Colly Cotton Marketing Pty Ltd & Anor v Simmons & Anor

Chappel v Hart (1998) 195 CLR 232; Ellis v Wallsend District Hospital (1989) 17 NSWLR 553; Fox v Percy (2003) 214 CLR 118; Gould v Vaggelas (1985) 157 CLR 215; Henville v Walker (2001) 206 CLR 459; CASES CITED: Pacific Carriers Ltd v BNP Paribas (2004) 208 ALR 213; Rosenberg v Percival (2001) 205 CLR 434; RT & YE Falls Investments Pty Ltd v The State of New South Wales [2001] NSWSC 1027; State of New South Wales v RT & YE Falls Investments Pty Ltd (2003) 57 NSWLR 1; Smith v Maloney (2005) 92 SASR 498; Smith v Noss [2006] NSWCA 37.

Colly Cotton Marketing Pty Ltd - First Appellant/First Cross-Respondent Colly Farms Risk Management Pty Ltd - Second Appellant/Second Cross-Respondent PARTIES: John Simmons - First Respondent/First Cross-Appellant ACN 073 056 461 Pty Ltd - Second Respondent/Second Cross-Appellant

COUNSEL: M Cashion SC & R Scruby - Appellants/Cross-Respondents A J Greinke & M L Grimshaw - Respondents/Cross-Appellants

SOLICITORS: Kemp Strang - Appellants/Cross-Respondents Shannon Donaldson, Dalby, Queensland (by their town agents Brown Wright Stein) - Respondents/Cross-Appellants

LOWER COURT JURISDICTION: Supreme Court

LOWER COURT MEDIUM NEUTRAL CITATION: [2005] NSWSC 727

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40664/05 SC 50166/03

SPIGELMAN CJ GILES JA McCOLL JA

Wednesday 7 June 2006 COLLY COTTON MARKETING PTY LTD & ANOR v SIMMONS & ANOR Judgment 1 SPIGELMAN CJ: I have had the advantage of reading in draft the judgment of Giles JA. Subject to two matters I agree with his Honour's reasons.

Breach of Warranty 2 Giles JA would uphold the appeal with respect to the breach of warranty said to arise from the creation of the crop lien in favour of Rabobank. I have come to a different view. 3 This issue turns on whether there was an agreement in writing to the creation of the lien pursuant to cl 37 of the Standard Conditions of the contract between the Appellants and Respondents. Those Standard Conditions contain the following relevant clauses: "36 FUTURE INTERESTS/VARIATIONS OF INTERESTS After the date of this Agreement the Grower must not grant any new Interest or vary any existing Interest without the prior written consent of Colly (which shall not be unreasonably withheld) and any existing Interested Person. 37 WARRANTIES The Grower represents and warrants to Colly each as a material term of this Agreement, that (a) at the time of delivery of any Cotton to Colly in accordance with this Agreement (except to the extent otherwise specified in this Agreement or agreed in writing by Colly) the Grower has or will have full legal and beneficial title to such Cotton; (b) the Grower has made a full and proper disclosure of all persons having an Interest, and the nature of their Interest; (c) all Cotton delivered by the Grower to Colly pursuant to this Agreement will be of good and merchantable quality, and free of contamination; 38 INDEMNITY The Grower agrees to and does hereby indemnify Colly from and against all damages, losses, costs and expenses incurred by Colly as a result of the failure by the Grower for any reason to comply with any of its obligations under this Agreement." 4 The word "interest" is defined: " 'Interest' means an interest in any Cotton delivered or to be delivered by the Grower pursuant to this Agreement, its proceeds, or the amount payable by Colly under this Agreement and whether arising by contracts, assignment, mortgage, charge, crop lien or other encumbrance." 5 Clause 1 of the Standard Conditions provides: "1.1 These are the standard conditions applicable to all cotton purchase contracts entered into by Colly which refer to these 'Standard Conditions'. 1.2 These terms and conditions must be read together with the relevant Colly Confirmation." 6 The definitions contain the following: " 'Confirmation' means the contract form by that name, pursuant to which Colly agrees to buy, and the Grower agrees to sell Cotton subject to these standard conditions." 7 Before Bergin J the Respondent relied on two alternative means of establishing that Colly had "agreed in writing" to the crop lien within the meaning of cl 37(a). First, it relied on the Acknowledgment by Colly of a Notice of the creation of the lien. Secondly, it relied on the entry into two On Call Contracts between the Appellants and the Respondents subsequently to the notice of the crop lien. The On Call Contracts, dated 15 February 2002 and 30 April 2002, expressly incorporated the Standard Conditions and expressed themselves to constitute a "confirmation". In each case Colly agreed to buy and the Grower agreed to sell a certain identified quantity of cotton. 8 Bergin J found against the Respondents with respect to the Notice and Acknowledgement. Her Honour found in favour of the Respondents with respect to the two On Call Contracts as constituting the relevant agreement in writing. Giles JA agrees with her Honour with respect to the Acknowledgement. His Honour would, however, allow the appeal with respect to the two contracts. 9 In this Court, although no Notice of Contention was filed, the Respondents relied, without objection, upon the Notice and Acknowledgement as an alternative basis for holding that there was an agreement in writing. 10 The relevant Notice was expressly headed "Notice to Marketor". It was executed under the Common Seal of the Respondent company but was expressed to be "From" Rabobank and was addressed to: "The Marketor of the crop pursuant to an agreement to market cotton on behalf of the Lienor …"

The "Lienor" was the Respondent company, also described in the document as "the Grower". The operative provision of the Notice was as follows: "PIBA and the Grower give you notice as follows: 1 The Grower has executed a crop lien in favour of PIBA over the cotton the subject of the marketing agreement between you and the Grower which gives PIBA the first right over the proceeds of the crop. 2 You are irrevocably directed and authorised to pay to PIBA as agent for the Grower all amounts which are or at any time become due to Grower under the Marketing Agreement, including any amounts for the sale of any cotton or any proceeds of any loan which you provide to the Grower. 3 Such payments will be made in the manner to the account nominated by PIBA. 4 You are authorised to prove to PIBA full details of the Growers contractual arrangements with you including but not limited to cotton forward sold contracts and currency trading positions. 5 This notice may only be revoked or varied by PIBA." 11 The Notice was forwarded to Colly under cover of a letter from the bank to which stated: "Please find attached Notice to Marketor together with the form of Acknowledgment relating to Clients 2001/2002 cotton crop, confirming the existence of a Crop Lien F/O PIBA. Could you please return the acknowledgement, duly completed, in the envelope provided. We trust that this arrangement is to your satisfaction and we thank you for your co-operation." 12 The Acknowledgement was executed on behalf of the Appellants and returned to the bank, with two deletions which were struck out as follows: We, COLLY COTTON MARKETING P/L acknowledge receipt of the notice regarding the crop lien from: ACN 073 056 461 (ACN 073 056 461) (as Trustee for the Retro Pastoral Trust) ('the Grower') The Grower does not owe any moneys to us which we can recover by set off against moneys payable to the Grower under a marketing agreement, other than ginning costs for the 2001/2 season. We agree that pursuant to any marketing agreement to be entered into by the Grower in respect of the 2001/2002 cotton crop we shall, in so far as we are able, in respect of currency futures and options dealing only accept from the Grower instructions: 1 To forward sell that amount of US dollars which correspond with, or do not exceed, the expected proceeds of sales in US dollars of the bales, which are the subject of the marketing agreement. 2 To enter into currency option transactions which, taking account of any transactions entered into under 1 above, do not leave the Grower over-hedged on US dollars having regard to the number of bales the subject of the marketing agreement. 3 To sell cotton futures in respect of bales which do not exceed in number the number of bales the subject of the marketing agreement. 4 To buy cotton put options in respect of bales, which do not exceed in number the number of bales the subject of the marketing agreement. 5 To buy cotton call options in respect of bales which do not exceed in number the number of bales the subject of existing sold cotton futures and/or bought cotton put option positions. 6 To sell that number of cotton call options in respect of bales which when combined with the Grower's cotton futures position (if any) in respect of bales do not exceed the number of bales the subject of the marketing agreement." 13 The Acknowledgement document also called for the "Marketor" to outline the existing foreign currency exposures, which was done in handwriting on the document. 14 Clause 37 must be construed in the context of the Agreement as a whole. Colly was concerned to ensure that, when it sold cotton pursuant to the agreement on behalf of growers it received, and was able to give, good title. Furthermore, by reason of the express reference to "full legal and beneficial title", and the restriction on creating or varying an interest under cl 36, it was concerned to ensure that there were no claims to the moneys to be received upon sale, other than those of which it had notice and to which it had agreed. 15 The reference to writing, whether in the form of "prior written consent" in cl 36, or in the form of "agreed in writing" in cl 37(a), was designed to ensure that any difficult issues of proof that could arise, in the case of an alleged oral consent or agreement, would be avoided by the existence of an unequivocal statement in written form, on the part of Colly, giving, relevantly, 'agreement'. 16 The purpose to be served by the requirement for an agreement in writing does not, in my opinion, require a communication of such agreement to the Grower. The Notice to Marketor was executed by the Respondent company and was expressed to be a notice given by both the bank and the company. I do not believe it to be material that the Acknowledgement was addressed only to the bank. 17 The word "interest" in the Standard Conditions is, as noted above, defined to include a crop lien. Pursuant to the warranty in cl 37(b), a Grower was obliged to make a disclosure of any such interest. Plainly, the Notice to Marketor discharged the Grower's obligation in this respect. There has, accordingly, been such "full and proper disclosure" to Colly. 18 The Notice, according to the covering letter, was directed to "confirming the existence of a crop lien". The Notice expressly stated, inter alia, that the lien gave the bank "first right over the proceeds of the crop", which clearly detracts from the "full legal and beneficial title" referred to in cl 37(a). The Acknowledgement was signed on behalf of Colly. The submission that such an "acknowledgement", given in such circumstances, does not constitute an agreement is not, in my opinion, in accordance with the commercial context in which the words fall to be construed. 19 The contract, including cl 37(a), must be given a commercial construction. So long as there is an unequivocal statement in writing indicating acceptance of the crop lien, in my view the commercial purpose of cl 37(a) is satisfied. 20 The document entitled "Acknowledgement" states in its opening words that Colly does "acknowledge receipt of the Notice". However, the document goes on to use the language of agreement when it states: "We agree that …" Colly would only accept instructions from the Grower in certain specific respects. 21 These provisions appear to be designed to ensure that the exposure of a Grower, under the usual form of an On Call Contract, to "futures" and "currency", would be restricted to the bales the subject of the marketing agreement between Colly and the Grower. The purpose of this 'agreement' on the part of Colly was, it appears, designed to serve the interests of the bank by limiting the exposure of the Grower. Indeed, the person who executed the document on behalf of Colly appeared to realise that fact by striking out paragraph numbered 1 in the Acknowledgement, at a time when the exposure by the Respondent to Colly exceeded the amount to which that paragraph referred. 22 Where, in a document clearly executed on behalf of the Appellant, it has agreed to conduct its contractual relationships with the Respondent subject to particular limitations, in my opinion, it cannot be said that it had not agreed to the creation of the crop lien to which those restrictions related. The document is in writing, so that there can be no dispute that, whatever force it has, it is a force which has been accepted by Colly. 23 In my opinion, the appeal in this respect should be dismissed.

Assessment of Damages 24 Giles JA would allow the appeal insofar as her Honour assessed damages on the basis that the Respondents would have sold cotton for a price less than $500 per bale. This was the "trigger price" identified by Mr Simmons in his evidence. Giles JA concludes that there is not sufficient reason to find that Mr Simmons would not have stuck to that price. 25 Giles JA refers to the authorities that indicate the caution with which a court must approach evidence given by a person who has suffered a loss about steps he or she would have taken but for the wrongful conduct. In my opinion, that caution should lead to an acceptance of her Honour's judgment in this respect. 26 The evidence of Mr Simmons was as follows (Blue AB 106): "I use a price of A$500 per bale as a 'trigger price'. I generally do not consider selling, less than this price, and when the price gets to this level I will start to watch it more closely. If the price is rising quickly, I will often hold off marketing until it seems to me the price has 'peaked' and then I will start to sell off a future crop." [Emphasis added] 27 The word I emphasised - "generally" - indicates that Mr Simmons accepted that there would be circumstances in which he would sell at less than $500. He did not, however, identify what those circumstances would be. 28 Mr Simmons annexed to his affidavit a graph of the Australian dollar cotton price over a number of years indicating that, for some months during the relevant period, the Australian dollar price was in excess of $500 per bale, reaching an amount marginally above $600 per bale. Nevertheless, for lengthy periods the price was less than $500. Other evidence about price fluctuations concentrated on a shorter period and indicate a greater degree of volatility in the price (see blue AB 655). Some of the declines are quite sharp and suggest that it may be the case that someone holding out for a higher price could come to the view that further declines are more likely than a retracing to a "target price". 29 These are very much matters of impression. In my opinion, her Honour was entitled to take the view that an agricultural producer who has a "target price" may, nevertheless, find himself in circumstances in which he may lose confidence in the price retracing towards the target and sell below the target, because of the risk of further decline. Her Honour was entitled to act on such a basis in determining, in the broad brush manner appropriate for this form of decision, what would have happened in the hypothetical circumstances which her Honour had to assess. 30 In my opinion, this aspect of the appeal should also be dismissed.

