FRANCIS THOMAS THURWOOD(in his own capacity and in his capacity as trustee of the F T THURWOOD TRUST) v FIRST FOR FINANCE PTY LTD ACN 056 452 245 and DEAN ROYSTON McVEIGH

6. The respondents pay the applicant damages in an amount of $720,195.54.

7. The respondents pay the applicant interest at the rate of 13.2% under the Federal Court Act from 28 May 1996 until the date of payment.

8. The respondents pay the costs of the applicant on an indemnity basis."

At all material times, the applicant ("Mr Thurwood") carried on a trucking business transporting goods between Melbourne and other capital cities. He carried on that business in his own capacity and as a trustee of a family trust. Nothing turns on the existence of the trust. For some of the time he carried on that business under the name Roadair. In addition Mr Thurwood has an interest in a company, Bartral Pty Ltd, which carried on a trucking business but which was wound up by an order of the Supreme Court of Victoria on 23 April 1997. On all the evidence before it, the Court finds that Mr Thurwood had continual financial difficulties in conducting Roadair. He had insufficient capital and serious difficulties in the cash flow of the business. None of his books of account was in evidence before the Court. It is doubtful that he kept proper books of account. In conducting his business he incurred a large number of debts some of which will be mentioned later. In any event, in April 1994, Mr Thurwood was in urgent need of financial assistance. This finance was obtained from the first respondent ("First for Finance") pursuant to an arrangement under which First for Finance approved a loan and hire purchase facility for Mr Thurwood as borrower. The amount of the facility was $228,000.00 being an account receivable loan of up to $100,000 and a hire purchase facility for 2 trucks at $64,000.00 each but in fact the purchase price of one was $59,000 and the purchase price of the other was $69,000.00. Provision was made for interest at 20% calculated on daily balances payable calendar monthly in arrears and 36 payments of $4,866.00 payable monthly in advance. In addition to the two hire purchase agreements, Mr Thurwood was to give security for the whole of the loan by a first ranking charge over the present and future assets of his business and a registered assignment of the present and future book debts of the business. To give effect to this arrangement, on 16 May 1994 Mr Thurwood entered into five separate agreements in writing namely:- 1. The loan agreement (account receivable), "the loan account". 2. The deed of assignment. 3. The charge. 4. The hire purchase agreement with respect to a new 1994 Nissan model truck, the cash price of which was $59,000.00 ("Truck No.1"). 5. The hire purchase agreement with respect to a new 1994 Nissan model truck, the cash price of which was $69,000.00 ("Truck No.2"). Effect was given to these agreements. With the benefit of the finance advanced by First for Finance, Mr Thurwood continued to conduct his trucking business Roadair. He had a number of arrangements under which third parties, in the nature of freight forwarders, engaged Roadair to transport goods by road. There is no satisfactory evidence to show whether the business was successful or not. On occasions Mr Thurwood used his own trucks. At other times he engaged sub-contractors to cart the goods. The impression given to the Court was that Roadair continued to suffer financial difficulties. The absence of any books of accounts of Roadair makes it difficult to make findings of fact on the financial position of Roadair. On 18 November 1995 Mr Thurwood, as the carrier, entered into an agreement in writing with the company Transport Linehaul Pty Ltd ("Linehaul"). The recitals to the agreement ("the Linehaul Agreement") illustrate the nature of the agreement. They are set out:- "RECITALS A. Fastway Couriers (Aust.) Pty Ltd (ACN 057 389 769) ("the franchisor") conducts a courier franchise business ("the Fastway business") through a network of regional master franchise operations ("the master franchises") throughout Australia. B. Pursuant to an agreement with the master franchises Linehaul provides linehaul freight services for the Fastway franchisees between the capital cities in each state or territory in which the franchisor conducts the business and between the regional territories of the master franchises. C. The carrier carries on the business of delivering freight in the State of Victoria and elsewhere and providing a freight service between the states and territories in Australia as trustee of the Thurwood Family Trust. E. The carrier has provided a linehaul freight service to Linehaul between certain capital cities in Australia and between certain regional franchise territories of the business. F. It has been agreed between the parties that the carrier shall provide and Linehaul shall use the carrier (subject to the provisions herein) for the provision of all the linehaul freight requirements of the Fastway business on the runs set out herein together with such other runs as may be agreed from time to time upon the terms and conditions contained herein."

It is not necessary to make reference to the details of the agreement. It was to operate for a period of 3 years commencing on 1 June 1995. This provision supports the view that Mr Thurwood had been providing his trucking business for Linehaul for some time before 18 November 1995. In fact he had been providing linehaul freight services to the Fastway Couriers group of courier franchise businesses for over 12 months. The agreement could be extended for a further period of 3 years. Under the agreement, Mr Thurwood had to provide the following runs:- "RUNS: A. Melbourne to Sydney (2 x 6 tonne vehicles) Sydney to Melbourne (2 x 6 tonne vehicles) Sydney to Brisbane (2 x 6 tonne vehicles) Brisbane to Sydney (2 x 6 tonne vehicles) Sydney to Canberra (1 x 6 tonne vehicle) Canberra to Sydney (1 x 6 tonne vehicle) Melbourne to Adelaide(1 x 6 tonne vehicle) Adelaide to Melbourne(1 x 6 tonne vehicle) B. Between the distribution depots situated in each of the above capital cities and the distribution depots situated in the master franchise territories (if any) between such capital cities including: (i) Sydney to Brisbane and Brisbane to Sydney stopping at Newcastle, Port Macquarie, Coffs Harbour and Gold Coast. (ii) Melbourne to Sydney and Sydney to Melbourne stopping at Albury/Wodonga. C. Such other additional runs as may be agreed between the parties."

