First Plaintiff Second Plaintiff v First Defendant Second Defendant Third... [2018] VSC 558 | Case summary

Supreme Court of Victoria|2018-09-21|Before: CROFT J

PRACTICE AND PROCEDURE - DEEDS AND OTHER INSTRUMENTS - Powers of attorney - Validity - Application for term finance - Words "agree to appoint" Whether a- ABL Custodian Services Pty Ltd & Bendigo and Adelaide Bank Ltd v Wade [2013] VCC 878 - Comptroller of Stamps v Associated Broadcasting Services Ltd [1990] VicRp 31; [1990] VR 335 - Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361.

PRACTICE AND PROCEDURE - DEEDS AND OTHER INSTRUMENTS - Powers of attorney - Powers of attorney created in one jurisdiction intended to operate in a different jurisdiction - Creation of power of attorney subject to the jurisdiction of where the power of attorney is made - Construction and operation of power of attorney subject to the jurisdiction of where the power of attorney is to operate - Employers' Liability Assurance Corporation Ltd v Sedgwick, Collins & Company Ltd [1927] AC 95 - First Russian Insurance Company (in liquidation) v London and Lancashire Insurance Company Ltd [1928] 1 Ch 922 - Chatenay v The Brazilian Submarine Telegraph Co Ltd [1891] 1 QB 79.

PRACTICE AND PROCEDURE - DEEDS AND OTHER INSTRUMENTS - Powers of attorney authorising person or entity to execute a deed on behalf of donor must be granted by deed under general law - Berkeley v Hardy [1826] EngR 905; (1826) 5 B&C 355; 108 ER 132 - MYT Engineering Pty Ltd v Mulcon Pty Ltd [1999] HCA 24; [1999] 195 CLR 636 - Harrison v Jackson [1797] EngR 415; (1797) 7 TR 207; 101 ER 935.

PRACTICE AND PROCEDURE - DEEDS AND OTHER INSTRUMENTS - Powers of attorney - Scope of power or agency will be strictly construed - Tobin v Broadbent (1947) 75 CLR 378 - Attwood v Munnings [1827] EngR 8; (1827) 7 B&C 278; 108 ER 727 - Bryant v La Banque du Peuple [1893] AC 170 - ABL Custodian Services v Kunz [2016] SADC 145.

PRACTICE AND PROCEDURE - DEEDS AND OTHER INSTRUMENTS - Deeds - Execution of a deed - Two directors' signatures - Directors authorise their facsimile signatures to be affixed to document - MYT Engineering Pty Limited v Mulcon Pty Limited [1999] HCA 24; (1999) 195 CLR 636 - Goodman v J Eban Ltd [1954] 1 QB 550 - Re a Debtor (No 2021 of 1995) [1996] 2 All ER 345 - Wilmink v Westpac Banking Corporation [2015] FCAFC 17 - Corporations Act 2001 (Cth), ss 127, 129(5).

COURTS AND JUDICIAL SYSTEM - GROUP PROCEEDINGS - Group membership - Consequences of being a group member - Clarke (as Trustee of the Clarke Family Trust) v Great Southern Finance Pty Ltd (Receivers and Managers Appointed) (in liquidation) [2014] VSC 516 - Byrne v Javelin Asset Management Pty Ltd [2016] VSCA 214 - Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd (2017) 118 ACSR 592; [2017] VSCA 51 - ABL Custodian Services Pty Ltd v Freer [2018] VSC 355 - Bendigo and Adelaide Bank Limited v Lonergan [2018] VSC 357 - Bendigo and Adelaide Bank Ltd v Laszczuk [2018] VSC 388 - Bendigo and Adelaide Bank Ltd v Haque [2018] VSC 406 .

1 This is a claim by Bendigo and Adelaide Bank Limited (ACN 068 049 178) and ABL Nominees Pty Ltd (ACN 106 756 521), the Plaintiffs, to recover two loans originally made by the Second Defendant, Great Southern Finance Pty Ltd (In Liquidation)

(ACN 009 235 143) ("GSF"), in June 2006 to the First Defendant, DY Logistics Pty Ltd (formerly known as Container Forwarding Services Pty Ltd) (In Liquidation) (ACN 101 825 790), and guaranteed by the Third Defendant, David William Young, together with interest and costs:[1]

(a) the First Loan, for $223,189.20, was made to finance an investment in the Great Southern 2006 Wine Grape Income Project Managed Investment Scheme ("2006 Vineyards MIS");

(b) the Second Loan, for $240,960.00, was made to finance an investment in the Great Southern 2006 Organic Olives Income Project ("2006 Olives MIS").

2 The Plaintiffs claim that the rights under the Loans and Guarantees were assigned to the Plaintiffs.[2] Young admits that he signed the Applications for Finance[3] and that the Loans were made by GSF.[4]

3 Young does, however, deny liability to the Plaintiffs for a number of independent reasons, as set out in his submissions:[5]

(a) First, no power of attorney was granted by Young to GSF, including on the basis set out by the County Court in ABL Custodian Services Pty Ltd & Bendigo and Adelaide Bank Ltd v Wade ("Wade").[6]

(b) Secondly, if Young is wrong about the first point, he says that the purported guarantees were not executed by his alleged attorney, GSF, because they were not signed as required under s 127 of the Corporations Act 2001 (Cth) ("the Corporations Act").

(c) Thirdly, if Young is wrong about the first and second points, the purported guarantees were not within the limited power of attorney purportedly granted by Young and are thus invalid.

(d) Fourthly, if Young is right about any of these matters, then for the same reasons, no loan deeds were validly executed on behalf of the alleged borrower, for which Young has given any guarantee or indemnity.

Moreover, Young contends that, to the extent that the Plaintiffs seek to rely upon the settlement of the Great Southern Group Proceedings,[7] he is not bound by the settlement because he was not a party to it, nor covered by its terms in any way.[8] Additionally, Young contends that the First Defendant was not a group member, because the Loan Deeds were entered into on its behalf, for the same reasons advanced by him as to why no guarantee was executed on his behalf by GSF.[9] The Plaintiffs, on the other hand, say that the First Defendant was a group member in the Great Southern group proceedings.[10]

4 The Plaintiffs rely on Witness Statements of Cameron Arthur Rhodes[11] and Stephen Flamer-Smith,[12] which were admitted as evidence at trial.[13] Exhibited to those Witness Statements are certain critical documents upon which the parties rely:

(a) The Application for Term Finance made by the First Defendant and guaranteed by the Third Defendant with respect to the 2006 Vineyards MIS made on 15 June 2006 ("First Application for Term Finance");[14]

(b) The Loan Deed executed on behalf of the First Defendant with respect to the 2006 Vineyards MIS on 15 June 2006 ("First Loan Deed");[15]

(c) The Application for Term Finance made by the First Defendant and guaranteed by the Third Defendant with respect to the 2006 Olives MIS made on 15 June 2006 ("Second Application for Term Finance");[16] and

(d) The Loan Deed executed on behalf of the First Defendant with respect to the 2006 Olives MIS on 26 July 2007 ("Second Loan Deed").[17]

The reference to documents in these reasons in an unqualified way - such as "the Loan Deeds" or "the power of attorney" - does not connote any view or position as to their validity. The substance of these reasons indicates my opinion or opinions in this respect.

(a) Whether the powers of attorney provided for in the Applications for Finance were valid.

(b) Whether GSF was acting within the scope of the powers conferred on it by the powers of attorney in the Applications for Finance in completing the schedules to the Loan Deeds in the way that it did.

(c) Whether a company may execute a document as a deed under s 127(3) of the Corporations Act 2001 (Cth) ("the Corporations Act") if two directors sign the document, for the purposes of s 127(1), by authorising their facsimile signatures to be affixed to the document.

(d) Whether the first defendant was a group member and, if so, the consequences of this for the Plaintiffs' claims against Young as guarantor.

