H P Mercantile Pty Limited v Thomas; H P Mercantile Pty Limited v Chandelle Nominees Pty Limited; H P Mercantile Pty Limited v Hobson

District Court of NSW|2006-10-18

CITATION: H P Mercantile Pty Limited v Thomas; H P Mercantile Pty Limited v Chandelle Nominees Pty Limited; H P Mercantile Pty Limited v Hobson [2006] NSWDC 109

CATCHWORDS: Assignments of loan debts - whether loans made - whether promise made that loans would not be assigned - effect of promise - requirements for legal and equitable assignment - presence of consideration - whether assignments conditional - allocation by creditor of payments - portion of interest statute barred

Conveyancing Act 1919, s 12 LEGISLATION CITED: Duties Act 1997 Limitation Act 1969, s 43 Stamp Duties Act 1920

Anning v Anning (1907) 4 CLR 1049; [1907] HCA 13 Arrale v Costain Civil Engineering Ltd [1976] 1 Lloyd's Rep 98 Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424 Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 City & Westminster Properties (1934) Ltd v Mudd [1959] Ch 129; [1958] 2 All ER 733 Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1 Cook v Wright (1861) 1 B & S 559 at 589; 121 ER 822 Corin v Patton (1990) 169 CLR 540 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 Grey v Australian Motorists & General Insurance Co [1976] 1 NSWLR 669 H P Mercantile Pty Ltd v Kibblewhite (unreported, Walmsley DCJ, 18/12/03) H P Mercantile Pty Ltd v Meakes (unreported, Rein DCJ, 23/06/04) Healey v Commonwealth Bank of Australia [1998] NSWSC 678 Helstan Securities Ltd v Hertfordshire County Council [1978] 3 All ER 262 Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133; [1919] HCA 64 Interstate Investment Co Ltd v Mobbs (1928) 28 SR(NSW) 572 Jones v Dunkel (1959) 101 CLR 298 CASES CITED: Karam v ANZ Banking Group Ltd [2003] NSWSC 866 L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235; [1973] 2 All ER 39 Lawrence v Cassell [1930] 2 KB 83 Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85; [1993] 3 All ER 417 Magill v National Australia Bank Ltd (2001) Aust Contract R 90-131; [2001] NSWCA 221 Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507 Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185 Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 Olsson v Dyson (1969) 120 CLR 365 Re Mount Tomah Blue Metals Ltd (in liq) [1963] ALR 346 Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84; [1916] HCA 47 Shepperd v Ryde Corporation (1952) 85 CLR 1 Soufflet Beheer v AWB Ltd [2006] FCA 51 Southern British National Trust Ltd (in liq) v Pither (1937) 57 CLR 89 Specialised Transport Pty Ltd v Dominiak (1989) 16 NSWLR 657 Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 Tailby v Official Receiver (1888) 13 App Cas 523 Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 Wickham Holdings Ltd v Brooke House Motors Ltd [1967] 1 All ER 117

H P Mercantile Pty Limited (Plaintiff) PARTIES: Peter Thomas (Defendant 2614/03) Chandelle Nominees Pty Limited (Defendant 2902/03) Adrian Hobson (Defendant 2909/03)

COUNSEL: D Fagan SC; P Stitz (Plaintiff) M Einfeld QC; J Stephenson (Defendants)

SOLICITORS: Versace McKenzie Lawyers Pty Ltd (Plaintiff) G J Gooden (Defendants)

1 These three proceedings concern an orchard scheme set up in 1991 by Tumut River Orchard Management Pty Ltd ("TROM"). Investment in the orchards known as Tumut River Orchards were solicited by means of a prospectus and each of the three defendants became an investor. Chandelle Nominees Pty Ltd ("Chandelle") applied for two lots in June 1991 and two lots in October 1991. Mr Thomas ("Thomas") applied for two lots in June 1991. Mr Hobson ("Hobson") applied for two lots in October 1991. It was agreed that the proceedings be heard together and that evidence in one would be evidence in the others: T3.5.

2 The scheme as outlined in the prospectus involved investors taking up an allotment (a share in the land owned by TROM), for which it would receive a licence from TROM and the management of that allotment by TROM. The scheme was marketed as a tax scheme and involved the investors borrowing most of the cost of the investment from TROM, but with Treetop Finance Pty Ltd ("Treetop Finance"), being substituted as the actual lender in place of TROM before the loans were actually made.

3 Each of the defendants applied for allotments and received allotments in the orchard, each signed a Deed of Loan in relation to the loan from Treetop Finance. The defendants have repaid some of the monies due by means of the application of distributions made out of sale of fruit from the scheme but the bulk of monies remain unpaid.

4 Treetop Finance assigned or purported to assign the loans made to each of the defendants to TROM ("the first assignment"). TROM assigned or purported to assign the loans to Treetop Project Ltd (described variously as TPL, Treetop and Projects, and which I shall refer to as "TPL") ("the second assignment"). TPL assigned or purported to assign the loans to Arnott-Smith Holdings Pty Ltd, which changed its name to Merilbah Pty Ltd (and which I shall refer to as "Merilbah") ("the third assignment"). Merilbah assigned or purported to assign the loans to H P Mercantile ("the fourth assignment"), the Plaintiff (which I shall refer to as "HPM").

5 There was a fifth assignment from TPL to HPM (which I shall refer to as "the fifth assignment") but it need only be considered if the first, second and third assignments were effective and the fourth assignment was not.

6 Mr D Fagan SC appears with Mr P Stitz for the plaintiff. Mr Martin Einfeld QC with Mr J Stephenson appears for all defendants. Extensive written and oral submissions were received from counsel.

7 There is no dispute that notices of each of the assignments were given to each of the defendants by the relevant assignees.

8 The defendants dispute any liability to HPM on a number of grounds. The parties agreed at the outset of the case (and using the terminology to which I have already referred) that the issues are:

(1) Whether there was an advance of funds by Treetop Finance to each of the defendants of the amount of principal which, according to the Deeds of Loan, was to be advanced.

(2) Whether each of the five assignments of debts, as follows, was an "absolute assignment by writing under the hand of the assignor", of any debt owed by the defendants for the purposes of s 12 of the Conveyancing Act 1919.

(3) Whether there was any contractual restriction/prohibition on assignment by Treetop Finance of the debts owed to it by the defendants, either by the terms of its Deeds of Loan with the defendants (made in June and October 1991) or under collateral contracts between Treetop Finance and the defendants.

(4) Whether any of the assignments was or were ineffective by reason of any terms of the Deeds of Loan of June and October 1991 or of any collateral contract between Treetop Finance and the defendants which restricted/prohibited assignment of the debts.