Conclusion 31 Accordingly, I am of the view that the appeal should be dismissed with costs. 32 GILES JA: Mr John Simmons grew cotton on the property "Charlievale", north of Warren. He initially conducted that and other farming activities in partnership with his wife, but from mid-1996 through ACN 073 056 461 Pty Ltd ("the Company"). From early 1997 the Company's cotton was marketed by sale to Colly Cotton Marketing Pty Ltd ("Colly"), at that time and until some time in late 2000 or early 2001 known as Colly Farms Gin Pty Ltd, a long established cotton merchant. 33 In late 1997 Mr Simmons or the Company took with Colly or its subsidiary Colly Farms Risk Management Pty Ltd ("Colly Farms") a sold position for $US2,500,000 for five seasons' crop production. The position was then rolled over into a succession of currency positions, and was in part closed out as cotton was sold to Colly. It was common ground that there was an agreement under which this was done ("the foreign currency agreement"), but the nature and terms of the foreign currency agreement, and the parties to it, were disputed in the proceedings. 34 In May 2000 Mr Simmons or the Company took with Colly or Colly Farms further sold positions for $US1,000,000, which were also then rolled over into succeeding currency positions. 35 Mr Simmons or the Company entered into a number of contracts relating to the sale to Colly of the 1998/1999, 1999/2000, 2000/2001 and 2001/2002 cotton crops. At the times of the foreign currency agreement and these contracts there existed successive forms of Colly's standard conditions for the purchase of cotton ("the Conditions"). Their place as terms of the foreign currency agreement was part of the dispute. They were generally incorporated into the sale contracts. 36 On 6 June 2002 Colly or Colly Farms closed out the then currency positions at a loss of $382,745.28, relying on a provision in the Conditions. The Company had sold to Colly its 2001/2002 cotton crop. Colly told Mr Simmons that, in accordance with the Conditions, it would offset the $382,745.82 against any money payable to the Company for the crop. 37 Rabobank Australia Ltd ("Rabobank"), then known as Primary Industries Bank of Australia Ltd, was owed money by the Company and held a crop lien over the 2001/2002 crop. Colly was on notice of the crop lien. It paid some of the purchase price for the cotton crop to Rabobank, but kept the majority as reimbursement to itself of the $382,745.28 and in satisfaction of other money payable to it by the Company. 38 Rabobank brought proceedings against Colly, claiming to be entitled to a further $390,571.10 from the purchase price and interest on that amount. 39 Colly cross-claimed against Mr Simmons, alternatively the Company, claiming damages for breach of a warranty in the Conditions that it would obtain title to the cotton. It claimed as damages any amount it might be required to pay to Rabobank. 40 Mr Simmons and the Company then cross-claimed against Colly and Colly Farms, claiming damages for loss suffered by misleading or deceptive conduct inducing entry into the foreign currency agreement ("the TP claim") or by breach of a duty of care in the advice given and not given in that respect ("the negligence claim"), and for breach of contract in closing out the currency positions on 6 June 2000 ("the contract claim"). For the TP claim and the negligence claim they claimed as damages loss suffered on closing out currency positions prior to 6 June 2002 ("loss (i)"), loss suffered on closing out the currency positions on 6 June 2002 ("loss (ii)"), and loss suffered because the Company's cotton would have been more advantageously sold if the foreign currency agreement had not been entered into ("loss (iii)"). For the contract claim they claimed as damages loss suffered because of the closing out of the currency positions on 6 June 2000. In the appeal, although perhaps not at the trial, it was made clear that the contract claim was in the alternative to, and a fall-back from, the TP/negligence claims. 41 Bergin J upheld Rabobank's claim against Colly. She dismissed Colly's cross-claim. She upheld the cross-claim of Mr Simmons and the Company as to each of the TP claim, the negligence claim and the contract claim. The assessment of the losses for the TP/negligence claims was by adoption with adjustment of an expert's calculation, with the recalculation left to the parties. According to Colly/Colly Farms, the assessment of loss (i) was $206,122.71 and of loss (iii) was $861,161.22, with which Mr Simmons/the Company appeared to disagree. Whatever these component figures, together with loss (ii) of $382,745.28 and interest the judge gave judgment for Mr Simmons and the Company against Colly and Colly Farms for $1,948,925. The judgment did not distinguish between Mr Simmons and the Company as parties entitled to judgment, or between Colly and Colly Farms as parties subject to judgment. 42 The success of Rabobank's claim against Colly was not challenged on appeal. Colly/Colly Farms appealed against the dismissal of its cross-claim, and Colly/Colly Farms appealed against the findings of misleading or deceptive conduct, breach of a duty of care, breach of contract and causation of loss in the cross-claim against them; they also appealed as to the assessment of loss (iii). Mr Simmons/the Company cross-appealed as to the assessment of loss (iii). 43 For the reasons which follow, in my opinion the appeal against the dismissal of the Colly's cross-claim should be allowed, the Colly/Colly Farms appeal should otherwise be dismissed, and Mr Simmons'/the Company's cross-appeal should be allowed. The damages for breach of warranty, however, are not the amount Colly is required to pay to Rabobank, but only $7,825.28. The assessment of loss (iii) requires recalculation by the parties, with a different adjustment of the expert's calculation. The judgments should be between Colly and the Company. With recalculation of interest, the judgment sums should be set off against each other. 44 The reasons are structured under the topics - · marketing of cotton; · the foreign currency agreement; · taking the May 2000 sold positions; · closing out prior to 6 June 2000; · closing out on 6 June 2000; · the Colly cross-claim; · the TP claim - misleading or deceptive conduct; · the TP claim - causation; · the TP claim - assessment of loss (iii); · the negligence claim; · the contract claim.

Marketing of cotton 45 In New South Wales cotton crops were normally sown in about October and harvested in April or May of the following year. Cotton merchants purchased cotton from growers and sold it to cotton mills throughout the world. The merchants offered prices to growers for delivery of their cotton to be grown in the current season or in future seasons. Growers commonly sold forward some or all of their crop for the current season or for future seasons, in advance of the harvest or of sowing. 46 A cotton grower could sell its cotton under pool agreements. These proceedings were not concerned with pool agreements, which can be passed over. Individual agreements were essentially of two kinds, a fixed price contract or an on call contract. A fixed price contract or an on call contract could be for delivery of an agreed number of bales of cotton, for delivery of the cotton harvested from a particular area or property, or for delivery of the balance of the cotton harvested from a particular area or property beyond a number of bales to be otherwise marketed. 47 Under a fixed price contract the cotton was sold at a price per bale fixed in $A. The contract could be a spot price contract, the price being determined at the market price at the time the cotton was delivered or ginned, or a forward contract, the price being agreed at the time of the contract. 48 Under an on call contract the cotton was sold at a price principally determined by the three variables "futures", "basis" and "currency". These variables were known as "legs" of the contract, and the on call contract permitted the grower to elect to fix any of the legs at any time by notice to the merchant. Futures was the US cotton futures price on the New York Cotton Exchange, a price in $US for the delivery of US cotton to US locations at specified future dates. Basis was a margin reflecting the difference between the Australian cotton price and the US cotton futures price due to differences in cotton quality and transport costs. Currency was the $US/$A exchange rate. By fixing the legs, of which futures and currency were the more important, the grower could protect itself against the volatility of the US cotton futures price and the volatility of the exchange rate. 49 The forms of on call contract used by Colly evolved over time. To illustrate the determination of the price by the three legs, an on call contract entered into between Colly and the Company in February 2002 provided - "Base Price: An amount per Specified Bale (subject to Standard Classification), stated gross and exclusive of GST, calculated as follows A = [(B+C) x 500]/[D x 100] - E Where A = the Base Price per Specified Bale B = the Futures Price (expressed in US cents per lb) established pursuant of the Standards [sic] Conditions C = the Basis (expressed in US cents per lb) established pursuant of the Standards [sic] Conditions D = the Australian dollar/US dollar currency exchange rate established pursuant to the Standard Conditions E = the AUD/bale Marketing charge established pursuant to clause 13 of the Standard Conditions" 50 It is not necessary to describe how the Conditions, all forms of which were in these respects relevantly in the same terms, provided for establishing the futures price or the basis. The currency exchange rate was established by what was described in cl 12 of the Conditions as a "Hedge". Clause 12 provided that payment to the grower was to be made in $A except to the extent the grower directed. The grower could direct payment in whole or in part in $US, or could give a "Hedge Notice" directing Colly to "Hedge" the whole or any part of its $US/$A exposure in relation to the net sale proceeds. In the latter event Colly had to Hedge unless it could not execute a trade in the market to cover its currency risk. A default provision obliged Colly to Hedge at a particular time related to business on the New York Cotton Exchange. 51 "Hedge" was defined as taking a position in a futures market opposite to a position held in the cash market to minimise the risk of an adverse price change, and Colly had to Hedge at the "Hedged Rate of Exchange", defined as "the rate of exchange from time to time offered by Colly for the conversion of United States dollars into Australian dollars at a particular time in the future, such rate of exchange to be set by reference to currency market pricing in the foreign exchange markets". Clause 12 may have expressed with some difficulty how the exchange rate was established, particularly in the definition of Hedge, but the intent was tolerably clear. The currency transaction was between Colly and the grower, and by the grower's election or by default the exchange rate was fixed for payment in $A under the particular on call contract. 52 A grower could seek to protect itself against the volatility of the exchange rate otherwise than by fixing the currency leg under an on call contract. Cotton merchants offered growers forward exchange contracts, by which a grower selling or intending to sell its crops under on call contracts could take a sold position in $US with the merchant to match the estimated future $US value of the cotton according to the US cotton futures price and the basis. One of the experts, Professor Gray, said that the rationale for a forward exchange contract was that the grower's crop would yield $US revenue which would be converted into a fixed $A sum regardless of movements in the $US/$A exchange rate between the time of fixing the currency and harvest of the crop. Mr Starling of Colly described it as "agreeing the rate [of exchange] in advance of the delivery date by entering into a forward exchange contract", and Mr Morison of Colly said - "Colly offers growers forward currency contracts to convert US dollar proceeds of the sale of their cotton to Colly to a payment from Colly in Australian dollars on delivery of the cotton. By using forward currency contracts, growers are able to hedge their forward exchange rate to coincide with delivery of cotton to Colly." 53 Other descriptions referred to fixing the currency leg of the on call contracts by entry into the foreign exchange contract and to hedging the exchange rate risk. It was often said that the sold position was used to price the cotton under an on call contract; this referred particularly to closing out the position in an amount equivalent to the actual $US value of the crop sold under the on call contract when that value was ascertained at the time of delivery. 54 A forward exchange contract was nonetheless markedly different from fixing the currency leg under an on call contract. If the quantity or quality of the crops, or the $US cotton futures price, meant that less was payable to the grower in $US than the estimated amount, the balance of the position became speculation on the exchange rate. Crop yields were subject to water availability and nature's vagaries, and US cotton futures prices were outside the grower's control, so there was speculation in a wider sense in using a forward exchange contract rather than fixing the currency leg under individual on call contracts. The speculation at both levels was the greater if the forward exchange contract was for a currency position to match the estimated $US value of cotton in more than one season, to be used to price the cotton in part in one season, in part in the next, and so on. The evidence was that forward exchange contracts were therefore normally offered for a maximum of three seasons, and that the sold position in this case of $US2,500,000 for five seasons' crop production, or $US500,000 per season, was unusual. The grower could in part alleviate the wider speculation by fixing the futures legs under individual on call contracts, but only partly because this required that the on call contracts had been entered into. A grower which entered into a forward exchange contract had to be particularly astute in managing the fixing of legs. 55 Further, a grower which had taken a sold position with a merchant under a foreign exchange contract was effectively locked in to growing cotton rather than some other crop, and there was an abundance of evidence that the grower had no choice but to sell its cotton to the merchant under on call contracts. This included evidence from Mr Morison and Mr Butler of Colly, Mr McKay who was Colly's agent in making the foreign currency agreement, Mr Anderson of Rabobank and the expert Mr Wyatt. Unless the currency position was used to price the cotton under on call contracts, it would be no more than speculation on the exchange rate. 56 In Colly's case, when it entered into a forward exchange contract with a grower it usually but not always entered into a corresponding forward exchange contract with its bank. As will be seen, the corresponding forward exchange contract was often at an exchange rate different from that of the forward exchange contract with the grower. This was a hedge of Colly's own exposure to the volatility of the exchange rate, and affirmed that the forward exchange contract with the grower was more than a pricing mechanism and gave rise to $US obligations between Colly and the grower: as Mr Morison said at one point, Colly had "a risk on its own position of the obligation we've made to the grower". 57 Colly had standard form commitment contracts, under which a grower agreed to commit and Colly agreed to take a quantity of cotton under a fixed price contract, an on call contract or another form of contract to be later selected by the grower. It was not necessary that a fixed price contract or an on call contract be preceded by a commitment contract, but a commitment contract or contracts was at the least expected where there was a forward exchange contract.