6 The First Application for Term Finance contains the following provisions, upon which the Plaintiffs rely:[18]

(a) statements that, "[d]irectors of corporate applicants will be required to provide a personal guarantee", and "[t]he declaration at the end of this application must be signed and dated by all applicants and guarantors".[19] Young was the sole director and secretary of the First Defendant at the time the Application was signed;

(b) under the heading "Project and Loan Details", the First Defendant applies for a ten year principal and interest loan to invest in 57 vinelots at $3,900 per vinelot, being $223,000, plus a loan fee of $889, making a total loan applied for of $233,189.[20] A handwritten annotation on the same page states that an interest rate of 10% and an application fee of 0.4% has been approved by Mr George Stubbs, Great Southern's manager for Victoria and Tasmania;[21]

(c) under the heading "Personal Details, Borrower/Guarantor", are Young's details, which state that his employer is the First Defendant and that his occupation is company director;[22]

(d) under the heading "Corporate/Trust Borrowers", are the First Defendant's details;[23]

(e) under the heading "Power of Attorney", each of the First Defendant and Young, the Third Defendant, agree to appoint GSF as their attorney, with powers:[24]

(i) "enter into and execute a loan deed in the form attached to this finance application";[25]

(ii) "to date the Loan Deed and complete the blank spaces in the schedule thereto consistent[ly] with the provisions of this finance application";[26] and

(iii) "to make and initial any necessary alterations to the Loan Deed which are not prejudicial to the interest of the Appointor in the considered opinion of the Attorney".[27]

The Appointor authorises the Attorney to exercise the powers under the Power of Attorney even if the exercise of that power involves a conflict of interest[28] and undertakes to ratify all that the Attorney lawfully does or causes to be done under the Power of Attorney granted;[29]

(f) under the heading "Risk Disclosure Statement & Declaration", there are statements that:[30]

Under the Provisions of the Loan Deed, the Guarantor may be liable (to the extent provided under the Agreement) instead of, or as well as, the Borrower, to pay the amounts owing to the Lender under the loan

If this finance application is accepted by the Lender and the finance is provided, the Loan Deed (and other documents connected with, or related to, the Loan Deed will be executed on my/our behalf by attorneys whom I/we have authorised to do so in part 6 of the finance application

(g) immediately above the Third Defendant's, Young's, signature is a statement that:[31]

hereby apply for term finance as detailed in this application or agree to guarantee the loan as detailed in this finance application;

...

• grant the power of attorney as set out in part 6;

confirm the consents and acknowledgements given in this finance application;
declare that I/we have read and understood this finance application, including the "Risk Disclosure Statement & Declaration" and the "Loan Deed";
declare that I/we have had the opportunity to obtain independent legal, financial and taxation advice; and
declare that I/we ... hereby accept liability for this loan as the borrower or guarantor (as the case may be) should this finance application be accepted.

(h) the pro forma loan deed is also set out.[32]

7 The First Loan Deed, claimed to be executed by GSF as attorney for the First Defendant and the Third Defendant, Young, contains a schedule which the Plaintiffs contend has been completed consistently with the First Application for Finance and provides, inter alia, that:[33]

(a) $222,300.00 was to be loaned to the first defendant to fund its investment in the 2006 Vineyards MIS;

(b) $889.20 was to be loaned to the first defendant to fund payment of the Loan Establishment Fee;

(d) interest would be charged on the Moneys Payable due and payable, but unpaid, at 13% per annum.

8 The terms of the Guarantee given by the Third Defendant, Young, are contained in clause 18 of the First Loan Deed and the terms of the indemnity he provided are in clause 19 of that document.[34]

9 The Plaintiffs contend that the rights under the First Loan Deed were assigned and transferred, ultimately to the First Plaintiff.[35]

10 In the Second Application for Finance, the First Defendant applies for, and the Third Defendant, Young, agrees to guarantee, a ten year principal and interest loan of $240,960 to acquire 30 Grovelots in the 2006 Olives MIS.[36]

11 The material features of the Second Application for Finance are the same as the First Application for Finance.[37]

12 The Second Loan Deed is, in its material features, the same as the First Loan Deed.[38] The Plaintiffs contend that the schedule to that document has, again, been completed consistently with the Second Application for Finance.

13 The Plaintiffs contend that the rights under the Second Loan Deed were assigned and transferred ultimately to the First Plaintiff.[39]

Whether the powers of attorney provided for in the Applications for Finance were valid

14 The Plaintiffs rely upon two powers of attorney which they say were granted when the Third Defendant executed the two Applications for Term Finance on 15 June 2006. The Third Defendant contends that the terms of the Finance Applications are relevantly identical to those considered in ABL Custodian Services Pty Ltd & Bendigo and Adelaide Bank Ltd v Wade[40] ("Wade"), where Judge Lacava, in the County Court, held that no power of attorney was validly granted by Mr Wade.

15 The Finance Applications include the following provisions, with each page headed APPLICATION FOR TERM FINANCE. Part 6 of the Finance Applications is headed "POWER OF ATTORNEY" and states, in paragraph (a):

(a) By signing this finance application, the Borrower and the Guarantor (if any) (Appointor) agree to appoint:

(i) where Great Southern Finance Pty Ltd (GSF) is the lender under the proposed loan, GSF and each director, company secretary and attorney or GSF, jointly and severally; or

(ii) where ABL Nominees Pty Ltd (ABL) is the lender under the proposed loan, each of ABL and GSF and each director, company secretary and attorney of ABL or GSF, jointly and severally, to be attorney for the Appointor (Attorney) on the terms specified herein and to exercise the powers as follows:

(iii) to enter into and execute a loan deed in the form attached to this finance application (Loan Deed) on behalf of the Appointor. A loan deed will be in the same form as the loan deed attached to this finance application despite any formatting changes to the document;

(iv) to date the Loan Deed and complete the blank spaces in the schedule thereto consistent[ly] with the provisions of this finance application;

(v) to make and initial any necessary alterations to the Loan Deed which are not prejudicial to the interests of the Appointor in the considered opinion of the Attorney;

...

Paragraph (h) of part 6 states: "[t]he Power of Attorney is executed as a deed".

16 The following page of the Finance Applications - the Execution Page - relevantly contains the following:

hereby apply for term finance as detailed in this finance application or agree to guarantee the loan as detailed in this finance application;

grant the power of attorney as set out in part 6

....

SIGNATURE OF APPLICANT//GUARANTOR

__________________

WITNESS SIGNATURE

___________________

17 The Third Defendant submits that support for his contention that the powers of attorney were invalid is provided by the decision in Wade, where the County Court held that the signing of the Finance Application the subject of that case did not create a power of attorney, for a variety of reasons, including because:[41]

(a) the use of the words "agree to appoint" constitutes an agreement to appoint in the future, and is not itself a grant of any power;[42]

(b) the reference to the power of attorney being "executed as a deed" is not part of the purported exercise of the grant of power; only the application for finance has been signed;[43]

(c) powers of attorney must be executed as deeds;[44] and

(d) the application for term finance was not a deed, including because it was not expressed to be "SIGNED, SEALED AND DELIVERED".[45]

18 Having regard to the position in Wade, the Third Defendant submits that in the present circumstances, the use of the words "agree to appoint" in the Finance Applications, instead of "appoint", indicates that the appointment is intended to occur in the future and is not effected in the present by the signing of the documents by the Third Defendant, Young.[46] Moreover, it is said that, as in the case of Wade, the fact that the Execution Pages do not state that, in signing the Finance Application, the person executes or signs the form as a deed confirms this construction.[47]

19 The Plaintiffs, on the other hand, emphasise some differences in the Finance Applications in the present proceeding as compared to the equivalent document the subject of the decision in Wade. In particular, they point to the absence of the dot point which appears in the Execution Pages of the Finance Applications in these proceedings which is cast in the present in terms of "grant the power of attorney as set out in Part 6".[48] The Plaintiffs argue that this express provision negates the argument decisive in Wade that the grant of any power of attorney was only something to be done in the future and not presently effected by the execution of the application for finance in that case. In my view, there is much to be said for this construction of the provisions of the Finance Applications as contended for by the Plaintiffs, as a reading of the documents as a whole, particularly with the presently expressed grant provisions in the Execution Pages, indicates an intention that the grant of the power of attorney be effected immediately.