The agreement contained detailed provisions relating to the payment by Linehaul for the services provided but it is not necessary to refer to them. Despite the existence of the Linehaul Agreement, which he considered to be lucrative, Mr Thurwood's financial position continued to worsen. By the end of 1995 he was suffering severe financial difficulties. He had a large number of unsecured creditors. A Inumber of creditors had obtain judgments against him. One judgment had been obtained against him and his wife in the sum of about $100,000.00 based on a guarantee they had given in support of a company, Tarraby Holdings Pty Ltd, through which he had previously conducted his linehaul freight business. An insurance company had obtained a judgment against him in the sum of $25,613.00 and had issued a bankruptcy notice against him based on that judgment. That company alleged that Mr Thurwood had committed an act of bankruptcy on 13 October 1995 for non-compliance with that bankruptcy notice. In addition large sums of money were being claimed against Mr Thurwood by the Australian Taxation Office in respect of group tax and superannuation tax, and the State Revenue Office in respect of payroll tax. Further sums were being claimed by people supplying goods and services provided to Mr Thurwood with respect to the conduct of his business. There is no doubt that by the end of the year Mr Thurwood was suffering a severe cash flow deficiency. Part of this deficiency arose from late payment by Linehaul for services provided by him under the Linehaul Agreement. As Mr Thurwood said in his affidavit in support of his application:- "By the end of 1995 I was in severe financial difficulty. I was in default in relation to payment of amounts due to First For Finance and I had numerous unsecured creditors. Transport Linehaul's payments to me were extending beyond the four week arrears period and I had cash flow problems. I wanted to refinance my loans with First for Finance but I could not obtain a release of the charge whilst amounts under the hire purchase agreements were outstanding. On or about 25 January 1996, I received a notice of demand from First For Finance for $101,014.97 under the loan agreement."

The amount of $101,014.97 did not include the arrears owing under the two hire purchase agreements. On 31 January 1996, arrears of $24,330.00 were owed by Mr Thurwood to First for Finance under the two hire purchase agreements. The notice of demand was dated 25 January 1996. It appears to be in conformity with the terms of the loan agreement. It gives notice of default under the loan agreement being the failure to repay the principal sum and interest thereon as and when due. It demanded immediate payment, namely the principal sum as at 31 December 1995 - $101,014.97 - and interest from that date to date of payment. The notice continued:- "AND FURTHER TAKE NOTICE that in the event you fail to remedy the default as aforesaid First for Finance Pty Ltd shall be entitled to exercise all its rights and powers under the said Loan Agreement (Account Receivable) and under the Charge and other securities given by you pursuant to the said Loan Agreement."

The "other securities" was a reference to the two hire purchase agreements. By deed dated 6 February 1996 and in conformity with the loan agreement and the charge, First for Finance appointed the second respondent ("Mr McVeigh"), a member of the accountancy firm Horwath & Horwath, as receiver and manager. The operative parts of the deed of appointment were as follows:- "APPOINTMENT OF RECEIVER & MANAGER FRANCIS THOMAS THURWOOD (in his own capacity and in his capacity as Trustee of the F T Thurwood Trust) Re: Charge dated 16th May 1994 To: FRANCIS THOMAS THURWOOD 7 Pearl Street ALTONA VIC 3018 TAKE NOTICE that FIRST FOR FINANCE PTY LTD (ACN 056 452 245) of 114-118 Miller Street, West Melbourne in the State of Victoria in pursuance of the powers reserved to it under the abovementioned Charge has appointed DEAN ROYSTON McVEIGH of 600 St Kilda Road, Melbourne 3004 in the said State, Chartered Accountant, to be Receiver & Manager to enter and take possession of the property and assets charged by the said Charge in the manner therein provided and to exercise all or any of the powers in that behalf conferred on a receiver and manager by the said Charge and by law. DATED the 6th day of February 1996."

Mr McVeigh exercised his powers on 6 February 1996. As Mr Thurwood said in his affidavit:- "As at the date of the appointment of Mr McVeigh I believe I owed First For Finance approximately $102,645.12 under the loan agreement (account receivable). I knew I was in arrears under the two hire purchase agreements but was not sure of the exact amounts."

Following the appointment of the receiver, negotiations took place between representatives of Mr Thurwood, First for Finance, Mr McVeigh and Linehaul which resulted in two agreements in writing being entered into, one of which, in substance, had the effect of Mr Thurwood assigning all his right title and interest in the past present and future debts owing by Linehaul to him to First for Finance and directing Linehaul to pay to First for Finance all amounts due to be paid by Linehaul to Mr Thurwood. The moneys were to be paid to Mr D R McVeigh of Messrs Horwath and Horwath. This agreement and the other agreement were each in writing and dated 9 February 1996. The second agreement was between First for Finance as "the Lender" and Mr Thurwood as "the Borrower". This agreement will be called "the second 9 February 1996 agreement"). The recitals to this agreement refer to the fact that the parties had entered into the loan agreement, the charge and the two hire purchase agreements all of which are called "the financial arrangements". In the recital, the loan agreement and the charge are, in error, stated to have been made on 11 May 1994. The recitals refer to the defaults made by Mr Thurwood under the financial arrangements and the appointment of Mr McVeigh as receiver and manager and that the parties to the agreement had agreed that Mr McVeigh would retire as receiver and manager "subject to the terms and conditions" of the agreement. Under clause 1 of the agreement, First for Finance revoked the appointment of Mr McVeigh as receiver and manager of the property and assets of Mr Thurwood. Clauses 2, 3 and 4 of the agreement are set out. "2. The Parties acknowledge that the Lender was entitled to take an Assignment of the past present and future debts owing to the Borrower from Transport Linehaul Pty Ltd of Unit 8, 5/7 Bennelong Road, Homebush. The Borrower covenants to do all things and execute all documents to give full force and effect to such Assignment including directing all payment due to the Borrower from the said Transport Linehaul Pty Ltd to the Lender or as it directs until all liability that the Borrower has to the Lender has been satisfied and repaid in respect to the loan agreement and arrears under the hire purchase agreements have been brought up to date. 3. It is acknowledged by the Borrower that the Assignment referred to in Clause 2 hereof is absolute and irrevocable and that the minimum payment to which the Lender will be entitled is $20,000.00 per week. 4. The Borrower further acknowledges that the Lender at its absolute discretion at any time so long as any sum is due and payable to the Lender under the financial arrangements from the Borrower, may re-instate the appointment of the said Dean Royston McVeigh as Receiver and Manager of the property and assets of the said Borrower without further notice to the Borrower. Without limiting the generality of the foregoing the Lender will be entitled to do so if the payment received by the Lender is less than $20,000.00 per week."