The foreign currency agreement 58 Throughout the evidence there were references to the property "Retro" as the source of the Company's cotton. "Retro" was Mr and Mrs Simmons' principal property. Cotton was grown only on "Charlievale", and it was common ground that "Retro" should where appropriate be understood as "Charlievale". 59 In their cross-claim Mr Simmons/the Company alleged as the foreign currency agreement a foreign exchange contract with Colly or Colly Farms "for the sale of US$2.5 million, later extended by further US$1 million", with the express term "to be rolled at your discretion". It alleged that the foreign currency agreement was to be found in a fax dated 23 December 1997 and as to the extension in a letter dated 11 May 2000. 60 In their defence to the cross-claim Colly/Colly Farms admitted a contract "for the establishment of currency rates", but said that it was "part of the Marketing Agreement". This referred to the Marketing Agreement alleged in Colly's cross-claim, a contract "for the sale of cotton grown or to be grown on a property known as Retro for the growing seasons 1998/1999, 1999/2000, 2000/2001, 2001/2002 and 2002/2003", to be found in conversations in December 1997 - January 1998, the fax of 23 December 1997, a letter dated 16 January 1998, the Conditions, and "[t]ransactional documents between Colly and Simmons pursuant to which Simmons and Colly recorded the terms for the pricing of the cotton and the exchange rate for the conversion of US dollars to Australian dollars". Implicitly, the Marketing Agreement did not include that currency positions could be rolled at the holder's discretion. 61 The conversations, fax and letters and some of the transactional documents are described in following paragraphs of these reasons. The judge did not wholly accept either of the pleaded agreements. She found - "175 I am of the view that the conversations between Mr Simmons and Mr McKay in December 1997 and the letters referring to foreign exchange orders and deals in December 1997 and January 1998 in the context of the surrounding circumstances evidence an agreement between Colly and Mr Simmons that: (1) the Company would sell to Colly whatever cotton it could grow for each of the following five cotton seasons; (2) there would be a currency arrangement entered into that would allow Mr Simmons or the Company to "enhance the Australian dollar price" of the cotton; and (3) Mr Simmons would be able to roll the currency at his discretion. This Agreement is not the same as the Marketing Agreement pleaded by Colly. Colly has failed to prove the Marketing Agreement as pleaded." 62 It may be observed that Mr Simmons/the Company also failed to prove the foreign exchange contract as pleaded. The judge did not clearly find who were the parties to the foreign currency agreement, but later referred to the "currency position" as being between Mr Simmons and Colly Farms. The contract as found did include a term that Mr Simmons would be "able to roll the currency at his discretion". I will later say more of rolling over a currency position taken under the foreign currency agreement. 63 Colly/Colly Farms submitted that the judge erred in her findings of the foreign currency agreement and the circumstances of its making. 64 The Colly agent in the district was Mr Robert McKay. He was a long-standing friend of Mr Simmons and a second cousin of Mrs Simmons. 65 As at 1997 the area of "Charlievale" developed for irrigation was about 540 acres. Allowing for some of the area to lie fallow, in a typical year and subject to water availability and good growing conditions a harvest of about 1400 bales of cotton could be expected. Due to water difficulties, in the 1996/1997 season only 152 acres were sown to cotton, in the result harvesting 473 bales. 66 In early 1997 Mr McKay arranged two contracts for the sale of cotton to Colly. Believing at the time that Mr Simmons still conducted his farming activities in partnership with his wife, in a "Colly New Grower Notification Form" sent to Colly he identified the grower as Mr Simmons trading as J & D Simmons. One contract, purportedly an on call contract, was dated 10 February 1997 and was for the sale of 400-550 bales from the 1996/97 crop. It identified the grower as J & D Simmons trading as J & D Simmons, and was signed by Mr and Mrs Simmons. The other contract, a fixed price contract, was also dated 10 February 1997 and was for the sale of 400-500 bales from the 1997/1998 crop for $500 per bale. It identified the grower in the same way and was also signed by Mr and Mrs Simmons. 67 The evidence did not disclose what was done about fixing the legs under the on call contract. There was delivery and payment under that contract prior to the conversations next mentioned. 68 In December 1997 Mr Simmons spoke to Mr McKay about involvement in foreign currency, colloquially referred to as "doing currency". The judge summarised the evidence - "53 In December 1997 Mr Simmons had a conversation with Mr McKay, the terms of which are in issue. It is clear that Mr Simmons had been speaking with other clients of Colly in the area that were serviced by Mr McKay about their dealings with Colly and their experiences in dealing with currency with Colly. Mr Simmons telephoned Mr McKay to discuss his interest in becoming involved in foreign currency. Mr Simmons claims that in this telephone conversation Mr McKay informed him that it was a "good idea" to get into "currency" and there was "easy money" to be made by taking out currency. Mr Simmons also recalled that Mr McKay said "you'd be good at this, Simmo" and informed him that he could always "roll out" if the currency was "out of the money".

54 There was then a discussion about "taking out " US$1 million to "cover" his wheat and cotton by taking out a foreign exchange contract for US$1 million "cover" in each of the following five years. Mr Simmons claimed that Mr McKay said that he would have to speak to Colly's people in Sydney before he could do that. Mr Simmons claimed that Mr McKay telephoned him later that day and said that Sydney would not allow him to do US$1 million a year, but that they would "let us take out" US$500,000 a year. Mr McKay also informed Mr Simmons that he was not able to do any currency in relation to his wheat crop.

55 Mr McKay's version of the conversation is different. He claimed Mr Simmons telephoned him and said: "I have been speaking with some growers who have been hedging currency and they have been doing well out of it. I want to get involved in that myself. I am looking to hedge my currency exposure for the next 5 years. I am selling cotton and wheat in US dollars and I want to take out hedging positions for both of those crops". Mr McKay gave evidence that he spoke with Colly's Grower Services Manager, Peter Cottle, who informed him that Colly would not take out currency in relation to wheat.

56 Mr McKay said that he telephoned Mr Simmons after speaking to Mr Cottle and informed him that he was unable to "hedge currency" in relation to his wheat crop. He said that he asked Mr Simmons what his "likely production" was going to be per season and that Mr Simmons informed him that he would be growing 400-500 acres producing about 1500 bales per season. Mr McKay said: "For 1500 bales you will be able to take currency positions for US$500,000 per season". Mr Simmons asked him whether he could possibly hedge currency for five years and Mr McKay informed him that Colly would only do currency for five years "if you commit five seasons' production". Mr Simmons said that he would make that commitment. Mr McKay claims that he then informed Mr Simmons that he would need to use US$500,000 of the currency position each year for the crop and if there was any surplus currency he would need to trade it out. He also claimed that he advised Mr Simmons that if he made a profit he would get it but if he made a loss he would have to take that loss. Mr McKay also claimed that he asked Mr Simmons whether he was "sure" he wanted to go ahead and that Mr Simmons advised him that he had spoken to other growers and that they had said that there was good money to be made and he wanted to go ahead.

57 Mr Simmons claimed that in this conversation Mr McKay did not ask any questions of him in relation to his financial situation or the ongoing water allocation for the property. Indeed Mr McKay does not claim to have asked Mr Simmons about those matters. Mr Simmons also denied that he was asked about expected production in terms of bales of cotton. He claimed that Mr McKay told him that he was unable to take out currency for five years in advance and that he would arrange for it to be taken out initially for two or three years and that "we could then roll some of it out into the later years at that time as we needed it". Mr Simmons was not cross examined on his evidence that Mr McKay had advised him that he would arrange for the currency to be taken out initially for two or three years.

58 Mr McKay agreed in cross-examination that he did not give Mr Simmons any kind of risk disclosure document. He said that apart from explaining that if he did not utilise the amount of currency in the year that he would be responsible for any profits or losses, there was nothing else that he said about the risks involved in currency. He knew that Mr Simmons did not have any experience in currency and he also knew that Mr Simmons was concerned not to sign anything that had a commitment for 1500 bales." 69 Adding to this, Mr McKay denied informing Mr Simmons that it was a good idea to get into currency and that there was easy money to be made. He did not directly contradict Mr Simmons' statement that other growers said there was easy money to be made, on his evidence only telling Mr Simmons that "by taking a position in currency you can enhance your Australian dollar price for cotton". In his evidence he added to a confirmation of this "if the currency went up after he had hedged the currency", but did not clearly say that he said that to Mr Simmons. 70 The judge did not expressly resolve all the differences between Mr Simmons and Mr McKay in their recollections of the conversations. It is apparent, however, from her findings as to representations for the purposes of the TP claim that she accepted that, by not contradicting Mr Simmons' reference to easy money to be made, Mr McKay had conveyed much the same as that it was a good idea to get into currency and that there was easy money to be made. Later in her reasons, having noted that Mr McKay denied that he told Mr Simmons that he could always roll out if the currency was out of the money, the judge referred to Mr McKay's evidence that he "told growers … that we had been able to roll the currency forward and that was the practice at the time" and found that Mr McKay "did make that representation to Mr Simmons in the conversation in December 1997". "That representation" must have been that Mr Simmons would always be able to roll the currency if it was out of the money, since the judge acted upon it in the TP claim. Later again in her reasons the judge did not accept "that Mr Simmons advised Mr McKay that he could commit to 1500 bales", but from the finding that the agreement included that the Company would sell Colly whatever cotton it could grow for each of the following five cotton seasons she appears to have accepted Mr McKay's evidence that Mr Simmons made the commitment of five seasons' production. 71 On 23 December 1997 Mr Simmons received a fax of that date, not from Colly but from Colly Farms, addressed to him trading as J & D Simmons. It read - "We confirm having placed the following Foreign Exchange order on your behalf: You sell USD$2,500,000 against AUD at spot 0.6500 to be rolled at your discretion

Please confirm your agreement by signing and return this facsimile" 72 Mr Simmons signed and returned the fax. 73 On 5 January 1998 Mr Simmons received a further fax from Colly Farms, again addressed to him trading as J & D Simmons, reading - "We confirm having Dealt the following FX deal on your behalf:

Details You Sell USD 2,500,000.00 against AUD at spot of 0.6500 to mature on 6th January 1998

Please confirm your agreement by signing and returning this facsimile." 74 Mr Simmons signed and returned the fax. 75 On 6 January 1998 came another fax from Colly Farms, similarly addressed, reading - "We confirm having Extended the following FX deal on your behalf:

Original Details: You Sell USD 2,500,000.00 against AUD at spot of 0.6500 to mature on 6th January 1998 Extended Details:

You Sell USD 2,500,000.00 against AUD at spot of 0.6500 to mature on 6th January 1999 at an outright forward rate of 0.6562

Please confirm your agreement by signing and returning this facsimile." 76 Again, Mr Simmons signed and returned the fax. 77 According to Mr Starling, Colly (or perhaps Colly Farms - he did not distinguish between them) took its own position with its bank to sell $US2,500,000 to mature on 6 January 1999 at the forward rate of 0.65570. 78 Also on 6 January 1998, Mr Simmons signed two contracts in relation to sale of cotton to Colly. 79 One contract was a "Lint Cotton Purchase Confirmation", a confirmation by Colly of "the following lint cotton purchase pertaining to our verbal contact on 6/1/98". The details given were appropriate to a fixed price contract for "Crop Year: 1998" for "Production off 450 acres in excess of 1100 bales to a maximum of 1450 bales". The pro-forma part of the document included, "Formal contracts for your signature will be forwarded shortly". There was no evidence of the "verbal contact on 6/1/98". There was already in place the fixed price contract arranged in early 1997 for the sale of 400-500 bales from the 1997/1998 crop, and the evidence did not explain the further transaction. The particular significance of the document is that, when returning it to Mr McKay, Mr Simmons wrote on it, "PS Bob our trading name is Retro Past Co ACN 073 056 461". Mr McKay passed on to Colly what he described as "the change of details of Mr Simmons' trading name." Colly was thereby told of the Company and that it was the trading entity. 80 The other contract was an on call contract dated 6 January 1998 for the sale of 0-350 bales from the 1997/1998 season, the copy in evidence bearing a note that it was "cancelled per Peter Cottle memo 1/4/98 due to water & agronomic problems". This also was not explained in the evidence. So far as appears there were no other contracts in accordance with the confirmation in relation to the 1997/1998 cotton crop. 81 In February 1998 Mr McKay asked Mr Simmons to sign a bale commitment to Colly for 1500 bales. Mr Simmons said he was not willing to commit to a definite number of bales unless he could be sure he could grow it. Mr McKay expressed his concern about that position and also about his own position, and blamed "Head Office in Sydney", claiming that he was "in trouble" for not obtaining a cotton commitment from Mr Simmons. In the result, Mr McKay prepared and Mr Simmons signed a letter which Mr McKay had earlier prepared dated 16 January 1998, addressed to Colly and reading - "This is to confirm a commitment for production off Retro for the next five years. I understand Colly will send Commitment Agreements for the years 1999, 2000 and 2001. This letter acknowledges the extra commitment for the years 2002 and 2003." 82 Two commitment contracts between Colly and the Company were signed by Mr Simmons in the middle of 1998, apparently for the cotton crops for the 1998/1999 and 1999/2000 seasons. Each included - "SPECIAL CONDITIONS: This Commitment Agreement offsets a currency position held on your instructions and on your behalf by Colly Cotton. In the event you the Grower elect to liquidate the position prior to or at expiry, with all profits or losses being on your account, your existing commitment to deliver bales will be cancelled by mutual agreement."

