Firstnamed Plaintiff Secondnamed Plaintiff v Defendant

UNCONSCIONABLE CONDUCT - Damages for unconscionable conduct or, in the alternative, for a breach of s 52 of the Trade Practices Act 1974 - Loss of opportunity to make an alternative investment - Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332.

1 These proceedings concern the operation of a prosperity bond investment scheme utilising prosperity bonds, which were policies of life insurance within the meaning of the Life Insurance Act 1995 (Cth). The bonds were issued by the defendant as insurer. This matter comes before the Court in relation to proceedings commenced in 2002, in proceeding number 2026 of 2002 ("the 2002 proceedings") and in proceedings commenced in 2009, in proceeding number 7779 of 2009 ("the 2009 proceedings").

2 In 1998, large amounts of money were invested in these prosperity bond policies by a group of investors. The policy premiums for these bonds, and their resulting earnings, were placed in a single identified fund. This fund was divided into units of equal value, which were allocated to investors in the prosperity bond policies according to their entitlement. The value of each of the units reflected the value of the underlying investments in the portfolios of assets with respect to which those units were issued. There was a "cash" category portfolio and a "secure" category portfolio. Investors in the bonds, as policyholders, were able to "switch" their units from one portfolio to another on notice to the defendant. The "cash" category portfolio units maintained a relatively stable value, whereas the "secure" category portfolio units varied in unit price as their price was fixed with reference to movements in share indices.

3 Until mid-2000, the defendant adopted a practice of historical pricing with respect to units, reflecting the value of the "secure" category portfolio. This enabled unit holders to assess likely movements in the value of the "secure" category portfolio units, by observing and assessing movements in share indices. As the unit value changed in line with share indices, unit holders could make profits (and avoid losses) by strategically switching between the "cash" and "secure" category portfolios. However, from mid-2000, forward pricing of units was applied by the defendant. This restricted the ability of unit holders to make profits by switching between the "secure" and "cash" categories of units. In order to continue to profit from switching under the forward pricing regime, unit holders sought to utilise sequential switch notices. These were given to the defendant interspersed with notices of revocation of switch notices. Each of these notices was given on the basis of the unit holders' assessments of movements in share price indices, which would affect the price movements in the "secure" category portfolio units. The use of, what might be termed, a sequence of switch and revocation notices, raised a variety of issues, including whether unit holders were permitted to "short sell" under the terms of the prosperity bond policies, and whether the defendant was entitled to give effect to a switching notice immediately or was obliged to wait for three working days before giving effect to a switching notice.

4 The dispute between the parties critically involved the interpretation of clause 1.8 of the prosperity bond policy, which is in the following terms:

"1.8 Large Withdrawals

We reserve the right to delay for up to 30 days any cash withdrawal or any transfer between the investment portfolios which would otherwise require the cashing within any 30 day period of Units valued at more that [sic] $100,000. We will then use the Unit Price(s) applicable at the end of the period of delay.

AXA Australia will waive its right to delay withdrawals and switches for 30 days, providing the investor gives three working days notice of its intention to switch or withdraw. The unit price will be the price on the day when the notice is given in writing. AXA Australia also agrees that should the investor change their mind prior to the completion of the portfolio switch or withdrawal transaction and not proceed with the switch or withdrawal, no penalty will be involved."

In addition to claims by the plaintiffs, as investors, that the defendant had breached these provisions, the investors claimed against the defendant on the basis of estoppel and contravention of s 52 of the Trade Practices Act 1974 (Cth).

5 The plaintiffs' claims were the subject of a long trial before Redlich J between October and December 2003, March and April 2004, and May, September and December 2006.[1] The issues raised in that trial were complex, both factually and legally, and resulted in a judgment of 387 pages. The proceeding at first instance was subject to an appeal the result of which, in general terms, was to vary the decision of Redlich J.[2]

6 Following the appeal, the Court of Appeal made orders which, amongst other things, remitted certain questions to the Trial Division for determination, as follows:[3]

"4) The following questions are remitted to the trial judge or, if he not be available to consider the matter further, to another judge of the Trial Division, for determination according to law:

a) Whether the defendant committed any and what breach or breaches of clause 1.8 of the plaintiffs' Prosperity Bond policies.

b) In the case of any breach of clause 1.8, whether the plaintiff in question is entitled to damages for breach in contract in respect of the breach and, if so, the amount of those damages;

c) In the case of any breach of clause 1.8, whether the plaintiff in question is entitled to damages in lieu of specific performance in respect of the breach and, if so, the amount of those damages.

5. It is directed that the judge to whom the above questions are so remitted for determination shall:

a) determine in light of the evidence already adduced whether it is just and appropriate for the parties to be permitted to adduce any further evidence or should be confined to that already adduced;

b) determine whether any question should be deferred to a special referee for decision or opinion and, if so, may refer the question accordingly."

7 In broad terms, the 2009 proceedings arise out of the 2002 proceedings, though they are said by the plaintiffs to be separate proceedings which arise out of events subsequent to matters relevant to the 2002 proceedings.

8 By summons dated 9 March 2010, the plaintiffs sought to make amendments to their statement of claim in the 2002 proceedings. The defendant opposed the application and, additionally, sought to strike out the statement of claim in the 2009 proceedings.

9 As indicated, the 2009 proceedings, like the 2002 proceedings, arise out of the prosperity bond policy investment arrangements established by the defendant. The plaintiff in the 2009 proceedings submitted that these proceedings concerned breaches subsequent to the facts and circumstances pleaded in the 2002 proceedings and were concerned, principally, with events which occurred in 2009. It is clear, however, from reading the amended statement of claim the subject of this application, that the facts and circumstances underpinning these events reach back to matters that occurred in the year 2000.

10 The defendant submitted at the hearing of these pleadings applications that many of the issues raised in the amended statement of claim in the 2009 proceeding were now precluded by reason of res judicata, or cause of action estoppel, because the cause of action is merged in the judgment already given in the 2002 proceeding, and no longer has any independent existence.[4] Alternatively, the defendant submitted that many of these issues are precluded by what has become known as Anshun estoppel.[5]

11 The defendant submitted that the relevant facts and circumstances relied upon in the 2009 proceedings have already been adjudicated upon in the 2002 proceedings, and are consequently now precluded from being raised and re-litigated on the basis of res judicata or action estoppel. In the alternative, the defendant submitted that, to the extent that these claims can be regarded as new claims, they are claims that are now precluded because they could and should have been determined previously, and thus come within the principles articulated in Port of Melbourne Authority v Anshun Pty Ltd.[6]

12 Having regard to the nature of the 2002 proceedings to which the 2009 proceedings clearly relate, I decided that it was not appropriate that the matters raised by the plaintiff and the defendant in their applications should be dealt with by way of a pleadings application, where there was not sufficient opportunity to consider the complex facts and law raised in these proceedings. Consequently, I decided that it was appropriate to allow amendment of the statement of claim in the 2002 proceedings, on the application of the plaintiffs, and that it was not appropriate to accede to the strike out application, in whole or in part, made by the defendant in relation to the 2009 proceedings. My reasons, with reference to authorities, are set out in a judgment dated 7 May 2010.[7]

Extent of remitted matters from Court of Appeal

13 The extent of matters the subject of the 2002 proceedings which were remitted by the Court of Appeal to the Trial Division is specified in the orders of the Court of Appeal; the terms of which, naturally, require careful consideration.[8] This is particularly important as the remit is narrow, in the sense that it is focused on particular questions. It is not a general invitation to the Trial Division to revisit issues in, or with respect to, the 2002 proceedings.

14 In relation to the 2002 proceedings, the critical question remitted is whether the defendant committed any breach or breaches of clause 1.8 of the plaintiffs' prosperity bond policies and, if so, what were the breach or breaches. The further questions remitted, with respect to damages or damages in lieu of specific performance, are dependent on a finding of a breach or breaches sounding in damages or a failure of performance with respect to the provisions of clause 1.8 which could provide a basis for an order for specific performance. If no breach or breaches of clause 1.8 are found, there is no warrant to proceed further, with respect to damages or any other matters.

15 The orders of the Court of Appeal do, however, within the scope of the questions remitted, contemplate the Trial Division determining whether it is just and appropriate for the parties to be permitted to adduce any further evidence or whether they should be confined to that already adduced. The orders also contemplate the possibility of a question being referred to a special referee for decision or opinion. The position of the parties was that a reference to a special referee may be appropriate with respect to some complex issues in relation to the question of damages, in the event that they arise.

16 As noted with respect to the pleadings issues the subject of my judgment in May 2010, the position of the defendant was that the matters sought to be raised by the plaintiffs in the 2009 proceedings did not have the effect of adding significantly to the issues remitted by the Court of Appeal with respect to the 2002 proceedings because, to the extent it was sought to do so in these proceedings, this was precluded by res judicata or cause of action estoppel or, alternatively, on the application of the principles in Anshun.[9] For the reasons which follow, it has not proved necessary to embark on the process of determining the extent to which particular issues the subject of the 2009 proceedings are now precluded from consideration; at least not in any detailed or comprehensive way.

17 The decision of the Court of Appeal and the orders made are, naturally, defined in their ambit by the issues and relevant evidence before Redlich J and, in turn, by the matters raised and pursued on appeal. It is common ground between the parties now that there have been further actions taken by the parties with respect to the prosperity bonds. The extent to which these matters may be raised or relied upon now or the extent to which subsequent events have raised new issues going to the interpretation of clause 1.8 of the prosperity bond policies - hence with respect to the question of breach or breaches - which are either relevant now or which are able to be raised now, having regard to res judicata and the preclusionary principles to which reference has been made, is in dispute.

18 In any event, for the purpose of considering the critical question whether there have been any breach or breaches of clause 1.8, the Court of Appeal judgment must be taken to be the definitive, authoritative, determination of the proper construction of the provisions of this clause. This does not mean, however, that there may not be some ambiguities or gaps in interpretation as a result of subsequent events or on the basis of issues with respect to the operation of clause 1.8 which are properly considered now. Consequently, it is neither necessary nor open for the Court now to revisit the proper approach to the construction of clause 1.8. Rather, the Court has the advantage of the consideration and determination of the commercial purpose of clause 1.8 and other provisions of the prosperity bond policies by the Court of Appeal and, in this context, the proper construction of its terms.

19 For present purposes it is, in my view, critical to examine the approach of the Court of Appeal with respect to the underlying proposition or assumption inherent in the plaintiffs' case throughout the 2002 proceedings, both in the trial before Redlich J and in the appeal. The pervading proposition or assumption was, and remains in the present stage of the 2002 proceedings and now in the 2009 proceedings, that the respondents were entitled, under the prosperity bond policies, to engage in profitable arbitrage. The Court of Appeal rejected this proposition or assumption in the context of the varying issues raised on appeal. At the outset, the Court of Appeal said:[10]

"In this appeal, the appellants contested the judge's construction of the special terms and argued that in one way or another they were entitled to be fully compensated for their expectation losses based upon the continuation of their ability to engage in arbitraging. ..."

The critical provision, the, so-called, special terms of the policies is clause 1.8.

20 In the course of considering the proper construction of clause 1.8, the Court of Appeal considered the argument by the plaintiffs (the appellants on appeal) that as the investor would, under the terms of clause 1.8, be entitled to revoke the notice before it expired, it followed that the defendant (the respondent on appeal) was not permitted to act on a notice until it had expired. If the notice were not revoked before it expired, the defendant would be bound, on its expiration, to complete the transfer at the price applicable on the day the notice was given. On this basis, the plaintiffs claimed that clause 1.8 enabled them to make arbitrage profits as they could decide whether to switch between portfolios, secure and cash, or withdraw units with the benefit of hindsight. Continuing, the Court of Appeal said:[11]

"[19] The judge placed some emphasis on the words 'the unit price will be the price on the day when the notice is given in writing'. His Honour reasoned that, if the price at which the transfer or withdrawal were to be effected was the price on the day that notice was given, the day of transfer or withdrawal should be that day. But in our view the purpose of the second paragraph of cl 1.8 was to accommodate an investor who wished to effect a transfer or withdrawal at the price applicable at the date of giving notice and wished also to avoid the possibility of a delay of 30 days. Its effect was that, in consideration of the investor giving the respondent three business days' notice of intention to transfer or withdraw, and therefore the opportunity for the respondent to do what it thought necessary or desirable to accommodate the transfer or withdrawal, the investor was to be permitted to revoke the notice if, during the period of notice, the price so moved as to make transfer or withdrawal undesirable from the point of view of the investor.

[20] The judge read the words 'prior to the completion of the portfolio switch or withdrawal transaction' as intended to convey something other than the expiration of the three business days' notice and thus as implying that completion could take place before the expiration of the notice. His Honour said:

'I reject the contention that the words "prior to the completion" can be disregarded as a matter of construction. They are not in conflict with any other words. The words mean that [the respondent] may "complete" within the 3 day period.'[12]

With respect, we disagree. In our view, if an investor gives notice of an intention to make a transfer or withdrawal in three business days' time, there is nothing in the policy apart from cl 1.8 which authorises the respondent to complete the transfer or withdrawal before the expiration of three business days."

The Court of Appeal then considered specific issues arising in the context of the proper construction of clause 1.8 with respect to short selling, buy price/sell price, historical price, deduced term as to historical price, express term as to historical price and, of particular importance in the present context, in relation to any implied term as to historic pricing and said:[13]

"[90] In our view, that is not so. We accept that his Honour erred in the construction of cl 1.8 of the policy. As we see it, the proper construction of the clause was to allow the appellants to make switches on 3 days' notice, and to cancel before expiration of that notice, as they contended. But so to say does not necessitate the implication of daily publication and historic pricing terms. The most that can be said is that the proper construction of cl 1.8 would not be inconsistent with the implication of such terms. Having come to that point, it is then necessary to take into account the other relevant express provisions of the policy, about the construction of which we consider that the judge was correct; and in particular, cll 2.2(e), 3.2(e) and 4.20, which, upon their proper construction, are necessarily inconsistent with the existence of the alleged implied terms.

[91] Counsel for the appellants submitted that, having found that the effect of cl 1.8 was to afford the appellants the 3-day option for which they contended, it was necessary to imply daily pricing and historic price terms in order to afford the appellants the benefit of that for which they had contracted.

[92] We reject that submission too. As observed earlier in these reasons, the special terms of the policies, and in particular cl 1.8, gave the appellants the right to make unlimited switches between portfolios on 3 days' notice and to cancel a proposed switch without penalty before the expiration of the 3 days. But those terms did not give the appellants the right to make switches at a profit. It is one thing (which the law requires) to imply terms in order to yield to a party the benefits for which he or she has contracted. It is quite another (which the law does not require) to legislate for benefits which that party may have hoped, even expected, to derive, but for which he or she has not contracted. Especially is that so when, as here, there are express provisions of the contract (in this case, cll 2.2(e), 3.2(e) and 4.20) which enable the other party to act in a manner which frustrates such hopes and expectations.[14]''

In summary, while the Court of Appeal was prepared to imply terms to ensure the delivery of a benefit for which the plaintiffs had contracted under the prosperity bond policies, it was not prepared to deliver some hoped for or expected benefit for which the plaintiffs had not contracted. In the context of this particular case, the last sentence of paragraph 92 of the Court of Appeal judgment is, in my view, of very significant importance.

21 The Court of Appeal emphasised this approach with respect to various other issues raised on appeal. In relation to terms as to daily unit pricing, the plaintiffs argued in support of an alleged requirement of daily publication of prices. As to this, the Court of Appeal said:[15]

"[97] Counsel for the appellants made much of the fact that the special terms entitled the appellants to make unlimited free switches. He submitted that, in order for that express right to be effective and for the appellants to get the benefit of it, the respondent had to declare and publish a unit price daily. Otherwise, he said, an investor could not make a rational decision as to whether or not to switch. On that basis he contended that the judge should have found that the implication of a term as to daily publication of unit prices was not only necessary to give business efficacy to the special terms, but also to be implied as part of the respondent's duty to do all things necessary to give the appellants the benefit of the right to unlimited and free switches.

[98] We reject that contention too. It proceeds upon the same misconception as was advanced in support of the implication of a term as to the continuation of historical pricing practice. The appellants may have hoped, perhaps even expected, to derive profits from historical pricing arbitrage. But they did not contract for an entitlement so to profit. They contracted for the right to switch as and when they chose but subject expressly to the risk that the respondent could exercise the powers conferred on it by cll 2.2(e), 3.2(e) and 4.20) to frustrate the hope and expectation of profits."

Again, the Court of Appeal emphasised that the plaintiffs' entitlement under the prosperity bond policies did not include the right to profitable arbitrage, the right to make switches at a profit. Rather, as the Court of Appeal emphasised in the last sentence of the passages set out above, the terms of the policies actually enabled the defendant to exercise powers under clauses 2.2(e), 3.2(e) and 4.20 "to frustrate the hope and expectation of profits" on the part of the plaintiffs.

22 The same approach is evident in the consideration of where any losses from "dilution" would lie under the terms of the policies. As the Court of Appeal explained, "'Dilution' is a natural consequence of historic pricing arbitrage between a stable Cash portfolio and a relatively volatile Secure portfolio. It occurs because arbitrage between those portfolios consists in the arbitrager taking advantage of an increase in the value of assets in the Secure portfolio".[16] The Court of Appeal concluded the implied term argument with respect to dilution, emphasising, once again, that the special terms, clause 1.8, did not provide for profitable arbitrage or any protection for the policyholders as a result of the natural consequences of dilution:[17]

"[112] According to the appellants, the judge's process of reasoning inverted the proper process of contractual construction by failing to consider first whether the policy or any special term of the policy enabled the respondent to dilute unit prices. But in our view it is the appellants who invert reason and the proper process of contractual construction. As has been explained, dilution was a natural consequence of Coneview investors arbitraging from the cash portfolio to the secure portfolio. It occurred because the Coneview investors sought to take advantage of an increase in the value of assets underlying the non-Coneview investors' units in the secure portfolio. Contrary to the appellants' case, dilution was not something which the respondent did or for which it needed to identify a contractual authority. It was something which occurred because the respondent did nothing to prevent it. What the appellants are seeking to do is to impose an unexpressed contractual obligation on the respondent to do something to prevent it.

[113] Counsel for the appellants put an alternative argument that, assuming it were necessary to take into account the number of units on issue at the time of determination of the unit price, the respondent would be bound to procure the redemption of sufficient of its own units or alternatively to procure the funding and issue of sufficient further units to the appellants to ensure that the value of the appellant's investment was not reduced by the effects of dilution.

[114] The judge rejected that argument too, and so do we. There is no express term to that effect and we see no sufficient basis to imply it. Such a term is not necessary in order to give the Coneview prosperity bonds business efficacy. The special terms of the policies, in particular the second paragraph of cl 1.8, gave the appellants the right to make unlimited switches between portfolios. But, as has already been observed, the special terms did not give the appellants the right to switch at a profit. Where the policy was intended to provide for guaranteed results, as with protection, it provided for them expressly. In other respects, the clear implication is that the policyholders were at risk.[18]

[115] Nor could a term of the kind contended for be regarded as reasonable. According to the appellants' particulars of loss and damage, the respondent was required to put into the portfolio over the life of the policies sufficient of the respondent's own money to enable the appellants to reap more than $1b in arbitrage profits (and apparently for no more reward than the relatively modest asset management fee charged to all policy holders plus the intangible advantages of having such a large amount of funds under management). As the judge said, that "would impose an extraordinary burden on [the respondent], not for the purpose of preserving the benefit of the contracts, but to give the [appellants] the return they hoped for".

[116] For the same reason, it would be absurd to suggest that such a term was so obvious as to go without saying."[19]

Again, emphasising the point, the Court of Appeal said:[20]

"[124] The appellants called in aid actuarial standard 3.03, but in our view that takes the matter no further. It may be assumed the standard imposed an obligation on the respondent to ensure that the reasonable expectations of the Coneview investors were met. But, for the reasons already expressed, any expectation that the respondent would continue to fund the arbitrage profits of the Coneview investors for the duration of the policy would have been unreasonable. ..."

23 Following on from the arguments in relation to dilution, the plaintiffs submitted that the terms of the prosperity bond policies did not permit the defendant to segregate the assets of the Coneview investors (which included the plaintiffs) from the investors in other prosperity bonds and thereby confine the effects of dilution as a result of Coneview investor arbitrage to those investors. Alternatively, the plaintiffs argued that if the terms of the policies did not require the defendant to guard against the adverse effects of dilution, there was no clause in the policies which permitted the defendant to segregate assets to confine the effects of dilution to the Coneview investors. Again, the Court of Appeal approached the segregation issue on the same basis as previous issues in that it emphasised that the plaintiffs were only entitled to the benefits for which they had contracted under the prosperity bond policies:[21]

"[134] Of course, it is true that, by removing the non-Coneview investors from the cash portfolio and the secure portfolio, the respondent effectively deprived Coneview investors of the ability to arbitrage at the expense of non-Coneview investors. It is also true that, by depriving Coneview investors of that ability, the Coneview policies ceased to be as profitable as they otherwise would have been. But there was nothing in any of the Coneview investors' policies which expressly prohibited the respondent from removing non-Coneview policy holders from the cash and secure portfolios or which required the respondent otherwise to ensure that the Coneview policies remained as profitable as they had been before removal of non-Coneview policies. We also reject the idea that any such obligations should be implied. The Coneview policies are efficacious without the addition of a term of that kind and it is not necessary in order to afford the Coneview investors the benefits for which they contracted. They have a prosperity bond policy with the ability to effect unlimited switches between the cash and secure portfolios. So far as the evidence goes, it is profitable in the same way that non-Coneview policies are profitable. It is capable of delivering all the benefits for which it provides. This is not a case in which it is necessary to imply a term in order to yield to the appellants any benefits for which they contracted.[22]

...