Under clause 5 Mr Thurwood was required to pay all the expenses involved with respect to the appointment of the receiver manager and the agreements. No submissions were made suggesting the appointment of the receiver and manager on 6 February 1996 was invalid or that the agreements of 9 February 1996 were unenforceable. From 9 February 1996 Mr Thurwood continued to operate his business. Since most of his receipts from that business came from Linehaul, and having regard to the fact that the moneys Linehaul were required to pay to Mr Thurwood under the Linehaul agreement now had to be paid to First for Finance, it is not surprising that the financial position of Mr Thurwood continued to deteriorate. The business had to fail. The position was not helped by the fact that Mr Thurwood had difficulty in providing the trucks necessary to comply with the conditions of the Linehaul Agreement. On 27 March 1996 Truck No.1 was involved in an accident and written off. The insurer did not pay the insurance money on the truck until 15 July 1996. That amount has been paid into a trust account pending the determination of this case. Mr Thurwood lost the use of other trucks needed to conduct his business. Truck No.1 was not replaced. One truck was repossessed before 2 May 1996. Two other trucks were repossessed by mid-May 1996. A fourth truck was repossessed. Another truck was written off as the result of an accident on 28 May 1996. None of these trucks was replaced. Mr Thurwood was unable to pay the accounts to enable him to operate his business. He owed large sums of money to creditors of his business. Because of his inability to retain his trucks Mr Thurwood was compelled to engage sub-contractors to perform his obligations under the Linehaul Agreement. He entered into what were described as "loss contracts" where, in order to meet his obligations to Linehaul, he engaged the sub-contractors on terms under which Mr Thurwood, of necessity, had to suffer a loss. In many cases, Linehaul had to pay some of the creditors of Mr Thurwood to enable him to continue using sub-contractors. Included among these creditors was a firm called Palm Trans. Linehaul was making payments direct to Palm Trans. Linehaul was unable to pay the $20,000.00 weekly payments to First for Finance. Sums of $4,000.00 were paid from time to time. To this extent Mr Thurwood was unable to comply with the terms of Clauses 2 and 3 of the second 9 February 1996 agreement. The payments were to be made direct to First for Finance until "all liability that the Borrower has to the Lender has been satisfied and repaid in respect of the loan agreement and arrears under the hire purchase agreements have been brought up to date". In the events which happened, under clause 4 of the second 9 February 1996 agreement, First for Finance was empowered to "reinstate the appointment of the said Dean Royston McVeigh as Receiver and Manager of the property and assets of the said Borrower without further notice to the Borrower". After 9 February 1996, Mr Thurwood's debts continued to increase. On or about 7 April 1996 he was served with a petition under the Bankruptcy Act 1966 for an order that his estate be sequestrated. The petition was based on the act of bankruptcy referred to earlier in these reasons. The petition was presented on about 8 March 1996 and was listed for hearing on 7 May 1996. The hearing of the petition has been adjourned from time to time and is now adjourned to a date to be fixed. The petition will lapse at the expiration of two years from the date it was presented. By notice of appointment of receiver and manager dated 2 May 1996, First for Finance appointed Mr McVeigh as receiver and manager. The operative parts of the notice are set out: "Re" Charge dated 16th May 1994 To: FRANCIS THOMAS THURWOOD 7 Pearl street ALTONA VIC 3018 TAKE NOTICE that FIRST FOR FINANCE PTY LTD (ACN 056 452 245) of 114-118 Miller Street, West Melbourne in the State of Victoria in pursuance of the powers reserved to it under the abovementioned Charge has appointed DEAN ROYSTON McVEIGH of 600 St Kilda Road, Melbourne 3004 in the said State, Chartered Accountant, to be Receiver & Manager to enter and take possession of the property and assets charged by the said Charge in the manner therein provided and to exercise all or any of the powers in that behalf conferred on a receiver and manager by the said Charge and by law."

A letter dated 2 May 1996 was given to Mr Thurwood at the same time as the notice. The letter, omitting formal parts was as follows: "Re: First for Finance Pty Ltd Enclosed herewith please find Notice of Appointment of Dean Royston McVeigh as Receiver and Manager of your property and assets the subject of the Charge dated the 16th May 1994 granted by you in favour of First for Finance Pty Ltd. We note that there is the sum of $45,449.80 still due and payable by you as the Borrower to First for Finance Pty Ltd as the Lender and consequently First for Finance Pty Ltd has exercised its right to reinstate the appointment of the said Dean Royston McVeigh as a Receiver and Manager."