(5) If so, whether consent was given by Mr Brien on behalf of each of the defendants in June 1992, to the assignment by Treetop Finance to TROM and whether such consent constituted a release and discharge of the restriction/prohibition on assignment or a waiver of any breach of contract constituted by or arising from the transfer from Treetop Finance to TROM, and whether the defendants in entering the "Agreement - Reducing Maintenance Fees" in November 1992 reflected this.

(6) Whether each of the documents evidencing the five assignments referred to in Issue (1) was duly stamped or, if not, whether by operation of the Stamp Duties Act 1920 or the Duties Act 1997 and having regard to notifications made by the plaintiff to the Office of State Revenue the documents may nevertheless be received in evidence.

(7) Whether each of the various notices to the defendants in respect of the assignments referred to in Issue (2) were valid and sufficient notice for the purposes of s 12 of the Conveyancing Act 1919.

(8) Whether, if the assignments are not effective to enable the plaintiff, in reliance upon s 12 of the Conveyancing Act 1919, to sue for debts in its own name without the joinder of successive assignors, nevertheless the assignments are effective in equity and the plaintiff is able to recover judgment in each of the proceedings notwithstanding the non-joinder of successive assignors.

(9) Whether the defendants have become liable to repay to the plaintiff the principal and interest due under the Deeds of Loan.

(10) Whether recovery of any part of the interest accrued under the Deeds of Loan and claimed by the plaintiff has become statute barred.

9 Issues (6) and (7) were abandoned by the defendants. So far as Issues (2) and (8) were concerned the plaintiff accepted that for the reasons explained in my decision in H P Mercantile Pty Ltd v Meakes (unreported, Rein DCJ, 23/06/04), I was unlikely to reach a different conclusion to that which I reached in Meakes that the offer made on 28 May 1998 coupled with oral acceptance did not constitute a legal assignment in accordance with s 12 of the Conveyancing Act and hence did not seek to persuade me to the contrary. For their part, the defendants abandoned an argument based on the non-joinder of the assignors of the type that had been unsuccessfully advanced by Mr Meakes in that matter. Issues (3), (4) and (5), it was conceded, applied only to Chandelle and Hobson and not to Thomas, he having entered a deed of loan prior to any asserted collateral contract being made.

10 This issue has several components. The first part of the issue relates to the fact that the transaction was effected by a round robin of cheques. Mr Fagan prepared a reconciliation document in relation to the monies which was marked MFI "12" and which it is accepted accurately reflects the evidence. In essence, Treetop Finance obtained money to lend investors from Permanent, Permanent paid the money to TROM, TROM paid the money to Treetop and Treetop paid the money back to Permanent, with most of these bulk transactions occurring simultaneously or close to simultaneously. HPM relies on Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 to say that notwithstanding the seeming artificiality of such arrangements, the law does not treat the agreements as a sham or without legal effect. The defendants accept that Equuscorp is binding authority on this Court but make the formal submission that Equuscorp was wrongly decided.

11 The second component of the argument (which is related only to the June loans ie two lots to Thomas and two lots to Chandelle) is that the defendants say that on close analysis of the material tendered in support of the case, the Court cannot conclude that any loan was in fact advanced by Treetop Finance to the defendants, even by way of advance on the defendants' behalf to Permanent, as clause 4(a) of the Loan Agreement required. Simplified, the argument is that there is evidence that 213 lots were supposed to be the subject of funding, and monies equivalent to 210 lots only are shown to have passed from Treetop to Permanent to TROM: see pp 49-54 of Exhibit "A".

12 A considerable amount of argument was directed to the interpretation of pp 51-52 of Exhibit "A", and whether the shortfall of three lots could be explained. There was no dispute that only 210 lots were the subject of advance of funds by Treetop Finance to Permanent for the period ending 30 June 1991. There is no dispute that the lots purchased by Chandelle and Thomas were intended to be the subject of loan, but the defendants say that the question of whether the loans were actually advanced for three of their four lots cannot be answered favourably to HPM even on the balance of probabilities.

13 In my view, it is relevant that the auditors in reporting to the trustee noted that there were three allotment sales to three other investors (who are named on p 109 of Exhibit "A") and that they being "identified by the manager as being pre-30 June sales were subsequently confirmed as post 30 June sales". There is thus an explanation for the difference between 213 and 210, which does not involve Chandelle or Thomas. The auditor's letter at p 108 states in respect of a final adjusting payment of $24,050 "representing the final deposits for Allotment sales prior to 30 June 1991": "We have reviewed the basis for this payment and confirm that it represents the final deposit due in relation to that year".

14 In my view that report by auditors to Permanent offers support for the conclusion that all monies due from Permanent to TROM for sales up to 30 June 1991 were paid and that there was no shortfall.

15 There was even a cheque from Permanent returning money to Treetop suggesting that Permanent was satisfied it had received funds for all of the allotments that it was transferring funds in respect of, and there is no document in which it is suggested by anyone that the allotments issued to Chandelle and Thomas were not paid for. Pages 51-52 of Exhibit "A" which show the names of the allottees point to a duplication of lot numbers to some of the allottees which duplication does not affect the lots issued to Chandelle or Thomas.

16 I am persuaded on the balance of probabilities that Treetop Finance did advance funds to Chandelle and Thomas by payment by Permanent Trustee to TROM for the allocation of the allotments by TROM to these defendants.

17 There was a further argument on the part of HPM, which was that since the defendants had sought and obtained tax deductions on the basis that they were indebted to Treetop Finance in respect of funds advanced by Permanent Trustee to TROM on their behalf, this amounted to an admission that the loans were in fact made. The defendants argue that the tax deductions were sought because the defendants believed that they were entitled to them and that this is not an admission that payments were made by Permanent on their behalf. I think there is a degree of approbation and reprobation in the defendants' position because having obtained a tax deduction on a particular basis, it is they (and no other party) who wish to assert that the substratum of the claimed tax deduction did not exist, but I do not need to resolve the issue in view of the conclusion to which I have come without reliance upon any "admission".

18 This argument, as it was developed, had the following elements in relation to the second assignment, some of which are relevant to the third, fourth and fifth assignments:

(1) The document which constituted the offer for the second assignment which was said to be accepted was Exhibit "G" not Exhibit "C". Exhibit "G" it was said did not assign the debts of the Defendants (originally debts to Treetop).

(2) Even if the Court was not satisfied Exhibit "G" was the offer, it could not be satisfied Exhibit "C" was the offer.

(3) The Court could not be satisfied the offer was ever accepted.

(4) Even if Exhibit "C" was the offer and the Court was satisfied that the offer was accepted there was no assignment because: (a) It could not be a legal assignment because it did not meet the requirements of s 12 of the Conveyancing Act .

