Goodridge v Macquarie Bank Limited

Legislation: Australian Securities and Investments Commission Act 2001 (Cth) s 12CA, s 12CB Conveyancing Act 1919 (NSW) s 12, s 170, s 170(1)(b) Property Law Act 1958 (Vic) s 134

Cases cited: Alexander v Theatre Realty 253 Ky 674 applied Amoretty v City of Melbourne Bank (1887) 13 VLR 431 Anning v Anning (1907) 4 CLR 1049 applied. Asamera Oil Corp v Sea and Oil General Corp (1978) 89 DLR (3d) 1 Attorney-General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 cited Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 applied Australian Guarantee Corporation Ltd v Balding (1930) 43 CLR 140 Australian Performing Rights Association v Monster Communications Pty Ltd (2006) 71 IPR 212 discussed. Australian Trade Commission v Solarex Pty Limited (1987) 78 ALR 439 applied Australian Woollen Mills Pty Limited v Commonwealth (1954) 92 CLR 424 applied Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452 at 506 cited Bateman v Hunt [1904] 2 KB 538 followed. Baun v National Finance P. 2d 560; 135 ALR 949 (1941) cited Begbie v State Bank of New South Wales (1994) ATPR ¶41-288 Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 applied Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 applied Caraponayoti & Co Ltd v Comptori Commerciele Andre & Cie SA [1972] 1 Lloyds 139 cited Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 cited CB Peacocke Land Co Ltd v Hamilton Milk Producers Co Ltd [1963] NZLR 576 cited. Chambers v Smith (1843) 12 M&W 2 cited Christianos v Rohrlach (1981) 55 ALJR 681 cited Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 cited Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 followed. Concut Pty Ltd v Worrell (2000) 176 ALR 693 Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 followed. Denny, Gasquet & Metcalf v Conklin [1913] 3 KB 177 applied. Devefi Pty Ltd v Mateffy Pearl Nagy Pty Ltd (1993) 113 ALR 225 applied Dudley Buildings Pty Ltd v Rose (1933) 49 CLR 84 cited Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 applied F.L. Schuler AG v Wickwan Machine Tool Soles Ltd [1974] AC 235 cited Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 applied. Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 applied. Federal Commissioner of Taxation v Orica Ltd (1998) 194 CLR 500 applied Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 considered Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 cited Forster v Jododex Aust. Pty Ltd (1972) 127 CLR 421 applied Golby v Commonwealth Bank of Australia (1996) 72 FCR 134 Grey v Australian Motorists & General Insurance Co Ltd [1976] 1 NSWLR 669 applied Haines v Bendall (1991) 172 CLR 60 Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458 applied Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd (1968) 121 CLR 584 Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 460 applied Hughes v Pump House Hotel Company [1902] 2 KB 190 cited Hutchens v Deauville Investments Pty Ltd (1986) 68 ALR 367 considered. Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 Joachimson (a firm) v Swiss Bank Corporation [1921] 3 KB 110 discussed Johnson v Perez (1988) 166 CLR 351 Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 cited. MacDonald v Robins (1954) 90 CLR 515 applied. Manser v Spry (1994) 181 CLR 428 McIntosh v. Shashoua (1931) 46 CLR 494 cited Morgan v BNP Paribas Equities (Australia) Ltd [2006] NSWCA 197 considered National Bank of Australasia Ltd v Mason (1975) 133 CLR 191 cited Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014, 1019-1020 referred to. Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 applied. Olsson v Dyson (1969) 120 CLR 365 followed Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395 distinguished Queensland Premier Mines Pty Limited v French (2007) 235 CLR 81 discussed Shepherd v Johnson (1802) 2 East 211 Smith v Corry & Co (1909) 28 NZLR 672 not followed Southern British National Trust Ltd (in liq) v Pither (1937) 57 CLR 89 applied Tailby v Official Receiver (1888) 13 App Cas 523 applied Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 considered Thomas v National Australia Bank Ltd [2000] 2 Qd R 448 applied. Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1903] AC 414 applied. Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 applied Tristan Head v Credit Corp [2000] NSWSC 488 not followed Upper Hunter County District Council v Australian Chilling and Freezing Co Pty Ltd (1968) 118 CLR 429 Van Lynn Developments Limited v Pelis Construction Co Limited [1969] 1 QB 607 Vickery v Woods (1952) 85 CLR 336 cited Walker v Bradford Old Bank Ltd (1884) 12 QBD 511 followed. Wenham v Ella (1972) 127 CLR 454 applied William Brandt's Sons & Co v Dunlop Rubber Company Ltd [1905] AC 454 cited Wilson v United Counties Bank Ltd [1920] AC 102 cited Young v Higgon (1840) 6 M&W 48 Zhu v Treasurer of NSW (2006) 218 CLR 530 applied Corbin on Contracts Ch 48 in Vol 9 at s 866,39 Contract Law in Australia JW Carter, EP Eden and GJ Todhurst (5th ed; 2007) McGregor on Damages 17th Ed

Dates of hearing: 14, 15, 23, 24 September 2009; 21, 22 October 2009

Date of last submissions: 29 October 2009

Date of judgment: 12 February 2010

Counsel for the Applicant: Mr. B W Rayment QC with Mr G R Kennett and Mr A Neal

Counsel for the First Respondent: Mr J Sheahan SC with Ms J Muir

Solicitor for the First Respondent Allens Arthur Robinson

Solicitor for the Second Respondent Piper Alderman

AND: MACQUARIE BANK LIMITED (ABN 46 008 583 542)

1. The parties bring in short minutes of order to give effect to these reasons at 9.30am on 16 February 2010.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website.

AND: MACQUARIE BANK LIMITED (ABN 46 008 583 542)

ISSUES............................................................................................................................ [2] MR GOODRIDGE'S MARGIN LENDING RELATIONSHIP WITH THE BANK......................................................................................................................................... [7] THE LOAN AND SECURITY AGREEMENT............................................................ [10] EVENTS LEADING TO 23 FEBRUARY 2009........................................................... [25] THE 5 FEBRUARY 2009 MARGIN CALL................................................................. [30] WAS MR GOODRIDGE IN DEFAULT IN MEETING THE MARGIN CALL MADE ON 5 FEBRUARY 2009?................................................................................. [40] THE SUBSEQUENT DEMANDS MADE BY LEVERAGED EQUITIES AND ITS CONDUCT ON 23 FEBRUARY AND THEREAFTER.............................................. [44] CLAUSE 5.2 - TIME FOR COMPLIANCE WITH A MARGIN CALL................... [64] CLAUSE 5.7.................................................................................................................... [73] NOVATION OR ASSIGNMENT................................................................................. [87] THE BANK'S DEALINGS WITH BNY IN RELATION TO MR GOODRIDGE'S LOAN.............................................................................................................................. [89] WAS THERE A NOVATION?...................................................................................... [100] WAS THERE A BREACH OF THE MASTER TRUST DEED AND OTHER NOTICE PROVISIONS?.............................................................................................. [126] LEVERAGED EQUITIES' POSITION........................................................................ [132] DID MR GOODRIDGE RECEIVE THE BANK'S LETTER OF 19 JANUARY 2009?............................................................................................................................... [139] ASSIGNMENT - WHAT NOTICE IS SUFFICIENT?............................................... [150] SUFFICIENCY OF THE 19 JANUARY LETTER....................................................... [159] THE NATURE OF THE ASSIGNMENT..................................................................... [168] THE ASIC ACT CLAIMS............................................................................................. [201] RELIEF........................................................................................................................... [212] CONCLUSION............................................................................................................... [237]

REASONS FOR JUDGMENT 1 Ross Goodridge, a barrister, signed a margin lending application with Macquarie Bank Limited, the first respondent, on 12 May 2003. As a consequence, he and the Bank entered into the then Macquarie margin lending standard terms and conditions in a loan and security agreement dated April 2002. The loan and security agreement gave the Bank power from time to time to vary its terms.

ISSUES 2 Two significant powers the Bank had under the loan and security agreement were: · the right under cl 5 to make a margin call when the value of the security it held fell below the level the Bank had set as sufficient for its loan; · the right under cl 21 to assign, transfer and novate the loan and security agreement. 3 In a complicated series of transactions in early January 2009 the Bank "sold" about 18,500 margin loans for nearly $1.5 billion. Mr Goodridge's loan was one of the loans "sold". The ultimate "purchaser" of these loans was Leveraged Equities Ltd, the second respondent. In an intermediate transaction, BNY Trust Company of Australia Limited purchased the legal title to the assets sold by the Bank and then sold those to Leveraged Equities. The transaction documents are very complex. They contain some recognition of the significant fact that the whole relationship between the Bank and its margin loan customers, like Mr Goodridge, may not necessarily be capable of being bought or sold, although aspects such as securities and secured debts could be. It was common ground that contractual obligations are generally incapable of assignment and that these can only be transferred by a novation of the original contract. 4 On 23 and 24 February 2009, Leveraged Equities made one or more margin calls on Mr Goodridge which he claims were invalid. On his asserted failure to comply with one or more of those calls, Leveraged Equities peremptorily sold the security he had provided to support his margin loan for their then market value. Those sales occurred at the market nadir for the units. They have since risen substantially in price but Mr Goodridge did not buy back in after the forced sales. The validity of what Leveraged Equities did depends on a number of contentious matters. The substantial issues are: 1. the proper construction of the loan and security agreement in respect of: (a) the Bank's ability to novate or assign all, or any part of that agreement, in favour of a third party; (b) the Bank's right to make a margin call payable at any particular time; (c) whether Mr Goodridge complied with any obligation on him to meet a margin call. 2. whether the agreements between the Bank and BNY: (a) were completely invalid because BNY had entered into them as a trustee without complying with fundamental provisions in cl 13 of the trust deed; (b) were legally effective to novate or assign in favour of BNY all or some parts of Mr Goodridge's relationship with the Bank to BNY. 3. whether the agreements between BNY and Leveraged Equities: (a) were legally effective to novate or assign in favour of Leveraged Equities some or all parts of whatever BNY had obtained in the transactions with the Bank in respect of Mr Goodridge's relationship with the latter; (b) gave Leveraged Equities the contractual power to act as it did in making margin calls on Mr Goodridge and then selling his security. 4. whether, before it made margin calls on Mr Goodridge or sold his securities, any notice to him of any assignment in favour of Leveraged Equities: (a) was necessary; (b) was received by Mr Goodridge. 5. whether either respondent engaged in conduct that was unconscionable within the meaning of s 12CA or s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act"); 6. whether Mr Goodridge is entitled to have restored to him his units or their current value or is only entitled to, effectively, brokerage fees on the forced sales. 5 There is no dispute that if Mr Goodridge's claim fails, he is liable to Leveraged Equities for the outstanding balance of his margin loan account, including accrued interest. 6 It was common ground that many of the arguments raised by the parties involved aspects of the law relating to contract, assignment and novation that had not been decided previously. The contracts and the legal issues were complex.

MR GOODRIDGE'S MARGIN LENDING RELATIONSHIP WITH THE BANK 7 In May 2003, Mr Goodridge applied to the Bank on its margin lending application for finance form. He appointed Martin Lakos of the Bank as his advisor. He sought a facility limit of $3 million. The application form required Mr Goodridge to authorise and request the Bank to make direct debits on his nominated bank account of any amounts, including margin calls, due under the loan and security agreement. He nominated, as the account for such direct debiting by the Bank, his Macquarie cash management trust account, which was conducted by an entity related to the Bank. 8 The Bank agreed that Mr Goodridge would become its customer. It established a margin lending facility for him. He had also a cash management trust account on which an entity related to the Bank accepted his deposits and paid him interest. The relationship between him and the Bank was one of banker and customer although it ranged more broadly and operated through the loan and security agreement. 9 In Joachimson (a firm) v Swiss Bank Corporation [1921] 3 KB 110 at 127, Atkin LJ said that there was only one contract between a bank and its customer. The terms of the contract involve obligations on both sides and required careful statement. They included the following provisions: the bank undertakes to receive money and to collect bills for its customer's account; the proceeds so received are not held in trust for the customer, but the bank borrows the proceeds and undertakes to repay them; the bank promises to repay at the branch of the bank where the account is kept during banking hours, including any part of the amount due, against the written order of the customer addressed to the branch at the bank.

THE LOAN AND SECURITY AGREEMENT 10 The loan and security agreement relevantly contained the following provisions, among others. Mr Goodridge, as borrower, was entitled to draw up to the amount of the credit limit on the terms of that agreement. The Bank was authorised by Mr Goodridge to apply the loan from time to time to purchase securities nominated by Mr Goodridge together with related expenses (cl 1.2). Mr Goodridge had to repay the loan together with all interest, fees and other moneys that accrued due under the agreement up to the date of such payment (whether or not that was payable) immediately upon the Bank making a declaration, following an event of default, that the loan was due and payable or terminating the facility (cl 4.1(a) and 13.2(a) and (b)) or within seven days of the Bank issuing a demand requiring that repayment. If the bank gave that notice, its obligations to provide the facility would cease (cl 4.1(b)). 11 The facility (being the revolving margin loan facility made available under the agreement (as defined in cl 25.1) was subject to annual review on each anniversary of the first drawing under it. At that time the Bank could terminate the facility and require immediate repayment of the loan and other moneys owing under it under the agreement if, in its opinion, there was a material adverse change (as defined) (cl 4.4). Importantly, margin calls were dealt with in cl 5 and included (in the version current in early 2009): "5.1 If at any time the Total Loan Balance exceeds or, in the Bank's opinion, is likely to exceed, the aggregate of the Market Based Limit and the Buffer, then the Bank may in its discretion require the Borrower to pay to the Bank a sum of up to the amount ("the Margin Call") by which the Total Loan Balance exceeds, or in the Bank's opinion is likely to exceed, the Market Based Limit (together with any costs incurred by the Bank in respect of such a payment). 5.2 The Borrower shall comply with any Margin Call by 2pm on three (3) Business Days following the Margin Call, unless otherwise notified by Macquarie Bank Limited in its absolute discretion." (emphasis added) 12 The terms of cl 5.2 set out above had been amended previously under the variation provision of the loan and securities agreement (cl 24.4). In about April 2004, the Bank notified Mr Goodridge, and presumably other borrowers, on his quarterly statement for the period ended 31 March 2004, that the margin call satisfaction period had been extended from one day to three days. The statement went on to explain: "[t]his means you now have more time to decide what action you would like to take. It also gives the market more time to recover, which may take you back out of your margin call." (emphasis added) 13 In the statements for the quarter ended 30 September 2007, the Bank advised borrowers that, "[p]ursuant to cl 25.4" of the loan and security agreement (scil cl 24.4), the original cl 5.2 had been replaced with the wording set out above. That change was notified to take effect from 15 December 2007 and, the statement went on to inform Mr Goodridge that, the Bank "… will confirm with you the date you need to satisfy a Margin Call at the time of issuing the Margin Call". (emphasis added) 14 The loan and security agreement gave the borrower a number of options as to the way in which a margin call could be satisfied, such as the provision of additional securities (cl 5.3 and 5.4) or cash (cl 5.5). If the borrower elected to provide further securities, cl 5.4 provided that "[s]uch lodgement must occur by 2 pm on the Business Day following the Margin Call". And where the borrower elected to provide cash, it had to be "… provided to the Bank in cleared funds by the time specified in clause 5.2". In addition, cl 5.7 and 5.8 provided: "5.7 Without limiting the Bank's rights following a Margin Call, if at any time the Total Loan Balance exceeds the aggregate of the Market Based Limit and the Buffer, the Borrower and the Securities Owner irrevocably authorise the Bank (and its officers and agents), as their respective several attorney, to sell or redeem (at the Bank's discretion) all or any part of the Secured Property as would produce sufficient funds to enable the Borrower to satisfy a Margin Call. If it becomes necessary to sell Securities which are listed for quotation on the ASX, such Securities may be sold through any broker nominated by the Bank at the broker's prevailing private client brokerage rates. 5.8 The Borrower is responsible for monitoring the Total Loan Balance and the Market Based Limit and is liable for payment of any Margin Call at the time at which the relevant Margin Call arises, irrespective of when or whether or not any notice to pay a Margin Call is given by the Bank." 15 The loan and securities agreement defined "Bank" as meaning Macquarie Bank or any of its subsidiaries which might provide the loan. The "Buffer" meant a percentage as determined and modified by Macquarie from time to time, "Market Based Limit" meant the value of the eligible securities (being securities approved by the bank from time to time to which it allocated a lending ratio) determined by multiplying the "Market Value" of those securities by the lending ratio applying at the relevant time. Significantly, "Market Value" was defined as meaning "… on any day, the value of the relevant property as determined by the Bank from time to time in its absolute discretion". The total loan balance was the aggregate of the loan and the value, as determined by the Bank, of any transactions which had been commenced but not settled (such as sales or purchases and the like but not money that was in the process of being transferred or arranged to satisfy a margin call). (cl 25.1) 16 The borrower was required to pay any amounts payable in full, without any set-off or counterclaim or deduction. In addition, cl 7.1 also provided that: "The Bank is entitled to require the Borrower to effect payments under this Agreement in any manner determined by the Bank, including by way of a direct debit authority." (emphasis added) 17 As I have found above, this authority was effected from inception of the relationship in Mr Goodridge's application form. And, cl 7.2 provided: "If any amount would otherwise become due for payment on a day which is not a Business Day [being defined in cl 25.1, as a day on which banks and the ASX were open for business in Melbourne and Sydney], that amount shall become due on the next following Business Day or, if that Business Day is in another calendar month, on the immediately preceding Business Day." 18 Under cl 12 any securities purchased using the facility were mortgaged to the Bank by Mr Goodridge (cl 12.1(a)) as security for the performance of the loan. The Bank was given power to approve, and revoke its approval of, particular securities as being eligible to be used by it as security for the loan (cl 12.4). 19 An event of default occurred if the borrower failed to make any payment "… when due in accordance with this Agreement" as well as in a variety of other instances. (cl 13.1(a)). If an event of default occurred, the Bank was authorised, without being obliged to do so, to declare the loan and interest and other money accrued due to be immediately due and payable without any further demand, or other legal formality of any kind (cl 13.2(a)) or to declare the facility terminated, at which time its obligations would immediately cease (cl 13.2(b)). In addition, when an event of default occurred, the Bank was authorised to sell any of the security on such terms as it thought fit in its absolute discretion without notice to the borrower (cl 13.2(c)(iii)). 20 Under cl 20, notices and other communications required to be in writing by the loan and security agreement had to be sent to the recipient by hand, prepaid post, facsimile or electronically. Notices or other communications would be deemed to be duly received, relevantly, if sent by prepaid post, three days after the date of posting and, if sent electronically, simultaneously with the sender causing the message to be sent unless the sender received a report indicating that the notice had not been delivered (cl 20.1 and 20.2(b) and (d)). The proper law of the loan and security agreement was Victorian (cl 24.13). 21 Also, significantly, cl 21 relevantly provided: "21.2 The Bank may assign, transfer, novate … and can otherwise deal in any manner [scil: with] all or any part of the benefit of this Agreement and any of its rights, remedies, powers, duties and obligations under this Agreement to any person, without the consent of the Borrower …. 21.4 Without limiting the previous provisions of this Clause 21, the Bank and/or its assignee or transferee is entitled to assign its rights and novate its obligations under this Agreement, or any part of this Agreement, to any trustee or manager of any securitisation programme." (emphasis added) 22 In March 2004 the Bank sent a brochure to, among others, its current borrowers, including Mr Goodridge, entitled "Margin Calls and how to avoid them". The brochure noted that the full terms and conditions were set out in the relevant loan contract, but said that when the borrower got a margin call, it required prompt action, usually by 2pm on the third business day after the margin call was issued. It noted that in order to satisfy the margin call the borrower had a number of options and stated: "The following must be completed prior to 2pm on the day your Margin Call is due: · if selling shares, your stockbroker must fax or email the contract notes to us; · if redeeming managed funds, you must complete the Managed Fund Redemption Form and fax it to us." 23 The borrower was told that alternatively, he or she could provide cash by 2pm on the day the margin call was due. The brochure also said under the heading "Market Rally": "Your Margin Call can be satisfied by a 'market rally'. This means that if your Current Gearing Level is sufficiently reduced by a rally in the prices of shares in your portfolio, within the satisfaction timeframe, your Margin Call will be satisfied. If you do not initiate one of these actions, the lender will act on your behalf - usually selling shares to reduce your loan." 24 The last method simply meant that if, in the period before the margin call was due, the share market increased the price sufficiently for the securities held by the borrower as collateral for the Bank's margin loan, then the borrower did not need to do anything.