83 From the letter of 16 January 1998, the commitment associated with the foreign currency agreement was for the five seasons commencing with the 1998/1999 season. It is not clear why the five seasons did not begin with the 1997/1998 season, but in fact the currency position was not used to price the cotton crop sold to Colly from the 1997/1998 season, presumably because the only on call contract was cancelled. 84 In my opinion, not differing in substance from the finding of Bergin J, by the foreign currency agreement Colly/Colly Farms agreed to provide to Mr Simmons/the Company and Mr Simmons/the Company agreed to take (I will return to the question of parties) the sold position for $US2,500,000 and Mr Simmons/the Company committed to selling to Colly/Colly Farms the cotton crops from "Charlievale" for the next five seasons. It was anticipated that $US500,000 of the position would be closed out each season as the crop was delivered and the value in $US was calculated, but it was agreed that the currency position could be rolled over and not progressively closed out if Mr Simmons/the Company so chose. Although the Conditions would be taken up as sale contracts were entered into, they were not part of the foreign currency agreement. There was an obligation to sell to Colly, but the practical necessity to sell under on call contracts was alleviated by the ability to roll over the currency position. 85 It is appropriate now to say more of rolling over the currency position. In the present context, it did not involve closing out the position and opening another position but rather, as Professor Gray described it, cancellation of the foreign exchange contract and its replacement with a fresh foreign exchange contract. The currency position under the fresh foreign exchange contract, however, was likely to be at a different exchange rate from the original contract (that can be seen in the faxes of 5 and 6 January 1998). Because there was not a closing out no loss or profit was realised, but the loss or profit did not go away; its realisation was deferred until the position was closed out, when it would be realised (although increased or reduced depending on future exchange rate movement). 86 Rolling over if the currency position was "out of the money", in its usage in the conversation between Mr Simmons and Mr McKay meaning that there had been adverse movement in the exchange rate, involved not using for a season's cotton crop the $US500,000 of the currency position (or whatever other amount equated to the value calculated in $US) to price the crop. To agree that Mr Simmons/the Company could "always" roll out did not mean for ever, but expressed the contingency of the currency position being out of the money; the point was that the currency position did not have to be partially closed out in each season. Whether the limit of rolling over would be the end of the five seasons or some further reasonable time need not be decided, but the currency position was taken under the foreign currency agreement as part of marketing cotton, and did not have an independent and unlimited life. 87 Colly/Colly Farms submitted that the judge erred in her findings for three reasons. 88 The first reason was that Mr Simmons/the Company had not pleaded the agreement found by the judge or submitted that the agreement should be found. The case of Mr Simmons/the Company had included that as a matter of fact holding the currency position required Mr Simmons/the Company to sell the Company's crop to Colly under on call contracts. The judge was called on to find what the agreement was, not to choose between two allegations and make no finding if neither allegation was fully made out. In my opinion, the foreign currency agreement as found by the judge and as I have expressed it was within the case as fought, and there was and is no denial of procedural fairness in this respect. 89 The second reason was that Mr McKay lacked authority to bind Colly or Colly Farms to the foreign currency agreement. Mr McKay's authority was not put in issue at the trial. He spoke to his superior, Mr Cottle, who let him go ahead save as to wheat. The faxes followed, for $US reflecting the conversation about five seasons and one stating "to be rolled at your discretion". They came from Colly/Colly Farms itself, supporting Mr McKay's actions. No reason has been shown to doubt Mr McKay's actual authority, but if he lacked actual authority he had ostensible authority (see Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [36]-[38]). 90 The third reason, it seems focussed on ability to roll over the currency position, was that an agreement in that respect was "improbable" because (a) the parties entered into on call contracts dealing with the same subject matter of Colly closing out positions; and (b) the size of the transaction was such that it would be expected that the parties would reduce their agreement to writing. 91 As to (a), cl 35 of the Conditions was concerned with closing out open positions; it is set out later in these reasons in the consideration of the contract claim. It did not deal with rolling over, but with closing out at Colly's discretion. Power in Colly to close out is at first sight at odds with entitlement in Mr Simmons/the Company to roll over, but there is no reason why Colly could not specially agree to fetter the power in standard conditions to the extent that the sale contracts took them up. On the contrary, where the foreign currency agreement was an umbrella agreement for five seasons there was reason to do so. Further, the asserted improbability pales against the evidence that Mr McKay told Mr Simmons that he could always roll out if the currency was out of the money and the stark terms of the fax of 23 December 1997, not referring to a currency position maturing at a particular date but in general terms to an order for a sold position for $US2,500,000 "to be rolled at your discretion". 92 As to (b), RT & YE Falls Investments Pty Ltd v The State of New South Wales [2001] NSWSC 1027 at [53]-[57] was cited. An appeal in that case was dismissed, see State of New South Wales v RT & YE Falls Investments Pty Ltd (2003) 57 NSWLR 1. As a decision on the facts in that case, it is not of assistance in the present case. In the present case it is manifest that the parties acted with informality, and the expectation is of little if any weight. The parties were making a legally binding agreement, however informally, hence getting Mr Simmons' signatures on the faxes and Mr McKay's efforts to obtain a written commitment, and I do not think there can be excised from their agreement what Mr McKay and the fax of 23 December 1997 said about rolling over as part of the agreement about a currency position. 93 Who were the parties to the foreign currency agreement? Colly/Colly Farms pleaded that the Marketing Agreement was between Colly and Mr Simmons, and according to the judge were equivocal as to the parties in their submissions. Mr Simmons/the Company pleaded in the alternative, but submitted at the trial that the foreign exchange contract was between Mr Simmons and Colly Farms. 94 The faxes of 23 December 1997 and thereafter were from Colly Farms. As the currency positions were rolled over and partially closed out, Colly Farms continued to appear as the entity with which the replacement positions were held. How $US due for delivery to Colly Farms was used to price the cotton contracts with Colly was not explained, but there could have been internal accounting between Colly and Colly Farms and I do not think the plain and consistent appearance of Colly Farms as the party to the foreign exchange contracts can be gainsaid. 95 However, that does not mean that Colly Farms was the Colly/Colly Farms party to the foreign currency agreement. There was reciprocity in the foreign currency agreement between taking the sold position for $US2,500,000 and the commitment to sell the cotton crops from "Charlievale" for the next five seasons. It was a commitment to Colly as the merchant which had already bought the 1996/1997 cotton crop and to which the letter of 16 January 1998 was addressed. The currency position was to be used to price the cotton sold to Colly, and was so used. Mr Morison was speaking realistically when he said in his evidence that "the currency contracts … were inextricably linked to the cotton commitment contracts" and "the currency contract is part of the cotton contract". In my opinion, Colly was the party to the foreign currency agreement, agreeing to provide the currency position and doing so through Colly Farms by causing its subsidiary Colly Farms to provide it. There was an umbrella foreign currency agreement under which the currency transactions came about, and Colly was the party which promised that the currency position could be rolled over. 96 The early 1997 sale contracts were with Mr Simmons or J & D Simmons, and the faxes of January 1998 were addressed to Mr Simmons trading as J & D Simmons. However, Mr Simmons in fact conducted his farming activities through the Company, and told Mr McKay of the Company when returning the confirmation of 6 January 1998. Colly was told of the Company, and that many of its communications continued to be addressed inappropriately to J & D Simmons or in terms such as Retro Pastoral Co was due to its poor records management. The Company was thereafter the identified party to the cotton sales, and at all times it had the interest in using (and used) the currency position to price the cotton crops. At all times the Company was the grower, as Mr Simmons recognised when he corrected Mr McKay through the note on the confirmation. In my opinion, Mr Simmons was acting on behalf of the Company, as agent for an initially undisclosed principal, and the foreign currency agreement was with the Company and the currency transactions were with the Company. 97 Hereafter in these reasons I will refer as appropriate to Colly and the Company, rather than to the duality of Colly/Colly Farms and Mr Simmons/the Company.

Taking the May 2000 sold positions 98 Mr Simmons/the Company alleged a foreign exchange contract "for the sale of US$2.5 million, later extended by a further $US1 million". Colly/Colly Farms did not by pleading the Marketing Agreement specifically controvert the extension of the foreign currency agreement to a further $US1,000,000, but left the status of the later currency transaction unclear. At the trial they contended that the May 2000 sold positions were taken in circumstances changed from those of late 1997/1998. 99 The 23 December 1997 sold position for $US2,500,000 was rolled over on 6 January 1998 to mature on 6 January 1999, see earlier in these reasons. On 6 January 1999 the position was rolled over to mature on 30 June 1999. 100 On 6 May 1999 $US260,000 was closed out at a profit of $3,679.51. A fax from Colly Farms dated 7 May 1999, addressed to John Simmons trading as J & D Simmons, included - "We confirm having executed the following FX deal on your behalf. Details You Buy USD 260,000.00 against AUD at spot of 0.6650. This has been rolled to mature on 30th June 1999 at a forward rate of 0.6650. This position will be used to partially offset the existing position outlined below: You sell USD 2,500,000.00 against AUD at a rate of 0.6588 to mature on 30th June 1999. Net profit of this partial close out is $A3,679.51." 101 The $US260,000 was not used to price the 1998/1999 cotton crop. According to Mr McKay, he told Mr Simmons that he would have an excess of $US260,000 for the season and needed to "trade that out". When the spot rate rose above the sold position rate, that was done. 102 On 30 June 1999 $US240,000 was closed out, used to price the 1998/1999 crop, and the remainder of the position was rolled over, as to $US1,000,000 maturing on 30 June 2000 and as to $US1,000,000 maturing on 29 June 2001. 103 In February 2000 there was sent to Mr Simmons a "Client Agreement and Risk Disclosure Statement". The Client Agreement took the form of an agreement between Colly Farms and the Company, and was concerned with dealing in futures contracts by Colly Farms on behalf of the Company. Futures contracts were explained as "a standardised agreement, made on a recognised exchange, to buy or sell a specified quantity of a described commodity at an agreed date in the future"; traded commodities were said to "include financial commodities such as bank bills and Treasury bonds". The Client Agreement was executed by the Company and returned. The Risk Disclosure Statement warned of substantial risk of loss in trading in futures contracts. It was signed by Mr Simmons and returned. 104 In March 2000 the Company and Colly entered into two contracts for the sale of the 1999/2000 cotton crop. They were on call contracts dated 14 March 2000, signed by Colly on 14 March 2000 and in one case by Mr Simmons on 20 March 2000 and in the other case by Mr Simmons but undated. One was for 1200 bales and the other was for 300 bales. 105 On 9 May 2000 Mr Simmons signed a Foreign Exchange Order Form addressed to Colly Farms; it was dated 10 May 2000, and Mr Simmons may have written a wrong date It recorded orders to sell $US500,000 "value date" June 2004 at a rate of 0.5785 and $US500,000 "value date" June 2005 at a rate of 0.5815. 106 On 11 May 2000 Mr Simmons received a fax from Colly Farms, addressed to him trading as Retro Pastoral Co, reading - "In response to the order placed with Bob Mckay on May 10, we confirm having dealt the following FX transactions, dated May 11, on your behalf. You sold 'USD 500,000 against AUD at a spot rate of .5785. This has been rolled to the 15th of June, 2003 at an all-in rate of .5920. This deal will be rolled to 2004 at a late date. You sold 'USD 500,000 against AUD at a spot rate of .5815. This has been rolled to the 9th of May 2003 at an all-in rate of .5950. This deal will be rolled to 2005 at a later date. For our records, please sign and return this deal confirmation to our Sydney office on (02) 9236 9050." 107 Mr Simmons signed and returned the form. 108 This was not rolling over an existing open position. The judge referred to the May 2000 currency transaction, but did not find why or in what circumstances it came about. A finding is difficult, because there was no evidence from Mr Simmons, Mr McKay or any one else explaining the transaction. An explanation may be that the five seasons for the foreign currency agreement ended with the 2002/2003 season and Mr Simmons intended to do currency in relation to the further seasons 2003/2004 and 2004/2005, hence the expected rolling over to 2004 and 2005. That is given some support by two on call contracts dated 25 May 2000 between Colly and the Company, signed by Colly on 25 May 2000 and by Mr Simmons on 2 June 2000, for 1500 bales from the 2003/2004 season and the 2004/2005 season respectively. But in the absence of evidence it is difficult to be satisfied that the transaction was a variation of the foreign currency agreement to encompass taking the May 2000 sold positions, or a second foreign currency agreement to similar effect to the earlier agreement. I will return to this when considering the contract claim; I do not think a finding is necessary.

Closing out prior to 6 June 2000 109 In May and June 1999 $US500,000 had been closed out, in part used to price the 1998/1999 cotton crop. A profit of $3,679.51 had been made. As at May 2000 the Company held currency positions for $US1,000,000 maturing on 30 June 2000, $US1,000,000 maturing on 29 June 2001, $US500,000 maturing on 9 May 2003 and $US500,000 maturing on 16 June 2003. The last two currency positions were to be rolled to 2004 and 2005 at a later date. 110 On 30 June 2000 $US331,500 was closed out, used to price the 1999/2000 crop. The remainder of the $US1,000,000 was rolled over into two positions, as to $US168,500 maturing on 22 November 2000 and as to $US500,000 maturing on 15 July 2002. 111 On 22 November 2000 the $US168,500 was closed out. $US56,028.50 was used to price the 1999/2000 crop, and $US112,471 was closed out at a loss of $52,509.38. According to Mr Simmons, Mr Morison told him that he was "not allowed to roll any more because 'the banks had stopped them (ie Colly) rolling their currency'." This does not seem to accord with later rollovers. 112 On 29 June 2001 the $US1,000,000 was rolled over into two positions, as to $US500,000 maturing on 24 December 2001 and as to $US500,000 maturing on 30 June 2003. 113 On 23 July 2001 the $US500,000 sold position taken on 11 May 2000 maturing on 9 May 2003 was rolled over to mature on 15 June 2005, and the $US500,000 sold position taken on 11 May 2000 maturing on 16 June 2003 was rolled over to mature on 15 July 2004. 114 On 6 December 2001 the $US500,000 maturing on 24 December 2001 was closed out, as to $US161,616 used to price the 2000/2001 crop and as to $US338,384 at a loss of $145,924.42. 115 There had been a profit to the Company on closing out of $3,679.51 and losses of $198,433.80, a net loss of $194,754,29. This does not fit with Colly/Colly Farms' assertion that loss (i) was assessed at $206,122.71. 116 At all times Colly had entered into corresponding positions with its bank, rolling over and sometimes having to close out and take a new position and in one case delivering $US. It was not suggested in the appeal that Colly's net loss, which was less than that of the Company, was material to the claims in the proceedings.

Closing out on 6 June 2002 117 As at 6 June 2002 the Company held currency positions for $US500,000 maturing on 15 July 2002, $US500,000 maturing on 30 June 2003, $US500,000 maturing on 15 July 2004 and $US500,000 maturing on 15 June 2005. Half the total currency position represented the sold positions taken on 11 May 2000. 118 By the end of 2001 the exchange rate had moved significantly against the $A. Mr Simmons foresaw financial difficulty for the Company, and in March or April 1992 told Colly that he wanted "to roll my currency out to get more time". Colly declined. 119 Mr Simmons consulted a solicitor. Colly held out the possibility of other financial assistance if it received full accounting information from Mr Simmons, but Mr Simmons' reaction was negative. At a meeting on 15 May 2002 his solicitor spoke of the possibility of the Company going into liquidation. The relationship became such that Mr Simmons hung up in a telephone conversation with Mr Morison, although he apologised when they spoke again. 120 Without prior notice to Mr Simmons, on 6 June 2002 all the currency positions were closed out. $US350,000 was used to price the 2001/2002 crop. The remaining $US1,650,000 was closed out at a loss of $382,745.28. In a letter to Mr Simmons dated 14 June 2002 Colly said that "as per clause 35.2 of the Standard Terms and Conditions, Colly Cotton Marketing Pty Ltd has closed out all of the outstanding foreign currency positions held on your behalf including the expected excess position for the 2002 crop … ". 121 Colly closed out its corresponding currency positions at a lesser net loss. 122 There were subsequent discussions, but the relationship was not reinstated.