20 Moreover, when regard is had to the scheme for financing and allocating interests to investors in the various Great Southern schemes - and in these particular schemes themselves - the relevant product disclosure statements make it clear, in my view, that the parties contemplated no other step in the creation of a power of attorney for the purpose of enabling execution of the Loan Deeds. Clearly the parties intended that the schemes succeed and that the investors gain interests in the schemes and that the interests be financed as contemplated in the product disclosure statements. For these reasons and applying the ordinary principles of construction with respect to commercial agreements and instruments, I am of the opinion that, even accepting the decision in Wade, the position in the present circumstances is relevantly different having regard to the differences in the Finance Applications. There are, however, further issues with respect to the validity of the powers of attorney, issues to which I now turn.

21 In terms of validity of the powers of attorney, the Third Defendant submits that even if the words "agree to appoint" are not determinative, the lack of any appropriate "solemnity" on the Execution Page - such as a physical seal or the words "signed, sealed and delivered" - is fatal.[49] Moreover, the Third Defendant contends that Victorian law is applicable with respect to the creation of the powers of attorney and that the position in Victoria is that an instrument signed by a natural person is not a deed unless it is physically sealed or, in the case of an instrument signed in Victoria on or after 1 September 1978, expressed to be sealed by that natural person.[50] The Third Defendant also contends that the fact that the documents are described on each page as "Application for Term Finance" indicates objectively that they are applications, and intended to be applications, rather than deeds.[51] Having regard to the position I have reached with respect to the application of Victorian law in this context it is not necessary to express any views on "solemnity" or related issues.

22 The Plaintiffs, on the other hand, submit that the position put by the Third Defendant in relation to the manner of creation of the powers of attorney is resolved by the provisions of s 9 of the Western Australian Property Law Act 1969, which legislation the Plaintiffs contend is the applicable law with respect to the creation of the powers of attorney. Section 9 of the Western Australian Act is as follows:

9 Formalities of deed

(1) Every deed, whether or not affecting property -

(a) shall be signed by the party to be bound thereby; and

(b) shall be attested by at least one witness not being a party to the deed but no particular form of words is required for the attestation.

(2) It is not necessary to seal any deed except in the case of a deed executed by a corporation under its common or official seal.

(3) Formal delivery and indenting are not necessary in any case.

(4) Every instrument expressed or purporting to be an indenture or a deed or an agreement under seal or otherwise purporting to be a document executed under seal and which is executed as required by this section has the same effect as a deed duly executed in accordance with the law in force immediately prior to the coming into operation of this Act.

The Plaintiffs rely, particularly, on the provisions of s 9(4) of this Western Australian legislation. The question therefore arises as to the applicable law with respect to the creation of these powers of attorney. If the answer is Victorian law, then the requirements of s 73A of the Property Law Act 1958 of Victoria must be complied with; and having regard to the provisions of ss 106 and 107 of the Instruments Act 1958.[52] These provisions were also relied upon in Wade in relation to which Judge Lacava said:[53]

In Victoria, a power of attorney must comply with the relevant provisions of the Instruments Act 1958 (Vic). Section 106 of the Instruments Act provides:

"(1) An instrument creating a power of attorney may be executed by, or by direction and in the presence of, the donor of the power.

(2) Where such an instrument is executed by a person by direction and in the presence of the donor of the power, two other persons shall be present as witnesses and shall attest the instrument."

"(1) A general power of attorney in or to the effect of the form set out in Schedule 12 shall operate to confer -

(a) on the attorney under the power; or

(b) ...

authority to do on behalf of the donor anything (other than delegate his powers under the power of attorney) which he can lawfully do by an attorney."

The form contained in Schedule 12 is in relatively simple terms. Clause 1 names a person who shall be the attorney and clause 2 authorises the attorney "to do on my behalf any thing that I may lawfully authorise an attorney to do". Importantly, the last line of the form reads: "SIGNED SEALED AND DELIVERED by."
By virtue of s73 of the Property Law Act 1958, an individual executes a deed by signing or placing his mark upon it, and sealing alone is not sufficient. Section 73A of the Property Law Act 1958 provides that-

"An instrument executed by an individual on or after the date of commencement of section 4 of the Property Law (Deeds) Act 1977 expressed to be sealed by that individual but not so sealed shall for all purposes operate and take effect as if it had been so sealed."

The defendant submits the effect of the Victorian legislation is that a power of attorney properly made must be expressed as a deed and at least recite the words "signed, sealed and delivered" as referred to in Schedule 12 of the Instruments Act (Vic) 1958. The defendant relies upon what Justice Forrest said in the decision of Ghosn v Principle Focus Pty Ltd & Ors (No 2)[54] as providing support to this submission, where his Honour said, inter alia:

"Section 107 of the Instruments Act gives effect to a general Power of Attorney provided it is 'in or to the effect of the form set out in Schedule 12'."

The defendant also refers to the position at common law. Dal Pont, in his work on Powers of Attorney at paragraph 4.19, says that at common law, the term "Power of Attorney" only applies to an authority conferred by deed. The authority for that proposition is Comptroller of Stamps (Vic) v Papalia.[55] I have read Papalia and agree, with respect to the learned author's statement of the common law position. In my view, clause 6(a) of the application for terms finance is not a deed.

In my view, and with respect, Judge Lacava correctly stated the position with respect to the requirements of these provisions in the course of accepting the submissions of the defendant in Wade. The position is, with respect to the Third Defendant, Young, in these proceedings, relevantly the same. For the reasons which follow, I am of the view that the powers of attorney were not validly created as deeds as they do not meet the requirements of s 73A of the Victorian Property Law Act 1958 ("Property Law Act"). It is uncontroversial that they were not created as deeds at common law.[56]

23 The Plaintiffs do, however, contend that the position in Victoria is, in effect, not substantially different from the position in Western Australia, even having regard to the requirements of s 73A of the Victorian Property Law Act. In support of this position, reliance is placed on a number of decisions, particularly a decision of the Court of Appeal in Nom de Plume Nominees Pty Ltd v Fingal Developments Pty Ltd[57] ("Nom de Plume Nominees"), the decision referred to in the Court's reasons including, particularly, Backstop Nominees Pty Ltd v Goscor Pty Ltd[58] ("Backstop Nominees"). These decisions do not, however, address the position with respect to the requirements for a natural person to validly execute a deed in Victoria. Nom de Plume Nominees and Backstop Nominees were concerned with the question whether a document executed by corporations under their common seals was to be characterised as a deed. As corporations, when they execute documents under their common seal, do not affix the traditional wax or wafer seal as would an individual and state that the document is "signed, sealed and delivered", the question of their intention as to whether or not the document is to be taken as a deed arises. This question does not, however, arise in a relevant sense with respect to execution by an individual. Indeed, this position is made clear by Tadgell J in Backstop Nominees:[59]

It is clear law that no particular technical form of words or acts is necessary to render an instrument the deed of the party sealing it: Xenos v Wickham (1866) LR 2 HL 296, at p 312, per Blackburn J. The intention, expressed or appropriately to be inferred, with which the instrument was executed and thereafter dealt with is of cardinal significance. I should not regard the fact here that the five corporate parties executed the instrument under their common seals as being of particular import by itself. That, alone, is equivocal. I refer without elaboration to what I said at first instance, and to what the Full Court said, in Comptroller of Stamps v Associated Broadcasting Services Ltd [1990] VicRp 31; [1990] VR 335. The added fact, however, that the two natural parties executed the instrument as for a deed at least suggests that the corporations did too. Moreover, it appears that the additional parties who were natural persons attested the affixing of the seal of each of Goscor Pty Ltd and the additional parties who were corporations. In the circumstances I should think it in the highest degree unlikely that all the defendants did not have the same intention as to the effect which the instrument should have upon its execution. To this are to be added the facts that the instrument was executed for the purpose of embodying terms of settlement of litigation, presumably intended to be effective notwithstanding the absence of expressed consideration, that the additional parties intended to bind themselves to guarantee the obligation of Goscor Pty Ltd and, as was again common ground, that counterparts of the instrument were exchanged. In the circumstances the intention of the parties to seal and deliver the instrument as a deed is readily to be inferred and I do so infer.