EVENTS LEADING TO 23 FEBRUARY 2009 25 Mr Goodridge had had a good relationship with the Bank from both his own and the Bank's view points. As his account manager, Jason Norval, informed his new superiors at Leveraged Equities on 10 February 2009, Mr Goodridge had always been very reliable when dealing with his margin loan. Mr Goodridge had always satisfied the few margin calls he had up to that time and had always been more than willing to assist the Bank. 26 Mr Goodridge had used his loan and security agreement facility to acquire various share market listed investments. However, by late 2008 he had consolidated all his holdings financed with the loan and security agreement facility into units in the Macquarie CountryWide Trust ("the MCW Trust"), an entity that had a relationship to the Bank. He also still had a cash management account with the Bank. Mr Lakos of the Bank was still his financial advisor although Mr Goodridge did not seek his advice actively at this time. Mr Lakos sent Mr Goodridge an email on 11 November 2008 informing him that the market price of the units in the Trust was 31 cents, but the discounted cashflow valuation that Macquarie Equities Limited had placed on it was $1.15. He recommended that the investment was outperforming its market value and that the underlying asset backing had increased to $1.88. Subsequently, sometime after late January 2009, the MCW Trust issued a report for the half year ended 30 December 2008 identifying that its net tangible assets per unit, including deferred tax liabilities, were $1.48. 27 In early January 2009, the Bank "sold" its margin lending business, together with a substantial number of its customer base, including Mr Goodridge's accounts to BNY. The next day BNY "sold" the same assets, including Mr Goodridge's accounts to Bendigo and Adelaide Bank's subsidiary, Leveraged Equities. I will consider the legal effect of these complex transactions later in these reasons. 28 On 19 January 2009, the Bank took steps to inform its customers in a letter that their accounts had been transferred first to BNY and then to Leveraged Equities. There is a dispute whether Mr Goodridge received this letter at any relevant time. The letter commenced by referring to an announcement to the Australian Securities Exchange on 8 January 2009 that the Bank had: "… sold the majority of its margin lending portfolio to Leveraged Equities. … Effective 8 January 2009: · Your loan facility was sold to BNY Trust Company of Australia Limited (as trustee of the Series 2008-1 PANTHER Trust); and · BNY Trust Company of Australia Limited was replaced by Leveraged Equities as trustee of the Series 2008-1 PANTHER Trust; and · The Series 2008-1 PANTHER Trust was renamed Leveraged Equities 2009 Trust. This means that Leveraged Equities is now the Lender for Macquarie Margin Loans … . Your Loan and Service [sic; Security] Agreement will remain unchanged at this time other than to enable Leveraged Equities to become and operate as the Lender. Please note that if you have an adviser they will also be notified of this change." 29 Mr Goodridge said that he never received this letter, or one in similar terms addressed to his superannuation trustee company, Redroad Pty Ltd. Mr Goodridge's partner, Ms Margaret Clay, with whom he lived, gave evidence that she did his filing at home using a system that would have caused such a letter to be filed if Mr Goodridge had left it for filing. She did not open or read his mail but she and he had subsequently, thoroughly, searched all his and Redroad's relevant files without locating the Bank's letter of 19 January 2009. I will deal with the detail of these issues later in these reasons.

THE 5 FEBRUARY 2009 MARGIN CALL 30 By early February 2009, Mr Goodridge owned 5,603,562 units in the MCW Trust. He had made a considerable number of purchases of about 1,110,000 MCW Trust units in January 2009 using his margin loan account. He considered MCW Trust to be the best stock (or units) to hold in light of the then impact of the global financial crisis. His strategy had been to sell his other shares and units and reinvest the proceeds in MCW Trust units. His current loan balance on 5 February 2009 was $865,152.21. At their then current price of 18 cents a unit, his units were worth about $1,008,640.00. The lending manager with whom Mr Goodridge had dealt at the Bank, Mr Norval, was transferred to and became an employee of Leveraged Equities on 2 February 2009. At the foot of his emails in February and March 2009, Mr Norval was named as "Account Manager - Leveraged Equities". 31 On 5 February 2009, Mr Norval sent an email to Mr Lakos, as Mr Goodridge's advisor, making a margin call for $159,076.40 and required it to be satisfied by 2pm the following Tuesday, 10 February 2009. This email set out a number of options by which the margin call might be satisfied. Mr Lakos advised Mr Norval that although he was notionally an advisor to Mr Goodridge, Mr Lakos had not given him advice for years. Mr Norval then caused Mr Lakos' advisor status to be removed, without informing Mr Goodridge. 32 Mr Lakos passed the email on to Mr Goodridge. He responded to Mr Lakos on 5 February saying that he did not have the money to meet the margin call at that time but was expecting about $200,000 in a dividend from the MCW Trust on 20 February 2009 which could be made available to meet the call and asked whether that was acceptable. On 10 February 2009 Mr Norval sent Mr Goodridge an email asking him to telephone. Later that day they had at least two telephone conversations. A recording of one is in evidence in which Mr Norval agreed to Mr Goodridge's proposal that the dividend be used to meet the margin call. Mr Norval asked Mr Goodridge to confirm that he had instructed the MCW Trust to credit the dividend to meet his margin call. Mr Norval gave him an account number to which the dividend should be credited. Mr Goodridge filled in a form addressed to MCW Trust changing his instruction for crediting the dividend to his cash management trust account and nominating instead the account number that Mr Norval had given him. Mr Norval told Mr Goodridge that he had done his part and that that was "perfect". Mr Norval said that he would call Mr Goodridge if he needed anything further. Mr Goodridge faxed to MCW Trust a request for direct credit of the dividend to the nominated account number and soon after faxed a copy to Mr Norval at the latter's request. 33 I find that Mr Goodridge did fax the instruction form to the MCW Trust on 10 February 2009 and that by following the instructions given by Mr Norval he satisfied the Bank's requirements as to the manner in which payment of the margin call would be expected in accordance with cl 7.1 of the loan and security agreement. 34 During this conversation, Mr Norval also told Mr Goodridge that he had "moved across as part of Leveraged Equities" and that there was now a new "chain of command". He said that he had prepared a comprehensive explanatory email. But, in the event, no such email was sent to Mr Goodridge. 35 Mr Norval sought approval internally for Mr Gooodridge's proposal. He then described the relationship between Mr Goodridge and the Bank in the glowing terms I have noted above. In addition, Mr Norval informed his new superiors, Paul Edwards and Lily Elliott that because Mr Goodridge was a barrister he understood the implications of having a default against his name and that his custom, if managed correctly, had the potential to contribute to the future growth of Leveraged Equities' loan book. Mr Edwards responded saying "[a]s discussed given the 'relationship' and the high level of assurance of receiving the dividend, I will extend the [margin] call till 20/2 subject to immediate review if the stock falls to 0.15 cents or lower". He said that from a risk perspective Mr Goodridge's account was "at the top of the curve" and that Leveraged Equities' model assigned "… a zero LVR [loan to valuation ratio] to this stock owing to high volatility and high leverage held by this company". Mr Edwards told Mr Norval to inform Mr Goodridge that "… ongoing finance of a single stock position in this security has no appeal". He required Mr Norval to provide a proposal to reduce or clear or secure Leveraged Equities' exposure to Mr Goodridge by 20 February 2009. 36 This instruction demonstrated how significant the change of relationship between a borrower, such as Mr Goodridge, and his banker could be, assuming the "sale" of his margin loan by the Bank to Leveraged Equities was effective. There is no evidence that the Bank or its affiliates ever took the derisory view of MCW Trust as a security in February 2009 that Mr Edwards expressed. Indeed, as recently as the previous November, Macquarie Equities had valued MCW Trust units at about four times their then market price of 31 cents. 37 Ms Elliott instructed Mr Norval to confirm to both Mr Goodridge and Mr Lakos in writing Mr Edwards' instructions as to Leveraged Equities requirements. Mr Norval did not do this in writing. And, despite Mr Edwards' instruction, Mr Norval did not give Mr Goodridge advice that the ongoing finance of his single holding MCW Trust units had no appeal to Leveraged Equities. Instead, Mr Norval phoned Mr Goodridge on 12 February and told him that "… one of the senior risk guys at LE" had approved his proposal to meet the margin call with the dividend payment on 20 February provided that MCW Trust's unit price did not fall below 15 cents. Mr Goodridge acknowledged that the fall in MCW Trust's unit price the previous day added an extra risk factor. Mr Norval said that: "… a different team … are looking after LVR's and all that sort of stuff at the moment … because your facility is under a single stock exposure … this will be something that's … looked at over the next … you know, coming months …, weeks and months, because … there's different criteria …" The conversation continued: "Mr Goodridge - yeah the risk portfolio changes I understand Mr Norval - exactly so they … just to keep you aware there is a potential for things to happen like the LVR to be reduced depending on what the stock does Mr Goodridge - yep Mr Norval - um, obviously there'd be a bit of, ah a bit of notice for that I would hope but um it … yeah it maybe … well … I mean obviously its entirely up to you but Mr Goodridge - nothing you've said would surprise me Mr Norval - yeah so um I just giving you a heads up cause it might come to a stage where you get a big margin call just because the LVR's been reduced … so Mr Goodridge - yeah Mr Norval - and if you had any opportunity it might be good to Mr Goodridge - to reduce my um LVR Mr Norval - exactly … I don't know if you have any other stock elsewhere or anything …" 38 On 21 February 2009, Leveraged Equities issued an updated approved shares LVR list that continued the 70% LVR assigned to units in the MCW Trust. 39 As events transpired, the dividend of $174,142.48 paid by MCW Trust was credited, contrary to his instructions, to Mr Goodridge's cash management account on 20 February 2009. The unit price for the MCW Trust had continued to fall and early on 23 February it was 14.5 cents. Mr Norval telephoned Mr Goodridge at about 11a.m. on Monday 23 February. Mr Goodridge was at his holiday home away from Sydney. He had been to a neighbour's house to access the internet and view his bank account details and emails. He told Mr Norval that he had noticed the payment had been made to his cash management trust account. He referred to the processing problem and said he would transfer the money. Mr Goodridge agreed to Mr Norval's offer to effect the drawing electronically while they were talking. Mr Norval then transferred $165,000 from the cash management trust account into Mr Goodridge's margin loan account. Mr Goodridge also acknowledged that he expected another margin call that day saying "… I'll scratch the money together and sort it out and sort out what to be sold later on". Mr Norval said that he would send an email later.

WAS MR GOODRIDGE IN DEFAULT IN MEETING THE MARGIN CALL MADE ON 5 FEBRUARY 2009? 40 The respondents argued that by 23 February 2009 an event of default had occurred under the loan and security agreement. This was, they argued, because the dividend had not been paid on 20 February as agreed and Mr Goodridge had not otherwise met the margin call by then. As will appear below, Leveraged Equities argued on 24 February 2009 that it could act as it did on the basis of this default. I reject this argument. 41 Mr Goodridge had done all that he had been required to do by Mr Norval for the purpose of meeting the margin call of 5 February. The fact that later the MCW Trust credited the dividend to Mr Goodridge's cash management account on 20 February 2009 did not constitute a default by him. First, under cl 7.1 of the loan and security agreement, the Bank was entitled to require the borrower to effect payments under it, including all margin calls, "in any manner determined by the Bank". Mr Norval had told him what he required Mr Goodridge to do to assign the dividend in order to satisfy the margin call. On 10 February 2009, Mr Goodridge had complied with the manner determined by Mr Norval and nothing remained for him to do. Mr Norval had said to Mr Goodridge that what he had done was "perfect". Secondly, part of the contract for the margin loan account included a request to and the authority of the Bank to make direct debits on Mr Goodridge's cash management account. So, again, the Bank had stipulated for a means of it being paid any margin call. The first means was not effective in light of the failure of the MCW Trust to implement the faxed instruction when the dividend was deposited into the cash management account on 20 February 2009. It then became amenable to a direct debit, had the Bank made one. 42 Under cl 5.1 of the loan and security agreement, the Bank had a discretion to require the borrower to pay to it a sum up to the amount of any margin call. And cl 7.1 gave the bank power to require such a payment to be made as it directed, including by direct debit. Mr Norval gave such a direction on 10 February 2009 and told Mr Goodridge that what he had done in compliance with the direction was "perfect". Having exercised its power under cl 7.1 twice (both by Mr Norval's instruction and by the standing request and authority of the Bank to make a direct debit on his cash management trust account, which on 20 February 2009 had the funds to meet the margin call in full), Mr Goodridge was not in default when neither exercise of power resulted in actual payment of the margin call on 20 February 2009, through no fault on his part. 43 For these reasons, I find that Mr Goodridge had not failed to make payment of the margin call at any time prior to Mr Norval's completion of the payment of $165,000 from the cash management account into the margin lending account on 23 February 2009. In other words, no event of default by Mr Goodridge had occurred by that time and he had complied with all of his obligations to the Bank under the loan and security agreement.

