lemons; and · said that, at that meeting, Mr Strahley told Mr Tracy that the first respondent only produces a small percentage of 1st grade lemons and that the average price per carton of the lemons produced from the trees during the years 2001 to 2004 varied from $23.02 to $30 to $18.

Submissions of the parties 177 The written submissions of the applicants make no reference to the claim pleaded in para 12(c) in the Further Amended Statement of Claim. 178 In summary the respondents submitted as follows: · Mr Strahley told Mr Tracy at the meeting of 3 December 2004 that: o the earlier the lemon crop is picked the higher the price that may be obtained because there were few lemons available to the market at that time, and it was possible that up to $70 per carton for first grade lemons may be obtained; o the budgeted price of lemons at the time was $22 per carton but based on current market information there was the possibility that a higher price may be received (Strahley affidavit sworn 12 July 2006 at [69(r)]). · The applicants were not led into error because: o it is not the applicants' evidence that Mr Tracy was misled into thinking that he would get $70 per carton for lemons (TS 401 ll 25-29); o Mr Tracy said in cross-examination that he did not proceed into contract on 16 February 2005 believing he would get $70 per carton for lemons or that the $70 would calculate up to the number of $1.5 million after production costs (TS 401 ll 36-37); o subsequently to 3 December 2004 the first respondent provided Mr Tracy further information as to budgeted prices for lemons: ▪ The 2005 Sunstate Budget provided to Mr Tracy on 10 December 2004 forecast a price per carton for lemons at $30. ▪ Mr Strahley, by email of 10 December 2004, provided to Mr Tracy an Australian daily fruit report of that date. On page 5 of the report there were lemon prices recorded as being obtained for the various lemon varieties in the markets on that day between $12 to $46 per carton for 1st and 2nd grade lemons for the Eastern seaboard. In cross-examination Mr Tracy's evidence was that when he received the market report he looked at the price ranges of $30-$55 for lemons per carton. The market report did not disclose lemons at that date were selling at that time for $70 per carton. Mr Tracy did not give evidence that he was told that he would get $70 for each carton of the lemon crop. ▪ By email of 21 December 2004 Mr Strahley sent to Mr Tracy the Sunstate Orchards Crop Historical Data and 2005 Season Estimates in a document titled Valuation Yield Summary 2004.xls. The recorded average price per carton for lemons for the 2005 season was $22 per carton. Mr Tracy said in cross-examination that he had looked at that document before Christmas of 2004 and was aware of the budgeted price (TS 407 ll 46-48, 408 ll 2-5). ▪ On 6 January 2005, at Mr Tracy's request, he was provided with a lemon pricing schedule for the 2005 season recording information from marketing agents, which included estimated prices for January, February and March 2005. ▪ On 7 January 2005 Mr Tracy was provided with an updated pricing schedule obtained from the fruit wholesaler Carter and Spence and comments from Sculli's, a fruit wholesaler, relating to the pricing of lemons. The average price for lemons was recorded in the schedule at $27.70 per carton with a comment in the email from Sculli's that lemons will be good for the season with an average price of $30 for lemons. · There was no sufficient basis on the evidence for the court to conclude that the alleged representation was misleading or deceptive or that there was any reliance by the applicants on the alleged representation.

Consideration 179 Earlier in the judgment I referred to words of warning of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318 concerning oral statements claimed to be misleading or deceptive. His Honour said: Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions of self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. Each element of the cause of action must be proved to the reasonable satisfaction of the Court, which means that the Court "must feel an actual persuasion of its occurrence or existence"… 180 This principle is of particular relevance in relation to this claim. 181 I do not consider this claim substantiated for the following reasons. 182 First, although the applicants in the Further Amended Statement of Claim plead the representation alleged in para 12(c), there is no specific claim elsewhere in that document that this representation constitutes conduct contrary to ss 52 or 53A as to historical pricing of lemons. The applicants plead generally in para 20A that the representations referred to in paras 11 to 17 were misleading or deceptive or likely to mislead or deceive, however in para 19 and 19A the applicants plead their grounds for the claims that representations in paras 11 to 17A were misleading or deceptive. There is no reference in either para 19 or para 19A to any grounds for the claim that the representation alleged in para 12(c) was misleading or deceptive. There is nothing before the Court in the pleadings to explain why the representation alleged in para 12(c) was misleading or deceptive. 183 Second, even if I accept that there is a claim by the applicants that the alleged representations in para 12(c) were misleading or deceptive, I am unable to identify any factual basis for this claim. As the respondents submitted and as Mr Strahley said at the hearing, Mr Strahley's evidence was that he had said that it was possible that up to $70 per carton for first grade lemons could be obtained for early season crop (TS 1205-1206) Mr Tracy's evidence was that he did not proceed into the contract believing he would obtain $70 per carton for lemons (TS 401 ll 36-37), or that he believed that lemons sold for $70 per carton would calculate up by the number of cartons to $1.5 million after production costs (TS 401 ll 39-40). Indeed Mr Tracy conceded that his understanding of lemons being sold for $70 per carton was that Mr Strahley, on 3 December 2004, mentioned that "someone he knew" received $70 per carton (TS 406 ll 25-28). In relation to the applicants' claim that First Respondent's budgeted sale price for lemons was $30.00 per carton, even if Mr Strahley had made such a representation at the meeting of 3 December 2004 the applicants have not substantiated that this representation was misleading or deceptive. In any event Mr Strahley subsequently emailed a market report containing lemon prices to Mr Tracy (TS 406 ll 38-47). 184 Third, the applicants do not make a case that they either relied on the alleged representation in para 12(c), or that they suffered loss as a result of relying on it. 185 There is no sufficient basis on the evidence for the court to conclude that the alleged representation was misleading or deceptive, or that there was any reliance by the applicants on that representation. 186 The claim in para 12(c) Further Amended Statement of Claim is not substantiated.

The claim 187 In para 14(a) Further Amended Statement of Claim the applicants claimed as follows: On 20 December 2004 the First Respondent represented to the First and Second Applicants that:- (a) the land yielded 6,902 bins of fruit for the Crop Year 2001; ... ... ... PARTICULARS The representations were written and are contained in a document entitled 'Yield Summary.xls' which was an attachment to an e-mail from the Second Respondent to the Second Applicant sent on 20 December 2004. 188 In para 19 Further Amended Statement of claim the applicants claimed that this representation was misleading or deceptive or likely to mislead or deceive in that: (h) the First Respondent knew that its representation that the land yielded 6,902 bins of fruit for the Crop Year 2001 was false because it had possession of the Packing Shed computer records which disclosed that in truth and in fact that the land had yielded only 6,727 bins of fruit for the Crop year 2001; 189 In the Defence the respondents in summary: · denied that any alleged representations were made to the first applicant or Mr Tracy; · said that on 20 December 2004 Mr Strahley sent to Mr Tracy an email attaching a file "Yield Summary.xls" which included seven year historical data and three year forecasts for the orchards; · said that for 2001 the total number of bins recorded for the orchards was 6,902 for specified crops.

Submissions of the parties 190 In summary, the applicants submitted as follows: · the Yield Summary.xls was a prediction of future yield performance of the orchards in the future; and · the representation was made to a potential purchaser in the course of the purchaser making enquiries about the subject matter of the sale. 191 The respondents submitted in summary as follows: · The applicants' case for misleading or deceptive conduct is that the Smartpak Packing Shed records disclosed that, for the 2001 crop year, the "land" yielded 6,727 bins of fruit. · The difference between 6,902 bins (which the respondents claimed constituted the historical yield) and 6,727 bins (which the applicants claimed constituted the "true" position) was insignificant. · The differences in the 2001 figures between the Yield Summary data and the SmartPak data averaged over the 2001-2002 period because the following year the SmartPak data recorded the total number of bins of fruit produced as 10,814 compared to 10,677 bins referred to in the Yield Summary for 2002. Accordingly, for 2001-2002 the Packing Shed records total was 17,541 bins, and the yield summary records 17,579 bins, which was an insignificant difference. · There was no evidence that the applicants were led into error by this difference, and there was no evidence that Mr Tracy or the applicants specifically considered the number of bins for 2001 other than Mr Tracy's evidence that he looked at the trends from 1998 to 2007.

Consideration 192 To the extent that the Yield Summary.xls provided that a total of 6,902 bins of fruit were produced and picked for the Bundaberg and Tiaro orchards in 2001, the provision of that document was in my view conduct of the respondents within the meaning of s 52. The question is whether the conduct of the respondents breached s 52. 193 I have already noted, and accepted, evidence of Mr Strahley in relation to concerns as to the reliability of data in SmartPak. In any event, in my view the claim by the applicants in para 19(h) as to the "true" production figures is not substantiated. I will deal specifically with the claims in para 19 in detail later in the judgment. 194 However even assuming that the reference to 6,727 bins of fruit in the Packing Shed records is accurate and the reference in the Yield Summary to 6,902 bins of fruit is not accurate, I consider that the difference is not material. The difference is 175 bins of fruit, being a 2.6% variation from the 6,727 bins claimed by the applicants to be the accurate yield. 195 In Hill v Tooth & Co Ltd (1998) ATPR 41-649 the court considered whether materiality in inaccuracy of trading figures supplied to a prospective purchaser of a hotel was a relevant consideration in deciding whether a representation as to the volume of trade was misleading or deceptive for the purposes of s 52. Einfeld J held that the discrepancy in that case of 2.7% was not sufficiently material so as to constitute misleading or deceptive conduct, and there were no exceptional circumstances in that case to render the discrepancy sufficiently material (Hill v Tooth & Co Ltd (1998) ATPR 41-649 at 41,221, cf Holmes J in Scootmore Holdings Pty Ltd v Bidvest Australia Limited [2001] QSC 329 at [120]). 196 The discrepancy of 175 bins of fruit in this context would appear to fall into the same category, namely not sufficiently material to constitute misleading or deceptive conduct by the respondents. 197 In my view the claim of the applicants in para 14(a) is not substantiated.

The claim 198 In paras 17A and 19A of the Further Amended Statement of Claim the applicants claim as follows: 17A. The First Respondent failed to disclose the following matters to the First and Second Applicants prior to 19 February 2005:- a) that the horticulturist employed by the First Respondent in the conduct of the orchard on the land had informed the First Respondent of his intention to resign in November 2004; b) that the farm manager reports prepared by the First Respondent's employees, including the Third Respondent, for the period September 2004 until February 2005 disclosed that:- (i) the Nova and Ellenor fruit crops on the land was significantly affected by the fruit disease EBS; (ii) the Murcott fruit crop on the land was affected by the fruit disease EBS; (iii) the Ellendale fruit crop on the land had been held on the trees past their pick date; c) that the spray records maintained by the First Respondent revealed that the fruit crops on the land had been sprayed with pesticides at 40 psi rather than 20 psi contrary to good agricultural practice; d) that the spray records maintained by the First Respondent revealed that the fruit crops on the land had not been sprayed with pesticide 14 days after the initial spray as required by good agricultural practice but that the fruit crops had been sprayed 32 days after the initial spray contrary to good agricultural practice; e) that the First Respondent had historical records of the agricultural performance of the land in its possession including historical information as to the number of bins picked, the number of cartons packed, the proportion of fruit sent for juicing, the proportion of first and second fruit and the packout rates for the fruit crops on the land for the Crop years 1998-2004 and that these records disclosed the matters referred to in paragraph 19; f) the Farm manager Reports for the period September 2004 to February 2005; g) the e-mail from the Second Respondent to the Third Respondent dated 7 December 2004 sent at 8.01 a.m. on that date; h) the e-mail from the Second Respondent to the Third Respondent dated 13 January 2005 sent at 2.46 p.m. on that date; i) the e-mail from the Second Respondent to the Third Respondent dated 14 January 2005 sent at 3.02 p.m. on that date; j) the e-mail from the Second Respondent to the Third Respondent dated 19 January 2005 sent at 8.06 a.m. on that date; k) the e-mail from the Third Respondent to the Second Respondent dated 3 February 2005 sent at 8.40 a.m. on that date. 19A. The conduct referred to in paragraph 17A was misleading or deceptive or likely to mislead or deceive because in the circumstances referred to in paragraphs 1-17 the First and Second Applicants had a reasonable expectation that the matters referred to in paragraph 17A would be disclosed by the First Respondent to them and the First Respondent knew or ought to have known that the First and Second Applicants held such reasonable expectation. 199 In summary, the respondents in the Defence alleged: · the horticulturist did not in November 2004 inform any of the respondents that he had an intention to resign in November 2004; · in January 2005, the matters pleaded in sub-para 17A(b)(i) and (ii) of the Further Amended Statement of Claim were disclosed to Mr Tracy. The respondents pleaded the following particulars: In a telephone conversation on 7 January 2005 John Owen Turner, horticulturalist, said to the Second Applicant that the Nova and Ellenor crop is especially susceptible to Emperor Brown Spot or Alternaria alternate (EBS) when grown in coastal areas and that the fruit crops at the orchards were affected by EBS. In a telephone conversation on or about 13 January 2005 between Daniel Papacek, entomologist, and the Second Applicant, Mr Papacek told the Second Applicant that if he was thinking of buying a citrus property at the coast he ought to be aware that it will be significantly affected by EBS; that the varieties of Novas and Murcotts are susceptible to EBS; that the crops at the First Respondent's orchards were affected by EBS and the presence of EBS adversely affected the profitability of the orchards. · denied that such historical records revealed the matters pleaded in para 18 of the Further Amended Statement of Claim which paragraph is a reliance allegation; · claimed that the applicants did not plead the facts or matters in the farm manager reports which allegedly were not disclosed, but that the maintenance of farm records by the First Respondent was disclosed to the applicants; · say that there was no reasonable expectation, requirement or obligation that such facts or matters be disclosed by the respondents. 200 The claims of the applicants in paras 17A and 19A of the Further Amended Statement of Claim are of wide ambit. It is convenient to summarise, and deal with them, in the following order: · silence with respect to the resignation of the horticulturist (para 17A(a)); · silence with respect to the farm manager reports (para 17A(b) and (f)); · silence with respect to historical records (para 17A(e)); and · silence with respect to emails (para 17A(g)-(k)). 201 I note that the allegations in paras 17A(c) and (d) of the Further Amended Statement of Claim were not pressed by the applicants in their written submissions. 202 Before turning to consider the particular claims of the applicants it is useful to first outline principles relevant to silence as a breach of Pt V of the Act.

Relevant principles 203 Silence may be relied upon in order to show a breach of s 52 when the circumstances give rise to an obligation to disclose relevant facts (Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 at 557 and see the useful discussion in Miller's Annotated Trade Practices Act (29th ed) 1.52.53). If the circumstances do give rise to such an obligation, the next question is whether the relevant silence constituted conduct which was misleading or deceptive or likely to mislead or deceive (Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 489, 504, 508). The duty to disclose is not confined to cases where there are particular relationships, such as trustee and beneficiary or solicitor and client (Henjo Investments Pty Ltd 39 FCR 546 at 557). However the applicant bears the onus of establishing how or in what manner that which was left unsaid had the potential to mislead or deceive. To have that potential, omissions in communicating information must be relevant to the topic about which it is said a respondent's conduct is likely to mislead or deceive and material in the circumstances (Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 467-468). 204 Of particular relevance in the circumstances of the case before me are comment of Hill J in Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97 at 114 where his Honour observed: Obviously, it is difficult to see how a mere silence could, of itself, constitute conduct which is misleading or deceptive or likely to mislead or deceive. However, if the circumstances are such that a person is entitled to believe that a relevant matter affecting him or her adversely would, if it existed, be communicated, then the failure to so communicate it may constitute conduct which is misleading or deceptive because the person who ultimately may act to his or her detriment is entitled to infer from the silence that no danger of detriment existed. Thus, where a duty to speak is imposed, silence may constitute misleading or deceptive conduct. (emphasis added)

Resignation of the horticulturalist: paragraph 17A(a)

Submissions of the parties 205 In summary the applicants submitted: · the evidence shows that the respondents knew that Mr Tracy had no experience with citrus; · Mr Tracy's evidence identified the importance of the continued presence of the horticulturalist; · Mr Burns' written evidence was that in July 2004 he notified Mr Breed that it was not his present intention to stay at the orchards after their sale; · any distinction drawn by the respondents between formal notice of Mr Burns' resignation, and the respondents' knowledge of Mr Burns' decision to resign, is one of semantics only; · in the context of a potential purchaser known by the respondents to have no citrus experience it was incumbent on them to disclose their knowledge of Mr Burns' decision to Mr Tracy. 206 In relation to this issue the respondents submitted in summary: · in fact, Mr Burns had not informed the first respondent that he intended to resign in November 2004. · Mr Burns' evidence was that he had considered travelling in 2004, that he had discussed this with Mr Breed but had not made any definite plans, and that he was waiting to see who purchased the orchards before making any decision. · It was Mr Tracy's acquisition of the orchards which caused Mr Burns to finally decide to leave. · Mr Burns gave notice of resignation on or about 11 February 2005. Prior to that date Mr Burns did not inform Mr Breed or any other person at Sunstate of his resignation. · Mr Tracy had not informed Mr Strahley that the presence of Mr Burns was an important or material consideration in the decision to proceed to enter into the agreements. Mr Burns' continuing employment was not one of the conditions negotiated to be included in any agreement between the parties. If Mr Burns' continuing employment was important to Mr Tracy, Mr Tracy could easily have identified it as a condition of agreement with the first respondent. · Mr Tracy's evidence was that prior to 17 February 2005 he had spoken with Mr Burns about future opportunities at the orchard but that Mr Burns did not provide any commitment to stay on with Mr Tracy. · Another horticulturalist could easily have been employed. In any event, Mr Burns was only one member of the management team. Mr Papacek and Mr Owen-Turner were horticultural experts who were available, had been retained by Sunstate, and could have been retained after the purchase of the properties.

Consideration 207 The applicants' pleaded case is that the respondents did not "disclose" that the horticulturalist, Mr Matthew Burns, had informed the first respondent of his intention to resign in November 2004. Two key questions are · whether Mr Burns had informed the first respondent of his intention to resign in November 2004; and · if Mr Burns had so informed the first respondent, whether the circumstances gave rise to an obligation in the respondents to disclose this information to the applicants, in particular Mr Tracy.

Did Mr Burns inform the first respondent of his intention to resign? 208 In his affidavit Mr Burns deposed as follows (Burns affidavit sworn 11 July 2006 at [75]-[78]): 75. In about the first or second week of July 2004, I said to Mr Breed that it was not my present intention to stay at the Orchards after the sale of the Orchards. However, at no time prior to about 11 February 2005 did I notify Mr Breed of my resignation. 76. In about February 2005, I officially resigned by giving 2 week's notice in writing as required by my employment contract. This would have been on or about 11 February 2005. I submitted my letter by facsimile to Mr Breed. Mr Breed tried to persuade me to stay at the Orchards after he received my fax. I do not recall being told by Mr Breed or Mr Strahley not to mention my resignation or plans to travel by Mr Tracy. 77. I have read paragraph 111 of the Statement of Peter Tracy. At no time prior to giving my resignation on or about 11 February 2004 did I give anyone from Sunstate Orchards notice of my resignation. I did not say to Mr Tracy that I had given such notice. I said to Mr Tracy that I don't want to work in the citrus industry any more; I'm tired of the lifestyle and want to travel. 78. My last day at Sunstate Orchards was Friday, 25 February 2005. 209 During cross-examination of Mr Burns, the following exchange took place between Mr Perry SC for the applicants and the witness: Right. But you see, here, you say: I said to Breed that it was not my present intention to stay at the orchards after the sale of the orchards. Now, that intention never changed from your perspective, did it? All you had to do was raise enough money?---Yes. Right. That was achieved by December?---Yes, thereabouts. And you frequently, didn't you, discussed with Breed your broad travel plans…?---Yes. …throughout the period July to December?---Yes, but it was still pie in the sky hopes. A bit more than that. It was your present intention to be effected by you raising enough money, which you had achieved by December of that year?---But I'd always - I wouldn't - to be honest, I was hanging around to see who would potentially buy the orchard and see if I wanted to stay on with that person. Mr Burns---?---I can--- HER HONOUR: Can you at least let the witness finish. MR PERRY: All right. THE WITNESS: Yes, so I wanted - I mean, I do look at my career and - you know, I'm not dead-set then - sorry, I wasn't determined that I'm definitely leaving. If there was an opportunity that I thought had potential, I would stay on, of course. If they were going to offer me an extra X amount of dollars, of course I would consider it. It's not like something that it was a definite, definite "I'm going". MR PERRY: Well, let's see: It's not my present intention to stay at the orchards after the sale. No qualifying that, is there?---No. No?---It's the first time I've written one of these. HER HONOUR: What was that, Mr--- Well, the first time I've written one of these---?---The first time I've written one of these. ---but accuracy for a scientist is not something you're a stranger to, is it?---No. No. So no qualifying what your intention in July '04 was, and as I said, you discussed with Breed throughout the balance of that year potential travel plans, didn't you?---Yes. And by the end of the year, you'd raised enough money, in fact, to give your present intention concrete certainty?---Not necessarily. I hadn't - as I said, I was waiting to see who bought the orchard. And also - you know, my parents were if-ing and ah-ing whether I - you know, influencing me to buy a house as well--- Tell me, did you say to Breed, other than what you've got here - so what we know you said to Breed was, in July, "It's not my intention to stay at the orchard after sale"; correct?---Sorry, in--- In July, "It's not my intention to stay after the sale". That's what you said to Breed?---Yes and no. Well---?---I mean, like--- HER HONOUR: Can I ask--- THE WITNESS: It's not definite--- HER HONOUR: I have a question for the witness. How old are you?---I'm 28 - 29. Twenty-nine, sorry. Thank you. MR PERRY: You're no child. Mr Burns, you don't assert in this statement sworn by you on oath that you ever qualified or conditioned your expression of intention conveyed to Breed, do you?---No, but--- No. You never said--- MR BELL: Well, I--- HER HONOUR: Please--- MR BELL: ---object to that. That is outrageous. But we'd like to hear the rest, I think, wouldn't we? If you don't want to hear it, that's fine, but I'm going to be submitting at the end you only got half the answer. It's silly. HER HONOUR: I was about to say, can you please answer the question. Thank you for the interruption there, Mr Bell. THE WITNESS: Please repeat the question. MR PERRY: You do not say in this statement that at any time in your assertion to Breed about what your intention was, did you qualify it or condition it in any way along the lines of, "Oh, I'll wait to see what someone offers me"?---No, but I didn't think that was what I needed to supply here. But we chit-chatted. We had conversations. He was thinking of buying the orchard. I chit-chatted with him about staying with him, you know, in that same manner. I chit-chatted with - it was just - we were - yes. We talked about a lot of things. He was looking at purchasing the orchard. He wanted me to stay. But he didn't purchase it?---No. And it was just that there were - yes, there were a lot of things we talked about regarding my future--- So other than your personal connection with Mr Breed, there was no condition or qualification ever expressed by you in terms of this present intention that you refer to in paragraph 75, was there?---But also, as I said before, if I had been given an opportunity of a lifetime, well, then, you know, I would have stayed on. All right. Absent a Gold Lotto win, you would not have stayed on - a Gold Lotto win in the sense of the opportunity of a lifetime, as you refer to it?---Yes. So absent that, it was made clear to everyone by you that you weren't staying once the orchards were sold?---In - I make spontaneous decisions, so I was telling them, "Yes, I'm going," but you never know with me. So that's all I can say. Let's do it in two steps. You were telling them, and repeatedly did so, throughout the balance of the year, July to December, that you were going. That's the first step?---Yes. Right. And the people that you were telling repeatedly through that period that you were going were Mr Breed?---Yes. Anyone else?---No. Oh, a few of the lower level staff. But in terms of management?---No. So Mr Breed was made aware by you on repeated occasions, July to December, that you were going, and your only qualification is "If I got," as you say, "the opportunity of a lifetime," that might convince you to stay?---Yes. Yes. Now, you say that you didn't send a notice of resignation. Now, that's strictly true, that you didn't send the letter, but you had made clear to Mr Breed in the terms that you just related to her Honour, what your clearly expressed intention was, hadn't you?---It wasn't clear until - to be honest, I don't know when I'd, you know, completely made up my mind. I can't remember the exact date. (TS 723-726) 210 There is no evidence that Mr Strahley or that anyone other than Mr Breed in the first respondent's employment knew of Mr Burns' thoughts concerning his future at Sunstate. 211 In my view the evidence demonstrates that: · in 2004 Mr Burns was considering leaving the employment of the first respondent; · from his point of view and at various times it was more likely than not that he would resign once the orchards were sold; but · his final decision would depend on what happened when the relevant properties sold. 212 In 2004 Mr Burns was in his mid-twenties, and considering overseas travel. Indeed it appears that this ambition was realised, as it was clear at the time of the proceedings that he was living in South Korea and would return there after the hearing. 213 It is not surprising that a person in his mid-twenties in 2004 would consider leaving employment to travel; nor in my view is it either unnatural or unexpected that a person of that age would, as Mr Burns indicated during cross-examination, vacillate in making decisions such as whether to buy a house, provide a commitment to his employer to remain in employment or, for example, postpone making such decisions and instead travel. It is also neither unnatural nor unexpected that a person in his mid-twenties would air his indecision to his colleagues and supervisors at work but refrain from making a decision until he was ready to act upon it. However this indecisiveness did not, in my view, constitute "an intention" to resign in 2004. 214 I consider that Mr Burns' evidence under cross-examination explains the statement in para 75 of his affidavit that "In about the first or second week of July 2004, I said to Mr Breed that it was not my present intention to stay at the Orchards after the sale of the Orchards". 215 In this context, the facts demonstrate that to the extent that the first respondent (through Mr Breed) had knowledge of Mr Burns' views in relation to leaving his employment, at most it was knowledge that Mr Burns was contemplating leaving once the orchards had sold, and that it was likely that he would if he did not receive an attractive offer to stay. I do not consider that Mr Burns had a firm intention to resign in 2004 - that intention crystallised after Mr Burns had met Mr Tracy and formed a view of Mr Tracy. This was made clear during the following exchange: HER HONOUR: I have a question for the witness, Mr Perry. Mr Burns?---Yes. Was the - I'm trying to think of a way to put this question. Was it anything to do with Mr Tracy's acquisition of the orchards which caused you to decide to leave?---Yes. Can you tell us what that was?---Simply because the manner in which he - he spoke to me. Like, if - if that - that conversation was obviously a crux, I could have gone either way, but that conversation reinforced that I didn't--- Although you'd already resigned by then--- MR PERRY: He'd already resigned by then. ?---Yes, but I - you can--- HER HONOUR: You can change your mind?---You can still take up employment with someone afterwards. I was still working in the house. Yes, no, the - the - he was too business-like. It was as if there was never going to be any - I don't think he understood the world of farming, and I never want to work under someone who doesn't have an understanding or an empathy of farming. So the people you had worked with, Mr Breed and others, they did understanding farming?---Yes, or--- In your view?---Yes, or they have a feeling and understanding and - yes. Yes. (TS 730-731) (Contrast, for example, the situation in Lubidineuse v Bevanere Pty Ltd (1984) 55 ALR 273 where the relevant employee had planned to leave prior to the sale of the employer's business and had already organised new premises for herself.) 216 While the knowledge of Mr Breed - and through him, the first respondent - that there was a possibility that Mr Burns might resign after the sale of the properties could have been communicated to Mr Tracy during negotiations to purchase the properties, it is difficult to describe what that communication might have been other than vague information that Mr Burns was considering leaving his employment, but would more likely stay if he endorsed the circumstances of the sale and/or received an attractive offer to stay. 217 Accordingly I do not consider that the applicants' case is substantiated in relation to this claim so far as they allege that Mr Burns had an intention to resign in 2004. In the interests of completeness however, I propose to consider whether the respondents were under an obligation to disclose information to the applicants concerning the possibility that Mr Burns might resign after the sale of the properties.

Did the circumstances give rise to an obligation in the respondents to disclose this information to the applicants? 218 The transaction involving the sale of the relevant properties followed commercial arms-length negotiations. As pointed out in Lam v Ausintel Investments Australia Pty Ltd (1990) 97 FLR 458 at 475, simply because one party has knowledge which the other does not, does not in itself impose an obligation on the first party to bring the information to the attention of the other party. This is only the case if there is an obligation of full disclosure. 219 Notwithstanding this, the applicants submitted that, in the context of a potential purchaser known by the respondents to have no citrus experience, it was incumbent on the respondents to disclose their knowledge of Mr Burns' decision to resign to Mr Tracy. Mr Tracy gave evidence that he was told in the last week of February 2005 by Mr Breed that Mr Burns had resigned, and specifically deposed that (Tracy statement sworn 17 November 2006): 110. ... The presence of Burns was an important consideration in my decision to go ahead with the sale transaction. This was because I had no technical experience in horticulture and was relying on Burns for this expertise… 111. After learning of Burns' resignation I telephoned Matthew Burns at his home which was on the Bundaberg orchard. I spoke to Burns and attempted to convince him to stay on however Burns was adamant. During this conversation Burns told me that he had informed Sunstate Orchards of his intention to resign months earlier. I told Burns that this was the first time that I had been informed of his intention to resign. I was greatly concerned that Burns' intention to resign had been concealed from me throughout the sale process. 220 In my view there is no evidence to support the existence of any obligation of the respondents to inform the applicants of any knowledge concerning Mr Burns' possible future resignation, so that a failure to do so was conduct which mislead or deceived or was likely to mislead or deceive the applicants. 221 First, notwithstanding the applicants' submissions concerning the lack of citrus experience of Mr Tracy and Mr Tracy's alleged reliance on Mr Burns' continuing presence at the orchards, there is no evidence that either: · the continuing presence of Mr Burns at the orchards was an important consideration in the acquisition of the orchards as Mr Tracy claimed; or · that Mr Tracy, either on his own behalf or on behalf of the other applicants, at any time made known to the respondents or anyone else the importance of Mr Burns' continuing employment in relation to the purchase of the properties. 222 Prior to settlement, at no time did Mr Tracy ask either Mr Strahley or Mr Burns himself of Mr Burns' intentions, which would be expected if Mr Burns' continuing employment was important. I accept the submission of the respondents that Mr Tracy could easily have identified the continuation of Mr Burns' employment as a condition of the agreement but apparently chose not to. 223 Second, notwithstanding Mr Tracy's lack of experience in citrus, there is no evidence before the Court that Mr Burns' resignation would affect Mr Tracy or the other applicants adversely any more than would the resignation of any other employee of the orchards. This is because: · As Mr Tracy had no experience of citrus, all employees of the respondents at the relevant properties would have had more experience in the citrus industry than him. Although Mr Tracy was prepared to hire the staff already employed by the respondents, negotiations between Mr Strahley and Mr Tracy did not proceed on the basis that all staff (or indeed any staff) would stay - rather the contract between the parties provided that the new entity would employ employees nominated by the respondents. I note, and accept the submission of Mr Bell QC during cross-examination, that this was more for the benefit of the employees, whom the first respondent was keen to ensure retained their positions, than Mr Tracy or the applicants (TS 290 ll 11-24) This position can be contrasted with, for example, the events in Lubidineuse v Bevanere Pty Ltd (1984) 55 ALR 273 where negotiations did proceed on that basis. In that case discussions between the vendor and proposed purchaser of a beauty salon proceeded on the basis that all staff of the salon would stay, in particular the senior employee who, after the completion of the sale, resigned and opened her own competing business nearby. Wilcox J found that, on the balance of probabilities, the vendor was aware, prior to the date of contract, that the senior employee intended to resign in the near future and establish a competing business in the near vicinity and that, despite this awareness, the vendor allowed the purchasers to purchase the business in the belief that the senior employee would stay on indefinitely (Lubidineuse 55 ALR 273 at 283). · although it is not in dispute that, prior to Mr Burns' arrival at the orchards, there had been no full-time horticulturalist, and that he had been employed to improve the cultural practices at the orchards with a view to improving the yields (Burns affidavit sworn 11 July 2006 at [32]), there was no evidence that Mr Burns was an employee critical to the business such that he could not be replaced in his role, or that other agricultural consultants available to the business (in particular Mr Owen-Turner and Mr Papacek) could not assist. Mr Tracy regarded Mr Burns as a "so-called expert horticulturalist who was an expert in citrus" however: o the evidence demonstrated that Mr Burns was a relatively recent graduate in horticulture at the time and appeared to have no particular expertise in citrus at the time of his engagement with the first respondent; o Mr Burns' evidence was that another horticulturalist could come later to the property, examine the orchard, recognise the history of the orchards including cultural practices at the orchards and continue the work in the orchards even in the absence of a handover of duties (TS 683 ll 1-15). Again, the role of Mr Burns can be contrasted with that of the senior employee in Lubidineuse v Bevanere Pty Ltd (1984) 55 ALR 273 whose primary role was one of client liaison and customer support, whose knowledge was important in securing the smooth transfer of customer goodwill to the new owners, and whose establishment of a new business resulted in the defection of customers and undermining of the business the subject of the sale. 224 Third, as emerged during cross-examination, Mr Tracy gave evidence that he was told by Mr Breed, and believed, that Mr Strahley had known of Mr Burns' intention to resign, and had instructed Mr Breed not to tell Mr Tracy of this intention (TS 261 ll 42-46, 262 ll 1-2). Mr Tracy said that he believed this deliberate concealment "was consistent with the misinformation that had been given - or perpetrated upon me through the whole process" (TS 260 ll 18-20). However other than what appears to be a statement in Mr Breed's unsigned statement, which for reasons I have already given is of little evidentiary value, there is no evidence that Mr Strahley ever gave anyone instructions to conceal such information from Mr Tracy, or indeed that he had known of Mr Burns' state of mind prior to February 2005. 225 I do not find the claim of the applicants in para 17A(a) substantiated.