[142] In any event, the segregation of Coneview investors and non-Coneview investors did not impermissibly affect the benefits of Coneview investors. As has been explained, the opportunity to arbitrage at the expense of non-Coneview investors was not something for which Coneview investors contracted."

The plaintiffs also argued that segregation was inconsistent with the provisions of s 32 of the Life Insurance Act 1995 (Cth) in that the process of segregation involved the defendant giving priority to its own interests over those of the owners of the policies. Again, the Court of Appeal rejected this submission on the same general basis as previously, namely that the meaning of "interests of owners and prospective owners of policies referrable to the fund" as used in s 32(1)(b) of that Act was referable only to the interests of those owners or prospective owners "as framed by their entitlements under the policies".[23] The response of the Court of Appeal to the plaintiffs' argument that segregation also involved a breach of s 46 of the Life Insurance Act was similarly based.[24]

24 The last issue dealt with was an argument by the plaintiffs that the defendant was estopped from relying upon its contractual right to move to forward pricing and that the trial judge, Redlich J, had erred in holding that "the minimum equity required no more than that the respondent be compensated for their costs of borrowing and maintaining their property bond investments plus management fees incurred and the loss of investment opportunities foregone until the effluxion of such time as represented reasonable notice by the respondent".[25] The Court of Appeal agreed with the conclusion of Redlich J and, in particular, his Honour's statement in concluding that the relief required was no more than was necessary to avoid detriment:[26]

"The expectation profits or loss of bargain which would flow from the fulfilment of the plaintiffs' assumption of a right to make arbitrage profits for the life of the policies is not a detriment for which equity should provide relief. ..."

25 In summary, the effect of the Court of Appeal judgment is to establish, and to emphasise, that the prosperity bond policies, clause 1.8 and the other provisions of those policies, did not confer upon the plaintiffs any right to arbitrage between the Cash and Secure portfolios at a profit. Also of particular importance in relation to this stage of the 2002 proceedings and the 2009 proceedings, the judgment establishes and emphasises that the defendant was entitled to utilise any powers under the terms of the policies to prevent the plaintiffs conducting arbitrage at a profit, particularly in circumstances where the result required expenditure of moneys by the defendant in order to allow the plaintiffs to achieve this or where their profits from arbitrage would, in effect, be provided or subsidised by other, non-Coneview, policyholders.

26 Against the background of the judgment of the Court of Appeal in the 2002 proceedings and the issues arising in the 2009 proceedings, the plaintiffs identified the issues to be determined as being relatively narrow:[27]

"2. The plaintiffs opened their case stating that notwithstanding the volume and complexity of the evidence, submissions and judgments to date, the key remaining issues in the proceedings are straightforward:

(a) What did the Court of Appeal decide to be the proper construction of the special terms negotiated by the plaintiffs with the defendant and in particular clause 1.8 of the plaintiffs' policies?

(b) Did the defendant breach clause 1.8 of the plaintiffs' policies and by its conduct deprive the plaintiffs of an otherwise valuable opportunity to take advantage of the special terms?

(c) What was the value of that opportunity?"

27 Addressing these broad issues in more detail, the plaintiffs' submissions continued by way of a summary of their case:[28]

"4. The defendant breached clause 1.8 of the plaintiffs' policies from November 2000 to the date of the Court of Appeal's decision on 5 December 2008, by adopting the practice of giving immediate effect to notices of intention to switch.[29] In doing so the defendant deprived the plaintiffs of the opportunity to give effect to their strategy of maximising the benefits available to them from the special terms of the policies, terms which the defendant had expressly agreed with the plaintiffs.

1. 5. The defendant further breached clause 1.8 after the decision of the Court of Appeal by adopting the practice of immediately converting all the non-cash assets in the secure portfolio to cash on receipt of a notice of intention to switch.[30] This was for all practical purposes equivalent to giving immediate effect to a switch from the secure portfolio to the cash portfolio,[31] which was precisely the conduct that the Court of Appeal had decided was not permitted by clause 1.8.
2. 6. The defendant further breached clause 1.8 by failing to put the plaintiffs in the position they would have been in had no notice of intention to switch been given if the plaintiffs revoked a notice of intention to switch. Rather the defendant's practice was to repurchase assets conforming to the secure portfolio mandate at the prices prevailing on the day of repurchase. This meant that the secure unit price was different, and for practical purposes under the plaintiffs' strategy less, than it would have been had the defendant not converted the non-cash assets to cash.[32]
3. 7. The cumulative effect of the defendant's conduct was to repudiate the policy of the plaintiff in the 2009 proceeding ... by showing an unequivocal intention not to be bound by clause 1.8. Instead the defendant took, and intends to take, any action possible to deprive Argot of the benefit of clause 1.8.
4. 8. The financial circumstances of Argot and Mr Tyne are in no way relevant to the question of whether the defendant's conduct was repudiatory.
5. 9. The plaintiffs' damages should be assessed on the basis that the defendant deprived them of the opportunity to take advantage of clause 1.8 of their policies. Many of the issues raised by the defendant go to calculation of damages and the steps legitimately available to minimise the defendant's losses, rather than the question of whether or not the defendant breached the plaintiffs' policies.
6. 10. The calculation of damages should be undertaken by a special referee on the basis that the plaintiffs would have pursued their objective of maximising the benefits available to them from clause 1.8 and the defendant would have taken the steps legitimately open to it to minimise the cost to its shareholders of the plaintiffs doing so.
7. 11. The special referee will need to be instructed as to:

(a) the proper construction of the policies, particularly with respect to determination of the day on which a notice is given under clause 1.8 and the expiry of the three day notice period under that clause;

(b) whether or not, and if so the extent to which, the defendant is permitted to undertake actions for the express purpose of depriving the plaintiffs of benefits that would otherwise be available to them under clause 1.8 including:

(i) conversion of the secure portfolio to cash on receipt of a notice of intention to switch;

(ii) changing the frequency of unit pricing; and

(iii) changing the composition of the plaintiff's portfolios; and

..."

The plaintiffs' summary continued, addressing repudiation and damages issues.[33]

28 The particular issues to be determined with respect to the construction and operation of the prosperity bond policies for the purpose of determining whether there was a breach of clause 1.8 of those policies are as follows:[34]

(a) Early Conversion (or immediate liquidation): Is the defendant entitled to convert the assets in the Secure portfolio immediately to cash on receipt of the switch notice?

(b) Portfolio Composition: Is the defendant permitted to vary the composition of the Secure portfolio for the purpose of reducing the benefits that would otherwise be available to the plaintiffs through taking advantage of the special terms?

(c) Day Count: The correct method of calculating the beginning and the end of the three working day period under clause 1.8 and the day's unit price which should be used in respect of a switch which is not revoked?

(d) Multiple Notices: The effect of issuing a switch notice when an earlier switch notice has not expired or has been revoked?

(e) Revocation of a Switch Notice: If a switch notice is revoked, is the plaintiff entitled to be put in the same position it would have been if the notice had never been given?

(f) Unit Pricing: Is the defendant permitted to calculate unit prices daily whether or not this has the effect of reducing the benefits that may otherwise be available to the plaintiffs through taking advantage of the special terms?

On the basis upon which the plaintiffs' case was put and in the context of the extent of the matters remitted by the Court of Appeal, the determination of these particular issues with respect to the construction and operation of the prosperity bond policies resolves the outstanding issues in the 2002 proceedings and the issues raised in the 2009 proceedings, the latter to the extent that they are now open.[35] There were also some good faith issues raised by the plaintiffs, which are considered separately.[36] It should be noted, in this context, that the defendant did concede some "technical" breaches between 2 and 8 November 2000 in completing one switch earlier than it should have done. This was a switch from the Secure portfolio to the Cash portfolio. In the perspective of the nature and quantum of the claim of the plaintiffs in these proceedings any such conceded or similar breaches must be regarded as insignificant, and particularly absent any attempt to prove any loss and damage flowing from them (specifically). This is unsurprising, given the focus of the plaintiffs' case on the range of issues put by the plaintiffs (those set out above and the good faith and related issues) in relation to which they claimed the defendant was in breach over a long period of time, and significantly since the trial before Redlich J. For these reasons and having regard to the views I have formed in relation to these issues, I regard any conceded and any similar "technical" breaches as insignificant and not matters to be considered for present purposes.

29 The parties provided a joint list of issues in dispute, at my request, after the conclusion of the hearing. The joint list has been relied upon to the extent that the issues listed now arise having regard to my findings with respect to the issues in dispute on the basis of these reasons.

30 Allegations that early conversion, or the immediate liquidation, of non-cash assets in the Secure portfolio on receipt of a switch notice, occurred were made only by the firstnamed plaintiff ("Argot") and not by the secondnamed plaintiff ("Pegela"), and then only in the 2009 proceedings. In broad terms, the allegation made by Argot in the 2009 proceedings was that immediate liquidation of non-cash assets in the Secure portfolio on receipt of a switch notice was a breach of the prosperity bond policy terms because the consequence of immediate conversion was to deny Argot the benefit of its entitlement under the policy terms to cancel a switch notice within the period specified. It was said that the denial of benefit flowed from the fact that if the value of the assets in the Secure portfolio increased prior to the cancellation of the switch notice by Argot, the increased value would be lost to Argot because the immediate conversion to cash assets would mean that even though it may resume its unit holding in the Secure portfolio on cancellation of the switch notice, the value of its units would only reflect the cash value of the non-cash assets at the time of their conversion and prior to any increase in value.

31 Allegations in this respect are contained in paragraphs 59-62 of the 2009 Further Amended Statement of Claim. These pleadings refer to a specific instance of the giving of a switch notice by Argot and the manner in which that notice was treated, directly and in terms of ancillary arrangements for conversion, by the defendant. It is helpful to refer to some of the details of these pleadings in order to make clear the issue raised in this respect. Paragraph 59 of the Further Amended Statement of Claim refers to a switch notice given by Argot after close of business on Wednesday 14 January 2009 (Switch Notice 3). It is alleged in paragraph 60 that Switch Notice 3 was revoked by a notice given after close of business on Friday 16 January 2009. This is followed by an allegation, in paragraph 61, that "In the premises of paragraphs 7 to 11 and 13 above", the defendant was required not to act upon Switch Notice 3. Paragraph 62 alleges that the defendant did act on Switch Notice 3 and consequently breached the terms of the Argot policy as follows:

"62. In breach of the Argot policy ... the defendant:

(a) within the three working day period advised in Argot Switch Notice 3:

(i) sold or purported to sell the non-cash assets within the Secure Portfolio supposedly referrable to the Argot policy; or

(ii) Switched the Secure Portfolio Account balance to the Cash Portfolio other than in accordance with the terms of any Switch Notice (or other authority or consent from Argot); and

(b) upon the revocation of Argot Switch Notice 3, re-acquired certain equity and fixed interest assets with the proceeds of the sale referred to in sub-paragraph (a) above."

32 The facts pleaded by Argot in relation to this particular notice, Switch Notice 3, were not accepted in their entirety by the defendant. In its defence, it pleads that the Argot policy had arrived in the Secure portfolio overnight between 14 and 15 January 2009. Consequently, on the morning of 15 January, there was an amount of cash in the Secure portfolio. At the commencement of that day, Argot Switch Notice 3, which was sent after business hours the evening before, was received. The defendant says that, had a switch notice not been received, it would have acquired non-cash assets with the cash then sitting in the Secure portfolio, but because the Switch Notice 3 had been received, it did not do so.

33 The defendant asserted its right to early conversion of assets in the Secure portfolio on receipt of a Switch Notice in paragraph 11(c)(ii) of its defence in the 2009 proceedings in the following terms:

"[The defendant] is entitled, upon receipt of a notice of intention to switch, to prepare for the switch by realising non-cash investments in the departure portfolio and reinvesting the amount so realised in cash investments within the portfolio, or take other steps to preserve the Portfolio Net Value on the day when the notice was given in writing, so as to ensure that the value of the investments underlying the Policy at the time when the switch is to be effected equals or exceeds the transfer amount and thus that it had funds from that portfolio available to fund the transfer amount."

The defendant further asserted in that defence, at paragraph 11(c)(iii), that:

"Taking the steps described in paragraph (ii) is not effecting a switch from the Secure to Cash Portfolios before the expiry of the notice of intention to switch or at all."

The plaintiffs submitted that the practice of the defendant before the decision of the Court of Appeal was to give immediate effect to any switch notice for a movement from the Secure portfolio to the Cash portfolio and thereby cause the entire investment of the plaintiffs in the Secure portfolio to be held in cash from the close of business on the working day on which the switch notice was received. It was submitted that the practice was reflected in the now deleted paragraphs 10A(b) and 10B of the defence in the 2002 proceedings in which the defendant asserted a right, but not an obligation, to delay giving effect to a switch notice for up to three working days. This meant, the plaintiffs submitted, that the defendant asserted an entitlement to give immediate effect to a switch notice and therefore to "convert the plaintiffs immediately to 100% exposure to cash".[37] The plaintiffs submitted that the practice subsequently adopted by the defendant with respect to early conversion of assets in the Secure portfolio to cash was "precisely the conduct that the Court of Appeal found the defendant was not entitled to engage in."[38] The plaintiffs submitted that the practice in respect of a switch from the Secure portfolio to the Cash portfolio is outlined in the memorandum to the defendant's Staff from Ms Vicki Carter of its Group Legal section dated 30 January 2009 which contained the following material:[39]

"between receipt of the notice (prior to 2.00 pm) and close of business, all non-cash assets supporting the units subject to the switch should be converted into cash assets in order to prepare for the switch, and ensure that there are sufficient assets supporting the units that are to be transferred at the price at which they are to be transferred."

34 The plaintiffs sought to contrast this material in Ms Carter's memorandum with the following passages in the judgment of the Court of Appeal, with respect to the proper interpretation and operation of clause 1.8 of the prosperity bond policies:[40]

"[19] ... Its effect was that, in consideration of the investor giving the respondent three business days' notice of intention to transfer or withdraw, and therefore the opportunity for the respondent to do what it thought necessary or desirable to accommodate the transfer or withdrawal, the investor was to be permitted to revoke the notice if, during the period of notice, the price so moved as to make transfer or withdrawal undesirable from the point of view of the investor."

"[20] ... In our view, if an investor gives notice of an intention to make a transfer or withdrawal in three business days' time, there is nothing in the policy apart from cl 1.8 which authorises the respondent to complete the transfer or withdrawal before the expiration of three business days."

Nevertheless, these passages from the Court of Appeal judgment which have been relied upon by the plaintiffs in relation to this issue must be read in the context of the overall and underlying approach of the Court of Appeal, which was that the prosperity bond policies did not confer any right on the plaintiffs to engage in profitable arbitrage.[42] Additionally, the Court does not, in these passages, canvas the nature of a switch, which is very important in this context, nor the effect of "revocation" of a switch notice.[43] The plaintiffs' position is only enhanced by these statements if one assumes that preliminary steps taken by the defendant preparatory to a switch are regarded as the switch or part of the process and, further, if it is assumed that the effect of "revocation" of a switch notice is to put the plaintiffs in the same position as though such notice had never been given. For reasons discussed elsewhere in some detail, I do not accept either of these assumptions.[44]

35 The plaintiffs submitted that the defendant cannot now be permitted to circumvent the decision of the Court of Appeal through the artificial device of immediately converting the assets in the Secure portfolio to 100% cash following receipt of a switch notice and arguing that this somehow different to giving immediate effect to the switch from the Secure portfolio to the Cash portfolio. It was submitted that this would be to do indirectly what is directly prohibited and, as such, would be unlawful.[45] Further, it was submitted that the principles of res judicata preclude the defendant from now advancing a defence on this basis. Alternatively, it was said that the principles in Anshun[46] preclude the defendant from now advancing a defence that would have been a complete answer to the plaintiffs' case in the earlier proceedings.

36 It was also submitted that the practice of early conversion denies the efficacy of the plaintiffs' right to revoke a switch notice before it is given effect to. It is not sufficient, it was said, for the defendant to repurchase the assets properly conforming to the Secure portfolio mandate if a switch notice is revoked. The plaintiffs must, they submitted, be put in the position that they would have been in if the notice had not been given effect to or, indeed, had not been given at all. As indicated previously, the plaintiffs' prejudice, as they identified it, was that a switch from the Secure portfolio to the Cash portfolio where the value of the Secure portfolio assets increases during the three day period after the switch notice was given would leave them without the benefit of that increase in the value of these assets if they were to revoke the notice. They would, in other words, lose all advantage of the rising market.

37 The defendant contended that, in substance, the plaintiffs' allegations are as follows:[47]

"(a) First, that by liquidating the non-cash assets in the Secure portfolio immediately on receipt of a notice from the plaintiffs of their intention to switch from that portfolio to the Cash portfolio at the expiration of three days' notice, NMLA is 'effectively' carrying out the switch immediately: see pars 62(a)(ii) and 81, particular (ii)(C) [of the Further Amended Statement of Claim in the 2009 proceedings]. The term 'effectively switched' appears in the latter place.

(b) Second, that as one of the effects of liquidating those assets is that the Secure unit price does not reflect movements in equity markets over the three-day notice period, and thus that if the notice of intention is cancelled or revoked during that period the unit price after revocation will not have risen in proportion to a general rise in equities markets during the period before revocation, the revocation does not put Argot in the same position as it would have been in if it had never issued the notice of intention. This is said by Argot -

(i) to deny it the right to revoke a notice, as to 'revoke' a notice means to make things as if the notice had never been given, or, in effect, to avoid the notice ab initio;

(ii) to deny it the benefit of their right to cancel a notice."

The defendant also made the point that the latter claim is not pleaded in these terms in that the contention that "revoke" as used in the terms of the policies means avoid ab initio is not pleaded by the plaintiffs anywhere in any form. Further, the defendant submitted that the contention that early liquidation of the assets in the Secure portfolio has the effect of denying Argot the benefit of its right to cancel a notice is not pleaded in that form, though the particulars contained in paragraph (i) of paragraph 81 of the Further Amended Statement of Claim in the 2009 proceedings alleges that Argot has, by the defendant's actions, been denied the benefit of the "Revised Capital Preservation Strategy".

38 The right of the plaintiffs to switch investment portfolios derives from paragraph 3.3(a) of the prosperity bond policies, a provision which is in the following terms:

1. a. You may switch investment portfolios by transferring amounts between the Prosperity Bond investment portfolios at any time. Minimum transfer amounts apply."

It follows that, as contended by the defendant, the nature of the right to switch which is conferred by clause 3.3(a) is determined by the terms of the particular policy. An immediately relevant term, which goes to the definition or description of a transfer or switch, is clause 3.3(b) of the policies, which provides:

"b. Corresponding adjustments to the number of Units will be made using Unit Prices as at the date to which your request for transfer applies."

39 The provisions of clause 2.2 of the prosperity bond policies are particularly relevant to the operation of clause 3.3 as they provide for the operation of the investment accounts provided for by the policies. Clause 2.2(a) introduces the position, providing for a number of investment portfolios from which an investor may choose. Clause 2.2(b) provides for the relationship between the policy and accounts maintained in the investment portfolios. These provisions are as follows:

1. a. Prosperity Bond has a number of investment portfolios; your choice at the Commencement Date is show on your initial Statement of Benefits. Any change to your investment portfolio choice will be shown on a subsequent Statement of Benefits. Further details of investment portfolios are given in Section 3 below.
2. b. Your policy contains Accounts in one or more of the various Prosperity Bond investment portfolios. Each account is maintained in Units."

40 Clauses 2.2(c), (d) and (e) of the prosperity bond policies are also relevant, as they provide for the relationship between accounts for the purpose of the process of adding or removing money from an account and its consequences in terms of the number of Units added or subtracted and the determination of the Unit Price. These provisions are as follows:

"c. Whenever an amount is put into an Account, a number of Units (determined by dividing that amount by the Unit Price) is added to the number of Units in that Account.

1. d. Whenever an amount is taken from an Account, a number of Units (determined by dividing that amount by the Unit Price) is subtracted from the number of Units in that Account.
2. e. We reserve the right to delay the application of money to or from an Account until midnight Australian Eastern Standard time on the date to which your request applies. We will then use the Unit Price applicable at the end of the period of delay."

41 In the context of these provisions of clause 2.2, it follows that clause 3.3(a) does, as the defendant contends, state exactly what a switch is: it is the transfer of an amount between investment portfolios. This position was recognised by the Court of Appeal in the context of considering the defendant's right to delay a switch for 30 days under the first part of clause 1.8 of the prosperity bond policies, having regard to the second part of that clause upon which the plaintiffs relied. The Court of Appeal said:[48]

"[33] Next, cl 3.3 of the policy refers to switching 'investment portfolios by transferring amounts between Prosperity Bond investment portfolios at any time'.[49] The natural and ordinary meaning of that clause is one of switching an amount which is an Account at the time of switching. But, as has been seen, cl 1.8 provides for the respondent to delay a switch (that is to delay switching an amount from one Account to another Account) for a period of 30 days, if such would require encashment within any 30 day period of Units valued at more than $100,000.

[34] As it appears to us, therefore, the purpose of cl 1.8 was to afford the respondent time in which to liquidate an investment, and thereby obtain the cash with which to purchase Units in the Account into which the investment was to be switched. There would be no point in stipulating for a 30 day period in which to liquidate an investment if the investor could delay until the 30th day the acquisition of the investment which was to be liquidated. As the appellants' expert witness, Mr Lyon, said in evidence, the respondent would not be able to make preparations to liquidate an investment unless and until it existed."

