HP Mercantile Pty Ltd v Dierickx & Ors

Judgment 1HIS HONOUR: These are proceedings for the recovery of a debt. The plaintiff ("HPM") claims to be the assignee of the debt. The first and second defendants (Mr and Mrs Dierickx) through an agent, entered into a loan agreement dated 30 June 1992 with the third defendant, Tumut River Orchard Management Limited ("TROM"). The amount borrowed was $24,050. Interest was payable on the loan at the rate of 20 per cent per annum, or, if the loan were not in default, 15 per cent per annum. The loan was used to acquire two "Farming Allotments" in a managed investment scheme known as the Tumut River Orchard Project. TROM was the owner of the land on which the orchards were located. Each farming allotment was a defined portion of land. TROM granted a licence to each investor for it to grow peach or nectarine trees. The cultivation and management of the land and the harvesting and marketing of the fruit was managed for each investor by TROM under a Farming Agreement. The Licence Agreement and the Farming Agreement were to be for periods of 14 years. The loan was to be repayable after six years. The investors were to be entitled to the net income derived from the sale of the fruit. The prospectus for the project projected that the income to be derived from the harvesting and sale of fruit would be more than sufficient to pay ongoing licence fees, fees payable under the Farming Agreement, and interest, and to repay the loan. 2On 31 December 1990 TROM had entered into an Investment Deed with Permanent Trustee Company Limited (called "the Representative") for Permanent Trustee Company Limited to represent the interests of the Growers (that is, the investors). Under the Investment Deed all the gross sale proceeds received by the manager (TROM) pursuant to the farming agreements were to be paid to the Representative. After deducting costs and expenses (including remuneration) the Representative was to credit to the account of each grower a share of the net income in proportion to the Growers' entitlements. 3Under the loan agreement there were to be two repayments of principal after three months and six months in the sums of $1,500 per farming allotment. Interest was to be paid and the balance of the principal sum was to be repaid by direct deduction from the moneys payable by the Representative to the borrower pursuant to the Investment Deed representing the income of the borrower in respect of his or her farming allotment. If there were insufficient moneys available from that source, the borrower was required to pay all moneys owing on the due dates for payment. 4The project was not a success. Mr and Mrs Dierickx allege that on the proper construction of the loan agreement, their liability to repay the outstanding balance of the loan and interest was limited to their net proceeds from the investment in the project. They also contend that the obligation to pay interest at the rate of 20 per cent is void or unenforceable as a penalty. 5Mr and Mrs Dierickx also contend that if on the proper construction of the loan agreement their liability is not so limited, they were induced to make the investment by representations that loan repayments, interest and orchard costs would be paid out of orchard income and that their liability would be limited to their net proceeds of their investment in the project. They say that if that is not the effect of the loan agreement, the loan agreement should be set aside ab initio pursuant to s 87(1) or s 87(2)(a) of the Trade Practices Act 1974 (Cth). They also say that there were not reasonable grounds for the representations that the orchard income would be sufficient to cover loan repayments, interest and orchard costs. They say that TROM failed to disclose that there was a real risk that project income would not be sufficient to cover loan repayments, interest and orchard costs, and that the investors would be required to make up the shortfall. They say they were induced to enter into the project by misleading or deceptive conduct and seek relief under the Trade Practices Act. 6Mr and Mrs Dierickx also contend that it was represented to them that the principal sum of $24,000 ($12,000 per farming allotment) would be used, or would be available for use, for the purpose of orchard enhancement and maintenance expenses and payment of the licence fee of $500 per allotment. They say that TROM as the promoter of the project failed to disclose all material information that could reasonably be expected to influence their decision to invest and failed to disclose that the principal sum would not be used, or be available for use, for the purposes of orchard enhancement and maintenance expenses or the payment of licence fees, but would be part of a round-robin transaction. 7Mr and Mrs Dierickx made the initial interest payment of $3,139 (being the first year's interest on the loan) at the time they applied for the loan. They duly made the first two partial repayments of principal. As at 30 June 1995 the outstanding balance of the loan was $15,742.36. 