Submissions of the parties 226 In summary the applicants submitted: · Information as to the effect on the orchards of EBS was in the farm manager reports for the period September 2004 to February 2005, which reports were never disclosed to the applicants prior to sale of the relevant properties. · Mr Strahley agreed during cross-examination that the farm manager reports for September to November 2004 informed him that Novas, Murcotts and Imperials were performing poorly. · Although the respondents pleaded that the allegations in para 17A(b) were met by evidence of Mr Owen-Turner and Mr Papacek, any disclosures made by those witnesses in relation to EBS do not cure the silence of the respondents concerning the factual matters contained in the farm manager reports. · There are good reasons to reject the evidence of Mr Owen-Turner and Mr Papacek in light of concerns as to their credit. · In relation to Mr Papacek: o the diary notes on which he relied recorded only what Mr Tracy said to him rather than what, if anything, Mr Papacek said to Mr Tracy; o Mr Papacek admitted under cross-examination that he recorded only one part of the conversation; and o it is unlikely that Mr Papacek would be able to remember the precise words he alleged he said to Mr Tracy. Accordingly Mr Tracy's version of events should be preferred over Mr Papacek's recollection. · In relation to Mr Owen-Turner: o his affidavit was internally inconsistent between paras 9(c) (concerning EBS and packout rates) and para 20 (concerning packout rates); o the evidence was such that the Court should find there was no discussion between Mr Owen-Turner and Mr Tracy of any kind concerning packout rates. 227 The respondents submitted in summary: · Mr Tracy would have known of the existence of farm manager reports from the Ray White Information Memorandum and could have asked for them. · EBS was disclosed to Mr Tracy, and there was no conduct of the respondents which was misleading or deceptive. · Mr Strahley provided to Mr Tracy the names of citrus experts (Mr Papacek and Mr Owen-Turner) who had been retained by Sunstate. Mr Tracy did not however proceed with obtaining a crop status report from Mr Owen-Turner, presumably because he did not consider the status of the crop a material consideration to investigate further. · Mr Papacek, Mr Owen-Turner and Mr Burns all told Mr Tracy of the existence of EBS, that crops at the orchard were affected by EBS, that the Murcott and Nova varieties of fruit are susceptible to the disease, and that EBS affects profitability. · It is well known that the Nova, Ellenor and Murcott varieties are susceptible to EBS and that the incidence of the disease is greater in coastal areas because the rainfall and humidity is higher. This information was also communicated to Mr Tracy by Mr Papacek and Mr Owen-Turner. · Mr Owen-Turner told Mr Tracy that EBS affects packout rate. · Mr Tracy admitted Mr Papacek mentioned EBS in conversation, including that the crops at the orchards were affected by EBS and that EBS affected profitability, but could not remember Mr Owen-Turner referring to EBS and its effect on packout rates. · In relation to the Ellendale fruit crop, the crop was small comprising some 500 trees, and the Ellendales were held late on the trees in 2004 due to poor prices, picking schedule and canker quarantine and prices (which factors ordinarily occur in the agricultural industry). Neither the fruit nor the trees were affected, and this did not have any significant effect on the 2004-2005 season yields. · In the circumstances there was no conduct which was misleading or deceptive.

Consideration 228 It is not in dispute that the first respondent did not provide Mr Tracy with the farm manager reports for the period September 2004 to February 2005. This was conceded by Mr Strahley during cross-examination (TS 1225-1226). 229 In considering paras 17A(b) and (f), the extent to which these paragraphs should be construed together is initially unclear. 230 If para 17A(f) were to be read in isolation, in my view it is potentially meaningless as a claim allegedly giving rise to a contravention of s 52 in the absence of identification of the reason why the failure of the first respondent to disclose the farm manager reports was misleading or deceptive, or in the absence of identification of specific facts or matters in the reports the non-disclosure of which was misleading or deceptive conduct by the respondents. However in their written submissions the applicants clarified the interaction of paras 17A(b) and (f). In relation to the claim of the respondents that the applicants "do not plead the facts or matters in the farm manager reports upon which they allege were not disclosed (sic)" the applicants submitted that "the Applicants plead the matters not disclosed to them by the non-disclosure of the Farm Management Reports at paragraph 17A(b) FASOC". (Applicants' Written Submissions at p 42). The intention of the applicants was that paras 17A(b) and (f) of the Further Amended Statement of Claim should be read together. If this is the case, para 17A(f) adds nothing to the alleged breach in para 17A(b). 231 I am prepared to give effect to this intention. Accordingly, the tenor of the applicants' claim is that it was the failure of the first respondent to produce the farm manager reports so far as the reports disclosed information referred to in para 17A(b) which constituted misleading or deceptive conduct. 232 In relation to the farm manager reports the respondents submitted that: · the farm manager reports were management tools, the existence of which was disclosed to Mr Tracy in the Ray White Information Memorandum at the meeting of 3 December 2004; · Mr Tracy did not request the reports be provided to him; · accordingly Mr Strahley did not reasonably comprehend that Mr Tracy expected those management reports were to be provided. 233 The Ray White Information Memorandum was, fundamentally, a marketing document prepared by the real estate agent acting for the first respondent in the sale of the relevant properties. The applicants do not dispute that a copy of the Ray White Information Memorandum was provided to Mr Tracy. On p 19 of that document under the heading "Totalpak" there is reference to "sales information and management reporting". It follows that, if there was a system of management reporting, then management reports would be produced within that system. 234 It may be that the first respondent would anticipate that, if it had disclosed in the Ray White Information Memorandum that management reports existed, then Mr Tracy could ask for those management reports if he so wished. However that is not material. If the failure of the first respondent to produce the farm manager reports constituted conduct which was misleading or deceptive within the meaning of s 52, it is not to the point that Mr Tracy could have asked if such reports existed, and then whether he could have copies of them. (cf Fleetman Pty Ltd FCAFC 80 at [17]). The obligation to produce the reports would have been on the first respondent. 235 However as I have identified, the real issue in relation to these claims concerns the disclosure of information described in paras 17A(b)(i)-(iii) of the Further Amended Statement of Claim. Two initial questions arise, namely whether the first respondent was under an obligation to disclose the information in paras 17A(2)(i)-(iii), and whether it did disclose that information.

Did the circumstances give rise to an obligation in the respondents to disclose this information to the applicants? 236 In my view it is clear that, in the circumstances, the first respondent was under an obligation to disclose to the applicants that the Nova and Ellenor fruit crops on the land was significantly affected by the fruit disease EBS and that the Murcott fruit crop on the land was affected by the fruit disease EBS. That these crops were so affected is clear from the evidence of Mr Owen-Turner and Mr Papacek, and not in dispute. 237 EBS is a fungal disease which affects certain varieties of fruit trees, including Nova, Ellenor and Murcott. Trees in coastal areas such as Bundaberg and Tiaro are particularly susceptible to the disease as well as other diseases such as Black Spot. EBS affects the profitability of an orchard because it marks the fruit. As a result the fruit is less valuable in the market place, the packout rate is affected (Owen-Turner affidavit sworn 6 July 2006 at [9(b)]) and in severe cases the disease causes leaf and fruit drop, and drop in yield (TS 699 ll 20-23, ll 40-42)). On such a serious issue, silence could in my view have constituted misleading or deceptive conduct. 238 However in relation to the issue of the Ellendale fruit crop on the land being held on the trees past their pick date, I am not persuaded that the first respondent owed any such obligation. No evidence was given by Mr Tracy as to his expectations in relation to the Ellendales. Nor has it been shown that the fact of late picking of fruit, in the context of operating orchards, was information which required disclosure. Further, even assuming that the first respondent was silent in relation to this issue, the applicants have not shown how such conduct lead the applicants into error within the meaning of s 52 so as to constitute conduct of a misleading or deceptive nature (Taco Bell 42 ALR 177). For example it has not been demonstrated that: · there was any expectation on the part of the applicants that the Ellendales would be picked at any particular time; or · information concerning any delays in picking of the Ellendales would be communicated to the applicants, so that silence on the matter meant that picking had not been delayed; or · even if picking was delayed, the applicants would suffer detriment (Winterton Constructions Pty Ltd 39 FCR 97 at 114); or · information as to the timing of the picking of the Ellendales was material to any decision of the applicants (cf Fraser 55 FCR 452). 239 In relation to the Ellendale fruit, the evidence of Mr Burns (Burns affidavit sworn 11 July 2006 at [79]-[82]) was that: · the crop of Ellendales on the properties was small; · reasons the Ellendales were held late on the trees in 2004 were that prices were poor, the picking schedule had been delayed because of the canker quarantine, and the prices of other varieties that were ready to harvest at that time were better and had a higher harvesting priority; · neither the fruit nor the trees were affected by the fruit remaining on the trees past normal picking time; · the lateness of the picking of the Ellendales would not have had any significant effect on the 2004/2005 season yields. 240 I am not persuaded that a contravention of s 52 has been demonstrated in relation to the Ellendales, or that there is any evidence before me that the applicants relied on the timing of picking of the Ellendales so as to result in any loss arising from absence of communication as to delays in picking.

Did the first respondent disclose the fact that EBS affected the Nova, Ellenor and Murcott fruit crops? 241 The evidence of Mr Tracy was that: · on 7 January 2005 he had a telephone conversation with Mr Owen-Turner, which conversation was general in nature and concerned general industry conditions, and included: o that coastal orchards had issues with pest control and EBS pressure; o no mention of Novas, but he could not remember mention of Murcotts; o no mention that fruit in the orchards was affected by EBS nor that EBS would affect the profitability of the orchards (Tracy statement sworn 17 November 2006 at [76]); o to his recollection, no mention of the effect of EBS on the packout rate (Tracy statement in reply at [65(g)]). · on or about 13 January 2005 he had a telephone conversation with Mr Papacek involving a general discussion about the citrus industry; that Mr Papacek told him that coastal orchards were susceptible to EBS and mentioned Novas and Murcotts; and that he could not recall what else was said in this conversation (Tracy statement sworn 17 November 2006 at [83], Tracy statement in reply at [56(d)]). · in the last week of February 2005 Mr Breed told him that EBS had seriously affected the Nova, Ellenor and Murcott crop and quantified the extent of the loss in sales revenue at $500,000 (Tracy statement sworn17 November 2006 at [110]), and it was Mr Breed only who was the source of his information about the existence of EBS affecting the crop (TS 264 ll 35-37). · he had never heard of EBS prior to January/February 2005, and he had to ask what EBS was (TS 301 ll 12-20). 242 Mr Tracy's evidence as to conversations he had had with Mr Papacek and Mr Owen-Turner is however significantly contradicted by the evidence of those witnesses. 243 Mr Papacek gave evidence that he conducted a horticultural consultancy and insectary business and had advised the first respondent from March 2004. Mr Papacek's expertise is not in dispute. Mr Papacek's evidence was that he had a telephone conversation on or about 13 January 2005 with Mr Tracy, after Mr Tracy had been given Mr Papacek's number by Mr Strahley. Neither of these issues are in dispute. 244 Mr Papacek's evidence was that he and Mr Tracy discussed the following: (a) I said to Mr Tracy that if you were thinking of buying a property over at the coast you ought to be aware that it will be significantly affected by diseases, including EBS; (b) I said to Mr Tracy that the varieties Nova and Murcotts are especially susceptible to EBS; (c) Black Spot, other diseases and wind blemish. I said to Mr Tracy that because the Orchards are on the coast the incidence of all diseases is greater because the rainfall and humidity is higher; and that coastal fruit are more prone to wind blemish because of the stronger winds and higher humidity near the coast. Wind can cause the fruit to rub against other fruit and branches. Wind blemished fruit has a lower price at market; (d) I said to Mr Tracy that the crops at the Orchards were affected by EBS and that EBS affected the profitability of the Orchards; and (e) Mr Tracy's potential purchase of the Orchards. (Papacek affidavit sworn 6 July 2006 at [18]) 245 In closing submissions, Mr Perry SC for the applicants submitted that a flaw in Mr Papacek's evidence was that the diary note he relied upon was not complete, and that, ultimately, the degree of conflict between he and Tracy was minor (TS 1449 ll 6-8). 246 Mr Owen-Turner was a consultant horticulturalist who undertook work for the first respondent from 2001 until the orchards were sold. Like Mr Papacek, Mr Owen-Turner's expertise was not in dispute. As was the case with Mr Papacek, Mr Owen-Turner was telephoned by Mr Tracy in 2004 after Mr Strahley provided Mr Tracy with Mr Owen-Turner's contact details. Mr Owen-Turner's evidence included the following: (b) The varieties of fruit that shouldn't have been grown at the Orchards. I told Mr Tracy that the Murcott, Nova and Ellenor varieties should not be grown because these crops are especially susceptible to Emperor Brown Spot ('EBS') or Alternaria alternata when grown in coastal areas. I also said to Mr Tracy that EBS affects the packout rate (The Orchards are located near the coast, which is ideal for the development of EBS because there is more wind, humidity, mists and fog near the coast. In some years EBS has little affect (sic) but in others it can be significant. These facts are well documented and well known to citrus growers). I also refer to paragraph 76 of the Statement of Peter Tracy and say that I did tell him that the Nova and Murcott varieties were affected by EBS. I also refer to my diary note of the conversation in which I have noted the following... (c) That fruit crops at the Orchards were affected by EBS. I told Mr Tracy that fruit crops at the Orchards were affected by EBS. I said to him that Murcotts and Novas were affected by EBS. (Owen-Turner affidavit sworn 6 July 2006 at [9]) 247 It is not in dispute that Mr Strahley gave Mr Tracy the telephone contact details of both Mr Papacek and Mr Owen-Turner in order to assist Mr Tracy to contact both consultants directly. 248 In my view the evidence of Mr Papacek and Mr Owen-Turner clearly demonstrates that Mr Tracy was informed of the prevalence of EBS in the Bundaberg-Tiaro region, the fact that the orchards were affected by the disease, that fruit crops susceptible to that disease (in particular the Nova and Murcott varieties) were affected, and the fact that the disease affected profitability. 249 The evidence also clearly shows that: (a) Mr Tracy did not understand the information being provided by the consultants; (b) Mr Tracy did not understand the significance of the information, particularly in relation to profitability of the orchards; (c) Mr Tracy did not communicate to the consultants his lack of understanding; and (d) Mr Tracy did not take any steps to remedy this lack of understanding. 250 In comparison, it appears that the first respondent and Mr Strahley had acted in good faith in providing Mr Tracy with an efficient and effective manner of being informed of key issues relevant to the orchards, in particular EBS. 251 I prefer the evidence of Mr Papacek and Mr Owen-Turner to that of Mr Tracy in this regard because: · it is not in dispute that it was well-known to anyone with any knowledge of the citrus industry that coastal orchards in locations such as Bundaberg and Tiaro were susceptible to EBS. · in my view the circumstances of the communication of information concerning EBS to Mr Tracy was another instance of where Mr Tracy was told information, but simply failed to comprehend it or appreciate the importance of it at the time. In my view it is more likely that Mr Papacek and Mr Owen-Turner, experts who both understood the information they were communicating to Mr Tracy and the significance of that information, would have a better recollection of the conversation than Mr Tracy. · There was no reason for either Mr Papacek or Mr Owen-Turner to give evidence which was not truthful in relation to their conversations with Mr Tracy. There is absolutely no evidence of any conspiracy between the consultants and anyone else which would affect the evidence of the consultants in this regard. · My observation of the demeanour of both Mr Papacek and Mr Owen-Turner was that they were both truthful witnesses. · More specifically, in view of the familiarity of both consultants with the orchards and the fact that Mr Tracy had contacted them, with the apparent endorsement of Mr Strahley and the first respondent, I think it unlikely that either consultant would confine his comments to generalities about citrus in coastal areas as claimed by Mr Tracy. It is much more likely that, as claimed by both consultants, they discussed with Mr Tracy issues specifically relevant to the orchards within their own knowledge. This is particularly so given the possibility that Mr Tracy would have need for their services in future following the sale of the orchards. I infer that it would not have been in their personal interests to be anything but candid with Mr Tracy. · In relation to the issue raised by the applicants of inconsistency in Mr Owen-Turner's affidavit as to whether he discussed packout rates with Mr Tracy, while the affidavit reflects poor drafting, I accept Mr Owen-Turner's explanation, namely that para 20 referred to his conversation with Mr Tracy at a time and place after 7 January 2005. 252 Further, and in any event, I consider that Mr Burns had informed Mr Tracy of the susceptibility of the Nova, Ellenor and Murcott fruit crops orchards to EBS in conversation in December 2004. At para 67 of his affidavit Mr Burns deposed: After that meeting, but before Christmas 2004, while I was supervising the thinning at the Bundaberg orchard, I spoke to Mr Tracy again while he was undertaking a site visit. During the conversation I mentioned the disease EBS to Mr Tracy when I explained the importance of thinning. I said to Mr Tracy that the thinning wasn't done well last year. Thinning involves removing clusters of fruit and fruit from heavily fruited areas of the tree so as to : improve fruit size and reduce tree stress; remove any small, disease, distorted or obviously poor grade fruit; and prevent touching fruit which provides a significant site for the growth of EBS. (Burns affidavit sworn 11 July 2006). 253 During cross-examination Mr Tracy conceded that he had had a conversation with Mr Burns about thinning, but could only recall from that conversation that the purpose of thinning was to prevent blemishing of the fruit. Mr Tracy could not recall any reference to EBS by Mr Burns (TS 299-301). In my view however, it is more likely that EBS was discussed by Mr Burns with Mr Tracy as an important reason for thinning. I prefer Mr Burns' evidence as to the conversation to Mr Tracy's, because, as I explained earlier in this judgment, I consider that Mr Tracy's failure to recall the subject of EBS being discussed was due to his failure to understand its significance to the orchards when he was initially interested in the orchards in December 2004. 254 In summary, the first respondent and Mr Strahley were not silent in relation to the issue of EBS at the orchards or more specifically the Nova, Ellenor and Murcott fruit crops. The fact that the information concerning EBS in the orchards was communicated to Mr Tracy through Mr Burns, Mr Papacek and Mr Owen-Turner, rather than providing him with farm manager reports, was in my view irrelevant. It is unfortunate that Mr Tracy did not comprehend the information he was being told about EBS in the orchards - to the extent that notwithstanding his conversations with Mr Burns and the consultants his evidence was that by January/February he still did not understand the concept of EBS or what it actually meant - but that lack of understanding, was not attributable to the respondents.

Submissions of the parties 255 In relation to the claim in para 17A(e) Further Amended Statement of Claim, the applicants submitted that the respondents failed to disclose historical performance records including with respect to yield and packout rates for the Crop years 1998-2004, and that these records in turn disclosed the matters referred to in para 19 of the Further Amended Statement of Claim. Paragraph 19 of the Further Amended Statement of Claim refers to reasons why the representations referred to in paras 11 to 17 were misleading or deceptive. I will deal with para 19 later in this judgment.

Consideration 256 I consider that the first respondent was under an obligation to provide accurate historical data in relation to the performance of the orchards to the applicants. However, as I have indicated earlier in this judgment, I find that the first respondent, through Mr Strahley, fulfilled this obligation. 257 In their written submissions concerning the alleged silence of the respondents in relation to para 17A(e), the applicants particularly referred to the SmartPak and TotalPak records maintained by the respondents, an email with packout rates attached from Mr Breed to Mr Strahley dated 11 May 2004 (exhibit A32) and the Block Summary data (exhibit R30) produced by the respondents in November 2004. I have already found that Mr Tracy was provided with the Block Summary data at his meeting with Mr Strahley and Mr Douglas on 3 December 2004. Further, as I have said earlier in this judgment, I find that Mr Strahley did not provide Mr Tracy with the email marked exhibit A32 or data generated by SmartPak because he did not have confidence in the accuracy of that material. As I have already noted, the Block Summary data contained detailed historical information for the orchards for the years 2002-2004 and a forecast component for 2005-2007, including reference to yield and packout rates. 258 The applicants submitted at some length that the Court should draw an adverse inference from the manner in which the respondents conducted their defence as to the disclosure of historical records, in particular the lack of explanation by the respondents for their failure prior to mid-July 2006 to plead that the Block Summary data had been provided by the respondents to Mr Tracy. The applicants also referred in written submissions to such issues as: · the fact that Mr Strahley did not insist on Mr Tracy executing a confidentiality agreement in relation to the Block Summary data; · the lack of subsequent reference in discussions to the Block Summary data; · the "degree and frequency of objections taken by the respondent's Senior Counsel during this passage of evidence which is completely out of all proportion to other objections taken in the proceedings; and · the "murky and sinister arrangements" between Mr Strahley and Mr Douglas (including the claim that they were old school friends). 259 In my view these submissions are not persuasive: · In relation to the conduct of the respondents' defence, I draw no inference other than, like the applicants in this case, the legal advisers for the respondents sought to amend the pleadings during the course of the proceedings. · In the absence of further evidence, I draw no inferences from the lack of a confidentiality agreement relating to the Block Summary data. · I draw no inferences from the alleged lack of reference in discussions between the parties to the Block Summary data. · I consider the applicants' submissions concerning the conduct of the respondents' Senior Counsel lack merit. · I consider the applicants' submissions concerning the "murky and sinister arrangements" between Mr Strahley and Mr Douglas unconvincing for reasons I explained earlier in this judgment. 260 In relation to the production of historical documents by the respondents: · on 20 December 2004 Mr Strahley provided Mr Tracy with historical yield information as contained in the Yield Summary.xls, containing actual yields for 1998 to 2004 for the Bundaberg and Tiaro Orchards; and · the historical records relating to the properties, including the Packing Shed records, the farm manager reports, and the spray records, were left at the orchards or the Packing Shed on settlement for Mr Tracy. 261 I consider that this conduct is not consistent with that of the respondents deliberately trying to withhold records. 262 In my view the claim of the applicants in para 17A(e) is not substantiated.

Emails: paragraph 17A(g)-(k) 263 The claim of the applicants in paras 17A(g)-(k) relate to the non-disclosure by the respondents of a number of emails: · paragraph (g): an email from Mr Strahley to Mr Breed dated 7 December 2004 sent at 8.01 am on that date, dealing in summary with the following issues: o work by an employee at Tiaro orchard; o work by an employee in relation to the Packing Shed line; o administrative work by Mr Breed; o thinning and chemical stocks; o slashing, weed and tree spraying; o authority for expenditure. · paragraph (h): an email from Mr Strahley to Mr Breed dated 13 January 2005 sent at 2.46 pm on that date, dealing in summary with thinning at Tiaro Orchard and timing of the thinning process; · paragraph (i): an email from Mr Strahley to Mr Breed dated 14 January 2005 sent at 3.02 pm on that date, dealing in summary with spraying and picking of fruit; · paragraph (j): an email from Mr Strahley to Mr Breed dated 19 January 2005 sent at 8.06 am on that date, dealing in summary with chemicals for the orchards and repair of tyres; · paragraph (k): an email from Mr Breed to Mr Strahley dated 3 February 2005 sent at 8.40 am on that date, dealing with the impact of EBS on the orchards and the packout rates, and a conversation between Mr Breed and Mr Papacek. 264 In their written submissions, the applicants submitted that paras (g)-(k) should be interpreted as they appear - in other words, that by pleading that each email was not disclosed, the applicants mean that the entire contents of each email was not disclosed. The applicants do not submit that these paragraphs are to be read with other sub-paragraphs in para 17A. Further: · the applicants submitted that, contrary to the submission of the respondents, the matters allegedly discussed between Mr Tracy and Mr Papacek and Mr Tracy and Mr Owen-Turner do not answer all the matters contained in the relevant emails; and · the applicants set out in tabular form the contents of the emails relied upon by the applicants and the contents of paragraphs in the Further Amended Defence and Cross-Claim relevant to the matter contained in the email. 265 A problem with this approach is that it is not clear from paras 17A(g)-(k) why the failure to disclose the emails to which those paragraphs referred constituted conduct allegedly in breach of s 52, other than a blanket pleading in para 19A that the first and second applicants had a reasonable expectation that the emails would be disclosed in the circumstances referred to in para 17. This is a fundamental issue. As Mason CJ and Gaudron J observed in Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286: The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (In Liq) per Isaacs and Rich JJ. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party's right to this basic requirement of procedural fairness. 266 So, as a general principle, when a party pleads breach of s 52 it necessarily follows that the factual basis upon which the section is invoked must be stated with appropriate clarity in the statement of claim (Fox J in Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 at 348). This is not the case here. The relevance of the failure to disclose the emails listed in paras 17A(g)-(k) to the applicants is not articulated in the Further Amended Statement of Claim, so as to present a case that the respondents can meet. This creates a problem which the applicants' submissions do not overcome. 267 A second fundamental flaw in the claim of the applicants in relation to the emails in each of paras 17A(g)-(k) is that, in the absence of articulation of the factual basis upon which the applicants allege that failure to disclose the relevant email was misleading or deceptive, the applicants do not substantiate their claim that the emails - as distinct from any information in them - be disclosed. The emails identified in paras 17A(g)-(k) were clearly internal emails sent as part of the management of the orchards, in the normal course of business. While it is undesirable for the Court to take an unnecessarily restrictive view of pleadings where the substance of an applicant's case is clear from the statement of claim, in this case the alleged substance of the applicants' case in paras 17A(g)-(k) is not clear from the manner in which it has been pleaded. In my view it would be unjust to the respondents to require them to meet a case which the applicants develop in their written closing submissions at the end of a long trial when the proper approach was clearly for the case to be unambiguously pleaded at the outset. 268 An illustration of the difficulties arising from the failure of the applicants to clarify the basis of their claim in each of these paragraphs through proper pleading can be seen by reference to the applicants' claim in para 17A(g) and the email of 7 December 2004. The substance of this email reads as follows: David Confirming what I need done at Sunstate. • Debbie to only work on an as required basis in the Tiaro orchard. • Steve, to service the Packing Shed line, only non cost repairs and servicing to be carried out. • Steve to work on Tiaro and Bundaberg on repairs when not in the shed. • You are to do any admin, casual wages and invoicing, then down to Tiaro for work there. • I need all R&M external cost to be stopped with only internal repairs carried out by Steve and staff. • I agree to $61,000 worth of thinning in total for both farms. • All chemicals stocks to be run down, with all herbicide and tree chemicals to be used for stores to maintain spray programs. Chemicals can be rotated on consultant's advice. Transfer chemicals between farms if required. • All slashing, weed and tree spraying is to be well maintained. • The contract slashing is to cease, salary and casual staff to take over this role. • You will need to get authority for any expenditure from HO. staff such as Matt, Trevor and Steve are to be informed of the process. Regards Andrew Strahley … 269 The applicants claim in their written submissions that the "Evidence contained in Exhibit" relevant to the matter contained in the email (and para 17A(g)) was "Only internal repairs carried out… Contract slashing is to cease" and the respondents' reply to this was "NIL". 270 However: · Even assuming that the failure to disclose this email could, without substantiation, be conduct misleading or deceptive within the meaning of s 52, the email itself contains a broad spectrum of instructions relevant to the ordinary course of management of the orchards including specific instructions regarding minor employees. To take random examples - are the applicants suggesting that failure of the respondents to disclose an email with the instruction "Debbie to only work on an as required basis in the Tiaro orchard" or "Steve to work on Tiaro and Bundaberg on repairs when not in the shed" was conduct in breach of s 52? · It is clear that, in making this submission after conclusion of the trial, the applicants sought to articulate the factual basis for the claim in para 17A(g) that failure to disclose that email constituted a breach of s 52. However this submission is in the nature of particulars. If this material were to form part of the applicants' claim, it should have been included in the Further Amended Statement of Claim. · In any event, the submission was "Only internal repairs carried out… Contract slashing is to cease" in relation to this email. This does not explain why the claim under para 17A(g) is in any way relevant to an alleged breach of s 52. 271 Similar comments could be made about the email referred to in each of paras 17A(h)-(k). So, in summary: · in relation to the email of 13 January 2005 (para 17A(h)) the applicants submitted that the issue revealed by the email was that "budgetary constraints imposed by the First Respondent had caused the failure to properly treat the fruit crop and that this was and that this was not disclosed to the Applicants" (Applicants' Written Submissions p 42) and "budgetary constraints imposed by the First Respondent had caused the failure to properly treat the fruit crop and this failure to apply pesticides would have been material to the Applicants' decision to purchase given that its disclosure to the Applicant would have suggested possible lower packouts" (Applicants' Written Submissions p 85 No 21. 5. E-mails) Issues relevant to budgetary constraints, failure to properly treat the fruit crop, failure to properly apply pesticides, or consequential effect on packout rates were not pleaded. The applicants had separately pleaded that the fruit crops on the land had been sprayed contrary to good agricultural practice (paras 17A(c) and (d)) however the applicants stated in their written submissions that they were not pressing these claims. No evidence was adduced by the applicants that any delay in the thinning process affected the viability of the orchards so as to influence Mr Tracy's decision to purchase. · In relation to the emails of 14 January 2005 (para 17A(i)) and 19 January 2005 (para 17A(j)) the applicants submitted that the issues revealed by these emails were "that the First Respondent was restricting the repair of farm machinery and that this was not disclosed to the Applicants" (Applicants' Written Submissions p 43) and "the Respondents were restricting the repair of farm machinery which will have adverse effects upon crop volume and quality and this policy if known would have been material to the Applicants' decision to purchase given that its disclosure to the Applicant would have suggested possible adverse effects on crop volume and quality" (Applicants' Written Submissions p 85 No 21. 5. E-mails). These submissions included claims as to alleged restrictions concerning repairs to farm machinery, the impact upon crop volume and quality, and the possible approach of the applicants to those hypothetical circumstances. However these issues were not pleaded by the applicants, and in any event constituted claims (such as an alleged approach of the respondents to repair of machinery contrary to ordinary business practice) which are simply not supported by evidence. · In relation to the email of 3 February 2005 (para 17A(k)) the applicants submitted that the issue revealed by this email was that "the 2005 current crop was affected as to 60% and the particular effect of that on the 2005 proposed packouts. The general disclosures purportedly made by Owen-Turner and Papacek could not have included these elements because they were in early January 2005" (Applicants' Written Submissions p 43). The applicants also submitted that "had (they) been informed that almost 60% of Nova, Murcott and Ellenor crops at both orchards was affected by disease and that this would reduce packouts to 35-40% and also reduce the fresh price received as no Class 1 fruit will be able to be packed with no juice market the effect on quality and volume of fruit would have been disastrous" (Applicants' Written Submissions p 85 No 21. 5. E-mails). The extent to which the 2005 crop was affected by EBS and the impact on the packout rates with specific reference to this email was not pleaded by the applicants, although evidence was given by Mr Tracy during cross-examination as to his views of the impact on the 2005 crop of EBS (for example, TS 292-295). I have already addressed claims by the applicants as to the allegedly misleading or deceptive conduct of the respondents concerning the presence of EBS in the orchards and the impact of the disease on packout rates. I have found that Mr Tracy was informed by both Mr Burns, Mr Papacek and Mr Owen-Turner of the existence of EBS in the orchards in previous years, the susceptibility of Novas, Murcotts and Ellenors to EBS, and that the disease impacted upon the packout rates. Further, the evidence demonstrates that the Novas and Murcotts were not due to be picked for a number of months beyond February 2005, that by the end of February 2005 the EBS had been contained, and that the appropriate strategy was to thin the Novas and Murcotts to remove obvious EBS damaged fruit (Burns affidavit sworn 11 July 2006 at [64]). This suggests that the response of the first respondent (while owner of the orchards) and the employees at the orchards was according to usual horticultural practices in the event of an EBS strike, and that the description of the situation as "disastrous" by the applicants in this context was an exaggeration unsupported by the evidence. 272 In summary, the applicants: · have not substantiated why failure of the respondents to disclose internal emails sent in the normal course of the business of managing the orchards was misleading or deceptive; · have not articulated in their pleadings the factual basis for this claim; · have attempted, improperly, to remedy this failure to articulate by reference to written closing submissions; · in any event, have not adduced adequate evidence to support a number of allegations within these claims. 273 In my view the claims of the applicants in paras 17A(g)-(k) are not substantiated.