THE SUBSEQUENT DEMANDS MADE BY LEVERAGED EQUITIES AND ITS CONDUCT ON 23 FEBRUARY AND THEREAFTER 44 During 23 February, the market price of units in MCW Trust dropped to 13 cents each. Leveraged Equities pleaded that during the course of the afternoon of 23 February it made two margin calls on Mr Goodridge. These were in the first and third of the three following emails Mr Norval sent to Mr Goodridge that afternoon, namely: (1) email sent at 2.05pm (the 2.05pm email) "Further to our discussion this morning, and following the transfer in of $165k, your facility is in margin call for $131,363.67." Can you please advise how this will be satisfied by 2pm tomorrow." (2) email sent at 3.57pm "MCW has dropped to 13 cents now and I have been contacted by our Risk department. Can you please advise what your preferred method is to satisfy the margin call. (currently $190,201.07)." I am sorry to hassle you but I have to give an update to Risk." (emphasis added) (3) email sent at 6.29pm (the 6.29pm email) "I have been unable to reach you this afternoon. I have been informed by our Senior Risk Manager that MCW is likely to have its LVR removed over the next few days. This will leave you with a loan of $700,125.21, which will effectively be a margin call. Currently, with the LVR at 70%, you are in margin call for $190,201.07. This must be satisfied by COB tomorrow. Please advise what you [sic] chosen satisfaction method will be ASAP. If you have any stock, either in your name or a third party name, I can arrange to transfer this in for you. Please let me know your thoughts and I will do my best to assist." (emphasis added) 45 As I will explain, after considering the factual aspects of the parties' dealings, I have concluded that none of these was a margin call within the meaning of cl 5 of the loan and security agreement because it failed to allow Mr Goodridge no less than until 2pm on the third business day after the call was made to comply with it. However, this non-compliance with the loan security agreement did not constrain the actions of Leveraged Equities. By late in the afternoon of 23 February 2009, Mr Edwards told Mr Norval that at 13 cents a unit, the MCW Trust was "a penny dreadful" and that if Mr Goodridge did not provide acceptable alternate security by the next day he would face almost certainly a LVR reduction or removal and a forced sell down. 46 Mr Goodridge said that he returned to Sydney later on 23 February 2009 and read these emails painting a bleak picture of the day's trade on the market. He understood from the 6.29pm email that the reference to "COB tomorrow" effectively gave him until just before the market opened on 25 February to satisfy the call. By then, he was shaken and upset by what was happening. He was appearing in court on the next day, 24 February and did not receive Mr Norval's next email sent at 10.05am or his earlier phone calls. Mr Norval's email represented another shift in Leveraged Equities' position stating: "Based on the share price of MCW, with this opening at 12c today, we will be force selling 5,603,562 units at 12pm today if the margin call is not satisfied at this time. Please respond ASAP and/or call me …" 47 Mr Edwards had instructed Mr Norval at 8.16am that morning that based on the price of 13˘ and the outstanding demand for $190,201.07 "… we should commence forced selling today to ensure FULL clearance of margin call by close of business today, unless margin call is met in full from other sources by Midday today". Mr Norval checked to see that $13,373.34 was available in Mr Goodridge's cash management trust account and informed Mr Edwards and Ms Elliott of this. She replied that notice of a new margin call had to be given as per the terms and conditions. That advice went unheeded. She again reminded Mr Edwards and Mr Norval at 2.18pm of the need for notice but said that because he held only one stock he should get 24 hours notice rather than 3 days. 48 The email chain above shows that despite working for Leveraged Equities, Mr Norval and his employer had direct access to Mr Goodridge's Macquarie cash management trust account and could draw what they wanted out of it to satisfy a margin call without needing to seek Mr Goodridge's consent. 49 In the meantime, at about 2pm Mr Norval was able to speak to Mr Goodridge who had just come out of court. He had seen the emails sent to him and asked if any forced sale had occurred. Mr Norval by then had been instructed by Ms Elliott to halt the forced sale instruction and had done so. He told Mr Goodridge that he was "in luck" because no sales had occurred. Mr Goodridge asked if he could have 10 or 15 minutes to see what he could "scratch … together". Mr Goodridge rang back 10 minutes later and told Mr Norval that he had put 1.6 million units onto the market at 12 cents each and he thought he could obtain the balance required by Mr Norval. Mr Norval reported back at 2.28pm to Mr Edwards and Ms Elliott about Mr Goodridge's position. He proposed giving Mr Goodridge "… until 3pm, and if not satisfied, we force sell him". 50 Then, at 2.37pm Mr Norval phoned Mr Goodridge again pressuring him to sort things out. Mr Goodridge reiterated that he had put 1.6 million units on the market at near market price and reminded Mr Norval that he had dealt with him before. Mr Norval told him that it had been taken out of his hands. He said that they had to sort things out by close of business and Mr Goodridge said that this was also his intention. He accepted Mr Norval's offer to give a discount on brokerage and instructed him to sell all his 5.6 million odd units at 12 cents. He said he was not asking for sympathy, but was doing his best. Mr Norval said: "I just want to try … and resolve it, your way, rather than have to sell out at 3:50 [pm], which is looking like what is going to happen … I'm basically going to have to give them something by then otherwise that's what they're gonna do." Mr Goodridge said that he would do his best. 51 Before 4pm that afternoon, Mr Norval attempted to sell all of the 5.6 million odd units and succeeded in selling 1 million at 10.5 cents each. At 4.43pm Mr Gooridge sent an email to Mr Norval and Mr Lakos informing them that he had offered to sell three beachfront properties to two friends who had yet to respond and had made an appointment to see a third friend the next day to see if he could obtain a loan "or similar" from him. Although Mr Norval did not refer to this email in his evidence, I am satisfied that it was received by its addressees. Mr Lakos did not give evidence. The third friend was a solicitor, Mr Firth. Ultimately the other two friends were unable to help but Mr Firth was, as I will explain shortly. 52 Next, at 5.14pm Mr Norval emailed Mr Goodridge saying: "I was forced to sell 1,000,000 units, which went through at 10.5 cents. The remainder will be sold tomorrow." He also asked how Mr Goodridge's sale attempt for the 1.6 million units had gone. 53 By now Mr Goodridge was emotionally overwrought. He felt under great pressure and was bursting into tears. He had difficulty sleeping. I am satisfied that he was not able to think clearly and felt devastated by the turn of events and pressure which the peremptory demands for large payments had placed on him. These feelings were compounded by his learning of the forced sale of the 1 million units in the investment he had spent much effort to accumulate. His emotional fragility caused him subsequently to make a number of inaccurate assertions, but I am satisfied that he did not do this dishonestly, or conscious of these errors. This has, of course, affected his reliability as a witness in some respects. Overall, I formed the view that he was an honest man although he was not always accurate because his recollection had been affected by his emotional reaction to what he regarded as a personal disaster. As he said: "All I know is that I was destroyed." That reaction, I must say, was understandable. 54 Mark Hawker, the wealth financing risk and compliance manager of Leveraged Equities gave unchallenged evidence that throughout February and March 2009 Mr Goodridge's access to the margin loan account through the Gear Up website was not blocked. But since it recorded, and still does, that he was in default of paying a margin call, as a practical matter he could not trade on that facility until he regularised the account. Sun Lui, an information technology employee of a company associated with the Bank, gave evidence that Mr Goodridge had logged onto Gear Up a considerable number of times in the first quarter of 2009, including five times on 25 February 2009. He said that if someone in the bank had removed a customer's shares from his loan portfolio, the customer would see a zero for the amount of his holdings. I am satisfied that on 24 February 2009 Leveraged Equities caused all of Mr Goodridge's 5.6 million units to be removed from his having any access or ability to deal with them through the internet. Mr Goodridge said that when he tried to access his share and unit trading account on the internet (which is separate from the Gear Up website after the market closed on 24 February he could not use the "buy" or "sale" functions and his CHESS (Clearing House Electronic Subregister System) portfolio showed no units in it at all. He said, and I accept, that he was not able to use the sale function after this time on the DirecTrade website. 55 Nonetheless I find that Mr Goodridge at some point, then or soon after could still see some units recorded as being in his name in both his internet portfolio summary and portfolio CHESS holdings webpages. So much is clear from his email to Mr Norval late on 26 February 2009. There he complained that Mr Norval had sold some units contrary to his instructions and that the two webpages gave inconsistent reporting of his then holdings. He said that the portfolio summary page showed 1,351,781 MCW Trust units in his name whereas the portfolio CHESS holdings page showed only 248,219 units in his name. It is possible that he may have misinterpreted what he saw because 248,219 units were sold that day leaving a balance of 1,351,781 units in his name that Leveraged Equities was force selling. 56 Later on 24 February 2009, at 6.24pm Mr Goodridge emailed Mr Norval protesting about the sale of the 1 million units. The email contained a number of inaccurate assertions about the past, but said that the sale had occurred despite his having tried to find a solution. Early the next morning he sent another email, with similar inaccuracies. 57 At 8.30 on 25 February Mr Goodridge kept his arranged appointment with his friend, Mr Firth. He explained what had happened, crying during the meeting. Mr Firth told him that he would have lent $400,000 to Mr Goodridge immediately that day. Mr Goodridge had both a friendship and a substantial professional relationship with Mr Firth and understood that Mr Firth would be good for his word. But, he also understood on the morning of 25 February that all his units had been sold and there was no longer a margin call to satisfy. For that reason, he said that he did not take up Mr Firth's offer or pay the $190,000 demanded in Mr Norval's emails of 23 and 24 February. I accept Mr Goodridge's evidence concerning his dealing with Mr Firth. 58 I accept that Mr Firth would have lent Mr Goodridge up to $400,000. I find that had he been given a margin call on 23 February 2009 that required compliance by 2 pm on the third business day thereafter (i.e. 26 February) Mr Goodridge would have been able to comply, and would have complied, with it because Mr Firth would have lent him the money to do so. 59 On and after 25 February, Leveraged Equities progressively sold the whole of Mr Goodridge's MCW Trust portfolio. After applying the whole of the net proceeds of sale to the margin loan account, it remained in debit by over $58,000. All the sale transactions are summarised in the following table: 60 Leveraged Equities argued that if Mr Goodridge had exercised prudent financial management of his position over the period leading up to the demands it made on 23 and 24 February he would have been able to meet them. It contended that he was too highly geared so that he was dangerously exposed to small adverse movements in the unit prices for the MCW Trust. It disclaimed responsibility for his predicament. 61 I reject this argument. While Leveraged Equities was correct to point to Mr Goodridge having responsibility for his investment decisions, there was no reason for him to contemplate that his lender would shorten the time for compliance with a margin call in the unjustified way that Leveraged Equities did on 23 and 24 February. 62 And, I have found that had he been given the minimum time allowed in cl 5.2 of the loan and security agreement Mr Goodridge would have raised funds from Mr Firth to cover any margin calls that could have been made on him. In Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452 at 506 Lord Macmillan said of an argument similar to that of Leveraged Equities: "Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticize the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken." (emphasis added) see too Wilson v United Counties Bank Ltd [1920] AC 102 at 125 per Lord Atkinson. 63 Leveraged Equities also argued that Mr Goodridge's authorisation of Mr Norval on 24 February 2009 to put all the units on the market at 12 cents was an instruction that it was entitled to act on, at least in respect of sales that it later made on and after 26 February 2009. But, by the time Mr Goodridge had sent his email of 6.24 pm on 24 February to Mr Norval, it was clear that he had withdrawn any such authority. He told Mr Norval that the sale of 1 million units at 10.5 cents was not what was discussed and that it was "very disappointing". Leveraged Equities' reliance on the earlier conversation to justify its forced sale was without substance and I reject it.

CLAUSE 5.2 - TIME FOR COMPLIANCE WITH A MARGIN CALL 64 I am of opinion that the Bank, and Leveraged Equities, to the extent either may have been able to exercise any rights of the Bank against him, could not make a margin call giving Mr Goodridge less than the period of notice in which he could comply in accordance with cl 5.2 of the loan and security agreement. 65 The Bank and Leveraged Equities argued that cl 5.2 permitted the time for compliance with a margin call to be reduced by the Bank. Leveraged Equities argued that the final clause in cl 5.2 was unambiguous and gave the Bank power to specify any time at all. It contended that the expressions "unless otherwise notified" and "in its absolute discretion" were of the widest import. It argued that cl 5.2 allowed the Bank to shorten the period for compliance to payment of the margin call on demand. The Bank and Leveraged Equities argued that, in effect, a margin call could be made payable at any time, notwithstanding the three business days referred to in cl 5.2, relying on the concluding qualification to that clause. In effect they contended that when Mr Norval accelerated the time at which payment was demanded, first to 2pm on 24 February 2009 and secondly, to close of business that day, he was giving a notification on behalf of Macquarie Bank or Leveraged Equities that was a notification "in its absolute discretion". I reject the respondents' argument. 66 First, the ordinary and natural meaning of the exception in the last clause in cl 5.2 excuses a borrower from compliance if the Bank, in its absolute discretion, notifies the borrower. The clause is directed to the borrower's compliance within the specified time unless the Bank notifies the borrower that he or she or it need not comply within that time. For instance, the time could not be shortened in the Bank's "absolute discretion" to require compliance on a non-business day, since cl 7.2 operates to make it fall due on a business day. 67 Secondly, the respondents' construction does not sit at all well with the balance of the loan and security agreement. It gives the Bank a discretion to require a margin call to be paid under cl 5.1. That discretion can only be exercised by the Bank making a determination of the market value of the securities for the purposes of calculating the market based limit. This is no idle matter. If the Bank uses the market value at any particular time on a business day, and the market then rallies or falls, the obligation to meet the margin call will be affected. A rally will reduce the amount of money necessary to be paid or perhaps eliminate it, if it rises sufficiently to reduce the total loan balance to below the aggregate of the market base limit and the buffer. Alternatively, if the market falls further, then the borrower is entitled to know, with certainty, whether the earlier determination of market value stands or another has been substituted. 68 Thirdly, cl 5.2 does not expressly give the Bank power to fix a shorter period for compliance. The principal obligation created by cl 5.2 is that the borrower comply by the time specified in the clause itself of 2 pm on the third business day following a margin call. The discretion given to the Bank by cl 5.2 allows it to extend the period for compliance or to waive the margin call. This meaning is consistent with the explanations given by the Bank to Mr Goodridge and other borrowers in about April 2004 and late 2007 when it informed him and them of changes to cl 5.2. The clause does not expressly allow the Bank to make a margin call payable on demand. Yet, that is the necessary consequence if the respondents' construction were correct. The right of a banker to require a customer to pay a debt on demand is significantly different to its right to require the customer to pay the debt after giving a particular period of notice. 69 The period of notice allows the customer time to organise his, her or its affairs in order to comply with the demand. Here, at the time of entering into the loan and security agreement and of each variation to cl 5.2, the parties (the Bank and Mr Goodridge) knew that margin calls would be made in volatile market conditions that may or may not continue for any particular period of time. They were aware that the market may rally and so enable compliance with the margin call without the customer ultimately needing to do anything. And, the respondents' construction of cl 5.2 is directly inconsistent with the right of a borrower to provide further security to satisfy a margin call by 2 pm on the next business day under cl 5.4. 70 A margin call payable on demand made after 2 pm could not be satisfied in accordance with the borrower's right under cl 5.4 by providing further securities by 2 pm on the next business day. The language of cl 5.4 does not give the Bank a discretion to reduce the time that it gives the borrower. Thus, the respondents' argument that cl 5.2 allows the Bank to specify any shorter time than 2 pm on the third business day following the call, including payment on demand, for compliance with a margin call contradicts another express term in cl 5.4 that offers a borrower a substantial contractual right. 71 It follows that I am of opinion that none of what Leveraged Equities purported to do in making "margin calls" on 23 and 24 February 2009 or selling Mr Goodridge's MCW Trust units was authorised by the loan and security agreement. He had not committed any breach of that agreement. No valid margin call had been made on him. And, he was not in breach of any obligation thereafter because no later margin call was ever made. 72 Mr Goodridge also argued that the express words "notified by Macquarie Bank Limited in its absolute discretion" in cl 5.2 required the Bank, and not Leveraged Equities, to exercise its discretionary power. I am of opinion that if Leveraged Equities were able to exercise any rights of the Bank against Mr Goodridge, then the fact that the Bank's full name appears in cl 5.2 would not prevent Leveraged Equities from exercising its discretion in cl 5.2. The defined words "the Bank" in the loan and security agreement were a shorthand expression for Macquarie Bank Limited. The use of the full expression in the clause at a time when the Bank actually was the other contracting party does not signify that the discretion in clause 5.2 was a personal discretion of the Bank that could not be novated in favour of or assigned to a third party. Acceptance of this argument of Mr Goodridge would lead to an uncommercial and unreasonable result. I reject it.

CLAUSE 5.7 73 Leveraged Equities also argued that cl 5.7 created an independent right of the Bank to sell any of Mr Goodridge's securities once a margin call had been made, regardless of whether the time had arrived for compliance with it. Thus, it argued the borrower could find that all his or her securities had been sold under cl 5.7 to meet a margin call before it was due to be satisfied. This result flowed, so Leveraged Equities contended, because of, first, the introductory words of cl 5.7, namely "without limiting the Bank's rights following a Margin Call, if at any time" the total loan balance exceeded the market based limit and the buffer amount and, secondly, the later words of that clause, namely: "the Borrower … irrevocably authorise(s) the Bank … to sell or redeem … any part of the secured property." 74 I reject this argument. It produces a very unreasonable and uncommercial result. As Lord Reid sagely observed in F.L. Schuler AG v Wickwan Machine Tool Soles Ltd [1974] AC 235 at 251E, the more unreasonable the result of a suggested construction of a contract, the more unlikely it is that the parties can have intended it, and if they do intend it, the more necessary it is that they make that intention abundantly clear. 75 If the Bank exercised its discretion to make a margin call, then cl 5.2 required the borrower to comply with it. It would be inconsistent to construe cl 5.7 as allowing the Bank to sell the borrower's security before the time that cl 5.2 gave the borrower to comply with the margin call. The words "if at any time" in cl 5.7 must be read with the preceding words "following a Margin Call". I am of opinion that the commercial intention behind the parties' use of those expressions is plain. The event which the parties had in mind, giving the Bank the power to sell, was a failure to comply with a margin call. In addition, the words introducing the last sentence of cl 5.7: "If it becomes necessary to sell …" suggest that the necessity has arisen because of a default by the borrower in compliance with a margin call. It would not be "necessary to sell" the borrower's securities merely because the Bank had the free standing right to do so for which the respondents contend. The rights of the Bank "following a Margin Call" arose only if it had not received payment or the margin call were not otherwise satisfied (e.g. by a market rally) by the due time. 76 The various contractual rights given to the borrower to satisfy a margin call elsewhere in cl 5 would be negated, if the Bank could act independently of anything the borrower had done to comply within the time fixed by cl 5.2. The parties were aware that the market could move favourably or unfavourably to the borrower during that period. When cl 5.8 provided that the borrower "is liable for payment of any Margin Call at the time at which the relevant Margin Call arises", the margin call must have been intended to have arisen at the time fixed for compliance in cl 5.2. The precise quantification of any liability to pay can only be ascertained at the moment the margin call is due because of fluctuations in the value of the security that may occur in the market. And, at that moment there may be nothing owing, and hence no liability. The liability to meet a margin call remains a contingent one up to the time for compliance and only matures into an actual liability if at that time the application of the formula in cl 5.1 to the loan balance and the valuation of the securities produces that result. 77 I am of opinion that cl 5.7 relates to a borrower's failure to pay or provide security to satisfy an actual liability to pay a sum certain at 2:00 p.m. on the day that the margin call is due. The Bank's power was to demand that the margin loan account and the value of the security be in a particular position at 2:00 p.m. on the day the margin call was due. This is a well understood and ordinary incident of the relation of banker and customer: cp National Bank of Australasia Ltd v Mason (1975) 133 CLR 191 at 199 per Barwick CJ, 205 per Stephen J who said: "… it is, I think, a contradiction in terms to speak of "moneys now owing" and at the same time to seek to include therein moneys only owing on a contingency; yet this I regard as the effect of the first reference to "whether contingently or otherwise" in cl. 1 (i) if it be given the meaning which the bank must contend for. In Community Development Pty. Ltd. v. Engwirda Construction Co. ((1969) 120 CLR 455), Owen J. examined the authorities concerned with the meaning of a "contingent creditor" and "contingent liability"; these authorities, together with his Honour's own judgment and that of Kitto J. in that case, do, I think, support the view that the contradiction to which I refer is a real one." (emphasis added)

78 And, in Morgan v BNP Paribas Equities (Australia) Ltd [2006] NSWCA 197 at [62-[67] Santow JA, with whom Giles and McColl JJA agreed, discussed a similar, but not identical, contract to the loan and security agreement providing for margin calls. He concluded that a margin call could not be made "sub silentio" by a provision similar to cl 5.6 because that would be a commercially nonsensical and inconvenient result: Morgan [2006] NSWCA 197 at [62]-[63] and at [66]-[67] he said: "All of this strongly indicates that when cl 7.1(c) states that "BNP may notify you of the margin call and of details of the actions which can be taken to satisfy the margin call", "may" in effect means "shall" when it comes to making a margin call in terms of the loan agreement. Otherwise, the client would simply not know what were the actions which should be taken to satisfy the margin call. Nor would the client know, in the absence of knowing a margin call existed, that actions were required to be taken in the first place. That then leads to the proper interpretation of cl 7.1(d) with its concluding sentence, "You must do so [that is satisfy each such margin call] even if BNP does not give you a notice requiring you do so". The words are ambiguous and are capable of meaning, read literally, that no notice of the margin call is required before the obligation to satisfy arises. But the more plausible meaning, and one which avoids a commercially unreasonable result, is that what is excused of BNP is the necessity to give notice that the margin call must be satisfied; it is enough to give notice of the call itself. Here it could not be said that even a person of Mr Morgan's expertise was obliged to act upon a margin call when he was not aware that there had been one, nor of circumstances that would allow him to conclude that the trigger event in cl 7.1(a) had occurred. This was because he was not made aware at the critical time of the reversal." (emphasis added) 79 Of course, the language of the loan and security agreement is different to the contract construed by Santow JA. But, similar considerations inform the construction of cl 5 of the loan and security agreement: Zhu v Treasurer of NSW (2006) 218 CLR 530 at 559 [82]. It is only at the moment that a margin call is due under cl 5.2 that a borrower in Mr Goodridge's position can know whether he has any liability at all to pay something to the Bank, and, if he does, how much that liability is. Prior to that time, the margin call was only due to be satisfied at 2 pm on the third day after the making of the call but it was neither immediately payable nor anything more than a contingent liability. The existence and amount, if any, of any actual liability of the borrower would only be known when the time for performance arrived at 2 pm on the third day. 80 Leveraged Equities argued that Morgan [2006] NSWCA 197 was distinguishable on two bases; first, in that case there was no equivalent to cl 5.8 which imposed an obligation on Mr Goodridge to monitor his margin position; secondly, Mr Goodridge in fact had done so. Prior to late on 24 February 2009, Mr Goodridge monitored his margin position using his access to the GearUp website. He was acutely aware, on 23 and 24 February 2009, of the increasing shortfall between his margin loan and the value of his security as the market price of MCW Trust units continued to fall. Through Mr Norval's telephone conversations and emails, Leveraged Equities reinforced to Mr Goodridge the deterioration of his margin position over that period. 81 However, cl 5.1 of the loan and security agreement gave the Bank a discretion to require the borrower to pay a sum up to the amount of the difference between the total loan balance and the market based limit. The sum that the Bank actually requires to be paid, which, of course, could be less than that difference, is defined as the margin call. Thus, while cl 5.8 imposes a duty on the borrower to monitor the total loan balance and the market based limit, it does not override the substantive creation of a liability to meet a margin call under cl 5.1. In cl 5.8 the words "… irrespective of when or whether or not any notice to pay a Margin Call is given by the Bank", can only be referring to the borrower's obligation to monitor created earlier in the clause. Those words cannot qualify the independent obligation created by cl 5.1; rather cl 5.8 confirms that in order to avoid being surprised if the Bank makes a margin call, the borrower must monitor his or her exposure, whether or not he or she is given any notice to pay. But, cl 5.8 provides that the borrower is liable to pay a margin call at the time at which it arises in any event. The part of cl 5.8 that I have just quoted makes no sense if read with the restatement, or explicit statement, of the borrower's liability to pay a margin call at the time it arises. This is because a margin call is defined as a sum actually determined by the Bank that it requires the borrower to pay - a margin call is not automatic or in a sum that is capable of calculation in advance of the Bank actually requiring the borrower to pay the sum specified by it which cannot exceed the difference in the amounts the borrower must monitor under cl 5.8. 82 Here, the loan and security agreement is a carefully drawn document that, in general, offers broad rights and powers to the Bank, which drafted it. If that drafting failed to achieve the more extreme constructions that it and Leveraged Equities seek to draw from it, they will be in a position to protect their interests by redrafting its terms. The Court should not strain to give even greater powers to the Bank, than the ordinary and natural meaning of the loan and security agreement gave it. 83 And, the agreement being construed in Morgan [2006] NSWCA 197 created a margin call automatically if Mr Morgan's loan balance and certain other sums exceeded a particular amount. The clause creating that liability operated differently to cl 5.1 of the loan and security agreement here. In Morgan [2006] NSWCA 197, BNP had reversed an entry on the relevant account that had the automatic effect of triggering a margin call. But, BNP did that without giving any notice to Mr Morgan. Hence, Santow JA's finding that, in those circumstances, BNP had to give notice of the margin call but did not need to give notice that it had to be satisfied. 84 Here, it is nonsensical to read cl 5.8 as ignoring the provisions of cl 5.1 that provide for the creation of a margin call only if the Bank chooses to make one. I am of opinion that cl 5.8 does not relieve the Bank from making an actual requirement of the borrower by communicating it to him or her if it chooses to exercise its discretion to make a margin call. 85 Moreover, in my opinion, Mr Goodridge was not in default at 3.50pm on 24 February 2009 when the forced sale of his securities began. The time by which he had to satisfy the margin call had not arrived; that is, 3.50pm was not the close of business, and Leveraged Equities or Macquarie Bank were not authorised to sell or offer for sale the securities at that time, whatever may have been the position later in the day. No event of default could possibly have occurred until after close of business, whenever that may have been, on 24 February 2009 assuming that the Bank was entitled to make any margin call due on 24 February. 86 The sale by Leveraged Equities of the 1 million units on that day shortly after 3.50pm was a breach of the loan and security agreement, a breach of trust, by the misuse of the power of sale, and a significant deflator of the market value of the securities. Mr Goodridge gave unchallenged evidence that he would have been able to pay the whole of the margin call through the offer from Mr Firth. The peremptory manner of the breach of the loan and security agreement by Leveraged Equities, if it were a party to it, on 24 February 2009 put it in a position where it had demonstrated that it no longer was ready or willing to perform that agreement according to its terms. Its conduct was a repudiatory breach that struck at the heart of the relationship.