8In June 1995 TROM offered investors the opportunity to exit from the project. On 14 June 1995 Mr Andrew Purcell, the managing director of TROM, sent a letter to Mr and Mrs Dierickx enclosing an application for them to exit the project. The letter stated that acceptance of an application to exit would be at the sole discretion of the Manager. Mr and Mrs Dierickx completed the application. According to Mr Dierickx, he did so after a telephone conversation with Mr Purcell in which Mr Dierickx accepted what he described as TROM's offer that he and his wife exit the project. Mr and Mrs Dierickx say that following their acceptance of that offer they had no further liability to TROM. HPM says that their application to exit the project was not accepted by TROM and they remained liable under the Investor Loan Agreement. 9By May 1998 TROM was in serious financial difficulties. As manager of the managed investment scheme it was required to hold a dealer's licence. To hold a dealer's licence it had to keep net assets of more than $500,000. Its auditor was not satisfied that it had net assets of that amount. On 25 May 1998 it was issued with a notice of assessment of income tax, penalties and interest for $5,768,106.45. 10TROM had promoted and was managing five other orchard projects organised on similar lines. Another company, Treetop Projects Limited ("TPL"), had been established by Mr Purcell on 7 January 1998. As at May 1998 TPL had three directors, namely, Mr Purcell, Mr Richard Moody, and Mr Jim Howson. TPL was manager of a managed investment scheme known as the Nutrasweet Project. TROM was the manager of six managed investment schemes, including the Tumut River Orchard Scheme. Shortly after 1 July 1998 deeds of retirement of TROM and appointment of TPL as manager were executed with effect as from 30 June 1998. 11From at least May 1998 Mr Purcell anticipated that TROM would have to go into external administration. An agreement dated 28 May 1998 was executed under the common seal of both TROM and TPL in anticipation of TROM's retiring as manager of the various orchard projects and TPL's undertaking that role. TPL held a security dealer's licence that permitted it so to act. The agreement dated 28 May 1998 provided that TROM should pay to TPL $18 million and that TPL agreed to perform the works and services specified in the Farming Agreements for each of the projects, and would apply to the Representative for its consent to do so. TROM agreed to retire as manager and to do all things desirable to facilitate TPL's appointment as manager. 12Mr Purcell prepared another document entitled "Offer to Transfer Loans, Cash and Equipment to Settle Debt" also dated 28 May 1998. It was addressed to TPL and signed by Mr Purcell on behalf of TROM. The document contained an acknowledgment by TROM that it owed TPL $18 million for its agreement to take over TROM's obligations as manager under the six projects. The document stated that TROM: "1. ... (b) offers to transfer loans (agreed value of $15,327,081), cash ($1,172,919) and equipment (freehold; $500,000, leased or on hire purchase; $1,000,000) to you, details of which are set out in Annexure 'A' hereto ('the Loans, Cash and Equipment'), in full satisfaction of that debt." The document stated that the offer could only be accepted orally. 13HPM contends that TPL orally accepted this offer. In other proceedings, Mr Purcell stated that Mr Moody of TPL accepted the offer on behalf of TPL. This is said to be confirmed in a minute of a meeting of directors of TPL said to have been held on 10 July 1998. The minutes state: "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.' Andrew Purcell also repeated the words." 14Mr Purcell and Mr Moody gave evidence in these proceedings that there was no such oral acceptance of the offer. Mr Purcell acknowledged that in numerous other proceedings where HPM has sought to recover loans from investors, he gave contrary evidence. He said that the evidence he gave in earlier proceedings was false and that there had been no acceptance of the offer. He also said that the documents he created were not created as at 28 May 1998, but were created much later and after TROM had gone into administration. 15Voluntary administrators were appointed to TROM on 20 July 1998. 16HPM's primary case is that it acquired title to the debt alleged to be owing under the Investor Loan Agreement by Mr and Mrs Dierickx by a chain of assignments, the first of which was an assignment from TROM to TPL on 28 May 1998. Mr and Mrs Dierickx say there was no such assignment. HPM contends in response that if that were so, nonetheless TROM is estopped from denying such an assignment. Mr and Mrs Dierickx put that estoppel in issue, but also say that even if TROM were so estopped, that estoppel does not bind them. 17On 28 April 1999 the creditors of TROM resolved that it be wound up and the administrators were appointed liquidators. On 6 December 1999 the liquidators of TROM brought proceedings against TPL asserting that the transfer of TROM's assets, including its rights to the debts owing under the loan agreements with investors, was an uncommercial transaction within the meaning of s 588FB of the Corporations Law, or alternatively, that the transfer of TROM's assets to TPL resulted in TPL receiving an unfair preference within the meaning of s 588FA of the Corporations Law. By the time those proceedings were settled TPL was also being wound up. The proceedings were settled by TROM's being admitted as a creditor in TPL's liquidation. The premise of that settlement was that the transfer of TROM's assets to TPL was not disturbed. 