FUTURE REPRESENTATIONS: GENERAL OBSERVATIONS 274 The applicants have pleaded that the future representations identified in the Further Amended Statement of Claim breached ss 51A, 52 and 53A of the Act (further amended statement of claim at [20]-[20A]). Before I specifically address the applicants' claims concerning the future representations in the Further Amended Statement of Claim I propose to make a number of preliminary observations and findings. My comments relate to: · the nature of s 51A; · the submissions of the respondents concerning the term "would be" in a number of the applicants' claims concerning future representations; and · the evidence of Mr Malcolm Frick, an expert agronomist called as a witness by the respondents.

1. Section 51A 275 The "future representations" are the subject of paras 12(a) and (b), 13, 14 (b) and (c), 15, 16 and 17 Further Amended Statement of Claim. For the respondents, s 51A is particularly significant because although s 51A does not provide an independent cause of action separate from ss 52 or 53A, and nor does it define a norm of conduct, if the facts demonstrate that the first respondent has made the representations alleged, the effect of s 51A is that the representation shall be taken to be misleading unless the first respondent had reasonable grounds for making the relevant representation. Conversely if the first respondent demonstrates that it had reasonable grounds for making the relevant future representations, it will not only be free from liability under s 51A but also from liability under s 52 of the Act. (Ting v Blanche (1993) 118 ALR 543 at 552, Quinlivan FCAFC 175 at [6].) 276 Whether this means that an alleged representor in the position the first respondent has the onus of proving that it had reasonable grounds for making the representation has historically been an issue of some doubt. Section 51A relevantly provides: (1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. (2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation. 277 It has been suggested that, because the deeming within the meaning of s 51A(2) takes effect unless the corporation adduces some evidence to the contrary, this does not mean that the onus of proof (which otherwise lies with the applicant) is reversed, but merely requires the corporation to go into evidence (ACCC v Universal Sports Challenge Ltd [2002] FCA 1276 at [46]). The weight of authority however is that the person making the representation can only avoid the deeming in s 51A(2) by establishing on the usual balance of probabilities that there were reasonable grounds for making the representation: Lewarne v Momentum Productions Pty Ltd [2007] FCA 1136 at [82], Ting 118 ALR 543 at 552, Bowler v Hilda Pty Ltd (1998) 153 ALR 95 at 108 and 117, Sykes 88 FCR 511 at 513-514, Adelaide Petroleum NL & Ors v Poseidon Limited & Ors (1988) 10 ATPR 40-901 at 49,700, Phoenix Court Pty Ltd (1997) ATPR 46-179(and cf other cases in support of this proposition listed at Miller, 29th ed para 1.51A.37). 278 Accordingly I consider that there is an onus on the representor in an individual case to establish that it had reasonable grounds for making representations as to future conduct. 279 The effect of s 51A was encapsulated neatly by Goldberg J in Phoenix Court Pty Ltd (1997)ATPR 46-179 where his Honour observed: Section 51A does not create an independent cause of action separate from section 52 and other sections in Pt V of the Act but rather casts the burden of proof on the respondent and if that burden is not discharged then a breach of s52 is established by the applicant proving the representation as to the future matter and the fact that it did not come to pass. 280 Clearly whether the representor had "reasonable grounds" to make the relevant representation will depend upon the facts of the case in question. I consider this issue later in the judgment.

2. "Would be" 281 A second general observation with respect to the future representations concerns the applicants' claim that each budgetary forecast as to a future matter "would be" as is recorded in the budget. This expression appears in the Further Amended Statement of Claim in para 13(a)-(c), para 16(a)-(d) and para 17(c) and (d) with respect to budgeted costs and returns; paras 13(a)-(d) and 16 (a)-(d) with respect to projected fruit crops; para 13(d) and 16(d) with respect to packout rates; and para 16(f) with respect to yield. 282 In relation to these representations the respondents submitted, inter alia, that no such representations as alleged were made by the forecasts, and that in relation to the budgetary forecasts they could not be expected to materialise precisely. The respondents refer particularly to comments of Connolly J in Lake Koala Pty Ltd v Walker [1991] 2 Qd R 49 at 59: This complaint is really characteristic of the particulars of alleged inaccuracy generally. What is really being said in relation to each of the heads of complaint is that the plaintiff spent more than was projected….Of course projections of this character, being estimates, cannot be expected to materialise precisely. 283 In relation to this submission I consider that: · Even if it is accepted that the predictions of the respondents were forecasts which could not be expected to materialise precisely, the claim of the applicants in relation to the future representations was not that the budgets had not materialised precisely but, in summary, that the relevant representations of the first respondent were misleading or deceptive and that the first respondent did not have reasonable grounds upon which to make them. · putting to one side for the moment the issues raised by s 51A in relation to future representations, if the forecasts were misleading or deceptive in a non-material sense they could still be misleading or deceptive for the purposes of s 52. The fact that they did not materialise precisely would be an issue going to causation and remedies rather than the central issue of whether the conduct was, as a matter of factual determination, misleading (cf discussion in Miller at [1.52.25]). · the essence of s 51A is that it recognises that representations as to future matters may be misleading, including documents in the nature of budgetary forecasts. 284 Accordingly, I do not find this submission of the respondents helpful in considering the claims of the applicants with respect to these particular future representations.

3. Admissibility and relevance of the expert report of Mr Frick 285 Third, Mr Malcolm Frick, an expert agronomist called by the respondents, gave expert evidence as to forecast yields and packouts. The respondents sought to rely on Mr Frick's evidence, in particular his affidavit of 10 July 2006, to which his expert report was annexed in relation to the reasonableness of forecasts made by the first respondent. 286 Although the applicants did not object to Mr Frick's expertise, they did object to the admissibility of his affidavit and annexures including his expert report. Objections were first raised by the applicants in November 2006, however the issue was addressed by both applicants and respondents in written submissions. I indicated with the parties' consent that I would deal with the objections to Mr Frick's affidavit after hearing his evidence and on the basis of the written submissions. 287 The primary aspect of Mr Frick's evidence-in-chief was the annexures to his affidavit. These annexures are summarised in paras 5 to 8 of Mr Frick's affidavit which read as follows: (5) Annexed to my Affidavit and marked 'MBF-02' is a copy of my 'Sunstate Orchards Pty Ltd - Expert Report' dated 9 July 2006 prepared by me in respect of this matter ('Report') (6) Annexed to my Affidavit and marked 'MBF-03' is a copy of the 'Index to Documents (Crop Expert)' referred to in the Report. I am informed by Paul Hardman, and verily believe, that document no. 4 on the Index to Documents (Crop Expert) is identified as document no 75 in the First and Second Respondent's List of Documents. As stated in my Report, document no. 4 is the document that I relied upon to obtain the yields and packout rates for 2002, 2003 and 2004. (7) Annexed to my Affidavit and marked 'MBF-04' is a copy of the document titled 'The Economics of Growing Citrus in the Central Burnett Region of Queensland' referred to in the Report. (8) Annexed to my Affidavit and marked 'MBF-05' is a copy of the document titled 'Packing Shed Records - "Commodity Packed by Grower" Reports - Key Data'. I relief upon 'MBF-05' in respect of the yield data and packout rates for 2001. 288 The objections of the applicants to Mr Frick's evidence were in summary that: · his expert report was prepared in gross breach of the relevant Practice Direction and should not be admitted; · having regard to a number of key circumstances, including reliance on third party sources, his evidence was irrelevant and should not be admitted; · even if Mr Frick's evidence were admitted it would be of absolutely no assistance to the Court in determining whether the respondents had a reasonable basis for their predictions; · the probative value of Mr Frick's evidence was outweighed by the prejudice to the applicants and the risk that it was misleading or confusing, as provided by s 135 Evidence Act. 289 I now look more specifically at the applicants' objections.

(a) Reliance on documentation not annexed to expert report 290 The applicants submitted that the report of Mr Frick was prepared in breach of the Federal Court of Australia Guidelines for Expert Witnesses in Proceedings in the Federal Court of Australia ("the relevant Practice Direction") as in force at the time the report was produced. This is because cl 2.7 of the relevant Practice Direction provides: There should be included in or attached to the report (i) a statement of the questions or issues that the expert was asked to address; (ii) the factual premises upon which the report proceeds; and (iii) the documents and other materials which the expert has been instructed to consider. 291 As was clear from both the expert report itself and evidence given by Mr Frick during cross-examination (TS 1321-1322), in preparing his expert report Mr Frick relied on documents which were not included in or attached to his report. This included material in the Brief to Crop Expert (indexed in the exhibit MBF-02 to Mr Frick's affidavit), as well as material from unidentified sources. 292 It is my understanding from the nature of the cross-examination of Mr Frick that this particular aspect of the applicants' objections related specifically to the material in the Brief to Crop Expert upon which Mr Frick relied and which was not annexed to his expert report. At the hearing and in their written submissions, the applicants referred in particular to the following matters: (a) there was no evidence that the contents of exhibit MBF-02 were sworn to be true and correct by Mr Frick; (b) there was no evidence that any opinions contained in exhibit MBF-02 were sworn to be his opinions alone and honestly held by him; (c) no declaration had been made by Mr Frick in accordance with para 2.6 of the relevant Practice Direction; (d) Mr Frick did not exhibit a copy of his instructions from McCullough Roberson provided to him as an expert witness. 293 At the hearing Mr Bell QC for the respondents submitted in summary that: · clause 2.7 of the relevant Practice Direction provides that there should be included or attached to the report the factual premises upon which the report proceeds; · rather than annex two volumes of material to Mr Frick's report, his affidavit annexes the Index to Documents (Crop Expert) which lists the material to which Mr Frick had regard other than material physically annexed to the affidavit; · the material listed in the Index to Documents (Crop Expert) were all documents that were otherwise in evidence; and · if necessary Counsel was prepared, through Mr Frick, to tender the actual "Brief to Crop Expert" and material therein, being the material already otherwise in evidence and listed in the Index to Documents (Crop Expert). 294 On the application of Mr Bell QC, and in order to progress the hearing with respect to the evidence of this witness, I permitted the applicants to tender the "Brief to Crop Expert" and material therein, being the material already otherwise in evidence and listed in the Index to Documents (Crop Expert). I now deal with the applicants' objection to Mr Frick's affidavit with respect to the alleged non-compliance with the relevant Practice Direction. I will deal later in this judgment with material from unidentified sources upon which Mr Frick said he relied, and which material was also not annexed to his expert report. 295 While Mr Perry's submission that the expert opinion of Mr Frick did not comply with the relevant Practice Direction was technically correct, in the circumstances before me I make the following observations: a. it is clear from Mr Frick's affidavit, p 1 of his expert report (MBF-02) and the annexure MBF-03 (the Index to Documents (Crop Expert) indexing the material in the Brief to Crop Expert) that, in preparing his expert report, Mr Frick reviewed data in the Brief to Crop Expert volumes. b. Mr Frick's affidavit with the annexures including the expert report had been available to the applicants since 2006. c. Mr Bell QC informed the Court that the data in the Brief to Crop Expert was already in evidence before the Court at the time Mr Frick was sworn as a witness. I accept this information, and in any event note from reviewing the Brief to Crop Expert that the following material, of which copies were included in the Brief to Crop Expert, was already in evidence by the time that Mr Frick was called as a witness: exhibits A32, A5, R30, A16, A12, A13, A17, A19, A21, A37, A39, A43, A45, A52, A30, A58, A64 and A66. d. Although the two volumes of material composing the Brief to Crop Expert were not physically annexed to Mr Frick's expert report as provided by cl 2.7, it is well established that compliance with a practice note is not a criterion of admissibility of evidence: Centurion Roller Shutters Pty Ltd v Automatic Technology (Australia) Pty Ltd [1999] FCA 1118 at [4], Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 2) [2006] FCA 364 at [13]. 296 The factual premises upon which the opinion is based, being the material in the Brief to Crop Expert, were identified, disclosed and available to all parties, and the subject of evidence which is itself admissible (Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313, and see discussion and cases cited in S Odgers Uniform Evidence Law (7th ed) Lawbook Co 2006). While it is preferable that the factual material upon which the expert relies be annexed to the report in compliance with the Federal Court of Australia Guidelines for Expert Witnesses in Proceedings in the Federal Court of Australia, in the circumstances of this case I do not consider Mr Frick's expert report inadmissible nor its probative value diminished because of the physical absence of the two volumes of material composing the Brief to Crop Expert from the affidavit or the expert report itself.

(b) Substantive objections to Mr Frick's expert report 297 The applicants submitted further that even if Mr Frick's affidavit were admitted as evidence, the affidavit and Mr Frick's expert report were irrelevant and of no assistance to the Court in determining whether the respondents had a reasonable basis for their predictions as to future performance of the orchards. The grounds of objection raised by the applicants related specifically to Mr Frick's responses to questions during cross-examination and were as follows: · Mr Frick, in compiling his report, did not speak to Mr Burns or any other Sunstate employee (TS 1327 ll 22-27); · in compiling his report Mr Frick obtained information from "industry contacts" (TS 1327 ll 32-45); · in compiling his report Mr Frick did not visit the orchards because of his work commitments (TS 1331 ll 39-46); · in compiling his report Mr Frick took no steps to assess the accuracy of that information and simply assumed it was accurate (TS 1333 ll 5-18); · in compiling his report Mr Frick used "experienced grower information and information from other consultants" (TS 1335 ll 36-37); · Mr Frick refused to disclose the names of the persons from whom he had obtained information used in the preparation of his report (TS 1336 ll 18-47); · Mr Frick refused to identify the location of the properties from which he obtained data for the purposes of his report (TS 1339 ll 10-42); · Mr Frick failed to recognise the climatic, geographical and soil differences between the inland Central Burnett Region (upon which he based his assessment of reasonable estimates for the two orchards) and the coastal areas where the two orchards were located (TS 1339-1340). 298 Before turning to consider these objections it is helpful to first identify the factual premises of Mr Frick's expert report.

Factual premises of expert report 299 Mr Frick's expert report is slightly in excess of seven pages in length. Mr Frick states on p 2 of his report that two questions were asked of him to provide an expert comment and report, namely: 1. Verify that the forecast yields were attainable or reasonable for the following varieties of citrus (Murcotts, Lemons, Imperials, Novas, Ellenors). 2. Verify that the packout figures provided were achievable based on industry best practice and taking into account past history of the orchard in question. 300 Mr Frick identified the documents and reference sources in his report (p 1) as follows: The relevant data to review was provided in the "Brief to Crop Expert" Documents 1-25. The main reference text used to verify the data provided in the briefs was "The Economics of Growing Citrus in the Central Burnett Region of Queensland". 301 Mr Frick also stated in his report (p 2) in relation to assumptions/validations: To validate the information provided in the reference text, a number of industry consultants and growers were contacted to verify that the yield information in the reference text was still valid as well as to provide up to date information on packout rates. This information is in my notes and is not tendered as reference information. 302 On page 3 of his report, Mr Frick explained as follows : Packout Rate To ascertain the validity of the forecast packout rates, information has been gained directly from industry contacts, including grower and consultant information. The reason for this is there was no published data available to work with and that the expected industry rates vary due to range of factors including: • Canopy management • Pest and disease management • Climatic conditions • Grading standards • Post harvest handling These factors can result in significant variations in crop performance at harvest between producers. … Yield Forecast The yield forecast data has been mostly derived from the industry publication 'The Economics of Growing Citrus : In the Central Burnett Region of Queensland." This is a highly regarded industry publication that was compiled with the direct assistance of many leading citrus producers. To ensure that the figures were applicable to coastal citrus and current management practices, correlation was made using industry contacts, including grower and consultant information. After research, the industry publication was the only source of printed reference for citrus variety information. 303 In this case, it was clear both from Mr Frick's oral evidence and his expert report that the factual bases of his evidence were: · the material in the "Brief to Crop Expert"; · in relation to yield forecasts - the Queensland Department of Primary Industries publication "The Economics of Growing Citrus: In the Central Burnett Region of Queensland"; · in relation to yields for Ellenors and Novas - information collected from industry sources (in the absence of published industry data); · in relation to packout rates - information from industry contacts, including growers and consultants (in the absence of published industry data); · his own knowledge from his twelve years experience in the industry. 304 It is also clear that Mr Frick contacted a number of industry consultants and growers to verify the yield information in the reference text, but that he did not contact Mr Burns, or visit the relevant properties.

Objection: Failure to check accuracy of material provided in Brief to Crop Expert and failure to consult Mr Burns 305 To the extent that Mr Frick relied on the material in the Brief to Crop Expert in giving his evidence, his evidence is relevant and unobjectionable. During cross-examination much was made of the fact that Mr Frick relied upon records provided to him without ascertaining - by inspection, reference to Mr Burns, or otherwise - their accuracy, or whether they were a sufficient basis upon which he might give the opinions contained in his report. However: · I am satisfied by Mr Frick's evidence that in producing his report, he preferred to conduct his own investigations and utilise his own information and experience (TS 1332 ll 2-11) rather than consult with Mr Burns. I am satisfied that Mr Frick's reasons for refraining from consulting Mr Burns in relation to the material in the Brief to Crop Expert were reasonable, namely that Mr Frick did not wish to be influenced by Mr Burns, whose position had been to maximise yield, or have his thought processes influenced by anyone involved in this case (TS 1330 ll 6-7, 1332 ll 19-21). I note that in any event the material with which Mr Frick was briefed included the farm managers' reports, and that he had reference to those reports prepared by Mr Burns (TS 1330 ll 20-21) as well as his own knowledge of the orchards from his work for previous owners of the relevant properties (TS 1335 l 20). · I am not persuaded that Mr Frick's approach in basing his expert report on material provided by the respondents (which, as I have noted, is in evidence) impacted adversely on the probative value of his report or otherwise renders his opinion irrelevant. Indeed as was pointed out by Sperling J in Elliot v Ivey [1998] NSWSC 116: The capacity of a professional person to give an opinion based on an exclusionary set of assumptions is implicit in this process. The implication is reasonable because professional men and women are accustomed to forming opinions on assumed facts in the course of their ordinary professional work. It is part of their stock in trade, developed by training and by experience in the practice of their profession. Thus it is that an expert witness has a much more limited role than that of a solicitor acting for a client. In particular, expert witnesses are not bound to use all information they might previously have obtained. On the contrary, expert witnesses are bound to confine their attention to specified factual assumptions which are made known to the court. The opinion is then only as good as the assumptions are established by evidence to be correct. (cf comments of Spiegelman CJ in ASIC v Rich (2005) 218 ALR 764 at [171] and discussion in I Freckelton & H Selby Expert Evidence (3rd ed) Lawbook Co 2005 p 629) 306 Accordingly I do not consider Mr Frick's failure to consult with Mr Burns either as to the accuracy of the material with which he had been briefed or more broadly, or his failure to take other steps to check the accuracy of the material, make his evidence inadmissible. If anything, his approach is an issue which goes to weight.

Objection: Failure to visit relevant properties 307 Mr Frick gave evidence that he did not inspect the properties at the time of preparation of his report, and had not been on the properties for a number of years. His evidence in summary was that he relied on the information given to him (TS 1333 ll 10-11) rather than attend the properties and consult Mr Burns. 308 The respondents have submitted that the inspection of the orchards in July 2006 was irrelevant to Mr Frick expressing his opinion because: · Mr Frick had knowledge of the orchards from the previous owners of the relevant properties; and · The orchards had not been maintained by the applicants since June 2005, and had deteriorated to such an extent that an inspection of them would have been irrelevant to the assessment being undertaken. 309 The failure of an expert assessing the reasonableness of predictions as to primary production to visit the properties would, as a general proposition, be an issue relevant to the value of the resultant expert report, although it would not necessarily render the opinion irrelevant and inadmissible (cf Mount Lawley Pty Ltd v Western Australian Planning Commission [2006] WASC 82). In this case I accept the submission of the respondents as to the futility of attendance at the orchards by Mr Frick in circumstances where the orchards had not been maintained for a year. Evidence was given by Mr Harrison, who inspected the property in June 2006, that in June 2006. The health of the trees was obviously very poor. The rows were overgrown, the trees were - still have fruit on from the year before - from the season before. The watering regime had not been maintained. There was just a slow - well, a - an obvious lack of management throughout the orchard. (TS 1275 ll 36-40) 310 And later during the hearing: Well, the condition of the trees, as I assumed in the - February '05, compared to what I saw in June '06, June '06 the trees were not able to be salvaged, and it was treated as agricultural land. (TS 1276 ll 13-16) 311 This evidence was not challenged by the applicants. 312 Such change in circumstances at the properties as lack of maintenance over the space of a year potentially means that an inspection of the properties in June 2006, when Mr Frick prepared his report, would have been of limited assistance to him in preparing his report (cf observations of Beach J in Australian Retail Enterprises Pty Ltd v ND Cowan Nominees Pty Ltd [2000] VSC 538 at [27]-[28]). I consider that the failure of Mr Frick to visit the properties at the time of the preparation of his report does not make his evidence inadmissible, but if anything goes only to weight.

Objection: Primary reference material DPI publication 313 Mr Frick's evidence was that his primary source of data with respect to yields and yield forecasts was the DPI publication "The Economics of Growing Citrus in The Central Burnett Region of Queensland" by J R Peter Hardman, published in 1994 ("the DPI publication"). The applicants did not in their submissions fault the authority of this publication as a primary source, however they claim that: a. Mr Frick failed in his report to identify the differences or the potential differences between the Central Burnett and the South Burnett regions; and b. Notwithstanding Mr Frick's reliance on the DPI publication, the reliability of his expert opinion was fatally damaged by his failure to identify persons whom he consulted to validate the application of the data in the DPI publication to the South Burnett region. 314 I shall deal with the second issue separately below. 315 In relation to the applicants' claim concerning the differences or the potential differences between the Central Burnett and the South Burnett regions, and Mr Frick's recognition of these differences, relevant issues are as follows: · As is made clear by its title, the DPI publication "The Economics of Growing Citrus in The Central Burnett Region of Queensland" clearly deals with the Central Burnett region of Queensland, as distinct from the South Burnett region of Queensland where the relevant properties are located. These regions are distinct but contiguous (this is recognised in, for example, the Australian Spatial Data Directory http://asdd.ga.gov.au). · During cross-examination, Mr Frick accepted that the South Burnett region is a coastal orchard region, whereas the Central Burnett region is not (TS 1338 ll 5-8). · In his expert report, Mr Frick commented on the discrepancies between the Central Burnett region to which the DPI publication referred and the South Burnett region as follows: To ensure that the figures [as to yield] were applicable to coastal citrus and current management practices, correlation was made using industry contacts, including grower and consultant information. (Frick expert report p 3) · In relation to any differences between the Central Burnett and the South Burnett regions however, Mr Frick gave evidence that: o any differences would not impact on yields, because yield tends to be very specific by variety. So, for example a Murcott variety should have the same yield potential so long as it is an acceptable growing region (TS 1338 ll 14-16) o any differences would impact on packout rates, which tend to be more related to climatic factors (TS 1338 ll 16-19). 316 In my view, contrary to the submissions of the applicants, Mr Frick recognised the differences in conditions between the Central Burnett and South Burnett regions. This was clearly noted in his report, and evidenced by the fact that he sought validation of the data in the DPI publication by reference to other sources. 317 However in any event the oral evidence of Mr Frick with respect to yield in my view satisfactorily addresses any issue arising from possible discrepancies between the two regions. Mr Frick's expert report clearly states that he relied on the DPI publication only in relation to yields, not packout rates. His evidence that any discrepancy between the two regions would not impact on yields was not challenged, nor otherwise was the authority of the information as to yields in the DPI publication disputed. 318 In my view Mr Frick did recognise differences between the two regions in his report. Whether he did so sufficiently thoroughly is not relevant to admissibility because his evidence was that yield is determined by variety of tree, not growth area. 319 I now turn to the key objection of the applicants with respect to Mr Frick's expert report, namely his refusal to identify third parties or properties consulted by him to validate the DPI data and its application to the relevant properties.

Objection: Failure to identify third parties consulted or location of comparable properties used as source of opinion 320 Mr Frick said in his expert report and gave evidence at the hearing that he obtained information in preparation of the expert report from growers in the relevant area as well as industry contact and other consultants. This was so in relation to: · validation of yield information in the DPI publication (Frick expert report p 2, TS 1326 ll 34-45); and · ascertainment of the validity of the forecast packout rates (Frick expert report p 3). 321 The reasons given for this approach were that: · in relation to validation of the yield data - the DPI publication was published in 1994 and specifically concerned the Central Burnett region as distinct from the South Burnett region where the relevant properties were located; and · in relation to providing an opinion as to packout rates - Mr Frick stated in his expert report that information had been gained directly from industry contacts because there was no published data available to work with. (Frick expert report p 3). 322 Mr Frick did not identify the persons whom he consulted to validate the yield data or ascertain the packout rate information, although he did say during cross-examination that he had contacted four separate people: · one of the persons he contacted had a property half way between Bundaberg and Tiaro; · one of the persons was a Central Burnett grower; · the other people he contacted were citrus agricultural consultants. 323 In his expert report he stated: This information is in my notes and is not tendered as reference information. (Frick expert report p 2) 324 At the hearing, Mr Frick explained the absence of identification of persons he had contacted: That information is not in there and it was made very clear to me by the people that I contacted that if I was to tender that information that they would not give it to me, because, in a lot of instances, growers actually gave me their actual farm packout information. And that is private information, which most growers do not release, and I was - with the relationship I have, they were comfortable to actually give it to me and - knowing that it wasn't going to go any further. (TS 1335 ll 42-48) 325 No application was made to the Court to have Mr Frick's source data placed before either the Court or the applicants in a confidential manner. 326 It follows that evidence in Mr Frick's expert report is based on hearsay to the extent to which his opinion relies on facts supplied by unknown third parties. 327 Unfortunately the submissions of the parties as to the admissibility of Mr Frick's evidence in light of his reliance on information provided by unidentified third parties were of limited assistance.

Hearsay and expert opinions 328 The general rule that hearsay evidence is not admissible, as recognised by s 59 Evidence Act, is relaxed in relation to expert opinions. Traditionally if expert witnesses relied on the existence or non-existence of some fact which was basic to the question on which they were asked their opinion, that fact needed to be proved by admissible evidence (JD Heydon Cross on Evidence (subscription service vol 1) Butterworths para 33825). However this so-called "basis" rule was extended at common law to allow knowledge of the expert derived from general experience to legitimately contribute to the opinion arrived at in the expert report. This knowledge derived from general experience could at common law be contrasted with specific information sought by an expert from third parties for comparative purposes as a basis for his or her opinion - such information would likely be hearsay unless it were disclosed and admitted, and the resultant opinion therefore inadmissible (English Exporters (London) Ltd v Eldonwall Ltd (1973) 1 Ch 415 at 421, Arnotts Ltd 24 FCR 313 at 350-351 and ASIC v Rich 218 ALR 764 at 800). 329 The position at common law may be compared with the position under the Evidence Act. Section 79 Evidence Act provides: If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge. (emphasis added) 330 It is clear from cases decided under the Evidence Act that the "basis" rule does not feature in s 79. Strictly speaking, it is not necessary for an expert opinion to be admissible for the factual basis of the opinion to be itself proven by admissible evidence (Neowarra v Western Australia (2003) 134 FCR 208 at [22] and [37], Quick v Stoland Pty Ltd (1998) 87 FCR 371 at 373-374, Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157 at [10], Bodney v Bennell [2008] FCAFC 63 at [90]). Instead, provided the expert evidence: · is opinion evidence which satisfies s 79; and · is relevant within the meaning of s 55(1). as a general rule it is admissible under s 56(1), and the general discretion of the Court to refuse to admit evidence under s 135 is sufficient to deal with problems that might arise in respect of the opinion the basis of which is not disclosed (Quick 87 FCR 371 per Branson J at 617, Emmett J agreeing; Bodney [2008] FCAFC 63 at [91]). 331 Branson J in Quick v Stoland explained in detail the legislative rationale for this position, and Lindgren J in Alphapharm Pty Ltd v H Lundbeck A/S [2008] FCA 559 summarised in detail the historical background including the Australian Law Reform Commission's Interim Report on Evidence (ALRC No 26, 1985). It is unnecessary to repeat the reasoning of their Honours here.