42 Expert evidence was given in relation to this issue by Mr Richard Lyon, a practising actuary. In his report, dated 25 January 2011, Mr Lyon identified the elements of the switch as being, simply, the cancellation and creation of units in the departure and arrival portfolios, respectively. In his view, the transfer, by journal entry, of the relevant amount of money from one portfolio to the other is part of the administration of the policy by the insurer, rather than part of the switch itself, though he did acknowledge in cross-examination that the policy defines the switch as including the transfer of money. Importantly, in paragraph 7.26 of his report, he identified the switch itself as occurring "when it is reflected in the liabilities", and stated that "none of the asset-related steps is required in order for the switch to take effect". This position was also confirmed in his oral evidence.[50] Paragraph 7.26 of his report includes a discussion, which begins at paragraph 7.17, as to "[t]he steps (if any) that the defendant would be required to undertake in preparation for a switch from the Secure portfolio to the Cash portfolio and by when those steps would need to be undertaken in order to effect the switch at the expiry of a switch notice". Mr Thornton agreed with Mr Lyon's distinction between a switch and assets dealings accompanying it, as did Dr Gribble.[51]

43 The expert evidence relied upon by the plaintiffs in relation to this and related issues was provided by Mr Richard Lyon, an independent actuary. The defendant relied upon expert evidence from Dr Julian Gribble, an independent actuary. The defendants also relied upon the evidence of Mr Michael Thornton who, at the time of the trial, had been employed by AXA Asia Pacific Holdings Ltd as its Group Chief Actuary. This position involved him having responsibility for some actuarial and risk management aspects of the defendant's business. In relation to these issues the defendant submitted that while Mr Thornton was a lay witness, he was in substance an expert.

44 As submitted by the defendant, the prosperity bond policy terms, the Court of Appeal and the expert witnesses all said the same thing: namely, that a switch is a transaction whereby units in one portfolio are cancelled and units in another portfolio created. Further, a switch is to be contrasted with the administration of assets underlying the policy in question, which is not dealt with in the policy and is not, aside from recognising its existence as being the domain of the defendant outside the contract,[52] the subject of the judgment of the Court of Appeal (or the trial judge, as a matter of fact).

45 Consequently, a switch between portfolios consists of the transactions with the units allocated to the policyholder in the relevant portfolios - involving the cancellation (subtraction from one portfolio) and the issue (addition to the other portfolio). All other activity associated with the switch is administrative and solely in the control of the defendant. The defendant's activity in this respect was not considered by Redlich J at the original trial or by the Court of Appeal because no contention was made about it by the plaintiffs. Nevertheless, I accept that it follows as a matter of necessary implication from the previous proposition. Additionally, as the defendant submitted, the prosperity bond policy says nothing about how investments are to be made, or about how preparations are to be made for a switch or about the consequences that might follow from the switch being made. Again, it follows from these apparently intentional omissions that these matters are therefore left, according to the terms agreed between the parties and contained in the policies, solely in the control of the defendant as the owner of the relevant assets.

46 It was also argued that the "practical effect" of early conversion, that is the immediate liquidation of the assets in the Secure portfolio on receipt of a switch notice, is the same as if the switch had actually been carried out. As contended by the defendant, the allegation that immediate liquidation or early conversion is "effectively" carrying out the switch assumes that there is only one effect of a switch, namely the change of the types of assets underlying the plaintiffs' policies. This is, however, not the only effect.

47 The major effect of a switch from the Secure portfolio to the Cash portfolio is that the policyholder ceases to hold Secure units and holds Cash units instead. The second effect of a switch is that it takes four business days to transition (switch back) to the other portfolio. Immediate liquidation, or early conversion, does not bring about either result, in or in substance. The plaintiffs continue to hold Secure units throughout the notice period. If they change their minds and withdraw the notice of intention to switch, then no further unit cancellations or allocations need be made; they simply continue to hold the same units they have held all through. They do not need to give a further notice or request to be switched back to the Secure portfolio or wait four working days to return, as they have never left it. The defendant conceded that it is true that after liquidation or early conversion of non-cash assets, movements in the Secure unit price during the balance of the notice period are similar to movements in the Cash unit price during the same period; but it is said that this is not the same as holding Cash units. It is simply a statement that the unit price performance is similar. In my view, this is a correct analysis of the position on the basis of the provisions considered and the views expressed by the Court of Appeal. Further, the assumption that the Secure portfolio always holds a mix of equities, fixed interest and cash assets is untrue in any event. The Investment Instructions applicable to defensive asset portfolios allow for such portfolio to hold 100% cash.[53] The defendant conceded that whilst it is true that this is not the normal asset allocation, it is nevertheless a permissible one, even in circumstances in which arbitrage is not occurring, for example where markets are experiencing unusual circumstances. The same thing, it was said, happens in the form of the cash drag effect, which is a normal consequence of entry into the Secure portfolio.[54] These factors, in my view, demonstrate a fallacy in the reasoning underlying the plaintiffs' submissions, certainly to the extent of the assumption as to the composition of the Secure portfolio, as indicated above.

48 Moving on from the position that the administration of assets underlying the prosperity bond policy in question is to be distinguished from the switch itself, the defendants contended, and emphasised, that the matching of its assets with its future liability in respect of a notified switch is good asset management practice. In summary, the defendant's position was that once the policyholder gives a notice of intention to switch out of the Secure portfolio, it has a fixed unit price which it is to receive. The policyholder then has no interest in the asset mix or performance of the Secure portfolio after that time until either it switches back into the Secure portfolio from the Cash portfolio or it cancels the notice of intention to switch, at which point the defendant would invest the policyholder's funds in the prevailing Secure portfolio asset allocation. A difficulty arises, at least from the defendant's perspective, because of the possibility of cancellation of the notice of intention to switch. When the switch notice has been given to it, the defendant can be confident that if the value of the underlying assets decreases, the switch will proceed, but it does not know whether that will occur or not. This is its difficulty. It does not know which way the value of particular classes of assets will move, save that it knows with virtual certainty that cash assets will not fall in value. The defendant says that, supported by the unanimous view of all the expert witnesses, good life assurance company practice does not require the defendant to underwrite every possibility. Rather, its obligation is to stand ready to transfer the Account Balance, at the unit price on the day that the notice to switch is taken to be given. I turn now to the expert evidence relied upon by the defendant in this respect.

49 Mr Lyon first expressed a view on the matter in his supplementary Expert Report in 2003.[55] He was commenting on the evidence of Mr Michael O'Brien, an actuary, who in 2003 was employed as the Chief Investment Officer of the defendant.[56] Mr O'Brien's evidence was that on receipt of a notice of intention to switch from the Secure portfolio to the Cash portfolio, he would instruct relevant officers of the defendant immediately to liquidate all non-cash assets in the Secure portfolio. He also said that if assets arrived in the Secure portfolio at a time when there was already a notice of intention to switch the relevant policies back to the Cash portfolio three days later (a situation which occurred in January 2009), it "would be contrary to all proper investment practice to acquire non-cash assets".[57] There was an assertion by Mr Tyne during the current hearing that Mr O'Brien had resiled from what he had said in this respect at the 2003 trial.[58] Nevertheless, I accept that a reading of the relevant transcript shows that Mr O'Brien did not resile from this position and, rather, was not challenged in relation to it.[59] Mr Lyon in his 2003 Supplementary Statement said that Mr O'Brien's:[60]

"rationale for immediate liquidation of non-cash assets in the Secure portfolio makes sense to me, provided that the switch to Cash is going to proceed. It is not clear what he would intend to do if the switch were cancelled." (Emphasis in original.)

50 In the present proceedings, Mr Lyon described in his witness statement the nature of investment-linked businesses and stated that "The insurer aims to hold assets matched as closely as possible to the defined liabilities".[61] The defendant submitted that this is the fundamental reason why it took the course of immediately liquidating non-cash assets when a notice of intention to switch was received. Also of significance is Mr Lyon's discussion in his witness statement of the circumstances in which it would be reasonable for a portfolio with objectives such as those of the Secure portfolio to hold cash assets exclusively:[62]

"5.35 The one circumstance in which I would think it reasonable to invest 100% in cash would be when it is known for a fact that all of the units in the portfolio will be redeemed on a certain future date at a known price and that price can be protected by converting to cash. This does not apply when the redemption price is unknown (and would be expected to reflect performance up to the redemption date). It also does not apply when the redemption notice may be cancelled by the policyholder(s), since it is then not certain that the redemption will occur.

5.36 In case it is not clear, I do not consider that it would be acceptable practice for an insurer offering a product similar to the Prosperity Bond, with or without the Special Terms, to invest the Secure portfolio 100% in Cash, other than on receipt of an irrevocable notice of withdrawal of all of the funds in that portfolio. I understand that a notice in accordance with the Special Terms is not irrevocable." (Emphasis in original.)

51 Evidence of Mr Lyon to which particular reference has been made was cross-examined.[63] The basic proposition, as expressed in the quoted passages from his statements, was, as submitted by the defendant, that it was perfectly good practice for an insurer to liquidate immediately all non-cash assets, provided the notice of intention to switch was irrevocable. It was noted by the defendant that Mr Lyon was criticised by the Court of Appeal for having expressed conclusions based on his interpretation of the terms of the policies which, as it happened, were found to be erroneous.[64] Mr Lyon was questioned in cross-examination in the current hearing about the reason why, in the passage quoted from part 5 of his witness statement (particularly paragraph 5.36), he emphasised the need for the notice of intention to be irrevocable. It was clear from his cross-examination that, although not stated in his report, the reason turned on his interpretation of the meaning of the word "revoke". This appears from the following exchange in cross-examination:[65]

"MR BRETT: If it is the duty of NMLA, or a good practice of NMLA to manage its assets so that they match as nearly as possible its liabilities, why is it not good practice to move from - to put the investments purely into cash?---That comes down to what is meant by revoking the notice, and I believe that I'm not qualified to give that opinion.

All right?---But if what is meant, is that it should be as if they had stayed in secure and not issued the notice, then the cash return is not appropriate, and so the mismatch risk goes the other way. The mismatch risk then is, that you've invested the assets in cash but you need to deliver the secure return, so now you need to make up the difference between the secure outcome and the cash outcome out of shareholders' funds, and you are going to have do that more often than the other.

So you are basically saying then, it's only if revoked means 'put back' into the position that they would have been if the notice had never been given, that what you are saying applies?---It's possible there's another construction that would have the same effect but yes, but if revoked means: Make it as if the notice had not existed; then it's clear that it should still have been secure, you wouldn't have made that cash conversion because the notice didn't exist, you should have been in that mandate, and that's the price that should exist on Thursday. It's possible there's another path that gets to the same answer, so I can't say that's the only circumstance in which that happens."

52 As submitted by the defendant, Mr Lyon's restriction of his approval of the defendant's conduct was based on his assumption, not stated in either report, that the right of policyholders to change their minds and not proceed with the switch meant that they had a right to be treated, on changing their minds in that fashion, as if they had never given a notice in the first place. Mr Lyon was careful to state, in his oral evidence, that he was not qualified to express an opinion on that matter, as it was a question of law. The defendant observed in its submissions that it was "... somewhat surprising that such a fundamental qualification of his opinion on such an important question in the proceeding was not mentioned in his report, especially having regard to the Court of Appeal's criticism of his having done exactly the same thing in his earlier report".[66] The revocation of a switch notice and the meaning of the word "revoke" in this context is discussed below.[67]

53 Dr Gribble also gave expert evidence in relation to the immediate liquidation of assets in the Secure portfolio. Considering what is good practice on the part of an insurer in relation to an investment-linked contract, reference was made by Dr Gribble to two concepts, namely "business as usual" and "best estimate". He explained in his report that guidelines in similar documents that identify what is and is not good practice are invariably prepared on the assumption that they are dealing with "business as usual".[68] In so doing, he identified five separate strands that are present when business is as usual.[69] In the course of this discussion, Dr Gribble said that there are "... a number of strands to a 'business as usual' paradigm". He then said that these strands include but are not necessarily limited to: typical policyholders; typical product; typical assets; typical investment objectives and typical supporting processes. Continuing, Dr Gribble said:[70]

"If any one of the strands of a 'business as usual' situation as outlined in paragraph 3.6.2, or more generally referred to in paragraph 3.6.1, fail then the situation ceases to be 'business as usual'. For example, actions or attempted actions of an atypical policyholder would generate a situation that is not 'business as usual'.

The extent of any steps taken by a life company to address such non-'business as usual' situations would depend on the life company's assessment of the impact of the actions creating the non-'business as usual' situations and cost and effort required of the life company to address it. Additionally, it would generally be considered appropriate that actions taken by a life company in a situation which is not 'business as usual' need not (and perhaps should not) be restricted to 'business as usual' actions."

Expressed in general terms, Dr Gribble's approach is that where an abnormal situation exists, individual responses are required by the life company. More particularly, he said that the situation created by the plaintiffs in seeking to exercise their rights under their policies in order to make gains and avoid losses on a day-by-day basis cannot be considered as business as usual.[71] Of the five strands of "business as usual" identified by Dr Gribble, three are identified as missing. First, the plaintiffs are not typical policyholders, the product they hold is not a typical product (that is, the prosperity bond policies with their special terms), and the plaintiffs' investment objectives are not those of typical policyholders.

54 Dr Gribble also discussed the nature of "arbitrage", noting that the word is not a term of art and bears different meanings. His discussion was, consequently, limited to a particular type of arbitrage, which he defined as follows:[72]

"Arbitrage is the situation in which a party (in particular in this case a policyholder) deliberately seeks to exploit a process to gain an advantage that was not contemplated or intended by the product provider."

"I make some comments on the term arbitrage as given in paragraph 3.8.1:

• An arbitrage has the purpose and intent of deliberately and systematically exploiting aspects of the life company's processes. This situation is intrinsically different to that when those same aspects are not being systematically exploited. See paragraph 3.8.2.
• The arbitrage is not made in the underlying investment markets, but through the arbitrager's exploitation of the processes used to administer the product, taking advantage of claimed volatility in the investment markets.
• It represents a short-term perspective focusing on the identified aspects of processes that are claimed to permit the arbitrage. The plaintiffs in their 'Particulars of Loss - Calculation of Contract Damages', received 21 January 2011, explicitly identify their short-term arbitrage strategy.
• Arbitrage is not an investment approach focused on seeking investment gains from the investment markets."

55 Relevant "stakeholders" were identified by Dr Gribble as including current and future policyholders and also the life company itself, including its shareholders.[74] Mr Thornton also considered that a life company has a legitimate interest in protecting its profitability, as long as it ensures that the policyholders receive the benefits to which they are entitled under their particular policies.[75] Consequently, this evidence supports the proposition that from the point of view of proper life company practice, it is accepted that a life company has a right to protect its own profitability to the extent that this is consistent with providing policyholders with the benefits to which they are entitled. Arbitrage of the type identified by Dr Gribble was also described, by him, as a practice that was generally considered appropriate for a life company to take steps to prevent, as far as it was able to do so within the limits of the relevant policies.[76]

56 In this context, Dr Gribble's evidence as to his views about immediate liquidation of non-cash assets are accurately described as follows:[77]

"(a) That as a matter of prudent business management immediate liquidation is appropriate to ensure that the insurer can honour its obligations and in particular to provide the amount necessary to carry out the switch in three days time: part 5.3.2.

(b) That at the time a notice of intention is received, the life company's best estimate of its future liabilities is that it must make the switch at the relevant prices (5.3.4).

(c) That the life company is entitled to take steps to mitigate risks to itself that may follow from the policyholders carrying out a strategy of arbitrage (as defined by him) that they have clearly identified (5.3.6).

(d) That the life company is not as a matter of good practice required to support the arbitrage strategy of the plaintiffs, especially where that strategy is intended to be carried out at the expense of the life company (5.3.7 - 5.3.9).

(e) That immediate liquidation in the circumstances described is consistent with good life company practice."

Similar views were expressed by Mr Thornton[78] and the views of Mr Lyon are very similar to those of both Mr Thornton and Dr Gribble, save to the extent that Mr Lyon interprets the second part of clause 1.8 as requiring the defendant to ensure that if a notice of intention is revoked, the plaintiffs are put in the same position as they would have been if they had never been given the notice.[79]

57 As has been discussed previously, the judgment of the Court of Appeal makes it very clear that the plaintiffs' entitlement under the prosperity bond policies did not include the right to profitable arbitrage, the right to make switches at a profit; and, further, the terms of the policies actually enabled the defendant to exercise powers "to frustrate the hope and expectation of profits on the part of the plaintiffs".[80] This does not, however, mean that the, so-called, special terms contained in the Prosperity Bonds policies do not provide benefits to the plaintiffs.

58 The special terms contained in the prosperity bond policies do confer a variety of benefits on the plaintiffs that the holders of other policies issued by the defendant do (or did) not have. These include:

(a) The right to make as many switches between investment portfolios as the plaintiffs wish, without having to pay a fee. The position for other policyholders is that they are entitled to two switches without fee and then for every subsequent switch they must pay a fee of 0.5% of the total value of their assets.

(b) The right to know exactly when a notified switch should be carried out - namely, after three working days have elapsed following the giving of the switch notice. Other policyholders may have a requested switch delayed for up to 30 days, entirely at the defendant's discretion.

(c) The benefit of knowing that when a switch is carried out three working days following the giving of a switch notice, that the unit prices applied will be those applicable on the day the switch notice was given. Other policyholders requesting a switch receive unit prices prevailing on the day the switch is eventually carried out.

(d) The plaintiffs have the right to cancel a switch notice, whereas other policyholders have no such right.

59 As the defendant submits, these benefits are valuable, though they may not be as valuable as the plaintiffs hoped or expected they would be. Nevertheless, that does not mean they have no value at all. The benefits which the plaintiffs complain that they do not obtain as a result of early conversion, that is the immediate liquidation of non-cash assets, are benefits to which, as indicated previously, the Court of Appeal has held that they are not entitled. In this context, it is also relevant to note that the plaintiffs paid nothing for their special benefits and received as many units in return for the premiums they paid as any other investor who paid a similar premium. Additionally, no disclosure was made by the plaintiffs to the defendant prior to the prosperity bond policies being issued about the manner in which the plaintiffs intended to use the provisions of clause 1.8 of the policies. The plaintiffs' conduct in this regard was described by the Court of Appeal as "sharp and exploitative".[81] This position should also, in my view, be viewed in the context of the arguments advanced by the plaintiffs in relation to the issue of portfolio composition with respect to the contractual significance of the Customer Information Brochure which was issued by the defendant on 15 July 1999.[82]

60 Finally, in relation to this issue, I turn to the argument as to whether or not any penalty is involved in the defendant's conduct where, under the provisions of clause 1.8 of the prosperity bond policies, a switch notice is cancelled by the plaintiffs. In broad terms, the ordinary meaning of a "penalty" is a charge or fee or deduction imposed as a result of the cancellation of, in this case, a switch notice - some sort of exaction imposed by way of "punishment" or "disincentive". As a matter of contract law, a penalty is the sum payable in terrorem:[83] It is a monetary sum, or a forfeiture, which is required by a contractual term to be paid to one party to the contract by the other party on a breach of the contract by that other party, and is designed to deter the party from committing a breach. Thus, in Legione v Hateley, Mason and Deane JJ said:[84]

"A penalty, as its name suggests, is in the nature of a punishment for non-observance of a contractual stipulation; it consists of the imposition of an additional or different liability upon breach of the contractual stipulation (see, generally, O'Dea v. Allstates Leasing System (WA) Pty Ltd [1983] HCA 3; (1983) 152 CLR 359)."

61 The defendant submitted that clause 1.8 imposes no such thing as a result of the cancellation of a switch notice. Rather, it says that when a switch notice is revoked, it simply proceeds no further. No fee or charge is levied by the defendant and the policyholder has the same Secure unit value before cancellation of the switch notice as after its cancellation. This, it was submitted, is consistent with the plaintiffs' aim of "value preservation": by giving a notice of intention to switch, they preserve the value of the Secure units as at the day the switch notice is received.[85] On cancellation of the switch notice, the value of the plaintiffs' policies had still been preserved because the value was fixed at the day of giving the switch, as the natural and ordinary, and desired, consequences of the giving of such a notice. Consistently with the approach of the Court of Appeal to these provisions, I am of the view that these were the contractual terms stipulated for and obtained by the plaintiffs.

62 Having regard to these matters, it is clear that in the present case, the cancellation or revocation of a switch notice is not a breach of contract, with the consequence that something different from the normal contractual definition of a "penalty" must have been intended by the parties when they used that word. In the context of clause 1.8 of the prosperity bond policies, the reference to a "penalty" must be taken to refer to some form of monetary liability, or some liability of some kind, to which the Coneview investors might, in the absence of the prohibition, become exposed in consequence of a cancellation of a switch notice; something that might result in the investors being worse off as a result of cancelling such a notice.

63 In my view, the early conversion or immediate liquidation of non-cash assets in the Secure portfolio does not expose the plaintiffs to any sort of liability and does not result in any reduction in the value of their policies. On the contrary, as submitted by the defendant, the immediate liquidation of non-cash assets will have had an effect that the value of those assets increased slightly in the period prior to the cancellation of the notice. The fact that if the plaintiffs had not given a switch notice they would have remained in the Secure portfolio asset allocation and might possibly have obtained the benefit of a greater rise in the value of the assets is merely one factor that a policyholder must take into account when determining if and when to give a switch notice. The plaintiffs did accept that there is an opportunity cost in switching out of the Secure portfolio.[86] It is fair to say that the opportunity cost in terms of asset appreciation foregone is merely an additional dimension of that cost. Consequently, it follows in my view, that immediate liquidation of the assets in the Secure portfolio is neither an incentive nor disincentive to the giving of a switch notice or the cancellation of a switch notice.