This position is made even clearer when regard is had to the statement of Blackburn J, to which Tadgell J refers in Xenos v Wickham:[60]

I can, on this part of the case, do little more than state to your Lordships my opinion, that no particular technical form of words or acts is necessary to render an instrument the deed of the party sealing it. The mere affixing the seal does not render it a deed; but as soon as there are acts or words sufficient to shew that it is intended by the party to be executed as his deed presently binding on him, it is sufficient. The most apt and expressive mode of indicating such an intention is to hand it over, saying: "I deliver this as my deed;" but any other words or acts that sufficiently shew that it was intended to be finally executed will do as well.

24 For the preceding reasons, I accept the Third Defendant's submissions that the decision in Nom de Plume Nominees and the other decisions to which reference is made do not stand for the proposition that sealing is unnecessary for a natural person to validly execute a deed in Victoria, providing that sealing is understood as including both an actual seal or words stating that the person has sealed the deed, as provided for in s 73A of the Property Law Act. Moreover, Nom de Plume Nominees and the other decisions to which reference is made are entirely consistent with the other authorities relied upon by the Third Defendant concerning the validity of deeds; for example, Backstop Nominees, Comptroller of Stamps v Associated Broadcasting Services Ltd,[61] and Comptroller of Stamps (Vic) v Papalia.[62] Twenty Ninth Macorp Nominees Pty Ltd v George,[63] which is cited by the Plaintiffs in support of their position is, in my view, not authority to the contrary. In that case, the instrument had execution clauses containing the words "Signed Sealed and Delivered". The question for the Court, as with the question in Nom de Plume Nominees and the other cases to which reference has been made, is whether the parties intended that the instrument take effect as a deed, and not whether the instrument could have been the deed of the relevant natural persons if it had not been expressed to be sealed by them.

25 The authorities with respect to the applicable law as to the creation and operation of powers of attorney draw a distinction in circumstances where the jurisdiction in which a power of attorney is created is different from the jurisdiction or jurisdictions in which the power of attorney is to operate. This distinction is made clear in a number of cases, particularly by the House of Lords in Employers' Liability Assurance Corporation Ltd v Sedgwick, Collins & Company Ltd[64] and in First Russian Insurance Company (in liquidation) v London and Lancashire Insurance Company Ltd;[65] and also Chatenay v The Brazilian Submarine Telegraph Co Ltd.[66] The Plaintiffs seek to argue against the authority and; or, alternatively, applicability of these decisions[67] by reference, particularly, to the Federal Court in two Trina Solar judgments.[68] The reasoning in this litigation is, however, distinguishable as those cases are concerned with whether an entity was a party to an arbitration agreement, an issue which only arose because the formalities of execution had been satisfied by one alleged party, namely, Trina Solar (US) Inc. Greenwood J held that the relevant law was the law of the forum.[69] Beach J addressed the question of validity, which his Honour said assumed an agreement had been made and went to whether the agreement was enforceable, voidable or void.[70]

26 The question in the present proceedings is, as submitted by the Third Defendant, not one of enforceability or voidability, but whether the common law requirements of the formalities of a deed, as modified by statute, have been met.[71] Moreover, as the Third Defendant observed, the difficulties in applying the reasoning in these cases to the present situation is highlighted by the reasoning of Edelman J at first instance,[72] where his Honour differentiated between questions whether a contract has been formed - consensus ad idem - and whether a contract which has been formed is valid. A power of attorney granted by deed is a unilateral act, so that the question of whether there is consensus ad idem does not even arise.

27 Applying the reasoning adopted in the English cases to which reference has been made, it follows that the law applicable to the creation of a power of attorney is the law of the jurisdiction in which it was made, but as to its construction and operation, the applicable law is that of the jurisdiction (or jurisdictions) where the power operates or is intended to operate. In the present circumstances, Young was based with an address in Victoria as he indicated in the Finance Applications - as was the witness to his signature, Mr Wills - and there was no evidence that they signed the Applications for Finance in any place other than Victoria. In my view, the inference must follow that they signed them in Victoria. Moreover, in the absence of evidence to the contrary, there appears to be no basis for the proposition which is, in effect, advanced by the Plaintiffs, that the Court should assume that the power of attorney was executed outside the jurisdiction.[73] It follows, in my view, that Victorian law governs the issue whether Young's signing of the Finance Applications constituted his making valid deeds granting the powers of attorney. Consequently, the effect of Victorian law is, as previously indicated, that the Finance Applications do not operate as deeds and, consequently, the powers of attorney are not executed as deeds. Execution of a power of attorney as a deed is necessary for it to be valid[74] and, since the Third Defendant, Young, did not execute the Finance Applications as deeds, no powers of attorney were thereby granted. Moreover, as the purpose of the purported powers of attorney was to authorise a person or entity to execute a deed on the Third Defendant's, Young's (and the borrower's) behalf,[75] the general law also requires that such a power also be granted by deed.[76]

Whether GSF was acting within the scope of the powers conferred on it by the powers of attorney in the Applications for Finance in completing the schedules to the Loan Deeds in the way that it did

28 As I have, for the preceding reasons, found that the powers of attorney were not executed as deeds and were, consequently, not effective, this issue does not arise. Nevertheless, in case matters proceed further, it is desirable that I express some views in this respect.

29 The appointment of an attorney or agent is, of course, contractual, and it follows that the terms of the appointment will define the extent and scope of the power or agency. The scope of the power or agency will be strictly construed.[77]

30 In the present case, the scope of the appointment of the attorney is confined by the provisions of the Finance Applications, which, as the Third Defendant submits, only permit the attorney "to date the Loan Deed and complete the blank spaces in the schedule thereto consistent[ly] with the provisions of this finance application" [Third Defendant's emphasis]. Thus, the scope of the power is limited in this way and the terms of this limitation must be strictly construed.

31 The Third Defendant contends that there are numerous inconsistencies between the Finance Applications and the Loan Deeds which the Plaintiffs claim were validly executed in the exercise of the powers of attorney. The inconsistencies identified by the Third Defendant are as follows:[78]

(a) The Alleged Deeds record two possible lenders, notwithstanding that the Finance Applications required that the name of the actual lender be stated by the deletion of inappropriate parties.

(b) The Alleged Deeds record that the funds purportedly borrowed might be applied towards three different projects, notwithstanding that the Finance Applications required that the inapplicable projects be deleted when the "deeds" were executed.

(c) The interest rates in the Alleged Deeds are materially different from what was set out in the Finance Applications: 10% is written on the Finance Applications but the Alleged Deeds provide for an interest rate of 13%.

(d) The monthly repayment dates are materially different from what was set out in the Finance Applications: the last business day is recorded in the Finance Applications yet the Alleged Deeds provide that the repayment date is to be the 31st day of each month. It is not to the point that by some process of contractual interpretation the same financial obligations might be imposed: the authority only permitted the execution of a loan deed having a specified form as well as having a specified effect.

(e) The loan fee on the one of the Alleged Deeds is materially different from what was set out in the Finance Application ($889.20 rather than $889).[79] This difference is small but not legally insignificant: Australian money is denominated in dollars and cents, not just dollars.