The Colly cross-claim 123 At the end of November 2001 Rabobank agreed to advance $350,000 to the Company for the cotton crop for the 2001/2002 season, and at its discretion further sums. The Company executed a crop lien in favour of Rabobank dated 30 November 2001. 124 On 21 January 2002 Rabobank sent to Colly a "Notice to Marketor" dated 30 November 2001 and an "Acknowledgement". The Notice to Marketor was expressed to be from Rabobank, but was also executed by the Company. It informed Colly of the execution of the crop lien giving Rabobank "the first right over the proceeds of the crop", and directed and authorised Colly to pay to Rabobank as agent for the Company, inter alia, "any amounts for the sale of any cotton". Other than that it acknowledged receipt of "the notice regarding the crop lien from: A.C.N. 073 056 461 Pty Ltd ('the Grower')", it is not necessary to describe the contents of the Acknowledgement. Rabobank asked that Colly return the Acknowledgement to it. Colly returned the Acknowledgement to Rabobank in early February 2002. 125 Colly and the Company entered into a number of contracts in relation to the 2001/2002 cotton crop, all on call contracts. A contract dated 25 May 2000 provided for sale by the Company to Colly of 1500 bales from the 2001/2002 season. A contract dated 14 February 2002, it seems in substitution for the earlier contract since it referred to an "original version" dated 25 May 2000, provided for sale by the Company to Colly of 1400 bales from the season. Another contract similarly dated provided for sale by the Company to Colly of bales from the season according to a formula amounting to bales from the harvest over the 1400 and up to an additional 300. Another contract dated 30 April 2002, again it seems in substitution for the contract last-mentioned because it referred to an "original version" dated 14 February 2002, provided for sale by the Company to Colly of bales from the season according to a different formula apparently intended to mean between 247 and 303 bales from the harvest over the 1400; it did not in terms say over the 1400. 126 The contracts ultimately in place were those of 14 February 2002 (1400 bales) and 30 April 2002 (bales over the 1400). At the trial there was some debate over whether they were amendments of the earlier contracts or replacements. Colly submitted that they were amendments, but the judge found that they were "new contracts". Colly did not repeat its submission on appeal, and there is no reason to depart from the judge's view. Thus the Company sold to Colly cotton over which it had given Rabobank a crop lien, and to the extent that timing mattered the sale post-dated the giving of the crop lien to Rabobank. 127 Each of the contracts incorporated the Conditions version 2, which included as cll 36, 37 and 38 - "36 FUTURE INTEREST/VARIATIONS OF INTERESTS After the date of this Agreement the Grower must not grant any new Interest or vary any existing Interest without the prior written consent of Colly (which shall not be unreasonably withheld) and any existing Interested Person. 37 WARRANTIES The Grower represents and warrants to Colly each as a material term of this Agreement, that (a) at the time of delivery of any Cotton to Colly in accordance with this Agreement (except to the extent otherwise specified in this Agreement or agreed in writing by Colly) the Grower has or will have full legal and beneficial title to such Cotton;

(b) the Grower has made a full and proper disclosure of all persons having an Interest, and the nature of their Interest;

(c) all Cotton delivered by the Grower to Colly pursuant to this Agreement will be of good and merchantable quality, and free from contamination.

38. INDEMNITY The Grower agrees to and does hereby indemnify Colly from and against all damages losses costs and expenses incurred by Colly as a result of the failure by the Grower for any reason to comply with any of its obligations under this Agreement." 128 The effect of the definitions in the Conditions was that each of the on call contracts incorporating the Conditions was an Agreement. The definition of "Interest" included an interest in any cotton delivered or to be delivered by the grower under the Agreement, its proceeds, or the amount payable by Colly under the Agreement arising (amongst other ways) by a crop lien. 129 The Company's gross proceeds from the sale of the 2001/2002 cotton crop were $533,187.89. From this Colly retained $429,599.43, made up of $382,745.29 for the currency loss, $46,843.14 owed by the Company from previous seasons and $30,945.05 for ginning charges. In the proceedings Rabobank claimed $390,571.10 from Colly. With interest, Colly was ordered to pay $472,697 to Rabobank. 130 Because of the crop lien, the Company did not at the time of delivery of the 2001/2002 cotton crop have full legal and beneficial title to it. The cross-claim turned on whether Colly had "otherwise … agreed in writing" as to Rabobank's crop lien, within the exception to the warranty in cl 37(a) of the Conditions. 131 The judge held that Colly had agreed in writing. She recorded the submission that, by the Notice to Marketor, Colly was advised that the Company had granted to Rabobank the relevant Interest in the 2001/2002 crop and that Colly could have objected but did not do so. She continued - "258 It was submitted that Colly's conduct in completing the Acknowledgment was a consent in writing to the grant of the Interest in the crop to the Bank. It was submitted that in those circumstances there was no breach of warranty upon which any indemnity should be ordered and that the Cross Claim brought by Colly against Mr Simmons and/or the Company should be dismissed. Clause 36 requires prior written consent, but that clause must be read with clause 37. Clause 37 (a) refers only to Colly otherwise agreeing in writing with no express temporal requirement. I am satisfied that the Acknowledgment is a recognition, without objection to the Bank's interest in the crop and is a consent, but it was not prior to the grant of the Interest.

259 The Acknowledgment was only returned to the Bank and, in my view, that document would not be sufficient to satisfy the term "otherwise agree in writing" in clause 37(a) of the Crop Lien. Thus prior to February 2002, but before delivery of the crop, there was no consent within the meaning of that term in clause 36 and there was no "agreement in writing" as referred to in clause 37 (a) of the Standard Conditions.

260 It was also submitted that Colly knew of the interest the Bank had in the crop by no later than early February 2002 and, with that knowledge, entered into the two new contracts on 14 February 2002 and the further contract on 30 April 2002. It was submitted that the entering into of those new contracts after return of the Acknowledgment should be treated as Colly having "agreed in writing" to the granting of the Interest. It was finally submitted that the execution of the new contracts is a clear and objective indication of Colly's consent and agreement to the grant of Interest in the crop to the Bank in the context of the Notice to Marketor and Acknowledgment.

261 I am satisfied that Colly agreed in writing to the Bank's interest in the Crop, by the entry into the contracts in February 2002 and April 2002 knowing of the Bank's Crop Lien. In those circumstances the Cross Claim against the Company must fail. Colly's Cross Claim will therefore be dismissed. 262 There was a defence of estoppel claimed in respect of the Cross Claim based on the same facts and circumstances claimed to have encouraged in the Company an assumption that it was entitled to grant the interest to the Bank pursuant to the Crop Lien. It is not necessary to decide this question, but it seems to me that once Colly was given the Notice by the Bank and the Company of the Bank's interest and did not suggest that it did not consent and once it entered into the contracts in February 2002 and April 2002 it would be a estopped from claiming that the Company had breached the warranty in clause 37 of the Standard Conditions." 132 Colly had not sued for breach of cl 36 of the Conditions because the crop lien was the grant of a new Interest, and it is not clear why the judge inquired into Colly's prior written consent to the grant of the crop lien. On any view, there was no prior written consent. The agreement in writing in cl 37(a) did not have to be given prior to the grant of the crop lien. The warranty spoke at the time of delivery of the cotton, and agreement in writing prior to that time (perhaps even afterwards) would have sufficed. 133 The Company did not under a notice of contention or by cross-appeal submit that an agreement in writing was to be found in the Acknowledgment, see the judge's [259]. At the hearing of the appeal counsel for the Company answered in the affirmative a question whether he relied on all three of the Acknowledgement, the new contracts and an estoppel, but did not present any submissions as to the Acknowledgement. While cl 37(a) did not speak of an agreement with the grower, it called for the formality of writing expressing agreement, and in order that Colly and the grower be at one as to the warranty I consider that the agreement in writing had at the least to be communicated to the grower. I doubt that the Acknowledgement was an agreement in writing, since receipt of notice of the crop lien did not mean consent to it and acknowledgement of receipt of notice did not change that position. But even if it was, it was not communicated to the Company. 134 Colly submitted that, contrary to the judge's [261], an agreement in writing was not to be found in entry into the new contracts of 14 February 2002 and 30 April 2002 with notice of the crop lien. It submitted that "agreed in writing" in cl 37(a) required the execution of a separate written agreement between Colly and the grower, to the effect that the grower was permitted to deliver cotton to which it did not have full legal and beneficial title. 135 If Colly meant a contractual document, I do not think that is so. An agreement in writing could be found in a written expression of agreement short of a contractual document. However, I nonetheless do not think that Colly's entry into the new contracts of 14 February 2002 and 30 April 2002 with notice of the crop lien amounted to the requisite written expression of agreement. 136 By entering into the new contracts Colly and the Company were agreeing, through the incorporation of the Conditions, that the Company should give full and beneficial title in the cotton to Colly. Particularly where cl 37(a) provided for an exception as "otherwise specified in this Agreement", it would be incongruous if the writing constituting the new contracts expressed that Company did not have to give full and beneficial title in the cotton to Colly. Further, entry into the new contracts with notice of the crop lien was consistent with insistence that the Company would have full legal and beneficial title to the cotton at the time of delivery; something more than entry into the new contracts was necessary for agreement that it could deliver cotton to which it did not have title to the extent of the crop lien. 137 The Company submitted that, read in context, cll 36 and 37 of the Conditions provided for consent to the crop lien which could not be unreasonably withheld, and that "agreed in writing" was broad enough to include "the novation of fresh cotton agreements in the light of specific notice of the granting of an interest". It further relied on cl 37(b) of the Conditions, submitting that by the Notice to Marketor it had made full and proper disclosure of Rabobank's crop lien and that as a matter of construction a grower who satisfied cl 37(b) should not be held to be in breach of cl 37(a). 138 I do not think that cll 36 and 37 can be run together in this way. A prior written consent of Colly to the grant of a new Interest or to variation of an existing Interest could have constituted an agreement in writing by Colly within cl 37(a), but that did not occur. Clause 36 required also the consent of any existing Interested Person, and the clauses performed different functions. Clause 37(b) also performed a different function from that of cl 37(a). It did not speak at the time of delivery of the cotton, and disclosure of an Interest did not carry with it agreement by Colly to the Interest; rather, the purpose was to promote disclosure so that Colly could consider its position under the contract (perhaps including whether or not to agree in writing). Consistently with the disclosure, Colly could insist on the title warranted in cl 37(a). 139 The Company then submitted that the judge had in the alternative upheld a defence of estoppel, see her [262], and that Colly had not appealed against the decision in that respect. Colly submitted that the judge had not upheld the defence, and had held back from expressing a concluded view: it relied on the observation that it was not necessary to decide the question and what it said was the hesitancy of "it seems to me". Colly submitted that in any event the defence was not made out by the "same facts and circumstances" to which the judge referred, because the crop lien was granted prior to all of the Notice to Marketor, returning the Acknowledgment and entry into the new contracts. It said that its conduct could not have founded detrimental reliance by the Company. 140 In his affidavit Mr Simmons referred to the Notice to Marketor and said that prior to the delivery of the cotton to Colly he "assumed that there was no difficulty with the crop lien granted to PIBA … and Colly had never suggested that I would be in breach of my obligations were I to deliver the cotton the subject of the notice". We were not referred to any other evidence going to detrimental reliance, nor has my reading of the evidence brought any to light. In my opinion, detrimental reliance was not shown and the estoppel defence was not made out. By entry into the new contracts Colly did not hold out to the Company that it did not have to have full legal or beneficial title to the cotton at the time of delivery. It would need clear indication, on a sale of cotton to Colly, that a crop lien over the cotton was of no moment, and for the reasons earlier given there was not. Nor was there evidence that Mr Simmons was led to cause the Company to act to its detriment in the belief that it did not have to have the title. 141 Having held that there was no breach of warranty, the judge did not consider the damages for breach of warranty. Colly submitted that the damages were the amount it had to pay Rabobank because Rabobank held the crop lien. The Company submitted that the damages were nominal only. In the manner the Company put its submission, it turned in part on Mr Simmons being the party to the foreign currency agreement. It was to the effect that, the currency loss of $382,745.28 being Mr Simmons' loss, Colly did not suffer loss through being unable to satisfy the Company's indebtedness to it, and Colly still had a claim against Mr Simmons which was not shown to be valueless. On the figures earlier set out, if the submission were accepted there would still be damages in a small amount. But I do not accept that the currency loss was Mr Simmons' loss. The foreign currency agreement and the currency transactions were with the Company. As well as the money from previous seasons and the ginning charges, if the currency loss of $382,745.28 was owed at all it was owed by the Company. 142 The breach of warranty meant that Colly could not use $390,571.10 of the purchase price for the cotton crop to satisfy the Company's liabilities to it. But Colly suffered loss only to the extent that the Company was liable to it; otherwise it had to pay the money to the Company. On the judge's holding on the contract claim, the Company was not liable to Colly for the $382,745.28, because Colly was in breach of contract in closing out the currency positions on 6 June 2002. If that be correct, the loss Colly suffered was $7,825.82, without interest because Colly did keep the money. Strictly Colly would suffer loss only if the Company did not otherwise pay it the $7,825.82 and was not good for the money, but that does not arise if these proceedings will enable a balance to be struck between them. 143 For the reasons later given in considering the contract claim, in my opinion the Company was not liable to Colly for the $382,745.28. The Company may or may not later have become liable to Colly for some other amount, according to the loss or profit which would have been realised if the currency positions had been closed out on maturity (perhaps after further rollovers), but Colly had to pay the purchase price for the 2001/2002 cotton crop to the Company prior to later realisation of any loss. Accordingly, Colly's damages for breach of warranty are $7,825.82.