64 In conclusion on this point, I am of the view that liquidation of non-cash assets in the Secure portfolio is not in any sense the imposition by the defendant of a penalty for the cancellation of a switch notice. Rather, it is a step contemplated by the Court of Appeal as consistent with and permitted by clause 1.8 of the prosperity bond policies. Further, there was nothing iniquitous or repudiatory in the defendant taking that step immediately upon receipt of a switch notice as opposed to some later time. I accept that in acting immediately, the defendant is simply, in the words of the Court of Appeal, doing "what it thought necessary or desirable to accommodate the transfer or withdrawal".[87]

65 Obligations which the defendant is alleged to have breached are set out in the Further Amended Statement of Claim in the 2009 proceedings.[88] There was a pleading of the issue of the Argot policy and then the pleading of various terms, most of which are uncontroversial.[89] Some terms are, however, controversial, namely the allegation in paragraph 9(c) that Argot was entitled to have its investment premium "invested to one or more of a number of investment mandates or portfolios (each of which being a Portfolio)". The defendant submitted that although the alleged term does largely reflect the terms of clause 2.2(a) of the Argot policy, the allegation in the pleading has had added to it the word "mandate", which does not appear in the policy at any point. The policy does only speak of "portfolios" and is silent throughout as to their individual natures or characteristics. These allegations appear to be the basis of further allegations, particularly those contained in paragraphs 9A and 9B of the Further Amended Statement of Claim in the 2009 proceedings, to introduce the contents of the Customer Information Brochure issued by the defendant on 15 July 1999 ("the CIB") as a repository of contractual terms with which the express terms of the Argot policy are to be read. This process is carried further, and more directly, in paragraph 13(c) of this Further Amended Statement of Claim where it is alleged that it was a term of the Argot policy that: "The Defendant would maintain the Secure Portfolio in a manner that ensured compliance with the description of it set out in the relevant Customer Information Brochure". Paragraph 14 of this pleading follows on with the allegation that a breach of this, and other terms pleaded in paragraph 13 of the Further Amended Statement of Claim, were conditions of the Argot policy "the breach of which entitled Argot to terminate the Argot Policy". The defendant submitted that the final step in the chain of argument with respect to the CIB was taken in paragraph 62 of the Further Amended Statement of Claim in the 2009 proceedings, which is set out above.[90]

66 The substance of these pleaded allegations is that the immediate liquidation by the defendant of the non-cash assets in the Secure portfolio is a breach of a contractual term which requires the defendant at all times to maintain the Secure portfolio in a manner which conforms to the description of that portfolio in one particular CIB, namely that which was in force (and which was expressly stated to be in force) only from 14 July 1999 to 14 July 2000.[91] The defendant submitted that the plaintiffs are not now permitted to make such a claim as the contention that the CIB was a contractual document has already been considered by the Court and, furthermore, rejected.

67 Allegations as to the documents constituting the contract between the parties were made in the Second Further Amended Statement of Claim in the 2002 proceedings.[92] It was alleged that the critical terms, described as the Special Investment Terms, agreed to apply were set out in:[93]

(a) a letter dated 20 July 1998 from AXA [the defendant] to Keller [Dr Peter William Keller], which remained in force until 14 July 1999. The Special Investment Terms were subsequently confirmed in a letter dated 21 June 1999 ("the Special Terms Letter") which applied from 15 July 1999;

(b) a document entitled "Investors in Prosperity Bonds Introduced by Coneview Pty Ltd" issued by the Defendant to each of the Plaintiffs, a copy of which is annexed to and forms part of each Policy ("the No Advice letter");

(c) a document entitled "Investors in Prosperity Bonds Introduced by Coneview Pty Ltd", a copy of which is annexed to and forms part of each policy ("the Undertaking letter").

The relevant prosperity bond policies were then pleaded[94] and then various express terms of the prosperity bond issued by the defendant to the plaintiffs for the entire life of each policy were pleaded.[95] These pleadings allege that the covering letter under which the plaintiffs were sent their policies contained a contractual term in relation to the making of additional investments, but it was not pleaded that the CIB was a contractual document or contained contractual terms. Nevertheless, in oral argument before Redlich J at the original trial, it was contended that the CIB was a contractual document and also that a document known as the Coneview Information Memorandum ("the CIM") which was issued to the plaintiffs by Dr Keller without the defendant's knowledge was a contractual document.[96]

68 In this respect, the defendant pointed to the discussion in the judgment of Redlich J in which the plaintiffs' alleged right to make additional investments was considered.[97] Redlich J noted that the contention of the plaintiffs that the CIB and the CIM were contractual documents had not been pleaded, even after substantial amendments to the Statement of Claim. His Honour rejected the proposition that the covering letter was a contractual document in holding that a policyholder "must look to the policy itself for a description of the parties' rights and obligations".[98] As the defendant submitted, the contention advanced orally in relation to the CIB being a contractual document was thus rejected.

69 The plaintiffs made no attempt in the Court of Appeal to contend that the CIB was a contractual document and nothing in the judgment of the Court of Appeal states or suggests that the position is or might be otherwise. Consequently, the rejection of this contention by Redlich J stands unchallenged. Even after amendment prior to the present hearing, the Second Further Amended Statement of Claim in the 2002 proceedings does not allege explicitly that the CIB is a contractual document though, as I understand the plaintiffs' present position, it is said to be implicit in those pleadings.[99] An explicit allegation that the CIB contained contractual terms did appear particulars to pleadings in the Further Amended Statement of Claim in the 2009 proceedings.[100] This allegation was denied by the defendant and subsequently deleted from the plaintiffs' pleading.[101]

70 As the judgment of Redlich J on this point remains unchallenged and not the subject of any adverse decision or comment by the Court of Appeal, I am of the opinion that it is not now open to the plaintiffs to allege that the CIB contains contractual terms. Although the treatment of this issue by Redlich J was in the context of allegations by the plaintiffs that they could make additional investments on the same special terms as the original investment by paying additional premiums, this does not, in my view, in any way detract from the generality of this finding with respect to the CIB. Consequently, the principles governing res judicata, cause of action estoppel and issue estoppel[102] do clearly render Redlich J's rejection of this contention now unchallengeable either in the 2002 proceedings or the 2009 proceedings.

71 Even assuming that the defendant was obliged to maintain the Secure portfolio in the manner described by the CIB, the plaintiffs' claim fails, in any event, for the reasons which follow. There are also difficulties, for the reasons advanced by the defendant, in the manner in which the plaintiffs' claim in this respect is put.[103]

72 In paragraph 9(j) of the Further Amended Statement of Claim in the 2009 proceedings, it is alleged that it was an express term of the Argot policy that the portfolios in which Argot could invest included the Cash and Secure portfolios. As noted previously, the allegation which follows in paragraph 9B of that Statement of Claim is a description of the Secure portfolio taken substantially from the description of that portfolio as set out in the CIB.[104] The description of the Secure portfolio which is taken from the CIB and relied upon in these pleadings does not, however, refer to or take account of the description of the Secure portfolio which appears in an earlier part of the same CIB:[105]

"The Secure Portfolio invests predominantly in cash and fixed interest securities to provide a high level of stability over time, but also with moderate exposure to equity investments to provide some scope for growth. It is aimed at the medium-term investor for whom security is a major factor, but who is looking for a higher return than is usually associated with cash in short-term investments."

73 In terms of breach, the plaintiffs allege, with particular reference to the events at the end of the working day Wednesday, 14 January 2009 and prior to the start of the next working day, that Argot provided a Switch Notice in accordance with the Argot policy and in accordance with the Revised Capital Preservation Strategy "advising a putative switch of the whole of Argot's Secure Portfolio Account Balance to the Cash Portfolio".[106] The plaintiffs then pleaded that, on the basis of previous allegations as pleaded, the defendant "was required by the terms of the Argot Policy and pursuant to Argot Revocation Notice 1, not to act upon Argot Switch Notice 3".[107] The defendant contended, with respect to these pleadings and more generally, that by virtue of the switch notice and policy terms it was required to carry out the switch unless the policyholder changed its mind subsequently. Pending any change of mind, the Court of Appeal has confirmed that the defendant may "do what it thought necessary or desirable to accommodate the transfer".[108] The defendant submitted further that if this was "acting" on the switch, the alleged "obligation" would be inconsistent with the Court of Appeal's interpretation of the effect of the policy. This raises, again, the issue of "early conversion" which has already been discussed.[109] As indicated previously, I am of the opinion that the defendant is correct in relation to the effect of the policy in this respect as interpreted by the Court of Appeal.

74 The plaintiffs' pleadings continue with a further allegation that by immediately liquidation non-cash assets in the Secure portfolio, the defendant "in breach of the Argot policy notwithstanding its obligations as pleaded in paragraph 61" (that is the obligation not to act on the switch notice) sold or purported to sell the non-cash assets within the Secure portfolio supposedly referable to the Argot policy or, alternatively, switched the Secure Portfolio Account Balance to the Cash portfolio other than in accordance with any switch notice or other authority or consent from Argot.[110] As this allegation relies upon previous allegations,[111] it fails because of the failure of the foundation upon which it is based, namely the preceding allegation, for the reasons already indicated.

75 There is also a further allegation of loss and damage based on breach by the defendant of alleged obligations with respect to the secure mandate, again by reference to the pleaded allegations to which reference has been made.[112] The critical part of these particulars is as follows:[113]

"... during all such time as any Switch Notice was extant in relation to the Secure Portfolio, caused the Secure Portfolio to be invested as if it were the Cash Portfolio and thereby effectively Switch Argot to the Cash Portfolio without its authority. This meant the Argot Policy (though nominally wholly invested in the Secure Portfolio) could not benefit from increases in the Secure Portfolio Unit Price that would have occurred had the defendant invested the Secure Portfolio according to the description of it in the Policy."

It is not, however, clear where these allegations lead. There was no description given in the pleadings, or anywhere else in the plaintiffs' case, of the manner in which the defendant is alleged to have failed to maintain the Secure portfolio as described in the CIB, apart from allegations based on the complaint of "early conversion" of assets in the Secure portfolio in breach of the policy terms. Apart from the "early conversion" issue, no attempt was made by the plaintiffs to identify any part of the description of the Secure portfolio set out in the Further Amended Statement of Claim in the 2009 proceedings,[114] or of any other relevant description of the Secure portfolio, that the defendant's conduct rendered inaccurate or breached; to the extent that it could be said that contractual obligations were created (noting the rejection by Redlich J of the plaintiffs' assertion that the provisions of the CIB were to be regarded as contractual terms).[115]

76 Even if it were accepted that the defendant was subject to the obligations as pleaded by the plaintiffs, the defendant submitted that there has been no failure by it to comply with the description of the Secure portfolio. In this respect, it contended that its alterations to its asset allocations and description of investment objectives and benchmark for the Secure portfolio were consistent with the descriptions in the CIB and involved no breach of contract and are not alleged to be breaches.

77 Further, the defendant submitted that the CIB is a guide[116] which informs prospective policyholders of the manner in which policies and portfolios will be administered, but in general terms and in normal circumstances.[117] In this respect, it submitted that statements in the CIB about asset allocations and the achievement of objectives can have no application when the policyholder is not behaving in the way assumed by the CIB: where the policyholder is, by its own actions, departing from the basis on which the CIB was framed. The CIB was framed, it said, as a description of how portfolios are maintained for normal investors seeking benefits of a type normally sought by investors in products like the prosperity bonds, as described in the CIB. In this respect, it is noted that Mr Lyon and Mr Tyne both agreed that the CIB was not aimed at investors like the plaintiffs.[118] Additionally, Mr Tyne's evidence at the 2003 trial was that he believed that the CIB was:[119]

"merely a standard brochure published by AXA. Since I believed that it was never intended that Coneview introduced investors would be investing on standard terms I paid little attention to the detail of this document."

The defendant submitted that the effect of these admissions was to defeat the pleaded cause of action. Further, it said that none of the statements in the CIB were sufficiently detailed or precise to permit allegations to be based on specific breaches of description which, it said, may be the reason why no particulars were given of any such breaches. In my view, it is clear for the reasons advanced by the defendant that no such breaches have been alleged or established. Allegations with respect to "early conversion" are discussed separately but, again, for the reasons indicated, no breaches are established.[120]

78 Issues were raised by the plaintiffs in relation to, what is conveniently described as the "day count" applicable to the switch notices. The issue arises because of the provision in the second part of clause 1.8 of the prosperity bond policies that: "AXA Australia will waive its right to delay withdrawals and switches for 30 days, providing the investor gives three working days' notice of its intention to switch or withdraw". Thus, the question raised, in this context, is the meaning of the expression "three working days' notice". The issue and this question is raised in the plaintiffs' pleadings by reference to various switch notices. Particular attention is, however, given in the pleadings to a notice of intention to switch from the Cash portfolio to the secure portfolio which was given by Argot to the defendant late in the night of Thursday 8 January 2009.[121]

79 Argot pleaded that the defendant breached its policy by not effecting the switch the subject of the switch notice until after 4.00pm on 14 January 2009.[122] It was also asserted in the pleadings that the defendant was in breach of the policy insofar as it asserted that "in calculating a period of time after a certain event (such as receipt of a notice), the day on which the event happens (the notice is received) is not counted" and therefore that it acted in accordance with the policy not effecting the switch until after 4.00pm on 14 January 2009.[123] It was later conceded by Argot that the day upon which the switch is effected is not counted for the purpose of calculating the notice period, but the concession left in controversy the question of which day a switch notice is given that is sent after business hours. The evidence was that a number of switch notices were sent to the defendant at various times after the usual close of the business day, many around the late hours before midnight and the early hours of the following day.

80 The defendant contended that a switch notice given after normal business hours is to be taken to have been given on the next working day. On this basis, the defendant says, the switch notice given by Argot late on Thursday 8 January 2009 should be taken to be given on Friday 9 January 2009, which was the day on which this notice, in fact, came to the attention of the customer service officer designated by the defendant, Mrs Bourke.[124] On this basis, the three days working period would be calculated excluding Friday 9 January as the day on which the notice was received and, consequently, comprising Monday 12 January, Tuesday 13 January and Wednesday 14 January 2009. Argot, on the other hand, contended that the "physical date", the actual day on which the notice was given, was the receipt day, irrespective of the time of day when the notice was sent and received. Thus, in terms of calculating the notice period, Argot contends that 8 January 2009 was the receipt day (the notice being sent at 10:21 pm and having reached the defendant at 11:26 pm that day) and so the three working days' notice period comprised Friday 9 January, Monday 12 January and Tuesday 13 January 2009.

81 Before turning to the provisions of the prosperity bond policies, it is useful to give the issue some general context by reference to the dictionary definitions of "working day" and some of the authorities in which this expression has been considered. The Oxford English Dictionary distinguishes in its definition of "working day" the notion or expression "a work-day" (sense 1.a) and "the portion of a day devoted to work or allotted to labour as a day's work" (sense 2). The first sense denotes a day on which work is performed and the following quotations give the sense of this:

"1725 D. Defoe New Voy. round World ii. 186 They quite forgot the Days, and knew not a Sunday from a Working-Day any more.

1832 F. Palgrave Rise & Progr. Eng. Commonw. ii. p. clii, The first open or working day after the two great weekly festivals of Sun-day and Moon-day.

1839 Thackeray Fatal Boots Feb., Then comes dismal February, and the working-days with it, after the Christmas and the New Year's heyday and merry-making are over.

1911 Onions Shaks. Gloss. p. vi, The compilation of which has occupied the full working-days of a year and a half."

The second sense, on the other hand, refers to the time during the day during which work is performed. The quotations set out indicate the sense of this:

"1853 Hogg's Instructor X. 282/2 To grant the Saturday afternoon holiday, and to limit the duration of every other working day within a certain definite period of time, not exceeding twelve hours, including the proper interval for meals.

1875 J. Macdonell in Fortn. Rev. Mar. 389 Leaving the length of the working day unchanged.

1890 J. E. C. Munro in Rep. Brit. Assoc. 472 The more rational proposals to establish a short working day."

82 The Macquarie Dictionary contains a similar definition:

"1. the amount of time that a worker must work for an agreed daily wage.

2. a day ordinarily given to working (opposed to holiday).

3. the daily period of hours for working."

83 There has also been some consideration of the expression in the cases, but care must be taken in seeking guidance from the interpretation of expressions used in other documents, generally in different contexts.[125] The authorities do, however, illustrate the different aspects of the dictionary definitions and emphasise the importance of the context in which the expression is used. Thus, in Mein v Ottman, Lord Trayner said:[126]

"I think it is wrong to say that a 'working day' consists of 24 hours - that period comprehends both a day and a night ... If the hours of night were to be comprehended in the 'working days', I would expect that to be distinctly provided."

On the other hand, in Turnbull, Scott & Co v Cruikshank & Co, Lord Trayner said:[127]

"In every twenty-four consecutive hours from the commencement of the loading or discharging, 500 tons were to be loaded or discharged if the weather did not hinder it or a holiday or Sunday intervened. And in my opinion the words 'working day' in the clause before us are used only in antithesis to the days which were Sundays or holidays".

In a similar sense, Vaughan Williams LJ said in British & Mexican Shipping Co Ltd v Lockett Brothers & Co Ltd:[128]

"A special term is introduced [in a charter party] by which it is provided that the discharge of cargo shall be not less than 30 'mille' per working day. ... It is not disputed that Sundays and holidays occurring during the discharging of the cargo would not be working days, and they would therefore have to be deducted in calculating the number of working days allowed, and I cannot see any reason in logic or otherwise why the same thing should not be done in regard to days which have been declared to be 'surf days' by the captain of the port".

Apparently adopting an intermediate sense, as between, for example, sense 1.a and 2 of the Oxford English Dictionary definition, Neville J said in Hanbury v Llanfrechfa Upper Urban District Council:[129]

"I ... think that the words 'working day' [in a local Act] ... mean the days upon which you may work, and not the days on which you do work, and mean, therefore, the six working days of the week, that is, the days of the week other than Sunday".

Although the parties did not rely upon dictionary or judicial authority in relation to the expression "working days", reference to this material does emphasise the point made by both the plaintiffs and the defendant that the question is one of construction of these particular policies.

84 The plaintiffs relied particularly on the second paragraph of clause 1.8 of the prosperity bond policies which provides, in respect of a switch, that:

"... The unit price will be the price on the day when the notice is given in writing."

In so doing, it was noted that the prosperity bond policies do not contain any interpretation provisions which prescribe or indicate how time periods are to be calculated for the purposes of the policies.

85 The defendant also relied upon the terms of the prosperity bond policies which, it submitted, indicate that the rights of the plaintiffs, as policyholders, to switch investment portfolios is subject to the defendant's administrative requirements as in force from time to time, relying particularly on paragraph 1.1(iii) of those policies. As these provisions exist in the context of clause 1.1 of the policies, it is helpful to set that clause out in full:

"1.1 Flexibility

This policy provides a number of valuable options which may enable you to make adjustments to suit your changing needs.

You may:

(i) pay an additional premium, subject to our express agreement;

(ii) request investment protection on some or all of your entitlements in those Prosperity Bond investment portfolios where protection is offered;

(iii) switch investment portfolios; or

(iv) withdraw cash by means of a full or partial surrender.

We will be pleased to provide you with details of our then current administrative requirements and level of charges which affect these changes. The date to which your request for a change applies must be on or after the date your request is received by us at our Customer Service Centre." [Emphasis as contained in the policies]

86 The defendant submitted that a processing cut-off time for applications and switch notices is a "quintessential" matter of administration and is extremely common.[130] In my view, the position put by the defendant is also assisted by the last, emphasised, sentence in clause 1.1 of the policies in that the reference to receipt at the Customer Service Centre does seem to suggest, in the context of fixing a date of receipt, that someone would be there to receive the request and to take whatever action might be necessary. At least, in general terms, this suggests, in my view, that the Customer Service Centre must be open and operating, hence the sense is usual business hours on a weekday other than a public holiday. In any event, the position of the plaintiffs is that the imposition of, or purported imposition of administrative requirements by the defendant which require a notice to be given during ordinary business hours during a weekday other than a public holiday is a breach of the terms of the policies.[131]

87 More specifically, the evidence was that the defendant advised the plaintiffs on 13 December 2011 that a 14:00 hours cut-off time applied to switch notices.[132] In that letter, the defendant stated:

"... you will need to be aware of the new administrative requirements NMLA have decide to implement in relation to your policy which are provided for under clause 1.1 of the policy document.

These requirements are as follows:

...

2. Any notice requiring NMLA to switch between investment portfolios must be received by us before 2.00pm Melbourne time on a Melbourne business day. A notice which is given after 2.00pm will be treated as having been given on the following business day."

No complaint was made by the plaintiffs in relation to this requirement when it was imposed nearly ten years ago and this remained the position until the issue emerged when Mr Tyne began to issue switch notices in 2009.

88 The defendant submitted that there are good reasons for imposing the cut-off time for the receipt of switch notices. This is because, it said, the plaintiffs have special terms in their prosperity bond policies which require special attention by the defendant, and whether or not "early conversion" is permitted. It is said that their notices must be treated in a completely different way from requests to switch made by other policyholders because calculations have to be made as to when the switch must be carried out and the attention of someone of reasonable seniority in the management of the defendant must be engaged to deal with each notice. On a more general basis, the defendant submitted that, as a matter of construction of a commercial contract, it is a term of the contract that is necessary for the effective operation of the contract that a notice given outside normal business hours or after any relevant deadline specified for the purposes of the contract will be deemed to be given on the next working day.[133]

89 The plaintiffs conceded that the defendant's "administrative requirements" might conceivably extend to matters such as the forms which need to be completed, addresses or fax numbers to which switch notices should be sent and other similar matters. They did not, however, concede that any such administrative requirements could have any substantive effect on the operation of the policies. More particularly, they submitted that "administrative requirements" cannot conflict with the express terms of the policies, especially the provisions of clause 1.8 that "[t]he unit price will be the price on the day when the notice is given in writing" - hence, by implication, not on the day on which the defendant deems the notice to be given. The effect of the defendant's position with respect to "administrative requirements" was, the plaintiffs submitted, to change the terms of clause 1.8 from requiring three days' notice of an intention to switch to a requirement that the plaintiffs give three and a half days' notice.