The appointment on 2 May 1996 was made without prior notice. A demand had been made for payment before the receiver was appointed on 6 February 1996 but having regard to the provisions of the second agreement of 9 February 1996, no demand was required before the receiver could be reinstated. Under condition 19(1) of the conditions to the charge Mr Thurwood agreed that a certificate given by First for Finance stating as at any date or dates the amount owing should "for all purposes in all courts and at all times be prima facie evidence of the facts stated therein". A certificate in conformity with condition 19(a) was given by First for Finance. The certificate was given on 28 April 1987 and was in the following terms (omitting formal parts):- " CERTIFICATE I, IAN RUSSELL BRINDLEY of 114 Miller Street, West Melbourne, General Manager, certify: 1. I am the General Manager of First for Finance Pty Ltd and an Officer of First for Finance Pty Ltd. 2. As at 6 February 1996 the amount owing by Francis Thomas Thurwood (in his own capacity and as trustee for the F.T. Thurwood Trust) to First for Finance Pty Ltd was the sum of $102,645.12. 3. As at 2 May 1996 the amount owing by Francis Thomas Thurwood (in his own capacity and as trustee for the F.T. Thurwood Trust) to First for Finance Pty Ltd was the sum of $86,646.71. 4. As at 28 April 1997 the amount owing by Francis Thomas Thurwood (in his own capacity and as trustee for the F.T. Thurwood Trust) to First for Finance Pty Ltd was the sum of $76,070.04."

It is noted that the certificate states that as at 2 May 1996 the amount owing by Mr Thurwood to First for Finance was $86,647.71. This is to be contrasted with the amount of $45,449.80 contained in the letter from First for Finance dated 2 May 1996. The apparent discrepancy arises from the fact that the amount in the letter did not represent the total amount then owed to First for Finance at that date. That amount was the balance owing under the loan agreement after having paid the initial amount of fees to Mr McVeigh ($9,709.50) and arrears of hire under the two hire purchase agreements. It did not make allowance for the liability for Truck No.1 which had been written off. The total liability with respect to that truck was calculated at 31 May 1996 at $34,704.00 thereby increasing the total liability over and above the arrears of hire ($11,943.76) by an additional amount of $22,760.00. The insurance proceeds ($29,500.00) were not paid until 15 July 1996. Those proceeds were calculated on the basis that the truck wreck was valued at $3,000.00. Even then the amounts do not all add up. At one stage, the applicant made claims for relief under the Credit Act 1984 (Vic) but at the hearing all claims based on that Act were abandoned. Many submissions were advanced on behalf of the applicant with respect to the two hire purchase agreements and the provisions of the Hire Purchase Act 1959 (Vic). Apart from including the arrears of hire due from Mr Thurwood under those agreements, and including those amounts and the insurance payment made following the write-off of Truck No.1, First for Finance has not sought to enforce any of the terms of the hire purchase agreements. The Hire Purchase Act provisions have no application to the facts of this case. The arrears of hire purchase instalments, as well as the insurance payments, are all debts owed by Mr Thurwood to First for Finance and are subject to the charge. Mr McVeigh, as receiver and manager, was empowered to take possession of the trucks the subject of the two hire purchase agreements but only with respect to the rights of possession enjoyed by Mr Thurwood as hirer. If the owner of those goods had been a third party no difficulty would have arisen. This is illustrated by the fact that other owners repossessed trucks on hire to Mr Thurwood after 2 May 1996. The Court did suggest that by taking possession of the interest of Mr Thurwood in the two trucks, there might have been a merger of the rights of First for Finance, as owner, and Mr McVeigh, as the alter ego of First for Finance, who was entitled to possession of the trucks as hirer. None of the parties before the Court pursued this suggestion. In the result, the Court concludes that the submissions based upon the two hire purchase agreements and the Hire Purchase Act are not relevant to any issue raised in this case. The rights and obligations of the parties depend upon the proper construction and application of the loan agreement, the charge and the second agreement of 9 February 1996. The parties did not refer the Court to any statutory provisions applicable to the construction and application of the charge. It is not a charge under the Corporations Law. The rights and obligations of the parties depend upon the terms of the loan agreement and charge as varied by the second agreement of 9 February 1996. The loan agreement is a long and complicated document. Under its terms First for Finance was from time to time to advance amounts to Mr Thurwood. Mr Thurwood agreed to repay the amounts so advanced together with interest thereon and other amounts in accordance with the terms of the loan agreement. Mr Thurwood agreed to give a first ranking charge over his present and future assets and an assignment of his present and future book debts. Provision was made that on default by Mr Thurwood, the whole of the principal sum would, at the option of First for Finance, become due and payable and could be recovered immediately irrespective of any other right First for Finance may have. Clause 7 contained a number of express agreements by Mr Thurwood including an agreement that a certificate given in conformity with clause 7 stating the amount owing as at any date was prima facie evidence of the facts stated. Time was of the essence for the purpose of the agreement. Clause 9 provided that upon payment of the principal sum and of all other moneys payable by Mr Thurwood to first for Finance, the latter would discharge Mr Thurwood, at his cost and expense, from all securities given by him. Clause 10 made special reference to the relationship between the loan agreement and the two hire purchase agreements. The charge is a long and complex document. It was made between Mr Thurwood as Borrower and First for Finance as Mortgagee. It comprises two parts, one headed "Charge" and the other headed "Conditions". The charge recites the various business arrangements entered into between the Borrower and Mortgagee. Under clause 1 of the charge the Borrower agrees to pay to the Mortgagee immediately upon demand "the whole of the principal sum" as defined when due and payable. The phrase "principal sum' is defined in condition 1 as all advances made or to be made to the Borrower and "all sums of money in which the Borrower may now or hereafter be indebted or liable or contingently indebted or liable to the Mortgagor on any account whatever". This includes amounts owing under the two hire purchase agreements. Under clause 2 of the charge the Borrower, as beneficial owner, charged in favour of First for Finance by way of first floating charge all his undertaking and all his assets, present and future with the observance and performance of his obligations. Under clause 3 the charge was to be a continuing security for the payment of all the moneys secured. Clause 6 is set out in full:- "6. NOTWITHSTANDING anything to the contrary herein expressed or implied the Borrower shall not be entitled to discharge the security until all moneys payable hereunder are fully paid or otherwise secured to the satisfaction of the Mortgagee."