The TP claim - misleading or deceptive conduct 144 The TP claim rested upon contravention of s 52 of the Trade Practices Act 1974 (C'th), prohibiting a corporation from engaging in misleading or deceptive conduct. In the cross-claim Mr Simmons/ the Company alleged misleading or deceptive conduct by the making of representations. The judge found - "279 I am not satisfied that there was a representation made that there was no risk in currency. I am satisfied that what was said by Mr McKay amounted to a representation that there was little risk in "currency". I am satisfied that a representation was made that Mr Simmons would always be able to roll the currency if it was out of the money. I am satisfied that Mr Simmons relied upon those representations when he signed the various currency letters from Colly Farms. It has not been suggested that Mr McKay was not authorised to make the representations on behalf of Colly or Colly farms. Indeed Mr Cottle authorised Mr McKay to "do" $2.5 million. The representations were as to future matters and there was no evidence called to establish that there was any reasonable basis for making them. The representations were totally inconsistent with the discretion in clause 35.2 of the Standard Conditions and totally at odds with the overwhelming evidence that entry into currency transactions in such a volatile industry had very serious risks. These representations were false and misleading or deceptive." 145 Colly submitted that the judge was in error in finding that representations were made that there was little risk in currency and that Mr Simmons would always be able to roll the currency if it was out of the money. It further submitted that, if the representations were made, they were not misleading or deceptive. 146 From the judge's discussion prior to the findings set out above, she considered that the representation that there was little risk in currency was founded on Mr McKay's failure to contradict Mr Simmons' reference to easy money to be made, his statement that by taking a position in currency Mr Simmons could enhance his $A price for cotton, and his informing Mr Simmons that he could always roll out if the currency was out of the money, taken with Mr McKay not saying anything about the risks involved in currency beyond responsibility for profits or losses if Mr Simmons did not utilise the amount of currency in the year. The second representation contributed to the first representation; as will shortly appear, I do not accept Colly's further submission that the second representation was not made. 147 Colly submitted that the first representation was not to be found in the conversations between Mr McKay and Mr Simmons. While Mr McKay did not explicitly say to Mr Simmons that there was little risk in currency, that was readily conveyed by Mr McKay's endorsement of doing currency and effectively that there was easy money to be made, and his speaking positively of enhancement of the $A price for cotton with the very limited reference to risk and any further risk seemingly negated by rolling over if the currency was out of the money. Particularly was that so when Mr McKay was speaking to a person he knew was relevantly inexperienced. In my opinion, the judge was correct in finding the representation. While not determinative, it is material that Mr Simmons gave evidence that he so understood his conversations with Mr McKay. He said in his oral evidence that he thought there was no downside to the currency position, and in para 32 of his affidavit sworn on 22 June 2004 - "In agreeing to the currency contract, I relied on what Bob McKay had told me in our conversations, and in particular his reassurance that the currency could always be rolled. To me this meant that there was little or no risk involved with the currency." 148 Colly then submitted that the judge was in error in finding that the representation was misleading or deceptive. It submitted that the statement that there is little risk in currency is too vague to have any meaningful content, that risk is a relative concept and that a particular matter could constitute a great risk to one person but an insignificant risk to another person, and that in the absence of identification of the risk a representation of little risk could not have any sensible meaning to a person in Mr Simmons' position. No doubt there is flexibility in the notion of little risk, but it is meaningful, and a representation as to little risk can readily be misleading or deceptive if in truth there is serious risk. The judge was well entitled to say that the representation was "totally at odds with the overwhelming evidence that entry into currency transactions in such a volatile industry had very serious risks". I have referred in relation to marketing of cotton to the speculation at two levels (it may be noted that Mr Simmons was not told of the need to be particularly astute in fixing the futures legs). The conversations with Mr McKay came to be specifically about the sold position of $US2,500,000 for five seasons, $US500,000 per season, and the speculation in that situation was all the greater because - · the currency was in place for an unusual five seasons; · 1500 bales was a near optimum harvest, which would not be achieved if there were water difficulties or adverse growing conditions; · the currency position was therefore likely to become significantly a speculation on the exchange rate, as in fact happened. 149 Going to the representation that Mr Simmons would always be able to roll the currency if it was out of the money, Colly first submitted that, if Mr McKay said anything to Mr Simmons about rolling the currency, it was that Colly had a practice at the time of rolling currency. The submission at this point was separate from submission earlier noted that agreement on ability to roll over the currency position was improbable, but fares no better. The judge found to the contrary, necessarily rejecting that Mr McKay told Mr Simmons only that Colly had a practice at the time of rolling currency. Her finding was significantly dependent upon her preference for the evidence of Mr Simmons over that of Mr McKay, bringing the restraint on appellant intervention discussed in Fox v Percy (2003) 214 CLR 118. On Mr Simmons' evidence, rolling currency if it was out of the money was not a current practice subject to change, but was unqualified as a statement of what Mr Simmons could do. I do not think that, within the principles of appellant restraint, the judge's finding can successfully be challenged. 150 In this respect, Colly also submitted that a representation that Mr Simmons would always be able to roll the currency if it was out of the money was inconsistent with the judge's acceptance that it was not represented that there was no risk in currency; and further, that use of $US500,000 of the currency position each year was inconsistent with always being able to roll the currency. Rolling over a currency position might defer realisation of a loss or profit, but risk remained, and there was no inconsistency; so far as the submission rested on rolling over for ever, that was not the effect of the foreign currency agreement. Use of $US500,000 each year was what was qualified by ability to roll the currency, and again there was no inconsistency. 151 Colly then submitted that a representation that Mr Simmons would always be able to roll the currency if it was out of the money was not misleading or deceptive, saying that it was meaningless without a statement regarding what "currency" or "rolling" involved or what it meant to be "out of the money". It submitted that, according to Mr Simmons' evidence, he understood nothing about "currency" except that he would lose money if the $A went down and gain money if it went up, and that the representation could not have conveyed anything to him. 152 The conversations were about a foreign exchange contract in $US, with loss or profit if the exchange rate varied. The trial seems to have been conducted without anyone questioning that being out of the money meant adverse variation in the exchange rate, and I see no reason to regard the phrase as meaningless. Even if rolling over was not a familiar notion, it carried a meaning that the currency transaction could be extended or replaced so that no loss was realised because the currency was out of the money. What was said is not to be parsed minutely, but considered together with all else that was said and not said for what it properly conveyed to Mr Simmons. He said that there was conveyed to him - and he was not cross-examined - that "there was little or no risk involved with the currency". The submissions are hardly open to Colly, but in the circumstances in which Mr McKay and Mr Simmons were speaking the representation carried meaning and there was no error in the judge regarding it as misleading or deceptive. 153 I have considered Colly's separate submissions, addressed separately to the two representations. The question is whether there was misleading or deceptive conduct. The two representations should not be taken separately, but should be seen together. In my opinion, the judge correctly found that there was misleading or deceptive conduct.

The TP claim - causation 154 Section 82(1) of the Trade Practices Act entitled the Company to recover the amount of the loss or damage suffered "by" Colly's conduct in contravention of s 52. Recovery action could be commenced up to three years after the accrual of the cause of action (s 82(2)): if Colly had a limitation defence, it did not rely on it "By" involves causation. Colly submitted that the judge had erred as to causation because -

(a) the misleading or deceptive conduct had not caused the Company any loss or damage at all;

(b) alternatively, the loss or damage caused by the misleading or deceptive conduct was confined to loss flowing from taking the sold position for $US2,500,000, and did not extend to loss from taking the May 2000 sold positions;

(c) alternatively again, the loss or damage caused by the misleading or deceptive conduct was confined to loss from the currency transactions, and did not extend to loss in relation to the sale of cotton. 155 Applied to losses (i), (ii) and (iii) earlier identified, these amounted to submissions that none of the losses was caused by the misleading or deceptive conduct; that only part of loss (ii) was caused by the misleading or deceptive conduct; and that none of loss (iii) was caused by the misleading or deceptive conduct.

(a) No loss or damage at all 156 The judge's [279] set out above included that she was satisfied that Mr Simmons relied upon the representations when he signed the various currency letters from Colly Farms. Mr Simmons gave evidence that "in agreeing to the currency contract" he relied on what Mr McKay had told him in their conversations, see para 32 of his affidavit earlier set out. 157 The judge further said - "280 Mr Simmons gave general evidence that he would not have entered into the currency positions if he had known what he now knows about the currency transactions. This evidence was not cross examined upon and I accept that if Mr Simmons had been advised of the serious risks and that he would not be able to roll out of the currency positions he would not have taken out the currency in the amount it was taken out. As I have said the die was cast in 1997." 158 The "general evidence" of Mr Simmons to which the judge referred was para 63 of his affidavit - "Given what I now know about marketing and currency, I am in no doubt that I would have marketed with cash contracts only and not with contracts involving foreign exchange contracts." 159 Colly submitted that it was "implausible" that the representations caused Mr Simmons to enter into the currency positions, first because Mr Simmons said that before approaching Mr McKay he had spoken to other of Mr McKay's clients and from talking to them it appeared to him that doing currency was a good idea, and secondly because of his understanding that he would make money if the $A went up but lose money if it went down. It said that the judge should have found that Mr Simmons had decided to do currency before seeing Mr McKay and that, already having the understanding that he would lose money if the $A went down, he was not affected in that decision by anything said about rolling out if the currency was out of the money. And it said that Mr Simmons' evidence that he would not have entered into the currency positions if he had known what he now knew about the currency transactions was not in point, because the question was not what Mr Simmons would have done had he known what he later came to know, but what Mr Simmons would have done had the representations not been made. 160 It is sufficient if the misleading or deceptive conduct played a part in the formation of the foreign currency agreement and Mr Simmons' conduct thereafter, see Gould v Vaggelas (1985) 157 CLR 215 at 236; Henville v Walker (2001) 206 CLR 459 at [14], [60]-[62], [106], [163]. After discussing what common sense might demand and the evidentiary onus to point to circumstances tending to rebut an inference of inducement, in Gould v Vaggelas Wilson J said at 238 that the fact-finding tribunal "must determine whether or not it is satisfied on the balance of probabilities that the misrepresentations in question contributed to the plaintiff's entry into the contract". The judge found that Mr Simmons was affected in his decision by what was said about rolling out if the currency was out of the money, and also by what was said and not said conveying that there was little risk in currency, and did not accept that he had made a decision regardless of his conversations with Mr McKay. No basis has been shown for error in her acceptance of Mr Simmons in this respect. 161 Determining causation of loss or damage by misleading or deceptive conduct should not be distorted because the conduct is alleged in the form of representations. There was misleading or deceptive conduct by Colly because Mr McKay conveyed to Mr Simmons that there was little risk in currency and he would always be able to roll the currency if it was out of the money; it could also be said that there was misleading or deceptive conduct because Colly failed to convey to Mr Simmons the true position that there were serious risks in doing currency and that rolling over might defer but did not eliminate the risk. Particularly viewed in the latter way, to speak of reliance can be an artificial approach to causation, which can be established if there would have been inaction or some other action if the true position had been known: see Smith v Maloney (2005) 92 SASR 498 at 514-5; Smith v Noss [2006] NSWCA 37 at [25]-[26]. Whether Mr Simmons would not have entered into the currency position if he had known what he later knew about the currency transactions, plainly meaning at the least the risk in currency, was evidence material to whether there would have been inaction or some other action if he had known that there was more than little risk in currency, and the judge was entitled to use it in coming to her conclusion as to causation. 162 Elsewhere in its submissions Colly submitted that para 63 of Mr Simmons' affidavit was meaningless because there was no evidence of what Mr Simmons then knew. In his oral evidence Mr Simmons said that he now knew of "the risks involved in currency", and on the evidence as a whole that was plainly so. The submission should not be accepted. 163 There is nothing in these submissions. Even if Mr Simmons first spoke to Mr McKay in the belief that doing currency was a good idea, and had an appreciation that if the $A went down he would suffer a loss, the misleading or deceptive conduct contributed to the entry into the foreign currency agreement and caused loss or damage.

(b) Loss or damage excluding loss from taking the May 2000 sold positions 164 The judge did not specifically address reliance or what Mr Simmons would not have done in relation to entry into the two further sold positions in May 2000. As I have said, she did not find why or in what circumstances the May 2000 currency transaction came about. Her findings referred to signing "the various currency letters" and to taking out currency "in the amount it was taken out", and the general evidence in para 63 of Mr Simmons' affidavit carried with it that he would not have entered into the May 2000 sold positions. I understand the judge to have held that the misleading or deceptive conduct also contributed to taking the May 2000 sold positions. 165 Colly submitted that causation did not extend to taking the May 2000 sold positions because -

(a) May 2000 was far removed in time from December 1997, and in the intervening period there had been a number of currency transactions (including a profit of $3,679.51 on the partial closing out on 7 May 1999);

(b) in February 2000 Colly had sent to Mr Simmons the Client Agreement and Risk Disclosure Statement, which put him on notice of the risks involved in foreign currency trading; and

(c) there was evidence that Mr Simmons was "part of the Yahgunyah Partnership who are also growing cotton", with advice from a Mr David Burton including prior to 2000. 166 Colly submitted that the judge failed to distinguish between currency losses incurred as a result of taking the sold position in December 1997 and currency losses suffered as a result of taking the sold positions in May 2000, and that there was no evidence capable of supporting a finding of reliance in relation to the latter. 167 I am not persuaded that the judge was in error in considering that causation extended to taking the May 2000 sold positions; if there be doubt whether she addressed the question, I would independently come to that view. 168 Nothing had occurred in the marketing of the Company's cotton to make Mr Simmons aware that it was incorrect that there was little risk, or that risk remained notwithstanding rolling out if the currency was out of the money. The initial sold position of 23 December 1997 had been rolled over on a number of occasions without question. There had been a partial closing out, used to price the 1998/1999 cotton crop. A small profit had been made on another partial closing out; the judge noted that Mr Simmons was so appreciative that he purchased Mr McKay a carton of Tooheys Extra Dry, and the profit was apt to confirm in Mr Simmons' mind that there was easy money to be made, certainly not to destroy that illusion. Subject to the next matters, on the evidence the representations continued to be what moulded Mr Simmons' conduct. 169 The Client Agreement and Risk Disclosure Statement spoke of futures contracts, not foreign exchange contracts, and described trading on a futures exchange, the necessity for deposits and occasions for margin calls. In those and other respects it did not reflect what had in fact been occurring in the Company taking the currency positions, and if Mr Simmons had read the Risk Disclosure Statement he may well not have realised that the currency transactions were a form of futures contract to which its warnings were material. But Mr Simmons did not read the documents. 170 Mr Simmons may have been remiss in not reading the Risk Disclosure Statement and seeing it as relevant to the Company's currency transactions, but as Gleeson CJ said in Henville v Walker at [13] - "It will commonly be the case that a person who is induced by a misleading or deceptive representation to undertake a course of action will have acted carelessly, or will have been otherwise at fault, in responding to the inducement. The purpose of the legislation is not restricted to the protection of the careful or the astute. Negligence on the part of the victim of a contravention is not a bar to an action under s 82 unless the conduct of the victim is such as to destroy the causal connection between contravention and loss or damage." 171 Colly did no more than send the Client Agreement and Risk Disclosure Statement to Mr Simmons and receive his signed Risk Disclosure Statement. It knew the Company had a large sold position; if it thought that Mr Simmons would be warned of the risks in doing currency, it did nothing to ensure or verify that that message was brought home to him. In my opinion, the representations continued to be what moulded Mr Simmons' conduct, and if failure to read the Client Agreement and Risk Disclosure Statement also contributed to taking the May 2000 sold positions it was enough that the misleading and deceptive conduct was one of the causes of the Company doing so. 172 The evidence as to the Yahgunyah Partnership was left obscure. Mr Simmons said that from time to time he read Mr Burton's advice to the partnership "as to the direction of the price of cotton", but did not ask Mr Burton's advice "as to the management of my own cotton marketing". Two news letters from Mr Burton were put into evidence, although it was not established that they were read by Mr Simmons. Neither wrote about doing currency. One newsletter described the $A as quiet, the other as "bullish long term". It was not put to Mr Simmons that, either generally or from these newsletters, by reason of his involvement in the Yahgunyah Partnership he came to a relevantly different appreciation of risk in doing currency by May 2000 from that of late 1997/early 1998. Colly's implicit invitation to infer that he did so - and there could not be more than speculation - should be declined, particularly when it did not see fit to confront Mr Simmons on the matter.