NOVATION OR ASSIGNMENT 87 Both the Bank and Leveraged Equities pleaded that the loan and security agreement had been validly novated or assigned by the Bank to BNY and then validly novated or assigned by BNY to Leveraged Equities in about January 2009. 88 Of course, it is not possible to assign obligations under a contract. Only rights can be assigned. Thus, it is necessary to examine the transactions between the parties to the transfer of the Bank's margin loan portfolio that was sought to be passed to BNY and then by BNY to Leveraged Equities. The first series of transactions in creating Leveraged Equities' asserted rights against Mr Goodridge involved dealings to which Leveraged Equities was not a party. I will consider these, first, and then the dealings between BNY and Leveraged Equities.

THE BANK'S DEALINGS WITH BNY IN RELATION TO MR GOODRIDGE'S LOAN 89 A master trust deed ("the master trust deed") was made on 16 November 2007 between Macquarie Securities Limited ("MSL"), as manager, and BNY as trustee. The master trust deed recited that it was intended to provide for the establishment of "series trusts" to be known as the "PANTHER Trusts" and that each series trust would be established for the purpose of funding the acquisition of "approved financial assets", or funding the acquisition by BNY, as trustee of one series trust, of approved financial assets held by it, as trustee of another series trust (Recitals A, B). Such a dealing would be effected by MSL and BNY entering into a form of trust deed called a "series supplement" to effect the particular transaction. Importantly, assets could be transferred from one series trust to another by MSL issuing to BNY a transfer proposal in accordance with cl 13 of the master trust deed. 90 The Bank contended that before January 2009 it held the legal interest in Mr Goodridge's loan and that BNY, as trustee of the Series 2007-1 PANTHER Trust ("the 2007 trust"), held the beneficial interest. The 2007 trust was established as a "series trust" by a "series supplement" also made on 16 November 2007 between MSL, as manager and BNY, as trustee. The Bank was not a party to this document. 91 While the 2007 trust deed appears to be in a form contemplated in the master trust deed it does not, on its face, contain any evidence that the Bank, which, significantly, was not a party to it, had parted with any legal or equitable interest in or in respect of its loan to Mr Goodridge. However, the transfer proposal of 7 January 2009 between the Bank, MSL and BNY first, in its capacity as the disposing trustee and, secondly, in its capacity as acquiring trustee included Mr Goodridge's margin loan debt of $640,603.75 and his then holding of 4,503,562 units in the MCW Trust as part of the "Assigned Assets". I will consider the effect of this transfer proposal below, but it appears to treat Mr Goodridge's loan and his units as being an asset and security in which BNY as trustee of the 2007 trust had some interest. 92 Under the structure contemplated in the master trust deed, BNY was appointed as trustee of the series supplements (cl 2) and MSL, the manager, for both the 2007 trust and another one called the series 2008-1 PANTHER trust ("the 2008 trust"). BNY Trust Australia (Registry) Ltd ("BNY Registry") also was a party to, and was appointed as security trustee for, the 2008 trust. BNY declared that as trustee of any series trust it would hold the assets of each such trust on trust for its unit holders on the term of the transaction documents for that trust (cl 3). The transaction documents were defined as meaning the master trust deed, any series supplement, sale agreement and servicing agreement relating to the series trust, any note subscription agreement and certain other documents relating to the particular series trust (cl 1.1). 93 Mr Goodridge contended that the transfer proposal, on which the Bank and Leveraged Equities relied to create the rights and powers Leveraged Equities asserted against him, was not one made in accordance with cl 13 and thus was ineffective. 94 Under cl 13.1 of the master trust deed MSL could issue a transfer proposal not less than five business days (or such other period as agreed by BNY) "prior to the Assignment Date" (i.e. the date specified in the transfer proposal for this purpose) in relation to the transfer proposal. The transfer proposal for the acquisition by BNY as trustee of the 2008 trust of various assets including Mr Goodridge's loan, actually specified 8 January 2009 as the assignment date. The requirement of five business days notice was varied for the 2008 trust deed by cl 1.17 which provided that MSL "… may give a Transfer Proposal under cl 13.1 of the Master Trust Deed not less than 1 Business Day before the Assignment Date". 95 The significance, here, of this specific variation of the time by which a transfer proposal could be given by MSL, is that the actual proposal was still given less than one business day before the assignment date. I will explain the factual context shortly. But, Mr Goodridge argued that this departure from the terms of the trust instruments had the consequence that nothing was acquired by the 2008 trust and Leveraged Equities had no rights at all in respect of his loan. This was because cl 13.3 of the master trust deed had a precondition to any transfer of assets in cl 13.3(a) that the trustee, BNY, had to receive a transfer proposal "in accordance with cl 13.1", which, of course, was amended by cl 1.17 of the 2008 trust. 96 Clause 13.3 of the master trust deed provided, relevantly: "Transfer of Assigned Assets If the Trustee has received: (a) (Transfer Proposal): a Transfer Proposal in accordance with clause 13.1; and (b) (Transfer Amount): on the Assignment Date in relation to that Transfer Proposal for the account of the Trustee as trustee of the Disposing Trust in relation to that Transfer Proposal, an amount equal to the Transfer Amount in relation to that Transfer Proposal (which may occur by ledger entry in the Trustee's books), then, subject to the other requirements of this Deed and the Transaction Documents for the Disposing Trust in relation to that Transfer Proposal and Transaction Documents for the Acquiring Trust in relation to that Transfer Proposal being satisfied in relation to matters which must be done on or prior to that Assignment Date relating to the Assigned Assets in relation to that Transfer Proposal, the Trustee will, with effect from the commencement of business on the Cut-Off Date specified in that Transfer Proposal, without any further act or thing, and without any instrument being brought into existence, hold the benefit of those Assigned Assets as trustee of the Acquiring Trust, subject to clauses 13.7 and 13.8 and the terms of the Transaction Documents relating to the Acquiring Trust." (emphasis added) 97 The 2008 trust deed was a "Transaction Document" in accordance with par (c) of the definition of that term in the master trust deed. Mr Goodridge argued that because cl 1.17 of the 2008 trust deed required any transfer proposal to be given not less than one business day before the assignment date, a failure to comply with this resulted in the non-satisfaction of a requirement of a "Transaction Document" so that the automatic deeming operation to vest the "Assigned Assets" in BNY as trustee of the 2008 trust of cl 13.3 never occurred. 98 The transfer proposal was dated 7 January 2009 (the 7 January Transfer Proposal) and, so, the assignment date of 8 January that it nominated was less than one business day prior to the assignment date required by cl 1.17 of the 2008 trust deed. Under cl 5 of the transfer proposal, on and with effect from BNY, as acquiring trustee: "… coming to hold the benefit of the "Assigned Assets" in accordance with cl 13.3 of the Master Trust Deed, [the Bank] as holder of the legal interest in the Assigned Assets, will thereupon, and without any further act by any person … assign all of [the Bank's] legal right, title and interest in the Assigned Assets to "[BNY"]." (emphasis added) 99 Importantly, cl 6 of the 7 January Transfer Proposal provided: "The parties agree that on and with effect from the Assignment Date, the Acquiring Trustee will assume the duties, obligations and liabilities of MBL under or in respect of each Assigned Asset which arise or accrue on and from the Assignment Date and undertakes to discharge those obligations and liabilities as and when required under each Assigned Asset. Nothing in this clause limits clause 2.13 of the Sale and Servicing Deed or releases MBL from any of its duties, obligations or liabilities under or in respect of any Assigned Asset which arose or accrued prior to the Assignment Date." (emphasis added)

WAS THERE A NOVATION? 100 The respondents argued that read together cll 5 and 6 of the 7 January Transfer Proposal constituted a novation of Mr Goodridge's loan and security agreement so that BNY stood in the Bank's shoes under it. They relied on the prospective grant of consent, or the waiver of any need for consent, to any novation of the loan and security agreement in cll 21.2 and 21.4. The respondents conceded that they had not found any case in the common law world to support this remarkable argument. But they relied on two observations in footnotes in Corbin on Contracts Ch 48 in Vol 9 at s 866,39 (the passage was repeated in the interim edition published in 2002) and in JW Carter, E Peden and GJ Todhurst: Contract Law in Australia (5th ed; 2007) at [17-07], n 17. 101 The learned author of Corbin asserted that assent to a novation could be expressed by a contracting party at the time the contract was made, empowering the obligor to substitute another for himself. The footnote relied on two cases, neither of which, on examination, support the author's assertion: viz. Baun v National Finance 114 P. 2d 560; 135 ALR 949 (1941), a decision of the Colorado Supreme Court and Alexander v Theatre Realty 253 Ky 674, a decision of the Court of Appeals of Kentucky. 102 The Australian text had a footnote merely stating that it is possible for the parties to agree in advance at the time of the original contract's formation, to the novation of the contract at some time in the future. This reflects no more than the outcome of the authorities that I examine below, namely that the parties can agree, for example, that a substitute purchaser will be introduced who can enter into a new contract that has the effect of novating the original one. However, the statement in the Australian text does not suggest support for the respondents' argument that a party can consent in advance to an unspecified means of novation that will subsequently be binding at election of another party. 103 I reject the argument that either cll 21.2 or 21.4 of the loan and security agreement gave the Bank authority to novate to any person without Mr Goodridge's consent, and that this had in fact been done. There is no doubt that the loan and security agreement was made in circumstances where both the Bank and Mr Goodridge provided consideration to the other. Each had obligations imposed on him and it that were owed to the other. The question is whether one party to a contract can prospectively authorise a novation to be made by another party unilaterally and without any further involvement or knowledge of the first party. If this could be done then the consenting party (here, the borrower) could be placed into a new contractual relationship with a third party, without notice to it and without any involvement beforehand. 104 It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption by each party to it of a legally enforceable duty to the other: Australian Woollen Mills Pty Limited v Commonwealth (1954) 92 CLR 424 at 457 per Dixon CJ, Williams, Webb, Fullagar and Kitto JJ; cited with approval by Gaudron, McHugh, Hayne and Callinan JJ in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105 [24]-[25]. 105 While cl 21.2 recorded Mr Goodridge's agreement that a novation could occur without his consent, it is difficult to conceive of the content of that consent. Did he agree to assume any obligations the Bank chose to create for him owed to a new lender in a transaction of which he knew nothing and in respect of a new party against whom he had no immediately enforceable contractual right (he not being a party to any such dealing with, in this case, BNY or Leveraged Equities)? Novation involves the creation of a new contract that extinguishes and replaces an earlier one. But it is not necessarily and, generally, will not be the same as the earlier contract, since if it were, there would not usually be a need to novate at all. Here, Mr Goodridge knew nothing about the party or parties (BNY in two capacities and then Leveraged Equities) with whom he supposedly contracted and he never entered into a new contractual document. 106 It is one thing for the Bank to seek to deal with its rights, that are assignable rights, without its borrower's involvement. It is another for the Bank to create and impose a new contract between its borrower and a third party in circumstances where the borrower has no participation in or knowledge of the formation of that "agreement". The concept of such an "agreement" is somewhat oxymoronic. Mr Goodridge asserted that it was impossible to effect a novation in such circumstances. I agree. In Olsson v Dyson (1969) 120 CLR 365 at 388-391 Windeyer J explained the principles applicable to novation of a contract in contrast with those for an assignment. He said (120 CLR at 388): "Novation is the making of a new contract between a creditor and his debtor in consideration of the extinguishment of the obligations of the old contract: if the new contract is to be fully effective to give enforceable rights or obligations to a third person he, the third person, must be a party to the novated contract. The assignment of a debt, on the other hand, is not a transaction between the creditor and the debtor. It is a transaction between the creditor and the assignee to which the assent of the debtor is not needed. The debtor is given notice of it; for notice is necessary to complete an assignment pursuant to the statute or in the case of an equitable assignment to preserve priorities. But the debtor's assent is not required. He is not a party to the transaction." (emphasis added) 107 His Honour pointed to a serious theoretical difficulty in every case of novation when the only consideration for the debtor's assumption of an obligation to a new party was the extinguishment of his obligation to the original creditor. But he observed that the requirements of Australian law were satisfied by a tacit agreement to extinguish the former obligation which could be inferred when an inconsistent obligation "is by agreement substituted": Olsson 120 CLR at 390. 108 A novation, or some similar result, can be achieved without following a set formula. It is possible to provide in separate clauses, or indeed in separate contracts or deeds between the same parties, for an assignment of property in one and an assumption of liabilities and obligations in another: Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520 at 532-533 [16]-[18]. Gleeson CJ, Gaudron, McHugh and Hayne JJ said in Sara Lee 201 CLR at 533 [22] (see too Concut Pty Ltd v Worrell (2000) 176 ALR 693 at 698 [18]-[19] per Gleeson CJ, Gaudron and Gummow JJ): "When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration." 109 The Bank and Leveraged Equities also contended that a novation may occur by a new party being substituted for an original contracting party because the terms of the contract authorise this and do not require a further tripartite agreement. They referred to what Finn and Sundberg JJ had said in Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395 at 405 [32], namely: "Seventh, a third party may become a "substituted contracting party" by novation of the original contract. Novation will, ordinarily, require the agreement of the original and the substituted party although the original contract itself may, on its proper construction, authorise a party to substitute a contracting party in its place without need for a further tri-partite agreement: see Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458 at 460. On novation, though, there is no assignment of rights and obligations, but rather the creation of new rights and obligations in a new contract: Olsson v Dyson (1969) 120 CLR 365 at 388; Cheshire & Fifoot's Law of Contract, [8.45] ff." 110 However, what their Honours said was not necessary for their decision and I do not think that what King CJ said in Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458 at 460 supports the proposition. There, the contract for sale of land named the purchaser "and or nominee" as a party. King CJ said (Harry 41 SASR at 460): "The notion of a vendor binding himself to accept an unknown nominee in place of the named purchaser as the party to whom he must look exclusively for performance of the contact is unusual. It is not a transaction into which one would expect a sensible vendor to enter. Indeed it is by no means clear that such a provision could be made legally effective. The substitution could only occur if the nominee subsequently agreed, for fresh consideration or under seal, to perform the respondent's obligations under the contract. For the respondent to be released not by reason of a subsequent novation agreement but by the effect of the words "and or nominee" in the original agreement, a great deal would have to be implied into those words. I would be most unwilling to construe a contract as containing a provision of such unusual character and dubious validity unless the language of the contract was quite clear." (emphasis added) 111 Here, if a novation occurred it would result in the substitution of BNY and Leveraged Equities successively in place of the Bank in the loan and security agreement. But under that agreement the Bank had unlimited liability for breach of its obligations to Mr Goodridge. The terms of cl 16.11 of the master trust deed (and cl 14.1 of the 2007 trust deed and cl 15.1 of the 2008 trust deed limited the liability of each of BNY and Leveraged Equities to that of a trustee of the relevant 2007 or 2008 trusts and provided several further limitations of that liability. These included confining the trustee's liability (absent fraud, gross negligence or wilful misconduct) to what was available from the assets of the relevant trust to satisfy the liability (cl 16.11(c), and see too cl 14.1(c) of the 2007 trust deed and cl 15.1(c) of the 2008 trust deed). While there is no evidence of what practical difference this made, the substantive difference of a novation in these circumstances is that the Bank's previous unlimited liability would no longer apply to events occurring after any novation and Mr Goodridge never agreed, in advance or otherwise, to such a change. 112 Novation is a transaction by which all parties to a contract agree that a new contract is substituted for one that has already been made; it involves the extinguishment of one obligation and the creation of a substituted obligation in its place: Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 at 491-492 [78] per Sheller, Stein and Giles JJA. They held that intention is crucial to show a novation, although intention may be express or implied from the circumstances. And Sheller, Stein and Giles JJA also said, applying what Barwick CJ had said in Upper Hunter County District Council v Australian Chilling and Freezing Co Pty Ltd (1968) 118 CLR 429 at 437, that in searching for an intention to novate, just as to contract in the first place, the Court does not take a narrow or pedantic approach, particularly in the case of commercial arrangements: Fightvision 47 NSWLR at 493 [86]. 113 The significance of the introduction of a new contracting party into an existing contractual relationship is illustrated by the simple factual situation that was considered in Dudley Buildings Pty Ltd v Rose (1933) 49 CLR 84. There, a vendor of land entered into a contract to sell the land to purchasers. The contract provided that the purchasers were acting as trustees and agents of a company yet to be formed and that the parties intended that the company would become the purchaser. The contract provided that that the vendor would recognise the company, when incorporated, as purchaser and if the vendor were paid a specified part of the purchase price, the original purchasers would be exonerated from all liability. The company was formed and the purchasers assigned their interest under the contract to it. Each of Rich J, Starke J and Dixon J held that the contract did not bind the company because it was not a party to it. They held that the company had not acted to bring itself into a contractual relationship with the vendor: Dudley Buildings 49 CLR at 92-93 per Rich J, 94-95 per Starke J, 97 per Dixon J. There, the contract could not be construed as operating to relieve the original purchasers from liability, because the company neither incurred, nor offered, to incur to the vendor the liabilities of the purchaser: Dudley Buildings 49 CLR at 97 per Dixon J. 114 Later Dixon J explained in Vickery v Woods (1952) 85 CLR 336 at 345 that the court will not impute that a party, subsequently introduced into an existing contractual setting intended to contract with one of the present parties: "… in order to give a legal basis or rationale to a transaction carried through upon an assumption, however incorrect, that no further contract was required and nothing more was necessary than to complete the transaction as initially provided in the contract. Rescission and novation ultimately depend on intention, and here none existed in fact and nothing was done from which such an intention must necessarily be implied." See too Christianos v Rohrlach (1981) 55 ALJR 681 at 682E-G per Mason, Murphy, Aickin, Wilson and Brennan JJ. 115 The Bank and Leveraged Equities argued that cl 21.2 was a consent or agreement by Mr Goodridge to their assumption of novated obligations to him, first, by BNY and then by Leveraged Equities. In my opinion that argument cannot be correct. Mr Goodridge simply knew nothing of the arrangements. 116 Although he had given his prospective "consent", there was no identified new contract to which he could have "consented" to become a party. In particular the Bank also relied on cl 21.4. That expressly extended both its and its assignee's or transferee's entitlement to novate its or their obligations under the loan and security agreement or any part of it to any trustee or manager of any securitisation programme. BNY was in the position of a trustee of a securitisation programme. Does it matter that Mr Goodridge knew nothing of the commercial transactions which occurred in respect of the Bank's sale of some of its margin loan portfolio which ultimately is said to have been acquired by Leveraged Equities? Could the novation have required him to pay the new party more money, or sell his house just because he "consented" to a novation? What changes could be allowed? 117 By expressing his consent under cl 21 to Macquarie dealing with a third party so as to novate its obligations to him as borrower from that third party, Mr Goodridge can be taken to have authorised the Bank to act on his behalf to bind him to a novated contract with the third party in much the same way as the technique of agency has been used in a Himalaya clause context in the law of agency: Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at 192-193 [79], [81] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ. 118 Here, the changes that occurred, if the Bank were able to novate successfully, were that its obligations in respect of Mr Goodridge were assumed by BNY, and his rights were then to be exercised against BNY. But, the nature and extent of the novated obligations were different because of the constraints on the liability of the trustees under the master trust deed. Although Leveraged Equities argued that subsequently BNY novated to it, I have concluded (for the reasons given later) that such a result is contrary to the termination and appointment deed to which it was a party. 119 I am not aware that any case has held that a cascading series of further agencies or agreements may be made sequentially. But, as a matter of fact, I have found that no novation of the loan and security agreement occurred between BNY and Leveraged Equities. Thus, the odd position may have been reached that Macquarie ceased to have a relationship with Mr Goodridge on 7 January 2009 and BNY became his margin lender. On the next day, BNY assigned Mr Goodridge's debt to Leveraged Equities but retained its novated obligations to him, even though BNY has played no part in any dealing with him and is not a party to the proceedings. This Kafkaesque scenario must now be disentangled. 120 In addition, as the Bank argued, some contracts can be made without one of the parties knowing that the other has accepted it, such as offers to all the world of the kind made in Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. Indeed, the postal acceptance rule also brought persons into contractual relations without one of them having immediate knowledge of that important fact. But those situations are distinguishable because the offeror has made an identified proposal that can be matured into a contract by the other party proffering the stipulated consideration. The nebulous words of cll 21.2 and 21.4 do not identify any particular contractual relationship or consideration for a novation. Those two clauses were merely agreements to agree with no contractual effect. Both cll 21.2 and 21.4, to the extent each dealt with novation, referred to a non-existent future transaction on uncertain and unidentified terms: Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604 per Gibbs CJ, Murphy and Wilson JJ. There was no mechanism by which the terms of the novation that would bind Mr Goodridge could be determined. 121 The Bank contended that cl 21.2 authorised "the Bank" to consent on Mr Goodridge's behalf to a novation of the loan and securities agreement. I reject this argument. First, it involves turning words dispensing with consent into an authorisation. Secondly, there is no evidence that the Bank, or BNY, did consent to anything on behalf of Mr Goodridge. Thirdly, the deed of termination and appointment dated 8 January 2009 under which Leveraged Equities took BNY's place as a trustee did not effect any novation of any of BNY's obligations in Leveraged Equities. 122 The Bank also argued that because Mr Goodridge continued to deal with Mr Norval during February 2009, authorised the dividend to be used to meet the margin call on 10 February, and on 24 February authorised Mr Norval to sell his MCW Units at not less than 12 cents each amounted to his consent to a novation. I reject this argument. Mr Goodridge dealt with Mr Norval, as he had in the past when he had been an employee of the Bank. Mr Goodridge did not have notice of any assignment. Nor did Mr Goodridge's conduct in arranging to meet what appeared to be a valid margin call on 10 February and thereafter amount to a consent to Leveraged Equities being novated in place of the Bank under the loan and securities agreement. All he did was comply with what appeared to be an ordinary event of meeting a margin call on his margin loan account. 123 Later on 23 and 24 February, Mr Goodridge had been placed in a very stressful position by the conduct of Leveraged Equities that I have found was, in any event, a breach of the loan and securities agreement, or would have been such a breach if Leveraged Equities were a party to it. The fact that Mr Goodridge assumed that Mr Norval was acting within his (Mr Goodridge's) contractual relationship with the Bank does not amount to consent. He relied on the indicia of the Bank being involved at that time, given he had not received the 19 January letter. The Macquarie branded GearUp website worked; the same relationship personnel, Mr Norval and Mr Lakos, continued to communicate with him; he still had a Macquarie branded margin loan account; and Mr Norval could gain instant access to and transfer funds from his Macquarie cash management account. 124 I am not satisfied that Mr Goodridge appreciated that his relationship with the Bank had ceased and I find that he did not give his consent to that occurring during the events in February 2009. 125 For these reasons, I am of opinion that no novation of the loan and security agreement, and any related agreements between the Bank and Mr Goodridge, occurred as a result of the 7 January transfer proposal and that the Bank retained all its obligations to Mr Goodridge.