Consideration 332 In relation to Mr Frick's expert evidence, to the extent that he relies on information provided by unidentified third parties, I make the following observations. 333 First, particularly in relation to packout rates but also to a significant degree in relation to yield information, it is clear that there was reliance by Mr Frick in forming his opinion on his research with growers and industry contacts. 334 Second, under cross-examination Mr Frick provided limited information as to the identity of the third parties from whom he obtained information, but not so as to make them identifiable. I note that this is not a situation where there is no discernible basis for the opinion - Mr Frick has explained that, because of confidentiality restrictions, he is not prepared to reveal his sources. He has informed the Court that his sources are growers and industry consultants. The question for the Court, of course, is whether the absence of identification by Mr Frick of his sources has a result which is tantamount to absence of a discernible basis for his opinion. 335 Third, where Mr Frick relied on information provided by unidentified third parties, this is not a situation where he is drawing his opinion from his own experience, in the sense that he is personally aware of the information from (for example) his own direct engagement. 336 Finally, in relation to packout rates and validation of the data in the DPI publication, this is not a situation where Mr Frick is relying on data in, for example, peer-reviewed journal articles and texts (cf discussion in Alphapharm [2008] FCA 559 at [779]). 337 In my view expert evidence of Mr Frick as to yields and packout rates is relevant in this case in the sense defined in s 55(1). It is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding. It is prima facie admissible. The key question is whether the Court should exercise its discretion under s 135 to exclude the use of Mr Frick's expert report in light of the circumstances I have already outlined, because its probative value is substantially outweighed by the danger that it might: (a) be unfairly prejudicial to a party; or (b) be misleading or confusing; or (c) cause or result in undue waste of time. 338 If the Court were to admit Mr Frick's expert report, the next issue is the weight to be ascribed to it because of the absence of identification of sources on which Mr Frick based his opinion (cf Branson J in Quick 87 FCR 371 at 621, Sydneywide Distributors Pty Ltd [2002] FCAFC 157 at [16] and [87]). 339 In my view the probative value of Mr Frick's expert opinion is substantially outweighed by the danger that it might be unfairly prejudicial to the applicants or be misleading or confusing. I consider it should be excluded in exercise of the Court's discretion under s 135 Evidence Act. 340 I take this view for the following reasons. 341 First, although Mr Frick's expertise and credibility are not in dispute, in this case the applicants take issue with the factual premises of the report. While the applicants do not submit that his opinion is based on fabricated data, or that he did not in fact consult with third parties as he claimed, the very real issue associated with Mr Frick's expert opinion in this case, and that to which the applicants object, is that the applicants were not in a position to test the unidentified source material upon which Mr Frick's opinion was based, by cross-examination or otherwise. This is a serious matter which in my view causes prejudice to the applicants. 342 Second, it is clear that, although the opinion as to packouts is substantially premised on information sourced from the relevant properties in the Brief to Crop Expert, it is also apparently substantially premised on data which Mr Frick sourced from unknown third parties, in relation to unidentified properties. This data is incapable of being tested in court. 343 Third, in relation to yields, although Mr Frick stated in his expert report that the main reference text used to verify the data provided in the Brief to Crop Expert was the DPI publication: · Overall Mr Frick's evidence indicates that he relied on the DPI publication only to a limited extent in his expert opinion. · The DPI publication was clearly used as a basis for Mr Frick's expert opinion as to yields in respect of Murcotts, lemons, and Imperials, however the DPI publication contains no information as to yields in respect of Novas. Mr Frick in his report acknowledges this limitation. In his report he states that there were no published yield data as to Ellenors (although Ellenors are apparently similar to Ellendales, in respect of which there is information in the DPI publication) or Novas, and that "the relevant information has been collected from industry sources" (Frick expert report p 6 in relation to Ellenors, cf p 7 in relation to Novas). · Even in relation to yields from Murcotts, lemons and Imperials, Mr Frick's opinion is to an unknown extent based on validating data he has collected from unidentified industry sources, which cannot be tested in court. 344 Fourth, the extent to which Mr Frick in his expert report relied upon his own specialist knowledge as distinct from information from unidentified sources is unclear from the expert report. So, for example, on p 5 of his report in relation to lemons Mr Frick states: The forecast packout rate was 80.5%. The considered industry potential is more likely between 65 and 75%, however both orchards have achieved packout rates higher than industry standard, which would suggest that in some seasons the 80.5% figure is achievable. 345 This "considered industry potential" to which Mr Frick refers could be based either on his own specialist knowledge, or more likely in this context, on information provided by unidentified industry sources. Even where observations in Mr Frick's expert report appear to be derived from his own knowledge (for example, in relation to packout rates his observations as to factors which can result in significant variations in crop performance at harvest (Frick expert report p 3) and his general comments concerning climatic conditions affecting packout rates as between coastal citrus and Central Burnett citrus (Frick expert report p 3)) it is not possible to be sure of the source of the opinion. In my view the manner in which Mr Frick's opinion as to packout rates was expressed in his report does not answer the question posed by Gleeson CJ in HG v The Queen (1999) 197 CLR 414 at 427, namely whether the opinion was wholly or substantially based on specialised knowledge based on training, study or experience. 346 Fifth, the respondents in their written submissions relied upon comments of Spiegelman CJ in the New South Wales Court of Appeal in ASIC v Rich at [171], which are as follows: An expert frequently draws on an entire body of experience which is not articulated and, is indeed so fundamental to his or her professionalism, that it is not able to be articulated… There will be occasions in which matters of this character are proper to be explored for the purposes of determining the weight to be given to the opinion. The mere fact that there must have been use of some extraneous material, even of the extensive character identified by his Honour, does not of itself necessarily lead to a conclusion that the evidence is of low probative value. In many cases the opinion will plainly be capable of being supported by the underlying facts proven or assumed. If so, the fact that a broader range of information may originally have been availed of would not necessarily detract to any significant degree from the probative value of the evidence given. Any such conclusion must depend on the particular circumstances of the matter under consideration. 347 However the information Mr Frick obtained from the four industry sources he did not identify does not, in my view, fall within the definition of his "entire body of experience which is not articulated and, is indeed so fundamental to his professionalism, that it is not able to be articulated". The information from these sources was not, for example, information he had acquired from his practice which contributed to his specialist knowledge. This was information he specifically sought with a view to being in a position to give an expert opinion on the yield and packout forecasts in question. Further, not only is the resultant information from sources known only to Mr Frick, but the actual specific information (for example, data referable to packout rates on specific properties) is known only to Mr Frick and is not capable of being tested. In English Exporters (London) Ltd v Eldonwall Ltd (1973) 1 Ch 415 at 421 Megarry J said as follows: It is one thing to say "From my general experience of recent transactions comparable with this one, I think the proper rent should be Łx": it is another thing to say "Because I have been told by someone else that the premises next door have an area of x square feet and were recently let on such-and-such terms of Ły a year, I say the rent of these premises should be Łz a year". 348 In my view, although these comments represent a common law position as to admissibility of expert opinion evidence as distinct from the position under the Evidence Act, they are relevant to the consideration by the Court under the Evidence Act as to the probative value of the evidence before it (cf Arnotts Ltd 24 FCR 313 at 350). 349 Sixth, it is unfortunate that no other expert evidence in relation to the issue of yield and packout forecasts was produced to the Court to contradict or otherwise answer the opinion of Mr Frick. However this does not automatically mean that the Court is obliged to accept Mr Frick's expert opinion (cf Hardie J in The Minister v Ryan (1963) 9 LGRA 112 at 114). The fact that Mr Frick stated in his oral evidence that he would not have been able to obtain the information from his industry sources upon which he appeared to rely for his opinion, without maintaining confidentiality, does not diminish the prejudice to the applicants in these circumstances. 350 Seventh, as I observed earlier in this judgment this is not a situation where the expert has sought to rely upon reputable articles, publications and material produced by others in the area in which they have expertise, and which is hearsay, as a basis for the expert opinion (cf for example Bodney [2008] FCAFC 63 at [92], Alphapharm [2008] FCA 63 at [762]). 351 Finally, while I do not fault Mr Frick's motives in seeking to verify that the packout figures provided to him were achievable and to validate the yield information before him, and while I understand his reasons for not wishing to disclose his industry sources, this is not a situation where, for example, he has himself produced a report on the basis of undisclosed data which has been published in a reputable journal and subject to peer review and independent criticism (cf discussion in Alphapharm [2008] FCA 63 at [776]-[779]). Mr Frick's expertise may have qualified him to know which (unidentified) growers and industry consultants to contact, and to ask for relevant information upon which he could base his opinion, however it is not reasonable that the applicants in the context of these proceedings should be expected to accept such a process without question, where sources were not identified. 352 Overall, I consider that there is such a blurring in Mr Frick's expert report of unidentified facts from unidentified sources, material from admitted sources, and his own specialist knowledge that its probative value is exceeded by the prejudice to the applicants and the risk that it is misleading or confusing. I am unable to extricate from the report his opinion, as distinct from unidentified hearsay evidence upon which his opinion may be based. 353 For the reasons I have given I exclude Mr Frick's expert report from evidence pursuant to s 135 Evidence Act. 354 I note that even if I had considered that the probative value of Mr Frick's expert report was not outweighed by the prejudice to the applicants within the meaning of s 135, I would have ruled that it be given no weight. The weight to be accorded to an expert opinion depends to a significant degree upon the factual basis for such an opinion (cf for example Ramsay v Watson [1961] 108 CLR 642 at 649, Branson J in Quick 87 FCR 371 at 621, Notaras v Hugh [2003] NSWSC 167 at [20]). I have already discussed in detail the difficulties associated with the lack of identification of sources, and what appears to be the intertwining of information from those sources with the specialised knowledge of Mr Frick in producing his report. Given the facts that: · a significant factual basis of Mr Frick's opinions was unidentified persons contacted specifically for the purpose of obtaining information upon which to base his opinions, which sources cannot be tested in any way; and · importantly, the extent to which Mr Frick's opinions were based on these sources compared with his own specialised knowledge (or, in relation to yield, the DPI publication) was unclear from his report the inevitable result in my view was that the report could be accorded no weight even if admitted. 355 Having made this finding however, in light of the fact that Mr Frick's expertise is not challenged, my findings in relation to his expert report do not extend to his oral evidence at the hearing to the extent to which that evidence was based on his specialised knowledge and experience. 356 I now turn to the claims concerning the future representations in more detail.

The claim 357 In para 12 of the Further Amended Statement of Claim the applicants claimed as follows: On 3 December 2004 the First Respondent represented to the First and Second Applicants that:- a) the lemon crop on the land was due to be picked in early January 2005 b) the proceeds of the sale of the lemon crop on the land after deduction of picking and processing costs would be $1,500,000.00. 358 Further in para 19(c) of the Further Amended Statement of Claim the applicants claimed: the First Respondent had no reasonable ground and knew that it had no reasonable ground to make its representation that the proceeds of the sale of the lemon crop after deduction of picking and processing costs would be $1,500,000.00 in 2005 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a), b) and d) and because it knew of the matters referred to in paragraphs 17A (a), (c), (d) and (e). 359 This representation was referred to as the "lemon dream" representation during the trial by Counsel and Mr Tracy, although Mr Tracy also referred to it as the "lemon lie". 360 (I have already considered claims of the applicants in para 17A to which there is reference in para 19(c). As a preliminary issue I also note that the applicants have not pursued their claims in paras 17A(c) and (d). I infer from the abandonment of those claims that the applicants are similarly no longer claiming reliance on those paragraphs in relation to other claims in the Further Amended Statement of Claim. For completeness, I make the observation that if the applicants were continuing to rely on paras 17A(c) and (d) in relation to the facts claimed therein for the purposes of para 19(c), I consider that those facts have not been substantiated in these proceedings. Further, I do not consider that the applicants have substantiated the "true position" as referred to in para 19(c) Further Amended Statement of Claim for reasons I explain later in this judgment.) 361 The respondents in the Defence denied the applicants' claims on the basis that: · In relation to para 12(a), no such representation was made and in any event the allegation was embarrassing and irrelevant as there was no allegation that the statement or representation was false or misleading or deceptive or likely to mislead or deceive; and · In relation to para 12(b), no such representations were made. The respondents also relied on the matters referred to in para 10 of the Defence, namely that at the relevant meeting Mr Strahley told Mr Tracy. (1) Picking of the lemon crop could be started in January 2005. (2) February is the bigger volume month for lemons. (3) The earlier the lemon crop is picked the higher the obtainable prices and a price of $70 per carton of 1st grade lemons may be achievable for the earlier picked lemons. (4) If the lemons are selectively picked as they ripen to be available to market before other growers place their fruit on the market there is a higher cost by reason of the selective picking of the lemons. (5) The First Respondent only produces a small percentage of 1st grade lemons and that the average price per carton of the lemons produced from the trees during the years 2001 to 2004 varied from $23.02 to $30 to $18.

Submissions of the parties 362 In summary, the applicants submitted as follows: · The respondents' denial of a representation at the meeting of 3 December 2005 between Mr Strahley and Mr Tracy that the net proceeds of the lemon crop for 2005 would be $1.5 million does not explain the references to the lemon crop at $1.5 million in subsequent emails from Mr Tracy to Mr Strahley (an example of which is an email from Mr Tracy to Mr Douglas, forwarded to Mr Strahley by Mr Douglas on 6 December 2004, exhibit A106) or the request for a parent company guarantee for the proceeds of the lemon crop to $1.5 million. The most likely explanation is that Mr Strahley made such a representation to Mr Tracy. · Although the respondents assert that the figure of $1.5 million was determined by Mr Tracy, the notes written by Mr Tracy after the meeting of 3 December 2004 were more consistent with the figure being mentioned by Mr Strahley. It is very unlikely that Mr Tracy, a man with no experience in citrus, would make such a bold assertion shortly after his first meeting with Mr Strahley. · The absence of complaint by Mr Tracy on being told that the net proceeds were $1.5 million was consistent with Mr Tracy being perfectly happy with the prediction. · Although Mr Tracy was conservative in his expectations and expected to receive 50% of the $1.5 million, this does not mean that he did not rely on the $1.5 million lemon dream representation. · Although the respondents submitted that the 2005 Valuation meant that Mr Tracy did not rely on the lemon crop representation, the 2005 valuation was infected with the false crop production figures provided to Mr Neubecker by Mr Breed and could be the subject of reliance by the respondents in equity to negate reliance by Mr Tracy. However the more fundamental point is that the 2005 valuation figure of $407,610 was after deduction of a profit and risk factor of 25%. 363 The respondents submitted in summary as follows : · In relation to the alleged representation that the lemon crop was due to be picked in early January 2005, Mr Strahley never said this and this allegation should not be accepted. · In relation to the alleged representation that the net proceeds of the lemon crop for 2005 would be $1.5 million, no such representation was made by Mr Strahley to Mr Tracy at the meeting of 3 December 2004; and in any event information provided to Mr Tracy after 3 December 2004 qualified such alleged representations.

Consideration: "the lemon crop on the land was due to be picked in early January 2005" (paragraph 12(a)) 364 The claim that "the lemon crop on the land was due to be picked in early January 2005" implies a claim that crop was to be picked in its entirety in early January 2005, and not merely that some of the lemon crop was due to be picked early that month. This is clear from the conduct of this case: the respondents' contend (and the applicants dispute) that Mr Strahley had told Mr Tracy that lemon picking could be commenced in January but that a bigger volume month was February, and that picking continued through to April. 365 Mr Tracy's evidence as to the timing of the picking of the lemon crop was based on his recollection. He did not keep notes of the meeting of 3 December 2004 where he alleges Mr Strahley made the relevant statement (Tracy statement sworn 17 November 2006 at [9]). 366 Mr Strahley's evidence (Strahley affidavit sworn 12 July 2006 paras 69(q) and (r)) was that, inter alia: · he did not tell Mr Tracy that the lemon crop was due to be picked in early January 2005; · he did say to Mr Tracy that the picking of the lemon crop could be started in January 2005, but that February was the bigger volume month; · he told Mr Tracy that the earlier the lemon crop was picked, the higher the price for the lemons, and that it was possible to obtain up to $70 per carton for grade 1 lemons. 367 In my view no representation was made by the either the first respondent or Mr Strahley that the lemon crop was due to be picked in its entirety in or by early January 2005. I accept Mr Strahley's version of the discussion between Mr Strahley and Mr Tracy on 3 December 2004 for the following reasons. 368 First, documentation of the first respondent including the Ray White Information Memorandum and budgetary documentation record that picking of lemons can occur over a number of months commencing in January through to April of each year. It is not in dispute that Mr Tracy was provided with the Ray White Information Memorandum. Further, Mr Tracy's evidence was that he noted the citrus calendar in that document (Tracy statement sworn 17 November 2006 para 30). The documentation before Mr Tracy therefore indicated that the lemons would be picked between January and April, not only in January. In view of these facts I consider it unlikely that Mr Strahley would have told Mr Tracy that the lemon crop was "due to be picked in early January". 369 Second, Mr Tracy conceded on a number of occasions both during cross-examination and re-examination that he was told by Mr Strahley that the picking of the lemon crop "started" in January and continued through February, March and April (for example, TS 413 ll 23-26, 491 ll 45-46, 492 ll 6-8). Indeed Mr Tracy conceded during re-examination that budgets presented to him by Mr Strahley on 10 December 2004 showed lemons being picked particularly through the month of February (TS 492 ll 6-8). 370 Third, Mr Tracy said during cross-examination: I remember there was talk about $70. I remember there was talk about $30. There was something about picking in January. (TS 413 ll 33-34) 371 In my view this indicates that Mr Tracy's recollection of Mr Strahley's statements, upon which this claim was based, was flawed. Mr Tracy recollected that Mr Strahley had said "something about picking in January". The likely explanation of this recollection is that it is consistent with Mr Strahley's version of events, namely that picking of lemons could begin in January 2005, and that lemons picked early could, if grade 1 lemons, achieve prices of $70 per carton. 372 Finally I note that Mr Tracy had no experience, and very little understanding, of the citrus industry in December 2004 at the time of this conversation with Mr Strahley. The evidence demonstrates in this context that he seized on one fact among many which were given to him, namely that lemons were "picked in January". That he was told that lemons were also picked in February, March and April did not appear to have made an impression on him in relation to formulation of this claim (although curiously this recollection was not consistent with a number of his answers during the hearing, which I noted earlier). However the fact that Mr Tracy's memory was selective in this respect does not entitle him to claim misrepresentation by the first and second respondents in relation to this claim. The applicants do not substantiate this claim.

Consideration: "the proceeds of the sale of the lemon crop on the land after deduction of picking and processing costs would be $1.5 million"(paragraph 12(b)) 373 Mr Tracy's evidence was that Mr Strahley had said "that the lemons would produce 1.5M dollars in revenue after production costs and that they were set to be picked in early January 2005." (Tracy statement sworn 17 November 2006 at [8]). Mr Tracy did not keep notes of the meeting at which Mr Strahley allegedly made this statement. 374 This claim was the subject of detailed cross-examination and re-examination of Mr Tracy during the hearing where Mr Tracy said, inter alia: · he had told Mr Breed that he expected to receive $752,000 income from the harvest of the lemons in January and February 2005, having revised his figures from $1.5 million for the lemons, which amount he had anticipated to receive "much earlier" (TS 264-265); · he denied that the basis of his belief that the proceeds would be $1.5 million was that he believed that the lemons were receiving $70 per carton, because he did not know how many cartons of lemons there would be (TS 401 ll 36-40, 412 ll 36-44); · the parent company of the first respondent were however not prepared to give a guarantee that the lemon crop would realise $1.5 million (TS 415 ll 34-37); · eventually the sum achievable from the harvest of the lemon crop was between $800,000 and $850,000 (TS 496 ll 42-46, 498 ll 18-21). 375 Mr Strahley denied that he had made this representation to Mr Tracy (Strahley affidavit sworn 12 July 2006 at [69(m)]). His evidence during the hearing was that $1.5 million was not a fair representation of his forecast of the lemon crop for 2005 (TS 1211 ll 3-5). 376 In my view, the submission of the applicants that Mr Tracy must have received information as to the value of the lemon crop from Mr Strahley is superficially persuasive in light of Mr Tracy's lack of understanding of the citrus industry. However following consideration of this claim, and notwithstanding this submission of the applicants, I do not consider that the first respondent, through Mr Strahley, at the meeting of 3 December 2004 made a representation that $1.5 million net realisable value was achievable for the lemons. I form this view for the following reasons. 377 First, on the basis of the evidence before the court I consider it possible that Mr Strahley mentioned the figure of $1.5 million during the meeting in relation to the lemon crop. This potentially ties in with the gross income from the lemons and limes to which Mr Bailey referred in his valuation report of 11 January 2005. However even if Mr Strahley had mentioned the amount of $1.5 million referable to the lemon crop, on the facts I do not consider it at all likely that Mr Strahley made the representation alleged by the applicants, namely that this represented the net realisable value of the lemon crop. No documentation existed which was produced by the respondents, either for Mr Tracy's benefit or otherwise, which could support a claim that the net realisable value of the lemon crop following deduction of costs including picking, packing and transport would be $1.5 million. The only evidence before the Court that Mr Strahley made the representation to Mr Tracy claimed by the applicants is the oral evidence of Mr Tracy that he recalled Mr Strahley making a statement referring to $1.5 million for the lemon crop at the meeting of 3 December 2004. Mr Tracy took no notes of the meeting or the statement and I have already found that Mr Tracy's recollection in relation to another claim arising from that meeting was inaccurate. I note again the warning of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318 concerning recollection of oral statements claimed to be misleading or deceptive. 378 Second, and in any event, there is evidence from which it can be inferred that Mr Tracy himself derived the amount of $1.5 million for the lemon crop from other information he had received in relation to the orchards and citrus prices in general, including information he received from third parties. So: · The evidence demonstrates that the first respondent communicated to Mr Tracy that it was only prepared to accept $4.5 million for the relevant properties. An email from Mr Tracy to Mr Douglas acting for the first respondent (which Mr Douglas then forwarded to Mr Strahley on 6 December 2004: exhibit A106) shows that Mr Tracy had offered $4 million, but was prepared to increase his offer to $4.5 million if the directors of the parent company of the first respondent gave a directors' guarantee that the net realisable value of the lemon crop was $1.5 million. (TS 415 ll 46-48, 416 ll 1-2, 419-420). This appeared to be the first time that reference to valuation of the lemon crop appears in writing. · Mr Tracy had made undated handwritten notes (Ex R40) which were tendered as evidence as to his deliberations in relation to purchasing the relevant properties. These handwritten notes included calculations. Mr Tracy agreed that the notes showed: o he had calculated receiving 38,000 cases of lemons, but had taken a conservative approach and discounted this sum by 10% to 35,000 cases of lemons; and o he had formed a view that he would receive $50 net per case of lemons. On the notes he had written "1.75 M", and below that following further calculations "1.5 LEM". (Significantly in my view, Mr Tracy said at the hearing in explanation of this figure "leaving me with a number of 1.5 lemons" (TS 419-420)). 379 Although no concession was made by Mr Tracy as to when these notes were made, I accept the submission of Mr Bell QC that it is likely that, given the nature of the notes and the information they reference, the notes date from early December 2004, and probably after the meeting with Mr Strahley when Mr Tracy was considering making an offer for the relevant properties, and that they reflect Mr Tracy's deliberations in relation to making an offer. If that is so, then it is clear that Mr Tracy had formed a view as to the approximate number of cartons of lemons which could be produced by the orchards, namely 38,000 cartons (despite his evidence that he did not have such information: TS 412 ll 41-44). It is not clear where Mr Tracy derived this information - a likely source was the first respondent although there is no evidence as to whether this figure was provided to Mr Tracy and if so what it represented. 380 Further, it is clear that Mr Tracy had received information concerning lemon prices from not only the first respondent but also third parties, including Mr Noel Sims, a lemon grower from Renmark in South Australia. Mr Tracy was informed that it was possible to obtain up to $70 per carton net for early crop first grade lemons (including by Mr Sims: TS 420 ll 7-8), and that the first respondent's budgeted price of lemons at the time was $22 per carton, but based on current market information there was the possibility that a higher price could be received. Indeed Mr Tracy's evidence was that at that time "I'm told all sorts of numbers about what's happening in the market place" (TS 491 ll 46-47). In my view it is likely that Mr Tracy sifted through the information he had been given, and, on the basis of information as to prices which could be achieved in the market in January, formed a view that he could receive $50 per carton net for 38,000 cartons of lemons, the total of which sum should in the interests of caution be discounted to $1.5 million. 381 I am not persuaded that the reason for Mr Tracy's calculations was that he "liked to check his figures" (TS 421 ll 30-31) in the sense of confirming information he had already received as to prediction of $1.5 million net for the crop. Rather Mr Tracy was calculating the amount he believed he could make from the sale of the lemons in those notes, based on a mixture of information he considered relevant. It was this calculation which formed the basis of his request for a directors' guarantee from the parent company for that amount. 382 In any event, even if I am wrong in holding that no representation was made by the first respondent through Mr Strahley on 3 December 2004 that the net realisable value of the lemon crop would be $1.5 million, I consider that information provided to Mr Tracy after that meeting qualified any such representation to the extent that the initially misleading effect of the representation did not persist (cf Lezam Pty Ltd 35 FCR 535 at 541). In particular I take into account the following evidence: · On or about 6 December 2004 Mr Tracy had sought "parent company directors' guarantee" on the net realisable value of the current lemon crop for $1.5 million, however this request was refused. Mr Tracy's evidence was that the first respondent was not prepared to guarantee the net income for the lemon crop (TS 415 ll 36-37). This refusal suggests that the first respondent could not undertake that the net realisable value of the lemon crop was $1.5 million. · The purchase agreements were negotiated on the basis that the risk was with the purchaser and that the picking of the lemon crop was subject to weather. Contractual clauses were included to that effect. · Mr Tracy confirmed at the hearing that he had told Mr Breed before settlement of the purchase of the properties that he did not expect to obtain $1.5 million for the lemon crop, but had told Mr Breed that he was expecting to receive between $750,000 and $850,000 for the lemon crop (TS 264-265). · Not one of the budgets prepared by the first respondent and provided to Mr Tracy forecast such a return on the lemon crop. · Following the meeting of 3 December 2004 the first respondent provided Mr Tracy with information including budgetary forecasts for revenue, prices, yield and packout by carton for lemons. All of this documentation indicated that, in general, an expected price for lemons was $30 per carton. This material, provided by the first respondent and Mr Strahley within a short time of that meeting, included: o the 2005 Sunstate Budget provided to Mr Tracy on 10 December 2004, which forecast the net profit for all of the fruit crops would be $755,760, and recorded the budgeted price per carton for lemons at $30; o considerable additional documentation including: ▪ an Australian Daily Fruit Report (exhibit A12) (emailed by Mr Strahley to Mr Tracy on 10 December 2004); ▪ a schedule with historical prices and cartons together with the 2004/2005 estimates which recorded the budgeted price for lemons for this period at $22 per carton (exhibit A21) (emailed by Mr Strahley to Mr Tracy on 21 December 2004); ▪ a lemon pricing schedule for the 2005 season including estimated lemon prices for January-March 2005 (exhibit A37); ▪ an updated pricing schedule (exhibit A38) provided to Mr Tracy on 7 January 2005 recording the average price for lemons at $27.70 per carton with comments that the average price of lemons was $30 per carton; and ▪ re-forecasted estimates of yields by number of bins and re-forecast estimates of number of cartons of lemons provided by the first respondent in a Yield Summary, Carton Yield Summary and Valuation Yield Summary. · The valuation report of Mr Anthony Bailey, prepared at Mr Tracy's request and dated 11 January 2005, estimated the net realisable value of the lemon and lime crop at the orchards as only $407,610. The report states that this was calculated on the basis of: o estimates of volume provided by Mr Strahley, which appeared to be reasonable at that stage but could vary at the time of harvest due to adverse seasonal conditions; o fluctuating prices depending on the time of harvest and supply, and demand pressures existing at the time of marketing; o a 2005 crop estimate of 2,160 cartons of limes at $10 per carton and 43,722 cartons of lemons at $30 per carton, giving a gross of $1,333,263; o cost of picking, transport to Packing Shed, packing and transport to market being $12.91 per carton, and totalling $592,337; o a 25% profit and risk; o the resultant equation being: Total crop income $1,333,263 Less 25% profit and risk $333,316 $999,947 Less picking, packing and transport $592,337 $407,610

383 In relation to Mr Bailey's report the applicants submitted it "was infected with the false crop production figures provided to Mr Neubecker by Mr Breed" and "cannot be relied upon by the respondents in equity to negative reliance". Further, the applicants' refer to the fact that the 2005 valuation figure of $407,610 was after deduction of a profit and risk factor of 25%. However in my view: · there is no evidence that false crop production figures, including as to packout rates, were provided by the first respondent to Mr Neubecker, which could in turn taint this estimation of crop and realisable value. I have already addressed issues relating to the 1 June 2004 Valuation Report. · Mr Bailey's evidence at the hearing was that he asked Mr Breed for the number of cartons ex-farm gate and had not discussed packout rates with Mr Breed (TS 825 ll 21-22). In relation to this information: o there is no evidence that material in Mr Bailey's valuation report as to the value of the 2005 crop in s 9 of the valuation report was tainted by false figures provided by Mr Breed or any other person associated with the first respondent; o the report, produced within a short time frame at Mr Tracy's request, contained a clear statement that the predicted net realisable value of the lemon crop was considerably less than $1.5 million, and indeed indicated that any belief of Mr Tracy that the lemon crop would receive anything near $1.5 million did not take account of costs in getting the fruit to market, and risk. 384 In these circumstances the applicants could not claim to be misled by any representation by Mr Strahley on 3 December 2004 that the net realisable value of the lemon crop would be $1.5 million. 385 Finally, and in any event, I do not consider that the applicants have substantiated the claim in para 19(c) as to the "true" position disclosed by the packing shed records. I shall deal with para 19 later in this judgment. 386 I do not find the applicants' claim in para 12(b) substantiated.

The claim 387 In para 13 of the Further Amended Statement of Claim the applicants claimed as follows: On 10 December 2004 the First Respondent represented to the First and Second Applicants that:- (a) the proceeds of the sale of the fruit crops that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be $5,724,168.00 (b) the cost of production of the fruit crops that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be $4,968,408.00 (c) the net profit before tax of the fruit crops that would be grown on the land for the period 1 January 2005 until 31 January 2005 would be $755,760.00 (d) a packout rate of 70-80% in the production of the fruit crops that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be achieved. PARTICULARS The representations were written and are contained in a document entitled '2005 Sunstate Budget.xls' which was an attachment to an e‑mail from the Second Respondent to the Second Applicant sent on 10 December 2004. 388 A surprising defect in the pleadings of the applicants in relation to the para 13 claim is that they have not pleaded the basis upon which these representations, even if made, were misleading or deceptive within the meaning of ss 51A, 52 or 53A. As I have observed elsewhere in this judgment, paras 19 and 19A of the Further Amended Statement of Claim present the applicants' case as to why the representations referred to in paras 11 to 17A were misleading or deceptive or likely to mislead or deceive. Paragraph 19A is referable only to para 17A. There is no reference in para 19 to the specifics of the claim as made in para 13(a)-(c). 389 (Although unfortunately it is not clearly pleaded, I assume that para 19(g) cross-references to para 13(d)). 390 For the purposes of this judgment, the immediate result is that, objectively, no case which the respondents can meet is actually pleaded by the applicants as to why any of ss 51A, 52 or 53A were breached in relation to the conduct alleged in paras 13(a), (b), and (c), other than broad claims in the stem of para 19 and in paras 20 and 20A that the representations referred to in, inter alia, para 13 were misleading or deceptive or likely to mislead or deceive. 391 However: · paragraphs 19(d), (e) and (f) appears to address the claims in para 16 of the Further Amended Statement of Claim in that paras 19(d)-(f) make specific reference to monetary figures, carton volumes and packout rates as found in para 16; but · there is some duplication of the material in paras 19(d), (e), and (f) in paras 19(n), (o) and (p) which also appear to address claims in para 16 by reference to the same figures, volumes and packout rates. I note that, although para 16 contains more extensive claims than para 13, there is some similarity in the claims of the applicants as between paras 13 and 16 in that: o both paras 13 and 16 contain allegations referable to fruit crops grown on the land for the period 1 January 2005 until 31 December 2005; and o both paras 13 and 16 contain allegations referable to proceeds of sale, cost of production, net profit and packout rates. 392 I consider it unlikely that the applicants intended to plead two sets of allegations in para 19 referable to the claims in para 16. It is more likely that the absence of reference in para 19 to the claims in para 13 was the result of inadvertent duplication in the Further Amended Statement of Claim and (presumably) typographical errors in paras 19(d), (e) and (f). I can find no reference in any pleadings or submissions of the applicants, or in the transcript of the hearing, to the failure of the applicants to specifically plead the basis upon which they claim that the representations in para 13 of the Further Amended Statement of Claim were misleading or deceptive or likely to mislead or deceive for the purposes of ss 51A, 52 or 53A. However the respondents in para 21(1) and (2) of the Defence: · accept that the references on paras 19(d)-(g) of the Further Amended Statement of Claim do refer back to paras 13(a)-(d) of the Further Amended Statement of Claim; and · indicate that the amounts referred to in paras 19(d), (e) and (f) should be the amounts referred to in paras 13(a), (b) and (c). 393 On the basis that the respondents were clearly prepared and able to meet the claims of the applicants in to paras 13(a)-(d) by reference to paras 19(d)-(g), and given that paras 19(d)-(f) may have contained typographical errors with respect to monetary amounts, I shall proceed to consider paras 19(d)-(f) as if they contain typographical errors and are referable to the claims in paras 13(a)-(d). 394 Accordingly, paras 19(d)-(g) Further Amended Statement of Claim presumably should be read as follows: (d) the First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the proceeds of the sale of the fruit crops that would be grown on the land for the period 1 January 2005 until 31 January 2005 would be $5,724,168 because it had possession of the Packing Shed data computer records which disclosed that in truth and in fact there had been only 40,364 cartons of fruit packed in the period 1 January 2004 until 31 December 2004 and that the land yielded an average packout of only 39.96% for the same period; (e) the First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the cost of production of the fruit crops that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be $4,968,408.00 because it had possession of the Packing Shed data computer records which disclosed the matters referred to in sub-paragraphs a)-c); (f) the First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the net profit (before tax) of the fruit crops that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be $755,760.00 because it had possession of the Packing Shed data computer records which disclosed the matters referred to in sub-paragraph a)-c); (g) the First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that a packout rate of 75-80% for the fruit crops that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be achieved because it had possession of the Packing Shed data computer records which disclosed that the average packout percentage for the fruit crops that had been grown on the land for the period 2002-2005 was as follows: 2002 - 36.77%; 2003 - 51.80%; 2004 - 39.96% and 2005 - 30.26%. 395 In summary the respondents in the Defence: · denied that any representation was made to the first applicant, and denied that any representations as alleged were made to Mr Tracy; · said that by email the first respondent sent to Mr Tracy a budget for the 2005 year; · said that the sum of $5,724,168 represented the total budgeted revenue from the Bundaberg and Tiaro properties in the budget records, and the budget did not state or convey the alleged representation; · said that the sum of $4,968,408.10 represented total budgeted operating costs for the 2005 year for the Bundaberg and Tiaro properties in the budget records and the budget did not state or convey the alleged representation; · said the sum of $755,760.14 represented total profit budgeted in the budget records and the budget did not state or convey the alleged representation; · said in relation to the budgeted packout rates the budget did not state or convey the alleged representation, but rather recorded individual packout rates for specific fruit crops as follows: o Oranges 80% o Limes 75% o Lemons 80% o Imperials 75% o Pages 70% o Nova 75% o Ellenor 75% o Murcott 70% o Ellendale 75% o Mango 80% · denied that the Packing Shed computer records prevented the first respondent from having reasonable grounds to prepare the budget for the 2005 Crop Year referred to in para 13; and · denied that the alleged representations were misleading or deceptive or likely to mislead or deceive either the first applicant or Mr Tracy. 396 Further, the first respondent said it had reasonable grounds for making the representations set out in the budget, and in para 21(5) Defence gave the following particulars: (1) The forecasted yield was an assumption made from the fruit that was expected to be produced from a tree (including those that were coming on line) in the 2005 crop year for each crop and was made taking into account historical data, physical inspection of the trees, current cultural practices and previous yields and consideration of factors such as disease and weather conditions which historically impacted on yield. (2) The yield is multiplied by the number of trees. (3) The gross yield is then divided by the capacity of fruit bins. (4) The indicative price was an estimate obtained from agents. (5) The picking cost is an estimate of the amount required to be paid to the employee/contractor. (6) The packout cost is an estimate of the amount required to pack each crop which takes into account historical data. (7) The packout percentage was derived by estimates of future rates, taking into account historical data for each crop, current cultural practices, and consideration of factors which may have historically impacted on packout rates for each crop, such as disease or weather conditions.