(c) Extension to loss in relation to the sale of cotton 173 The judge first considered the other elements of both the TP claim and the negligence claim, and did not distinguish between the claims in her consideration of damages. 174 The judge said as to damages - "313 Mr Simmons gave evidence admissible in relation to each of the claims in the cross-claim, other than the negligence claim: s 5D(3) Civil Liability Act 2002; that, had he been advised or as he put it, given what he now knows about marketing and currency, he would have entered into cash contracts only and would not have entered into any contracts involving currency or foreign exchange.

314 Mr Simmons gave evidence that he generally does not consider selling cotton at less than A$500 per bale and refers to it as a "trigger price". He said that if the price is rising quickly he would often hold off marketing, or selling, until it seemed to him that the price had peaked and he would then sell off a future crop. He believed that he would have tried to market all of the 2000 production at a price of A$550 per bale, having regard to the Australian dollar cash price of cotton that had reached A$600 per bale in that period. He also gave evidence that he believed he would have been quite prepared to sign a fixed price contract for 1,000 bales at $550, with a balance of crop contract at the same price.

315 Mr Simmons calculated that, but for his dealings with Colly, he would have marketed the 1406 bales he grew in the 1999/2000 season by a balance of crop contract of 1406 bales at $550 or 1000 bales at $550 per bale and a balance of crop contract of 406 bales at $550. He did similar calculations for the seasons 2000/2001 and 2001/2002. Professor Gray analysed this approach in his report and calculated the resulting net loss incurred by Mr Simmons by having the currency in place as the difference between what his net income would have been as per the assumed marketing scheme just referred to and what he actually received for the various years." 175 The evidence to which the judge referred in her [313] was again para 63 of Mr Simmons' affidavit. The judge considered some criticisms of "the assumptions made by Professor Gray on the basis of Mr Simmons' evidence", and ultimately accepted that the assessment of damages should be on the method adopted by Professor Gray on Mr Simmons' evidence, but with downwards adjustments to bale prices for the three seasons 1999/2000, 2000/2001 and 2001/2002. She said - "323 I am satisfied that had Colly or Colly Farms advised Mr Simmons of the risks of currency, it is reasonable to conclude on all the evidence that Mr Simmons would have taken a far more cautious approach to the currency positions than was taken in December 1997. I am satisfied that for the years 1999/2000 and following the Company would have only sold cotton pursuant to a Fixed Bale/Cash Price Contract. I am of the view that in all the circumstances of this case, and taking into account the inherent risks in the industry, both environmental and financial, including a subsequent decline in the exchange rate, a reasonable figure for the bales for the crop year 1999/2000 is $510 per bale, for the crop year 2000/2001 $490 per bale and for the crop year 2001/2002 $475 per bale. Otherwise, I am satisfied that the method of calculation used by Professor Gray is to be adopted. … " 176 Colly first submitted that, because in her [279] and [280] the judge spoke only of currency matters, and did not find that Mr Simmons relied on the representations when deciding to enter into cotton contracts with Colly or in deciding the price at which to fix cotton under those contracts, it was not clear that the judge intended that the loss or damage for the TP claim extend beyond currency loss and to loss suffered as a result of entering into cotton contracts. It suggested that, because the judge's consideration of damages was undifferentiated between the TP claim and the negligence claim, she may have intended the loss as a result of entering into cotton contracts (loss (iii)) to be confined to the negligence claim. I have no doubt that the judge's assessment of damages applied to the TP claim, and that she found that the loss or damage suffered by the misleading or deceptive conduct included loss (iii). 177 Colly then submitted that the evidence established causation only of the losses suffered on the close out of the currency positions. It said that Mr Simmons gave no evidence to the effect that he relied on the representations in deciding to enter into cotton contracts with Colly, and that his evidence was relevantly confined to para 32 of the affidavit of 22 June 2004. 178 This overlooked para 63 of the affidavit, to which the judge specifically referred. In any event, the question was not whether Mr Simmons relied on the representations in deciding to enter into cotton contracts, or in deciding the price at which to fix cotton under those contracts, and loss or damage suffered by the misleading or deceptive conduct did not stop with taking the currency positions. The question was whether loss or damage had been suffered by the misleading or deceptive conduct because, if he had not done currency, Mr Simmons would have sold the Company's cotton under fixed price contracts and the Company would have received more money. 179 Mr Simmons' evidence in para 63 of his affidavit posed that the misleading or deceptive conduct caused him to market the Company's cotton with "contracts involving foreign exchange" when he would otherwise have marketed with "cash contracts only", and the judge accepted him in that respect. There was ample reason for the acceptance. Mr McKay told Mr Simmons that Colly would only do currency for five years if he committed five seasons' production, and Mr Simmons agreed; the letter of 16 January 1998 confirmed the commitment. One consequence of the misleading or deceptive conduct was that the Company was tied to selling its cotton to Colly under on call contracts, and if it would otherwise have sold the cotton under fixed price contracts any differential in net proceeds could properly be found to be loss (or profit) suffered by the misleading or deceptive conduct.

The TP claim - assessment of loss (iii) 180 The appeal and cross-appeal as to the assessment of loss (iii) were concerned with the prices at which the Company would have marketed its cotton under fixed price contracts. As appears from the judge's [314]-[315] earlier set out, Mr Simmons gave evidence of the prices at which he would have marketed the cotton for the 1999/2000, 2000/2001 and 2001/2002 seasons. The judge found that the bale prices he proposed were "too generous in the circumstances of this case", and it is convenient to repeat her [323] - "323 I am satisfied that had Colly or Colly Farms advised Mr Simmons of the risks of currency, it is reasonable to conclude on all the evidence that Mr Simmons would have taken a far more cautious approach to the currency positions than was taken in December 1997. I am satisfied that for the years 1999/2000 and following the Company would have only sold cotton pursuant to a Fixed Bale/Cash Price Contract. I am of the view that in all the circumstances of this case, and taking into account the inherent risks in the industry, both environmental and financial, including a subsequent decline in the exchange rate, a reasonable figure for the bales for the crop year 1999/2000 is $510 per bale, for the crop year 2000/2001 $490 per bale and for the crop year 2001/2002 $475 per bale. Otherwise, I am satisfied that the method of calculation used by Professor Gray is to be adopted. … " 181 Colly submitted that the judge should have found the Company would have sold cotton "at about the prices that [it] did in fact sell it". It said in its written submissions, which were not relevantly amplified in oral submissions - "97 There are two points of significance to note about what in fact happened during those years. The first is that there was no suggestion on the evidence or on the pleadings that the prices at which the Respondents' cotton was actually sold were unreasonably low. The second is that Mr Simmons had the opportunity to fix the price at which his cotton was sold. He gave evidence that during 1999 the Yahgunyah Partnership (of which he was a partner, and which grew and sold cotton in a similar way to the Respondents) retained a Mr Burton and received advice about the direction of the price of cotton, and that he read that advice. Mr Simmons fixed the price at which the Company sold cotton in 1998-1999 and in 2000-2001. He rejected an offer in late 2000 to fix the Company's cotton price for the 2000-2001 year at $497. Further, in April 2001, when the Respondents were due to fix their cotton price, Mr Simmons said that 'I don't want to price my cotton at these levels. I feel the market will go up but I need time'. In 1999-2000, he failed to fix his cotton price, and so the price for that year was fixed in accordance with cl 10.2 of the Appellant's standard terms and conditions. 98 Bergin J ought to have acted on the above evidence, and not on Mr Simmons' … statements, and to have concluded as a result that … on the balance of probabilities, the Respondents would have sold cotton at about the prices that they did in fact sell it." 182 Thre was no occasion for the Company to plead or attempt to prove that the prices at which the Company's cotton was actually sold were unreasonably low. The kinds of contract were very different. Marketing cotton under an on call contract was a more complex exercise than marketing under a fixed price contract, the outcome significantly turning on the grower's astuteness in fixing the legs. Greater complexity again was brought when the grower was doing currency. There can not be a simple equation of the hypothetical outcome of marketing under fixed price contracts with the actual outcome of marketing under on call contracts when also doing currency; apples and pears come to mind. 183 To the extent that Mr Simmons did not fix the futures leg under the on call contracts, so that the actual outcome involved a market price of cotton near the time of delivery, that does not seem to me to provide any real guide to the outcome had the Company's cotton been marketed in a different way under fixed price contracts generally made forward, at times other than near the time of delivery. In my opinion, the judge was entitled to determine the hypothetical outcome by regard to Mr Simmons' evidence, albeit with the considerable caution appropriate to evidence after the event from the person alleging loss of what that person would have done, with its implications for reliability (see for example Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 582; Chappel v Hart (1998) 195 CLR 232 at 246; Rosenberg v Percival (2001) 205 CLR 434 at [157]-[158]). The judge exercised that caution, hence the adjustments. 184 The Company submitted that the judge should not have adjusted the bale prices downwards. It said that the adjustments were not the subject of evidence or submissions, the trial being a contest between Professor Gray's calculation of loss and that of Mr Wyatt. It said that Mr Simmons was not cross-examined on his evidence of the prices at which he would have sold cotton under fixed price contracts, and should have been accepted as to the prices or at the least as to his trigger price as a floor price for the hypothetical outcome. And it said that Mr Wyatt's criticisms of Professor Gray's assumptions were misconceived, and that there was support elsewhere in the evidence for Mr Simmons having a trigger price and achieving it under fixed price contracts. 185 The contest was not a choice between one or other of Professor Gray's calculation of loss and that of Mr Wyatt. It included regard to Mr Wyatt's criticisms of Professor Gray's assumptions, which meant challenges to Mr Simmons' evidence of what he would have done, and the judge was entitled, indeed obliged, to arrive at the damages she considered were appropriate on the evidence. 186 Mr Simmons' evidence was not of a flat $550 per bale under all fixed price contracts for all seasons. It was that he would have tried to market at a variety of prices, which he detailed according to when he sold and the number of bales. The prices were often $550 per bale, but at times $530 per bale or $525 per bale and in one instance $502 per bale. The judge was not obliged to accept this evidence, even though Colly did not cross-examine upon it, and that Colly took issue with it was known through the report of Mr Wyatt. Nor was the judge obliged to accept Mr Simmons' evidence of his trigger price and take $500 per bale as a floor price for the hypothetical outcome. 187 The judge considered that the bale prices assumed by Professor Gray were too generous because adjustments were necessary "to take into account some of the caution expressed by Mr Wyatt in relation to the luxury of hindsight" (at [321]). As I read her reasons, the caution she accepted was that $550-plus per bale was historically a very high cotton price, that Mr Simmons was an inexpert cotton marketer and was unlikely to have marketed perfectly, and that selling forward (as Mr Simmons said he would largely have done) meant that Mr Simmons would not always have sold into "cotton rallies", meaning windows of high prices. Mr Wyatt pointed out that, to achieve the prices he said he would have tried to achieve, Mr Simmons would have had to sell forward at the time of cotton rallies in mid-1998 and late 1999-early 2000, but that Mr Simmons did not fix the futures legs under the on call contracts to take advantage of these high prices. 188 The Company's submissions included that selling forward into cotton rallies was not a question of hindsight, but of watching the forward prices and selling when they were high. However, the expertise lay in knowing when they were high, and it is hindsight to take Mr Simmons to have sold when they were high. Mr Simmons may have sold at lower prices before the cusp, or at higher prices after the cusp, as other growers must have done (if they did not, there would not be volatility in the cotton prices). Mr Simmons' actual conduct cast doubt on whether he would have seen and acted upon the cotton rallies. The judge was engaged in a necessarily uncertain exercise of assessment, and in my opinion she was well entitled to regard these matters as calling for adjustments to what Mr Simmons said he would have tried to achieve. 189 Whether the adjustments should have been to the extent of those made is another matter. The uncertainty of the exercise meant that a detailed explanation in the judge's reasons could not be expected, but a floor price of $500 per bale in my view called for consideration. Mr Simmons said that he "generally [did] not consider selling cotton at less than this price". Mr Morison said that he was aware that that was Mr Simmons' target, and that most growers had that target in their mind; Mr Anderson said that some growers "use $500 as a good rate to forward sell at". Mr Simmons did reject an offer to sell part of the 2000/2001 crop for $497 per bale, and over the seasons from 1997/1998 to 2003/2004 did sell some cotton under fixed price contracts all for more than $500 per bale. 190 Had Mr Simmons acted upon his trigger price by not selling at less than $500 per bale, from the evidence of actual prices there would have been sufficient opportunity to sell the Company's cotton for no less than that price. I am conscious of departing from a determination by the judge in no small measure one of impression, including impression of Mr Simmons as a cotton marketer, but while the judge referred to Mr Simmons' evidence of his trigger price she gave no reasons for concluding that he would not have stuck to it. I can not see sufficient reason to conclude that he would not have stuck to it. The judge was entitled to assess damages on adjusted bale prices, but in my view adjustments below a floor price of $500 per bale were not warranted by the evidence, and to that extent the judge's determination can not stand. $500 per bale should replace the $490 per bale and $475 per bale.