WAS THERE A BREACH OF THE MASTER TRUST DEED AND OTHER NOTICE PROVISIONS? 126 There was no express evidence of waiver or variation of the requirement in cl 13.1 of the master trust deed that MSL to give BNY "not less than 1 business day['s]" notice of the 7 January transfer proposal. However, the Bank and Leveraged Equities relied on the documents as demonstrating that the 7 January transfer proposal was made in accordance with cl 13.1 of the master trust deed, as amended by cl 1.17 of the 2008 trust deed, which itself was made on 6 January 2009. They relied on the participation of the parties to the various documents and the payment of over $1.48 billion on 8 January 2009 to BNY in its capacity as trustee of the 2007 trust as evidencing the acceptance by the parties of the achievement of legal efficacy for the 7 January transfer proposal. They argued that, despite the apparently deliberate drafting these trust documents, a business-like approach should be taken to give effect to the obvious commercial intention that the steps taken by the participants reflected. 127 Mr Goodridge argued that the "cut off" date of 1 January 2009 selected in cl 4(b) of the 7 January transfer proposal would mean that cl 13.3 of the master trust deed and cl 5 of the transfer proposal would operate retrospectively. Yet, he contended, cl 5 of that transfer proposal, by expressly referring to the need for accordance with cl 13.3, never operated because of the failure to give one business day's notice under cl 1.17 of the 2008 trust deed. Additionally, by force of cl 13.1 of the master trust deed, BNY as the disposing trustee under the 2007 trust remained entitled to, but did not receive, five clear days notice of the 7 January transfer proposal. 128 Often in contracts and statutes, times are fixed for some act to occur "not less than" or "not later than" a day or days before an event. When that mode of ascertaining the time for an event to take place is employed, the usual construction calculates the interval as consisting of whole days. This is an application of the maxim that the law takes no account of parts of a day as Stephen J and Mason J (with whom McTiernan J agreed) explained in Forster v Jododex Aust. Pty Ltd (1972) 127 CLR 421 at 449 and 452-453. That case involved a statute but the majority applied the reasoning in relation to a contract of the English Court of Appeal in Caraponayoti & Co Ltd v Comptori Commerciele Andre & Cie SA [1972] 1 Lloyds 139. There Lord Denning MR (at 143) said that the general rule is that between the two events there must be so many clear days. It is a principle of construction of long standing: cf Chambers v Smith (1843) 12 M&W 2 at 5 per Parke B; Young v Higgon (1840) 6 M&W 48 at 54 per Parke B. 129 Of course, these general principles cannot be determinative of the construction of the words used by the parties in the commercial and trust documents here. Those documents must be construed as meaning what a reasonable person in the position of the parties would have understood them to convey having regard to the matrix of mutually known facts or surrounding circumstances and the objective aim and genesis of the transaction: Toll (FGCT) 219 CLR 165 at 179 [40] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ. Thus, the documents will be construed so as to avoid them making commercial nonsense or working commercial inconvenience. And, their commercial purpose, being the purpose of a reasonable person in the position of the parties, is relevant: Zhu (2004) 218 CLR 530 at 559 [82] per Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ. 130 The lack of adherence by the parties to the forms and requirements of the documentation they were using to deal with very large sums of money and other interests is significant. It is reflected in the very difficult questions of whether any novations or assignments occurred. Careful drafting and close attention to the many requirements of that documentation may have exposed and reduced the issues considered in these reasons. 131 The difficulty with Mr Goodridge's submission is that all of the parties to the transactions between the Bank, MSL, BNY and Leveraged Equities appear to have proceeded on the basis that whatever notice was given by the 7 January transfer proposal, the transactions it contemplated could proceed to completion for a very large sum of money on the next day, without waiting for a further one or five clear business day or days. The Bank contended that under cl 13.1 BNY, the trustee, could agree to less notice. And, it argued that BNY had agreed to less notice because it participated fully to completion of a very large and complex commercial transaction. I accept the Bank's argument that it was evident that BNY, as the trustee, had exercised its right otherwise to agree to proceed on less than one or five day's or days' notice. I infer that BNY, as trustee, either waived any right it had to such notice of the 7 January transfer proposal or agreed to proceed with the transactions it contemplated notwithstanding the lack of full notice before completing the arrangement. The entitlement to receive notice under cl 13.1 of the master trust deed and cl 1.17 of the 2008 trust was for its benefit and BNY was capable of waiving compliance with the requirement. I am satisfied that, as a practical matter, it must have done so.

LEVERAGED EQUITIES' POSITION 132 It was common ground that Leveraged Equities' rights, if any, to deal with Mr Goodridge depended on the efficacy of the deed of termination and appointment dated 8 January 2009 between BNY, as "outgoing trustee", AB Management Pty Ltd (a company associated with Leveraged Equities and its parent Bendigo and Adelaide Bank) as manager, and Leveraged Equities as "incoming trustee". I will refer to this deed as the "LE appointment deed". Importantly, the LE appointment deed dealt with the operation of "Transaction Documents" and the roles of BNY and Leveraged Equities under them. "Transaction Documents" were defined in the master trust deed as meaning, relevantly, documents going to the constitution of each series trust and its financing. It is common ground that the defined term "Transaction Documents" did not include any loan and securities agreement made by the Bank with margin loan borrowers and in particular, did not include Mr Goodridge's loan agreement. 133 The LE appointment deed was intended to substitute Leveraged Equities as trustee of the 2008 trust in place of BNY. The LE appointment deed provided in cl 2 that with effect on and from 8 January 2009 (defined as "the Effective Date"): · BNY was terminated as trustee of the 2008 trust and Leveraged Equities was appointed in its stead (cl 2(a)(i) and (ii)); · BNY was released from all obligations and liabilities imposed on it under each "Transaction Document", that arose on or after 8 January 2009, together with all present and future claims and liabilities from or in connection with the released obligations and liabilities (cl 2(a)(iv)); · Leveraged Equities assumed all the obligations and liabilities imposed on the trustee of the 2008 trust under each "Transaction Document" in relation to the 2008 trust and all claims and liabilities arising on or after 8 January 2009 from or in connection with those obligations and liabilities. 134 The critical provision in the LE appointment deed on which the Bank and Leveraged Equities relied as either a novation of Mr Goodridge's (and other) loan agreement with the Bank was cl 3(b). This was in the following terms: "3…(b)In consideration for [Leveraged Equities] assuming [BNY's] obligations and liabilities as contemplated in this Deed, on the Effective Date: (i) all of the Assets of the [2008 trust] will vest in [Leveraged Equities]; and (ii) [BNY] transfers and assigns all of its rights, title and interests in the Assets of the [2008 trust] to [Leveraged Equities]." 135 Again, it was common ground that the reference in cl 3(b) to "[BNY's] obligations and liabilities as contemplated in this Deed" was to those obligations and liabilities in the "Transaction Documents" referred to in cl 2(a)(iv) and (v) and that these did not include Mr Goodridge's loan and securities agreement. 136 However, while both the Bank and Leveraged Equities acknowledged that their argument was not as clearly supported as in the case of the 7 January transfer proposal, they contended that cl 3(b) should be construed as a novation in Leveraged Equities of all of BNY's rights, titles, interests and well as of BNY's obligations and liabilities that it had obtained from the Bank, including a complete novation of Mr Goodridge's loan and securities agreement. 137 I reject this argument. First, the words of cl 3(b) make a clear distinction between the consideration moving from Leveraged Equities to BNY (namely the assumption of other, distinct obligations and liabilities having no relation to the loan and securities agreement) and the vesting in or transfer to Leveraged Equities of assets, rights, title and interests. It would fly in the face of the language of cl 3(b) to distort it so as to comprise a novation by Leveraged Equities by which it also assumed obligations and liabilities to about 18,500 borrowers under loan and security agreements they previously had with the Bank. Secondly, obligations and liabilities cannot be described as an asset or property within the meaning of "Asset", as defined in the master trust deed (that definition applied to the word "Asset" as used in the LE appointment deed. Thirdly, the language of transfer and assignment of assets, rights, title and interests in cl 3(b)(ii), is the antithesis of a novation involving Leveraged Equities assuming, in addition, obligations and liabilities. Fourthly, the words chosen by the parties themselves selected assets, rights, title and interest as one subject matter and obligations and liabilities as a second, separate and distinct subject matter. There is no ambiguity or overlap apparent in the careful and discrete treatment of each of the two subject matters throughout the LE appointment deed. For whatever reason, including Leveraged Equities' lack of expression of its willingness to assume the Bank's or, if it had any, BNY's obligations and liabilities to its customers under loan and securities agreements, the LE appointment deed did not involve Leveraged Equities assuming those obligations and liabilities. 138 It follows that Leveraged Equities can only rely on any right, title or interest in, or in respect of, Mr Goodridge's loan and securities agreement that it may have acquired from BNY under cl 3(b) of the LE appointment deed as passing to it by an assignment.

DID MR GOODRIDGE RECEIVE THE BANK'S LETTER OF 19 JANUARY 2009? 139 The Bank led evidence of a system of postage of these and over 18,500 other identical letters to the customers of the Bank whose margin loans had been "sold" to Leveraged Equities. The effect of the Bank's evidence was that its usual practices for despatch of bulk mail had been followed and that the letters addressed to both Mr Goodridge and Redroad at his home address were apparently despatched. The Bank's system did not record any difficulty with, or return of, the two envelopes addressed to Mr Goodridge and Redroad. Ms Rebecca Cole, a business administrator with Leveraged Equities, who had previously worked in a similar position with the Bank, gave evidence about the system used to deal with returned mail. She said that she had no idea of the percentage of the over 18,500 of these letters that were returned and she had not counted them. 140 The Bank and Leveraged Equities argued that the probabilities favoured a finding that the letters of 19 January 2009 addressed to Mr Goodridge and Redroad were in fact received by him but read and discarded as not being important enough for him to file. They pointed to Mr Goodridge's problems with his recollection of the events surrounding his traumatic experience that culminated with his bringing these proceedings. The respondents argued that Mr Goodridge was not a reliable witness and that his denial of the receipts of the letters of 19 January 2009 should be rejected. 141 Neither the Bank nor Leveraged Equities suggested that Mr Goodridge was dishonest. However, they pointed to a number of matters that they argued made it likely that he was not sufficiently reliable for his assertion that he did not receive the letter of 19 January 2009 from the Bank unlikely. Mr Goodridge accepted that his recollection at the time of the events in February 2009 and subsequently his recall of them were not reliable. He accepted that he had jumbled and inaccurately repeated or recorded conversations and events that had occurred, when he subsequently spoke to Mr Norval and Ms Shephardsonor wrote emails to them in February 2009. He was emotional and obviously distressed about what had happened when he gave evidence. I carefully assessed his demeanour, conscious that he had an obvious self-interest in advancing the proposition that he never received notice in writing of the assignments. 142 Ordinarily, there is a reasonable presumption that a letter, once posted if properly addressed and stamped, will be delivered in the ordinary course of the post. And, in Australian Trade Commission v Solarex Pty Limited (1987) 78 ALR 439, Neaves, Beaumont and Wilcox JJ held that a fact finder could find on the balance of probabilities that a letter was received by its addressee in the ordinary course of post but later mislaid by unknown means. Thus, the addressee would be found to have received the letter for the purposes of service or having notice of it, even though it had later been mislaid and was unavailable. 143 I accept the evidence led by the Bank and Leveraged Equities of a detailed and generally reliable system for despatching important documents to the Bank's former customers, including Mr Goodridge and Redroad at his residential address. There is no evidence that any of the correspondence directed to Mr Goodridge or Redroad had been returned to the Bank's agents for despatch of such correspondence. On the other hand, that system, like any system, was not necessarily perfect. Letters do, from time to time, get lost in the ordinary course of the post, sometimes they are returned to their sender (here the Bank) but not recorded. Mr Goodridge and Ms Clay gave evidence that they did not see any letter of 19 January addressed to either Mr Goodridge or Redroad. The parties agreed that Ms Clay's evidence assisted only to the extent that, had she seen such a letter, she would have filed it and that there was no evidence that she had in fact filed it or remembered seeing it. 144 Thus, the question whether Mr Goodridge received notice of the assignment in the letter of 19 January 2009 depends on my accepting his evidence that he did not, rather than accepting that he did because of the ordinary reliability of the Bank's system. The Bank and Leveraged Equities suggested that Mr Goodridge may have regarded the letter as of no particular importance and could have discarded it in accordance with his ordinary practice for such correspondence. 145 I believe Mr Goodridge when he said that he did not receive the letter, either in his own capacity or through his company, Redroad, prior to March 2009. I have anxiously weighed up that finding against all of the evidence including the discussions that he had with Mr Norval prior to and on 24 February 2009 in which reference was made to Leveraged Equities, its role, and the new team to which Mr Norval reported. I have arrived at this finding conscious of the new footer to emails that Mr Goodridge received in February 2009 from Mr Norval that identified him as an "Accounts Manager Leveraged Equities". 146 Moreover, there is an obvious difficulty in any judge making demeanour based findings when there is other reliable evidence that supports a contrary view. But ordinary human experience is that sometimes systems fail, and people tell the truth that the system did not operate as expected. I am comfortably satisfied that Mr Goodridge was telling the truth when he said that he did not receive the letter of 19 January 2000 and that if he had received it he would have caused it to have been filed both in his own files and for those of Redroad. I accept that his own files were not always in perfect order. But I find that if he received such a document it would have been a matter of importance to him. He would have appreciated its significance because it changed the identity of the person who was his banker and margin loan lender. I reject the respondents' arguments that he regarded that document as of no importance. I am very comfortably satisfied that if he had received it, he would have regarded the Bank's letter of 19 January 2009 as of considerable importance because it would have identified to him exactly when his relationship had changed and the identity of the person with whom he was dealing. 147 I accept Mr Goodridge's evidence that he had read about the transaction in the newspaper and engaged in these discussions with Mr Norval with that background in mind. That is different to, and those discussions are not the same as, the requirement in s 12 of the Conveyancing Act 1919 (NSW) of its analogues (including s 134 of the Property Law Act 1958 (Vic)) that notice in writing had to be given to Mr Goodridge for the purposes of a legal assignment of his debt or chose in action. 148 Likewise, a generalised message was on the Bank's GearUp website from 8 January 2009 to 2 March 2009 informing persons, including Mr Goodridge, who logged on that the Bank "… has sold the majority of its margin lending portfolio to Leveraged Equities … effective 8 January 2009. For more information, please click on the banner in the left hand side navigation bar". Mr Goodridge would have seen this when he logged on, but he denied clicking on the link. I accept his evidence. In the event, the vague information on the GearUp website about the majority of the loans being assigned was not pressed as notice of an assignment. This concession was correct. The webpages did not state that Mr Goodridge's margin loan had been assigned. 149 Therefore, I am of opinion that the webpages could not be notice to him of any assignment of his loan at law, by statute or in equity. At most they invited speculation. But, they conveyed no relevant notice to him of any assignment of his obligations. As Griffith CJ said in Anning v Anning (1907) 4 CLR 1049 at 1060: "… written notice means a document addressed to, and intended to be retained by, the debtor." He said that the object of a written notice was "… to inform the debtor that the debt is to be paid to B instead of A".