It is not proposed to refer to the whole of the conditions of the charge. They are extremely long and, it is fair to say, onerous as far as the Borrower was concerned. No submissions were made on behalf of Mr Thurwood that they could not be enforced against him. Condition 1 contained definitions which will not be referred to further. Condition 2 contains a number of events which gave rise to the power of the Mortgagor to appoint a receiver and manager including default of payment of principal when demanded. This requirement was varied by the second agreement of 9 February 1996. Other grounds were if judgment was entered against the Borrower or if any bankruptcy notice or petition was issued against the Borrower. Condition 7 empowered the Mortgagee to appoint a receiver and manager and to remove such a person. Conditions 7, 8, 9, 10, 11 and 12 confer many powers on the Mortgagee and any receiver and manager appointed under the charge. Condition 13 contains a number of obligations imposed upon the Borrower including an obligation to pay specified amounts to any receiver and manager. Condition 14 is set out:- "15. The Mortgagee shall not nor shall any receiver appointed by it by reason of the Mortgagee or such receiver entering into possession of the Mortgaged Property or any part of it (including the income thereof) be liable to account to the Borrower as Mortgagee in possession or for anything except actual receipts or be liable for any loss upon realisation or for any default or omission for which a Mortgagee in possession might be liable."

Condition 19 includes the agreement relating to the certificate stating the amount owing to the Mortgagee. Conditions 18 and 20 are set out:- "18. This charge shall be a continuing security notwithstanding any settlement of account intervening payment or other matter or thing whatsoever until final discharge hereof shall have been given to the Borrower."

"20. Upon payment by the Borrower to the Mortgagee of the Principal Sum the Mortgagee shall upon the request and at the cost of the Borrower re-assign or otherwise release from this charge the Mortgaged Property or so much thereof as shall then be vested in the Mortgagee by virtue hereof."

No final discharge of the charge has been given to Mr Thurwood. It is necessary to turn to the forms of order sought by Mr Thurwood. By order 1, he is seeking a determination that the appointment of Mr McVeigh as receiver and manager on 2 May 1996 is invalid. This order will not be made. The facts set out earlier make it clear that on 2 May 1996 the principal sum was immediately due and payable. It was not necessary to give a demand for payment, see the second agreement of 9 February 1996. In any event, the issue of the bankruptcy notice and the petition for a sequestration order entitled Mr McVeigh to be appointed. On the material before it, the Court finds that the appointment was valid. Orders 2 and 3 can be considered together. For ease of reference, those two orders are set out again:- "2. A declaration that amounts owing to the first respondent under the loan agreement have been paid in full and that the charge has been fully discharged. 3. A declaration that the appointments of the second respondent pursuant to the charge on 7 February 1996 and 2 May 1996 terminated as at 29 May 1996."

No formal discharge has been given in conformity with conditions 18 and 20 of the charge. In substance, counsel for Mr Thurwood has contended that in truth the charge was discharged by agreement or by operation of law. The agreement depends on events which occurred in May 1996 Following the making of the two agreements dated 9 February 1996, Linehaul made payments to First for Finance. The payments were not in conformity with the terms of the second agreement dated 9 February 1996. Truck No.1 had been written off in March 1996. Following his appointment as receiver and manager on 2 May 1996, Mr McVeigh permitted Mr Thurwood to continue to operate his business but exercised control of the money to be used by Mr Thurwood for this purpose by exercising control over the expenditure of funds in an account at the Challenge Bank in the name of Mr Thurwood. Linehaul continued to make payments to First for Finance, sometimes through Mr McVeigh and sometimes direct to First for Finance. Linehaul was becoming dissatisfied with the service, or rather lack of service, provided by Mr Thurwood under the Linehaul Agreement. By notice of default dated 13 May 1996, Linehaul gave notice to Mr Thurwood of his default under the Linehaul Agreement. The Notice stated if the default continued after 5 days the Linehaul Agreement would be terminated without further notice. Following receipt of this notice, Mr Thurwood said he had to renegotiate his contract with Linehaul. He attempted to do this by establishing a company called RoadXpress Pty Ltd of which he, and one of his sub-contractor drivers, were directors. This agreement was never finalised. The Linehaul Agreement was terminated but Mr Thurwood continued to cart goods for Linehaul on a more limited basis. Further amounts were paid by Linehaul to First for Finance. On figures available by late May 1996, Mr McVeigh gave notice that the receivership could be finalized upon the payment of a sum of $26,052.97. This amount was based on calculations made following discussions between representatives of Mr Thurwood and Mr McVeigh. These calculations were given to Mr Thurwood's representative on about 27 May 1996 and were as follows:- " FRANK THURWOOD Exposure: Winter & Taylor Finance (Izusu) 2,000.00 (approx.) G.M.A.C. (Izusu) 1,927.09 C.B.F.C. (UD Nissan) -

First for Finance (refer Schedule A) -

Crawford Truck Hire 3,868.00

Wages -

Insurance 3,600.00

Liabilities: Morrison 1,600.00 Doug Peter Draw 3,300.00 I. Sheen 4,200.00 9,300.00 Group Tax - 2 weeks tax for 4 employees 2,332.80