32 The Plaintiffs respond to these matters which the Third Defendant contends are "inconsistencies" of significance with respect to the exercise of the powers of attorney by separating what they say are de minimis or trivial matters and one of more substance, namely, the overdue interest rate. As to the, so-called, de minimis or trivial matters, the Plaintiffs make the following submissions:[80]

Some of the differences identified by Young in paragraphs 5A and 30A of his Amended Defence between the Loan Deeds as executed and the pro-forma loan deed in the Applications for Finance are de minimis or trivial and plainly fell within the authority conferred on GSF as attorney. For example:

(a) Item 7 of the pro-forma loan deed provided for repayments to be made on the last Business Day of the month. Item 7 of the Loan Deed as executed provided for repayments to be made on the 31st day of each month. The effect of clause 29.3 of the Loan Deeds is that the provisions operate to the same effect.[81]

(b) The fees specified in the First Application for Finance were $889 or 0.4% of the amount borrowed. The fee specified in item 4 of the First Loan Deed was $889.20. 0.4% of the amount borrowed to invest in the 2006 Vineyards MIS, $222,300, is $889.20.[82]

(c) The first page of the pro-forma loan deed and the executed Loan Deeds contained instructions to "delete as applicable" whichever of GSF and the second plaintiff was not the Lender. This was not done in the executed Loan Deeds (although of course this meant that in this respect the Loan Deeds remained in precisely the form attached to the Applications for Finance). It was plain from GSF's execution of the Loan Deeds that it was the Lender and Young admits that the Loans were made by GSF.[83]

(d) Item 2 of the schedule to the pro-forma loan deed contained an instruction to "delete whichever not applicable" in respect of the schemes invested in. This was not done in the executed Loan Deeds. Instead the details of the scheme invested in were completed and the details of other schemes were left blank.[84]

33 Taking the, so-called, de minimis or trivial matters first, I am of the opinion that the submissions in this respect by the Plaintiffs should be accepted as, apart from the provision that repayments be paid on the 31st day of each month, which I will discuss further, the other matters are truly trivial. It could not possibly be within the contemplation of the parties that the arrangements for the investment in the Great Southern schemes would fail for the sake of a mistake of 20 cents in the fee specified in Item 4 of the First Loan Deed or the failure to "delete as applicable" or where the identity of the relevant lender and scheme it is in fact clear and readily ascertainable.

34 Of more significance, perhaps, is the provision for repayments on the 31st day of each month, which is, of course, a nonsense. Again, it could hardly be thought that the investment arrangements for these Great Southern Managed Investment Schemes would have been contemplated by the parties as failing on this basis. The common sense interpretation of this provision is that the repayments were due on the last day of each month. As set out above, the Third Defendant raises the point that there may be uncertainty created in relation to the repayment date if the 31st day of each month or the last day of each month is not a business day. This matter is, however, specifically addressed in the provisions of sub-clause 29.3 of the Loan Deeds, which provide that when the last day for doing an act is not a "Business Day" (as defined), the preceding Business Day in the place where that act is to be done applies. For these reasons, I am of the opinion that the rather unhelpful reference to repayments to be made on the 31st day of each month is a de minimis or trivial matter which would not affect the valid exercise of the purported power of attorney.

35 Of more significance is the point made by the Third Defendant that the interest rates specified in the Loan Deeds are materially different from what was set out in the Finance Applications. There is nothing in the Finance Applications which provides for an "overdue rate" of interest, and there is no evidence of any general commercial or lending practice with respect to the differential (if any) between the rate of interest payable under a commercial lending arrangement of the kind the subject of these proceedings when not in default and the rate of interest payable when the borrower is in default. Clearly, judicial notice can be taken of the fact that mortgages and loan contracts generally do provide for a higher, default, rate of interest which is usually couched in the drafting device, long-accepted, whereby what is, in substance, the default rate of interest is specified as the rate payable subject to the proviso that if the borrower "duly and punctually pays" moneys due under the mortgage or loan agreement, the lender will accept a lower rate. One might think that, in substance, the higher rate is a penalty and that this "device" does not change that position - "a rose by any other name"! Nevertheless, this "device" has been accepted by the courts for centuries as a legitimate commercial provision which does not constitute a penalty provision - save for the possibility that the interest rate differential is so great as to lead to a different conclusion.[85]

36 In response, the Plaintiffs observe that the attorney was authorised "to exercise the powers under the Power of Attorney even if the exercise of that power involves a conflict of interest"[86] and the appointor undertook "to ratify all that the Attorney lawfully does or causes to be done under the Power of Attorney".[87] It is, however, convenient to observe at this point that although a provision of this nature may, on its face, appear quite broad and far-reaching, when regard is had to the authorities which indicate that the authority conferred by a power of attorney must be strictly construed, it could not be supposed that a provision of this nature in the documents now under consideration would require a borrower to ratify an act by the attorney beyond the scope of the authority conferred by the power. However, for the reasons which follow, I do not regard that as being the situation here, as, on consideration of the suite of documents provided as part of the Finance Applications, I am of the view that the insertion of the overdue rate of interest was within authority. I turn now to that issue.

37 The pro forma loan deed attached to each Application for Finance included in the schedule a blank space in which the overdue rate was to be inserted.[88] In each case, the rate that was inserted was 13%,[89] 3% higher than the ordinary rate.

38 In ABL Custodian Services Pty Ltd v Kunz[90] ("Kunz"), Judge Slattery of the South Australian District Court found that the power of attorney in that case was insufficient to authorise the insertion of an overdue interest rate in the defendant's loan deed. His Honour found that because of this, to the extent the overdue interest rate was relied upon, but only to that extent, the loan deed would be unenforceable.[91] However, his Honour found at [203] that the effect of the Deed of Settlement of the group proceedings was that the defendant in that proceeding was bound by his loan deed, including the provisions as to overdue interest.[92]

39 The Plaintiffs in the present proceedings agree with the overall conclusion reached by Judge Slattery that the Loan Deeds are acknowledged to be valid and binding in the Deed of Settlement and the Plaintiffs submit that the First Defendant and the Third Defendant, Young, cannot now depart from that position.

40 It should, however, be observed that Judge Slattery found that the authority conferred by the power of attorney was, in the circumstances of that case, insufficient to authorise the inclusion of the overdue rate in the loan deed. This decision of the South Australian District Court is, of course, not binding on this Court, but the extensive and careful reasoning of Judge Slattery in that case deserves attention and respect. I do, however, accept that his Honour's reasoning in Kunz should be distinguished in the present circumstances for the reasons advanced by the Plaintiffs, namely because:

(a) to the extent his Honour relied on the "no conflict" and "no profit" rules,[93] his Honour did not consider the express provisions of the power of attorney authorising the attorney to exercise their powers "even if the exercise of that power involves a conflict of interest";

(b) his Honour erred in treating the requirement to complete blanks in the loan deeds "consistent[ly] with the provisions of this Application" as only entitling the attorney to complete the blanks if the relevant information was contained in the Application for Finance.[94] There were plainly various items in the schedule to the pro forma loan deed that could not be completed from the information contained in the Application, such as: item 2, the number of vinelots (or similar) allocated to the investor, which might be less than the number applied for; item 6, the interest start date; item 7, the monthly repayment dates; and item 8, the number and amount of monthly repayments. The attorney was not permitted to complete the blanks in the schedule in a manner that was inconsistent with the Application for Finance. Completion of the overdue interest rate was in no way inconsistent with the Application for Finance.

41 For the preceding reasons, I am of the view that GSF acted, or would have acted within its powers as attorney in completing the interest rates in the schedules to the Loan Deeds in the event that the powers of attorney were themselves valid. As I have found that the powers of attorney were not valid, it follows that GSF's purportedly acting within these powers is simply of no effect. Moreover, issues raised by the Third Defendant with respect to any fiduciary duties GSF may have owed to Young does not arise.[95] However, in the event that the powers of attorney were valid, I am of the opinion that there would be no breach of fiduciary duties to Young as contended for by him, as Third Defendant, because, as indicated previously, the insertion of the overdue interest rate was otherwise within power.

Whether a company may execute a document as a deed under s 127(3) of the Corporations Act if two directors sign the document, for the purposes of s 127(1), by authorising their facsimile signatures to be affixed to the document

42 The position of the Plaintiffs is that the Loan Deeds were executed by GSF in accordance with s 127 of the Corporations Act. The provisions of s 127 relevantly provide:

Execution of documents (including deeds) by the company itself

(1) A company may execute a document without using a common seal if the document is signed by:

(a) 2 directors of the company; or

(b) a director and a company secretary of the company; or

(c) for a proprietary company that has a sole director who is also the sole company secretary--that director.

Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(5) for dealings in relation to the company.

...

(3) A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2).

(4) This section does not limit the ways in which a company may execute a document (including a deed).

43 The word "document" is not defined in the Corporations Act, but is defined in the Commonwealth Acts Interpretation Act 1901 to mean:

any record of information, and includes:

(a) anything on which there is writing; and

(b) anything on which there are marks, figures, symbols or perforations having a meaning for persons qualified to interpret them; and

(c) anything from which sounds, images or writings can be reproduced with or without the aid of anything else; and

(d) a map, plan, drawing or photograph.

Section 9 of the Corporations Act defines the word "deed" as including "a document having the effect of a deed."

44 It is common ground that the Loan Deeds were not actually, physically, signed by the director and secretary of GSF whose names are recorded on these documents, that is by personally writing their signatures. Moreover, it is apparent from the witness statements relied upon in these proceedings that no evidence is adduced as to which person or persons affixed or personally authenticated the affixing of the purported facsimile signatures of the directors and secretary of GSF whose names are recorded on the Loan Deeds.

45 The Plaintiffs, in support of their position that the Loan Deeds were validly executed by GSF in accordance with s 127 of the Corporations Act, make reference to the consideration of these issues by the Court in Bendigo and Adelaide Bank Ltd v Laszczuk[96] ("Laszczuk"). It is helpful, for present purposes, to set out that part of my judgment in Laszczuk upon which the Plaintiffs rely, but, before doing so, it is also helpful to set out the provisions of s 129(5) of the Corporations Act which are relevant to that discussion. These provisions are as follows:

(5) A person may assume that a document has been duly executed by the company if the document appears to have been signed in accordance with subsection 127(1). For the purposes of making the assumption, a person may also assume that anyone who signs the document and states next to their signature that they are the sole director and sole company secretary of the company occupies both offices.

The latter sentence in that sub-section is not relevant in the present circumstances, but it is included for completeness of the quote.

46 The passages from the judgment in Laszczuk upon which the Plaintiffs rely are as follows:[97]

A company may execute a document as a deed if it is signed by two directors or a director and a secretary. In my view, this is made clear by ss 127(1) and (3) of the Corporations Act 2001 (Cth). This is, indeed, how GSF executed the Laszczuk Loan Deed. In my view, there is no inconsistency between this Commonwealth legislation and the provisions of the Property Law Act 1969 (WA) (Western Australia being the applicable state law under clause 29 of the Loan Deed), or similar legislation with respect to the execution of deeds more generally. In any event, to the extent there is a conflict between the Commonwealth and Western Australian legislation, the Commonwealth legislation would prevail as a result of the operation of s 109 of the Constitution. Nevertheless, I am of the opinion that the better view is that the Commonwealth and State legislation is not inconsistent - the Commonwealth legislation directing attention to execution by companies but not precluding a company from choosing to comply with the Western Australian formalities if it chooses to do so. As the Commonwealth legislation is directed to execution of deeds, I also accept the proposition that the provisions of the Western Australian legislation which dispense with the need for delivery of a deed[98] may be relied upon in the present circumstances so that to the extent that delivery might be seen to be in issue applying general law principles, the position is otherwise in light of this legislation. Additionally, the signatures of officers executing a document on behalf of a company, including a deed, are not, under the provisions of s 127(1) of the Corporations Act, required to be attested or witnessed.
As to the form of the signatures, it should be borne in mind that a signature is only a mark. A signature may be impressed upon a document by a stamp with the authority of the person signing.[99] The evidence of Mr Rhodes is that this is how the loan deeds were executed by GSF.[100] Moreover, there is no reason why the assumptions a person is entitled to make under s 129(5) of the Corporations Act should be confined to signatures made with a pen in the usual way.

47 It must be remembered, however, that the evidence, circumstances and arguments advanced in different proceedings are not to be assumed as relevantly analogous and that is not the position here. I turn, therefore, to these issues in the context of the present proceedings.

48 Section 127 of the Corporations Act does, as its heading indicates, permit a company to execute a deed if the document "is signed" by one director and one secretary of the company. The Third Defendant, Young, contends that s 127, on its proper construction, requires a deed or other instrument of a company to be physically signed by the relevant company officer or for the person to authenticate personally the mark appearing on the document as his or her signature. Thus, it is submitted that copying and pasting a facsimile signature by a person unknown is not sufficient for the purposes of s 127 of the Corporations Act. For the reasons which follow, I do accept, in the circumstances of these proceedings and the arguments advanced, that this is the correct position.

49 The word "signed" is not defined in the Corporations Act.[101] The Corporations Act excludes the operation of s 10 of the Electronic Transactions Act 1999 (Cth) ("ETA").[102] Accordingly, the Commonwealth legislation dealing with whether a legislative requirement may be met by electronic means expressly excludes s 127 of the Corporations Act from its operation. There is otherwise no indication given by Parliament that "signed" is intended to have any other meaning that its ordinary meaning.

50 The ordinary meaning of the word "signed" is elucidated by the common law. At common law a person may sign a document by stamping their name,[103] by typewriting or by printing, but in all cases, the question will be whether what was done fulfilled the function of a signature.[104] What is required for signing to be effective is that there be some kind of "personal authentication of the individual 'signing'".[105]

51 In MYT Engineering Pty Limited v Mulcon Pty Limited, the plurality of the High Court considered the modes by which a company could execute a contract.[106] It was observed:[107]

Section 182(1) [of the Corporations Law] and its legislative predecessors permitted a company to make some contracts in writing without affixing the company seal. But if the company seal is affixed to a contract that does not have to be sealed, and the sealing is not done or witnessed as the articles of association require, the document may nevertheless constitute a contract binding on the company. In 195 Crown Street Pty Ltd v Hoare a company executed a lease by affixing the seal. Contrary to the requirements of the company's articles of association, the affixing of the seal was not witnessed by two directors; it was witnessed by a director and a secretary. The Court of Appeal in New South Wales held that the document had been signed by the company. Asprey JA (with whom, on this point, Walsh JA agreed) said that:

It is to be borne in mind that s 35(1)(b) [of the Companies Act (NSW)] contemplates that the document may be 'signed', that is to say, the name of the company may be inscribed, by a natural person. Such a signature can be affixed by that person in a variety of ways so long as what is done by him is performed with the intention of authenticating the document so as to be binding on the company under whose authority he is executing the document.

52 In the case of Re a Debtor,[108] Laddie J, sitting in the Chancery Division, considered the instance of a person signing a proxy for a creditors' meeting, which was sent to the chairman of a meeting by fax. Laddie J observed:[109]

It seems to me that the function of the signature is to indicate, but not necessarily prove, that the document has been considered personally by the creditor and is approved of by him.

...

... I have come to the conclusion that a proxy form is signed for the purposes of r 8.2(3) if it bears upon it some distinctive or personal marking which has been placed by there by, or with the authority of, the creditor.

53 In Wilmink v Westpac Banking Corporation, the Full Court of the Federal Court held in relation to the meaning of a "simple signature" in s 25 of the Bills of Exchange Act 1909 (Cth):[110]

The Macquarie Dictionary Online defines a signature relevantly to be:

1. a person's name, or a mark representing it, as signed or written by that person or by a deputy, as in subscribing a letter or other document.

...

In Muirhead v Commonwealth Bank of Australia (1996) 125 FLR 434, the Court of Appeal of Queensland held that, in the absence of any express provision or other indication to the contrary, s 97(1) of the Bills of Exchange Act is not to be taken to preclude signature by an agent. At 438, McPherson JA (Macrossan CJ and Davies JA agreeing on this issue) observed (quoting from Lord Denning's dissenting judgment in Goodman v J Eban Ltd [1954] 1 QB 550) that the "great virtue of a handwritten signature ... lies in the fact that no two persons write exactly alike, and so it carries on the face of it a guarantee that the person who signs has given his personal attention to it." At 440, McPherson JA expressed approval of the statement in K Robson (ed) Riley's Annotated Bills of Exchange Act and Cheques and Payment Orders Act that "signature" may perhaps be defined as the writing of a person's name on a bill or notice in order to authenticate and give effect to some contract thereon. His Honour also referred to the United States Uniform Commercial Code definition of the term "signed" as including any symbol executed or adopted by a party with present intention to authenticate a writing, citing _Brady on Bank Check_s s 3.1, 4th ed (1969).