ASSIGNMENT - WHAT NOTICE IS SUFFICIENT? 150 The parties did not suggest that anything turned on identifying a proper law for the assignment and adopted the New South Wales legislation as the applicable law. The question of the application of choice of law rules to assignments if of great uncertainty: Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395 at 403-404 [30]. I will proceed on the position adopted by the parties. 151 Both the Bank and Leveraged Equities argued that effective notice of an assignment made under s 12 of the Conveyancing Act (i.e. a statutory assignment) could be given using any means provided in s 170 of the Act, even if the debtor did not in fact receive the notice. Relevantly, s 12 and s 170(1)(b) of the Conveyancing Act provided: "12 ASSIGNMENTS OF DEBTS AND CHOSES IN ACTION Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor: Provided always that if the debtor, trustee, or other person liable in respect of such debt or chose in action has had notice that such assignment is disputed by the assignor or anyone claiming under the assignor, or of any other opposing or conflicting claims to such debt or chose in action, the debtor, trustee or other person liable shall be entitled, if he or she thinks fit, to call upon the several persons making claim thereto to interplead concerning the same, or he or she may, if he or she thinks fit, pay the same into court under and in conformity with the provisions of the Acts for the relief of trustees. … 170(1) Any notice required or authorised by this Act to be served shall be in writing, and shall be sufficiently served: .... (b) if left at or sent by post to the last known residential or business address in or out of New South Wales of the person to be served." 152 Thus, the respondents contended that by proving that the 19 January letter had been sent by post to Mr Goodridge at his home address, they had proven service on him, even if he never received the letter. First, they relied on a decision of Cooper J in respect of the New Zealand analogues of ss 12 and 170 in Smith v Corry & Co (1909) 28 NZLR 672 at 673. He held, in an obiter dictum, that when the analogue of s 12 required "express notice in writing to be given to the debtor …" it prescribed a criterion that required the notice to be served for the purposes of the analogue of s 170. However, as the letter in that case was not registered, Cooper J found that service under the equivalent of s 170 (which then required the use of registered post) had not been established: Corry & Co 28 NZLR at 675. Secondly, the respondents relied on a decision of O'Keefe J in the Supreme Court of New South Wales to the same effect: Tristan Head v Credit Corp [2000] NSWSC 488 at [11]-[14]. 153 However, in Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 at 438-439 the majority, Dixon and Evatt JJ, held that the object of the requirement imposed by the words in s 12 "… of which express notice in writing shall have been given …" was that the debtor have actual notice of an assignment. They rejected the argument that notice by implication, or by operation of law, or by the equitable doctrine of constructive notice, was sufficient, saying (Naylor 55 CLR at 439): "The purpose is to make essential actual notice that the debt has been assigned. "One of the objects of the giving of notice to the debtor is that he shall `know with certainty' in whom the legal right to sue him is vested" (McIntosh v. Shashoua (1931) 46 CLR 494 at p. 515, per Evatt J.). The purpose does not extend to giving the debtor particulars of the assignment. The assignment must be by writing, but, if it is in writing, then notice to the debtor is necessary only to acquaint him with the fact that the debt is payable to the assignee and the statute requires that he shall be expressly notified." (emphasis added) 154 Although Evatt J had dissented in McIntosh v Shashoua (1931) 46 CLR 494, immediately before the passage from his judgment quoted above by Dixon and Evatt JJ in Naylor 55 CLR at 439, Evatt J had held that s 170 did not relieve the assignee from establishing actual service of the notice of assignment on the debtor: McIntosh 46 CLR at 514-515. (The other members of the Court expressly refrained from deciding that question: see at 503-504 per Gavan Duffy CJ and Dixon J, at 507 per Starke J, and at 518 per McTiernan J.) 155 I am of opinion that I should follow the construction arrived at by Dixon and Evatt JJ in Naylor 55 CLR at 438-439. O'Keefe J did not refer to either of the two cases in the High Court on the interaction of ss 12 and 170. In any event, I am satisfied for the reasons given by Evatt J in McIntosh 46 CLR at 514-515 and by Dixon and Evatt JJ in Naylor 55 CLR at 438-439 that on its proper construction s 12 requires the debtor, or other obligor, to be given actual notice of an assignment under it. A notice served merely in accordance with s 170 is insufficient unless the debtor or the obligor actually receives it. 156 The parties did not rely on the provisions of any Victorian statute dealing with service of any notice of assignment. As noted above, cl 24.13 made Victorian law the proper law of the loan and security agreement. And cl 20.2(b) provided that a notice or other communication if sent by prepaid post would be deemed to be duly received three days after posting. Provisions such as cl 20.2(b) are of obvious commercial utility in both statutes and contracts. In the absence of a contrary intention, proof of the use of a prescribed or agreed method of delivery is usually sufficient to prove delivery for the purpose of the statute or contract concerned: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 95-96 per Mason, Murphy, Wilson, Deane and Dawson JJ. However, the deeming effected by cl 20.2(b) was not made conclusive and did not exclude proof to the contrary. And so, proof of non-receipt is in my opinion admissible, and if accepted, is proof that no notice was given: Fancourt 154 CLR at 96-97. 157 In any event, cl 20.2(b) did not expressly provide for service of notice of an equitable assignment. And, I do not consider that cl 20.2(b) can deem that an obligor has notice of an equitable assignment any more than s 170(1) of the Conveyancing Act can in the context of a statutory assignment. As I will explain the absence of notice does not affect the validity of the equitable assignment. 158 A number of other matters were fully argued on the basis that Mr Goodridge had received notice of the assignment to Leveraged Equities in late January 2009 and I should briefly express the views and the reasons I have formed on them. The primary of these issues in relation to Mr Goodridge were: (a) did the letter of 19 January give sufficient information, assuming it were received by Mr Goodridge, to amount to a notice of assignment at law, under s 12 of the Conveyancing Act, or in equity? (b) what was assigned first, by the Bank to BNY, and, secondly, by BNY to Leveraged Equities?

SUFFICIENCY OF THE 19 JANUARY LETTER 159 Mr Goodridge argued that he had to receive notice of the assignment between the Bank and BNY before any subsequent assignment (such as that by BNY to Leveraged Equities) could be effective under s 12. I reject that argument. It eschews the fundamental nature of an assignment of a debt or obligation as being a transaction that is independent of a direct dealing in which the debtor or obligor is personally involved. Rather, an assignment of a debt or obligation treats what the debtor or obligor is bound to do as the subject matter of the disposition by the assignor to the assignee without the need for the debtor or obligor to be a party to, or aware of, it. 160 Ordinarily an equitable assignment of an equitable interest entitles the assignee to all equitable remedies applicable to the subject matter of the assignment and to give a good discharge. The assignment itself produces the immediate result that the assignee stands in the assignor's shoes and it is not necessary to regard the assignor as a trustee for the assignee: Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 447 and 452 per Barwick CJ, Stephen, Mason and Wilson JJ. 161 Notice of an assignment given either under s 12, or in equity, first, will, bind the debtor or obligor and, secondly, for s 12, will pass the legal right to the debt or legal chose in action to the assignee. There is no reason, in principle, or in the words of the statute, why a cognate notice or successive notices cannot be given under s 12. The fact that this may result in an intermediate assignee having a statutory or legal title (under s 12) to the debt or other legal chose in action for only an instant in time does not prevent that legal title existing or passing. All the section requires for the legal title to pass is that express notice of the assignment in writing be given to the debtor or obligor as Collins MR, Stirling and Mathew JJ held in Bateman v Hunt [1904] 2 KB 530 at 538. The English Court of Appeal held there that one cognate notice giving details of two earlier assignments of a mortgage more than three years after they had been made was effective to pass the legal title to the mortgage debt to the latest assignee. Giving the judgment of the Court, Stirling LJ said that the analogue of s 12 did not prescribe any time by which notice had to be given or the person who had to give it: Bateman [1904] 2 KB at 538. 162 No period for giving notice is mentioned in s 12 of the Conveyancing Act and its analogues, nor does the section provide by whom notice must be given. AL Smith and Williams JJ held in Walker v Bradford Old Bank Ltd (1884) 12 QBD 511 at 517 that the effect of not giving notice was to let in all equities which may exist or be created prior to giving notice. Until notice is given the action had to be brought in the name of the assignor. 163 It is not necessary to give the date of the assignment in the notice informing the debtor of it: Grey v Australian Motorists & General Insurance Co Ltd [1976] 1 NSWLR 669 at 681D-F per Samuels JA; Van Lynn Developments Limited v Pelis Construction Co Limited [1969] 1 QB 607 at 612G-613C per Lord Denning MR applying Atkin J in Denny, Gasquet & Metcalf v Conklin [1913] 3 KB 177 at 180. In Hughes v Pump House Hotel Company [1902] 2 KB 190 the assignor builder assigned to his bank all monies currently due or to become due from the building proprietor under a building contract. The assignment included the entitlement to receive extras and empowered the bank on behalf of the assignor to adjust all accounts, give effectual receipts, sue and to compromise or settle any proceedings (see [1902] 2 KB at 191). Matthew LJ held that the intention was to pass to the assignee complete control of all monies payable under the building contract and to put the assignee bank, for all purposes, in the position of the assignor as regards to those monies: Hughes [1902] 2 KB at 194. 164 A notice of an assignment under s 12 must enable the debtor or obligor to know with certainty in whom the legal right to sue him is vested: Naylor 55 CLR at 439. However, as Dixon and Evatt JJ explained it is not necessary to give particulars of the assignment in the notice. The notice must directly and definitely state that the obligation to pay the debt has been assigned. It need not give details of the mechanism of the assignment provided that, as Dixon and Evatt JJ said, it acquaints the debtor or obligor with the fact that the debt is payable to the assignee: Naylor 55 CLR at 439. Atkin J in Denney, Gosquet and Metcalfe [1913] 3 KB at 181 held that even though the trustees of a deed of arrangement had not been named in a letter notifying the deed to a debtor of the assignor, because the letter gave an express and accurate reference to the deed to which the trustees were parties and notified the assignment to them, the requirements of s 12 were satisfied: see too Naylor 55 CLR at 437-438. 165 In addition, s 12 operates to pass and transfer the legal right to a debt or legal chose in action to the assignee by the debtor or obligor being given actual notice of the assignment. The section contemplates that the assignment can be effective in equity before such notice is given. The assignments here were transactions for value between assignors and assignees intended to dispose then and there of whatever rights the former had to any debt or legal chose in action against Mr Goodridge. And, if effective, the assignees would be entitled to enforce, and to use the assignors' names to enforce, the rights assigned as soon as the transactions between them occurred, whether or not Mr Goodridge knew anything about them. What s 12 does is to give a further means of enforcement to assignees of debts or legal choses in action; it does not deal with the transaction of assignment itself. This is because s 12 operates on a pre-existing equitable assignment and recognises that the mere giving of notice of the assignment to the debtor or obligor does not overcome equities that would have bound the conscience of the assignee in the enforcement of its rights. 166 I am of opinion that the letter of 19 January would have been effective had Mr Goodridge received it at the critical time to give him proper notice for the purposes of s 12 and also of informing him of Leveraged Equities' equitable assignment. The letter informed the addressee of first, the chain of assignments and, secondly, whom he or she had to pay to get a good discharge. 167 I have found that Mr Goodridge did not receive notice of any assignment to Leveraged Equities because I have believed his evidence that, prior to late March 2009, he did not receive the Bank's letter of 19 January 2009. Leveraged Equities had no statutory rights under s 12 of the Conveyancing Act that it could have exercised directly against Mr Goodridge when it made its demands on him, and later sold his MCW Trust units in February and March 2009.