The negligence claim 191 In the circumstances of this case, success in the negligence claim would not produce greater damages than success in the TP claim. It is not necessary to consider Colly's challenges to the judge's findings on duty of care, breach of the duty of care, and consequent causation and loss, which in many respects re-presented its submissions in relation to the TP claim.

The contract claim 192 For the Company this was a fall-back claim, unnecessary in the event of success on the TP claim save that it was maintained if the loss or damage excluded loss from taking the May 2000 sold positions. The Company remains fully successful on the TP claim. Whether Colly was in breach of contract in closing out the currency positions on 6 June 2002 must nonetheless be considered, because material to damages on the Colly cross-claim. 193 Mr Simmons'/the Company's cross-claim alleged the foreign exchange contract with the express term "to be rolled at your discretion", and breach of that express term by closing out the currency positions on 6 June 2002. The Colly/Colly Farms counter-allegation of the Marketing Agreement implicitly denied that currency positions could be rolled at the holder's discretion. 194 Breach of contract, however, did not turn on that term, or the term of the foreign currency agreement that the currency position could be rolled over and not progressively closed out if the Company so chose. If on 6 June 2002 the Company held an open position for $US500,000 maturing on 15 July 2002, to take the earliest maturing position as at that date, Colly was not entitled to cause Colly Farms to close it out, and Colly Farms was not entitled to close it out, unless they could point to some authority from the Company so to act. Any breach of contract was not in refusing rollover at maturity, but in closing out prior to maturity, and the fact that in March or April 2002 Colly told Mr Simmons that he could not roll his currency to get more time was not the true breach. Whether the Company was entitled to roll over the currency positions at maturity could go to damages, so far as it was necessary to forecast what loss or profit would have come about had the positions not been wrongly closed out on 6 June 2002, but that is a separate matter. 195 Returning to taking the May 2000 sold positions, it therefore does not matter for breach of contract, as distinct from damages, whether there was a variation of the foreign currency agreement, a second foreign currency agreement, or no more than the order producing the currency positions. And the Company in fact contended for damages on the basis of closing out the currency positions at maturity without any further rollovers, see later in these reasons, so whether the Company was entitled to roll over the currency positions did not go to damages. It can now be seen that entitlement to roll over the currency positions raised a false issue; but the parties' submissions were not dependent on it, and the true issue can be determined without unfairness. 196 In the letter of 14 June 2002 Colly relied on cl 35.2 of the Conditions for the authority to close out the currency positions. Clause 35 was in the same terms in relevant versions of the Conditions, and read - "35 COMMODITIES/CURRENCY HEDGING 35.1 In relation to any order by the Grower to enter into a currency or commodity position, the following shall apply: (a) a currency order must be matched off by an equivalent number of Committed Bales;

(b) all placement and cancellation orders must be completed in writing on Colly's standard placement and cancellation forms provided to the Grower for that purpose and must be signed by the Grower within 48 hours of placement of an order failing which Colly shall have the right in its absolute discretion to cancel the order or buy out of the filled position at the Grower's expense; and

(c) no currency and or commodity orders will be accepted unless the Grower has filled in and signed a SFE Non Discretionary Risk Disclosure Statement. 35.2 Colly may withhold any payment to the Grower or retain funds held on the Grower's behalf and may utilise part or all of those funds to offset or close out any futures/options and/or foreign currency position where such position is held by Colly on behalf of the Grower. The decision to liquidate any such position shall be entirely at the discretion of Colly. Following liquidation of the position by Colly, Colly shall account to the Grower for the balance of funds (if any) held by it." 197 In the definitions "Committed Bales" meant, with a presently immaterial qualification, the number of bales of cotton "specified in the Confirmation", and "Confirmation" meant "the contract form by that name, pursuant to which Colly agrees to buy, and the Grower agrees to sell Cotton subject to these standard conditions". Not all the on call contracts were named as Confirmations, but no point as to that appears to have been taken at the trial. 198 The judge held that Colly was not entitled to close out the currency positions, which she referred to as "the future years currency", because "the future years currency was not matched off by an equivalent number of Committed Bales and the discretion in clause 35.2 was not available to Colly" (at [212]). She appears to have accepted the submissions summarised in the preceding paragraphs - "208 It was submitted on behalf of the Company and Mr Simmons that, taken in context, the right to close out positions under clause 35.2 is referable to the positions taken out by a grower under clause 35.1. The future years currency was not taken out under clause 35.1 because the currency preceded the relevant cotton contracts by some years; no currency was taken out on Colly's "standard placement and cancellation forms"; and no SFE (or any) risk disclosure statement was signed until February 2000. It was submitted that Colly had no right to close out the currency at all or was only able to close out currency in relation to the cotton deliverable in the 2002 season. 209 It was submitted that the term "Committed Bales" in clause 35.1(a) is defined as the number of bales specified in the confirmation (clause 2.1). This provides a link between the currency and the cotton the subject of the particular contract, and a limitation on the ability of Colly to close out currency positions. That limitation is reinforced by clause 12, which provides machinery for the taking out of currency against cotton. Under clause 12.1, Colly pays sale proceeds in A$, except to the extent directed by the grower, using a "Currency Selection Notice" and a "Hedge Notice" (clauses 12.2 and 12.3). Importantly, clause 12.3(a) provides such notices "may only be given in relation to so much of the estimated Net Sale Proceeds as is attributable to Cotton Futures Contracts expiring in May or July of the Season". The currency in this case was not taken out using a Currency Selection Notice or Hedge Notice. More importantly, clause 12.3(a) reinforces the view that the right to close out positions is a right which, in context, is limited to positions maturing in that growing season against the cotton to be delivered." 199 On this reading of cl 35, the words in cl 35.1 "any order by the Grower to enter into a currency … position" referred back to a Hedge Notice pursuant to cl 12, and the words " any … foreign currency position" in cl 35.2 referred to a foreign currency position taken in compliance with a Hedge Notice; so Colly's discretion to liquidate a position did not apply to the currency positions taken pursuant to the foreign currency agreement or, whatever their basis other than a Hedge Notice, to the May 2000 sold positions. 200 Clause 35.1 did not refer to a Hedge Notice, or to a notice in writing as distinct from an order, and referred also to an order to enter into a commodity position; this latter order did not appear elsewhere in the Conditions. The sub-clause extended beyond the effect of a Hedge Notice as an order to enter into a currency position, and reasoning that the future years currency was not taken out under cl 35.1 because requirements (a), (b) and (c) were not met seems to me to reverse the operation of the clause. The question was whether the future years currency involved orders to enter into a currency position within the opening words; if it did, it may be that the requirements were neglected. 201 A perhaps better argument is that cl 35.1 did not apply to a foreign exchange contract because a foreign exchange contract would not ordinarily be matched off by a number of Committed Bales, since Committed Bales required a sale contract or contracts (a Confirmation or Confirmations) and even if the grower was de facto or by agreement committed to selling its cotton crop to Colly its commitment would not ordinarily be found in a sale contract or contracts in existence at the time of the order. That depends, however, on whether care was taken to tie up cotton sales by a sale contract or contracts at the time of the foreign exchange contract. Colly's internal procedural manual of December 1999 stated bluntly that an on call contract or a commitment contract "must be in place for all currency positions established by Growers", and that "prior to executing a currency position, the Grower must agree the number of underlying bales being committed to Colly under an On-Call-Contract". If this had been done for the $US2,500,000 sold position and the May 2000 sold positions, they could have been taken upon orders to enter into currency positions within the opening words of cl 35.1. 202 Even if the currency positions were not taken upon orders to enter into currency positions within the opening words of cl 35.1, it is a further step whereby the discretion to liquidate a position in cl 35.2 applied only to a position taken upon such an order. Clause 35.2 applied to "any futures/options and/or foreign currency position", in different language from and perhaps going beyond a currency or commodity position. While cl 35.1 stipulated the requirements (a), (b) and (c) for an order to which its opening words referred, nothing prevented Colly from taking a currency position on behalf of a grower on an order outside those requirements. 203 I have reservations about the judge's reasons for her holding. There are in my view more fundamental reasons why cl 35.2 did not authorise Colly or Colly Farms to close out the currency positions on 6 June 2002. 204 The Conditions began - "1. INTRODUCTION 1.1 These are the standard conditions applicable to all cotton purchase contracts entered into by Colly which refer to these 'Standard Conditions".

1.2 These terms and conditions must be read together with the relevant Colly Confirmation." 205 The foreign currency agreement was not a cotton purchase contract within cl 1.1. None of the foreign exchange contracts for the currency positions closed out on 6 June 2002 was a cotton purchase contract. Whether one begins with the foreign currency agreement and the order producing the May 2000 sold positions, or goes to the currency positions as they were held as at 6 June 2000, the Conditions were not applicable. Nor, on the foreign currency agreement as found, were the Conditions otherwise in play as part of that agreement. 206 Colly prefaced its submissions as to the construction of cl 35.2 with the proposition that the Company had executed the 1400 bale on call contract of 14 February 2000 in relation to the 2001/2002 cotton crop, and that the contract incorporated the sub clause. It may have been implicit in the submissions that, if cl 35.2 was part of a sale contract current at the time of the closing out, that sufficed to entitle Colly or Colly Farms to close out a currency position however arising. I do not think that is so. When the currency positions were closed out, $US350,000 was used to price the cotton crop sold under the on call contract of 14 February 2000. The remainder of the currency positions had no connection with that or any other sale contract. The entitlement to close them out could not be found in the contract. 207 Further, the authority in cl 35.2 extended only to use of funds held by Colly on a grower's behalf to close out a foreign currency position held by Colly on behalf of the grower. The Conditions defined Colly to include "where applicable, any Related Body Corporate of Colly", and it was submitted that Colly Farms was a Related Body Corporate. Colly Farms did not hold funds on the Company's behalf. Neither Colly nor Colly Farms held a position on behalf of the Company in an agency sense, but if holding a position on behalf of a grower included being the opposite party to a foreign exchange contract, Colly Farms rather than Colly was the opposite party. There was not the necessary congruence between holding funds and holding a foreign currency position. According to its own terms, cl 25.2 did not apply in the circumstances of 6 June 2002. 208 Colly submitted that there was no breach of contract because (a) the contract as pleaded by Mr Simmons/the Company was discharged when the foreign exchange contract evidenced by the fax of 23 December 1997 was performed by the initial currency position and its rolling over on 6 January 1998; and (b) that contract was between Mr Simmons and Colly Farms, but the currency positions closed out on 6 June 2002 were held by the Company as a result of the later rollovers. 209 The submissions did not recognise that the judge had found an agreement wider than that pleaded by Mr Simmons/the Company. (Colly/Colly Farms had contended for an even wider agreement, the Marketing Agreement.) The submissions can not be accepted when (a) the foreign currency agreement was not limited to the initial currency position and one rollover, but encompassed currency positions appropriate for $US2,500,000 with rollovers and progressive closing out over five seasons; and (b) the foreign currency agreement was with the Company. 210 It is not necessary to consider the Company's submission that, so far as cl 35.2 entitled Colly to close out the currency positions, it should be found to be unconscionable and declared void. 211 There was breach of contract by Colly in closing out the currency positions on 6 June 2002. The damages depended on the profit or loss which would have been made or incurred when the open positions were closed out by the Company, whenever that would have been. It is most unlikely that the damages were equivalent to the loss of $382,745.28. They may have been more than that amount, or less, depending on future events. 212 The judge dealt rather globally with damages, but apparently in relation to the contract claim said - "320 The parties have not approached the quantum question on the basis of what may have been the case if the 2003, 2004 and 2005 currency positions had not been closed out, in other words, what the position may have been if the contract had not been breached. There is no such assessment." 213 Colly submitted that it followed from the judge's [320] that the Company had not proved its damages under the contract claim. The Company submitted that its damages were what it described as "the direct close-out losses of $338,389.80" (I think it meant $382,745.28) plus "the lost gains had the currency positions been allowed to mature, calculated by Professor Gray in his second report at $321,070.70". Its submission involved that the judge overlooked Professor Gray's assessment of what would have been the case if the currency positions had not been closed out. It said that an estimate for the position maturing in 2005 made by Professor Gray was now known, and the remission to the Commercial List for the assessment may be appropriate. Colly replied that, for a variety of reasons which I will not detail, Professor Gray's calculation was unsound. 214 It is not necessary to enter upon these matters. It is sufficient for damages on the Colly cross-claim that the Company was not liable to Colly for the $382,745.28. Damages on the contract claim need not be assessed, because the Company does not recover the damages on top of damages on the TP claim.

Orders 215 Colly/Colly Farms have had a modicum of success on Colly's cross-claim, but it is thoroughly overshadowed by the otherwise failure of the appeal and by Mr Simmons'/the Company's partial success in the cross-appeal. Colly's monetary success is small, and the issue on its cross-claim can not have greatly contributed to the costs at the trial and in my view did not greatly contribute to the costs on appeal. 216 The judge ordered Colly/Colly Farms to pay Mr Simmons'/the Company's costs of the proceedings, before 18 February 2005 on a party/party basis and after 18 February 2005 on an indemnity basis. No doubt the parties will agree on the basis for any costs incurred on 18 February 2005. Presumably Mr Simmons/the Company made an offer of compromise and then bettered it; the appellate result will not reduce their betterment. In light of the limited success on Colly's cross-claim and the balance of appellate success in favour of Mr Simmons/the Company, in my opinion -

(a) the order below should be varied to provide for payment of ninety-five per cent of the costs; and

(b) Colly/Colly Farms should pay ninety per cent of Mr Simmons'/the Company's costs of the appeal and cross-appeal. 217 If there is any question of a special basis for the appellate costs which the parties can not resolve, that should be made known on the mention date next specified, and directions will be given for its resolution by the Court. The parties should bring in short minutes, after appropriate recalculations, to give effect to these reasons. The proceedings should be listed for mention before myself at 9.30 am on 16 June 2006 for the making of orders. 218 McCOLL JA: I agree with Giles JA. **********

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