Submissions of the parties 397 In summary, the applicants submitted as follows: · the email transmission of the 2005 Sunstate Budget.xls (exhibit A13) on 10 December 2004 constituted the making of the representations alleged in paras 13(a)-(d); · the 2005 Sunstate Budget was a prediction made by the respondents as to the crop production of the orchards in 2005, made to a potential purchaser in the course of the purchaser making inquiries about the subject matter of the sale; · evidence of reliance by the applicants on the representations in Ex A13 is found in Mr Tracy's statement of 17 November 2006 at paras 22-24 and 153-158; · the applicants plead that the 2005 Sunstate Budget.xls was misleading or deceptive because it predicted yields and average packout rates that had never been achieved by the orchards between 1998 and 2004; · the packout rates in the 2005 Sunstate Budget.xls were 70-80% while the average historical packout rates for the orchards for 2002 was 36.77%, for 2003 was 51.8% and for 2004 was 39.96%; · the defence of the respondents that in making the prediction the first respondent took into account historical data, physical inspection of the trees, current cultural practices, previous yields, and such factors as disease and weather conditions cannot stand because: o this type of activity was one of the duties of Mr Burns who was never asked to carry out a scientific yield estimate; and o no scientific yield estimate was ever undertaken by Mr Breed, Mr Strahley, Mr Owen-Turner or Mr Papacek; · despite Mr Strahley's evidence as to the basis of his predictions of yield and packout in his affidavit, Mr Strahley's evidence showed that on no occasion did he ask Mr Burns any questions about the matters Mr Strahley said that he took into account in forming the basis of his reasonable grounds for making the 2005 Budget prediction; · the 2005 Budget predicted significant net profit from the operations of the orchards in 2005, something which the respondents knew had never occurred between 1998 and 2004; · "the fact that the Sunstate Budget.xls predicted such a different result from the past performance of the orchards is another factor that suggests that before predicting a crop performance result that had never been achieved the respondents should have undertaken a formal scientific yield and packout study to verify the rather extraordinary prediction which predicted average packout rates nearly double past historical performance" (Applicants' Written Submissions p 81). 398 In response, the respondents made detailed written submissions as the "broader factual matrix" behind the sale negotiations in respect of the relevant properties. This background was, the respondent submitted, relevant to consideration of all claims made by the applicants in respect of future representations allegedly made by the first respondent. These submissions are also significant because, although the respondents make specific submissions with respect to each of paras 12, 13, 14, 15, 16 and 17 in relation to future representations, the broader submissions encapsulate to a large degree the respondent's case in discharge of its onus of proof under s 51A. 399 These broader submissions concerned: · management communication and protocol; · the budgetary process and the foundation upon which the first respondent compiled the budgets; · management reform and asset refurbishment; · Mr Tracy's knowledge of the budgetary procedure and the forecasts; · the budgetary forecasting for 2005 to 2007. 400 The respondents also made specific detailed submissions concerning the reasonableness of its grounds to make forecasts in relation to: · packout rates for the 2005 Crop Year; · yields for the 2005, 2006 and 2007 Crop Years; · prices for the 2005 Crop Year. 401 Given the length of these broader submissions (some twenty-five pages) I do not propose to summarise them, but will refer to them as appropriate in my consideration of the substantive issues. 402 Specifically in relation to the claim in para 13 however I note that the respondents submitted in summary that: · The representations claimed by the applicants were not made. As pleaded in the Defence, the figures to which para 13 Further Amended Statement of Claim referred actually related to other matters - namely: o The applicants in para 13(a) claimed that the Sunstate Budget.xls represented that the sale of the fruit crops grown on the land would be $5,724,168. In fact, p 1 of the budget records total forecasted revenue at $5,724,168 on the bases set out in the budget. o The applicants in para 13(b) claimed that the Sunstate Budget.xls represented that the cost of production of the fruit crops grown on the land was $4,968,408. In fact, p 14 of the budget records total forecasted operating costs at $4,968,408 on the bases set out in the budget. o The applicants in para 13(c) claimed that the Sunstate Budget.xls represented that the net profit before tax of the fruit crops that would be grown on the land was $755,760. In fact, p 15 of the budget records forecasted total profit of $755,760 on the bases set out in the budget. o The applicants in para 13(d) claimed that the Sunstate Budget.xls represented that a packout rate of 70-80% would be achieved in the production of the fruit crops. In fact, the budget did not forecast an average packout as alleged, rather pp 13-22 of the annexure to the budget records budgeted packout rates of Oranges 80%, Limes 75%, Imperials 75%, Pages 70%, Nova 75%, Ellenor 75%, Murcott 70%, Ellendale 75%, Mango 80%. · The budget was qualified by: o the information which had been given to Mr Tracy at the first meeting between Mr Tracy and Mr Strahley of the budgetary process and factors which affect forecasts; o re-forecasts or further information supplied to Mr Tracy subsequent to 10 December 2004, namely; ▪ as to yield : by the Yield Summary; ▪ as to packout : by the Carton Yield Summary and the Valuation Yield Summary; ▪ as to price: by the Valuation Yield Summary, the fruit wholesalers 7 January 2005 Production Pricing Schedule and the information provided to Mr Tracy as to lemon prices; · In relation to the forecasted revenue and therefore net profit: o the key factors were yield, packout rate and commodity prices, and the first respondent had reasonable grounds to forecast those figures; o in any event, the total revenue and revenue per costs were qualified by the provision of the subsequent information as to yield, packout rates and prices; · In relation to costs of production: o the first respondent had reasonable grounds to forecast the costs of production; and o the costing forecast was built up on a cost per tree basis and was comprehensive; · In relation to the net profit, the first respondent had reasonable grounds to forecast the net profit referred to in the budget. · In relation to the applicants' claim as to average packout rates: o the budget did not provide any representation as to average packout rates; and o the first respondent had reasonable grounds to forecast the packout rates referred to in the model; · Mr Green, the forensic accountant called by the applicants, accepted that the budget was arithmetically and logically sound, reliable and did not omit any material input, and that the model is reliable as a predictive tool of future financial performance.

Consideration 403 The applicants' pleaded case is that by an attachment "2005 Sunstate Budget.xls" emailed by Mr Strahley to Mr Tracy on 10 December 2004, the first respondent made the representations claimed in para 13 Further Amended Statement of Claim. 404 The email to which the 2005 Sunstate Budget.xls was attached contains no message from Mr Strahley to Mr Tracy. The subject is "2005 Sunstate budget". 405 Despite the absence of any statement in the email which could be a representation, I agree with the applicants that, in emailing the 2005 Sunstate Budget.xls document to Mr Tracy, the first respondent through Mr Strahley was making a representation to a potential purchaser in the course of the purchaser making enquiries about the subject matter of the sale. An important point of initial contention however is the nature of the representation made by the first respondent in providing this document to Mr Tracy. The respondents raise in dispute the issue whether the representation was to Mr Tracy alone, or to the first applicant through Mr Tracy. I will return to this issue later in this judgment. 406 A review of the 2005 Sunstate budget.xls document reveals that the respondents' description of the amounts referred to in paras 13(a)-(c) is technically accurate, in comparison with the applicants' description of those amounts. So: · the sum of $5,724,168 on p 1 of the 2005 Sunstate budget.xls represents the total budgeted revenue from the Bundaberg and Tiaro properties; · the sum of $4,968,408.10 on p 14 of the 2005 Sunstate budget.xls represents the total budgeted operating costs for the 2005 year for the Bundaberg and Tiaro properties; · the sum of $755,760.14 on p 15 of the 2005 Sunstate budget.xls represents the budgeted total profit from the Bundaberg and Tiaro properties. 407 Further, the respondents' claim that the budget did not state or convey the alleged representation, namely that a packout rate of 70-80% in the production of the fruit crops that would be grown on the land for the period 1 January 2005-31 January 2005 would be achieved, is accurate. The budget records budgeted packout rates for specific varieties of fruit as set out earlier in this judgment, not a "packout rate of 70-80%" as the applicants plead. 408 However despite this lack of precision in the applicants' pleadings, it is clear that the applicants' pleadings in para 13 are sufficiently identifiable so as to allow the respondents to answer them. So, for example, the packout rates in the 2005 Sunstate Budget.xls did actually range from 70% (Pages, Murcott) through to 80% (Oranges, Lemons, Mango). Similarly, the "total budgeted revenue from the Bundaberg and Tiaro properties" is recognisable as the "proceeds of the sale of the fruit crops that would be grown on the land" (Further Amended Statement of Claim at [13(a)]), and similar comparisons could be drawn in relation to the terms used in paras 13(b) and (c) and the accurate description of the amounts in those paragraphs. Accepting that para 13 Further Amended Statement of Claim does, with sufficient substantive accuracy if not technical accuracy, reflect the relevant representations in the 2005 Sunstate Budget.xls, the immediate question is whether, in making the representations as to future matters with respect to the 2005 total budgeted revenue, the total budgeted operating costs, the budgeted total profit and the packout rates, the first respondent can establish that it had reasonable grounds within the meaning of s 51A. 409 It is not in dispute that the properties ceased to be operated as orchards after 23 June 2005 when the third applicant entered voluntary administration pursuant to Pt 5.3A Corporations Act 2001 (Cth) (Tracy statement sworn 17 November 2006 at [152]). Evidence is scant as to what actually occurred at the orchards between 21 March 2005, when the contract of sale was completed, and 23 June 2005. The evidence of Mr Tracy was that: · The third applicant entered into a lease on 22 March 2005 with the first applicant by which the first applicant permitted the third applicant to occupy the orchard land, and the third applicant failed to pay the first applicant rental in the sum of $287,794.52 in the period 21 March 2005 until 23 June 2005 (Tracy statement sworn 17 November 2006 at [141]). · Between 21 March 2005 and 22 June 2005 the third applicant conducted an orchard business on the orchard land and incurred trading losses of over $500,000.00 in that period (Tracy statement sworn 17 November 2006 at [142]). · After receiving a report from the TotalPak system on 13 April 2005 he realised that the lemon crop was below budget (Tracy statement sworn 17 November 2006 at [146]). · Mr Breed explained to Mr Tracy that "the poor packouts were due to black spot on the fruit and bruising from picking in humid conditions" (Tracy statement sworn 17 November 2006 at [147]). · On 4 May 2005 he received a document showing that the orchards were approximately 3000 bins under budget, which he calculated meant a reduction of about $1 million in gross revenue from that projected in the 2005 Budget. (Tracy statement sworn 17 November 2006 at [148]-[149]). 410 There is however before the Court unchallenged evidence of both Mr Strahley (Strahley affidavit sworn 12 July 2006 at [267]) and an expert forensic accountant, Mr Lytras, who was called as a witness by the respondents, that the packout rate for the lemon crop picked at the orchards in 2005 was 81.2% (Lytras expert report p 10 at [2.6(c)]). This rate exceeded the packout rate of 80% for lemons forecast in the 2005 Sunstate Budget.xls. 411 This evidence is relevant because, as Miller writes in relation to s 51A: … the non-fulfilment of a promise when the time for performance arrives will be deemed to be misleading unless the person making the promise brings evidence to establish that there were reasonable grounds for making the promise. (Miller at [1.51A.25]) 412 Accordingly: · The evidence demonstrates that the relevant properties were not maintained as orchards for the 2005 calendar year (or indeed the balance of the 2004-2005 financial year), and accordingly were not conducted after 23 June 2005 in such a manner as to earn revenue or profit, incur costs or cause fruit to be picked. · The evidence demonstrates that, objectively, the events predicted by the respondents' future representations in the 2005 Sunstate Budget.xls (the subject of para 13) did not occur. In the words of Goldberg J in Phoenix Court Pty Ltd (1997) ATPR 46-179, the events did not come to pass. Sections 51A and 52 are thus enlivened. 413 Considering later events which did occur is of some relevance - although clearly not conclusive - as to whether the respondents had reasonable grounds to make the future representations. Nonetheless while examining evidence of later events may throw light upon the overall probabilities it remains vital to guard against hindsight illusion (cf Mason P in City of Botany Council v Jazabas Pty Limited [2001] NSWCA 94 at [83]). There is no necessary connection between the reasonable grounds and the subsequent circumstances which resulted in the predicted state of affairs not occurring (Sykes 88 FCR 511 at 513 per Heerey J).

Relevant historical performance issues 414 As demonstrated by paras 19(d)-(g), the applicants in relation to their claims under para 13 relied substantially on the contents of the Packing Shed records, data the applicants claimed those records disclosed with respect to the historical performance of the orchards, and the applicants' allegation that the first respondent knew of that data. In summary, the substance of the applicants' case is that the respondents had no reasonable grounds for their representations as to the future financial performance of the orchards, based on the historical performance of the orchards. 415 There is no doubt that historical performance can be a factor relevant to the reasonableness of a forecast of future performance (see, for example, ACCC v Top Snack Foods Pty Ltd [1999] FCA 752, ACCC v Telstra Corporation Ltd [2007] 244 ALR 470). However in determining whether a person had reasonable grounds for expressing an opinion or making a prediction as to a future matter, is necessary to judge the matter as at the date of the representation (see Lyndel Nominees Pty Ltd v Mobil Oil Australia Ltd (1997) 37 IPR 599 at 625, Sykes 88 FCR 511 at 513, City of Botany Council [2001] NSWCA 94 at [83]). Historical performance is one factor, although it is an important factor. In paras 19(e) and (f) the applicants claim that the respondents had in their possession Packing Shed data computer records which disclosed the matters referred to in paras 19(a), (b) and (c). I have already considered the claims in paras 19(a), (b) and (c) and found that the respondents had reason to distrust the information in the Packing Shed records to which the applicants refer. Further, I do not consider that the applicants have substantiated the "true position" with respect to, inter alia, the Packing Shed records as claimed by the applicants in paras 19(d)-(g). I shall return to this issue later in my judgment. 416 However even putting to one side for a moment the monetary figures in para 19 Further Amended Statement of Claim based on the Packing Shed computer records, the respondents admit that the financial and horticultural performances of the orchards in previous years were not as positive as forecast in 2005. So for example: · Mr Strahley conceded that the first respondent had incurred losses in the 2001, 2002, 2003 and 2004 years (Strahley affidavit sworn 12 July 2006 at [69(b)], TS 906). · During cross-examination Mr Strahley gave evidence that the relevant properties suffered a loss of $700,000-$900,000 in 2001, a loss of $2 million in 2002, a loss of $700,000-$900,000 in 2003, and a loss of approximately $1 million in 2004 (TS 906). · Mr Strahley gave evidence under cross-examination that there was a steady decline in the revenue base for the actual price of the citrus from 2001 until 2004 (TS 910 ll 10-11, 27-28). · Mr Strahley gave evidence that price and packout percentages among the fruit varieties were inconsistent (TS 911 ll 6-16), and historically poor (Strahley affidavit sworn 12 July 2006 at [69(e)]) with the result that price and packout percentages were the two areas where there was underperformance against expectation (TS 912 ll 47-48). · The historical packout rates for 2002, 2003 and 2004 as recorded in the Block Summary data, and as conceded by the respondents, were less than forecast in the 2005 Sunstate Budget.xls, as demonstrated by the following table drawn from the Block Summary and Mr Strahley's evidence (Strahley affidavit sworn 12 July 2006 at [246]): Year Lemons Imperials Novas Ellenors Murcott Bundaberg Tiaro Bundaberg Tiaro Bundaberg Tiaro Bundaberg Tiaro Bundaberg Tiaro % % % % % % % % % % 2001 77.98 83.62 79.98 71.64 66.14 57.56 95.54 80.18 86.30 86.77 2002 72.65 70.37 41.52 49.58 1.61 40.94 24.79 42.26 31.12 48.90 2003 89.57 82.5 62.08 66.51 68.22 61.80 51.65 48.21 56.32 59.42 2004 62.33 57.2 39.68 58.49 29.64 28.76 0 22.55 37.38 46.29

417 Even on the case put by the respondents, salient examples of which I have identified above, the 2005 Sunstate Budget.xls clearly represented forecasts of a considerable improvement in the performance of the relevant properties in 2005 compared with the previous three years in relation to yield, price and packout rates.

Have the respondents discharged their onus under section 51A? 418 To paraphrase Heerey J in Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513, the task of the first respondent is therefore to show: ● some facts or circumstances ● existing at the time of the representation ● on which the first respondent in fact relied ● which are objectively reasonable and ● which support the representation made. 419 In considering the facts and circumstances on which the first respondent relied in making the representations as to future economic performance of the orchards, it is in my view critical to consider the process in which the first respondent engaged in compiling the 2005 Sunstate Budget. 420 First, Mr Strahley gave evidence that the budget model upon which the 2005 Sunstate Budget was based was developed in 2001 in conjunction with Dr Matt Shaffer, a specialist with skills in financial modelling who was employed by the US parent company of the first respondent. The budget also provided for revenue and cost on a per tree basis. The first respondent had utilised the template since 2001 in preparation of the yearly budgets (Strahley affidavit sworn 12 July 2006 at [10], [225]). 421 Critically, the key factors influencing revenue were: · yield; · prices; and · packout rates. (Strahley affidavit sworn 12 July 2006 at [225]) 422 Second, the applicants do not dispute the soundness of the budget model used by the respondents. Mr Paul Green, an expert forensic accountant requested by the applicants to prepare an expert report detailing his opinion of the loss and damage (if any) suffered by the applicants in these proceedings, reviewed documents including the 2005 Sunstate Budget. In relation to the 2005 budget the subject of para 13 of the Further Amended Statement of Claim, Mr Green stated in his report (forensic accountant's report, exhibit PDG-2 to Green statement filed 5 July 2006): · The budget model in the 2005 Sunstate Budget was a sophisticated series of interlinked spreadsheets which developed a financial budget for the 2005 season January-December (para 8.2.6). It was sophisticated and comprehensive (paras 8.3.2 and 8.13) · the model in the budget was arithmetically and logically sound and reliable (para 8.2.7); · the model was materially complete and did not omit any material inputs (para 8.3.4); · the model included all material revenue and expense items required for predictive purposes (para 8.3.4); · the model was sensitive to changes in factors that effect gross revenue and in particular yield factors (volume and packout) and the average price for the crop (paras 8.3.4, 9.1); · the model was reliable as a predictive tool of future financial performance (para 8.3.4). 423 Mr Tracy also agreed that the 2005 Sunstate Budget was a thorough document, prepared by the first respondent in the ordinary course of business (TS 439 ll 17-21). 424 On this basis, I will consider the claims in para 13 as follows: · first, by reviewing the factors taken into consideration by the first respondent (in particular, through Mr Strahley) in the budgetary process relevant to all claims in para 13. · second in relation to the claim in para 13(a) by taking into consideration the following issues: o yield - approach of management; o yield - historical records; o yield - management reform and asset refurbishment; o yield - absence of scientific yield estimate; o yield - industry standards; o price - approach of management; o price - historical events; o packout rates - approach of management; o packout rates - historical records; o packout rates - improvements in cultural practices; o packout rates - packout realised for lemons; o packout rates - absence of packout study; o conclusion. · third, in relation to the claim in para 13(b) by taking into consideration the following issues: o lack of evidence by the applicants; o inputs; o conclusion. · Fourth, in relation to the claim in para 13(c), by reference to my findings in relation to paras 13(a) and 13(b). · Fifth, in relation to the claim in para 13(d), by reference to my findings concerning packout rates in the context of my consideration of para 13(a). · Sixth, by reference to information provided to Mr Tracy in relation to the budgetary process and factors relevant to that process.

General issue - the budgetary process 425 The respondents submitted that the budgetary process formed the foundation for the reasonable grounds which existed for the budgets provided by the first respondent to Mr Tracy, including the 2005 Sunstate Budget. 426 Mr Strahley gave detailed evidence as to the budgetary process, including the following: · the budgets, including the 2005 Sunstate Budget, were prepared by the first respondent, in the ordinary course of its business, using a standard template, for each financial year ending 30 June (Strahley affidavit sworn 12 July 2006 at [44], [45]). · The budgets were prepared with input by Mr Strahley, Mr Breed, field staff and Ms Carolyn Bailey who was the financial controller of the US parent company of the first respondent. Mr Strahley said that he was personally involved in the budgetary process and reviewed information provided by Mr Breed and the field staff (Strahley affidavit sworn 12 July 2006 at [10], [221]). · The head office of the first respondent also prepared monthly budget summaries in the ordinary course of business, containing year to date actuals and the variance from budget to actuals (Strahley affidavit sworn 12 July 2006 at [23]). As part of the budgetary process the budget was also reviewed on a quarterly basis (Strahley affidavit sworn 12 July 2006 at [221]). · Block Summary data were prepared as part of the yearly budgetary process as a basis of identifying the historical data for yields and packout rates (Strahley affidavit sworn 12 July 2006 at [67]). Earlier in this judgment I dealt with the decision of Mr Strahley not to accept the packout data provided by Mr Breed in an email in May 2004 and the decision to produce of Block Summary data instead. 427 Further, Mr Strahley gave evidence that his role in the budget process involved him taking account of such factors as: · industry standard yield data provided in the DPI publication "The Economics of Growing Citrus: In the Central Burnett Region of Queensland" (Strahley affidavit sworn 12 July 2006 at [223]); · block summary data and historical data (Strahley affidavit sworn 12 July 2006 at [223]); · his knowledge of factors which historically impacted on price, yields and packouts during the first respondent's ownership of the orchards (Strahley affidavit sworn 12 July 2006 at [223]); · the decline in commodity prices 2001-2003 and the canker outbreak in 2004 (Strahley affidavit sworn 12 July 2006 at [56]-[59]); · expenditure on cultural costs (Strahley affidavit sworn 12 July 2006 at [227]); · issues relating to management of picking and transportation of fruit (Strahley affidavit sworn 12 July 2006 at [227]); · the age of the trees (TS 917 ll 34-48); · the fact that the orchards are located near the coast, which could be an advantage because the orchards were ordinarily able to produce fruit to the market in the early part of the harvest before other growers and therefore take advantage of higher prices, but could also be a disadvantage because the orchards were susceptible to coastal conditions such as wind, moisture, humidity and diseases like EBS (Strahley affidavit sworn 12 July 2006 at [226(c)]); · availability of labour to pick the crop (TS 902 ll 14-19). 428 In relation to this evidence I make the following observations. 429 First, I consider that the factors taken into account by Mr Strahley and the first respondent in the budgetary process were appropriate. They reflect a practical recognition of issues of relevance to the orchards and their economic performance. I will refer later in this judgment in more detail to the relevance of the data in the DPI publication, but consider it of particular relevance to yields of specific varieties of fruit grown on the orchards and therefore performance of the relevant properties in relation to those varieties. 430 Second, as I have already observed the applicants do not dispute the soundness of the budgetary model used by the respondents. As a template, it is a reasonable basis for forecasting economic performance.

Paragraph 13(a) Yield - approach of management 431 Mr Strahley gave evidence that, in reviewing the budgeted yields, he took into account in particular: · the historical data; · the implementation of the management reforms and improved practices; · changes in the cultural practices; · matters reported in the Farm Manager reports; · his site visits during the 2004 Crop Year; · his observations that there were substantial cultural practice improvements; · his observations that the orchards were in a good condition which were being properly monitored by Mr Burns and Mr Papacek. (Strahley affidavit sworn 12 July 2006 at [256]) 432 In my view these factors were appropriate to take into consideration in the review process.

Paragraph 13(a) Yield - historical records 433 Significantly, to the extent that the forecast operating revenue of the relevant properties relied on yields, the bin yields in 2005 forecast by the 2005.Sunstate Budget.xls - 14,241 bins - were lower than the yields that had been achieved by Sunstate in the 2003 Crop Year (namely 17,376 bins: Strahley affidavit sworn 12 July 2006). On the basis that the 2003 yields demonstrated what had been achieved by the orchards, and what could be achieved, it appears that the forecast total yield for 2005 was reasonable.

Paragraph 13(a) Yield - management reform and asset refurbishment 434 The evidence shows that the respondents' prediction of yields and packout rates in the 2005 Sunstate Budgets.xls was clearly linked to the significant management reform and asset refurbishment of the relevant properties between 2001 and 2004, the extensive improvements in cultural practices at the orchards, and the strategy to improve yield and packouts arising from these substantive reforms. It is clear that during this time, and particularly from 2003 onwards, the first respondent: · implemented a comprehensive program of management reform and asset refurbishment to improve yields including the engagement of Mr Papacek and Mr Owen-Turner as consultants. Mr Strahley's affidavit sworn 12 July 2006 at [18] gave the following examples of this reform: o water security: ▪ upgrading of the irrigation system and management; ▪ fertigation (introducing fertilizer through the water line); and ▪ bore (well) upgrading at Bundaberg; o a tree nutrition audit and fertilizer program implementation in 2001; o upgrading of the cool rooms in the Packing Shed in January 2004; o installation of a new Packing Shed computer data tracking system (TotalPak) which commenced recording data in the 2004 Crop year; o engagement of Mr Burns in 2004, and utilising the services of specialist consultants in addition to Mr Papacek and Mr Owen-Turner, namely Mr Noel Sims and soil scientist Mr Bart Davidson; · substantially increased capital and operating expenditure as part of the ongoing development of the orchards and the Packing Shed. The evidence was that cultural costs increased by over 50% from 2001 to 2005 (Strahley affidavit sworn 12 July 2006 at [227(c), (d]), Lytras expert report p 9 of [2.3]). · under the direction of Mr Burns from early 2004 and in conjunction with the consultants Mr Papacek and Mr Owen-Turner, improved cultural practices at the properties with a view to improving the yields. Mr Burns implemented and managed a new cultural practices program which included irrigation, pruning, thinning, spray and fertilizer. Mr Burns gave extensive and detailed evidence in his affidavit as to the nature of the improvements to cultural practices at the orchards, including evidence that: o in 2004 the first respondent pruned every block and all varieties on the orchards (Burns affidavit sworn 11 July 2006 at [38]); o in October/November 2004 the first respondent undertook an extensive thinning programme (Burns affidavit sworn 11 July 2006 at [48]); and o fertilising and pest spraying took place extensively with improved practices at the properties (for example, Burns affidavit sworn 11 July 2006 at [54]). 435 Mr Burns said that it was clear to him that, prior to his engagement, a substantial area of the orchards had not been properly pruned, and that the orchards had been "let go" in previous years (TS 673 ll 37-39). He also gave evidence that the watering programme in place prior to 2004 meant that there was some over-watering which would have affected the rates of fruit growth (Burns affidavit sworn 11 July 2006 at [30]). 436 Mr Burns gave evidence that while there was a chance that the comprehensive pruning programme implemented in 2004 might reduce the yield for 2005, it would result in improved yields for the 2006 season. However he also gave evidence that the overall effect on yield, compared to the 2003 season, needed to be considered with the other cultural practices which were expected to produce improvements to yield (Burns affidavit sworn 11 July 2006 at [32], [33]). Indeed Mr Burns' evidence was that he did not expect the pruning programme to negatively impact on yield in the 2005 Crop year (TS 664 ll 20-21).

Paragraph 13(a) Yield - absence of scientific yield estimate 437 The applicants claimed that forecasts as to yield by the respondents could not reasonably have been made in the absence of a scientific yield estimate. 438 Mr Burns stated under cross-examination that he did not provide a scientific yield estimate to management of the first respondent, that this was the only way that management could really keep an accurate record of his views on matters of yield, and that it was the most accurate way of properly assessing prospective yield (TS 648 ll 15-19, 650 ll 26-33, 742 l 38, 743 ll 14). The applicants rely on the fact that no scientific yield estimate was ever undertaken by any of Mr Burns, Mr Breed, Mr Strahley, Mr Owen-Turner or Mr Papacek and therefore claim that the first respondent had no reasonable grounds for its representations the subject of para 13. 439 In my view the absence of a scientific yield estimate undertaken by Mr Burns or anyone else does not diminish the reasonableness of the grounds upon which the first respondent based its representations as found in the 2005 Sunstate Budget.xls document. I take this view because: · Mr Burns gave evidence that his role as a horticulturalist for the orchards involved advising management on expected yields (Burns affidavit sworn 11 July 2006 at [6]). He provided monthly reports to Mr Breed describing the general horticultural matters for each orchard, the crop status for each orchard and water usage and weather for the Bundaberg orchard. Mr Burns also contributed to sections of the Farm Manager reports which were provided to Mr Strahley. · Mr Burns also gave evidence that in 2004 he provided two oral estimates of expected crop yields for 2005 to Mr Breed, and that the estimates were undertaken using his experience, knowledge of the various blocks, the trees on those blocks, the varieties of fruit, what he saw on the trees, his previous citrus experience and his knowledge of the historical picking records from the trees in the blocks. (Burns affidavit sworn 11 July 2006 at [85]). · It is clear from the evidence that Mr Burns had a detailed knowledge of the orchards. His evidence was that he lived in the orchards (TS 684 l 39). · Mr Burns' unequivocal evidence was that complete absence of formal reporting on expected yields was consistent with him being employed to improve cultural practices at the orchards with a view to improving yields (TS 667 ll 37-39). He stated that as a horticulturalist, he did not need to construct detailed records of the orchards, but was able to rely on visual perceptions in order to be able to, for example, know whether a block required pruning (TS 684 ll 32-46), or know whether an orchard had been thinned (TS 684 ll 6-7, and generally 673). · It is also clear that in his reports he made comments as to prospective yields (for example, Burns affidavit sworn 11 July 2006 at [88(b)(i)]). 440 No evidence was produced that horticultural advice as to yields without a scientific yield estimate was ineffective. In my view the first respondent did not need to carry out a scientific yield estimate in order to be in a position to make representations as to yield based on reasonable grounds.