90 Further, the plaintiffs submitted that the general rules of construction should apply with respect to the calculation of the expiring of the three day notice period. The general rule is that "in computing a period of time from a date, the period will commence at the end of the day of that date" although "there is no universally operating rule to that effect".[134] By analogy, it was said, s 36(1) of the Acts Interpretation Act 1901 (Cth) provides that "Where in an Act any period of time, dating from a given day, act or event, is prescribed or allowed for any purpose, the time shall, unless the contrary intention appears, be reckoned exclusive of such day or of the day of such act or event". Section 44 of the Victorian Interpretation of Legislation Act 1984 is to similar effect.

91 In counting the days the plaintiffs sought to distinguish between parts of the day - "working day" and other times - in order to meet the defendant's arguments. Thus it was submitted:[135]

"130. The defendant submits at paragraph 77 of its closing submissions[136] that a notice given outside normal business hours (presumably 9am to 5pm) should be taken to be given on the next working day. Presumably this submission is made on the basis that 'working day' in clause 1.8 refers to an ordinary business day between the hours of 9am and 5pm. The plaintiffs are prepared to accept that definition.

131. If the definition is accepted, then the plaintiffs say that the start of the calculation of the three working day period for the purposes of clause 1.8 should commence at the start of the next 'working day' after the notice is given. For example, if switch notice from secure to cash is given at 7am on Tuesday, then the first 'working day' of the period is Tuesday, from 9am to 5pm. The end of the three 'working day' period is 5pm on the Thursday and the defendant is required to give effect to the switch at this time if the switch has not been revoked in accordance with the orders of the Court of Appeal. This accords with the defendant's understanding of the notice period, since the defendant required that a notice had to be revoked by 5.00pm on the third working day, if it was to be revoked at all. It follows the plaintiffs are then free to give a notice of intention to switch back from cash to secure at any time after 5pm on the Thursday and before 9am on Friday which would not be a short selling notice and for which Friday (9am to 5pm) would be the first 'working day' of the next three 'working day' period".

92 In my opinion, the submissions of the defendant on the basis of construction of the relevant provisions of the prosperity bond policies with respect to the day count and, to the extent that the express terms do not answer the question raised, the right of the defendant to impose reasonable administrative requirements, leads to the conclusion that the cut-off time nominated by the defendant was reasonable. In any event, even if it was not a reasonable cut-off time, a "working day" for the purpose of giving a switch notice, means normal business hours during that day. In my view, the plaintiffs' arguments based upon dividing or apportioning the twenty-four hour period of a day into the "working day" of usual business hours and the other part or parts of the day would serve to defeat the express terms of the policies in which time periods with respect to the switch notices are specified in terms of days, rather than parts of days. It is also contrary to the general position at common law that regard is not usually had to fractions of days for the purpose of construing time periods. This position is subject to express agreement to the contrary, but in the present case, the express terms of the policies re-affirm the application of the general rule, rather than the contrary position.[137] Finally, the construction and approach of the plaintiffs with respect to the day count is, in my view, a manifestation of their position that the prosperity bond policies gave them a right to profitable arbitrage. This position has, however, been rejected by the Court of Appeal[138] and with that rejection goes any argument that the proper construction of the policies with respect to the day count should be construed in a manner which would not detract from, if not facilitate, this position.

93 It follows that the defendant is entitled to impose the administrative requirements with respect to the giving of switch notices which it relies upon. Consequently, the allegations by the plaintiffs of breach with respect to the switch notice given on 8 January 2009 must fail - and the position with respect to the other switch notices must be considered in light of these administrative requirements.

94 The second switch notice which the plaintiffs alleged was treated contrary to the requirements of Argot's policy was the switch notice received by the defendant at 23:01 hours on Tuesday 13 January 2009.[139] The switch notice was a notice of intention to switch from the Secure portfolio to the Cash portfolio but as a result of the defendant's treatment of the first switch notice, Argot at that time only held units in the Cash portfolio. In any event, it was submitted that no matter on which day the second switch notice was taken to be given (that is, on 13 January 2009 on Argot's construction of the policy or on 14 January 2009 on the defendant's construction which, as I have indicated, I regard as correct), it was a short selling notice because the switch requested by the first switch notice was either in the process of switch after close of business on 13 January 2009 (on the plaintiffs', Argot's, day count) or not due to be processed until after close of business on 14 January 2009 (on the defendant's day count). Accordingly, the earliest date that a new switch notice could have been given after the first notice was either Wednesday 14 January 2009 (on the plaintiffs' day count) or Thursday 15 January 2009 (on the defendant's day count). Accordingly, Argot's allegation of breach with respect to this notice fails.[140] In this respect, it should be noted that the Court of Appeal found that "short selling" was not permitted under the terms of the policy.[141] In this context, "short selling" was treated as the "... giving notice of intention to switch an investment before acquiring the investment, provided that the investment was acquired on or before the expiration of the notice".[142] The fifth switch notice, which Argot submitted was not treated in accordance with the terms of the policy, was received by the defendant at 00:22 hours on Saturday 17 January 2009.[143] This notice requested a switch from the Cash portfolio to the Secure portfolio for both Argot and Pegela. At that time (whether at Friday 16 January 2009 on Argot's day count or Monday 19 January 2009 on the defendant's day count), Argot was still invested in the Secure portfolio, so the result was an impermissible attempt by Argot to short sell. Argot remained invested in the Secure portfolio at the critical time because Switch Notice 3 (received at 19:44 hours on Wednesday 14 January 2009) and Switch Notice 4 (received at 19:28 hours on Thursday 15 January 2009) were cancelled by Argot and Switch Notice 2 was invalid due to short selling. As submitted by the defendant, Switch Notice 5 was given on the assumption by Argot that there is a moment of time, between the working day on which the switch is completed and the next working day, during which the policyholder can give a switch notice and thereby shorten the switching cycle of the receipt working day plus three working days set out in the Prosperity Bonds policy. As discussed above,[144] on the basis of the terms of the policy, I accept that there is no such moment of time. The basis upon which this was put by the plaintiffs was not made clear and it was not suggested by any of the parties that this was a situation which attracted any of the common law concepts or rules with respect to moments of time. Consequently, Argot's claim of breach with respect to the fifth switch notice fails.[145]

95 This leaves the remaining switch notices the subject of breach allegations, namely Switch Notice 3 and Switch Notices 6, 7 and 8. The allegations with respect to the latter three notices[146] were withdrawn because the factual foundation for these allegations of breach were conceded by Mr Tyne to be erroneous. This then leaves the third switch notice which raised allegations of breach based on "early conversion".

96 Switch Notice 3 was given by Argot requesting a switch from the Secure portfolio to the Cash portfolio. It was received by the defendant at 19:44 hours on Wednesday 14 January 2009.[147] On 14 January 2009, Argot held units in the Cash portfolio with a switch to the Secure portfolio being processed overnight.[148] Consequently, at the commencement of the business day on 15 January 2009 Argot held units in the Secure portfolio. The defendant treated the notices given on the next working day, 15 January 2009, and so treated the notice as valid.

97 Argot's allegations of breach with respect to the third switch notice is that the defendant, by selling non-cash assets in response to this notice within the three day notice period, breached the provisions of the policy.[149] Although the allegation of breach was based on "early conversion", the position was that following previous switch notices, no equities or fixed interest assets, in other words "non-cash assets", had been acquired and placed in the Secure portfolio. Consequently, that portfolio held cash investments. This meant that when the Switch Notice 3 was given, there was no disposal of non-cash investments in the Secure portfolio because none existed. The defendants submitted that this occurred for the following reasons:[150]

"(a) When a switch into Secure is completed, the incoming value arrives as an amount of funds held on deposit in cash investments within the Secure portfolio. The earliest point at which equity and fixed interest investments would be acquired by the Investment Club Secure portfolio is on the afternoon of the first business day following the completion of a switch into Secure (that is, in this case, on Thurs 15 Jan 2009), as explained by Mr McMenamin.[151]

(b) However, in accordance with NMLA's 2009 decision rules for the plaintiffs' policies,[152] if a notice of intention to switch out of Secure is received prior to the acquisition of non-cash assets, those assets will not be acquired, as NMLA will only have to sell them again immediately in response to the new switch notice."

On this basis and having regard to the position reached with regard to "early conversion", the allegations of default in relation to the third switch notice fail.[153] The position with respect to "early conversion" has already been considered and reference should be made to the preceding discussion to the extent that "early conversion" in this sense is relevant to the allegations with respect to the third switch notice.[154]

98 It was also alleged that the defendant breached the prosperity bond policies by its "assertion" or position that it is not possible under the policy terms for a policyholder to have two switch notices in the same direction extant at any one time. In other words, the issue is whether multiple or concurrent switch notices are permitted.

99 At first instance, in the 2002 proceedings Redlich J found, and the Court of Appeal confirmed, that the plaintiffs were not entitled to engage in "short selling". The Court of Appeal understood short selling to mean:[155]

"[29] ... 'giving notice of intention to switch an investment before acquiring the investment, provided that the investment were acquired on or before the expiration of the notice'."

Continuing, the Court of Appeal held:[156]

"[30] ... 'We consider that, upon its proper construction, the policy does not contemplate or tolerate switches of an investment from one Account to another unless, at the time of giving notice to switch, the investment is in hand in the Account from which it is to be switched'."

100 However, as the plaintiffs submitted, neither the Court of Appeal nor Redlich J decided whether or not the plaintiffs were permitted to give more than one notice in respect of a portfolio in which the "investment is in hand". It follows, the plaintiffs say, that given the requirement that the defendant not give effect to a switch for three working days, there could be up to three successive unrevoked switch notices on foot in relation to a portfolio at any particular time.

101 The issue arose when, on 19 January 2009, the defendant wrote to Argot stating that in its view, Switch Notice 4 was invalid because it was directing a switch of the same kind as Switch Notice 3 which had not been cancelled. As noted previously, Switch Notice 3 was a notice of intention to switch from the Secure portfolio to the Cash portfolio.

102 More particularly, the defendant's position in this respect is that the policies permit only one switch at any one time and that the effect of two concurrent notices is that one must cancel the other - either the first notice is cancelled by the giving of the second notice or, if the first notice is operative, the second notice is invalid and is simply to be disregarded for all purposes.

103 In support of its position, the defendant submitted that clause 1.8 of the policies requires the policyholder to give "three working days' notice of its intention to switch" portfolios. It does not confer a right to give multiple notices expressing inconsistent intentions, one to switch on, say, a Thursday and another to switch on the Friday. The plaintiffs submitted, on the other hand, that "[t]he oldest notice will govern for the duration of its tenor".[157] In response, the defendant submitted that if that were so, the subsequent notices given while the oldest notice remains on foot would not answer the contractual description of a notice giving "three working days' notice of its intention to switch" portfolios. Further, it submitted that they are no more than contingent, inoperative documents that somehow spring into effect if and when the previous notice or notices are cancelled, whereupon the expression of the condition or contingent intention in the first of the subsequent notices is apparently converted into an expression of actual intention. Consequently, it was said the point at which the notice becomes a notice of actual intention is some time less than three days before it is required to be given effect. This means, it will follow, that it does not satisfy the requirements of clause 1.8.

104 As an alternative, the defendant submitted that the only way in which a subsequent notice which is issued while an earlier notice is on foot could answer the contractual description of a notice of the plaintiffs' intention to switch portfolios is if such a notice impliedly revoked the earlier notice. As to this, it was also submitted that clause 1.8 of the prosperity bond policies does not specify any particular manner in which the plaintiffs may communicate to the defendant that they have "changed their minds". In my view, the communication of change of mind would, if this construction were correct, be effected by giving of the later notice. On the other hand, the express terms of clause 1.8 appear to contemplate some express communication of change of mind and intention to revoke an existing switch notice. Consequently, I think that there is force in the view that this requirement of clause 1.8 is not satisfied by leaving the defendant to imply a change of mind as the result of the giving of a subsequent switch notice while an earlier notice is on foot. Having said that, I am of the view that there is more force in the argument that subsequent notices, as contingent inoperative documents that later "spring into effect", could not be regarded as satisfying the three working days' notice requirement provided for in clause 1.8.

105 The defendant notes in its submissions that resolution of this question is an important matter to determine for the construction of the ongoing operation of the Pegela policy, but even if the defendant was wrong in the construction of the policy provisions in this respect, no loss or damage was occasioned to Argot because the switch notice discussed had been cancelled by Argot before the defendant informed it of its views on validity. In this respect it was submitted that the stating of a bona fide view as to the construction of a contractual term is not a breach or repudiation.[158] For the preceding reasons, I am of the opinion that the defendant's position in relation to this issue is correct and, consequently, any issues with respect to repudiation in the context of the Pegela policy do not arise.

106 Clause 1.8 of the prosperity bond policies entitles the policyholder to revoke a switch notice without penalty. The critical provisions of this clause are as follows:

"AXA Australia also agrees that should the investor change their mind prior to the completion of the portfolio switch or withdrawal transaction and not proceed with the switch or withdrawal, no penalty will be imposed."

It is common ground between the parties that if a notice of intention to switch is revoked, then the defendant must not effect the switch. The controversy between the parties goes to the process involved in effecting the switch and whether the giving of a switch notice by the plaintiffs which is subsequently revoked leaves them in the same position as if the switch notice had never been given. In broad terms, the plaintiffs' position is that revocation of a switch notice puts them in the position they would have been in had the notice never been given. The position of the defendant, on the other hand, is that the process of effecting a switch means that although the plaintiffs will retain the same number of units in the same portfolio as were held immediately prior to the giving of the switch notice, they cannot be in the same position as they would have been had the switch notice not been given because of the need to trigger, when the notice was given, the process of effecting the switch. The defendant's position is put on the basis that it is entitled to undertake actions following the receipt of a switch notice which have the effect that if the plaintiffs revoke the switch notice, they will not be placed in the same position that they would have been if they had never given the switch notice.

107 The plaintiffs submitted that the defendant's position was not supported by the critical provisions of clause 1.8 of the policies in that it was contrary to the plain meaning of the word "revoke", being to "annul by recalling or taking back" or to "bring or call back".[159] The plaintiffs submitted that even if it were accepted that the defendant was permitted to take actions it considered appropriate when a notice of intention to switch is received, those actions could not be tantamount to giving effect to the switch before the expiry of the notice or deprive the plaintiffs of their right to revoke the switch notice and be placed in the same position that they would have been if the switch notice had not been given.

108 By way of example, the plaintiffs made reference to a strategy outlined by Mr Thornton whereby the defendant could protect its position in relation to whether or not the plaintiffs would proceed with the switch through the acquisition of derivatives.[160] The plaintiffs said that they had no objection to the shareholders of AXA protecting themselves through the course of action outlined by Mr Thornton as long as the shareholders and not the policyholders met the cost of acquiring the derivative investments and that these investments did not form part of the Secure portfolio because the effect of them so doing would be to make the Secure portfolio equivalent to the Cash portfolio. The basis for the latter proposition appears to be the statement by Mr Thornton that "Overall, the return on the assets in the [Secure] portfolio while the derivative was in place would be the cash rate of return".[161] This highlights the substance of the plaintiffs' complaint, which is that the effect of the defendant taking the steps to which it says it is entitled to take on receipt of a switch notice is to deprive the plaintiffs of the rate of return which would otherwise have been obtained on their units in the Secure portfolio absent a switch notice, rather than the Cash portfolio rate of return which would apply if the defendant's position were correct.

109 The defendant, on the other hand, approached the provisions of clause 1.8 of the prosperity bond policies somewhat differently. It submitted that the effect of a switch notice given under clause 1.8 is to inform the defendant of the intention of the policyholder to have its policy switched in three days' time at unit prices fixed on the day of the notice. Further, it submitted that the switch notice provided for under clause 1.8 of the policies is unqualified and that the right of the plaintiffs to cancel or revoke a switch notice ought not to be viewed as a qualification on that notice but, rather, a second or additional right conferred upon the plaintiffs under clause 1.8. Further, the terms of that clause do not require or provide for the provision of any indication by the plaintiffs whether or when they might intend to exercise the second right, that is, the right to cancel or revoke a switch notice. Consequently, the defendant submitted that it is entitled to treat the switch notice as meaning exactly what it says, namely, that the plaintiffs have an unqualified intention to switch at certain prices and, consequently, the defendant is entitled to order its affairs accordingly.

110 Reference has already been made to the critical provisions in clause 1.8 of the policies which confer the right on the plaintiffs to change their minds with respect to a switch notice. These provisions do not use the word "revoke", but operate in the event of an investor change of mind, the consequence being, on communication of that change of mind to the defendant, that it "not proceed with the switch ...". The absence of the word "revoke" in these provisions and the reference to the switch does, in my view, indicate the stopping of an ongoing process at the point that the defendant is notified by the investor that it has "changed their mind". This is, in my view, reinforced by the implication that notices of this intention must be communicated and, expressly, "prior to the completion of the portfolio switch ...". In considering the effect of these provisions, the Court of Appeal did describe them as permitting the investor "to revoke the notice". However, in the context of the Court of Appeal's consideration of this issue, I think it is clear that the word was being used in the sense of paraphrasing the contractual provisions contained in clause 1.8 of the policies, rather than an indication that these provisions should be interpreted as though the word "revoked" had been used.[162] In my view, this is also clear from the consideration given in the reasons of the Court of Appeal to the process which the defendant was permitted, or required, to undertake to give effect to a switch notice.[163]

111 Particularly, I note that the Court of Appeal held expressly that:[164]

"[19] ... the purpose of the second paragraph of cl 1.8 was to accommodate an investor who [1] wished to effect a transfer or withdrawal at the price applicable at the date of giving notice and [2] wished also to avoid the possibility of a delay of 30 days. Its effect was that, in consideration of the investor giving the respondent three business days' notice of intention to transfer or withdraw, and therefore the opportunity for the respondent to do what it thought necessary or desirable to accommodate the transfer or withdrawal, the investor was to be permitted to revoke the notice if, during the period of notice, the price so moved as to make transfer or withdrawal undesirable from the point of view of the investor." [Emphasis added.]

The significance of the process involved in effecting a switch was further emphasised:[165]

"[34] As it appears to us, therefore, the purpose of cl 1.8 is to afford the respondent time in which to liquidate an investment, and thereby to obtain the cash with which to purchase units in the account into which the investment was to be switched. There would be no point in stipulating for a [delay] period in which to liquidate an investment if the investor could delay until the [last] day the acquisition of the investment which was to be liquidated. ..."

112 Thus, the defendant submitted, the approach and findings set out in the Court of Appeal's reasons are expressly permissive in that the defendant may do what it thinks "necessary or desirable" to effect a switch. The position is, as found by the Court of Appeal, that clause 1.8 of the prosperity bond policies does not constrain the defendant's actions in response to receipt of the switch notice, otherwise than in preventing the defendant carrying out the switch (by cancelling and creating the relevant units and transferring an amount of money) earlier than three working days after the day on which the notice was received.

113 I accept that the statement by the Court of Appeal that the defendant is entitled to use the three day notice period to do what it thought necessary or desirable to accommodate the transfer or withdrawal necessarily implies that there will or may be changes made by the defendant during that period from the state of affairs that prevailed on the date upon which the switch notice was given. It was submitted by the defendant that interpreting clause 1.8 so as to prevent it from making any such changes would be to deprive it of the opportunity that the Court of Appeal held that it has. Further, it was said that the reference to the liquidation of an investment to obtain cash to purchase units, to which reference was made by the Court of Appeal,[166] is a reference to the very administrative steps in question in effecting a switch.

114 The defendant submitted that there is nothing in the provisions of clause 1.8 of the prosperity bond policies which requires a return to an earlier state of affairs upon revocation of a notice of intention to switch. In particular, it was submitted that there is nothing in the clause, particularly with reference to the expression "not proceed", or in the meaning of the word "revoke" that implies an obligation on the defendant to undo any steps that it had already taken in response to receipt of a switch notice. The word "revoke", it was submitted, does not mean to avoid the thing ab initio. Rather, it was said that in normal usage when a notice of any other thing is revoked, it simply ceases to have effect from the time of revocation. Emphasising this position, the defendant submitted that revocation does not, in normal usage, involve avoidance ab initio, treating the thing revoked as if it had never existed, or treating things done pursuant to the thing revoked as invalid or requiring to be reversed.

115 At this point, it is useful to refer to some dictionary definitions. The Oxford English Dictionary contains a variety of definitions of the word "revoke", both as a noun and a verb. In the present context, if the word "revoke" were to be used in clause 1.8, it would be used as a verb. The senses in which such a verb might be used vary significantly, depending upon context, as the Oxford English Dictionary indicates very clearly. These senses include:

"...

2.

a.trans. To recant, withdraw (something one has written or said); to retract, take back (a statement, opinion, vow, etc); to renounce (a belief).

...

1. R. MANHEIM tr. H. Leisegang in J. Campbell Mysteries 253 Odobesco ∙∙ revoked his opinion of 1868. For in the third volume ∙∙ he put forward an entirely different interpretation.
2. T.E. BARLOW Question of Women in Chinese Feminism vii. 331 She never revoked her belief.

**b.**intr. To make a retraction; to recant. Also with from. Obs.

...

3.trans.

a. To annul, repeal, rescind (a decree, will, privilege, etc.); to cancel (an order, appointment, office, etc.). Also intr.

...

†b. To break up, dissolve (an assembly). Obs. rare¯1.

...

5.trans.