In Muirhead, McPherson JA also referred to the judgment of the Supreme Court of Ceylon, in Meyappan v Manchanayake [1961] LKCA 17; (1961) 62 NLR 529. In that case, the question was whether a cheque, upon the reverse of which had been placed a stamp of the name of the firm, had been signed by the firm. Samsoni J said (at 532):

The correct view, I think, is that unless there is added to the name so stamped a signature of a person verifying the so-called signature to show that it was placed there with the authority of the firm, the document cannot be regarded as validly signed. No case has gone so far as to hold that the mere stamping of the name of a firm, be it a company or a partnership, on a document is a valid signature by that firm.

54 In the present circumstances, there is no evidence with respect to the Loan Deeds of authentication. More particularly there is no evidence that either the director or secretary whose signatures are purportedly affixed to those Deeds authenticated their facsimile signatures in any way. There is not even evidence in the form of GSF Board Minutes authorising and, depending on their content, authenticating such signatures generally, or more particularly. Moreover, there is no evidence that, after the facsimile signatures were attached, either Mr Young or Mr Rhodes personally authenticated the affixation of their signatures. I accept that Bendigo and Adelaide Bank Ltd v Laszczuk[111] is not an authority to the contrary. The question in that case was whether a signature within the meaning of s 127 of the Corporations Act could be impressed upon a document by a stamp. The question in this case is whether the affixing of a facsimile purporting to be the signature of a director or secretary of a company constitutes the signature of that officer for the purposes of s 127 of the Corporations Act, notwithstanding that the officer did not intend to authenticate the document by authorising the affixing of the facsimile to that particular document and, indeed, had no involvement in the production or authentication of the particular document. For completeness, I note that Mr Rhodes was erroneously described as a signatory to the Loan Deeds as secretary when he was, in fact, then a director. As indicated in the present context this error is of no significance.

55 For the preceding reasons, I find that the Loan Deeds have not been validly executed for the purposes of s 127 of the Corporations Act.

Group membership of the First Defendant and its consequences

56 The Plaintiffs submit that the First Defendant was a group member, having satisfied the criteria for group membership.[112] The Third Defendant, Young, says, on the other hand, that the First Defendant was not a group member because of the alleged deficiencies in the execution of the Loan Deeds.[113] The Plaintiffs submit that this defence is misconceived, because the relevant criteria for group membership is that the First Defendant entered into a loan with GSF to fund payment of the application fees in respect of the relevant scheme, not that the First Defendant entered into a Loan Deed in respect of the scheme. The Third Defendant admits that the First Defendant entered into the relevant loans with GSF.[114] Moreover, the other criteria for group membership are, the Plaintiffs submit, satisfied.[115]

57 Consequently it would appear that the First Defendant is relevantly a group member although, for the reasons which follow, this does not affect the position of the Third Defendant.

58 In terms of the consequences of group membership for the First Defendant, the Plaintiffs make reference to the decisions of this Court in ABL Custodian Services Pty Ltd v Freer[116] ("Freer") and Bendigo and Adelaide Bank Limited v Lonergan.[117] As the Plaintiffs observe, both decisions concerned applications for judgment against borrowers who were group members in the Great Southern group proceedings. In summary, in terms of consequences, the Court held that (with paragraph references to Freer):

(a) the discretion of the Court should be exercised in favour of proceeding summarily to enforce the settlement approved in the Great Southern group proceedings ([9]);

(b) the consequence of being a group member in the group proceeding is that the group member is bound by the terms of the Deed of Settlement and particularly the acknowledgement that the group member's Loan Deed is valid and binding (clause 4.1.4) and the release of any Claims (as defined) ([14]);

(c) group members are bound by the provisions of the Deed of Settlement, properly construed; and whether or not the operation of that deed extends to settle issues and claims beyond what would otherwise be within the ambit of the common issues in the group proceedings is a question of construction ([16]);

(d) the admission in clause 4.1.4 of the Deed of Settlement as to the "validity and enforceability" of the Loan Deeds was to be taken as an admission that the loans had been made ([17]);

(e) that the Court of Appeal had decided in Bendigo and Adelaide Bank Limited v Pekell Delaire Holdings Pty Ltd[118] that the orders approving the Deed of Settlement had not been made in excess of jurisdiction ([22]);

(f) a group member cannot contest the making of the advance ([25]); and

(g) a group member cannot contest the assignment of the loan ([26]).

Consequences for the Third Defendant, Young, of the First Defendant Being a Group Member?

59 As the Plaintiffs accept, the Third Defendant, Young, is not, himself, a group member and is therefore not bound by orders made in the group proceedings or by the Deed of Settlement of those proceedings. Nevertheless, the Plaintiffs contend that as the guarantor of the obligations of a group member - particularly a group member of which Young was the sole director, secretary and shareholder - the Deed of Settlement has consequences for Young. In particular, the Plaintiffs point to a variety of provisions of the Loan Deeds, upon which they rely in support of their claim:[119]

"unconditionally and irrevocably guarantees to the Lender the payment of all of the Moneys Payable".

"indemnifies the Lender against any claim, action, damage, loss, liability, cost, charge, expense, outgoing or payment which the Lender pays, suffers or incurs, or is liable for, in respect of any of the following:

(1) any failure by the Borrower to pay any of the Moneys Payable when due or in the manner in which it was required to be paid ..."

40 Clause 19.2 provides for a further indemnity if:

"any of the Moneys Payable (or moneys which would have been part of the Moneys Payable had they not been irrecoverable) are irrecoverable by the Lender".

Clause 21 states that the obligations of the Guarantor are unconditional and "not released, discharged or otherwise affected by anything which but for this provision might have that effect including ... (5) any arrangement, composition or compromise entered into by the Lender or any other person ...".

42 "Moneys Payable" is defined in clause 1 to mean:

"the aggregate of:

(a) the Principal Sum;

(b) Interest; and

(c) any other moneys payable to or recoverable by the Lender under the terms of this Document including without limitation, other Costs and Expenses".

[emphasis omitted]

60 On this basis, the Plaintiffs submit that the effect of the Deed of Settlement in the group proceedings is that the Loan Deeds are valid and enforceable as between the Plaintiffs and the First Defendant and the Moneys Payable by the First Defendant are as defined in the Deed of Settlement. Thus, the Plaintiffs submit that under his guarantees and indemnities, the Third Defendant, Young, must pay the Plaintiffs the Moneys Payable and cannot contest that those moneys are payable.

61 The Plaintiffs, do, however, concede that the Third Defendant, Young, is entitled to raise defences as to his own liability - for example as to the proper execution of the Loan Deeds on his behalf by GSF - but he is not entitled to challenge his obligation to pay the Moneys Payable by reason of the "arrangement, composition or compromise" entered into by the Plaintiffs and the First Defendant in the Deed of Settlement. So, for example, the Plaintiffs contend, the Third Defendant, Young, cannot challenge the validity of the execution of the Loan Deeds on the First Defendant's behalf by GSF, including by reason of the insertion of the overdue interest rate in the schedule to the Loan Deed.

62 In response, the Third Defendant submits that because his arguments in relation to his own liability as guarantor are the same as his arguments as to why the Loan Deeds are not validly executed on behalf of the First Defendant, it is not necessary to deal separately with the position of the First Defendant. Thus, the Third Defendant contends that because the Plaintiffs accept that he is not bound by the Deed of Settlement,[120] it is not necessary to address the question whether the First Defendant is bound by the Deed of Settlement, whether he was not a party to the Deed or covered by its terms in any way.