(b) It could not be an equitable assignment because: (i) the offer if accepted was hedged by qualifications that rendered the assignment not immediate and equivocal and hence not absolute;

(ii) there was no consideration for the offer to assign;

(iii) if there was consideration it was executory and not executed.

19 Exhibit "G" in these proceedings was Annexure "H" to Mr Purcell's affidavit in the Supreme Court proceedings brought by the liquidator of TROM against TPL, and the offer to which therefore Mr Moody was then said to have been responding was in somewhat different terms to that which HPM asserts here.

20 Mr Purcell's evidence on affidavit in this Court was that the offer made to TPL was that found in Exhibit "C". He explained that he had decided to re-engross Exhibit "G" because amendments were in hand and it looked messy. Both documents had been executed. I note too that an undefined reference to "ASH" in paragraph 5 of Exhibit "G" has in new paragraph 4 been changed to "TPL" in Exhibit "C".

21 So far as acceptance of the offer is concerned, Mr Purcell's evidence was that Mr Moody, a director of TPL, rang him on 29 May and orally accepted the offer. There is also a minute of a meeting of directors of TPL of 10 July 1998 in the following terms (see Exhibit "A" p 234): "Richard Moody further confirmed the acceptance by Treetop of the 28 May 1998 offer and of the 1 July 1998 offer to settle debt during this meeting with the following words, in the presence of John Purcell, saying: 'I hereby accept on behalf of Treetop Projects Limited, the Offers to Transfer Loans, Cash, land, materials, leases and equipment to settle debt from Tumut River Orchard Management Limited, dated 28 May 1998 and 1 July 1998.'

22 Mr Einfeld QC attacked Mr Purcell's credit, saying that his evidence on a number of matters was unsatisfactory and that I ought not believe him on the following critical matters:

(1) his evidence that TPL through Mr Moody accepted TROM's offer contained in Exhibit "C" on 29 May 1998 and confirmed that it did on 9 July 1998;

(2) his evidence that a meeting of TPL was held on 9 July 1998;

(3) his evidence that any consideration was paid by TPL to TROM for the transfer of the obligations;

(4) his evidence that the document Exhibit "C" was what was accepted by Mr Moody rather than the offer in Exhibit "G".

23 The matters upon which Mr Einfeld, at various points, attacked Mr Purcell's credit were:

(1) his having attached a copy of what is Exhibit "G" in these proceedings to his affidavit in Supreme Court proceedings and not Exhibit "C", and his explanation that it was the only copy he had in his possession (T159.15);

(2) his evidence that he did not appreciate that Treetop Finance would itself have a tax problem (T108);

(3) his reluctance to admit that he had led Mr Brien to believe the earnings from the allotment would pay for interest;

(4) his failure to annex Exhibit "H" to his affidavit of 11 November 2005 in these proceedings;

(5) the absence of any note recording acceptance by Mr Moody made by Mr Purcell on or around 29 May 1998 or indeed at any time notwithstanding the importance of the issue;

(6) the explanation by Mr Purcell that he did not make a note of Mr Moody's acceptance on behalf of TPL because he wanted to record the acceptance through a meeting;

(7) the fact that Mr John Purcell was present at the meeting to record acceptance when he was a director of TROM and not TPL, and Mr Peter Forsythe, a director of TPL, was not present;

(8) the fact that according to Mr Purcell he held a meeting of TPL at 9pm at his sister's house, two months after the date that he says he had received oral acceptance by Mr Moody of TROM's offer.

24 The issue of Mr Purcell's credit is relevant to several elements of the argument advanced against the second assignment, so I shall deal with it first.

25 It is at first blush surprising that Mr Purcell could have sworn an affidavit verifying a defence in the Supreme Court that no debt was owed by TPL to TROM when that is what Exhibit "G" (and Exhibit "C") both say in clause 1(b). Mr Purcell explained that the advice TPL had received from Mr MacDougall QC (as he then was) was to the effect that the obligation of TPL was not a "debt" and that is why he verified that defence. Furthermore the context in which this occurred was that the liquidator of TROM was claiming that Mr Purcell together with TPL had wrongly waived an $18 million "debt". When one looks at Exhibit "H" in conjunction with Exhibit "G" (or Exhibit "C") I think it can be seen why it might well have been thought that the transactions had to be viewed together and that in reality TROM was not forgiving a "debt" of $18 million but rather TPL was agreeing to take over the obligations of TROM as well as its assets and hence not make any net additional payment, and see also T155.26-54. The fact that Mr Purcell annexed Exhibit "C" but not Exhibit "H" to his affidavit in these proceedings is at first surprising, but his explanation for having done so is that he did not know that there was an issue about whether there was in fact an agreement by TPL to take over the liabilities of TROM (see T137), which is I think not unreasonable given the different range of arguments advanced in this case, H P Mercantile v Meakes, and H P Mercantile Pty Ltd v Kibblewhite (unreported, Walmsley DCJ, 18/12/03). It was Mr Purcell who made reference to the document (see T130.15), so I do not think there was any attempt by him to deliberately hide the existence of the document.

26 It is clear that there are differences between Exhibits "C" and "G" which go beyond the handwritten amendments but Mr Purcell was not cross-examined about these differences: see T151.41-T152.51. I do not think there was any Jones v Dunkel (1959) 101 CLR 298 inference to be drawn from the failure of Mr Fagan to ask questions about a topic that had been left alone by Mr Einfeld, and in any event I think it is unrealistic to expect Mr Purcell to now recall eight years later the precise reason as to why other changes that were made were in fact made.

27 The absence of any record of Mr Moody's acceptance in May 1998, the absence of any record of TROM, and the delay between the supposed acceptance by Moody and the meeting of 9 July 1998, induce some doubt as to whether there was an acceptance in May 1998 and hence the veracity of the minutes of 9 July: Exhibit "A" p 234. That doubt without more does not lead to the conclusion that a TPL record of a meeting on 10 July is a fabrication. The form of the minute, however, is not inconsistent with an earlier acceptance, and it would have been an easy matter to have fabricated a note of oral acceptance on 29 May rather than to prepare a minute of a meeting purportedly held two months later.

28 Since both TROM and TPL by their respective human agents (or at least the majority shareholders) wanted assignment to occur, it was really only a question of documenting the acceptance without incurring stamp duty. The presence of a person specifically noted as representing TROM (Mr John Purcell) appears to have been linked to the fact that it was TROM that had made the offer.

29 Mr Purcell controlled both TROM and TPL. TROM was in difficulty with its licence (T146 and T173) and failure to assign would have left the whole project in jeopardy because of breaches by TROM. Mr Purcell's evidence that the minute was probably annexed to his Supreme Court affidavit (see T171) was not challenged and this points to the minute having been in existence for many years.