Paragraph 13(a) Yield - industry standards 441 Mr Strahley gave evidence that he used information in the Block Summary as well as industry data in the DPI publication "The Economics of Growing Citrus in the Central Burnett Region of Queensland", together with his knowledge of the factors which impacted historically on each of the historical years, in gauging forecasted yields or packout rates in the context of the historical data (Strahley affidavit sworn 12 July 2006 at [223]). 442 Although pursuant to s 135 Evidence Act I have excluded from evidence Mr Frick's expert report for the reasons I gave earlier in this judgment, opinions given by him at the hearing which are clearly within his specialised knowledge are both admissible and, in my view, do not give rise to such issues as would enliven the Court's discretion under s 135. 443 In response to a question from Mr Perry SC during cross-examination, Mr Frick said: Yield tends to be very specific by variety in which - in such an instance that a Murcott variety should have the same yield potential so long as it is an acceptable growing region. (TS 1338 ll 14-16) 444 Mr Frick's evidence as to yield by variety is unchallenged, and I accept it. 445 Appendix K to the DPI publication lists actual yield data collected from yield records of growers. In comparing the DPI data relevant to Murcotts, Imperials, lemons with the forecast yields for those citrus varieties in the 2005 Sunstate Budget.xls, it is apparent that the 2005 forecast yields in that document were within industry parameters. To the extent that the first respondent was basing its forecasts for 2005 on industry standards as appearing in the DPI publication, those forecasts were based on reasonable grounds.

Paragraph 13(a) Price - approach of management 446 Mr Strahley gave detailed evidence in his affidavit (Strahley affidavit sworn 12 July 2006 at [247]-[255]) as to the approach taken by him in the budgetary process. In summary his evidence was that: · the budgetary process involved forecasting commodity prices for fruit across each variety. · the citrus fruit market is very volatile and reflects constant changes in the supply and demand for the variety of fruit, classes of fruit and size. · in making forecasts, pricing of the fruit was determined in the context of: o historical prices; o factors which may have impacted on such prices; o information received from the fruit wholesalers; o the Daily Fruit Pricing Report; o discussions with other growers. · he or Mr Breed obtained indicative pricing from fruit wholesalers with whom they dealt, as well as other fruit wholesalers. · as a component of keeping abreast of the commodity prices and the market Mr Strahley talked to Mr Noel Sims each Friday, and they would discuss the lemon market. · in the Valuation Yield Summary he had available the average prices received by the first respondent during the financial years 2002, 2003 and 2004. Those average prices were provided to Mr Tracy on 21 December 2004. · he was provided copies of correspondence between Mr Breed and Sculli's fruit wholesalers in the ordinary course of the business of the first respondent in January 2005, giving Sculli's views of upcoming prices of Imperials, lemons and Murcotts as follows: o an average price of $30 for lemons and $18 for Imperials was expected; o an average price of $20-$25 for Murcotts was expected; · he was provided a copy of an email Mr Breed received from Carter & Spencer wholesale agents attaching indicative returns for lemons on 14 February 2005. 447 The applicants accepted that Carter & Spencer and Sculli's were: · experienced in relation to providing fruit prices; · knew the fruit; · knew the properties; · knew the history; · make their trade in the marketplace (TS 506 ll 24-27). 448 In my view the steps taken by the first respondent in the budgetary process in forecasting fruit prices they could expect to receive were thorough and reasonable. To that extent representations by the first respondent in para 13, to the extent that those representations depended on fruit prices, were made on reasonable grounds.

Paragraph 13(a) Price - historical events 449 Evidence was given as to two events which had occurred in the industry which impacted on packout rates and prices in 2002 and 2004. 450 First, in 2002 the Bundaberg orchard was subject to hail strike, with the result that the crops across all varieties at the orchard were severely affected (TS 920 l 25). So, for example, the Block Summary data records the packout rate for Novas at Bundaberg that year as 1.61%. 451 Second, although the respondents' properties were not directly affected, both citrus prices and picking of fruit were affected in 2004 by an outbreak of citrus canker disease in Queensland. However Mr Strahley gave evidence that, because properties in the large citrus-producing region of Emerald had been quarantined because of the citrus canker outbreak, he was expecting prices would improve for the benefit of citrus properties in Queensland which were not quarantined (Strahley affidavit sworn 12 July 2006 at [56]-[59], [66]). 452 In my view it was reasonable to take these factors into account in forecasting prices for citrus in 2005.

Paragraph 13(a) Packout rates - approach of management 453 Mr Strahley gave evidence that, in reviewing the budgeted packout rates, he took into account in particular: · historical data; · the implementation of management reform and improved practices, including upgrading of cool rooms at the Packing Shed; · the changes in cultural practices, including the engagement of Mr Papacek to properly address the potential problem of EBS in the orchards; · the supervision by Mr Burns of the picking of the fruit, including properly managing the timing of the pick, the fruit to be picked and the actual picking process. Mr Strahley contrasted the likely improvements in relation to picking of the fruit supervised by Mr Burns, with the poor management of the picking of Novas in 2004; · his view that there had been a material improvement in the quality of the fruit compared with previous years with a corresponding increase in the packout rates of the fruit. (Strahley affidavit sworn 12 July 2006 at [260], [262], [263], [266]) 454 In my view these factors could reasonably be taken into account by the first respondent in relation to forecast packout rates, which in turn would impact upon the economic performance of the orchards.

Paragraph 13(a) Packout rates - historical records 455 The applicants submitted that the packout rates predicted by the first respondent in the 2005 Sunstate Budget.xls had never been achieved by the orchards in the years 1998-2004, and in particular were significantly in excess of the packout rates that had been achieved in 2002, 2003 and 2004. Earlier in the judgment I set out in tabular form the packout rates achieved in respect of lemons, Imperials, Novas, Ellenors and Murcotts at both orchards between 2001 and 2004, based on the Block Summary data. 456 Significantly, the Block Summary data, the accuracy of which is not in contention, demonstrates that in 2001 the packout rates for those specific fruit crops in the orchards were high but that they had deteriorated since that year. 457 The evidence clearly shows that the orchards were capable of achieving packout rates similar to those forecast in the 2005 Sunstate Budget.xls. On this basis, representations at least as to packout rates of lemons, Imperials, Novas, Ellenors and Murcotts were based on reasonable grounds.

Paragraph 13(a) Packout rates - improvements in cultural practices 458 Mr Burns gave detailed evidence that he had expected the improved cultural practices at the orchards to have the following results: · The implementation of the adjustments to the irrigation system would produce significant gains in fruit size and quality (Burns affidavit sworn 11 July 2006 at [31]). · The pruning programme would improve fruit quality, reduce the incidence of EBS, and reduce the time to pick or harvest fruit from a tree (Burns affidavit sworn 11 July 2006 at [33]). · Because thinning improves fruit quality and decreases stress to the fruit tree, it was expected that improvements in the yield would occur in the 2005 Crop year. (TS 658 ll 5-15). · The engagement of Mr Papacek's services would result in a significant advance for the first respondent in its production, because Mr Papacek's firm "Bugs for Bugs" had expertise in citrus culture. Mr Burns gave evidence that with the assistance of Mr Papacek: o the first respondent was able to develop an Integrated Pest Management programme which targeted problems such as citrus pests and diseases; o the first respondent employed the techniques of the Integrated Pest Management to develop a plan for the remainder of the 2003/2004 season and the 2004/2005 season; and o the plan outlined what needed to be done on each block, week by week, at both orchards (Burns affidavit sworn 11 July 2006 at [52]). · The benefits of the pruning and cultural practices implemented by him in 2004 would have a "huge" benefit for that year and the following year. (TS 673 ll 37-39). 459 Mr Burns' evidence was consistent with the evidence of Mr Owen-Turner as to the correlation between pruning and thinning as a management system on the one hand, and on the other hand yield and packout rates (TS 889 ll 22-23, 890 l 22). Mr Burns' evidence also acknowledged the relationship between nutrition of the trees and the quality of the fruit (TS 890 l 22). 460 The management and reporting relationship between Mr Burns, Mr Breed and Mr Strahley is not in dispute. The engagement of Mr Burns and the experts, the expenditure on improvement and refurbishment of the properties, the reformed cultural practices and the ensuing benefits to orchard productions were within the control and knowledge of the first respondent, and Mr Strahley, who formed a view that a significant improvement in packout rates would follow. Mr Strahley's evidence was that, by December 2004, he was of the opinion that the orchards were "starting to perform" (TS 1201 ll 20-22).

Paragraph 13(a) Packout rates - packout realised for lemons 461 As I noted earlier in this judgment, the packout rate realised by the first respondent for lemons in the 2005 Crop Year (81.2%) exceeded the forecast packout rate. I note this fact as contributing to the overall probability that the first respondent made its representation as to the performance of the orchards in 2005 on reasonable grounds (cf Sykes 88 FCR 511, City of Botany Bay Council [2001] NSWCA 94).

Paragraph 13(a) Packout rates - absence of packout study 462 As far as I can ascertain, the first time the applicants raised the issue of the absence of a packout study being relevant to the reasonableness of the respondents' representations as to future crop performance was in their written submissions at the conclusion of the trial (Applicants' Written Submissions p 81). This can be compared with the question of whether a formal scientific yield should have been undertaken which was the subject of cross-examination of Mr Burns during the hearing. 463 In my view the reasonableness of the respondents' grounds in making their representations, so far as they related to packout rates, was not related to whether a packout study had been undertaken. The engagement of Mr Burns at the orchards was directly related to the improvement in packout rates - indeed his evidence at the hearing was that: Everything I did related to packout rates. (TS 672 l 38) 464 I accept the evidence of Mr Burns and his views as to the likely improvements in packout rates resulting from the improvements to cultural practices at the orchards. 465 In my view the applicants have not demonstrated the absence of a packout study as relevant to para 13 Further Amended Statement of Claim.

Paragraph 13(a) - Conclusion 466 In conclusion, I consider that the respondents had reasonable grounds for making the future representations as to the 2005 revenue in the 2005 Sunstate Budget.xls.

Paragraph 13(b) - Lack of evidence by applicants 467 As a preliminary point I note that, although the applicants plead in para 13(b) (and para 19(e)) that the representation of the first respondent as the predicted costs of production of the fruit crops in the 2005 Crop year was misleading or deceptive, there is no evidence that Mr Tracy was led into error by the budgeted costs in the 2005 Sunstate Budget, either in Mr Tracy's evidence-in-chief or under cross-examination. During cross-examination Mr Strahley gave evidence that he had discussed operating costs (both total costs and cultural costs) with Mr Tracy (for example, TS 1014-1015) but neither the applicants' submissions nor the evidence support a claim that the applicants were mislead or deceived by representations as to future costs in terms of para 13(b).

Paragraph 13(b) - Inputs 468 In any event, I have already observed that in his expert opinion, the applicants' expert forensic accountant Mr Green considered that the budgetary model used by the first respondent, including in the case of the 2005 Sunstate Budget, was materially complete and did not omit any material inputs (para 8.3.4), and included all material revenue and expense items required for predictive purposes (para 8.3.4). 469 Further I have already outlined in detail the evidence of the first respondent as to its budgetary process, including factors taken into consideration in that process. 470 Notwithstanding the claim in para 13(b) (and para 19(e)) as to the costs of production, the soundness of the first respondent's process in forecasting costs is not otherwise impugned by the applicants.

Paragraph 13(b) - Conclusion 471 In my view, the evidence shows that the first respondent had reasonable grounds for forecasting the cost of production in 2005.

Paragraph 13(c) 472 The budgetary model used by the first respondent adopts a conventional approach in determining net profit before taxes by taking into account the total revenue and the costs in deriving the net profit. I have already found that the first respondent had reasonable grounds for making representations as to its total revenue - which derived from the proceeds of sale of the fruit crops - in 2005 (para 13(a)) and as to its costs of production (para 13(b)). 473 On this basis, the first respondent had reasonable grounds for making the representation as to net profit before tax of the fruit crops that would be grown at the orchards during 2005.

Paragraph 13(d) 474 In considering the claim of the first respondent in para 13(a) I considered factors taken into account by the first respondent in making representations as to packout rates of fruit grown on the land during 2005, namely the approach of management, historical performance in relation to packouts, improvements in cultural practices and the impact on packout rates, the packout rate actually realised for the lemons in the 2005 Crop Year, and the issue raised by the applicants as to the absence of a packout study undertaken by the respondents. These factors are equally relevant to the reasonableness of the grounds of the first respondent in making representations as to the range of packout performance forecast in 2005. In my view the first respondent had reasonable grounds for making the representations as to packout performance by the orchards in the 2005 Crop Year.

Conclusion 475 I consider that the first respondent had reasonable grounds for making the representations the subject of that para 13 Further Amended Statement of Claim. I am not persuaded that the representations were misleading or deceptive for the reasons referred to in paras 19(d)-(g). In my view it is irrelevant whether the representations were made to Mr Tracy personally, or to the first applicant through Mr Tracy.

Paragraph 13 - necessary qualifications 476 In any event to the extent that the first respondent was required to qualify its representations to the applicants in order that representations as to future conduct could be said to be made on reasonable grounds. I consider that the respondents appropriately and effectively did so. This is not an issue which was raised by the applicants, and indeed as Allsop J observed in Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171 at [627] it does not follow that any statement in any commercial context which can be characterised as a promise must be accompanied by any existing legal or factual qualification. I address the issue in the interests of completeness in light of comments in such cases as Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189 at 201-2, Bowler 153 ALR 95 at 108, Famel Pty Ltd v Burswood Management Ltd (1989) ATPR 40-962 and Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171 at [627]. 477 First, I accept the submission of the respondents that on numerous occasions Mr Tracy was informed that, because the orchards were an agricultural business, the performance of the orchards was subject to factors beyond the control of the respondents including weather, commodity prices and market issues such as citrus canker. Mr Strahley in his affidavit said that during his meeting with Mr Tracy on 3 December 2005 he said that: · The citrus canker outbreak in 2004 adversely impacted on the performance of the orchards (Strahley affidavit sworn 12 July 2006 at [69(c)]). · The overall outcome of the budget forecasts were subject to factors beyond the control of the first respondent including weather and commodity price fluctuations and market access such as issues like citrus canker (Strahley affidavit sworn 12 July 2006 at [69(m)]). 478 Further, Mr Strahley said that he told Mr Tracy: there are a various factors which impact upon the packout rate, these are: variety of fruit; timing of picking as a response to market requirements/demand for a particular fruit size, colour, sugar level and expected shelf life; number of pickers supplied; age of the tree; weather at picking to interrupt picking, consistency of visual grading on the packing line; poor post harvest treatment such as dipping or delays in packing due to limitation of storage; method of transport and cultural practices such as thinning, pruning, spraying, fertilization and irrigation during the growing period. On site employee management plays a significant role during the picking and packing process in determining packout rates. (Strahley affidavit sworn 12 July 2006 at [69(t)]) 479 I also note that in an email of 20 December 2004 attaching the Carton Yield summary.xls from Mr Strahley to Mr Tracy, Mr Strahley said: Bear in mind as per all agricultural industries these are subject to the weather and timing of picking and packing. 480 Finally, Mr Bailey referred to factors relevant to budgetary forecasts including weather and timing of picking in his valuation report to Mr Tracy. At section "9.Crop" Mr Bailey said: This valuation is based on the estimates of volume provided by Mr A Strahley which appear to be reasonable at this stage but could vary at the time of harvest due to adverse seasonal conditions. The prices contained for fruit fluctuates depending on the time of harvest and supply and demand pressures existing at the time of marketing. 481 Mr Tracy in his witness statement in reply to the affidavit of Mr Strahley acknowledged that Mr Strahley had informed him of the citrus canker outbreak and its adverse impact on the orchards (Tracy statement in reply to the affidavit of Strahley at [4(c)]) and said that he recalled some discussion with Mr Strahley about market fluctuations and market access (para 4(n)). In relation to Mr Strahley's claim in para 69(t) of his affidavit, Mr Tracy denied having a discussion as deposed to by Mr Strahley, but recalled Mr Strahley telling him that attention to detail was important in relation to the management of the farms (para 4(u)). At the hearing, Mr Tracy acknowledged that there had been discussions with respect to budgetary matters on 3 December 2004, and that Mr Strahley organised a meeting for Mr Tracy with Ms Carolyn Bailey on 20 December 2004 in order for Ms Bailey to explain to Mr Tracy the standard way in which accounts were kept in relation to primary industry (TS 391 ll 21-34, cf Strahley affidavit sworn 12 July 2006 at [106]). 482 In my view Mr Strahley did inform Mr Tracy of factors affecting the overall outcome of the budget forecasts. I consider that Mr Tracy's failure to recall the discussion to which Mr Strahley deposed in para 69(t) of his affidavit of 12 July 2006 other than a general impression that "attention to detail was important in relation to the management of the farms" was due to Mr Tracy's lack of knowledge of the citrus industry and his inability to appreciate the importance of what was being told to him at the meeting of 3 December 2004. It was clear that, for example, Mr Tracy recalled Mr Strahley informing him that the timing of picking was weather-dependent (for example, TS 344 ll 13-16), and indeed there was a clause in the contract of sale in relation to risk of weather. Further, and in any event, it is clear that Mr Tracy was informed by Mr Bailey of the impact of seasonal conditions on economic performance of the orchards. 483 Second, in addition to informing Mr Tracy of factors affecting the budgetary forecasts including weather, the first respondent qualified the representations in the 2005 Sunstate Budget.xls by providing Mr Tracy with subsequent budgetary information, namely the Yield Summary.xls (provided on 20 December 2004), the Carton Yield Summary.xls (provided on 21 December 2004), the Valuation Yield Summary.xls (provided on 21 December 2004) and the Production Pricing Schedule Jan 05.xls (provided on 6 January 2005). This subsequent information is the subject of separate claims by the applicants. I now turn to those separate claims.

FUTURE REPRESENTATIONS: PARAGRAPHS 14(b), (c) & (d)

The claim 484 In para 14 of the Further Amended Statement of Claim the applicants claimed as follows: … b) the land would yield 14,075 bins of fruit for the Crop Year 2005; c) the land would yield 19,567 bins of fruit for the Crop Year 2006; d) the land would yield 22,322 bins of fruit for the Crop Year 2007. PARTICULARS The representations were written and are contained in a document entitled "Yield Summary.xls" which was an attachment to an e-mail from the Second Respondent to the Second Applicant sent on 20 December 2004. 485 Further in paras 19(i), (j) and (k) of the Further Amended Statement of Claim the applicants claimed: i) The First Respondent had no reasonable ground and knew that it had no reasonable ground to make its representation that the land would yield 14,075 bins of fruit for the Crop Year 2005 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraph a)-c) and f) j) The First Respondent had no reasonable ground and knew that it had no reasonable ground to make its representation that the land would yield 19,567 bins of fruit for the Crop Year 2006 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a)-c) and f) k) The First Respondent had no reasonable ground and knew that it had no reasonable ground to make its representation that the land would yield 22,322 bins of fruit for the Crop Year 2007 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a)-c) and f) 486 In summary the respondents in the Defence: · denied that any alleged representations were made to the first applicant or Mr Tracy; · said that the email to which the Yield Summary.xls was attached stated in part "… I will utilize this information within the reforecast. I had the orchard guys revisit their yield estimates…"; · said that the forecasted estimated yields did not convey or state the representations alleged in paras 14(b)-(d) of the Further Amended Statement of Claim; · denied that the Packing Shed computer records disclosed the matters alleged, and in any event denied that the Packing Shed computer records prevented the first respondent from having reasonable grounds to prepare the Yield Summary.xls; · had reasonable grounds for making the representations in the Yield Summary. In particular, the respondents submitted that the forecasted yield was an assumption made from the fruit that was expected to be produced from a tree in the 2005 Crop year for each crop, and was made taking into account: o historical data; o physical inspection of the trees; o current cultural practices; o previous yields; o consideration of the factors such as disease and weather conditions which historically impacted on yield;

Submissions of the parties 487 The applicants submitted in summary: · The document Yield Summary.xls (exhibit A17) was misleading or deceptive because it predicted yields that had never been achieved by the first respondent between 1998 and 2004. · The respondents claimed that they had a reasonable basis for making the predictions in the Yield Summary.xls because they took into account historical data, physical inspection of the trees, current cultural practices, previous yields, and consideration of factors such as disease and weather conditions. However having regard to the evidence of Mr Breed and Mr Strahley and the considerations referred to in relation to the 2005 Sunstate Budget.xls, there could not possibly have been a reasonable basis for the making of those predictions. 488 In summary, the respondents submitted: · the Yield Summary.xls was sent to Mr Tracy as an attachment to an email, which email qualified the Yield Summary.xls document; · any representations in the Yield Summary were qualified by the fact that they were estimates of the field staff; · the Yield Summary.xls was provided in light of information given to Mr Tracy about factors affecting budgetary calculations; · in any event, the first respondent has established on the evidence that it had reasonable grounds for the yields estimated by the field staff for the 2005, 2006 and 2007 Crop Years; · there was no representation as alleged; · alternatively, any representations were qualified; · alternatively the first respondent had reasonable grounds to make the forecasts for the 2005 Crop Years.

Consideration 489 The Yield Summary.xls is a document of two pages. On the first page the data is described as "Yield Forecast 3 Years Historical 7 Years" with separate tables for Bundaberg and Tiaro; on the second page the data is described as "Combined Orchards". Both pages describe actual yields between 1998 and 2004, and estimated yields for 2005, 2006 and 2007. The three figures found in para 14 Further Amended Statement of Claim are on the second page of the Yield Summary.xls under "Combined Orchards". 490 The message in the email attaching the Yield Summary.xls from Mr Strahley to Mr Tracy was as follows: Peter, I will utilize this information within the reforecast we discussed on Friday. I had the orchards guys revisit their yields estimates on the weekend. 491 A "representation" includes a statement made by a representor to a representee and relating by way of affirmation, denial, description or otherwise to a matter of fact (Halsbury's Law of England, 4th ed vol 31 para 703, cf Given v Pryor (1979) 24 ALR 442 at 446). In this case the representation made by the first respondent through Mr Strahley is that the yield data (a) were produced by the field staff and (b) Mr Strahley would use the data in reforecasting the yield figures which he would later provide to Mr Tracy. It is not, in my view, an unqualified representation as to the yield figures, upon which the applicants could rely as against the first respondent. At its highest, the data is field information, which appears to have been provided for the information of Mr Tracy, but which was subject to review by Mr Strahley. To that extent I do not consider that the provision of the Yield Summary.xls to Mr Tracy conveyed representations that: · the land would yield 14,075 bins of fruit for the Crop Year 2005; · the land would yield 19,567 bins of fruit for the Crop Year 2006; or · the land would yield 22,322 bins of fruit for the Crop Year 2007. 492 However if I am wrong in relation to this finding, and the provision of the Yield Summary.xls does constitute a representation to the applicants as claimed in paras 14(b), (c) and (d), I nonetheless consider that the first respondent has discharged its onus of proving that it made the representations as to yields in 2005, 2006 and 2007 on reasonable grounds. In particular: · similarly to my earlier observations in relation to para 13 Further Amended Statement of Claim, I accept that the total yield estimate for 2005 in the Yield Summary.xls was lower than the yield that had been achieved by the first respondent in 2003, and was accordingly achievable. · Although the estimates for 2006 and 2007 were in excess of yield achieved in previous years, I accept that the basis of the forecast was that the first respondent took into account historical data, physical inspection of the trees, current cultural practices, previous yields, and factors such as disease and weather conditions. I consider my earlier analysis of yield issues in relation to the 2005 Sunstate Budget.xls applicable to the applicants' claim in para 14(b), (c) and (d). · Mr Burns gave evidence that in his view: o the benefits of the improved pruning practices implemented in 2004 would have mainly been seen in the 2006 and 2007 Crop years (Burns affidavit sworn 11 July 2006 para 38); o the benefits of the improved pruning practices would have been "huge" (TS 673 l 39); o the improved spraying practices would have reduced disease, and improved fruit quality and therefore packout rates in the 2005 season and the following seasons (Burns affidavit sworn 11 July 2006 at [65]); · Mr Strahley gave evidence that he expected the improved cultural practices would improve the 2005 to 2007 yields (Strahley affidavit sworn 12 July 2006 at [228], [258]). · The claim of the applicants in paras 19(i), (j) and (k) as to the "true position" are not substantiated. I will deal specifically with the claims in para 19 in more detail later in the judgment. 493 This is not a case where there is no adequate foundation for optimistic predictions of future production. In my view the claims of the applicants in paras 14(b), (c) and (d) are not substantiated.

The claim 494 In para 15 of the Further Amended Statement of Claim the applicants claimed as follows: On 20 December 2004 the First Respondent represented to the First and Second Applicants that a) the land would yield 14,075 bins of fruit for the period 1 January 2005 until 31 December 2005; b) the land would yield 271,728 packed cartons of fruit for the period 1 January 2005 until 31 December 2005 PARTICULARS The representations were written and are contained in documents entitled "Carton Yield Summary.xls" and "Valuation Yield Summary.xls" which were attachments to two e-mails from the Second Respondent to the Second Applicant sent on 21 December 2004. 495 Further in para 19 Further Amended Statement of Claim the applicants claimed as follows: l) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the land would yield 14,075 bins of fruit for the period 1 January 2005 until 31 December 2005 because it had possession of the Packing Shed computer records which disclosed the matters referrer (sic) to in sub-paragraphs a)-c) and f); m) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the land the land (sic) would yield 271,728 packed cartons of fruit for the period 1 January 2005 until 31 December 2005 because it had possession of the Packing Shed computer records which disclosed that the land had yielded the following number of packed cartons of fruit for the period 2001-2005 : 2001 - 110,079; 2002 - 91,447; 2003-214,882; 2004-132,526 and 2005-40,364. 496 The respondents in summary: · denied that the alleged representations had been made to the applicants; · said that on 20 December 2004 Mr Strahley sent Mr Tracy an email which qualified the attached Carton Yield Summary.xls; · said that the Carton Yield Summary.xls recorded: o budgeted bins to be packed for the period January 2005 to December 2005 of 14,075; and o budgeted cartons to be packed of 262,277; · said that on 21 December 2004 Mr Strahley sent Mr Tracy an email attaching the Valuation Yield Summary 2004.xls which stated "These are the Sunstate crew's crop historical data and 2005 season estimates for the valuation. HTW should ask for them before including them as a crop component in the valuation"; · said that the Valuation Yield Summary 2004.xls did not refer to yields for bins and recorded an estimated total yield for the 2005 crop year of 262,278 cartons; · denied that the Packing Shed computer records either disclosed the matters alleged or prevented the first respondent from having reasonable grounds to prepare the carton yield summary or the valuation yield summary; · said that the first respondent had reasonable grounds to make the representations set out in the yield summaries.

Submissions of the parties 497 The applicants claimed in summary that: · The representations in the Valuation Yield Summary and the Carton Yield Summary were misleading or deceptive because of the disparity between the actual historical records of bin and carton numbers produced by the orchards and the predicted levels. · The cartons predicted in the Sunstate Budget were 271,728 whereas the actual cartons produced by the orchards historically were 2001-110,079; 2002-91,447; 2003-214,882; 2004-132,526. · The respondents' claim that the prediction was reasonable because in making it they took into account historical data, physical inspection of the trees, current cultural practices, previous yields, and consideration of factors such as disease and weather conditions could not stand for the reasons the applicants advanced for the earlier future predictions. 498 The respondents submitted in summary: · The Carton Yield Summary is a carton production budget for each variety of fruit for each month of the 2005 Crop year. · The Carton Yield Summary did contain a representation that the land would yield 271,728 packed cartons of fruit. · The email qualified the forecast by informing Mr Tracy that yields were budgeted figures and that Mr Tracy should bear in mind that as per all agricultural practices the forecasts were subject to the weather and timing of picking. · The yield of 14,075 bins was qualified by the same qualifications applying to the Yield Summary. · The Valuation Yield Summary was an estimate for the 2005 Crop Year of the number of cartons of fruit of 262,278 with historical numbers of cartons and budgeted average prices per carton for each fruit variety. · The bin yield in the Valuation Yield Summary had been revised from the 2005 Sunstate Budget and the forecast number of cartons to be packed was reduced from the 2005 Sunstate Budget. · For reasons already given in relation to earlier predictions and in the context of the submissions as to the Yield Summary allegations these forecasts were made on reasonable grounds.

Consideration 499 The Carton Yield Summary.xls (exhibit A19) is a one page document projecting a total of 14,075 bins and 262,277 cartons of fruit for the 2005 Crop Year. It was attached to an email from Mr Strahley to Mr Tracy and Mr Douglas on 20 December 2004 with the following message: Pete, these are the budgeted figures. Bear in mind as per all agriculture industries these are subject to the weather and timing of picking & packing. 500 The Valuation Yield Summary.xls (exhibit A21) is a one page document with records of prices and cartons of fruit in the 2001/2002, 2002/2003 and 2003/2004 years, and estimated prices and cartons for fruit in 2004/2005. The estimated cartonnage for 2004/2005 was 262,278 cartons. The document was attached to an email from Mr Strahley to Mr Tracy sent on 21 December 2004 with the following message: Pete, These are the Sunstate crew's crop historical data and 2005 season estimates for the valuation. HTW should ask for them before including them as a crop component in the valuation. 501 While the respondents are correct in submitting that the Valuation Yield Summary 2004.xls did not refer to yields for bins but only cartons, it is clear that the Carton Yield Summary 2004.xls referred to both bins and cartons. Notwithstanding the lack of precision by the applicants, read together, the Valuation Yield Summary.xls and the Carton Yield Summary.xls was estimated: · 14,075 bins of fruit for the period 1 January 2005 until 31 December 2005; and · 271,728 packed cartons of fruit for the period 1 January 2005 until 31 December 2005. 502 The cumulative effect of these documents was: · The first respondent was making representations as to the yields in bins and cartons to the applicants; and · Although like the Yield Summary.xls the Valuation Yield Summary.xls was explained by Mr Strahley as an estimate of the first respondent's field crew, unlike the Yield Summary.xls there was no suggestion that the data in the Valuation Yield Summary.xls would be subject to any further review by Mr Strahley, or that it was provided in some interim fashion for Mr Tracy's information. Further, the fact that Mr Strahley suggested in his email that the data be provided to the HTW for valuation purposes indicates that the first respondent, through Mr Strahley, was representing the accuracy of the data in the Valuation Yield Summary.xls. 503 However, the first respondent clearly qualified the forecasts as to both yields and cartons in the Carton Yield Summary.xls by reference to weather and timing of picking and packing. These documents also clearly represented a revision of earlier production forecasts. 504 I consider the first respondent had reasonable grounds for making the representations in the Valuation Yield Summary.xls and the Carton Yield Summary.xls for the same reasons I have already discussed earlier in this judgment with respect to the 2005 Sunstate Budget.xls and the Yield Summary.xls. 505 Further, I do not consider the claims of the applicants in paras 19(l) and (m) as to the "true position" are substantiated. I will deal specifically with the claims in para 19 in detail later in the judgment 506 In my view the applicants' claims in para 15 Further Amended Statement of Claim are not substantiated.