• 2 weeks tax for 3 employees 1,749.60 4,082.40

Superannuation -$58.20 per employee per week 2 weeks x 4 people 465.60 2 weeks x 3 people 349.20 814.80

Holiday Pay - $67.90 per employee per week 2 weeks x 4 people 580.80 2 weeks x 3 people 407.40 988.20

Schedule A 7,067.63 33,647.71

Account Balance $7,594.75 on 27.05.96 at Less: 7,594.75 12.30 pm

Amount required $ 26,052.97

First for Finance as at 31st May, 1995 18,520.92 Fees of Receiver and Manager 10,000.00 Fees of Hardham Dalton Sundberg 2,000.00

Monies Received from Transport Linehaul to 27th May, 1996:

• 17th April, 1996 4,000.00
• 24th April, 1996 4,000.00
• 24th May, 1996 25,000.00 33,000.00 (2,479.08)

Additional Interest 400.00

Shortfall on Truck 1 ) 2,204.30 Shortfall on Truck 2 ) assume payout prior to 31st May 1996 6,942.41 $ 7,067.30

" Mr Dennis Healy, an officer of the firm of Horwath & Horwarth, was assisting Mr McVeigh with the management of the receivership. He had been having discussions with representatives of Mr Thurwood with respect to the financial position of the receivership. He had prepared the calculations. Under cover of a handwritten letter on the letterhead of Horwath & Horwath dated 28 May 1996 and signed by him, Mr Healy sent a copy of the calculations to the solicitors of Mr Thurwood. The letter was as follows: "Attached is schedule of payments to be made from receivership of Frank Thurwood. Item headed liabilities represents subcontractor payments. Further cheque for $27000 received from Transport Linehaul this morning. Any surplus funds will be refunded to Frank Thurwood." Linehaul paid $27,000 to First for Finance on 28 May 1996. As a result, it was contended that the amounts owing by Mr Thurwood to First for Finance had been paid and that therefore the charge had been terminated. It was contended also that as a result the charge had been fully discharged. The Court finds that the amounts owing to First for Finance had not been paid in full. The amount of $27,000 paid by Linehaul was calculated on the basis of two conditions precedent being satisfied. That amount was based on the receipt of two sums by First for Finance from other sources. First, the insurance moneys with respect to Truck No.1 had to be paid to First for Finance. There was delay in the payment resulting from the need of the insurer to obtain medical reports relating to whether the driver of the truck had certain drugs in his blood at the time of the accident. When the insurance money was paid, a dispute arose as to who was entitled to it. Eventually, the money was paid into a trust account in July 1996. In the meantime the hire charges had until July continued to be a debt due to First for Finance and subject to the charge. Truck No.2 had been retained by Mr Thurwood even though his interest in that truck as hirer had vested in Mr McVeigh as receiver-manager. Mr Thurwood refused to acknowledge Mr McVeigh had any interest in that truck. It was hidden in N.S.W. and Mr McVeigh could not get possession of it. Mr Thurwood had told Mr McVeigh that he would sell Truck No.2 at a price which would enable him to pay $35,000.00 to Mr McVeigh to pay out the hire purchase agreement. The figures given by Mr McVeigh to finalise the receivership assumed the receipt of both these amounts. This is made clear by a letter written by Mr McVeigh to the solicitors for Mr Thurwood dated 31 May 1996. The letter refers to a letter from the solicitors for Mr Thurwood dated 30 May 1996 but that letter is not before the Court. The letter of 31 May, omitting formal parts is as follows:- "Re: Frank Thurwood I refer to your letter of 30th May, 1996 and advise as follows: 1. The receivership has extended beyond original expectations. This extension has been principally caused by considerable delays in obtaining funds from Transport Linehaul Pty. Ltd. until the last seven days. 2. Finalisation of the receivership has always been dependent upon: · recovery of insurance monies in respect of my appointors vehicles written off in an accident; · sale of the other vehicle at an agreed price ($35,000); · receipt of sufficient funds to pay the balance of my appointors debt, my costs including unpaid costs of operating the business during the period of the receivership and my remuneration. The first and second of these conditions have not been met. 3. I have indicated to Transport Linehaul Pty. Ltd. that services will not be provided beyond trips undertaken pm. 29th May 1996 to am. 30th May, 1996. 4. An accounting of my receivership will be forwarded upon finalisation of the receivership.

You are requested to advise by return mail as to whether the sale of the Nissan vehicle under hire purchase from First for Finance Pty. Ltd. is to proceed and when settlement will occur."

The Court accepts the evidence of Mr McVeigh on this issue. The letter signed by Mr Healy is not accepted as stating the true position. The $35,000.00 has not been paid to First for Finance. Apparently Mr Thurwood was not able to sell Truck No.2. He still has possession of it. He refuses to tell Mr McVeigh where it is. In the meantime the hire purchase payments continue to accrue and are to be paid to First for Finance. The issue between Mr Thurwood and Mr McVeigh is illustrated by reference to further documentation. On 31 May 1996, Mr McVeigh provided a balance sheet to Mr Thurwood setting out the assets and liabilities of Mr Thurwood with respect to the receivership. That balance sheet is set out but a reference to it shows that account is taken with respect to the two trucks the subject of the hire purchase agreements, the payment of the insurance moneys with respect to Truck No.1 and the agreed purchase price payout with respect to Truck No.2. The balance sheet shows:- "FRANK THURWOOD Midday 31/05/96 $ Assets

Truck to be refinanced 35,000 Insurance to be received 29,500 Wreck 3,000 Hino Truck 12,000 Forklift 4,000 International Truck 2,000