30 Mr Purcell did say that he did not consider the tax implications to TROM (as opposed to those of the investors). I agree that this is rather surprising but I do not think it is implausible and it has no significance at all to any of the factual disputes between the parties.

31 I thought that overall Mr Purcell came across as a cautious and careful witness who was for the most part prepared to make concessions when appropriate. He did not readily agree that he had encouraged the belief in Mr Brien that the project's earnings per allotment would pay for the loan but he did agree with this when shown his letter, although noting that there was a "copious amount of information" about the project supplied to Mr Brien in the prospectus, an assertion which was not challenged. Pages 3.3, 3.5, 3.19 and 3.30 of Exhibit "A" do point to areas of risk in relation to the project.

32 Mr Einfeld also argued that HPM had failed to call Mr Moody or Mr Purcell's sister to corroborate the fact of the meeting on 10 July. I do not think there is a Jones v Dunkel (1959) 101 CLR 298 point - no-one was called by the defendants to assert that the meeting did not occur and there was a minute of the meeting.

33 Whilst I do have concerns about the integrity of the scheme being marketed and the steps being taken under it such as the round robin of cheques, putting those matters aside and taking into account the very important fact that all of the matters about which Mr Purcell was being questioned occurred a long time ago (up to 15 years ago), I did not gain an unfavourable impression of Mr Purcell as a witness and nor do I think that the cross-examination justifies a conclusion that Mr Purcell is a liar whose evidence I should reject. I accept his evidence as truthful, it not having been contradicted by any other witness. I accept his evidence that there was a meeting of TPL on 10 July 1998 as reflected in the minute and hence that the offer by TROM was in fact accepted by TPL.

34 HPM's case is that the offer contained in Exhibit "C" was in fact accepted when according to Mr Purcell's evidence Mr Moody, a director of TPL, advised acceptance by TPL on 29 May 1998. Alternatively there is evidence of acceptance by way of minutes of a meeting of TPL at which Mr Purcell, Mr Moody and Mr John Purcell were present (see Exhibit "A" p 234). Acceptance on either date satisfied the terms of the offer and Mr Einfeld accepted that if there was indeed acceptance then it did not matter which date was chosen.

35 Accepting the evidence of Mr Purcell as I do, I find that the offer was accepted either on 29 May or on 9 July 1998. I accept that what was accepted was an offer in terms of Exhibit "C". I think it is likely that Exhibit "G" was re-engrossed as Exhibit "C", for the reasons given by Mr Purcell, and that other changes thought expedient were made at that time. Even were the offer that was contained in Exhibit "G" accepted, I am not persuaded that the description "Tumut Project Loan Book" with a specified loan value does not sufficiently describe the loans that were to be transferred. The change in ascribed value from $100,000 (in Exhibit "G") to $200,000 (p 255 Exhibit "A", which is a copy of Exhibit "C") is of little significance as the total "principal due now" and "interest" are the same, so that what is being allowed as a figure for the loans after assessing the difficulties in collection is not in any way determinative of what was being transferred. Mr Purcell was in control of both companies and he at the time of the offer and at the time of its acceptance understood the offer to include the Tumut loans (T154.1-T155.24) even though the schedule to Exhibit "G" did not include the names of the defendants.

36 Mr Einfeld emphasised that regard could not be had to the conduct of parties after the contract was entered into in order to construe the meaning of the contract. The issue was considered in Magill v National Australia Bank Ltd (2001) Aust Contract R 90-131; [2001] NSWCA 221 and authority rejecting such evidence was approved (Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 and L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235; [1973] 2 All ER 39): see [49]-[53]. Mr Fagan did not challenge the principle - indeed he relied on it in a different context. I proceed upon the basis that subsequent conduct cannot be used to interpret the meaning of the contract. It does not follow that subsequent conduct is not available to determine whether something promised under the contract was in fact done. I think it is of some relevance that TPL and TROM proceeded on the basis that the defendants' loans had been transferred since notices of assignment were sent to the defendants, and TPL later purported to assign the defendants' loans to Merilbah.

37 I have already noted in relation to Issue (4)(a) that HPM does not really contest the defendants' assertion in this case (and see T199.15-33), but as the written submissions do refer to the matter I should state that I adhere to the view expressed in [27]-[31] of Meakes, that the written offer and oral acceptance do not constitute a legal assignment within the meaning of s 12 of the Conveyancing Act.

38 There was agreement that we are concerned here with legal choses in action - and that a contract for valuable consideration to assign legal property effects an equitable assignment when consideration is paid or executed, as equity acts upon the conscience of the assignor and regards as done that which ought be done: see Meagher, Gummow and Lehane, "Equity: Doctrines and Remedies" at para 6-050 and the cases there cited including Tailby v Official Receiver (1888) 13 App Cas 523.

39 There was therefore no dispute that for the assignment to be effective as an equitable assignment (of a legal chose in action) consideration would have to be established.

(1) the debt as expressed in 1(b) was illusory because TROM never agreed to pay $18 million to TPL, but only to treat the "debt" as satisfied;

(2) there was never any intention that TROM pay $18 million to TPL for taking over the obligations of TROM.

41 The defendants also argued that for an equitable assignment to be effective not only must there be consideration but:

(1) there must be an intention to make an immediate and absolute assignment. A "conditional" assignment did not merit these requirements. I shall deal with the conditional issue separately;

(2) consideration must be executed and not executory.

42 The defendants' arguments concerning the $18 million endeavoured to compartmentalise Exhibit "C" from Exhibit "G" in an unrealistic way. Much emphasis was laid on the fact that TROM and TPL had chosen to make their agreement in the fashion they had and hence had to live with the consequences. I do not think the Court can exclude from consideration the existence of an agreement (Exhibit "G") executed on the same day as Exhibit "C", and which I infer was the earlier agreement, as an offer which by its terms dealt with the subject matter of clause 1 of Exhibit "C". It was made clear by Mr Purcell that this approach was taken for the purpose of avoiding stamp duty (see T134 in respect of Exhibit "C" and T171 in respect of the later agreement in respect of which a different approach was taken). Although there was an artificiality in the arrangements in one sense, there was nevertheless a logic to it and no illegality is asserted. In my view, the consideration for the transfer of assets was the forgiving of a debt created immediately prior to the offer being made and with the obvious purpose of seeing the assets and obligations transferred to TPL with no net expenditure of cash by TPL or TROM. I do not think that the absence of proof that TROM had $18 million in its bank account or could pay it immediately defeats the existence of consideration. As Windeyer J noted in Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 31, "an assignment in satisfaction, or part satisfaction, of an antecedent debt was taken in equity as made for value".