THE NATURE OF THE ASSIGNMENT 168 It is important not to confuse the nature of an assignment, with the consequence of giving notice of the assignment to the debtor or obligor. An assignment is an immediate disposition of a legal or equitable right, title or interest. Its efficacy depends on, first, the ascertainment of the fact that there has been a disposition of that right, title or interest and, secondly, the formalities under s 12 of the Conveyancing Act or in equity which must be satisfied to effect such a disposition. Different rules apply to differing types of property and to voluntary assignments, as opposed to assignments made for value. 169 Here, there is no dispute that the transactions relied on as assignments by the Bank to BNY, and then by BNY to Leveraged Equities were for value. But that is not the end of the inquiry. Before s 12 of the Conveyancing Act could be relied on by it against Mr Goodridge, Leveraged Equities must establish that the right it seeks to enforce is a "… debt or other legal chose in action". If it is not, then s 12 has no bearing and Leveraged Equities must establish that that right is property that was effectively assigned to it in equity. 170 An assignment for value will be enforceable in equity by the assignee. And, the benefit of a contract is in general assignable in equity and may be enforced by the assignee: Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1903] AC 414 at 420 per Lord Macnaghten. He said that the assignor was not a necessary party although it ought ordinarily be joined: Tolhurst [1903] AC at 420-421; and see too per Lord Lindley at 424 in William Brandt's Sons & Co v Dunlop Rubber Company Ltd [1905] AC 454 at 462. Lord Macnaghten said that an equitable assignment need not take any particular form and continued: "It may be addressed to the debtor. It may be couched in the language of command. It may be a courteous request. It may assume the form of mere permission. The language is immaterial if the meaning is plain. All that is necessary is that the debtor should be given to understand that the debt has been made over by the creditor to some third person. If the debtor ignores such a notice, he does so at his peril. If the assignment be for valuable consideration and communicated to the third person, it cannot be revoked by the creditor or safely disregarded by the debtor." 171 He held that the insolvent assignor's trustee in bankruptcy had no interest in the proceedings and was not therefore a necessary party: William Brandt's [1905] AC at 462. At common law, an assignee of a chose in action can bring proceedings in the assignor's name to enforce the obligation, even though the assignor refuses to consent, because the assignment is sufficient authority to do so: MacDonald v Robins (1954) 90 CLR 515 at 524 per Dixon CJ, Webb J agreeing. 172 An equitable assignment is complete upon the expression by the assignor of an intention to make over to the assignee then and there the assignor's equitable interest in the property or right concerned. It is not necessary to give notice of the assignment to the obligor in order to perfect the disposition in equity of the property or right under the dealing between the assignor and assignee. Notice, however, is important at a practical level, because until notice is given first, the obligor can pay the assignor and obtain a good discharge and, secondly, the assignee may lose, or be postponed in its priorty. Notice will bind the obligor: Comptroller of Stamps (Vic) v Howard-Smith (1936) 54 CLR 614 at 622 per Dixon J; Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 26 per Windeyer J; see too Thomas v National Australia Bank Ltd [2000] 2 Qd R 448 at 453 [18] per Pincus JA. 173 In an equitable assignment, the assignee takes no better title than his assignor had and takes subject to all equitable interests and defects affecting the assignor's title: Southern British National Trust Ltd (in liq) v Pither (1937) 57 CLR 89 at 105 per Rich J. No debtor or obligor can relieve himself of the debt or obligation owed to another by making an agreement with a third party. Liabilities to pay debts and obligations are not assignable: Federal Commissioner of Taxation v Orica Ltd (1998) 194 CLR 500 at 513 [19] per Brennan CJ and see at 530 [67] and [68] per Gaudron, McHugh, Kirby and Hayne JJ. 174 The nature of the dealings between the Bank, BNY and Leveraged Equities had similarities to the transfer of book debts and the contractual rights of the assignor to enforce the obligations of the debtor: cp Australian Guarantee Corporation Ltd v Balding (1930) 43 CLR 140 at 160-162 per Dixon J. 175 But, the margin loan was not a static or unchanging liability due by Mr Goodridge to the Bank. Whileever he was not in default, he could draw down further on the margin loan up to his limit of $4.8 million if he provided sufficient security. And he could repay some or all of it and regain possession of some or all of the security he had provided when, on 7 January 2009, the Bank purported to assign the balance of Mr Goodridge's margin loan and his, then, units in the MCW Trust as at 1 January 2009 to BNY and BNY assigned that sum the next day to Leveraged Equities. The purported assignment also included such of the Bank's contractual rights against Mr Goodridge that could be assigned. These dealings raised the question whether, if he incurred further debts on the margin loan account and provided further security, the Bank's rights to these would pass immediately initially to BNY and then to Leveraged Equities? This would occur if the dealings were assignments because the two transfer proposals operated as assignments of future property for value that passed the property, as soon as it came into existence, to the assignee: Balding 43 CLR at 154-155 per Isaacs, 157 per Starke J, 160-162 per Dixon J; Tailby v Official Receiver (1888) 13 App Cas 523; Everett 144 CLR at 450. 176 However, because its obligation to provide the loan or further advances to Mr Goodridge had not been transferred, the Bank remained bound to him under the loan and security agreement. So, if the Bank lent more of its money and obtained security for it the questions arise how or why would the new debt and associated rights pass to Leveraged Equities? After all, the Bank had made a new advance of its, not Leveraged Equities', funds because the Bank was contractually obliged to Mr Goodridge to do so. 177 The complexity of this tripartite putative relationship in which there were one lender, the Bank, and a different assignee creditor, Leveraged Equities, was byzantine to say the least. Somehow, at the moment Mr Goodridge drew down on the facility, the Bank would have to provide him with funds and, on the respondents' argument, the right to enforce his liability to repay the new advance by the Bank would then pass to Leveraged Equities even though it had not made the advance. While there was a transitional services agreement ("the transitional services agreement") in place to cater for their internal relationships and adjustments, the Bank's former customers had no idea of what lay behind the transfer arrangements. BNY was not a party to that agreement. 178 As noted above, under cl 3(b) of the LE appointment deed, BNY transferred to and Leveraged Equities had vested in it, all BNY's rights, title and interests "in the Assets of the [2008 trust]". The expressions "Assets" and "Assigned Assets" were defined in cl 1.1 of the master trust deed. "Assigned Assets" were defined specifically in relation to transfer proposals. The expressions meant the disposing trustee's entire right, title and interest in all present and future assets, real and personal property, including choses in action and other rights as well as the benefit of all covenants and agreements and other choses in action in favour of or held by the disposing trustee under the transaction documents in relation to the disposing trust. In essence, the defined term "Assigned Assets" was intended to capture all the rights, titles and interests that the disposing trustee held under the transaction documents for the disposing trust. Also under the LE appointment deed, BNY was released from and Leveraged Equities assumed all obligations and liabilities imposed on BNY under each "Transaction Document". It is common ground that Mr Goodridge's loan and security agreement was not a "Transaction Document". 179 Next, the Bank argued that the transitional services agreement made on 8 January 2009 between the Bank, Margin Lending Nominees Pty Ltd, Macquarie Equities Ltd and Leveraged Equities operated if there were an assignment, rather than novation, in favour of Leveraged Equities. It contemplated that Leveraged Equities would get the benefit of the borrower's promise to pay in cl 4 and obtain the security held by the Bank for that promise. Importantly, the Bank would still be obliged to make advances in discharge of its obligations to Mr Goodridge and other borrowers, but somehow Leveraged Equities would receive the benefit of the borrower's promise to repay the composite borrowing. Thus, the Bank would lend money and create a debt due to it by its borrower, and Leveraged Equities would have the right to claim repayment of that debt through some internal accounting between the two of them. In such circumstances a borrower might have a real interest in the identity of his lender, which suggests that the rights sought to be dealt with in this way were personal rather than proprietary and were not capable of assignment. The Bank argued that despite this, cl 21 of the loan and security agreement contemplated that there could be such a dealing and authorised it in advance. 180 Under cl 9 of the transitional services agreement the Bank would act as settlement agent in relation to the processing of margin loans, making advances and receiving repayments (including advances made or collections made after completion of the transactions on which Leveraged Equities relies as giving it rights against Mr Goodridge) under loan and security agreements and a daily settlement of accounts between the Bank and Leveraged Equities. The Bank would undertake these activities in accordance with what cl 9 referred to as a "transition plan". The parties to that agreement undertook to negotiate a transition plan for this purpose (cl 14), but no actual plan was in evidence, only the contemplation that it might be made. And cl 12.3 provided that the Bank performed its services under that agreement as an independent contractor and not as an agent or fiduciary. 181 The respondents argued that Leveraged Equities took an assignment of the Bank's margin loan rights to, among others, Mr Goodridge's margin loan and MCW Trust units as at 1 January 2009 under the provisions of a sale and servicing deed dated 6 January 2009 between the Bank, MSL, BNY, Leveraged Equities and Bendigo and Adelaide Bank ("the sale and servicing deed"). Clause 2.4 of that deed provided: "Sale Notice constitutes an offer to sell A Sale Notice constitutes an offer by the [Bank] to assign to [BNY] with effect from the commencement of business on the relevant Cut-Off Date on the terms of this Deed the [Bank's] entire right, title and interest in, to and under the following: (a) (Margin Loans) each Margin Loan identified in the schedule accompanying the Sale Notice; (b) (Securities) all Securities in existence from time to time in relation to the above Margin Loans; (c) (Margin Loan Receivables) all Margin Loan Receivables in existence from time to time in relation to the above Margin Loans; and (d) (Margin Loan Documents) all Margin Loan Documents in existence from time to time in relation to the above Margin Loans." (emphasis added) 182 Under the 2008 trust deed, both the loan and security agreements and the securities relating to each margin loan were part of the defined term "Margin Loan Documents". Pursuant to cl 2.4 of the sale and servicing deed margin loan rights the Bank offered to assign to BNY those documents together with each margin loan held by the trustee, and all present and future money owing at any time in respect of the margin loan, including advances or financial accommodation made by the Bank before or after the commencement of business on the cut off date. 183 Thus, the nature of what passed, if that offer were accepted, included an "assignment" of Mr Goodridge's loan and security agreement and the securities he had provided under it. That did not make sense. His agreement was incapable of assignment since it contained not only rights but also obligations of the Bank owed to Mr Goodridge. The respondents did not suggest that only the pieces of paper comprising the loan and security agreements were assigned. That could hardly be so since the securities given under those agreements were also assigned. However, as Lord Browne-Wilkinson said in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at 103E (see too Orica 194 CLR at 513 [19]): "Although it is true that the phrase "assign this contract" is not strictly accurate, lawyers frequently use those words inaccurately to describe an assignment of the benefit of a contract since every lawyer knows that the burden of a contract cannot be assigned: see, for example, Nokes v Doncaster Amalgamated Collieries Ltd [1940] A.C. 1014, 1019-1020." 184 Thus, giving the benefit of Lord Browne-Wilkinson's doubt to those who drafted these documents, I will assume that the Bank must have offered to assign only the benefit of the loan and security agreements in the sale and servicing deed. But once again that produces an unworkable tripartite relationship in which Mr Goodridge would have two "the Bank" entities from whom he was borrowing, each of which could exercise independently the rights given to "the Bank" under the loan and security agreement in respect of the margin loans and margin loan receivables in cl 2.44(a) and (d). 185 The Bank and Leveraged Equities relied on the transitional services agreement as providing a means by which the Bank could perform its obligations to its borrower under the loan and securities agreement harmoniously with the tripartite relationship it contemplated with the borrower. They contended that this ensured that while the Bank performed its residual obligations to borrowers, it did so at the ultimate expense of Leveraged Equities. And, they contended that the transitional services agreement allowed Leveraged Equities to set the policies that the Bank would apply in carrying out its obligations to its borrowers, so that even if Leveraged Equities were only an assignee of the Bank's rights, it had control effectively over all aspects of the Bank's margin lending relationship with its customer. And, Leveraged Equities said that it had had assigned to it the right to repayment of the balance of the margin loan under cll 4.1 and 4.4 of the loan and security agreement. 186 The respondents jointly submitted that a very considerable number of rights of "the Bank" under the loan and security agreement were assigned to Leveraged Equities. These included the rights: · to be paid interest and to determine the interest rate (cl 3); · to be repaid the loan after an event of default or other circumstance in which it became repayable (cll 4, 13); · to make and be paid margin calls (cl 5); · to request financial or other information from the borrower (cl 9); · to accept or withdraw particular securities as being eligible securities for the purposes of the loan and security agreement (cl 12); · to disclose information to an adviser of the borrower, and act as an attorney of the borrower (cl 24.3, 24.6); · to vary the terms of the loan and security agreement (cl 24.4); · to vary the credit time, and determine both the lending ratio and market value (cl 25.1). 187 The respondents' joint submission accepted that the Bank retained the obligation to the borrower to advance further funds and to apply the loan to the purchase of securities nominated by the borrower under cl 1.2. 188 The unworkable situation so created can be illustrated by considering the obligation of "the Bank" under cl 1.2 of the loan and security agreement to allow Mr Goodridge to draw up to the amount of his credit limit. That was defined in cl 25.1 as the lesser of $4.8 million and "the market based limit". The latter expression involved the Bank determining the market value of Mr Goodridge's securities based on its assessment of their value arrived at using its absolute discretion. However, if the respondents' argument were correct, Leveraged Equities had had that right of assessing market based value assigned to it so that, simultaneously, it could value the same property differently and exercise a power to make a margin call. So, if the right to exercise the discretion had been assigned, the Bank could not perform its obligation, and if it were not assigned, Leveraged Equities could not exercise its right to assess value in order to protect its position and to make margin calls. This suggests that the drafting of these documents proceeded on the basis of the mistake Lord Browne-Wilkinson disclaimed, and that, indeed, the parties intended to "assign" the whole of the loan and security agreements, including obligations. 189 The existence of this wide discretion to make valuations affecting the availability of finance in a person's banker, suggests that the identity of the banker would be important to the customer. Indeed, there was a pronounced change of attitude towards Mr Goodridge once the Bank ceased, and Leveraged Equities began, to manage his loan. I am not satisfied that the Bank would have classified MCW Trust units, that bore its brand name, as a "penny dreadful", even in the market conditions of 23 and 24 February 2009. It is likely that the Bank would have taken the view of Mr Norval on 10 February when he recommended to Mr Edwards extending the margin call, as I have described above. 190 These considerations are relevant to understanding the nature of the loan and security agreement and the rights of the Bank under it that might be capable of assignment in the sense explained by Northrop, Gummow and Hill JJ in Devefi Pty Ltd v Mateffy Pearl Nagy Pty Ltd (1993) 113 ALR 225 at 237-239. They said (at 238) that provisions of the agreement in that case "… are to be construed, prima facie, from the position that assignment of the benefit of the agreement is to be permitted only to the extent to which express provision is made": see CB Peacocke Land Co Ltd v Hamilton Milk Producers Co Ltd [1963] NZLR 576 at 582-583 (emphasis added); Devefi 113 ALR at 238. 191 Here, of course, cll 21.2 and 21.4 expressly provide for assignment: CB Peacocke [1963] NZLR at 582-583 per North, Turner and McCarthy JJ. The importance of cll 21.2 and 21.4 is that the parties to a contract can provide that rights or benefits under it, not otherwise assignable, can be assigned: Devfi 113 ALR at 235; Pacific Brands 149 FCR at 404 [32] (third proposition); CB Peacocke [1963] NZLR at 581-583. The respondents argued that these considerations supported the efficacy of what they had sought to achieve in the documents. 192 I reject that argument. What the documents fail to achieve is a coherence in the rights or benefits with which they purport to deal. It is impossible, in my opinion, to bifurcate the lending obligations and rights by the mechanism employed here. There cannot be two persons who meet the description "the Bank" capable of exercising the same rights and powers to determine, independently, the available credit for Mr Goodridge, the value of his securities and whether or not he is in default. 193 In my opinion, this raises a situation analogous to that discussed in Hutchens v Deauville Investments Pty Ltd (1986) 68 ALR 367 at 372-373 by Gibbs CJ, Mason, Wilson, Brennan and Deane JJ who said (Hutchens 68 ALR at 373): "... it would seem to be simply impossible, as a matter of basic principle, to assign the benefit of a guarantee or the security for it (as distinct from the property secured) while retaining the benefit of the guaranteed debt and thereby to convert the one debt owing by both principal debtor and guarantor to the one creditor into two debts, one owing by the principal debtor to the creditor and the other owing by the guarantor to the assignee. If it were otherwise, the position would seem to be that, by assigning the benefit of a guarantee and the guarantor's security and retaining the benefit of a principal debtor's indebtedness and the principal debtor's security, a creditor could effectively divorce the guarantor's liability from that of the principal debtor and effectively deprive the guarantor of the rights which flowed from his position as such including (where available) his rights of subrogation." 194 And in Queensland Premier Mines Pty Limited v French (2007) 235 CLR 81 at 96 [38] Kiefel J (with whom the other members of the Court agreed) explained that Naylor 55 CLR 423 held that the transfer of a mortgage did not give the transferee the right to sue a surety on a guarantee contained within the mortgage. Her Honour went on to say that this did not prevent the parties to the transfer from agreeing to effect a transfer of a debt arising from a separate loan agreement: see French 235 CLR at 101 [57]. 195 No doubt the overall commercial result which the various parties to the master trust deed and other related dealings sought, could be achieved by novation of the loan and security agreement, as cll 21.2 and 21.4 recognised. But, this was not done, again, no doubt, because it would have required over 18,500 borrowers to agree: cf Devefi 113 ALR at 238. Instead, the mechanism of assignment was employed to achieve a result that was beyond its reach. 196 Obviously, the courts should strive to give effect to commercial dealings and contracts. But, the law relating to assignments is an area that is bedevilled by technical rules, some of which have purposes that protect the rights of persons such as debtors or persons to whom the identity of the other party is important, who would otherwise be involuntarily made subject to a relationship with a stranger. 197 The reliance of the Bank and Leveraged Equities on commercial and administrative arrangements arrived at between them in order to make workable the practical side of their overall transaction distracts from the critical issue. That issue is the assignability of the chose in action, namely Mr Goodridge's margin loan at its value on January 2009 and his then supporting security. If the rights were assignable as a matter of law, then Leveraged Equities could assign them in turn, to X without any of those accompanying arrangements. The legal efficacy of the assignment of a right cannot depend on the practical steps any particular assignor and assignee may agree in order to make the assignment workable. The validity of the dealings here must be capable of being tested by examining the position if Mr Goodridge's loan were the only loan assigned. Could it be assigned by Leveraged Equities to X, as subsequent assignee? And when that was done, what rights would X obtain on such an assignment? 198 If the respondents were correct, X would obtain all of the rights referred to at [186], including the right of the Bank to determine market value of Mr Goodridge's securities and their LVRs, while the Bank itself remained obliged to lend to him and assist him to acquire more securities on its own determinations of market value and LVR. The Bank had an obligation to make the loan using its power to determine those factors. How could X have that power to the exclusion of the Bank? Suppose Leveraged Equities made an equitable assignment to X of this posited chose in action consisting of Mr Goodridge's margin loan and securities but did not give the Bank notice of it. How would the Bank be able to discharge its contractual obligations to Mr Goodridge to decide whether or not it would hand him more money? He had a legal right to have the Bank make determinations in accordance with the loan and security agreement as and when he applied for further advances. 199 I am of opinion that the Bank cannot have disposed, once for all, of its rights and power to determine, independently of Leveraged Equities or X, whether or not it was obliged to lend Mr Goodridge more money. First, no express provision of any document relied on by the Bank and Leveraged Equities provided for the assignment of those rights: Devefi 113 ALR at 238. Secondly, such "rights" or, rather powers and duties, are not capable of assignment because they were inherent and necessary to both the Bank's rights and its obligations under the whole loan and security agreement, i.e. the "rights" or powers and duties not just in the enforcement of the borrower's debt, but in the creation of further debts. 200 In my opinion there cannot be a separation of the Bank's existing legal right to a debt and supporting security owed by Mr Goodridge from its continuing obligation to lend to him and to assist his acquisition of further securities on the same terms and conditions. This was not simply an assignment of a debt free standing from an ongoing relationship between the assignor and debtor. The Bank and Leveraged Equities were seeking to assign pieces of the relationship to give effect to a commercial objective. But the mechanism that they chose could not assign what the Bank and Mr Goodridge had agreed would be the criteria and use of powers on which the Bank would be bound to lend him more money. That part of the loan and security agreement was inseverable from the obligation of the Bank to lend on the terms of that agreement.

THE ASIC ACT CLAIMS 201 Mr Goodridge's purpose in acquiring, through his margin loan, and holding the MCW Trust units was to provide a source of income for his retirement which he considered would have tax advantages. He thought that they were the best stock to hold in the circumstances of the global financial crisis for this long term personal objective. 202 He claimed that whatever rights the respondents had in respect of their equitable entitlement to realise the value of the units if he defaulted under the loan and security agreement they were fiduciary in nature. This was because the exercise of power or discretion to sell could adversely affect his interests and he was at the mercy of the relevant respondent in that respect. By wrongly exercising that power or discretion, when no right to sell had arisen, he claimed that the respondents, or one of them, had acted unconscionably within the meaning of s 12CA of the ASIC Act: i.e. in a way that equity would regard as unconscientious. Alternatively, he argued that the conduct was unconscionable within the wider statutory meaning of s 12CB. 203 The Bank argued that Mr Goodridge's case on unconscionability failed to distinguish between the conduct of the respondents. It contended that at worst, all the Bank did was to put Leveraged Equities into the position in which it could exercise the power or discretion to sell. It, the Bank, had not taken any active role and they could not be found to have engaged in the conduct unconscionably. This submission was made despite the Bank's pleading, in the alternative to it denying having sold, that it had authorised and consented to what Leveraged Equities had done under cl 6.2(d) of the transitional services agreement. In opening, senior counsel for the Bank described this as ratification if Mr Goodridge had been misled that he was still dealing with the Bank. 204 Leveraged Equities argued that Mr Goodridge was not at some special disadvantage of which it had taken advantage and so he could not establish that he was entitled to invoke s 12CA (e.g. Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447). And, relying on what Spigelman CJ said in Attorney-General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557 at 583 [120]-[121], it contended that no high level of moral obloquy had been established against it. It contended that a bank was not normally a fiduciary in relation to its customer. And, Leveraged Equities also argued that s 12CB did not apply here because of the limitation imposed in s 12CB(5) that the section applied only to financial services ordinarily acquired for personal, household or domestic use. It argued that Mr Goodridge was a professional earning income that he invested into his business enterprise, including the use of the margin loan facility to acquire the units. It argued that his purpose in investing was to derive income and that was not within the classes of activity in s 12CB(5). 205 I am of opinion that it is not necessary to decide whether s 12CA avails Mr Goodridge. It has been interpreted as, in effect, creating a statutory analogue of the equitable doctrine to relieve persons, including mortgagors, who are under a special disadvantage evident to the other party so as to make the latter's conduct in exploiting the disadvantage unconscientious: Amadio 151 CLR 449; Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at 74 [46] per Gummow and Hayne JJ. I discussed the authorities in Australian Performing Rights Association v Monster Communications Pty Ltd (2006) 71 IPR 212 at 243-244 [140]-[145]. 206 However, the norm of conduct imposed by s 12CB is different from and of wider scope than that imposed by equity and repeated in s 12CA. One circumstance relevant here is that Leveraged Equities had and exercised power to control the disposition of Mr Goodridge's property that he had offered to the Bank as security. He was vulnerable to abuse of that power. I do not consider that the relationship between a mortgagor and mortgagee is ordinarily capable of characterisation as fiduciary, for the mortgagee does not undertake or agree to act in the mortgagor's interests: Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41 at 96-97 per Mason J. Rather, the mortgagee acts in its own interests which often will be transparently different to and in conflict with the mortgagor's. Here, the mortgage relationship was created within an ordinary relationship of banker and customer: cf Golby v Commonwealth Bank of Australia (1996) 72 FCR 134 at 136D-F per Hill J. 207 What creates the distinction here from this usual position is the misuse of the power of sale, in the circumstances that I have found. Equity would have enjoined the sale had all the facts been established. Mr Goodridge, of course, did not seek relief then. But, by acting as it did with his property, Leveraged Equities required him to comply with conditions that were not reasonably necessary to protect its legitimate interests (see s 12CB(2)(b)); namely first, it required him to pay money in accordance with a timetable and series of demands that were not valid and, secondly, it threatened, and then proceeded, to sell his property without a legitimate interest (on my findings above) that it was then entitled to protect. Leveraged Equities thus misused its power of sale unconscientiously without any right to do so. Indeed, Ms Elliott vainly, and as I have found still wrongly, suggested to Mr Edwards at 2.18pm on 24 February 2009: "If the client is in day 1 we should at least provide him with 24 hour notice, I wouldn't give him 3 days because he is single stock." 208 This was, in all the circumstances, unconscientious insistence by Leveraged Equities on any rights it may have had as an assignee: cf Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 325 [25], 335 [58] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ. 209 There is no evidence, other than Mr Goodridge's evidence of his purpose, for which margin loans of the kind here are ordinarily acquired within the meaning of s 12CB(5). In Begbie v State Bank of New South Wales (1994) ATPR ¶41-288 at 41,898 Drummond J said: "… it is in my view necessary to have regard not just to the activity, here the provision of loan funds, but also to the purpose that activity is intended, in the particular case, to serve. Only then can the true nature of the services in connection with which it is said the respondent has acted unconscionably be identified and a proper answer given to the question posed by s. 52A(5)."