18Mr and Mrs Dierickx say that the transfer of assets from TROM to TPL was a transaction intended to defeat creditors that is voidable pursuant to s 37A of the Conveyancing Act 1919. HPM says that Mr and Mrs Dierickx, as debtors of TROM and not creditors of TROM, have no standing to have the transaction avoided under s 37A. 19Mr and Mrs Dierickx also say that if there were an oral acceptance of the offer dated 28 May 1998, nonetheless there was no effective assignment because: (a) the agreement required TROM to transfer the loan into TPL's name, subject to any agreement as to management, and that required a novation and the borrower's consent; (b) the transaction was improvident; (c) there was no effective assignment in equity because TPL did not have clean hands and because TROM did not receive valuable consideration for the assignment. 20On 15 March 2000 TPL entered into an agreement called an "Asset Sale Agreement" with Arnott-Smith Holdings Pty Ltd ("Arnott-Smith Holdings"). Arnott-Smith Holdings later changed its name to Merilbah Pty Ltd ("Merilbah"). By that agreement TPL agreed to sell assets to Arnott-Smith Holdings that included the benefit of the loans to persons who had entered into a licence deed and farming agreement under an investment scheme. If Mr and Mrs Dierickx then owed a debt under their investment loan agreement with TROM that had been assigned by TROM to TPL, then TPL agreed to assign that debt to Arnott-Smith Holdings. 21Mr and Mrs Dierickx contend that the second assignment from TPL to Arnott-Smith Holdings (Merilbah) was ineffective because Merilbah did not take over the management of the Tumut River Orchard Project and the Growers' Representative did not approve of the retirement of TPL as manager or the appointment of Merilbah as manager. Mr and Mrs Dierickx say that the personality of the lender as the manager of the Tumut River Orchard Project was important to their undertaking the liability to repay the debt and the debt could not be assigned to someone who did not take over the responsibility to manage the project. 22On 14 November 2000 an application was made by a creditor of TPL for its winding up. An administrator was appointed to TPL on 1 December 2000 and it entered into a voluntary creditor's winding-up on 9 February 2001. 23After TPL went into liquidation the liquidator of TPL threatened to bring proceedings to challenge the assignment of TPL's assets to Merilbah. On 31 August 2001 Merilbah entered into an agreement with HPM for the assignment of the loan account receivables owned by Merilbah originating from 11 horticultural and viticultural investment schemes, including the Tumut River Orchard Project. These included any debt payable by Mr and Mrs Dierickx under their investment loan agreement. HPM's principal claim is that it is by virtue of this assignment (and the two preceding assignments from TROM to TPL, and TPL to Merilbah) that it is entitled to sue for the debt. Mr and Mrs Dierickx say that the third assignment is ineffective because neither Merilbah nor HPM was manager of the project. It also says that the assignment was ineffective because the assets were acquired at a substantial undervalue to the detriment of the growers. The legal basis for the latter contention is unclear. 24If either of the first or second assignments in the chain of assignments set out above is ineffective, HPM relies upon two other assignments. On 22 December 2004 HPM entered into an agreement with TPL and its liquidator whereby HPM agreed to pay $1,750 and in consideration for that promise, TPL assigned to HPM any residual interest it had in the loans to HPM. 2522 December 2004 was more than six years after the date for repayment of the loan by Mr and Mrs Dierickx to TROM. The loan was repayable on 30 June 1998. HPM commenced these proceedings in the Local Court on 28 June 2004 against Mr and Mrs Dierickx. If the debt had not been effectively assigned to HPM by 30 June 2004, prima facie, its cause of action on the debt was extinguished on 30 June 2004 and the fourth assignment on 22 December 2004 from TPL to HPM would be ineffective. HPM says that the limitation period was extended by reason of confirmations of the debt by Mr and Mrs Dierickx that extended the limitation period. It also says that because Mr and Mrs Dierickx granted a charge over their interest in the project to secure repayment of the debt the limitation period for the recovery of the principal sum was 12 years, not six years (Limitation Act 1969 (NSW), s 42). 