43 Reference was made to Arrale v Costain Civil Engineering Ltd [1976] 1 Lloyd's Rep 98 in which relevantly an employer had agreed to pay a statutory entitlement and obtained a receipt. Denning MR and Stephenson LJ held that there was no agreement by the worker not to bring a common law claim. Lane LJ noted that the employer never intended to rely on a section of the Workers Compensation statute and said "It is no consideration to refrain from a course of action which it was never intended to pursue": at 106 citing Cook v Wright (1861) 1 B & S 559 at 589; 121 ER 822.

44 In Cook v Wright (1861) 1 B & S 559 at 589; 121 ER 822, a tenant had received a claim for contribution to local council works in the vicinity of the house in which he was a tenant. He asserted that he was not the owner and not liable but the trustees representing the local council threatened to take proceedings against him to recover the claimed contribution. The tenant, notwithstanding his belief that he was not liable (which incidentally was a correct view of the legislation), but recognising that the trustees believed him liable and that they would sue "in order to avoid the expense and trouble of legal proceedings against himself he agreed to compromise" and in furtherance of that compromise he gave three promissory notes, one of which he honoured and two of which he did not. He asserted, when suit was brought against him on the two dishonoured notes, that there was no consideration for them. Cockburn CJ, Wightman and Blackburn JJ held that there was consideration. They examined cases dealing with compromise of litigation where proceedings had actually been commenced and held that there was no difference where the proceedings were threatened (at 569, 826): "We agree that unless there was a reasonable claim on the one side, which it was bona fide intended to pursue, there would be no ground for compromise; but we cannot agree that (except as a test of the reality of the claim in fact) the issuing of a writ is essential to the validity of the compromise".

45 I think the reference to "bona fide intended to pursue" was specifically referable to claims in respect of which there was doubt, or even considerable doubt, as to their legitimacy, not rights which are indisputably available to a party, but which they agree not to pursue.

46 In Arrale v Costain, there was no evidence to suggest that the requirements of the relevant Article could be relied on and Geoffrey Lane LJ inferred that the defendants never intended "as a matter of policy" to invoke the Article, hence bringing the case within the principle enunciated in Cook v Wright. But both cases are concerned with resolution of litigation or threatened litigation, and in my view this has no application to the present circumstances. Here there is evidence of an agreement signed on the same day the offer was made and with the offer accepted either the following day or at least by 9 July within the period specified in the offer.

47 Both TROM and TPL (Mr Purcell controlled both, with his brother in the case of TROM: T96) wanted the management out of the hands of TROM. They wanted to create a structure by which that would occur. Subject to their acts being consistent with the obligations of TROM (to its creditors and under the deed of management) and otherwise compliant with the law, they were entitled to adopt whatever structure they pleased. I do not think there is any substance in the argument that the consideration was illusory.

48 The words "paid or executed" within the passage cited at [38] were the subject of considerable attention here. The defendants argue that there is no evidence that the consideration of $18 million was paid. I think the answer is that by clause 1(b) the consideration was treated as either paid or executed and nothing further was required to be done. The passage set out at the end of [42] above from the judgment of Windeyer J in Norman is again relevant.

49 The defendants relied on Soufflet Beheer v AWB Ltd [2006] FCA 51 in which it was held that the letter said to amount to the offer was not in fact an offer and was not capable of acceptance as such. Kenny J discussed the need for consideration and noted that a promise to pay an existing debt without more is not sufficient. He also discussed the distinction between "accord and satisfaction" and "accord executory" noting that the latter does not operate to discharge existing rights unless and until the accord is performed whereas the latter operates as a discharge as soon as the accord is achieved. Kenny J suggested a third category, which is accord and conditional satisfaction, which amounts to an existing and enforceable agreement but does not operate to discharge any existing cause of action unless and until there has been performance.

50 Obviously, until the offer contained in Exhibit "C" was accepted there was no agreement, but once it was accepted then subject to one issue with which I shall deal below it was not conditional. I do not think accord and satisfaction is really of any relevance here. If the offer was accepted then the consideration, namely the forgiving of a debt, was sufficient.

51 The offer (Exhibit "C") was not and could not of itself constitute an assignment. If however the offer contained in Exhibit "C" was accepted, as I have found it was, then on acceptance an agreement was formed. The same applies to Exhibit "G" if that was the offer made and accepted. On acceptance, clause 3 provides that the loans (inter alia) will vest in TPL. In my view neither clause 4 or 5 alter that vesting nor render the assignment unconditional. So far as clause 6, which is headed "Mechanisms for Adjustment", is concerned, it is part of Annexure A. It does not expressly provide that there is to be no assignment but rather explains the circumstances giving rise to the parties' intentions. Presumably if the ASC Growers' Representative or auditor did not require (or were thought not likely to require) rectification, then the offer would not have been accepted. Further, the adjustment related to only the amounts in item 5 - the Limited Recourse Apple Investor Loans as agreed or to be decided by an independent valuer. If the mechanism for adjustment were incapable of application the parties agreed that inability of completion of "any part of this arrangement for any reason then this shall not compromise any other part of the arrangement" which would lead to exclusion of that part which could not be applied. In accordance with established beneficial construction of commercial contracts the Court would strive to give effect to it: Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429.

52 Cases dealing with imperfect gifts such as Corin v Patton (1990) 169 CLR 540, Olsson v Dyson (1969) 120 CLR 365, and Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 are not relevant in this context. Passages from the judgment of Glass JA in Grey v Australian Motorists & General Insurance Co [1976] 1 NSWLR 669 (at 673E-F and 675A-D) in which he contrasted absolute and conditional assignments were relied upon. Glass JA, whose judgment was a minority judgment, was dealing solely with whether or not s 12 had been complied with in relation to the particular document which required the assignee to sign and date it, there being no evidence of consideration (see at 672E-F). Interstate Investment Co Ltd v Mobbs (1928) 28 SR (NSW) 572 is also a case dealing with legal assignment, as is Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1: see at 17. In Meakes I held that the assignment from TPL to Merilbah was not unconditional and hence not absolute within the meaning of s 12 of the Act (see [46]) but found that there was an equitable assignment.

53 The fact that an agreement to assign for consideration contains clauses that require steps to be taken does not preclude the assignment from being effective as at the date fixed by the agreement to be the date of vesting. If the agreement were to provide that the entitlement to the property (here choses in action) was not to vest until satisfaction of a condition subsequent then there would be no assignment until satisfaction of that condition subsequent. Clause 3 here provided that title would vest "in you on such acceptance". Concerns about the need for the donor to do everything to effect the transfer which have exercised the courts' attention in cases such as Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185; Anning v Anning (1907) 4 CLR 1049; [1907] HCA 13 and Corin v Patton (1990) 169 CLR 540 (and see Meagher, Gummow and Lehane, "Equity Doctrines and Remedies", at [6-075]-[6-155]), do not apply to equitable assignments where there is consideration, and clause 4 is simply a mechanism for transferring the loans into TPL's name.