210 Ordinarily, individuals seek to make provision for their later life and retirement while they are in the workforce in whatever capacity they engage. A person who saves in a bank account for his or her retirement, or for a fund for Christmas presents, or for a "rainy day", puts that money aside for a personal use. Depending on their purpose, so too may a person who invests the money in an interest bearing bank account or some other property, such as a superannuation fund, annuity, real property or shares. Here, Mr Goodridge invested in the MCW Trust units for his retirement. I am satisfied that this purpose was the purpose for which he acquired from the Bank the financial services consisting of the loan and security agreement, the margin loan and the ability operate those facilities. 211 Accordingly, I am of opinion that such services are of a kind ordinarily acquired for personal use and that that was the use for which Mr Goodridge acquired them: Begbie (1994) ATPR ¶41-288 at 41,898.

RELIEF 212 Mr Goodridge sought an order that his 5,603,562 units in the MCW Trust be restored to him by one or other of the Bank or Leveraged Equities. Alternatively, he sought damages. The respondents argued that all he is entitled to is the value of the units sold, measured as at the time of their sales, in late February and early March 2009. Since they were sold on market, they contended that his only loss was the amount of the transaction costs of the sales and, possibly, of any purchases to restore his holding. They also contended that what Mr Goodridge should have done when they cut off his margin loan and sold his units without any basis (on the assumption they were in breach of this rights) was to have used the $400,000 loan offered by Mr Firth and gone into the market to replace the units as they were being sold off. 213 I reject the respondents' argument. Having put him in the position they did, I am of opinion that they ought completely to restore Mr Goodridge to the position he would have been in had they not wrongly exercised power of sale. This includes compensating Mr Goodridge for any cost dividend payments. He must bring to account any interest he would have had to pay on the margin loan had it continued at the level it was at on 24 February 2009. However, since no margin call was validly made, he need not give credit for a call he was never asked to meet. I have had regard to the submissions of the parties that the value of the units has increased substantially since the unauthorised sale - hence their dispute as to the date for assessment of damages and the form of relief. Indeed, Leveraged Equities accepted that it had sold the units at the bottom of the market. 214 Mr Goodridge had a contract that was breached by the unauthorised sale of his property. That property was made available to the Bank as security for his margin loan and credit limit. As Gibbs J said in Wenham v Ella (1972) 127 CLR 454 at 473 a plaintiff can receive compensation by way of damages for breach of contract by being allowed: "… to recover the value of a lasting asset to which he was entitled under a contract and for which he had paid in full and in addition the loss of profits sustained during the period from the date of the breach until judgment." 215 Here, Mr Goodridge paid for the units in full when he acquired them, and met all of his obligations to the bank to maintain them. I am of opinion that it is specious of the respondents to argue that having created the difficulty for Mr Goodridge, he then had to get them out of the loss he had suffered while they have persisted in insisting that he could simply have gone back into the market either while they sold up all his units, or soon after. 216 From the evening of 24 February 2009 he believed that none of his units was available to him because of them being force sold for his alleged failure to meet the margin calls on 23 and 24 February. Mr Goodridge gave unchallenged evidence that when he tried to open a new margin loan account that allowed him to trade in shares, to replace the margin loan account with the Bank, the process took him about eight weeks. He had found that opening a similar account for his son and daughter-in-law had taken about five weeks. He was then asked whether, with access to the loan of $400,000 he could have bought units in the MCW Trust for that sum through a stockbroker. He said that he had never used a stockbroker, although he did not question that that transaction could have been effected. I accept Mr Goodridge's evidence. 217 Leveraged Equities argued that Mr Goodridge should have mitigated his loss by borrowing from Mr Firth and, presumably others, to buy back his lost units contemporaneously with its wrongful forced sales. He said that he would not borrow to pay money to one or both of the respondents when he understood that he had been the victim of a breach of contract. Leveraged Equities argued that this was a failure by him to mitigate his loss. I reject this argument. It is over simplistic and ignores the effect of what Leveraged Equities had done, and was persisting in doing, in force selling his units: Banco de Portugal [1932] AC at 506. Mr Goodridge had accumulated the units and paid for them over a considerable period. He could not buy back all the units being sold because Mr Firth's offer of $400,000 was insufficient to both meet Leveraged Equities' unjustified demands for about $190,000 and then to recoup the sold units. Moreover, as the forced sales seemed to be leading the market down, he would face the real risk of further unjustified, peremptory demands from Leveraged Equities for margin calls, and that would absorb more of the money from Mr Firth's loan offer. 218 Next, Leveraged Equities said that Mr Goodridge should only receive damages for the difference of about $2,600 between his authorisation or instruction to Mr Norval on 24 February to sell at 12 cents a unit and what 4 million units were sold for. I reject that argument. First, Leveraged Equities never acted on that authority. Secondly, as I have found, it was withdrawn later that day. Thirdly, Mr Goodridge only gave the instruction because of the wrongful conduct of Leveraged Equities peremptorily demanding payment by 3.50pm that afternoon. 219 The principle applicable for the assessment of compensatory damages at common law was stated by Mason CJ, Dawson, Toohey and Gaudron JJ in Haines v Bendall (1991) 172 CLR 60 at 63 (and applied by the Court in Manser v Spry (1994) 181 CLR 428 at 434-435, 437): "The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed: Butler v Egg and Egg Pulp Marketing Board ((1966) 114 CLR 185 at 191); Todorovic v Waller ((1981) 150 CLR 402 at 412); Redding v Lee ((1983) 151 CLR 117 at 133); Johnson v Perez ((1988) 166 CLR 351 at 355, 386); MBP (SA) Pty Ltd v Gogic ((1991) 171 CLR 657); Livingstone v Rawyards Coal Co ((1880) 5 App Cas 25 at 39); British Transport Commission v Gourley ([1956] AC 185 at 197, 212). Compensation is the cardinal concept. It is the "one principle that is absolutely firm, and which must control all else": Skelton v Collins ((1966) 115 CLR 94 at 128), per Windeyer J. Cognate with this concept is the rule, described by Lord Reid in Parry v Cleaver ([1970] AC 1 at 13, as universal, that a plaintiff cannot recover more than he or she has lost." 220 The question is on what date should damages be assessed. The respondents point to the prima facie rule at common law that this should be the date at which the injured party could reasonably be expected to mitigate damages by seeking an alternative to contractual performance. They called in aid what Mason CJ said in Johnson v Perez (1988) 166 CLR 351 at 357. He cited the decision of the Supreme Court of Canada in Asamera Oil Corp v Sea and Oil General Corp (1978) 89 DLR (3d) 1 at 31 where Estey J said that a plaintiff seeking damages for a failure to return shares lent to the defendant: "… ought to have crystallized these damages by the acquisition of replacement shares so as to minimize the avoidable losses flowing from the deprivation by [the defendant] of [the plaintiff's] opportunity to market the ... shares. Such share purchases should have taken place within a reasonable time after the date of breach." 221 The law was not always so. In Shepherd v Johnson (1802) 2 East 211 at 212 the Court of King's Bench held that the time to value stock lent but not returned or replaced was at the time of trial. Lawrence J observed that had a bill for specific performance been filed in equity, the defendant would be compelled to replace at the then market price. This view was followed by A'Beckett J in Amoretty v City of Melbourne Bank (1887) 13 VLR 431 at 433 in a claim in tort for conversion. McGregor on Damages (17th ed) at [24-012]-[24-014] criticises this approach as inconsistent with general principles of mitigation. 222 In my opinion, there is no inflexible rule of law that fixes the date of such an assessment. As Gleeson CJ, McHugh, Gummow, Kirby and Heydon JJ said in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at 656-657 [35]: "The approach of subtracting value from price is commonly employed where the acquisition of land, chattels, businesses or shares is induced by deceit. It has also been commonly employed under s 82 of the Act (Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 6-7, per Gibbs CJ: at 12, per Mason, Wilson and Dawson JJ; Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 291, per Brennan, Deane, Dawson, Gaudron and McHugh JJ). It is sometimes described as the rule in Potts v Miller ((1940) 64 CLR 282). Even in the areas in which that approach is often applied, and even apart from cases in which consequential losses have been recovered, the "rule" is not universal or inflexible or rigid. This perception is not novel (cf Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254). It has existed at least since the judgment of Dixon J in Potts v Miller and has been quite plain since that of Gibbs CJ in Gould v Vaggelas ((1985) 157 CLR 215 at 220-221). Even Jordan CJ, who called the rule "well settled", acknowledged that it was only a "rule of practice" (McAllister v Richmond Brewing Co (NSW) Pty Ltd (1942) SR (NSW) 187 at 192). The flexibility of the rule can be seen by reference to a number of its characteristics." (emphasis added)

They were, of course, dealing with a case involving an assessment of value and observed (HTW 217 CLR at 658 [37]): "There are other reasons why the law does not limit recovery by reference to market value -- the amount for which the plaintiff might have sold the assets acquired. One is that, subject to mitigation issues, the plaintiff is "not bound to sell them (Peek v Derry (1887) 37 Ch D 541 at 594 per Sir James Hannen)." 223 Mr Goodridge was not in a position fully to recoup his lost investment immediately. It would have taken him some time to do so by establishing a new margin loan account. He had been hit hard, emotionally and financially, by the wrongful conduct of Leveraged Equities. He began these proceedings promptly on 6 April 2009 seeking relief, albeit different from its current formulation. The respondents could have remedied his position then and there. They did not do so in April 2009 or later. 224 I do not consider that Mr Goodridge acted unreasonably in failing to buy units in the short time before he began the proceedings, or thereafter. Once the forced sales ceased, the market for MCW Trust units began to rise. It would have been commercially unreal for him to consider returning to use the margin loan facility with whomever his lender was given the hostile conduct he had experienced. Nor did the respondents prove that there was any likelihood that the margin loan would have been available to him with a 70% LVR so that he could have reacquired the units, with some degree of reasonable assurance that he would not have had a large margin call, if Leveraged Equities decided that the LVR should be reduced. As Mr Norval had told him on 24 February, Leveraged Equities would sell all the units at 3.50 pm. It was reasonable for Mr Goodridge not to have used the margin loan facility offered by such a lender to buy back his investment. Leveraged Equities had demonstrated to him that it was not going to assist him in restoring his position. And, Mr Norval had warned him on 12 February that "… it might come to the stage where you get a big margin call just because the LVR's been reduced". 225 That prospect had not yet been fulfilled, but a reasonable person in Mr Goodridge's position would be justified in not using the margin loan when such a threat was hanging over him or her, especially after the events of 23 and 24 February. And, had he, or such a reasonable person, known of Mr Edwards' LVR model assigning a zero LVR to MCW Trust units as at 11 February, no-one reasonably would risk financing a reacquisition with Leveraged Equities through Mr Goodridge's margin loan facility. 226 Nor is it appropriate to approach the assessment of Mr Goodridge's damages merely as if the Bank or Leveraged Equities had converted his MCW Trust units when they were sold. The breach of contract did not merely involve wrongful sale of securities. It was bound up with a refusal to provide Mr Goodridge with his margin loan facility in accordance with its terms. By demanding payment when none was due, the respondents denied him the right to use his loan to hold his securities. The cognate effect was that Mr Goodridge was denied his present entitlement to maintain his borrowings and to hold his securities, in the form of his MCW Trust units. 227 His damage was not just the loss of the securities, when they were wrongly sold, but the deprivation of his legal entitlement to be provided with a margin loan to hold those securities. He lost both and is entitled to be put in the position he would have had if the breach had not occurred. 228 Any damage which results from a breach of contract and was reasonably in the contemplation of the parties when the contract was made is recoverable even though the claimant's impecuniosity contributed to it: Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 658-659 per Gibbs CJ. The Chief Justice held that a wrongdoer is liable for the consequences flowing from his wrongful act notwithstanding that the victim was unable, because of lack of funds, to take the steps to mitigate his loss: Burns 161 CLR at 659, see too at 674-675 per Brennan J. 229 The respondents bore the onus of proving a failure by Mr Goodridge to mitigate. The market evidence established that at no time after 26 February 2009 did the price of MCW Trust units fall below 12 cents. I am satisfied that had a margin call been given to Mr Goodridge on 23 or 24 February 2009 allowing him three business days to raise $190,000 in accordance with cl 5.2 of the loan and security agreement, he would have done so and that, by 11 March 2009 the market had recovered sufficiently that he had no further immediate likelihood of receiving a fresh margin call. MCW Trust units were then trading at 15˘ and by 24 March had risen to 23˘. 230 The respondents did not prove that the Mr Goodridge could have restored his position. It is one thing for him to have saved his existing position were he given the three business days he was entitled to have in order to meet a valid margin call. I am satisfied that he would have done so using Mr Firth's loan. It is another where the mindset of Leveraged Equities was to force sell his large parcel of units in a falling market and to deny him time, even the time his contract allowed, to raise funds to preserve his position. The respondents have not satisfied me that Mr Goodridge could have found alternative finance on any terms at all, let alone on the terms he had with the Bank, to buy back his 5.6 million odd units at any particular price. 231 A banker that breaches its existing contractual obligation to provide finance to its customer, force selling his property and then alleges that the customer failed to mitigate his loss by not buying that property back then and there must show that this highly unlikely scenario has an air of reality. Without finance, Mr Goodridge could not buy back. Nor is it sufficient that he had some finance. Mr Firth's offer was not equivalent to, and fell far short of, a contract with a banker to provide a margin loan facility of $4.8 million allowing him to purchase MCW Trust units with a loan valuation ratio of 70% (albeit that this ratio could be varied). Moreover, as the market for the MCW Trust units began to rise during March 2009, the cost of recouping Mr Goodridge's previous holdings also increased. After the breakdown in his relationship with his financier on 24 February, Mr Goodridge could not reasonably be expected to have confidence in borrowing from it and committing Mr Firth's loan in an effort to recoup his loss. 232 In those circumstances, I reject the respondents' arguments: Banco de Portugal [1932] AC at 506. Mr Goodridge was not prepared on and after 24 February 2009 to use the margin loan to buy back his units. I am unpersuaded that his inaction was unreasonable. If as a result of their treatment of Mr Goodridge, the damages the respondents must pay, or the sum that they must now outlay, has increased, they have only themselves to blame, not him. 233 In addition, I consider that in the exercise of my discretion under s 12GM of the ASIC Act, I should make an order under s 12GM(2)(d) that the respondents restore the units sold to Mr Goodridge with the adjustments I have mentioned. That order would compensate him appropriately for the contravention of s 12CB that I have found: cf Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 at 682-688 [160]-[191] esp at 685-686 [177]-180] per Ipp JA with whom Giles JA at 657 [1] and Hodgson JA at 667 [52] agreed, on the approach to assessing damages under sections such as s 12GM. 234 Leveraged Equities also argued that damages should be assessed against it in tort on the basis that it had converted Mr Goodridge's units. It argued that on this basis it was liable only for about $4,700 in brokerage, since the sales were at market value. Mr Goodridge did not claim exemplary damages for conversion: Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd (1968) 121 CLR 584. 235 In my opinion, the damages in conversion can be assessed on the same basis as in contract in the circumstances of this case. 236 The Bank is as liable as Leveraged Equities because I have found that the attempted novation and assignment failed. The Bank appointed or authorised Leveraged Equities to act as its agent in dealing with Mr Goodridge's position as its customer.

CONCLUSION 237 Mr Goodridge's claim should be upheld. In short I have found that: (a) Mr Goodridge had complied with and satisfied the 5 February 2009 margin call in accordance with the Bank's requirements by 23 February 2009. He was never in default in respect of that margin call; (b) the peremptory demands on Mr Goodridge for payments that were made on 23 and 24 February 2009 were not margin calls or otherwise authorised under the loan and security agreement; (c) no power to sell Mr Goodridge's MCW Trust units was ever enlivened; (d) the sales of those units and the respondents' denial of his entitlement to be provided with finance in accordance with his margin loan facility were actions in breach of the contract between Mr Goodridge and the Bank; (e) Mr Goodridge is entitled to have his property restored to him and to be compensated for any loss he suffered subject to his giving credit for any obligation or liabilities he would have incurred had the breach of contract not occurred. 238 Although it is not necessary to my decision, as these matters were fully argued, I have also concluded that: (a) the transactions on which the Bank and Leveraged Equities relied as novations of Mr Goodridge's margin loan and loan and security agreement did not novate those agreements. He remains in a contractual relationship with the Bank on the terms of the pre-existing contracts; (b) no valid assignment of the Bank's rights to Mr Goodridge's margin loan, MCW Trust units or the loan and security agreement occurred because the nature of the Bank's obligations to Mr Goodridge were so interconnected to its rights that they could not be separated in the manner on which the respondents relied; (c) Mr Goodridge did not receive notice of any assignment of the bank's rights under s 12 of the Conveyancing Act or in equity before his MCW Trust units were sold; alternatively, (d) Leveraged Equities acted unconscionably in the exercise of whatever powers it had against Mr Goodridge in contravention of s 12CB of the ASIC Act. 239 The parties should bring in short minutes of order to give effect to these reasons. I certify that the preceding two hundred and thirty-nine (239) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.