†a. To call back or restore (time, the past, etc); (also more generally) to summon or bring back (a thing or animal). Chiefly fig. Obs.

...

1. W. COWPER _Task_VI. 25 How readily we wish time spent revok'd, That we might try the ground again.
2. Acton 256 We could not revoke the tide of time.

b. To recall, summon back (a person), esp. from exile or from an office abroad. Now rare.

...

1. K. MAIER et al. Conspicuous Destr. X. 181 On March 13, in retaliation for the expulsions, the United States revoked ... its ambassador.

c. To dismiss a person from (an office, position of authority, etc.).

...

7.trans. Chiefly with to or unto (oneself). To take back (a thing); to appropriate (a right, privilege, etc.); to assume jurisdiction over (a case, a suit, etc.). Also with into (one's hands).

...

1. Last Vials Aug. 139 It is 'good news' to tell the whole world that its true King is about to appear, and to revoke to himself all the power and royalty of the earth.
2. A.R. KELLY Eleanor of Aquitaine & Four Kings xxi. 229 He publicly revoked into his own hands all the provinces he had long ago assigned to his sons.
3. J.C. SPALDING tr. Reformation Eccl. Laws Eng. 255 A bishop can revoke to himself cases which are being tried before his vicar.

Similar senses appear in the Oxford English Dictionary definitions of "revoke" used as a noun:

"1. The action or an act of revoking something, revocation; repeal; renunciation. Now chiefly in beyond revoke.

...

1. Nation (Thailand) (Nexis) 9 Feb., A mandate is by no means beyond revoke, as witnessed many times in world history."

A much briefer definition is set out in the Macquarie Dictionary, which picks up some of the senses referred to in the Oxford English Dictionary:

"revoke /rə'vouk/ verb (revoked, revoking) -verb (t) 1. to take back or withdraw; annul, cancel, or reverse; rescind or repeal; to revoke a decree.-verb (i) 2. Cards to fail to follow suit when one can and should do so; renege. -noun 3. Cards an act or instance of revoking; renege. [Middle English, from Latin revocāre call back] - revo-ker, noun"

116 As noted previously,[167] Mr Tyne referred to a dictionary definition of "revoke" as meaning "annulled by calling back". This was a reference to the definition contained in Merriam-Webster International Dictionary.[168] This definition is as follows:

"re-voke verb

re-voked re-vok-ing

Definition of REVOKE

transitive verb

1 : to annul by recalling or taking back : RESCIND

2 : to bring or call back

intransitive verb

: to fail to follow suit when able in a card game in violation of the rules

...

Examples of REVOKE

The judge revoked her driver's license.

Their work permits were revoked.

Their privileges were revoked after they misbehaved.

...

Related to REVOKE

Synonyms: abandon, abort call, call off, cry off, drop, recall, repeal, rescind, cancel, scrap, scrub

Antonyms: continue, keep"

117 As observed by the defendant, none of the examples of the uses of the word "revoke" referred to in the Merriam-Webster definition involve or result in the thing revoked being treated as if it never existed and nor are things done by the holder of it treated as invalid or as never having existed or as requiring to be reversed. In each case, the holder of the licence, work permits or privileges ceases to hold it as and from the time of revocation, but no more than this is involved in the concept of revocation the subject of these examples. On this basis, it was submitted that the meaning of "revocation" or "revoke" relied upon by the plaintiffs is not the normal meaning of that word or words and is not supported by the dictionary definitions. On the other hand, the dictionary definitions contained in the Oxford English Dictionary and the Macquarie Dictionary, which are set out above, do indicate that the word "revoke" is used in a wider variety of senses than indication in the Merriam-Webster dictionary. The common thread in these dictionary definitions, particularly as emphasised in the definitions and examples given in the Oxford English Dictionary, is that the word must be read in context. In this case, to the extent that it might be said to be implicit in the provisions of clause 1.8, it must be read in the context of those provisions.

118 In the context of clause 1.8 of the prosperity bond policies, the word "revoke" is, in my view, only implicit in the sense that it might be said to paraphrase the last sentence of those provisions, which is set out above.[169] In my view, there is nothing in this sentence which suggests a restoration of the position ab initio in the event that the investors "change their mind" and decide "not to proceed with the switch ...". Consequently, the defendant is entitled to treat a notice of intention to switch as meaning exactly what it says, namely that the plaintiffs intend to have their policy switched in three days' time at unit prices fixed on the day of the notice, and the defendant is entitled to act on that basis. If the plaintiffs subsequently change their minds and inform the defendant that they no longer wished to proceed with the switch, then the defendant must deal with the situation that then exists, which is one where it has made preparations for the carrying out of the switch in accordance with the switch notice given to it, with the result that the Secure portfolio will have contained only cash-type assets for a certain period of time. These provisions do not require the defendant to take action to adjust the unit price so that it equates with the unit price that would have existed if the switch notice had never been given at all, for this would amount to a requirement that the "revocation" affected the position ab initio.

119 The remaining question in relation to this issue is whether the judgment of the Court of Appeal casts any doubt upon or indicates a contrary position to that discussed thus far. The plaintiffs relied upon the following part of the judgment of the Court of Appeal in support of their position that if they decided not to proceed with a switch notice, they were entitled to be placed in the same position as though the notice had never been given. The relevant parts of the Court of Appeal reasons are as follows:[170]

"[19] ... the investor was to be permitted to revoke the notice if, during the period of notice, the price so moved as to make transfer or withdrawal undesirable from the point of view of the investor."

The defendant is correct, in my view, in characterising this passage as an observation as to the effect of the right of the plaintiffs to change their minds and not proceed with a switch notice.

120 As to this contention, the defendant submitted:[171]

"166. First, in the contract itself the right to cancel a switch exists without any statement of purpose; further, as the judge held at the 2003 trial, its purpose was never explained to NMLA by the plaintiffs or their agent.[172]

167. Second, the Court of Appeal must be taken to have been giving an example of one use of the clause, not defining its meaning. The right not to proceed with a switch is unconfined - it is sufficient that the policyholders change their mind. Its exercise is not restricted to the example referred to by the Court of Appeal; the plaintiffs are entitled to change their minds for any reason at all.

168. Third, there is nothing in the Court of Appeal's statement that indicates the existence of any obligation of NMLA to ensure that the Secure portfolio unit price in fact moves in any particular manner or at all; it is simply a statement that if as a matter of fact the unit price moves so as to make the switch no longer desirable, then as a practical matter the plaintiffs might be thought likely to change their minds and not proceed with it. There is no indication of what sort of movement might occur to bring about that result or how exactly that is to be reflected in the assets in the Secure portfolio from day to day.

169. Finally, NMLA's construction does not negate the practical effect described by the Court of Appeal. In particular, if the relevant asset markets are rising or predicted to rise, the policyholder may decide that it no longer wishes to switch out of Secure into Cash (when to do so would be to lock itself out of the stock market for at least 4 -5 business days). In that case, under NMLA's practice, cancellation of the switch has the effect of enabling the policyholder to get back into the market within one business day of the cancellation. This is entirely consistent with the Court of Appeal's example of a purpose of the right to cancel."

121 The defendant's submissions in this respect ought to be accepted. In the context of the reasons set out in the Court of Appeal judgment, I am of the opinion that it is clear that the reference to price movements in the part of the judgment relied upon is given by way of example and that it would be a very strained reading of the Court of Appeal's reasons to suppose that it was being suggested that the plaintiff investors could not choose to decide not to proceed with a switch notice for any other reason or reasons, whether commercially based or not. Additionally, the reference to price movements is not limited as to short-term or long-term, and whilst a statement of this kind with a short-term perspective might be thought more persuasive in terms of the plaintiffs' position, it would be less so if read with a longer term perspective. This is because a long-term movement in the market would make market, hence price, movements over a three day period potentially much less significant. In any event, the Court of Appeal is not suggesting, in the passage set out[173] or otherwise, that the proper construction of clause 1.8 of the prosperity bond policies is to be determined on the basis of the effect of the right of the plaintiffs to change their minds.

122 The issue in relation to unit pricing is whether the defendant is permitted to calculate unit prices monthly whether or not this has the effect of reducing the benefits which the plaintiffs claim may otherwise be available to them as a result of taking advantage of the special terms of the prosperity bond policies.

123 The position of the plaintiffs is that clause 1.8 of the prosperity bond policies requires that the unit price be calculated daily and that the defendant is not entitled to calculate unit prices only monthly as it claims to be entitled to do. In support of its position, the plaintiffs draw an inference from the provisions of clause 1.8, which entitles them to give three days' notice of its intention to switch units, together with the right to change their mind in relation to the switch notice as indicating a requirement for the calculation of unit prices on a daily basis. The underlying assumption is that unless unit prices were calculated on a daily, rather than a monthly, basis, there would be no possibility of unit price movement during the three day period, with the consequence that their arbitrage strategy would be rendered impossible or at least much less attractive.

124 The plaintiffs submitted that monthly pricing of units would conflict with the requirements of clauses 3.2(a) and 4.20 of the Prosperity Bond policies, which provide:

"3.2 Prosperity Bond Market-Linked Portfolios

a. Prosperity Bond Market-Linked Portfolios are divided into parts of equal value called Units which are used to keep track of your entitlements under this policy. Changes in market values in the investments in each portfolio are reflected in the Unit Prices which rise and fall as a result."

"Section 4 - Definitions

...

4.20 'Unit Prices' are the dollar value of each Unit. The Unit Price in a particular Prosperity Bond Market-Linked Portfolio is calculated as follows:

(i) As soon as practical after a day as at which the Portfolio Net Value is determined, we determine a Benchmark Unit Price as at that date, by dividing the Portfolio Net Value by the total number of Units then held in that portfolio.

(ii) The Unit Price is then calculated by adjusting as we deem appropriate the Benchmark Unit Price most recently determined to take account of any fluctuations in the market value of the investments of the portfolio since the date as at which the Portfolio Net Value is determined.

(iii) ..."

125 In relation to these provisions, it was submitted that the defendant would not comply with its obligations to adjust the Benchmark Unit Price "to take account of any fluctuations in the market value of the investments of the portfolio" if it did not calculate a unit price on a daily basis, or at least on any day on which a unit price is required. It was said that the phrase "as we deem appropriate" in clause 4.20(2) gives the defendant a measure of administrative discretion in how it goes about taking into account any fluctuations in the market, but does not remove the obligation to do so (plaintiffs' emphasis).

126 Further, in support of its position, the plaintiffs relied upon various parts of the judgment of the Court of Appeal on the basis that the "no movement in unit prices" argument had been alluded to by the defendant previously,[174] but apparently not accepted by the Court of Appeal. In this respect, reference was made to paragraph [19], [26], [40] and [108] of the judgment of the Court of Appeal on the basis that these parts of the judgment indicate an assumption that unit prices would move to reflect movements in asset values. Further, in relation to paragraph [108], it was said that the Court of Appeal held that clause 3.2(a) "... amounts to a clear statement that unit prices will rise and fall in a manner that reflects the value of the assets in the portfolio from time to time". The reference in paragraph [108] to the operation of clause 3.2(a) is in the context of a discussion of "dilution", which is described by the Court of Appeal as "... a natural consequence of historic pricing arbitrage between a stable Cash portfolio and a relatively volatile Secure portfolio".[175] The parts of the reasoning at paragraph [108] relied upon by the plaintiffs appear to be as follows:

"[108] ... As set out above, cl 3.2(a) provides that portfolios are to be divided into parts of equal value, called Units, 'to keep track of your entitlements under this policy' and that 'changes in market values of the investments in each portfolio are reflected in the Unit Prices which rise and fall as a result.' That amounts to a clear statement that unit prices will rise and fall in a manner that reflects the value of the assets in the portfolio from time to time. Clause 3.2(a) provides for dividing portfolios into parts of equal value to keep track of entitlements. Similarly, the first paragraph of cl 4.20 expressly provides that the Benchmark Unit Price is to be determined by dividing the value of the assets in the portfolio by the number of units on issue. That means that the number of units in a portfolio must be taken into account when determining unit prices".

127 In my opinion, particularly given its context, the passage set out above indicates no more than the provisions of the prosperity bond policies contemplate movements in unit prices. There is nothing in this passage or, indeed, the contents of paragraphs [19], [26] or [40], the parts of the reasons for judgment of the Court of Appeal relied upon by the plaintiffs in this respect, which indicate or assume more than this. Critically, there is no discussion or suggestion in these parts of the Court of Appeal judgment which state, imply or suggest that unit pricing is to occur at any particular frequency.

128 There are, however, parts of the reasons for judgment of the Court of Appeal which are clearly critical to this issue to which the plaintiffs make no reference. These are paragraphs [95] to [98] of the judgment, which appear under the heading, which immediately precedes this material, "Term as to daily unit pricing". The Court of Appeal's treatment of this issue opens with paragraphs [95] and [96], as follows:

"[95] Counsel for the appellants argued in support of the alleged daily publication of prices term that the judge had erred in concluding that such would be inconsistent with express terms of the policy and not supported by custom. In counsel's submission, inasmuch as cl 3.2(e) of the policy provided that unit prices 'are usually declared on a daily basis, but may be declared more or less frequently' it was a breach of the express provisions of cl 3.2(e) for the respondent to adopt a practice of failing to declare prices daily.

[96] We disagree. There could be no breach of the kind alleged unless upon its proper construction cl 3.2(e) amounted to a warranty that the respondent would usually declare unit prices on a daily basis. In our view, it appears from other clauses of the policy, and in particular from cll 2.2(e) and 4.20, that it did not have that effect but rather was in the nature of a warning that the pricing system could be changed".

The discussion concludes with paragraphs [97] and [98], which have been set out previously,[176] where the Court of Appeal emphasised that the plaintiffs' entitlement under the prosperity bond policies did not include the right to profitable arbitrage and that the defendant was entitled to exercise powers under the policies "to frustrate the hope and expectation of profits" on the part of the plaintiffs.

129 In support of its position, the plaintiffs also sought to rely upon the Unit Pricing: Guide to Good Practice issued by the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission.[177] In particular, reference was made to the statement that:[178]

"You should price as frequently as you make it possible to buy or sell units in the fund, and process applications at the price effective on the date of transaction".

It was also submitted that monthly pricing would conflict with the defendant's Unit Pricing Policy,[179] which specifies, in section 5.2 (Frequency of settling and calculating unit prices) that daily unit pricing is used in respect of both statutory funds and the underlying trusts. It was also noted that the Unit Pricing Policy specifies, in section 12 (Backdating), how backdating is to be dealt with, noting that Appendix D states that:

"A simple definition of backdating is the situation where the effective date on an application/withdrawal for a product is earlier than the process date of an application/withdrawal".

As to this, the plaintiffs submitted that the "three day option" in clause 1.8 is, in effect, a contractually mandated form of backdating. On this basis, reference was made to sub-paragraphs 12.2.2 and 12.2.3 of the Unit Pricing Policy, as follows:

"12.2 Backdating Costs/Benefits

NMFM Trusts

12.2.1 ...

12.2.2 In instances where backdating does occur and there is a cost to the product, if the cost to the product is deemed to be less than $100, the cost will be borne by unit-holders in the product. In circumstances where the cost to the trust is greater than $100, the cost will be borne by AXA.

Statutory Funds

12.2.3 In instances where backdating does occur, if the backdating period for an application/withdrawal is less than or equal to 5 Australian business days, the cost/benefit to the product will be borne by unit-holders in the product. In circumstances where the backdating period for an application/withdrawal is greater than 5 Australian business days, the cost/benefit will be borne by AXA."

Consequently, it was said that the effect of the defendant's own policies is that unit pricing must be undertaken on a daily basis and to the extent that there are costs incurred by reason of backdating, those costs must be borne by the defendant. In my view, this material does not assist the position of the plaintiffs. The policy documents, both regulatory and those of the defendant, are significantly later in time to the date upon which the prosperity bond policies were entered into and, in any event, the terms of those policies must govern the position. Further, I am of the opinion that the issue has been settled by the Court of Appeal in those parts of the judgment to which reference has been made.[180] Additionally, I am of the view that the position is strengthened having regard to the specific reference by the Court of Appeal to this issue in the context of both the "express terms of the policy" and "custom".[181]

130 Finally, the plaintiffs made reference to the evidence of the defendant's witnesses in support of the proposition that it was departing from settled practice or custom for the purpose of depriving the plaintiffs of the benefit of the special terms:[182]

"142. The defendant's witnesses each stated that the defendant's practice was to calculate unit prices daily.[183] The only rationale for departing from that practice was to deprive the plaintiffs of the benefit of the special terms.

143. Mr Thornton even went further to suggest that the defendant could adopt a practice of examining the movements in underlying asset values and, if the asset prices had moved in favour of the defendant, set a new unit price but, if asset prices had moved in favour of the plaintiffs, refuse to adjust the unit price.[184] This practice would fly in the face of the requirements of clause 4.20 of the policy and sections 32 and 48 of the Life Insurance Act. That the defendant could even propose such a practice serves only to demonstrate the determination of the defendant that under no circumstances will it permit the plaintiffs to benefit from the special terms granted by the defendant.

144. Mr Thornton similarly demonstrates the defendant's willingness to flaunt the terms of the policy in his proposal that that the defendant set the unit price on day a switch is given effect to, not the day the switch notice is given, as required by the express terms of clause 1.8 and the orders of the Court of Appeal.[185]"

Even if one were to accept the plaintiffs' characterisation of the evidence of the defendant's witnesses, as set out above, I am of the view that this takes their position nowhere having regard to the express finding by the Court of Appeal that the defendant was entitled to exercise the powers conferred upon it by clauses 2.2(e), 3.2(e) and 4.20 of the Prosperity Bond policies "to frustrate the hope and expectation of profits".[186]

131 Reference should also be made to the submissions by the plaintiffs that the defendant was under and obligation of good faith which, putting it in general terms, favoured the position of the plaintiffs.

132 It was common ground between the parties that the prosperity bond policies are "investment-linked contracts" for the purposes of s 14 of the Life Insurance Act 1995 (Cth) and that the defendant and its directors must comply with ss 32 and 48 of that Act in "the investment, administration and management of the assets of a statutory fund, ... giving priority to the interests of owners and prospective owners of policies referable to the fund". Reference was made to sub-s 48(3) of the Act which provides that:

"In order to avoid doubt, it is declared that, in the event of conflict between the interests of owners and prospective owners of policies referable to a statutory fund and the interests of shareholders of a life company, a director's duty is to take reasonable care, and use due diligence, to see that the company gives priority to the interests of owners and prospective owners of those policies over the interests of shareholders."

On this basis it was submitted that a life company, in exercising judgment or discretion in respect of the administration of life policies, must exercise that discretion in favour of the policyholders and not in a manner that advantages the shareholders of the life company at the expense of the policyholders.

133 Further, it was submitted by the plaintiffs that as contracts of life insurance the plaintiffs' policies were also subject to s 13 of the Insurance Contracts Act 1984 (Cth) which provides that:

"A contract of insurance is a contract based on the utmost good faith and there is implied in such a contract a provision requiring each party to it to act towards the other party, in respect of any matter arising under or in relation to it, with the utmost good faith."[187]

The duty implied by s 13 is a statutory duty apart from any ordinary duty of good faith which might be owed by parties to a commercial contract.

134 The plaintiffs submitted that it was common ground between the parties and was accepted by Redlich J at the trial in the 2002 proceedings and by the Court of Appeal that s 13 of the Insurance Contracts Act applied to the policies. Redlich J noted that:[188]

"Each of the parties alleges that the conduct of the other and their construction of the special terms is contrary to the general notions of fairness under the LIA [Life Insurance Act] and the duty to act with the utmost of good faith under s 13 of the ICA [Insurance Contracts Act]."

135 Redlich J did, however, find it "unnecessary to further consider the plaintiffs' allegation that the defendant was in breach of its implied duty to act with utmost good faith towards them".[189]

136 In the context of and towards the conclusion of a discussion on "Dilution", the Court of Appeal made reference to ss 13 and 14 of the Insurance Contracts Act and rejected the contention that the obligation of good faith involved the defendant, in effect, funding the plaintiffs' profitable arbitrage. The Court of Appeal said:[190]

"[125] Counsel for the appellants contended that, if the express or implied terms of the policy permitted dilution, the judge should have held that the respondent's reliance on the provisions amounted to a failure by the respondent to act with the utmost good faith and, consequently, that the respondent was precluded by ss 13 and 14 of the Insurance Contracts Act 1984 (Cth) from relying on those provisions.

[126] We also reject that contention. At the risk of repetition, there was nothing in the terms of the policy which required the respondent to continue to fund the arbitrage profits of the Coneview investors for the life of the policies. That being so, there was no lack of good faith involved in the respondent's refusal to assume an obligation to continue to fund the arbitrage profits of the Coneview investors for the life of the policies.[191]"

137 The Court of Appeal approached arguments based on s 32 of the Life Insurance Act on the same basis:[192]

"[145] The appellants contended that segregation was inconsistent with s 32 of the Life Insurance Act 1995 (Cth), which so far as relevant provides that:

(1) In the investment, administration and management of the assets of a statutory fund, a life company:

(a) must comply with this Part; and

(b) must give priority to the interests of owners and prospective owners of policies referable to the fund.

...

(4) A reference in subsection (1) or (2) to the interests of owners of policies referable to a statutory fund is a reference to the interests of such persons viewed as a group.