Issues (3), (4) and (5): The Non-Assignability Point

54 This argument is advanced on behalf of Chandelle and Hobson but not Thomas: see T194.36-46. In June 1991 before Chandelle and Hobson took up allotments, Mr Brien, managing director of Chandelle and agent for it and also for Hobson, one of his clients, sought an assurance from Mr Purcell on behalf of TROM that any loans made by TROM (or Treetop Finance it would seem) would not be assigned. Although an affidavit by Mr Brien had been prepared neither it (nor any other affidavit on behalf of the defendants) was read in the defendants' case.

(1) In a letter dated 21/06/91 from TROM signed by Mr Purcell (p 15 Exhibit "A"), TROM stated: "This is to confirm that, for you and your clients investing in the Tumut River Orchard project, the Treetop Loan will not be assigned."

(2) At a time after Treetop Finance had purported to assign to TROM the debts owed by investors to Treetop Finance, Mr Purcell on behalf of TROM sought Mr Brien's consent on behalf of Chandelle and Hobson to the assignment, which consent was forthcoming: see pp 133-4 of Exhibit "A".

(3) Chandelle and Hobson thereby consented to the assignment by Treetop Finance to TROM.

(4) No consent was sought by TROM to the assignment by TROM to TPL.

(5) A clause expressly permitting assignment was deleted by Mr Brien from the Deed of Loan for Chandelle and for Hobson before execution of the two Deeds of Loan.

56 The Deed of Loan dated 30/06/91 contained the following clause (pp 46-7 Exhibit "A"): "21.1 This Deed contains the entire understanding and agreement between the parties as to the subject matter of this Deed.

21.2 All previous negotiations, understandings, representations, warranties, memoranda or commitments in relation to, or in any way affecting, the subject matter of this Deed, the Farming Allotment(s), the Borrower's rights and obligations under the Investment Deed and the Farming Allotment(s) or otherwise in relation to the Borrower's participation in the Tumut River Orchard Project shall be of no force or effect whatsoever in relation to the subject matter of this Deed."

57 Chandelle and Hobson argue that the arrangement reached with Mr Purcell by Mr Brien was a collateral contract. A collateral contract is a contract the consideration for which is the making of some other contract (the "main contract") (see K W Wedderburn, "Collateral Contracts" [1959] CLJ 58 cited in Carter on Contract footnote 1 [10-100]). A collateral contract may be between the parties to the main contract or include one of the parties to that contract: see [10-130] of Carter.

58 There are cases in which the conduct said to give rise to a collateral contract is representational (see the discussion in Carter on Contract at [10-100]-[10-120]) but a "collateral contract may also arise where the statement is directly promissory in character or effect, rather than representational": see [10-110] of Carter; Shepperd v Ryde Corporation (1952) 85 CLR 1 and Lawrence v Cassell [1930] 2 KB 83, and see City & Westminster Properties (1934) Ltd v Mudd [1959] Ch 129; [1958] 2 All ER 733, described by Wedderburn (supra) at pp 70-71 as "the strongest application of the collateral contract doctrine which our courts have yet entertained". There is no dispute between the parties that no collateral contract can be found if the alleged contractual term is inconsistent with the terms of the main contract: Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133; [1919] HCA 64; Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507.

59 The following sub-issues arose in relation to the matter:

(1) Is the letter promissory in nature or merely a representation?

(2) If it is promissory, by whom and to whom is the promise given?

(3) If promissory in nature does it contradict the terms of the deed of loan?

(4) What effect did the giving of consent by Mr Brien on behalf of his clients have upon the promise?

(5) If the promise was extant and breached what is the consequence?

60 Because consent was undoubtedly given by Chandelle and Hobson (if they were the promisees) to the transfer of the loans to TROM, the only relevant question in (2) is whether the promise was given by TROM to Chandelle and/or Hobson. A further issue arose as to whether the promise, if given to Chandelle, extended to the second parcel taken up later and to Hobson at all.

61 In my view, the letter contains a promise in return for Mr Brien's clients taking up allotments in the Tumut Orchard Scheme (and implicitly financing the purchase of the allotment by way of a loan). Mr Purcell accepted that Chandelle and Hobson were clients to whom the offer was intended to be addressed: T100.51-T101.11. In my view, the offer was intended to be made to any clients of Mr Brien that Mr Brien could persuade to invest in the scheme and upon the basis of the promise that the loans would not be assigned. There is no dispute that Chandelle was such an investor. The fact that Chandelle took up a second parcel of two lots only later is not in my view relevant given that the lots were still lots in the same scheme and under the same prospectus (albeit extended in operation). There was no dispute that Hobson was also a client of Mr Brien.

62 If the letter of 21 June reflects an offer which was capable of acceptance by entry into the Farming Agreement and Deed of Loan, which I think it does (see Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256; Australian Woollen Mills Pty Ltd v Commonwealth (1954) 92 CLR 424 and Re Mount Tomah Blue Metals Ltd (in liq) [1963] ALR 346) then the agreement was a collateral contract, subject to the question of inconsistency with which I shall deal below.

63 Having regard to the conversation deposed to by Mr Purcell at paragraph 7 of his affidavit of 18 July 2006, even as modified by his oral evidence at T104, I do not think it can be doubted that what prompted Mr Brien to raise the assignment question was the reference on the bottom of the "Personal Asset and Liability Statement" (pp 216-7 Exhibit "A") forming part of the Loan Application to Treetop Finance which was in the following terms: "Treetop Finance Pty Ltd is wholly owned by Andrew and (Benjamin) John Purcell, directors of the Manager of the Tumut River Orchard Project. It is their intention to assign loans provided by Treetop Finance Pty Ltd to a reputable financier".

64 The reference to the manager was clearly a reference to TROM.

65 I do not think it can be doubted that in making the promise in the letter of 25 May 1992 (Exhibit "A" p 132) Mr Purcell was giving the promise at least on behalf of TROM as agent of Treetop Finance, the proposed lender.