Cash at Bank: National 25,400 Challenge 4,047 29,447

Debtors subject to disputes and set-off (unreconciled) requirement for payout 8,349 123,296 Liabilities

Lease payments: Winter and Taylor - Izusu 1,890 G.M.A.C. - Izusu 1,927

Crawford Truck Hire 3,868

Sub-Contractors: Peter Fraser 3,300 Tony Sheen 4,200 7,500

Group Tax 4,082 Superannuation 815 Holiday Pay 988 Wages (this week) including on costs 3,000 Workcover 8,500 Dominion Taylor Wood (estimate) 10,000 P.P.S. (contingent) 2,080 Horwath & Horwath 10,000 Hardham Dalton & Sundberg 2,000 First for Finance Pty Ltd (finance agreement) (10,000) First for Finance Pty Ltd (truck finance) 76,646

" Following receipt of the letter from Mr McVeigh dated 31 May 1996, the solicitors for Mr Thurwood replied as follows (omitting formal parts):- " Francis Thomas Thurwood We refer to your letters dated 31 May 1996 and 3 June 1996. We are instructed that on 24 May 1996 Mr Healey of your office informed Tony Newman of Transport Linehaul Pty Ltd that the amount required to conclude the receivership was a payment from Transport Linehaul Pty Ltd of $25,000.00 together with a further payment of $12,500.00 to enable our client to attend to payment of outstanding wages, fuel and sub-contractors fees. In performance of this arrangement, Transport Linehaul Pty Ltd duly paid these sums into the nominated account and on Friday 24 May 1996 your office authorised withdrawal out of the account by our client of the requisite sums to meet the wages, fuel and contractors fee then due for payment. We are instructed that Mr Healy of your office spoke again to Tony Newman of Transport Lineball Pty Ltd on Monday 27 May 1996 indicating that a further payment of $27,000.00 was required for the receiver "to get out". In reliance on this statement Transport Linehaul Pty Ltd duly paid the further sum of $27,000.00 to you. This was confirmed in writing by your facsimile dated 26 May 1996 (sic) which acknowledges receipt of the further sum of $27,000.00 paid to you on that day and confirms that any surplus funds will be refunded to our client. In making the statement confirming that any surplus monies will be refunded to our client you have presumably had regard to the provisions of Condition 11 of the charge under which you have purported to act which provides inter alia that all monies received by the mortgagee are to be applied in the following order:

1. First in payment of the mortgagee's costs in respect of the receivership.
2. Secondly, in payment of the principal sum.
3. Thirdly, towards payment of interest.
4. Fourthly, any surplus shall be paid to the borrower. By virtue of the various statements made by you on your behalf and by operation of your facsimile to us dated 26 May 1996 (sic) our client regards himself as finally discharged pursuant to the provisions of the charge. Pursuant to Condition 20 of the charge we hereby request the mortgagee to reassign or otherwise release from this charge the mortgaged property or so much thereof as is vested in the mortgagee by virtue of the charge or ancillary security documents. Any appointment of the mortgagee or yourself as our client' attorney is terminated and there is no power to act as our client's attorney under condition 17 of the charge or otherwise. We are instructed to require payment of the surplus monies due to our client together with a complete accounting in respect of monies received. Finally, we give notice that we have instructions from our client to institute proceedings under the Credit Act 1984 to recover all payments made by our client to you under the charge. We should be pleased to have your response." The enclosures with the letter need not be referred to further. The date 26 May 1996 appearing in the letter appears to be in error, the correct date being 28 May 1996. The letter dated 3 June 1996 is not before the Court. It was contended further that an accounting of the monies received and expended and liabilities incurred by Mr Thurwood during the period of the receivership showed that the debt had been paid in full. At the hearing much time was spent on these figures. In fact, a mini accounting of the receivership was undertaken. Under the charge there is no obligation imposed on First for Finance to give this accounting except in conformity with condition 15. See also clause 6 of the charge. Counsel for Mr Thurwood relied upon a statement of running accounts taken from the computer records of First for Finance in respect of the accounts receivable loan agreement and the two hire purchase agreements. These accounts show that on 22 March 1996, the running account showed a credit of $3,462.46 owing to Mr Thurwood, that on 26 March 1996, a credit of $7,462.46 owing to Mr Thurwood, on 3 April 1996 a credit of $441.01 owing to Mr Thurwood and on 27 May 1996 a credit of $7,321.93 owing to Mr Thurwood. In between times the accounts show Mr Thurwood owed money to First for Finance. Illustrations are given, on 28 May 1996 an amount of $442.42 and on 16 January 1997 an amount of $2,188.64. The Court does not accept this contention. The figures do not give the whole picture. They do not include amounts owing under the hire purchase agreements nor the payments owing with respect to the two trucks. In any event, there is no evidence to establish the fact that the charge has been terminated. Clause 6 of the charge, which has been set out earlier in these reasons, provides that Mr Thurwood shall not be entitled to a discharge of the security until all moneys payable under the charge (including moneys owing under the hire purchase agreements) are fully paid or otherwise secured to the satisfaction of First for Finance. Condition 18 of the charge, which has been set out earlier in these reasons, provides that the charge remains a security until final discharge thereof has been given to Mr Thurwood. On any view of the evidence, the charge has not been terminated. Accordingly, orders 2 and 3 will not be made. Order 4 seeks an order for the taking of accounts of the receiverships commenced on 7 February 1996 and 2 May 1996 respectively. Condition 15 of the charge has been set out earlier in these reasons. Under that condition neither First for Finance nor Mr McVeigh is liable to account to Mr Thurwood for anything except actual receipts. Those two respondents have accounted for receipts. For reasons already given, Mr Thurwood has not established he has paid his debt to First for Finance. Order 4 will not be made. For reasons already given, order 5 will not be made. Mr Thurwood has not established any liability on the part of First for Finance or Mr McVeigh. Accordingly, it is not necessary to consider the question of damages. By way of cross-claim, First for Finance is seeking an order for the payment of $106,134.58, the delivery up of a Mercedes Benz car, and the delivery up of the Nissan truck being the truck described in these reasons as Truck No.2. Questions arise also with respect to the $29,500, being the proceeds of the insurance for Truck No.1 which are held in the special trust account. The cross-claim for the Mercedes Benz car depends upon material contained in an affidavit sworn by Mr Thurwood in the bankruptcy proceedings. It is not necessary to consider this matter in any detail. It is sufficient to say that the evidence before the Court does not justify the making of the order sought by First for Finance. The Court considers the cross-claim relating to the two trucks. Mr Thurwood had possession of each of the trucks pursuant to the terms of the hire purchase agreements. Each of the agreements constituted one of the five separate agreements in writing entered into on 16 May 1994. The trucks, or rather the interest of Mr Thurwood in each of those trucks, formed part of the property given by way of security pursuant to the loan agreement and the charge. Clause 10 of the loan agreement provided that any default under the loan agreement would be a default under the hire purchase agreements and any default under the hire purchase agreements would be a default under the loan agreement. Under the charge, the phrase "principal sum" was defined to include amounts owing under the hire purchase agreements. At the time of the appointment of Mr McVeigh as receiver manager on 2 May 1996, Mr Thurwood was in arrears with his payments under the hire purchase agreements. At that time, the first truck had been written off as a result of the accident but payments continued to be payable to First for Finance. As a result of the charge, upon being appointed receiver-manager of the assets of Mr Thurwood on 2 May 1996, the rights of Mr Thurwood under the hire purchase agreements vested in Mr McVeigh. Clause 1.1(j) of the hire purchase agreement contains a covenant by Mr Thurwood to keep the trucks insured in the name of First for Finance as owner to whom all insurance moneys were to be paid. Further Clause 8 of the hire purchase agreements contains an irrevocable authority by Mr Thurwood to pay insurance proceeds "in satisfaction of any debt due and payable". In any event, apart from the rights of Mr McVeigh to possession of the two trucks by reason of his appointment as receiver-manager, First for Finance was entitled, on 2 May to immediate possession of the two trucks on the basis of the substantial defaults by Mr Thurwood; see clause 1.1(a) and clause 2 of the hire purchase agreements. On any view, First for Finance is entitled to the insurance moneys being held in the trust account. No payments have been made by Mr Thurwood with respect to Truck No.1 since it was "written off" on 27 March 1996. At 2 May 1996, Mr Thurwood was some five months in arrears of payments. He refused to give Mr McVeigh Truck No.2 to enable Mr McVeigh to exercise his rights as receiver-manager. Mr McVeigh never had actual or physical possession of Truck No.2. There was an agreement by which Mr Thurwood agreed to pay Mr McVeigh $35,000.00 for Truck No.2. The sale did not proceed. No further instalments were paid by Mr Thurwood. Mr McVeigh is entitled to possession of Truck No.2 by reason of the terms of the loan agreement and the charge. Difficulties may arise under the provision of the Hire Purchase Act 1959 with respect to the making of an order for possession of Truck No.2. The Court will not pursue this matter further. But the Court is of the opinion that under the terms of the charge, Mr McVeigh is entitled to possession (as hirer) of Truck No.2 and will order that Mr Thurwood deliver up Truck No.2 to Mr McVeigh within 14 days. This conclusion is based on the finding that the security conferred by the charge has not been discharged. The remaining matter relates to the cross-claim for damages. Under clause 7(a) of the loan agreement Mr Thurwood agreed that a certificate signed by an officer of First for Finance stating that at any date, the amount owing by Mr Thurwood "shall for all purposes and in all Courts and at all times be prima facie evidence of the facts stated therein". Such a provision is not contrary to public policy; see Dobbs v The National Bank of Australia Ltd (1935) 53 CLR 643. In the present case, a certificate has been given by an officer of First for Finance. That certificate has been set out earlier in these reasons. It certifies that as at 28 April 1997 the amount owing by Mr Thurwood in his own capacity and as trustee for the F T Thurwood Trust to First for Finance was the sum of $76.070.04. The certificate does not make clear whether that sum includes the $29,500.00 in the trust account and the $35,000.00 for Truck No.2. Having regard to the amounts involved the Court draws the inference that the sum of $76,070.04 does not include either of those amounts. The amount stated in the certificate is prima facie evidence that the amount was owing on 28 April 1997. There is no sufficient evidence before the Court to refute that prima facie evidence. Accordingly there will be judgment for First for Finance against Mr Thurwood for $76,070.04. Apart from the orders for the delivery up of Truck No.2 to Mr McVeigh, and the payment of damages in the sum of $76,070.04 to First for Finance, the cross-claim is dismissed. In all the circumstances, Mr Thurwood should pay the costs of the respondents to the application and the costs of the cross-claimants on the cross-claim. I certify that this and the preceding thirty-five (35) pages are a true copy of the Reasons for Judgment of the Honourable Justice R M Northrop. Associate: Date:

ATTACHMENT Counsel for the applicant Mr P Searle Solicitors for the applicant Nevett Ford Counsel for the respondents Mr I Jones Solicitors for the respondents Hardham Dalton & Sundberg Dates of hearing: 28, 29 and 30 April 1997, 1 and 2 May 1997.