[146] We do not agree. The plain and ordinary meaning of the 'interests of owners and prospective owners of policies referable to the fund' is their interests as framed by their entitlements under the policies. That interpretation was supported by evidence given by Lyon that life companies generally understand s 32 as requiring the treatment of all policyholders with reference to their entitlements under their policies. Section 32 does not require a life company to confer benefits for which policies do not provide and, as we have said, the Coneview policies did not provide that non-Coneview investors would remain invested in the Cash and Secure portfolios so as to ensure profitable Coneview investor arbitrage. The suggestion that segregation gave priority to the respondent's own interests over the interests of Coneview investors is also misconceived. In effect, it simply repeats the fallacy that the respondent was required to put sufficient of its own funds into the Secure portfolio to eradicate the effects of dilution on arbitrage switching between the Cash and Secure portfolios."

The same applies to s 48 of that Act.

138 The plaintiffs sought to limit the effect of this finding by the Court of Appeal on the basis that it did not excuse the defendant from meeting the costs of the obligations it had assumed or given the defendant carte blanche to take any action to deprive the plaintiffs of the benefit of the special terms of the policies which was not prohibited by the express terms of the policy. It submitted further that if the defendant's contrary position were correct, the obligation of utmost good faith would be empty and would confer on the parties no greater rights or obligations than they would have had under the ordinary law of contract. I do not accept this submission. It is clear from the passages from the Court of Appeal judgment set out above that the Court had turned its mind to statutory obligations of good faith and rejected the submissions of the plaintiffs in this respect, both in the reasons for judgment and its orders and declaration.[193] In my view, this is also made abundantly clear by the emphasis given by the Court of Appeal in its judgment to the position that under the terms of the policies, the plaintiffs had no right to profitable arbitrage and, further, that the defendant was entitled to exercise its rights under the policy provision to frustrate their "hope and expectation of profits".[194] Additionally, in my view, the position of the plaintiffs in this context is not enhanced by reliance upon any common law obligation of good faith or duty to cooperate in effecting the contractual purpose[195] or the evidence of Dr Gribble and Mr Thornton in support of the proposition that the defendant cannot now be permitted to deprive the plaintiffs of the benefit of clause 1.8 simply because it regrets the bargain that it made.[196] There can be no duty to cooperate to bring about something which the contract does not require, or to give effect to a claimed right the contract does not confer. In my view, the approach taken by the Court of Appeal to the right to profitable arbitrage as claimed by the plaintiffs also disposes of these issues.

Effect of any res judicata, issue estoppel and Anshun matters

139 On the basis of the position reached with respect to the effect of breach or breaches, no res judicata, cause of action estoppel or Anshun estoppel matters or issues need be considered further, as both the remaining matters in the 2002 proceedings and the 2009 proceedings are resolved for the reasons already indicated.

Damages for unconscionable conduct and misleading or deceptive conduct

140 In relation to the 2002 proceedings, there remains for determination the assessment of damages payable by the defendant to each of the plaintiffs for unconscionable conduct or, in the alternative, misleading or deceptive conduct within the meaning of section 52 of the Trade Practices Act 1974 (Cth). The orders made by Redlich J in this respect were not set aside by the Court of Appeal. His Honour ordered:

"1. It is declared that the defendant engaged in unconscionable conduct in respect of the Prosperity Bonds issued by it to the plaintiffs by failing to disclose to the plaintiffs, prior to their entry into their respective Prosperity Bond policies, its intention to −

(a) cease calculating the prices of units issued in respect of the Cash and Secure portfolios on an historical basis; and

(b) reduce the plaintiffs' expected profits from arbitrage through the defendant's calculation of the prices of units issued in respect of the Cash and Secure portfolios on an historical basis by permitting changes in the numbers of units issued in respect of those portfolios to cause the prices of units in those portfolios to rise or fall, being changes brought about in consequence of switches of units between those portfolios requested by or on behalf of the plaintiffs.

(a) the defendant engaged in misleading and deceptive conduct within the meaning of section 52 of the Trade Practices Act 1974 (Cth) by failing to disclose to the plaintiffs, prior to their entry into their respective Prosperity Bond policies, its intention to −

(i) cease calculating the prices of units issued in respect of the Cash and Secure portfolios on an historical basis; and

(ii) reduce the plaintiffs' expected profits from arbitrage through the defendant's calculation of the prices of units issued in respect of the Cash and Secure portfolios on an historical basis by permitting changes in the numbers of units issued in respect of those portfolios to cause the prices of units in those portfolios to rise or fall, being changes brought about in consequence of switches of units between those portfolios requested by or on behalf of the plaintiffs.

(b) the plaintiffs' claims that the defendant engaged in misleading and deceptive conduct otherwise fail.

1. Order that the defendant pay damages to the plaintiffs:

(a) to be assessed in respect of the defendant's conduct referred to in order 1, such damages −

(i) to compensate the plaintiffs for:

(A) any borrowing expenses and other costs reasonably incurred in maintaining their investments in respect of their Prosperity Bond policies;

(B) any management fees paid in respect of the management of their Prosperity Bond policies; and

(C) any loss of opportunity to make alternative investments which the plaintiffs are able to establish;

(ii) to be calculated from the date on which the defendant ceased calculating the prices of units issued in respect of the Cash and Secure portfolios on an historical basis until the conclusion of a reasonable period after the date on which notice was given of the defendant's intention to cease calculating the prices of units issued in respect of the Cash and Secure portfolios on an historical basis; and

(iii) not to include any expectation profits or damages for loss of bargain;

(b) in the alternative to (a) above, to be assessed in respect of the defendant's conduct referred to in order 2."

141 The parties in their joint list of issues in dispute summarised the outstanding issues in this respect as follows:

"Unconscionable conduct / Trade Practices Act damages

8.1 Reasonable period: For the purposes of calculating the plaintiffs' loss and damage for contravention of section 52 of the Trade Practices Act or unconscionable conduct pursuant to the order of Redlich J, what is a "reasonable period" for the purposes of para 3(a)(ii) of the Orders of Redlich J made on 15 December 2006? The plaintiffs contend for 3 months (from 16 October 2000) for Pegela and 6 months for Argot; the defendant contends for one month.

8.2 Management fees and borrowing costs: During the reasonable period applicable to each of Argot and Pegela, what management fees and borrowing costs were incurred by each of them?

8.3 Alternative investment: During their reasonable period applicable to each of Argot and Pegela, has either or both of the plaintiffs established on the balance of probabilities that it lost a commercially valuable opportunity to make an alternative investment by reason of having invested in the policies in reliance upon the defendant's contravention of section 52 of the Trade Practices Act or unconscionable conduct?

8.4 Expectation damages. The plaintiffs confirm that they are not (or are no longer) claiming expectation damages in respect of the defendant's unconscionable conduct and contravention of section 52 of the Trade Practices Act.

8.5 Orders: In accordance with the parties' written submissions, the orders of the Court should be that the defendant pay the plaintiffs damages in respect of the defendant's unconscionable conduct / contravention of section 52 of the Trade Practices Act in an amount agreed between the parties, having regard to any findings with respect to paragraphs [8].1 to [8].3 above or, failing agreement, in an amount determined by an Associate Justice."

142 The date that the defendant ceased calculating the price of units on a historical basis was 16 October 2000. Therefore, the plaintiffs are each entitled to damages for:

(a) any borrowing expenses and other costs reasonably incurred in maintaining their investments in respect of their Prosperity Bond policies;

(b) any management fees paid in respect of the management of their Prosperity Bond policies; and

(c) any loss of opportunity to make alternative investments which the plaintiffs are able to establish;

to be calculated from 17 October 2000 to the conclusion of the reasonable period. The reasonable period referred is the amount of notice the defendant should have given the plaintiffs of the changes referred to in paragraph 1(a) and (b) of Redlich J's orders.[197]

143 The plaintiffs submitted that the reasonable period for Pegela was three months. This was based on the evidence of Mr Hawkins that it would take three months to cash out of the Prosperity Bond policies and invest in an alternative investment.[198] The plaintiffs submitted that the reasonable period for Argot for making its alternative investment was six months. These submissions appeared to be based on the amount of time required to cash out of the Prosperity Bond policies, decide on another investment, obtain any required financing for the new investment and to enter into the new investment.

144 In its closing submissions the defendant submitted that one month[199] was reasonable notice as the entire investment could have been withdrawn immediately, or at least very quickly. I accept that this is the case and, consequently, as the defendant submitted, one month is more than sufficient for the purpose of withdrawing funds and making alternative investments. As a result, I find that one month is a reasonable period for the purpose of calculating the damages.

145 I now turn to consider the claims for loss of opportunity damages. Argot claims damages for the loss of the opportunity to make an alternative investment with an entity called LJM Partners. This claim was supported by the evidence of Mr Scott Tyne both in his witness statement and in cross examination.[200] Pegala claims damages for the loss of opportunity to make an alternative investment in Wesfarmers shares. This claim was supported by the evidence of Mr Garrick Hawkins both in his affidavit and in cross examination.[201]

"Damages for loss of opportunity

15. The principles by which some loss or damage for the loss of an opportunity to enter into an alternative investment are to be established and quantified are well established.

16. The plaintiffs must establish:

(a) on the balance of probabilities, that their entry into the Prosperity Bond policies caused them to lose a commercial opportunity which had some, not merely negligible, value; and

(b) by reference to the degree of probabilities or possibilities, the value of the opportunity lost.

17. In Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 355, Mason CJ, Dawson, Toohey and Gaudron JJ described the manner in which this two stage enquiry is to be approached as follows:

"[T]he applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable."

18. In short, in a case such as this, a plaintiff must "establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed": Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 13 per Mason, Wilson and Dawson JJ. If it cannot do so, it will have not have established any loss.

19. If a plaintiff can establish that he or she could and would have entered into some non-negligible alternative investment opportunity, the value of that opportunity will be assessed by reference to the degree of probability of the claimed value of the investment actually coming to fruition, even if it is less than 50%: Malec v J C Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 at 642-643 per Deane, Gaudron and McHugh JJ; Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 355-356.

20. The defendant does not accept that the plaintiffs' entry into the Policies actually deprived them of any alternative investment opportunity that would otherwise have been open to them. That is to say, while it may be the case that the plaintiffs would not have invested in the policies had it not been for the defendant's unconscionable conduct, it is for the plaintiffs to establish, to the satisfaction of the Court, that the fact that they did invest in the policies prevented them from making some other form of investment. If at the time there was no other investment opportunity that they found attractive, or if there was some attractive investment but they had the means to invest in it and decided not to for some reason, then the defendant's conduct could not be said to have caused them to miss an alternative opportunity. The relevant facts will be explored during the hearing. "

147 The defendant further submitted that:[203]

"262. The plaintiffs' own evidence shows that there was no opportunity to make an alternative investment lost by reason of each plaintiff's entry into its Prosperity Bond. This is because of one or more of the following.

(a) There was no alternative investment then under consideration. The Prosperity Bond was a unique investment opportunity, such that each plaintiff was able to make the investment outside of their usual pattern.

(b) The suggested alternative investment opportunities now put forward by each plaintiff lack credibility.

(c) If, contrary to the above, there was an alternative investment which either plaintiff was considering, each of them had the resources to undertake that investment in October 2000 and their resources were not affected adversely by their investment in the Prosperity Bond.

1. The plaintiffs were free at all times to withdraw from Prosperity Bond on 24 hours notice, with their capital entirely intact. Accordingly, if there had been an alternative investment that could only have been funded by them if they were not invested in the prosperity bond, they could have withdrawn their funds immediately.

264. These conclusions are established by:

(a) the evidence of Messrs Tyne and Hawkins that there was no comparable product offering the same mix of return and risk;[204]

(b) the fact, established in documents sourced from ANZ Sydney under subpoena, that the bank was willing to lend on Prosperity Bonds because of the special security characteristics which the Prosperity Bond offered, with its guaranteed "Protection Option";[205]

(c) the fact, established by Argot's[206] and Pegela's[207] stated intentions in November 2000 to each invest a further $5 million in their respective policies, that their holding of the policies did not exhaust their ability to invest an equivalent sum at that time;

(d) the fact that Pegela had the means to undertake any investment that it chose - the determinant on entry into other investments was the rate of return, length of time and risk, not constraints on the availability of finance.[208]"

148 On the basis of the authorities, evidence and other matters referred to in the defendants submissions I accept that the plaintiffs have not established on the balance of probabilities that they each lost a commercial opportunity. While both plaintiffs may have been considering alternative investments prior to purchasing the Prosperity Bond policies, there is insufficient evidence to establish that the plaintiffs would have made the alternative investments as proposed in their evidence or that they did not have the funds to make those alternative investments regardless of whether they invested in the Prosperity Bond policies. As the plaintiffs could exit the Prosperity Bond policies at any time, there was nothing stopping the plaintiffs from withdrawing from the Prosperity Bond policies and making the alternative investments. For these reasons the plaintiffs claims for loss of opportunity damages must fail.

149 Consequently, the plaintiffs are entitled to damages for unconscionable conduct for borrowing expenses and other costs reasonably incurred in maintaining their investments, and management fees paid in respect of the period 17 October 2000 to 16 November 2000 in an amount agreed between the relevant plaintiff and the defendant, or, in default of agreement, as determined by an Associate Justice.

150 The plaintiffs are entitled to damages for unconscionable conduct, or, in the alternative, misleading or deceptive conduct. The plaintiffs did not press its claim for expectation damages for misleading or deceptive conduct and did not submit that they were entitled to more damages for misleading or deceptive conduct than for unconscionable conduct. Consequently, there is no need to go on to consider damages for misleading or deceptive conduct.

151 For the preceding reasons, it follows that in relation to the 2002 proceeding, the defendant has not committed any breach or breaches of clause 1.8 of the prosperity bond policies and that, consequently, this answers and disposes of the only questions remaining to be determined as stated in the orders of the Court of Appeal made on 26 February 2009.[209] It also follows that none of the matters set out in the 2009 Further Amended Statement of Claim, individually or collectively, constitute a breach of the Prosperity Bond policies and, consequently, could not constitute a repudiation of the Argot policy or justify termination. Consequently, the repudiation claim set out in paragraph 82 of the 2009 Further Amended Statement of Claim and the alternative claims in paragraphs 84 to 87 of that pleading must be dismissed.

152 As has been noted,[210] another aspect of matters referred to the Trial Division by the Court of Appeal was whether the parties should be permitted to adduce further evidence or to be confined to that already adduced. Subsequently to those orders of the Court of Appeal, the matter became more complex, and in a manner apparently not contemplated when those orders were made, as a result of the commencement of the 2009 proceedings. Consequently, the giving effect to this order would involve the characterisation of any further evidence sought to be adduced as pertaining to the 2002 proceedings or the 2009 proceedings and then embarking on the exercise contemplated by those orders in relation to 2002 proceedings evidence - with introduction of 2009 proceedings evidence subject to res judicata, cause of action estoppel and Anshun estoppel matters or issues. The parties did not pursue the conduct of such a process focusing, rather, on the extent that issues the subject of the 2009 proceedings were or were not capable of being pursued on the basis of res judicata, cause of action estoppel and Anshun estoppel arguments. For reasons already indicated, it is not necessary to take the process further, even on this basis.[211] It also follows from the preceding reasons that there remains no role for any special referee, a possibility also contemplated in the orders of the Court of Appeal.[212]

153 In relation to the 2002 proceedings, other than with respect to the claim for damages for unconscionable conduct and misleading or deceptive conduct, I determine, for the preceding reasons, that the answer to the questions remaining to be determined in accordance with the orders of the Court of Appeal dated 26 February 2009[213] is that there is no breach and there are no breaches of clause 1.8 of the plaintiffs' Prosperity Bond policies.

154 In relation to the claim for damages for unconscionable conduct and misleading or deceptive conduct I direct that damages for unconscionable conduct be determined in accordance with the preceding reasons.

155 In relation to the 2009 proceedings, for the reasons indicated, these proceedings should be dismissed.

156 I will hear the parties further in relation to the form of final orders and in relation to the question of costs.

[1] See ACN 074 971 109 (as Trustee for the Argot Unit Trust), Pegela Pty Ltd, Thomas Oates and Paul Oates v National Mutual Life Association of Australasia Limited [2006] VSC 507.

[2] ACN 074 971 109 (as Trustee for the Argot Unit Trust) & Anor v The National Mutual Life Association of Australasia Ltd [2008] VSCA 247; (2008) 21 VR 351.

[3] ACN 074 971 109 (as Trustee for the Argot Unit Trust) and Pegela Pty Ltd v National Mutual Life Association of Australasia Ltd (No 2) [2009] VSCA 24, [10] (paragraphs 2 (4) and (5)).

[4] See Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 at 532 (Dixon J); Jackson v Goldsmith [1950] HCA 22; (1950) 81 CLR 446 at 466-468 (Fullagar J) "although dissenting his exposition can be treated as authority": Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd [1993] FCA 342; (1993) 43 FCR 510 at 513 (FC); Chamberlain v FCT [1988] HCA 21; (1988) 164 CLR 502 at 511.

[5] See Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589; and see Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd [1992] FCA 272; (1992) 36 FCR 406 at 422-423.

[6] [1981] HCA 45; (1981) 147 CLR 589.

[7] [2010] VSC 186.

[8] See above, paragraph 6.

[9] Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589.

[10] ACN 074 971 109 (as Trustee for the Argot Unit Trust) & Anor v The National Mutual Life Association of Australasia Ltd [2008] VSCA 247; (2008) 21 VR 351 at 356-7, [7].

[11] [2008] VSCA 247; (2008) 21 VR 351 at 359, [19] and [20].

[13] [2008] VSCA 247; (2008) 21 VR 351 at 373-4, [90]- [92].

[14] Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 607-8 ; [1979] HCA 51; 26 ALR 567 at 576 (Secured Income) (Mason J); Far Horizons Pty Ltd v Mc Donald's Australia Ltd [2000] VSC 310 at [128] (Byrne J).

[15] [2008] VSCA 247; (2008) 21 VR 351 at 375, [97] and [98].

[16] [2008] VSCA 247; (2008) 21 VR 351 at 376, [102].

[17] [2008] VSCA 247; (2008) 21 VR 351 at 380, [112]- [116].

[18] Expressum facit cessare tacitum: Aspdin v Austin (1844) 5 QB 671 at 684 (Lord Denman CJ, Patterson, Coleridge and Wightman JJ); Ansett Transport Industries (Operations) Pty Ltd v Commonwealth [1977] HCA 71; (1977) 139 CLR 54 at 73 ; [1977] HCA 71; 17 ALR 513 at 529 (Mason J).

[19] BP Refinery (Westernport) Pty Ltd v President Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 at 283 ; [1977] HCA 40; 16 ALR 363 at 379 (PC); _Secured Income_at CLR 605- 6; ALR 575-6; Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 441 ; [1995] HCA 24; 131 ALR 422 at 442-3 ; [1995] HCA 24 (McHugh and Gummow JJ)

[20] [2008] VSCA 247; (2008) 21 VR 351 at 393, [124].

[21] [2008] VSCA 247; (2008) 21 VR 351 at 385-6, [134] and [142].

[22] Compare Butt v McDonald (1896) 7 QLJ 68 at 70-1 (Griffith CJ, Cooper and Power JJ); _Secured Income_at CLR 607; ALR 576.

[23] [2008] VSCA 247; (2008) 21 VR 351 at 387, [146].

[24] [2008] VSCA 247; (2008) 21 VR 351 at 390, [152].

[25] [2008] VSCA 247; (2008) 21 VR 351 at 390, [153].

[26] [2008] VSCA 247; (2008) 21 VR 351 at 394, referring to judgment of Redlich J [952] (citations omitted).

[27] See Outline of the Plaintiffs' Closing Submissions (19 May 2011), paragraph 2.

[28] See Outline of the Plaintiffs' Closing Submissions (19 May 2011), paragraphs 4 to 11.

[29] Statement of Michael Thornton, CB D16 paragraphs 23 and 24.

[31] Statement of Richard Lyon, CB C15 paragraph 7.32.

[32] Exhibit DM-11 to the statement of Dale McMenamin, CB D12.

[33] See Outline of the Plaintiffs' Closing Submissions (19 May 2011), paragraphs 11(c) to 14.

[34] See Outline of the Plaintiffs' Closing Submissions (19 May 2011), paragraphs 119 and 120.

[35] See above, paragraphs 11 and 12 and, below, paragraph 139 .

[36] See below, paragraphs 131 to 138..

[37] See Outline of the Plaintiffs' Closing Submissions (19 May 2011), paragraph 158.

[38] Outline of the Plaintiffs' Closing Submissions (19 May 2011), paragraph 159; referring to [2008] VSCA 247, at [20] and also the orders of the Court of Appeal made on 26 February 2009 ([2008] VSCA 24).

[39] Exhibit DM-11 to the witness statement of Dale Austin McMenamin (20 December 2010).

[40] [2008] VSCA 247; (2008) 21 VR 351 at 359, [20].

[41] [2008] VSCA 247; (2008) 21 VR 351 at 359, [19].

[43] The plaintiffs also sought to rely upon the language of the orders made by the Court of Appeal ([2008] VSCA 24, [10] (paragraph 1(2)(b)):

"The respondent was not permitted to effect the switch until the expiration of the notice" (emphasis added).

The plaintiffs sought to interpret the use of the word "effect" as indicating that no preliminary steps could be taken by the defendant with respect to underlying assets for the purpose of the switch. These orders do not, in their terms, define what it is to "effect the switch". Rather, the meaning of this expression is to be found in the reasons contained in the Court of Appeal judgment. Consideration of the reasons of the Court of Appeal does not support the plaintiffs' position, as indicated in these reasons.

[44] See below, paragraphs 38 to 47 (nature of a switch) and paragraphs 106 to 121 (effect of "revocation" of a switch notice).

[45] See Outline of the Plaintiffs' Closing Submissions (19 May 2011), paragraph 163, referring to Re Sentry Life Assurance Limited v Life Insurance Commissioner [1983] FCA 208; (1983) 49 ALR 292 at 308: "To appropriate the subsidy to part only of the statutory fund is a 'back door' approach and, in truth, is no more than an attempt to do indirectly what is forbidden to be done directly (see James v Eve (1873) LR 6 HL 335 at 344; Oxley County District Council v Macleay River County District Council (1964) 65 SR (NSW) 13 at 28). It lacks validity accordingly."