The claim 507 In para 16 of the Further Amended Statement of Claim the applicants claimed as follows: On 5 January 2005 the First Respondent represented to the First and Second Applicants that: (a) the proceeds of the sale of the fruit crops that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be $5,363,176.00; (b) the cost of production of the fruit crop that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be $4,534,961.00; (c) the net profit before tax of the fruit crops that would be grown on the land for the period 1 January 2005 until 31 January 2005 would be $828,214.00; (d) a packout rate of 75-80% in the production of the fruit crop that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be achieved; (e) the land would yield 13,028 bins of fruit picked in the period 1 January 2005 until 31 December 2005; (f) the matters referred to in sub-paragraphs (a)-(e) was the most accurate prediction of the yield that would be obtained from the land in the period 1 January 2005 until 31 December 2005. PARTICULARS The representations were partly oral and partly in writing. The representation referred to in sub-paragraph (g f) was oral and was made by the First Respondent, by the Third Respondent, to the First and Second Applicants in a conversation between the Third Respondent and the Second Applicant that took place on 5 January 2005 at the First Respondent's shed. The representations referred to in sub-paragraphs (a)-(f e) were in writing and are contained in a document entitled 'Most Likely Scenario' which was authored by the First Respondent, by the Third Respondent, and provided to the First and Second Applicants on 5 January 2005 at the First Respondent's shed. 508 Further, the applicants claim in para 19 that: n) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the proceeds of the sale of the fruit crops that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be $5,363,176.00 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a)-f) and l); o) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that cost of production of the fruit crop that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be $4,534,961.00 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a)-f) and l); p) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the net profit before tax of the fruit crops that would be grown on the land for the period 1 January 2005 until 31 January 2005 would be $828,214.00 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a)-f) and l); q) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that a packout rate of 75-80% in the production of the fruit crop that would be grown on the land for the period 1 January 2005 until 31 December 2005 would be achieved because it had possession of the Packing Shed computer records which the matters referred to in sub-paragraphs a)-c), f) and l); r) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the land would yield 13,028 bins of fruit picked in the period 1 January 2005 until 31 December 2005 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraph l); s) The First Respondent had no reasonable ground and knew that it had no reasonable ground for stating that the matters referred to in sub-paragraphs 16(a)-(e) was the most accurate prediction of the yield that would be obtained from the land in the period 1 January 2005 until 31 December 2005 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a)-f); 509 The respondents claimed that no representations were made by the first respondent as alleged - rather, they alleged that the "Most Likely Scenario" document was authored by Mr Tracy and not by either the first respondent or Mr Breed.

Submissions of the parties 510 Unfortunately, the written submissions of the applicants in relation to this claim are difficult to follow. They are, regrettably, scattered through the 128 pages of the applicants' written submissions with little explanation as to the reason for such fragmentation. Further there is considerable cross-referencing of material within the written submissions without indexing or other identification of the material to which cross-referencing is made. So, for example material relevant to this claim can be seen in the Applicants' Written Submissions at: · Pages 62-63 under the heading "TRACY'S ALLEGED AUTHORSHIP OF MOST LIKELY SCENARIO". Paragraph 1 of that material state, without further precision, "For the reasons stated earlier there is no reliable evidence before the Court which could support a finding that Mr Tracy was the author of the Most Likely Scenario". · Page 61 under the heading "THE APPLICANTS' DUE DILIGENCE" the applicants submitted "For the reasons stated earlier in relation to Mr Breed there is no reliable evidence before the Court to support a finding that Mr Tracy was the author of the Most Likely Scenario". · Page 55, where in para 16 under the heading "FAILURE TO CALL MR BREED" there is oblique reference to the Most Likely Scenario document in the context of the conversation between Mr Tracy and Mr Breed. · Page 82 under the heading "No 19 WAS THE REPRESENTATION MADE BY Ex39 MISLEADING OR DECEPTIVE OR LIKELY TO MISLEAD OR DECEIVE OR FALSE OR MISLEADING IN RELATION TO THE ORCHARDS?", the applicants submitted that "the evidence concerning the Tracy-Breed meeting and the effect of the failure to produce Mr Breed for cross-examination have been dealt with earlier". 511 In summary however, I understand the applicants' case concerning para 16 Further Amended Statement of Claim to be as follows: · The respondents do not plead that there were any reasonable grounds for the making of the forecasts the subject of the claim in para 16. Accordingly, if the Court finds that the representations were made they are deemed to have been misleading or deceptive under s 51A. · The respondents failed to call Mr Breed as a witness, presumably because such cross-examination would not have assisted the respondents' case. It follows that Mr Tracy's version of the conversation with Mr Breed in relation to the production of the Most Likely Scenario document should be accepted. · The data summary document to which the respondents refer in their submissions, and which was part of the Most Likely Scenario, was a worksheet within the 2005 Budget.xls provided to Mr Tracy on 10 December 2004 and provided in turn by Mr Tracy to Mr Bailey on 4 January 2005. However although the worksheet from the 2005 Budget was in Mr Tracy's computer on 4 January 2005, this does not establish that the Most Likely Scenario was in Mr Tracy's computer on 4 January 2005. · Reference to pp 68-69 of the Most Likely Scenario shows the changes in bin numbers made by Mr Breed on 5 January 2005, which proves conclusively that the analysis of Mr Lytras was wrong. · In relation to this issue the respondents demonstrate "once again … a superficial and glossed approach to the submissions…". 512 In summary, the respondents submitted: · The evidence demonstrated that the Most Likely Scenario was not created on the afternoon of 5 January 2005 when Mr Tracy was in conference with Mr Breed at the Packing Shed, but that it was created on or before 4 January 2005. · The evidence demonstrated that on 4 January 2005 Mr Tracy had emailed to Mr Bailey three documents, namely the Carton Yield Summary, the Yield Summary and a Data Summary. · Mr Lytras' second affidavit established that the Most Likely Scenario was in Mr Tracy's computer on 4 January 2005 as he produced the same document to Mr Bailey, being the "data summary" on that date for the purposes of undertaking his valuation. · This was consistent with the sworn affidavit of Mr Breed that he did not create the Most Likely Scenario. · In any event Mr Tracy's version of events did not establish that the alleged representations were made by the first respondent, because: o There was no evidence from Mr Tracy that Mr Breed made the statement as alleged in para 16(f) Further Amended Statement of Claim. o Mr Breed was operating the computer as he had a working knowledge of the budget model. o Mr Breed was operating the computer to input the various scenarios of Mr Tracy. o The events of 5 January 2005, on Mr Tracy's case, involved Mr Tracy asking Mr Breed for assistance for his own purposes in assessing a variety of scenarios. Whatever occurred on that day relating to Mr Tracy's laptop computer and the analysis of different scenarios had nothing to do with a farm manager's authority to perform the functions which he had as a farm manager. There was no interest for the first respondent in the development of these scenarios, or any evidence that Mr Strahley approved of them. o Mr Breed had made it plain that he had no authority to provide any external person with farm information, in particular financial information in relation to the first respondent's conduct of the orchard. This was acknowledged by the applicants at para 4 on pp 17-18 of the applicants' written submissions.

Consideration 513 In his statement, Mr Tracy's evidence was in summary: · On 5 January 2005 he travelled to the Packing Shed with his laptop and met with Mr Breed. · On the laptop was the 2005 Sunstate budget provided earlier to him by Mr Strahley. · He asked Mr Breed to consider a number of scenarios as to the trading results for the period January 2005-December 2005 based on the 2005 Sunstate budget supplied by Mr Strahley. · The scenarios were titled "brilliant", "optimistic", "most likely" and "worst case". · The spreadsheets were extremely complex linking to multiple source data worksheets and he did not have the familiarity or technical competence to efficiently operate these spreadsheets. · He began making some alterations to the spreadsheets based on what Mr Breed was telling him however he soon realised that he was not capable of efficiently dealing with the data, so he turned his laptop around so that Mr Breed could make the changes to the spreadsheets Mr Breed said were necessary for the various scenarios. · Mr Breed checked Mr Tracy's limited input before completing spreadsheets for each scenario, and Mr Tracy made no alterations to the spreadsheets once completed. · Mr Breed was the author of the various scenarios although the spreadsheets were saved on Mr Tracy's laptop computer. · Mr Breed used Mr Tracy's laptop to create each of the trading scenarios. · The process began by Mr Breed looking at the separate elements of the spreadsheet increasing or reducing certain inputs and then calculating the trading result for that scenario. · Mr Tracy's reason for asking Mr Breed to undertake the exercise was that he wanted the view of "the man on the ground" concerning the accuracy of the 2005 Budget that had been provided to him by Mr Strahley. · When Mr Breed calculated the Most Likely Scenario he reduced the number of bins that were stated in the 2005 budget from 14,241 to 13,208, changed the picking times slightly, increased the expenses slightly and slightly reduced the costs of the bin harvest. Mr Breed did not reduce any of the packout rates but instead increased two of them slightly. · As Mr Breed undertook the other calculations he changed other variables but mainly prices obtained for the fruit to arrive at the different scenarios. 514 The only other evidence of the events of 5 January 2005 was that of Mr Breed in his affidavit sworn 14 July 2006. I have already found that, in the circumstances, little weight can be attributed to Mr Breed's affidavit. I note however that, in many respects, Mr Breed's evidence of the events of 5 January 2005 was similar to that of Mr Tracy with the critical distinctions being that Mr Breed claimed that Mr Tracy had authored the Most Likely Scenario, that Mr Tracy had performed all the calculations and entered most of the data, and that Mr Breed was in a subordinate role to Mr Tracy in relation to creation of these documents.

Did Mr Breed have authority to make representations to Mr Tracy? 515 Leaving aside for one moment the issue whether the first respondent, through Mr Breed, actually made the oral and written representations claimed by the applicants in para 16 Further Amended Statement of Claim, I consider that Mr Breed would have had at least ostensible authority from the first respondent to make such representations on its behalf within the meaning of s 84(2)(a) of the Act and such cases as Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 and Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1990) 3 ACSR 649. 516 It is clear that Mr Strahley, as managing director of the parent company of the first respondent, and also as an executive director of the first respondent itself, had actual authority on behalf of the first respondent to make representations binding the first respondent in the transaction with Mr Tracy. Mr Strahley was also clearly the primary contact of Mr Tracy in the purchase transaction, particularly with respect to budgetary and financial information. Further, the evidence is that, after contracts had been exchanged, Mr Strahley had given Mr Palfreeman the responsibility of communicating with Mr Tracy until settlement, which included communicating with the Packing Shed any request for information from Mr Tracy, and to that extent Mr Palfreeman would have had actual authority to provide Mr Tracy with information (TS 1114 ll 17-19, 1231 ll 30-31). These issues are not in dispute. 517 In relation to Mr Breed, the respondents admitted in para 3(2) of the Defence that Mr Breed acted as agent of the first respondent within the scope of his employment. Mr Breed was the farm manager of the first respondent. That does not necessarily mean that Mr Breed had authority to make representations binding the first respondent in relation to budgetary and financial issues. The key question is whether Mr Breed's authority extended to making such binding representations, or whether the conduct of the first respondent had clothed Mr Breed with such authority by way of apparent or ostensible authority. 518 To the extent that there was a hierarchy in the first respondent's management structure, the evidence is that Mr Breed was a senior member of the management team to whom other staff at the orchards, including Mr Burns, reported. In describing the communication protocol at the orchards Mr Strahley explained that the employees communicated with the farm manager, who in turn communicated with him (Strahley affidavit sworn 12 July 2006 at [20]). 519 In his affidavit, Mr Breed described his responsibilities as including: a. management of the Bundaberg and Tiaro orchards; b. management of the Packing Shed; c. purchasing of equipment and consumables; d. sales of produce; e. staff management; and f. provision of yield and packout data and other performance data to head office in Brisbane for inclusion in management reports and budget documents. (Breed affidavit sworn 14 July 2006 at [5]). 520 This evidence is not disputed. However the respondents' position is that Mr Breed had no authority as farm manager to provide any external person with farm information and, in particular, financial information as to the first respondent's conduct of the orchard. Indeed the respondents point to evidence of Mr Neubecker that on one occasion Mr Breed had been unwilling to provide unqualified information without first confirming the information with Mr Strahley (TS 853 ll 42-47). 521 While Mr Breed's primary functions appear to have been to manage the relevant properties and to report to Mr Strahley in relation to the operational matters involving the properties, such evidence as is before the Court demonstrates that, even if he did not have actual authority to do so, in practice Mr Breed was armed with the appearance of authority to speak to third parties in relation to financial matters on behalf of the first respondent without Mr Strahley's express prior consent. I form this view for the following reasons: · Both Mr Bailey (TS 847 ll 30-37) and Mr Neubecker (TS 853 ll 42-47), had obtained financial information from Mr Breed in relation to the orchards. Mr Bailey said that he understood that Mr Breed was the person on behalf of Sunstate whom he should contact in order to obtain, from the first respondent's perspective, relevant production information, and that he further understood that Mr Breed was authorised to provide such information. · During cross-examination Mr Strahley agreed that "Mr Breed was, in terms of his position, the source of information from the farm to [Mr Strahley], or indeed, from the farm to Tracy, whether directly or through [Mr Strahley]" (TS 1015 ll 21-23). · during negotiations the first respondent gave Mr Tracy access to the Packing Shed where he had discussions with, inter alia, Mr Breed (TS 1226 ll 7-9, Strahley affidavit sworn 12 July 2006 at [219(c)]). It is clear that Mr Breed had numerous communications with Mr Tracy during which Mr Breed provided Mr Tracy directly with data (for example, email from Breed to Tracy on 6 January 2005 exhibit A37; email from Breed to Tracy on 14 January 2005 exhibit A39). There is no evidence that the first respondent limited Mr Breed's discussions with Mr Tracy during the negotiation period - indeed the first respondent appeared generous in allowing Mr Tracy access to Mr Breed in the course of his duties. · Mr Strahley communicated with Mr Tracy through Mr Breed on at least one occasion (Strahley affidavit sworn 12 July 2006 at [165]). · Mr Breed was in communication with and provided confidential price information to third party fruit wholesalers for their comment, which comment was then forwarded to Mr Tracy (Strahley affidavit sworn 12 July 2006 at [253]). 522 In relation to the meeting of 5 January 2005 between Mr Tracy and Mr Breed, Mr Tracy did not give evidence as to how the meeting was arranged, however I infer that it was arranged by Mr Tracy contacting Mr Breed and arranging to meet him at the orchards. This is consistent with Mr Breed's affidavit (para 30). The evidence was that Mr Strahley was absent on leave at that time. However in light of: · the endorsement of the first respondent to Mr Tracy meeting with Mr Breed on various occasions; · the apparent absence of limitations on communications by Mr Breed to Mr Tracy on budgetary or financial matters; · the role of Mr Breed in communicating with third parties; and · Mr Breed's seniority in the management structure of the first respondent; in my view representations by Mr Breed to Mr Tracy in the nature of the Most Likely Scenario would have bound the first respondent. 523 The next question however is whether the first respondent, through Mr Breed, made the representations claimed by the applicants in para 16 Further Amended Statement of Claim.

Was Mr Breed the author of the Most Likely Scenario? 524 In their submission that the Most Likely Scenario was actually created by Mr Tracy and not Mr Breed, the respondents rely on evidence of Mr Lytras and Mr Bailey. In his affidavit Mr Bailey deposed that on 4 January 2005 Mr Tracy had emailed him three documents for the purposes of Mr Bailey undertaking a valuation of the relevant properties. Those documents were the Carton Yield Summary.xls, Yield Summary.xls, and "data summary.xls". It does not appear to be in dispute that the document "data summary.xls" was an extract of approximately 22 pages from the 2005 Sunstate Budget.xls. 525 Mr Lytras, the forensic accounting expert called by the respondents, gave evidence that the numbers in the data summary.xls were exactly the same as those in the "Data" worksheet of the Most Likely Scenario document (Lytras second affidavit sworn 11 May 2007). This evidence was not challenged by the applicants. On that basis it is clear that the material in the data.summary.xls forms a foundation of the calculations in the Most Likely Scenario document. 526 The key issue in relation to this claim is whether this evidence means that the Most Likely Scenario was already in Mr Tracy's laptop computer prior to his meeting with Mr Breed. The respondents say that Mr Lytras' evidence establishes that this was the case. 527 The fact that the basis of the Most Likely Scenario was the data summary which Mr Tracy already had prior to the meeting with Mr Breed does not automatically establish that he had already created the Most Likely Scenario prior to 5 January 2005. However in my view, the evidence supports the respondents' submissions that Mr Tracy both initiated the creation of the Most Likely Scenario, and was the "author" of that document. I form this view for the following reasons: · Prior to the meeting of 5 January 2005 Mr Tracy had clearly isolated from the 2005 Sunstate Budget.xls (a document of 141 pages in length) material of 22 pages which became the "data summary.xls". He clearly considered this data of such importance that he had forwarded it to Mr Bailey on 4 January 2005 as reference material for Mr Bailey's valuation. Accordingly, by 4 January 2005 (prior to his meeting with Mr Breed) Mr Tracy was clearly focusing on that data, and in a position to manipulate the material in the data summary.xls to create the various scenarios including the Most Likely Scenario. · However in any event Mr Tracy's own evidence demonstrates that he created the Most Likely Scenario rather than Mr Breed. Mr Tracy had brought his laptop to the meeting, and he deposed that he asked Mr Breed to consider a number of scenarios which Mr Tracy had already created, including one titled the Most Likely Scenario. Mr Tracy asked Mr Breed to assist him because the spreadsheets were complex and Mr Tracy was not familiar with them. The concept of the Most Likely Scenario was conceived by Mr Tracy, its data set was provided by Mr Tracy, and his own evidence demonstrates that he drew Mr Breed in to assist him in the technical task of completing the various scenarios to his (Mr Tracy's) satisfaction. The author of the Most Likely Scenario was Mr Tracy, not Mr Breed (cf observations of Morling J in Crocker v Papunya Tula Artists Pty Ltd (1985) 61 ALR 529 at 531, and discussion in S Ricketson The Law of Intellectual Property: Copyright, Designs & Confidential Information (2nd ed, looseleaf) Lawbook Co 2002, para 7.45). · Although little weight can be attributed to Mr Breed's evidence, his evidence is that Mr Tracy created the Most Likely Scenario and Mr Breed assisted Mr Tracy.

Did Mr Breed represent the Most Likely Scenario to be the "most accurate prediction" of the yield in 2005? 528 Further, I am not persuaded that Mr Breed had represented to Mr Tracy that the Most Likely Scenario was "the most accurate prediction" of the yield that would be obtained from the land in the 2005 Crop Year. I have already noted in this judgment the caution with which courts approach serious difficulties of proof of oral or partly oral conduct in the absence of some reliable contemporaneous record or other satisfactory corroboration (Watson (1995) NSWLR 315 at 319). The only evidence of Mr Breed's oral representation was the evidence of Mr Tracy, who had visited Mr Breed with apparently pre-conceived ideas as to, inter alia, the "most likely" scenario for 2005, and who had recruited Mr Breed's assistance in entering the data to produce these scenarios. While I do not doubt Mr Tracy's honesty, in my view it is likely that Mr Tracy satisfied himself of the various scenarios and considered those scenarios vindicated by the assistance Mr Breed provided him in producing them.

Conclusion 529 Finally, I consider that the claims of the applicants in paras 19(n)-(s) as to the "true position" are not substantiated. I will deal specifically with the claims in para 19 in more detail later in the judgment 530 In my view the claims in para 16 Further Amended Statement of Claim are not substantiated.

The claim 531 In para 17 of the Further Amended Statement of Claim the applicants claimed as follows: On 6 January 2005 the First Respondent represented to the First and Second Applicants that: a) the land would yield 13,415 bins of fruit picked for the period 1 January 2005 until 30 September 2005; b) the land would yield 249,441 cartons of packed fruit for the period 1 January 2005 until 30 September 2005; c) the proceeds of sale of the fruit crops that would be grown on the land for the period 1 January 2005 until 30 September 2005 would be $5,443,770.00; d) the average price per carton for fruit yielded by the land for the period 1 January 2005 until 30 September 2005 would be as follows: Murcotts $22.87; Lemons $30.12; Imperials $18.08; Novas $20.14 and Ellenors $17.94; e) the fruit yielded by the land for the period 1 January 2005 until 30 September 2005 would yield the following packout rates: Murcotts 65%; Lemons 80.5%; Imperials 70%; Novas 75% and Ellenors 67%. PARTICULARS The representations were written and are contained in a document entitled "Production Pricing Schedule Jan 05.xls" which was an attachment to an e-mail from the Third Respondent to the Second Applicant sent on 6 January 2005. 532 Further in para 19 the applicants claimed: t) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the land would yield 13,415 bins of fruit picked for the period 1 January 2005 until 30 September 2005 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a)-f); u) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the land would yield 249,441 cartons of packed fruit for the period 1 January 2005 until 30 September 2005 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a)-f); v) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the average price per carton for fruit yielded by the land for the period 1 January 2005 until 30 September 2005 would be as follows: Murcotts $22.87; Lemons $30.12; Imperials $18.08; Novas $20.14 and Ellenors $17.94 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a)-f); w) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the proceeds of sale of the fruit crops that would be grown on the land for the period 1 January 2005 until 30 September 2005 would be $5,443,770.00 because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a)-f); x) The First Respondent had no reasonable ground and knew that it had no reasonable ground for predicting that the fruit yielded by the land for the period 1 January 2005 until 30 September 2005 would yield the following packout rates: Murcotts 65%; Lemons 80.5%; Imperials 70%; Novas 75% and Ellenors 67% because it had possession of the Packing Shed computer records which disclosed the matters referred to in sub-paragraphs a)-f). 533 In summary the respondents: · denied that the allegations in para 17 were made; · said that the first respondent had reasonable grounds to make the representations recorded in the Production Pricing Schedule Jan 05.xls because: o the production pricing schedule was a pricing assumption schedule; o the pricing under the heading "Pricing received" was obtained from agents; o the average price per carton was an expected price upon the assumed crop production, the class percentages for the crop and yields as referred to in the schedule for each crop type; · said that the first respondent sent Mr Tracy a pricing and average price per carton schedule undertaken by the agent Carter and Spencer for crops and a pricing schedule from the agent Sculli's; · denied that in those circumstances the alleged representations were misleading or deceptive or likely to mislead or deceive either the first applicant or Mr Tracy.

Submissions of the parties 534 The applicants claimed in summary that: · The predictions of future citrus prices and revenue contained in the Production Pricing Schedule.xls (exhibit A37) were misleading or deceptive because of the difference between the actual historical performance and the predicted prices. · Although the respondents pleaded that the pricing predictions were reasonable because they were obtained from third parties, this evidence cannot stand against the evidence of Mr Strahley and Mr Burns as to the pricing outlook and as to the continuous decline in citrus prices that had been experienced since 2002. · Exhibit A93, a position report from April/May 2004, disclosed that the first respondent held the view that the price decreases would continue. 535 The respondents claimed that the Production Pricing Schedule.xls did not convey the representations claimed by the applicants, and that: · the schedule was for the specific fruit varieties specified in the report and not a representation as to all the fruit crops grown on the orchards; · it did not contain or convey a representation as to the yield of the orchards or the gross proceeds of the fruit crops that would be grown on the orchards; · it was plainly a forecast subject to such qualifications as weather and time of picking; · it plainly was produced to forecast pricing of the fruit only and identified the assumptions made to forecast that pricing; · Mr Tracy accepted that the pricing schedule was a response to his request to be provided with evidence of likely pricing for the 2005 season; · there were no packout rates recorded in the schedule although they could be calculated; · in any event information in the document as to revenue and prices was qualified on 7 January 2005 upon Mr Tracy being provided with an updated pricing schedule from the fruit wholesaler, Carter and Spence, and comments from Sculli's, a fruit wholesaler, relating to the pricing of lemons (exhibit A38).

Consideration 536 On 6 January 2005 Mr Breed sent an email to Mr Tracy with the attachment Production Pricing Schedule.xls. The subject of the email was "Pricing Schedule", and the message in the email read: Peter Attached is the pricing assumption data on the main varieties. Please let me know if I can help with anything else. Thanks for the day yesterday and hope you had a safe trip. 537 The Production Pricing Schedule.xls was a document of five pages, with pages headed "Lemon Pricing Schedule Season 2005", "Imperial Pricing Schedule Season 2005", "Nova Pricing Schedule Season 2005", "Ellenor Pricing Schedule Season 2005", and "Murcott Pricing Schedule Season 2005". Each page featured a small chart, by reference to months in 2005, and forecast information including bins picked, cartons packed, class 1 and class 2 fruit, sales, and average carton prices. 538 In my view the first respondent did not make the representations alleged by the applicants. Further, even if representations as to forecast prices were made by the first respondent the first respondent had reasonable grounds for doing so. I form this view for the following reasons: · I agree with the submissions of the respondents that the claims in paras 17(a), (b) and (c) do not reflect any representations in the Production Pricing Schedule.xls. The Production Pricing Schedule.xls was limited to specific fruit varieties specified in the report, and was not a representation as to all the fruit crops grown on the orchards including limes, mangoes or oranges. Accordingly, it could not constitute a representation as to the total yield of the orchards or the gross proceeds of the fruit crops that would be grown on the orchards. · The data in the Production Pricing Schedule.xls was clearly qualified. It was described by Mr Breed as "pricing assumption data on the main varieties." It was clearly not an unqualified prediction of performance of price, or anything else including packout rates or yield. · The Production Pricing Schedule.xls contained no record of packout rates as claimed in para 17(e). · I agree with the submission of the respondents that the revenue and prices were qualified on 7 January 2005 when Mr Tracy was provided with an updated pricing schedule in relation to the pricing of lemons obtained from the fruit wholesaler Carter and Spence, and with a comment in the email from Sculli's that prices for lemons would be good for the season. · In any event I consider representations by the first respondent as to price were made on reasonable grounds for the same reasons I outlined earlier in this judgment with respect to para 13 Further Amended Statement of Claim. 539 Further, the claim of the applicants in paras 19(t)-(x) as to the "true position" are not substantiated. I will deal specifically with the claims in para 19 in more detail later in the judgment 540 In my view the claims in para 17 Further Amended Statement of Claim are not substantiated.

PACKING SHED RECORDS: PARAGRAPH 19 541 Paragraph 19 Further Amended Statement of Claim is a catch-all provision referring back to the claims in paras 11-17. Throughout this judgment I have referred to para 19 in the context of the individual claims in paras 11-17. It is important that the claims of para 19 be specifically addressed, and I do so now. 542 In essence, the applicants in para 19 have claimed that the representations in paras 11-17 were misleading or deceptive or likely to mislead or deceive in that: · in relation to the Historical Representations of the first respondent, the first respondent knew that the representations were false because it had possession of the Packing Shed computer records which disclosed the true position (paras 19(a) and (b)); · in relation to the Future Representations of the first respondent, the first respondent knew it had no reasonable grounds to make the representations because: o the first respondent had possession of the Packing Shed computer records which disclosed the true position (paras 19 (c)-(x)); o the first respondent knew of the matters referred to in paras 17A (a),(c),(d) and (e) (para 19(c)); 543 In the Defence, the respondents denied the claims of the applicants in para 19.

Further Amended Statement of Claim 544 I have already considered para 17A in detail. The claims in paras 17A(c) and (d) were not pressed by the applicants in their submissions. I found that the claims in paras 17A(a) and (e) were not substantiated. 545 There is also considerable cross-referencing between each of the sub-paragraphs in para 19 as well as back to paras 11-17. 546 I have already dealt with the historical representations of the respondents, in relation to which the Packing Shed records were clearly of particular relevance. 547 Further, as I have already explained, historical information in the Packing Shed records was of more limited assistance in relation to future representations than historical representations because historical performance is only one factor in assessing whether a representation as to a future matter is reasonable. 548 Two major issues arose in relation to the applicants' claims concerning the Packing Shed records in para 19, namely: · whether the first respondent and Mr Strahley attempted to destroy the Packing Shed records to prevent the applicants accessing the records and therefore discovering that the respondents had perpetrated a fraud on them; and · more broadly, the proof (or lack thereof) concerning the true position in the Packing Shed records, as claimed by the applicants in para 19, and as considered in the expert evidence of Mr Green and Mr Lytras.

Did the first respondent and Mr Strahley attempt to destroy the Packing Shed records? 549 This very serious accusation was not specifically pleaded by the applicants, but it was made numerous times during the hearing by Mr Tracy (TS 266-270, 381). I deal with this matter only because Mr Bell QC for the respondents submitted that these particular accusations have "hung over the head" of the respondents, in particular that of Mr Strahley, and because the first respondent is a public company with reporting obligations. 550 As I mentioned earlier in this judgment, no reliable evidence was produced in support of the allegation that the first respondent and Mr Strahley had ordered the destruction, or otherwise attempted to damage or destroy, the Packing Shed records to prevent the applicants accessing them. Mr Tracy claimed that he was told by Mr Breed and Mr Devenny that Mr Palfreeman and another person attempted to delete all of the data files from the computers. However in my view fatal to this accusation was: · the absence of sworn evidence by Mr Devenny deposing to this fact. A statement purporting to be that of Mr Devenny was filed by the applicants on 30 June 2006, however as it is unsigned no weight can be attributed to it. Mr Devenny was not called as a witness by either party; · the fact that, although there is an assertion to this effect in the unsigned statement of Mr Breed, I have attributed no weight to that statement. In any event this allegation is subsequently contradicted by Mr Breed in his sworn affidavit; · the sworn evidence of Mr Palfreeman, who deposed that he and another Hancock employee had been instructed by Mr Strahley to attend the relevant properties at settlement in order to remove the first respondent's and Hancock's proprietary hard copy and electronic information from the orchards and the Packing Shed, but to "leave TotalPak all working and complete". Mr Palfreeman deposed further that he complied with these instructions. (Palfreeman affidavit sworn 6 July 2006 at [22]); · the sworn evidence of Mr Strahley, who deposed that he had told Mr Palfreeman to go to the property and remove the first respondent's and Hancock's proprietary hard copy and electronic information from the orchards and the Packing Shed, but to "leave TotalPak all working and complete" (Strahley affidavit sworn 12 July 2006 at [215]). 551 It is clear that there is absolutely no basis to any accusation that either: · the first respondent or Mr Strahley ordered the Packing Shed computer records destroyed or deleted to prevent Mr Tracy or any of the applicants having access to them after settlement; or · that any of these records were actually either destroyed, deleted or even damaged on the instructions of the first respondent or Mr Strahley. 552 It is not surprising that this accusation was not pursued in the pleadings.