66 The more difficult question is whether the promise was given not only by TROM as agent for Treetop Finance but also by TROM on its own behalf. The following matters point to the offer having been given by TROM in its own right:

(2) the letter is signed by Mr Purcell as director, implicitly as director of the company whose letterhead he has used, and even though he was also a director of Treetop Finance he makes no reference to that directorship;

(3) the letter makes no reference to the promise being made solely as agent of Treetop Finance;

(4) the notation to which I have referred in [63] above makes clear the close association between TROM and Treetop Finance (and indeed TROM was referred to in the prospectus as the lender although it had been decided after the prospectus had been issued to use a different company, Treetop Finance);

(5) the reference to "when investing in the Project" emphasises further the connection between the promise and the Project;

(6) it was very much TROM's interest that Mr Brien's clients invest in the Project;

(7) the promise is not expressed as "Treetop Finance promises not to assign" but rather "the Treetop loan will not be assigned".

67 Against that conclusion is the absence of any reference to TROM in the conversation held with Mr Brien - rather reference was made only to Tumut River Orchard Management Finance Pty Ltd (the former name of Treetop Finance) or Treetop Finance.

68 I do not think the absence of any reference in the conversation between Mr Brien and Mr Purcell is sufficient to overcome the matters referred to in [66] above and I have come to the view that the letter from TROM should in the circumstances be treated objectively as a promise by TROM both on its own behalf and by Treetop Finance.

69 That conclusion obviates the need to consider the difficult question of whether if the promise was given by Treetop Finance only it passed with the assignment by Treetop to TROM so that TROM thereupon became bound to seek Chandelle's and Hobson's agreement to any further assignment, before it could assign. Mr J G Starke QC in "Assignment of Choses in Action in Australia", Butterworths at paragraph 38 states the rule: "An equitable assignee of a chose in action takes it subject to all the equities that the debtor or fundholder has against the assignee as at the time of notice of the assignment, and subject also to all the infirmities and defects in title of the assignor"

citing Southern British National Trust Ltd (in liq) v Pither (1937) 57 CLR 89 at 100-113; Redman v Permanent Trustee Co of New South Wales Ltd (1916) 22 CLR 84; [1916] HCA 47 at 91-2 and Halsbury's Laws of Australia, LexisNexis, p 507, and see to the same effect the judgment of Mason J (as he then was) in Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1 at 19, with whom Aicken and Wilson JJ agreed. Although I made reference in the course of the hearing to that passage in Mr Starke's book, the issue was not explored in argument and I do not express any final view upon it.

70 In my view therefore the offer is one made by TROM on behalf of the proposed lender Treetop Finance and itself. So far as it is given by TROM I do not think it is inconsistent with the terms of the deeds of loan between Treetop Finance and Chandelle and Hobson, because:

(1) it is not inconsistent for A to promise B that C will not do X even if C itself has not agreed with B not to do X;

(2) the deed as amended by Chandelle and Hobson did not deal with the subject of assignment at all and if clause 21.1 is read literally then there was no right of assignment since all topics were said to be covered by the deed; or alternatively in such circumstances there is a real question of whether "assignment" is in any event part of the "subject matter of the Deed";

(3) clause 21.2 unlike 21.3 does not refer to collateral agreement and does not specifically exclude "agreement".

71 In my view the fact that consent was sought by TROM and Treetop Finance and given by Mr Brien on behalf of his clients in June 1992 (see Exhibit "A" pp 133-134) to the transfer of loans from Treetop Finance to TROM does not detract from the effect of TROM's promise. Chandelle and Hobson's dealings with TROM in November 1992 are consistent with their consent to the assignment from Treetop Finance to TROM: see pp 138-143 of Exhibit "A" in which assignment is noted and this fact does not take the matter any further.

72 Mr Fagan argued that the promise, if it was given by TROM, could not have been intended to include a promise that TROM would not assign if it happened (contrary to any expectation as at June 1991) that TROM became the assignee of loans. I agree that the contract must be construed as at the time it was formed (which was when the offer was acted upon) but what TROM promised was not that Treetop Finance would not assign the loans but rather that the loans would "not be assigned". That promise was a continuing promise by TROM, and subject to any waiver or release it continued to operate upon TROM. TROM's assignment to TPL at a time when there ceased to be any lack of identity between the promisor under the collateral contract and the person to whom obligations were owed under the Deed of Loan, was a breach of that promise, no consent having been sought by Chandelle or Hobson to the assignment. The consent to transfer from TPL to TROM amounted to waiver of objection to that transfer but it was not a consent to any other transfer.

73 The question of consequence of breach of a non-assignment clause is a topic of considerable importance. It has caused some divergence of viewpoint in the field of hire purchase: see Wickham Holdings Ltd v Brooke House Motors Ltd [1967] 1 All ER 117; Helstan Securities Ltd v Hertfordshire County Council [1978] 3 All ER 262 discussed in Specialised Transport Pty Ltd v Dominiak (1989) 16 NSWLR 657. In Specialised Transport Pty Ltd v Dominiak, Young J (as he then was) held that the lessee's purported assignment or subletting of a prime mover was ineffective to pass to the third party any interest in the prime mover or leasing agreement because of the prohibition on assignment in the lease agreement: at 663G.

74 Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85; [1993] 3 All ER 417 is powerful authority for the proposition that "an attempted assignment of contractual rights in breach of a contractual prohibition is ineffective to transfer such contractual rights" per Lord Browne-Wilkinson (with the concurrence of other members of the House of Lords). He went on to say: "If the law were otherwise, it would defeat the legitimate commercial reason for inserting the contractual prohibition, viz, to ensure that the original parties to the contract are not brought into direct contractual relations with third parties."

75 HPM's submissions, whilst asserting that there was no contractual promise not to assign, did not respond to the defendants' arguments on the consequence of breach and seemed to accept Linden Gardens as in point.

76 In paragraph 91 of "Assignment of Choses in Action in Australia", Butterworths, Mr J G Starke QC (as he then was) said: "… where the condition against assignment is such an essential part of the contract that the party insisting on non-assignability would not have entered into the contract unless assured of strict observance of the condition, or the condition against assignment goes to the substance and foundation of the transaction, assignments in breach of the condition ought to be treated as void and inoperative." [footnotes omitted]

77 Chandelle and Hobson through Mr Brien insisted on non-assignability by requiring and obtaining a written promise to that effect, and struck out clause 17 of the Deed of Loan (which clause expressly permitted assignment). Linden Gardens speaks of the legitimate commercial reason for inserting the contractual prohibition which involves a less onerous test than that promoted by Mr Starke. The present case is neither a building contract nor a hire purchase or lease case. There may well be room for argument that any contractual promise not to assign ought be honoured and have the consequence that assignment in breach of it is ineffective, but in any event I regard the circumstances of the giving of the promise such as to point to the importance of it to Chandelle and Hobson, and hence make it appropriate to treat the assignment in breach as ineffective. I am not convinced that it is necessary for the Court to discern a particular commercial reason or perceived commercial reason, particularly since TROM went to the trouble of recording the promise in writing, but it can be inferred that Mr Brien thought it advantageous to have the lender as a company controlled by the same interests as controlled the manager of TROM.