[46] Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589.

[47] Written Closing Submissions of the Defendant (2 May 2011), paragraph 118.

[48] [2008] VSCA 247; (2008) 21 VR 351 at 361-2, [33]- [34].

[50] See transcript pp 287.5 - 289.5; and 291.12 - 293.11.

[51] See transcript pp 951.24 - 953.6 (Thornton); transcript p 993.9 - .17 (Dr Gribble).

[52] See Court of Appeal judgment, as to the purpose of clause 1.8 [2008] VSCA 247; (2008) 21 VR 351 at 359, [19] and 362, [34]; cf effects of dilution: [2008] VSCA 247; (2008) 21 VR 351 at 380, [112] and 384, [128].

[53] NMLA Investment Instructions 2003 (F06); Investment Instructions 2008 (F07); McMenamin 2010 WS (D12), pars 15- 17; see also CIB (N01), p 17 "Investment of the Portfolios"; Thornton WS (D16), pars 76-78.

[54] As to the "cash drag effect", see Written Closing Submissions of the Defendant (2 May 2011), Appendix B, paragraph 7(b).

[55] See supplementary statement of Richard Hugh Stewart Lyon (15 December 2003), paragraphs 11.8 -11.9.

[56] See the witness statement of Michael Joseph O'Brien (18 November 2003).

[57] See the witness statement of Michael Joseph O'Brien (18 November 2003), paragraphs 29 - 33.

[58] See Tyne XXN (17 March 2011), transcript pp 672.8 - 16 - 684.12 - 19).

[59] See 2003 trial transcript pp 2452.29 - 2454.29.

[60] Supplementary statement of Richard Hugh Stewart Lyon (15 December 2003), at paragraph 11.9.

[61] See expert witness Statement of Richard Hugh Stewart Lyon (25 January 2011), part 2, particularly at paragraph 2.8.

[62] See expert witness statement of Richard Hugh Stewart Lyon (25 January 2011), part 5, particularly at paragraphs 5.35 to 5.36.

[63] See Lyon XXN, 2011, transcript pp 336.24 - 356.6.

[64] See ACN 074 971 109 (as Trustee for the Argot Unit Trust) & Anor v The National Mutual Life Association of Australasia Ltd [2008] VSCA 247; (2008) 21 VR 351 at , [123].

[65] Lyon XXN, 2011, transcript pp 349.30 - 350.28.

[66] Written Closing Submissions of the Defendant (2 May 2011), paragraph 146.

[68] See Expert statement of Dr Julian deGruchy Gribble (21 February 2011), Part 3.6.

[69] Expert statement of Dr Julian deGruchy Gribble (21 February 2011), paragraph 3.6.2.

[70] Expert statement of Dr Julian deGruchy Gribble (21 February 2011), paragraph 3.6.3.

[71] See Expert statement of Dr Julian deGruchy Gribble (21 February 2011), paragraph 3.6.4.

[72] Expert statement of Dr Julian deGruchy Gribble (21 February 2011), paragraph 3.8.1.

[73] Expert statement of Dr Julian deGruchy Gribble (21 February 2011), paragraph 3.8.3.

[74] See Expert statement of Dr Julian deGruchy Gribble (21 February 2011), paragraphs 3.8.5 and also 3.8.9.

[75] See Statement of Michael Thornton (February 2011), paragraphs 41 and 42; and similar views were expressed by Mr Lyon in cross-examination in the 2011 hearing (see transcript p 327.3 - .13).

[76] See Expert statement of Dr Julian deGruchy Gribble (21 February 2011), paragraphs 3.8.22 and following; and paragraph 5.2.9.

[77] See Written Closing Submissions of the Defendant (2 May 2011), paragraph 151; referring to s 5.3 (with particular paragraph numbers in brackets) of the Expert statement of Dr Julian deGruchy Gribble (21 February 2011).

[78] See Statement of Michael Thornton (February 2011), paragraphs 93-101.

[79] As noted previously, the defendant submitted that Mr Lyon's interpretation of the second part of clause 1.8 of the policies is erroneous; see above, paragraph 51-52.

[81] See [2008] VSCA 247; (2008) 21 VR 351 at 405, [233].

[82] See below, paragraphs 65 and following.

[83] Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1914] UKHL 1; [1915] AC 79 at 86 (Lord Dunedin).

[84] [1983] HCA 11; (1983) 152 CLR 406 at 445.

[85] See examination of Mr Lyon in the 2011 hearing, transcript p 524.15 - .23; and see also Particulars Loss, August 2010, paragraph 8.

[86] See the witness statement of Scott Francis Tyne (8 November 2010) paragraph 23.

[87] [2008] VSCA 247; (2008) 21 VR 351 at 359, [19].

[89] Paragraphs 7 and 8 of the Further Amended Statement of Claim plead the issuing of the Argot policy and paragraph 9 pleads a number of alleged terms of the policy. The terms alleged in paragraphs (a), (b), (d), (e), (f), (h) and (k) are not controversial.

[91] See the CIB (CB N01). The plaintiffs addressed the expiry of the CIB and the defendant's position in this respect in the Outline of the Plaintiffs' Closing Submissions (19 May 2011) in the following terms:

"172. The defendant's reliance on the expiry date of the customer information brochure is misconceived. The expiry of the customer information brochure meant no more than that the defendant was no longer permitted to market the prosperity bond without issuing a new document. However, the expiry of the customer information brochure did not relieve the defendant of the obligations it had assumed, and the representations it had made, to customers who acquired prosperity bonds while the document was current. These customers acquired products which needed to be held for at least ten years to obtain the associated tax benefits; products which in the nature of life insurance could be expected to be held for the rest of the customer's life. The defendant was not entitled to vary portfolio compositions arbitrarily 12 months after entering into these long-term contracts."

Although I do not see the defendant's reference to the CIB expiry date in these terms, I am of the view that even if this were a correct characterisation of the defendant's submissions, it does not detract from its submissions as to the significance of the CIB or my reasons in respect of the current issue.

[93] Second Further Amended Statement of Claim in the 2002 proceedings, particulars to paragraph 6.

[94] See Second Further Amended Statement of Claim in the 2002 proceedings, paragraph 8.

[95] See Second Further Amended Statement of Claim in the 2002 proceedings, paragraph 10.

[96] See Court Book in the original trial, pp 370-399.

[97] [2006] VSC 507, at [847]-[858].

[98] [2006] VSC 507, at [857].

[99] See Second Further Amended Statement of Claim in the 2002 proceedings, paras 6, 8 and 10.

[100] See particulars to paragraph 7 of that Further Amended Statement of Claim, contained in Part G of Particular (ii) of that paragraph.

[101] See Further Amended Statement of Claim in the 2009 proceedings (filed pursuant to my order of 27 January 2011), marked at particulars to paragraph 7.

[102] See ACN 074 971 109 v The National Mutual Life Association of Australia Ltd [2010] VSC 186, [38]-[42] (Croft J).

[103] See Written Closing Submissions of the Defendant (2 May 2011_)_, paragraphs 111-115.

[104] See the Customer Information Brochure issued by the defendant on 15 July 1999 (p 10).

[105] See the Customer Information Brochure issued by the defendant on 15 July 1999 (p 7).

[106] Further Amended Statement of Claim in the 2009 proceedings, paragraph 59.

[107] See Further Amended Statement of Claim in the 2009 proceedings, paragraph 61 (referring to previous pleadings in paragraphs 7 to 11 and 13); noting that the reference to "Argot Switch Notice 3" is the notice referred to in paragraph 59 of these pleadings.

[108] [2008] VSCA 247; (2008) 21 VR 351 at 359, [19]; and see above, paragraph 31.

[110] See Further Amended Statement of Claim in the 2009 proceedings, paragraph 62 (see above, paragraph 31).

[111] Particularly paragraph 61 of this Statement of Claim.

[112] See Further Amended Statement of Claim in the 2009 proceedings, paragraph 81 (which refers to and relies upon any breach "such as that pleaded in paragraph 62"; allegations which, in turn, depend on paragraph 61 of the Statement of Claim, allegations which have been considered in the preceding paragraphs, above.

[113] See Further Amended Statement of Claim in the 2009 proceedings, paragraph (C) of the particulars to paragraph 81.

[114] See paragraph 9(j) of those pleadings.

[116] The CIB was not a regulated or registered prospectus or product disclosure statement under the Corporations Act or other statute. See expert witness statement of Richard Hugh Stewart Lyon (25 January 2011) (C15), par 5.10; Green v AMP Life Ltd [2005] NSWC 370 per Campbell J at [12] (talking of 1999): "A CIB sought to state in plain English the benefits which were available under the Plan, and to give some information about how the Plan operated. As well, it contained some worksheets to assist an applicant to decide how much cover he or she should apply for, and an application form."

[117] See expert witness statement of Richard Hugh Stewart Lyon (25 January 2011) (C15), paragraphs 5.25 and 5.26 and statement of Dale Austin McMenamin (20 December 2010) (D12), paragraph 21.

[118] Lyon XXN, 10/03/11, T-329.20-330.4; Tyne XXN, 17/03/2011 T-720.25-28, 721.5-6. Mr Tyne chiefly relied on the document (CIM) produced by Dr Keller: witness statement of Scott Francis Tyne (13 October 2003) (C02), at pars 16, 17, 25, to the extent that he relied on the CIB, it was for the opinion that he would never have contemplated investing in the Prosperity Bondy policy without switching rights: par 26, 28(d).

[119] Supplementary witness statement of Scott Francis Tyne (13 October 2003) (C03), par 12. See also witness statement of Scott Francis Tyne (13 October 2003) (C02), par 12: Tyne "skim read" the CIB and did not keep a copy of it; and Mr Tyne's evidence in cross-examination at the 2003 trial (G11) at T-569 ("I skim-read the Customer Information Brochure because it was just a bog standard document produced by AXA"); T-647 (that he read the CIB "very, very briefly"); and T-665 (that he "skim-read" the CIB).

[121] See the Further Amended Statement of Claim in the 2009 proceeding, paragraphs 54 to 66.

[122] See the Further Amended Statement of Claim in the 2009 proceeding, paragraph 55.

[123] See the Further Amended Statement of Claim in the 2009 proceeding, paragraph 66, with reference to paragraph 55.

[124] See witness statement of Angela Terzita Bourke (16 December 2010) (D11), paragraph 26.

[125] See JSB Southern Australia Pty Ltd v West City Group Holdings Pty Ltd [2011] VSC 476 (Croft J) at [55]-[61], with particular reference to the discussion by Sir Kim Lewison in The Interpretation of Contracts (4th ed, Sweet & Maxwell, London, 2007), paragraph 7.02.

[126] (1904) 6 F 276 at 281.

[127] (1904) 7 F 265 at 273.

[128] [1911] 1 KB 264 at 279-280 (CA).

[129] (1911) 75 JP 307 at 308.

[130] It relied in this respect on the evidence of Dale McMenamin in his witness statement dated 20 December 2010 (D12), paragraphs 35 to 37 which indicate that the processing deadline adopted matches the defendant's internal deadline for dealing with its unit trust investments; also the evidence of Mr Lyon that "setting reasonable deadlines is common", extremely common (see Lyon XXN, 2011, transcript p 351.10, .17, .22 - .25).

[131] See Further Amended Statement of Claim in the 2009 proceedings, paragraph 80(b)(i).

[132] See, for example, letter to Mssrs Oates, 13 December 2001; and it is common ground that a letter in like terms was sent to Argot and to Pegela at that time.

[133] Referring to BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 (PC).

[134] Associated Beauty Aids Pty Ltd v FCT [1965] HCA 20; (1965) 113 CLR 662 at 667 (Barwick CJ).

[135] Outline of Plaintiffs' Closing Submissions (19 May 2011), paragraphs 130 and 131.

[136] Written Closing Submissions of the Defendant (2 May 2011), paragraph 77.

[137] See Halsbury's Laws of Australia [410-165]; and see Prowse v McIntyre (1961) 111 CLR 264 at 271 (McTiernan J).

[138] See above, paragraphs 17 to 25; and as to the consideration of "working day" in the authorities, see, above, paragraph 83. Without overstating the extent that consideration of the meaning of an expression in other contexts can be relied upon more generally, it is instructive that there is no suggestion that a "working day" or a day upon which work or business is conducted could be "fractionated" as advocated by the plaintiffs.

[139] See Witness Statement of Ms Angela Terzita Bourke (16 Decmember 2010), paragraph 27; cf Further Amended Statement of Claim in the 2009 proceeding, paragraph 56.

[140] See Further Amended Statement of Claim in the 2009 proceeding, paragraph 58.

[141] [2008] VSCA 247; (2008) 21 VR 351 at 361-2, [29]- [36].

[142] See [2008] VSCA 247; (2008) 21 VR 351 at 361, [29].

[143] See the Witness Statement of Ms Angela Terzita Bourke (16 December 2010), paragraph 44; cf Further Amended Statement of Claim in the 2009 proceeding, paragraph 67.

[145] See Further Amended Statement of Claim in the 2009 proceeding, paragraph 69.

[146] Contained in the Further Amended Statement of Claim in the 2009 proceeding, paragraph 72, 75 and 78.

[147] See Witness Statement of Ms Angela Terzita Bourke (16 Decmember 2010), paragraph 31: cf Further Amended Statement of Claim in the 2009 proceedings, paragraph 59. This notice was later cancelled by notice given after business hours on Friday 16 January 2009 (see Further Amended Statement of Claim in the 2009 proceeding, paragraph 60).

[148] See Witness Statement of Dale McMenamin (20 December 2010), paragraph 26.

[149] See Further Amended Statement of Claim in the 2009 proceeding, paragraph 62.

[150] Written Closing Submissions of the Defendant (2 May 2011), paragraph 82.

[151] Witness Statement of Dale McMenamin (20 December 2010) (D12), pars 39(b), 40, 47.

[152] NMLA Office Memo, 30 Jan 2009 (F46).

[153] See Further Amended Statement of Claim in the 2009 proceeding, paragraph 62.

[155] [2008] VSCA 247; (2008) 21 VR 351 at 361, [29].

[156] [2008] VSCA 247; (2008) 21 VR 351 at 361, [30].

[157] Outline of the Plaintiffs' Opening (28 February 2011), paragraph 83.

[158] See DTR Nominees v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 432-3 (Stephen, Mason and Jacobs JJ); see also Woodar Investment Development Ltd v Wimpey Construction UK Ltd [1980] UKHL 11; [1980] 1 WLR 277 (HL) at 283 (Lord Wilberforce) and 297 (Lord Keith of Kinkel).

[159] Referring to the Webster's International Dictionary referred to by Mr Tyne in support of the plaintiffs' submission. See Tyne XXN (17/3/2011) transcript p 697.19 - .27; see Outline of the Plaintiffs' Closing Submissions (19 May 2011), paragraph 147 referring to Written Closing Submissions of the Defendant (2 May 2011), paragraph 161, though not noting that the dictionary definition referred to in that paragraph was a reference to that relied upon by Mr Tyne and that, in paragraph 162, the submissions of the defendant advances an interpretation of these dictionary definitions at odds with the interpretation advanced by Mr Tyne in support of the position of the plaintiffs.

[160] Witness statement of Michael Thornton (February 2011), paragraph 102 - 109.

[161] Witness statement of Michael Thornton (February 2011), paragraph 106.

[162] See [2008] VSCA 247; (2008) 21 VR 351 at 359, [19]; and see, similarly, paragraph 2(c) of the Orders of the Court of Appeal ([2008] VSCA 24, [10]).

[163] See also [2008] VSCA 247; (2008) 21 VR 351 at 362, [34].

[164] [2008] VSCA 247; (2008) 21 VR 351 at 359, [19].

[165] [2008] VSCA 247; (2008) 21 VR 351 at 362, [34].

[166] See [2008] VSCA 247; (2008) 21 VR 351 at 362, [34], set out above, paragraph 111.

[168] As available on-line at http://www.merriam-webster.com/infor/commitment.htm.

[170] [2008] VSCA 247; (2008) 21 VR 351 at 359, [19].

[171] Written Closing Submissions of the Defendant (2 May 2011), paragraphs 166 to 169.

[172] TJ at [312], [427], [598]; CA at [227]. Nor had that purpose become apparent to NMLA by reason of Dr Keller's activities during 1999 and 2000; until November 2000, clause 1.8 had never been used by the Coneview investors when switching.

[174] Mr Brett at Court Book H08 Appeal Transcript page 166, line 09: "If, for example, AXA were to declare unit prices once a month ... and simply have the unit price constant in the meantime there is no ability to arbitrage".

[175] [2008] VSCA 247; (2008) 21 VR 351 at 376, [102].

[177] Regulatory Guide 94 - August 2008.

[178] Unit Pricing: Guide to Good Practice, p 59.

[179] Unit Pricing Policy - The National Mutual Life Association of Australasia Limited - National Mutual Funds Management Limited - October 2008.

[180] Particularly {2008} 21 VR 351 at 374-5, [95]-[98].

[181] See [2008] VSCA 247; (2008) 21 VR 351 at 374, [95].

[182] See Outline of the Plaintiffs' Closing Submissions, paragraphs 142-144.

[183] Statement of Myra Hoare, Court Book D03 paragraph 8; statement of Dale McMenamin, Court Book D06 paragraphs 9 and 10; Vicki Bourke at page 6 in exhibit ATB-4 to the statement of Angela Bourke, Court Book D11 (also at exhibit DM-11 to the statement of Dale McMenamin Court Book D12); statement of Dale McMenamin Court Book D12 paragraph 38; statement of Michael Thornton, Court Book D16 paragraphs 47 and 69(b).

[184] Statement of Michael Thornton, CB D16 paragraphs 123-128.

[185] Statement of Michael Thornton, CB D16 paragraphs 117-122.

[186] See [2008] VSCA 247, [98]; and see above, paragraph 21.

[187] Notwithstanding the doubts expressed by Dr Gribble at T1040, lines 27-28, it is common ground between the parties and was accepted by Justice Redlich and the Court of Appeal that section 13 of the Insurance Contracts Act applies to the plaintiffs' policies. Redlich J noted at [859] that "Each of the parties alleges that the conduct of the other and their construction of the special terms is contrary to the general notions of fairness under the LIA and the duty to act with utmost good faith under s 13 of ICA."

[188] [2006] VSC 507, at [859].

[189] [2006] VSC 507, at [896].

[190] [2008] VSCA 247; (2008) 21 VR 351 at 383, [125] and [126].

[191] Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228, [23]-[24] (Buchanan JA).

[192] [2008] VSCA 247; (2008) 21 VR 351 at 387, [145]- [146].

[193] As to the latter, see [2008] VSCA 24, [10] (paragraph 2(3)(a)).

[195] See Outline of the Plaintiffs' Closing Submissions (19 May 2011), paragraphs 105-107.

[196] See Outline of the Plaintiffs' Closing Submissions (19 May 2011), paragraphs 108-118.

[198] Transcript, 545 at [16]-[18].

[199] In its opening submissions the defendant submitted that the reasonable period was no more than three months; see Outline of Defendant's opening submissions (4 March 2011), paragraph 27.

[200] Witness statement of Scott Francis Tyne (8 November 2011), paragraphs 64-72.

[201] Affidavit of Garrick Hawkins(9 June 2010), paragraphs 5-9.

[202] Outline of Defendant's opening submissions (4 March 2011), paragraphs 15- 20.

[203] Written Closing Submissions of the Defendant (2 May 2011), paragraphs 262-264.

[204] Tyne 2011 WS (C14), par 66(e)-(j); Hawkins 2003 Supp WS (C05), pars 10, 18.

[205] See ANZ Private Bank Diary Note (M Ferdinands) 16 May 2000, re Tyne Group [ANZ subpoenaed docs file 04 Misc, pp 38-51] at pp 40-41 of 234: "AXA Prosperity Bond Protection Option" and "Credit Rating of AXA"; ANZ Private Bank Diary Note (G Cracknell), 4 May 2000, re Hawkins Group, " [ANZ subpoenaed docs file 04 Misc pp 64-69 of 234] at pp 3 -4 of 6: "AXA Prosperity Bond Protection Option" and " Credit Rating of AXA"; ANZ Private Bank Diary Note (G Cracknell) 8 February 2000 re Tyne Group [ANZ subpoenaed docs file 04 Misc pp 62-63 of 234] - discussing application to invest in "AXA Guaranteed Bonds" and discussion of similar deals for other clients . Mr Tyne discovered in his fruitless application to Standard Chartered Bank in Hong Kong that that bank also fastened onto the Protection Option as essential to its security analysis.

[206] Letter, Argot to NMLA, 9 Nov 2000, OCB 1497 (G06: 2003 Trial CB vol 5, p 123 of 364): "It has been determined to invest a further $5 million into the above policy. ... It is proposed to make this further investment at the end of the month.".

[207] Letter, Pegela to NMLA, 9 Nov 2000, OCB 1509 (G06: 2003 Trial CB, vol 5, p 136 of 364): "I advise that Pegela has determined ... to invest a further $5 million in Prosperity Bonds. We propose to make this investment by the end of the month. Please provide appropriate documentation to facilitate investment."

[208] Hawkins XXN, 21/03/2011 T-810-811, 843.26 - 844.2 ("The means were there, yes, I agree with that."), 844.21-25 ("It would have been challenging, but yes.").

[209] ACN 074 971 109 (as trustee for the Argot Unit Trust) and Pegela Pty Ltd v The National Mutual Life Association of Australasia Limited (No 2) [2008] VSCA 24, [10].

[213] [2008] VSCA 24, at [9].