63 In my opinion, the Third Defendant's contention that he is not liable to the Plaintiffs under either the guarantee or indemnity provisions of the Loan Deeds is correct. It is common ground that the Third Defendant is not bound by the Deed of Settlement and therefore any liability to the Plaintiffs must arise elsewhere, and the only obvious other possible basis is under the terms of the Loan Deeds. For the preceding reasons, I have found that the Loan Deeds are not validly executed and are, consequently, of no effect. For the reasons already discussed, that does not affect the potential liability of the First Defendant, but does, in my view, materially affect the position of the Third Defendant. Any primary liability which might attach to the Third Defendant under the indemnity provisions of the Loan Deeds simply cannot arise because these Deeds are ineffective. Moreover, as observed in the guarantee context the whole basis of any obligations which would otherwise provide a basis for these indemnity provisions does not exist. Rather there are obligations applicable to the First Defendant arising as a result of the Deed of Settlement; not any obligations arising under the Loan Deed to which the Third Defendant became privy. Nothing in the Deed of Settlement affects this state of affairs with respect to someone in Young's position, who is neither a party to the Deed of Settlement nor subject to its broader operation as found by the Court of Appeal in Byrne v Javelin Asset Management Pty Ltd[121] ("Byrne") and Bendigo and Adelaide Bank Ltd v Pekell Delaire Holdings Pty Ltd[122] ("Pekell").

64 In terms of any possible obligation as guarantor, the Third Defendant guarantees obligations of the First Defendant under the provisions of the Loan Deeds. He did not, however, guarantee obligations under ineffective Loan Deeds in circumstances where any obligation of the First Defendant with respect to those ineffective Loan Deeds arises not from the terms of those Deeds themselves, but, rather, as a result of the approval of the Deed of Settlement and the consequences of that approval as found by the Court of Appeal in Byrne and Pekell flowing from the operation of provisions of Part 4A of the Supreme Court Act 1986. It is trite law that the terms of any guarantee are to be strictly construed and that, even a relatively minor variation of the nature of obligations guaranteed may result in release of the guarantor; depending, of course, on the terms of the particular guarantee. In the present circumstances, this is not a situation where the nature or extent of the primary obligation guarantee has been varied in any respect. Rather, the obligation which the Plaintiffs seek to bring within reach of the guarantees is now on a fundamentally different basis. For the preceding reasons, it is clear that the First Defendant had no obligations whatsoever under the terms of the Loan Deeds and its only obligation arises under the provisions of the Deed of Settlement as a result of its "enhanced" reach under the provisions of Part 4A of the Supreme Court Act 1986 - an entirely different obligation to that guaranteed by the Third Defendant, Young.

65 For the preceding reasons, the Plaintiffs have failed to establish the validity of the Loan Deeds upon which they rely and, accordingly, their claims founded upon or in relation to the provisions of those Loan Deeds must be dismissed.

66 The parties are to bring in orders to give effect to these reasons. I otherwise reserve the question of costs and will hear the parties further in relation to this issue.

[1] Plaintiffs' Outline of Opening Submissions (15 August 2018), [5].

[2] Plaintiffs' Outline of Opening Submissions (15 August 2018), [6].

[3] Amended Defence of the Third Defendant (21 February 2017), [3], [18], [28], [43].

[4] Amended Defence of the Third Defendant (21 February 2017), [6], [31].

[5] Outline of Opening Submissions of the Third Defendant (22 August 2018), [2]; see also Plaintiffs' Outline of Opening Submissions (15 August 2018), [8].

[7] The Deed of Settlement was approved by the Court under s 33V of the Supreme Court Act 1986 in Clarke (as Trustee of the Clarke Family Trust) v Great Southern Finance (Receivers and Managers Appointed) (in liquidation) [2014] VSC 516.

[8] Outline of Opening Submissions of the Third Defendant (22 August 2018), [3].

[9] Outline of Opening Submissions of the Third Defendant (22 August 2018), [3].

[10] Plaintiffs' Outline of Opening Submissions (15 August 2018), [9].

[11] Witness Statement of Cameron Arthur Rhodes (6 June 2018).

[12] Witness Statement of Stephen Flamer-Smith (13 July 2018).

[13] Transcript (29 August 2018), 26-8.

[14] Exhibit CAR-2 to the Witness Statement of Cameron Arthur Rhodes (6 June 2018) ("First Application for Term Finance (2006 Vineyards)").

[15] Exhibit CAR-4 to the Witness Statement of Cameron Arthur Rhodes (6 June 2018) ("First Loan Deed (2006 Vineyards)").

[16] Exhibit CAR-3 to the Witness Statement of Cameron Arthur Rhodes (6 June 2018) ("Second Application for Term Finance (2006 Olives)").

[17] Exhibit CAR-5 to the Witness Statement of Cameron Arthur Rhodes (6 June 2018) ("Second Loan Deed (2006 Olives)").

[18] Plaintiffs' Outline of Opening Submissions (15 August 2018), [11].

[19] Under the heading "Checklist for Applicants" of the First Application for Term Finance (2006 Vineyards); see also under the heading "Checklist for Applicants" of the Second Application for Term Finance (2006 Olives).

[20] First Application for Term Finance (2006 Vineyards), part 1.

[21] First Application for Term Finance (2006 Vineyards), part 1.

[22] First Application for Term Finance (2006 Vineyards), part 2; see also Second Application for Term Finance (2006 Olives), part 2.

[23] First Application for Term Finance (2006 Vineyards), part 3; see also Second Application for Term Finance (2006 Olives), part 3.

[24] First Application for Term Finance (2006 Vineyards), part 6; see also Second Application for Term Finance (2006 Olives), part 6; and see below [15], where those provisions are set out in full.

[25] First Application for Term Finance (2006 Vineyards), part 6(a)(iii); see also Second Application for Term Finance (2006 Olives), part 6(a)(iii).

[26] First Application for Term Finance (2006 Vineyards), part 6(a)(iv); see also Second Application for Term Finance (2006 Olives), part 6(a)(iv).

[27] First Application for Term Finance (2006 Vineyards), part 6(a)(v); see also Second Application for Term Finance (2006 Olives), part 6(a)(v).

[28] First Application for Term Finance (2006 Vineyards), part 6(c); see also Second Application for Term Finance (2006 Olives), part 6(c).

[29] First Application for Term Finance (2006 Vineyards), part 6(d); see also Second Application for Term Finance (2006 Olives), part 6(d).

[30] First Application for Term Finance (2006 Vineyards), part 6; see also Second Application for Term Finance (2006 Olives), part 6.

[31] First Application for Term Finance (2006 Vineyards), directly below part 6; see also Second Application for Term Finance (2006 Olives), directly below part 6.

[32] First Application for Term Finance (2006 Vineyards); see also Second Application for Term Finance (2006 Olives).

[33] First Loan Deed (2006 Vineyards), schedule 1.

[35] Witness statement of Stephen Flamer-Smith (13 July 2018), [18]-[24], [31].

[36] Second Application for Loan Finance (2006 Olives), parts 1-2.

[37] At part 1 of the Second Application for Loan Finance (2006 Olives) a handwritten annotation provides that an interest rate of 10% and an application fee of 0.4% have been approved but it does not say by whom those terms were approved; see also the footnotes to [6] above.

[39] Witness Statement of Stephen Flamer-Smith (13 July 2018), [58]-[63].

[41] Outline of Opening Submissions of the Third Defendant (22 August 2018), [7].

[42] ABL Custodian Services Pty Ltd & Bendigo and Adelaide Bank Ltd v Wade [2013] VCC 878, [17].

[43] ABL Custodian Services Pty Ltd & Bendigo and Adelaide Bank Ltd v Wade [2013] VCC 878, [19].

[44] ABL Custodian Services Pty Ltd & Bendigo and Adelaide Bank Ltd v Wade [2013] VCC 878, [30].

First Plaintiff Second Plaintiff v First Defendant Second Defendant Third Defendant

At a glance

Court

Decision date

Before

Source

Judgment (280 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (6)