78 In my view the assignment by TROM to TPL breached TROM's contractual promise to Chandelle and Hobson that the loans would not be assigned and no consent having been given (except to the transfer from Treetop Finance to TROM), the assignment to TPL was ineffective. TROM would of course have had a right to recover the debt from Hobson and Chandelle if the loans were otherwise established. If follows that HPM can have no claim against Chandelle and Hobson.

79 Although strictly it is not necessary to consider the question of validity of the Third and Fourth Assignments viz a viz Chandelle and Hobson, it is necessary to consider the issue viz a viz Thomas, and against the possibility that my conclusion on the non-assignment point favourable to Chandelle and Hobson is erroneous, I shall make no distinction between Thomas on the one hand and Chandelle and Hobson on the other, in what follows.

80 The defendants argue that this assignment found at pp 242-266 of Exhibit "A" is ineffective as an equitable assignment because:

(1) it was "an agreement to assign" and not "an assignment";

(2) it was conditional upon the occurrence of other events identified in clauses 2.3, 2.8, 3.3, 3.4 and 8.1.

81 Assignment was according to clause 2.3 to take effect from "Completion". "Completion" was defined as "completion of the sale and purchase of the Assets contemplated in this agreement" and "Completion Date" was defined as "7 days from the date of this agreement": p 243.

82 Clause 2.8 provided: "This Agreement is subject to a similar agreement dated 27 January 2000 between TPL and Moraitis Holdings Pty Ltd being rescinded."

83 Mr Purcell deposed in a statutory declaration to the fact that there never was an agreement between Moraitis Holdings and TPL (see pp 335, 336 and see p 271 in which Mr Purcell as director of TPL advised Merilbah (then Arnott-Smith Holdings Pty Ltd) that there was no agreement).

84 A clause requiring rescission of an agreement that does not exist is either ineffective or is satisfied where no such agreement is in place.

85 Clauses 3.3 and 3.4 provided: " 3.3 Payment

ASH will satisfy the Purchase Price by payment by bank cheque or other form of legal tender acceptable to TPL or by undertaking to satisfy the Assumed Liabilities in the same amount or such combination as shall be determined by ASH.

Premium amounts in clause 3.2 i) and j) above shall be by payment by bank cheque or other form of legal tender acceptable to TPL.

Treetops will be paid 10% of the principal repayments of Grower Loans to which ASH or its assigns are entitled made from the proceeds of the Growers' orchard business, provided that the above amounts shall only be paid if the amount of cash distributable to Growers in each Project, as determined by the auditor of the Projects for the time being, exceeds in any year $500,000. TPL's right to the amounts payable under this clause are to be determined for each financial year and are not cumulative. ASH acknowledges it is aware that in most of the Investment Schemes 50% of the funds available from the Allotments after other amounts payable from the fruit sales proceeds are payable to the Grower."

86 These clauses do not in my view make the assignment conditional - they are the mechanism for payment by Merilbah to TPL. If payment was not made in accordance with those provisions TPL would be entitled to obtain payment from Merilbah.

87 Clause 8.1 provided: " 8.1 Time and place

Completion will take place at Verekers, Solicitors, Sydney office on the Completion Date at 10 am or such other place or time as the parties agree."

88 This clause coupled with the definition of "Completion Date" specifies when and where completion is to take place - it does not make the assignment conditional.

89 The defendants argue that this assignment (the document found at pp 292-307) is only an agreement to assign and is conditional "having regard to clauses 2.1, 4 and 5".

90 Clause 2.1 provides: "2.1 On the execution of this document by all parties, HPM shall pay MER $10,000.00 at which time full rights, title and interest in the Assets passes to HPM."

4.1. On the Settlement Date (or as soon as practical thereafter), MER shall at its own cost, take any steps necessary to properly assign the Assets.

4.2. Without limiting the requirement under paragraph 4.1, within seven (7) days of settlement MER shall do all acts and things necessary to prepare, sign and forward all assignment notices, and where relevant, advise ARG and HOL of the assignment of the Assets."

92 Clause 5 provides: " 5. TITLE AND RISK

Title and risk to the Assets passes to HPM from the Settlement Date."

93 The "Settlement Date" is defined as "the date this agreement is signed and payment is made in accordance with paragraph 2.1": see p 293 Exhibit "A".

94 At p 308 of Exhibit "A" is acknowledgment of the sum of $10,000 payable pursuant to clause 2.1. The acknowledgment is dated 31 August 2001.

95 For the same reasons set out in relation to the second and third assignments, the agreement to assign was not subject to a condition subsequent which was not fulfilled, and hence the assignments were effective.

96 Having found the Fourth Assignment to be effective, I do not need to consider the Fifth Assignment.

98 It was agreed that s 43 of the Limitation Act 1969 precludes recovery of interest that accrued more than six years before the commencement of proceedings.

99 There was nevertheless considerable argument about how (if the debts were otherwise owing) they were to be calculated. In my view, what is critical to this is what the agreement provided. The general rules concerning distinct debts and the appropriation of funds (see Healey v Commonwealth Bank of Australia [1998] NSWSC 678 and Karam v ANZ Banking Group Ltd [2003] NSWSC 866) do not override contractual clauses which specify how payments are to be dealt with. Clause 5(c) provided that distributions were to be applied first to interest. If TROM did not do this, that does preclude HPM from re-calculating the debt. I do not accept that what was transferred by the assignment was the debt in the amount specified - what was transferred was a legal chose in action which either existed or it did not, and the extent of which was calculable by the lender in accordance with the terms of the agreement and later if assigned by the assignee also in accordance with the agreement. If the lender had erroneously recorded $500,000 as owing in its books that might have a consequence as between lender as assignor and assignee but would not make the borrower liable for the debt wrongly described. The same must apply in reverse in the absence of some estoppel or where for example the debtor has paid the debt, wrongly calculated. It follows that HPM is entitled to apply any amounts received as against interest in calculating amounts otherwise owing.

100 The conclusion I have reached in relation to the prohibition on assignment leads to the result that there should be verdict and judgment for Chandelle and Hobson. In relation to Thomas however, it follows from my conclusions on the other claimed impediments that HPM is entitled to succeed against him. From MFI "13" it appears on my calculations that the amount for which he is liable is $68,306.18 (including $522.02 interest from the last day of the hearing until today) but I will not formally enter judgment until the parties have confirmed that MFI "13" does not include any amount precluded by s 43 of the Limitation Act 1969 and that the calculations are correct.

101 I will hear the parties on the issue of costs.

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Judgment (169 paragraphs)

Cases Cited (24)