The "true position" 553 Earlier in this judgement I made observations as to Mr Strahley's legitimate concerns with respect to the reliability of material in the SmartPak records. I noted that this concern lead Mr Strahley to withhold from Mr Tracy the Historical Packouts 2004.xls document prepared by Mr Breed, and to produce instead the Block Summary data as an accurate summary of historical data. 554 The claims of the applicants in the Further Amended Statement of Claim that the conduct of the respondents was misleading or deceptive relied heavily on the respondents' alleged knowledge of the "true" historical position the applicants specifically identified throughout para 19. In particular, the applicants claimed that the Packing Shed computer records disclosed that in truth and in fact: · in the 2001 Crop year 91,276 cartons of fruit were produced (para 19(a)); · in the 2001 Crop year the land yielded an average packout of 36.77% (para 19(a)); · in the 2001 Crop year 6,727 bins of fruit were produced (para 19(h)); · in the 2002 Crop year the land produced 215,033 cartons of fruit (para 19(b)); · in the 2002 Crop year the land yielded an average packout of 51.80% (para 19(b)); · in the 2004 Crop year the land produced 40,364 cartons of fruit (para 19(d)); · in the 2004 Crop year the land yielded an average packout of 39.96% (para 19(d)); · the average packout percentage for the fruit crops that had been grown on the land for the period 2002-2005 was: 2002 - 36.77%; 2003 - 51.80%; 2004 - 39.96% and 2005 - 30.26% (para 19(g)); · the number of packed cartons of fruit for the period 2001-2005 were: 2001 - 110,079; 2002 - 91,447; 2003 - 214,882; 2004 - 132,526; 2005 - 40,364 (para 19(m)). 555 There are however significant difficulties associated with the applicants' position in respect of these figures. 556 First, a key difficulty is that, unlike the respondents who in defending this action have relied on material which they have clearly identified as evidence, and which is available to be scrutinised by the Court, the applicants have not clearly identified the source of the material which they claim to represent the "true facts" as I have set out above, other than to allege that this material is from "the Packing Shed records". Mr Tracy during cross-examination said that, in the Further Amended Statement of Claim, he had articulated the numbers which, in his opinion, were correct (TS 353 ll 27-31). However in identifying the source material for this claim, the applicants in their submissions barely take their case beyond the claim as set out in para 19 Further Amended Statement of Claim. This is of particular concern in light of the fact that the onus lies with the applicants to make their case under ss 52 and 53A. 557 Second, to the extent that the applicants have based their claims in para 19, and in paras 11-17 on facts stated in para 19, on the findings of Mr Green in his expert report, I consider such claims flawed. The only finding in Mr Green's expert report I can identify as relevant to historical production of the orchards was in relation to the "Actual Weighted Average Pack-out Rate" of fruit over the period 2001-2004. In my view however Mr Green's finding with respect to this issue was flawed because of the nature of his instructions. I note in particular: · The Instructions to Expert Witness provided by the applicants' instructing solicitors to Mr Green dated 9 June 2006 (Green expert report appendix 2) identified the documents provided to Mr Green evidencing the crop performance of the orchards for the period prior to 1 January 2005 as only: 1. Herron Todd White Valuation dated June 2004 (paragraph 6 of the Tracy Statement) 2. "Sunstate Budget Nov 04.xls" supplied on 10 December 2004 (paragraph 27 and 28 of the Tracy Statement) 3. "sstrnd-nosgara.xls" supplied on 21 December 2004 (paragraph 40 of the Tracy Statement). · It is clear that in making his findings, Mr Green did not base his findings on the Packing Shed computer records. Indeed, Mr Green did not list the Packing Shed computer records in his source documentation. I agree with the criticisms to this approach by the respondents' expert forensic accountant, Mr Lytras (Lytras expert report at [11.82]). · In calculating average packout figures, Mr Green appeared to rely upon a "Historical Production Schedule" apparently created by Mr Breed and provided by him to Mr Tracy in June 2005 by email. This in itself causes concern as any qualifications arising from the use of that document are neither identified nor explained by Mr Green. · It became clear during cross-examination of Mr Tracy that the "Historical Production Schedule" to which Mr Green had reference in preparing his expert report was identical to a document in Mr Breed's affidavit, which Mr Tracy agreed had been prepared by Mr Breed after Mr Tracy had directed Mr Breed to remove from the calculations all fruit which had been placed in "hat bins" (TS 281 ll 33-44). The respondents submitted that this produced a distortion in the packout rates, and consequently a distortion in Mr Green's analysis of the historical packout rates achieved by the respondents. I agree with that submission. 558 Third, the unchallenged evidence of Mr Lytras was that the information derived from the Packing Shed records, which were annexed to Mr Lytras' expert report, was at material variance with the claims made by the applicants in paras 19(a),(b), (d), (g), (h) and (m) Further Amended Statement of Claim (Lytras expert report at [2.1]). Mr Lytras clearly based his report on underlying source documents provided to him, and annexed to his report. I agree with Mr Lytras' comments in his expert report criticising the basis of Mr Green's analysis in that it was not based on underlying source documents. Indeed I note that Mr Green in his letter of 16 October 2006 (annexed to his statement sworn 17 October 2006) acknowledged the issue that his calculations as to historical performance was based on the model prepared by Mr Breed, but stated further that this issue was a matter for trial. 559 On the basis that Mr Lytras based his opinions on information derived from the Packing Shed records, I prefer Mr Lytras' evidence to that of Mr Green in relation to historical performance of the relevant properties. 560 (With respect to Mr Lytras' evidence, although early in the proceedings the applicants signalled that they would have objections to Mr Lytras' affidavit and expert report (TS 4), no objections were made in the written submissions of the applicants to that evidence following my direction that outstanding objections be addressed in written submissions. No further objections to Mr Lytras' affidavit and report were not raised at any time later in the trial by the applicants.) 561 Fourth, I note the following oral closing submission of Mr Bell QC: And our submission is that I must say, with respect, that if Mr Tracy's case had any legs at all, the cross-examination of Mr Strahley would have been completely devastating because he had the documents, the documents were all in emails and spreadsheets, and all that had to happen was Mr Strahley had to have one in front of him, and then have the Packing Shed record in front of him, and say, "Look at that. How do you explain the difference?" That didn't happen. I was - where did all that go? Where did all this - the lie, the big lie about all would be revealed in the Packing Shed records. Where did it go to? (TS 1408 ll 20-27) 562 That is an interesting question, for which the applicants do not provide an answer. 563 In my view the claims of the applicants in para 19 are not substantiated. It follows that, to the extent that the claims of the applicants in paras 11-17 Further Amended Statement of Claim rely on the claims of the applicants in para 19, the claims in paras 11-17 similarly cannot be substantiated.

CONCLUSION 564 I have found that none of the applicants' claims in the Further Amended Statement of Claim have been substantiated. The conduct of the respondents, so far as the applicants have established it, was not misleading or deceptive or likely to mislead or deceive within the meaning of s 52 Trade Practices Act. No representations as to future matters made by the respondents, to the extent to which the applicants have substantiated representations made by the respondents, were misleading or deceptive within the meaning of s 51A Trade Practices Act. In the absence of submissions with respect to s 53A, and in light of my findings with respect to s 52, I also consider that the facts do not support any cause of action based on s 53A Trade Practices Act. 565 The appropriate order is therefore to dismiss the applicant's Amended application. 566 Before doing so however, it is appropriate to make a number of comments concerning: · the applicants' claims that they had suffered loss or damage "by conduct" of the respondents within the meaning of s 82 of the Act; and · whether there was a case against Mr Strahley as pleaded in para 20B Further Amended Statement of Claim. 567 I make such comments in the event that I have erred in my findings that the respondents had not acted in breach of the Trade Practices Act in relation to claims pleaded by the applicants in the Further Amended Statement of Claim.

RELIANCE 568 The applicants in para 18 Further Amended Statement of Claim listed a series of specific actions undertaken by the applicants in reliance on the truth of the representations referred to in paras 11-17, and in reliance upon the first respondent's silence concerning the matters referred to in para 17A. The common theme of these actions was the acquisition of the relevant properties from the first respondent. All actions listed in para 18 related to that purchase transaction and the decision of Mr Tracy (who, as I have already noted, was the directing mind and will of the first and third applicants) to enter that transaction. 569 As Mason CJ observed in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525, the statutory cause of action for which s 82(1) Trade Practices Act provides arises when the applicant suffers loss of damage "by" contravening conduct of another person. Section 82(1) clearly comprehends the common law concept of causation. 570 It is clear that the contravening conduct need not be the sole inducement in sustaining the loss (Gould v Vaggelas (1985) 157 CLR 215; National Australia Bank Ltd v Cunningham [1990] FCA 310 at [6], Ricochet Pty Ltd v Equity Trustees Executors and Agency Company Ltd (1993) 41 FCR 229 at 233, Elitegold Pty Limited v Cm Holdings Pty Ltd, Australia Fair Shopping Centres Pty Limited and Cm Developments (Qld) Pty Ltd [1995] FCA 1336 at [49]) although it is necessary that the contravening conduct had a substantial rather than a negligible effect (Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd (1997) 19 ATPR 41-550 at 43,619; McHugh J in Henville v Walker (2001) 206 CLR 459 at 494). 571 Further, it is not fatal to a claim of reliance that the applicant does not give express and direct evidence of reliance : see analysis of Lindgren J in MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 at 358 and observations of the Full Court in Amadio Pty Ltd v Henderson (1998) 81 FCR 149 at 245-246. 572 However, where it appears that the applicant had knowledge of the true facts by the time it allegedly acted on the impugned conduct, it is clearly much more difficult for the applicant to demonstrate reliance on such conduct: cf Rumpe v Camrol Pty Ltd [1985] FCA 5, McMahon v Pomeray Pty Ltd [1991] FCA 289. Similarly, where the applicant makes its own inquiries or retained its own advisers to ascertain the true position there is some authority that reliance on the impugned conduct is negated: cf The Australian William E Simon Graduate School of Business Administration Incorporated v Minister Administering the National Parks and Wildlife Act 1974 (NSW) (1994) 51 FCR 243. 573 In my view the evidence demonstrates that Mr Tracy, and through him the first and third applicants, were determined to purchase the properties from an early date, and did not rely on the representations in paras 11-17A Further Amended Statement of Claim to enter the transaction to acquire the relevant properties or any transaction associated with that purchase. I form this view in relation to the applicants' alleged reliance on representations in these paragraphs for the reasons I set out below in relation to: 1. the email of 6 December 2004. 2. Mr Tracy's knowledge of the history of the orchards. 3. Mr Tracy's conduct of the due diligence. 4. Mr Tracy's experience as a "corporate doctor"; and 5. Mr Tracy's lack of experience in relation to citrus. 574 Because extensive submissions were also made concerning Mr Tracy's reliance on the 1 June 2004 Valuation Report, I will also make an additional comment concerning the applicants' claims of reliance on that report which I set out below.

Email of 6 December 2004 575 First, it is clear that Mr Tracy offered to purchase the relevant properties on 6 December 2004, three days after his first meeting with Mr Strahley to discuss the relevant properties. In an email from Mr Tracy to Mr Douglas at 11.20am on 6 December 2004 (exhibit A8), Mr Tracy wrote as follows: Dear Peter We offer to purchase the properties, plant & equipment, water rights, know how and fruit stock and all other assets on the following basis: • $4.0 (four million AUD) as is where is with crop included • Existing staff entitlements paid out in full on settlement • Guarantee to reinstate staff through a new entity • 14 day due diligence period • 10% (ten percent $400,000.00) deposit payable upon completion of due diligence by bank guarantee provision of an independent scientist report to warrant that the property is canker free • settlement 12 January 2005 • confidentiality agreement to bind both parties during the process. Time is of the essence in this matter and we would appreciate your timely response. 576 At the time that Mr Tracy offered to purchase the relevant properties he had had a meeting with Mr Strahley, and had received from Mr Douglas: · the 1 June 2004 Valuation prepared by HTW; and · the Block Summary data. 577 The claims of the applicants in paras 17A(a), (b), (e) and (f) were to varying degrees referable to the period up prior 6 December 2004. 578 However as at 6 December 2004 Mr Tracy had not been provided with documents referable to the applicants' claims in paras 13, 14, 15, 16, 17, 17A(f)-(k), and (to varying degrees) 17A(b) and (f). 579 Leaving aside for the moment the question whether Mr Tracy and the first and third applicants relied at all on the conduct of the respondents in relation to the acquisition of the relevant properties and related transactions, the inference may be drawn that, in light of the conduct of Mr Tracy in offering to acquire the relevant properties on the terms he proposed on 6 December 2004, neither he, nor the first and third applicants through him, relied on the conduct of the respondents as claimed in paras 13, 14, 15, 16, 17, 17A(f)-(k), and (to varying degrees) 17A(b) and (f) in deciding to purchase the relevant properties. 580 The applicants submitted that the email from Mr Tracy to Mr Douglas constituted only an invitation to treat rather than a legally enforceable final offer to purchase the orchards and the shed, and that this was clear because the email specified that any purchase was expressed to be subject to due diligence. 581 Whether or not the offer by Mr Tracy was a legally enforceable offer to purchase the relevant properties is an issue I need not decide. Further, the fact that an offer was made by Mr Tracy on 6 December 2004 was not conclusive - misleading or deceptive conduct engaged in after entry in contractual relations may nonetheless contravene s 52 (cf Johnson v Eastern Micro Electronics Pty Ltd (1986) 70 ALR 339 at 352). However, that Mr Tracy made such an offer suggests that by 6 December 2004 he had decided to purchase the properties, and that he wished to expedite settlement of the transaction subject to his own due diligence.

Knowledge of history of the orchards 582 Secondly, I consider the evidence demonstrates that Mr Tracy was determined to purchase the orchards notwithstanding that he had no experience of citrus or indeed of horticulture, and notwithstanding that he was repeatedly informed of issues affecting the potential profitability of the orchards, including: · the orchards had been unprofitable in previous years; · the orchards were in a geographical location which increased the risk of disease including EBS (as explained not only by the respondents but Mr Papacek and Mr Owen-Turner); · the orchards and the Packing Shed had historically required a considerable expenditure of money to enhance their performance, and bore considerable ongoing cultural costs; and · the performance of the orchards (as in the case of all horticulture) was clearly dependent on factors outside the control of the respondents including weather and disease. 583 Further, I consider it significant that Mr Bailey, the valuer engaged by Mr Tracy, valued the properties at the sum paid by Mr Tracy, and no higher. The applicants submitted that the valuation of Mr Bailey was derived using false data supplied by the first respondent, however: o I do not accept that submission. o Even on the premise advanced by the applicants that Mr Bailey relied on falsely inflated data, Mr Bailey still valued the properties at $4.5million; and o In any event, although Mr Tracy gave evidence that he was shocked by this seemingly low valuation (TS 322 ll 4, 445 ll 9 cf Tracy statement sworn 17 November 2006 at [78]), he proceeded to purchase the properties notwithstanding that "shock" because on his calculations the property would still show a return of capital and because he felt that the "canker scare was over". I consider it likely that Mr Tracy simply did not believe Mr Bailey's valuation, and preferred to rely on his own judgment as to the future value of the relevant properties.

Conduct of due diligence 584 Thirdly, Mr Tracy made it clear in his email of 6 December 2004, and it was a term of the contract of purchase that Mr Tracy would perform his own due diligence in relation to the property. The evidence is that Mr Tracy did conduct this due diligence himself, without seeking the assistance of experts in the citrus industry, and formed his own conclusions on the basis of that exercise. So, for example: · as I have already found, Mr Tracy created the four scenarios including the Most Likely Scenario based on budgetary data provided by the first respondent; · as I have also found, Mr Tracy calculated the sum of $1.5 million for the sale of the lemon crop based on information he adduced; · Mr Tracy obtained his own independent valuation of the property from Mr Bailey, who valued the property at no more than Mr Tracy had offered, and also qualified the valuation referable to external factors such as weather; · Mr Tracy had a telephone conversation with Mr Owen-Turner (although he did not provide written instructions for Mr Owen-Turner to attend the orchards as requested by Mr Owen-Turner) and a telephone conversation and meeting with Mr Papacek. Mr Tracy did not otherwise utilise the expertise of Mr Owen-Turner or Mr Papacek in his due diligence; · Mr Tracy made numerous inspections of the orchards in December 2004 and January 2005 where he met Mr Breed, Mr Burns, Mr Devenny, and the Tiaro supervisor Mr Trevor Schulz; · The first respondent gave Mr Tracy free access to Mr Breed and Mr Burns to seek information, and Mr Tracy took advantage of that access to seek information at his own discretion. 585 The applicants submitted that Mr Strahley did not provide Mr Tracy with "the all important financial model" from Mr Strahley's own due diligence folder referable to when the relevant properties were acquired by Hancock, however in my view this is of no relevance. Leaving aside the fact that the failure to provide this document was not the subject of any claim by the applicants, Mr Strahley explained during cross-examination that he did not give Mr Tracy the forecast document which formed part of Hancock's decision to buy the properties because it was "aggressive in its expectations"(TS 973-974). This explanation was reasonable, particularly in light of the significant reforms to the manner in which the orchards had been conducted since the properties were originally acquired by Hancock several years earlier.

"Corporate doctor" 586 Fourth, Mr Tracy's interest in, and determination to acquire the orchards, is in my view also explained by his identification of himself as a "corporate doctor". Evidence in relation to this issue, included: · Mr Tracy told Mr Papacek that he was a corporate doctor and that he utilised his management expertise to get companies operating profitably (TS 310 ll 25-31). · Mr Tracy's interest was in buying a business which had future prospects of profitability; · Mr Tracy's belief that he could bring to that business: My attention to detail. My capacity to focus on this business rather than, as I think Mr Strahley might have told me at one time, he had so many businesses and he wasn't able to spend enough time on them. (TS 312 ll 1-5) · The fact that Mr Tracy was offering $4.5 million for the relevant properties whereas Mr Tracy was aware that the properties had been valued by Mr Neubecker in June 2004 at $6.9 million. · A printout from the web-site of the firm of which Mr Tracy was a director, The RT Group Pty Ltd (exhibit R21), which featured a photograph of Mr Tracy and fellow director, and described The RT Group as: a business turnaround firm assisting businesses in the small to medium sector secure their long-term survival, profitability and success… We are an intentionally small consultancy providing personalised services to reinvigorate business while maintaining the highest professional and ethical standards. In doing so, our greatest pride comes from knowing our clients have assured their future business success. 587 The RT Group also described its specialisations as: ● stopping profit leaks, ● business turnarounds, ● strategic positioning, ● mentoring, ● providing business support, and ● facilitating supplier alliances. 588 The evidence before the court indicates that Mr Tracy's expertise in business turnaround made the orchards a particularly attractive business proposition, particularly in light of his perceived ability (unlike Mr Strahley) to focus on the business to the exclusion of other distractions. 589 A manifestation of Mr Tracy's determination to acquire the properties in the context of his role as a corporate doctor was reflected in his discussions with Mr Douglas to re-sell the Packing Shed immediately following the signing of the purchase agreement on 17 December 2004 (TS 345, exhibit R26). I consider that Mr Tracy saw the orchards and the Packing Shed as an opportunity for a quick profit (as was clear from his email to a colleague on 16 December 2004 exhibit R22). 590 The applicants in their submissions submitted that the respondents knew that Mr Tracy had no citrus experience, and complain that the respondents painted a picture of Mr Tracy as: a sophisticated businessman with significant business experience and academic qualifications who did not have an ambition to be a farmer but rather who was only interested in buying the orchards with a view to securing its cash flow, making managing improvements and deriving the benefit of the cash flows from the crop with a view to re-selling the assets purchased for a profit. (Applicants' Written Submissions p 69) 591 The evidence demonstrates, in my view that this picture was accurate.

Lack of experience in citrus 592 A significant element of the case advanced by the applicants was that the respondents took advantage of Mr Tracy's naiveté in horticulture, and the fact that he had no experience in citrus, to deceive him into purchasing the relevant properties. This was made particularly clear during cross-examination of the respondents' witnesses at the hearing (for example, TS 1091-1092, 1169, 1222). 593 In my view the evidence does not support this premise. The evidence demonstrates that the first respondent, through Mr Strahley, went to significant lengths to provide Mr Tracy with accurate information. I consider that Mr Tracy was a competent and astute businessman who considered his lack of experience in the citrus industry of little importance in relation to this transaction, and who was confident in his own abilities to undertake a due diligence and to profit from the acquisition of the relevant properties.

Specific comment: 1 June 2004 Valuation Report 594 In relation to the 1 June 2004 Valuation Report, the respondents submitted that, even if the representations of the first respondent in the 1 June 2004 Valuation Report were misleading or deceptive, the applicants had not demonstrated reliance on those representations in entering the transactions to purchase the relevant property, because the applicants made their own inquiries in relation to the historical performance of the relevant properties. 595 In this case there is meagre evidence of reliance by the applicants on the historical production material in the 1 June 2004 valuation report as pleaded in para 11. Mr Tracy deposed: On 29 November 2004 Douglas e-mailed me a copy of a Herron Todd White ("HTW") valuation of the orchards dated June 2004 (J48). (Tracy statement sworn 17 November 2006 at [6]) 596 Further, under cross-examination by Mr Bell QC, Mr Tracy said as follows: Yes, but Mr Tracy, are you really going to say to her Honour that the subject of this complaint did not arise because Breed was telling you about it? "Look, what happened, Peter Tracy," - when you're sitting in this room with Mr Lynch - "is when we were getting a valuation, Strahley was misleading the valuer. He wasn't giving in the information." That's how you first got onto it obviously, isn't it?---No. It wasn't. I see?---No, it wasn't. Because I knew the bin numbers and the carton numbers of - put forward by the valuer, in the 1 June 2004 valuation, as I recall was the date. That was an important piece of information, in terms of what I relied on, because valuers are proper people and they make proper judgments. (TS 257 ll 8-17) 597 However I consider that, at its highest, the representations as to historical production in the 1 June 2004 Valuation Report induced Mr Tracy to have further discussions with Mr Strahley after 29 November 2004, and to meet with Mr Strahley on 3 December 2004. 598 I think it unlikely that the representations as to historical performance in 1 June 2004 Valuation Report would have been a factor causing Mr Tracy to enter into the transactions to purchase the relevant properties. The applicants submitted that the material was conveyed to Mr Tracy as a potential purchaser making enquiries about the subject matter of the sale. However I have already found that on or by 3 December 2004 Mr Tracy was provided with the Block Summary data which contained accurate data as to historical production, and that this material was discussed by Mr Tracy and Mr Strahley at the meeting of 3 December 2004. It is difficult to see how, after 3 December 2004, the applicants could show any continuing reliance on the estimates of historical production in the 1 June 2004 Valuation Report. The Block Summary data and other material such as the Yield Summary.xls, produced by the respondents for Mr Tracy, clearly superseded the heavily qualified material in the 1 June 2004 Valuation Report. 599 A further relevant factor with respect to reliance by the applicants on historical production figures in 1 June 2004 Valuation Report is that on 16 December 2004 Mr Tracy procured his own valuation report by Mr Bailey in relation to the relevant properties as part of an arrangement to seek finance for their acquisition. In relation to this report the applicants submitted in summary that: · The evidence revealed that both the 1 June 2004 Valuation Report and Mr Bailey's report were derived using false packout rates provided by the first respondent. · When the evidence of Mr Bailey is examined it is clear that he simply copied most of the 1 June 2004 Valuation Report into the report he prepared. · The respondents cannot in equity be entitled to rely on either valuation report because the first respondent (through Mr Breed) rendered the reports unreliable by providing grossly inflated packout rates to Mr Neubecker which the respondents knew vastly exceeded actual historical crop performance data. · Even apart from the falsity of packout rates Mr Bailey's report is so unreliable and flawed that the Court should find that its receipt could not possibly be held to affect the question of reliance because, inter alia, information as to 2004 production figures were inaccurate. · Evidence of Mr Bailey reflects badly on his credit. 600 The fact that Mr Bailey's report should contain heavily qualified estimates referable to historical production is surprising given that by January 2005 more accurate material in the form of the Yield Summary and the Block Summary data was clearly available. A comparison of the two valuation reports shows that the material under "Production" in para 7.3 1 June 2004 Valuation Report is identical to that under "Production" in para 7.5 11 January 2005 Valuation Report with the exception of a sentence in para 7.5 which reads "Recent crops were significantly lower due to the effects of citrus canker; and a large percentage of the crop was juiced." Under cross-examination, Mr Bailey conceded that he used information, including the carton yield data, from the 1 June 2004 Valuation Report in the 11 January 2005 Valuation Report, because that information was available from the work undertaken by Mr Neubecker (TS 824 ll 9-12, ll 29-39, 825 ll 24-31). It is also clear however that Mr Bailey was under pressure from Mr Tracy at the relevant time to expedite production of his valuation report. 601 As the evidence demonstrates, both valuation reports were procured with a view to obtaining finance. It is difficult to identify how, in circumstances where a new valuation report which also addressed historical production data was prepared by another valuer at Mr Tracy's instigation, it could be said that the applicants were relying on the historical data in the 1 June 2004 Valuation Report at the time of the acquisition of the relevant properties. 602 In any event, while Mr Perry SC in cross-examination of Mr Bailey made much of the fact that Mr Bailey's report replicated the historical production figures found in the 1 June 2004 Valuation Report, this replication was in no way directed by the respondents. The fact of duplication of the material was, if anything, an issue between Mr Tracy and Mr Bailey. Mr Tracy organised his own valuation report for his own purposes, by a valuer whose valuation of the relevant properties was, in the end result, very different from that of Mr Neubecker and indeed reflected the price which Mr Tracy had offered to pay. Notwithstanding the fact that the historical production data in the two reports was substantially identical, in my view this does not mean that, in the chain of causation, any original influence on the applicants exerted by the 1 June 2004 Valuation Report in relation to this data remained (contrast, for example, Henjo Investments Pty Ltd (No 1) 39 FCR 546). Indeed as the evidence also demonstrates, Mr Tracy clearly took into account Mr Bailey's report in his decision to purchase the relevant properties (Tracy statement sworn 17 November 2006 at [77], [78]).

CASE AGAINST MR STRAHLEY AND MR BREED 603 In para 20B Further Amended Statement of Claim the applicants pleaded as follows: Each of the Second and Third Respondents is a person who: a) has aided, abetted, counselled or procured; or b) has been knowingly concerned and/or a party to the contravention by the First Respondent of section 51A and 52 of the Trade Practices Act 1974 as alleged in paragraph 20A. 604 There is no case against either Mr Strahley or Mr Breed in relation to s 53A. 605 In the Defence, the respondents denied this claim so far as it concerned Mr Strahley. Mr Breed was not represented in these proceedings. 606 Although the applicants do not specifically plead the relevant legislation, in prescribed circumstances s 75B of the Act imposes accessorial liability in relation to certain provision of the Act. In Yorke v Lucas (1985) 158 CLR 661 at 666-669 the High Court observed that: · the words "aided, abetted, counselled or procured" in s 75B are taken from the criminal law where they are used to designate participation in a crime as a principal in the second degree or as an accessory before the fact (at 666-667); · notwithstanding that s 75B deals with civil rather than criminal liability, the words in s 75B should be interpreted according to their meaning in criminal law (at 668, 669); · in the criminal law a person will be guilty of the offences of aiding and abetting or counselling and procuring the commission of an offence only if he intentionally participates in it (at 667); · to form the requisite intent he must have knowledge of the essential matters which go to make up the offence whether or not he knows that those matters amount to a crime (at 667); · a person can only be brought within para 75B if he intentionally aided, abetted, counselled or procured a contravention by the representor of s 52 Trade Practices Act (at 667); · The fact that the representations may have been made by the person is not sufficient to bring the person within s 75B - he or she must have had knowledge of their falsity (at 668) 607 The interplay of ss 51A and 75B was also considered by the Full Court in Quinlivan v Australian Competition and Consumer Commission [2004] FCAFC 175 where the Court said: Accordingly, where s 75B or s 80 accessorial liability is in issue in relation to a representation with respect to a future matter, the existence or otherwise of reasonable grounds will be relevant. If reasonable grounds exist, there will have been no contravention and thus no question of accessorial liability will arise. However, as against the accessorial respondent, the onus will be on the applicant to show the respondent had actual knowledge that • the representation was made and • it was misleading or • the corporation had no reasonable grounds for making it. (at [15]) 608 The respondents in this case submitted that para 20B Further Amended Statement of Claim did not adequately plead the essential elements of the cause of action, and did not allege: · actual knowledge by Mr Strahley of each alleged representation; · that he knew each representation was misleading; and · that he knew that the first respondent had no reasonable grounds for making the alleged representations as to future matters. 609 By way of example the respondents pointed to the allegation regarding the Most Likely Scenario, which the applicants in para 16 pleaded was created by Mr Breed, and submitted that the applicants did not plead that Mr Strahley had actual knowledge of such representations, or that they were misleading, or that there were no reasonable grounds for making the forecasts or predictions. 610 The applicants in response submitted as follows: The evidence of accessorial liability for the Second Respondent is as follows:- 1. Strahley caused the 2004 Valuation containing the false crop production figures to be sent to the Applicants; 2. Strahley sent the Applicants the 2005 Budget, Yield Summary.xls, Carton Yield Summary.xls, and Valuation Yield Summary.xls to the Applicants. The evidence of accessorial liability for the Third Respondent is as follows:- 1. Breed made the representations about the Most Likely Scenario and the oral representations made on 5 January 2005. 2. Breed sent the Applicants the Production Pricing Schedule Jan.05.xls 611 In my view the applicants have not properly pleaded the required elements of a s 75B claim against either Mr Strahley or Mr Breed regarding any of the representations in the Further Amended Statement of Claim. Paragraph 20B does not allege actual knowledge by either Mr Strahley or Mr Breed of each alleged representation, that either respondent new each representation was misleading, or that either respondent knew that the first respondent had no reasonable grounds for making the alleged representation as to future matters. The written submissions of the applicants with respect to s 75B constitute an attempt to replead their claims after the hearing has concluded, but in any event continue to fail to address the elements of s 75B as articulated in Yorke v Lucas and Quinlivan. I consider that even if I have erred in my findings that the representations of the first respondent as pleaded in the Further Amended Statement of Claim did not breach ss 51A or 52, the claims of the applicants against Mr Strahley and Mr Breed in respect of accessorial liability failed at the threshold.

CROSS-CLAIM BY FIRST RESPONDENT 612 The applicants conceded that, if the applicants failed in their action against the first respondent and Mr Strahley, the first respondent was entitled to succeed in its cross-claim against the first applicant. 613 In these circumstances, it is clear that the first respondent has been successful in the cross-claim against the first applicant and I propose to make the orders sought by the first respondent. 614 In this context however the first respondent has not sought interest to be paid at a specific rate of interest on either damages or the sum of $150,000 claimed, other than interest pursuant to s 51A Federal Court of Australia Act 1976 (Cth). Section 51A(1) provides: In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either - (a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or (b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest. 615 Although s 51A does not prescribe a rate of interest, the usual practice in the Federal Court has been to adopt the rates of interest applied in the Supreme Court of the State in which the application is commenced unless there is evidence that the rates are penal or not commercial: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 688 at [7], Gordon v Commonwealth [2008] FCA 603. The current rate of interest prescribed under s 47 Supreme Court Act 1995 (Qld) is 10% per annum. No submissions were made by the parties as to an appropriate rate of interest. I consider that the rate of interest of 10% per annum under the Supreme Court Act should be applied.

COSTS 616 At the hearing I indicated to the parties that I would not make any orders as to costs when I delivered judgment, but would require the parties to make submissions and then give consideration to appropriate costs to be ordered. Accordingly I make no orders as to costs pending submissions by the parties. THE COURT ORDERS THAT:

1. The amended application filed 16 February 2006 be dismissed.
2. The cross-claim filed 5 June 2007 be allowed as follows: (a) the cross-respondent pay the cross-claimant damages in the sum of $385,383 for breach of the Packing Shed agreement; (b) the cross-respondent pay the cross-claimant the sum of $150,000 for a loan which remains due and owing; and (c) the cross-respondent pay the cross-claimant interest at the annual rate of 10% on the sums ordered to be paid in sub-paragraphs 2(a) and 2(b) herein pursuant to section 51A Federal Court of Australia Act 1976 (Cth) to be calculated from the date the relevant cause of action arose. I certify that the preceding six hundred and sixteen (616) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier.

Associate: Dated: 5 September 2008 Counsel for the Applicants: Mr R Perry SC

Counsel for the Respondents: Mr J Bell QC with Mr PP McQuade

Solicitor for the Respondents: McCullough Robertson

Date of Hearings: 13, 14, 15, 16, 17, 20, 21, 22, 23, 24 November 2006, 8, 9, 10, 11, 14, 15, 16 May and 6 June 2007