26On 1 November 2011 TROM and its liquidator entered into a deed of assignment with HPM. HPM agreed to pay $10,000 and in consideration of that payment TROM assigned to HPM any right, title or interest it then had in the loans purportedly assigned to TPL under the first assignment. HPM says that if for any reason the first assignment was ineffective, it acquired title to the loans by the fifth assignment of 1 November 2011. The fifth assignment was entered into more than 13 years after the loan debt became due. HPM contends that as it commenced proceedings on 28 June 2004, before the cause of action for recovery of the debt became statute-barred, it can rely upon the later assignment of the debt if the earlier assignments were ineffective. It makes the same argument in relation to the fourth assignment. 27Notice of all of the assignments was duly given to Mr and Mrs Dierickx. 28It is convenient to deal with the issues in the following order. First, whether HPM has title to sue for a debt which is not statute-barred. That raises many sub-issues. I have concluded that HPM is entitled to sue for the debt. 29Secondly, whether the lender's only recourse for repayment of the loan was against Mr and Mrs Dierickx's entitlement to a share of the net income of the project. I have concluded that the loan was not a "without recourse" loan. 30Thirdly, whether there was an agreement between TROM and Mr and Mrs Dierickx for them to "exit" the project, that is, for them to be released from their liability for the loan in consideration of their releasing their entitlements under the Licence Deed and the Farming Agreement. I have concluded that Mr and Mrs Dierickx have not established that such an agreement was made. 31Fourthly, whether Mr and Mrs Dierickx were induced to enter into the Investor Loan Agreement by misrepresentations, misleading or deceptive conduct, or non-disclosure of material information, on the part of TROM, and if so, whether the investor loan agreement should be set aside, or whether Mr and Mrs Dierickx had a claim for damages against TROM which is to be set off against the loan debt. I have concluded that the claim that Mr Dierickx was led to believe that the loan was without recourse has not been established, but the claim that TROM represented that the moneys advanced to Mr and Mrs Dierickx and then paid under the Farming Agreement to TROM would be available to be used by TROM in paying orchard enhancement and maintenance expenses has been established, and that this was false. I have concluded that this gives rise to a good defence to HPM's claim. 32Fifthly, if Mr and Mrs Dierickx's defences otherwise fail, whether the provision for payment of interest at 20 per cent per annum is void as a penalty. I have concluded that if this question had to be decided, Mr and Mrs Dierickx's contention would fail. 33The proceedings have had a tortuous history. They were commenced in the Local Court. They were later transferred to the District Court. They were later transferred to the Supreme Court along with numerous other proceedings. HPM has instituted many actions for the recovery of debts claimed to be owing under loan agreements entered into either in relation to the Tumut River Orchard Project or similar projects promoted by TROM or TPL. All the other proceedings transferred to the Supreme Court were settled. Although the principal amount of the outstanding debt was less than $20,000, HPM claims to be entitled to interest at 20 per cent per annum capitalised annually. It now claims a debt of in excess of $180,000.

The first assignment: TROM to TPL 34TROM was an unlisted public company. It was required to have three directors. According to the ASIC search as at May, June and July 1998 its directors were Mr Andrew Purcell, Mr Peter Forsyth, and Mr Benjamin John Purcell. TPL was also a public company. It was incorporated on 7 January 1998. Its directors between May and July 1998 were Mr Andrew Purcell, Mr Richard Moody, and Mr Jim Howson. 35As noted above at paras [12] and [13] HPM contends that the first assignment occurred by TROM's making a written offer to assign various assets including its loan books to TPL in consideration of TPL's accepting the assignment as satisfaction of a debt of $18,000,000 and by that offer having been accepted orally by Mr Moody on behalf of TPL. The debt of $18 million is said to arise from the contract referred to at para [11] above, also dated 28 May 1998, between TROM and TPL, whereby TROM promised to pay TPL $18 million and TPL agreed to undertake TROM's role as manager of the various projects. In numerous other proceedings, Mr Purcell gave evidence of the making of the offer and of its having been orally accepted by Mr Moody on behalf of TPL. That evidence was corroborated by a document purporting to be a minute of a meeting of directors of TPL of 10 July 1998 which further confirmed the acceptance of the offer referred to at [13] above. 36In Thomas v HP Mercantile Pty Ltd [2008] NSWCA 308 the Court of Appeal dismissed an appeal from his Honour Judge Rein of the District Court (as his Honour then was) against a finding that there had been an effective assignment of a loan debt owed by a Mr Thomas. The Court referred to evidence given by Mr Purcell in that proceeding that on 29 May 1998 in a telephone conversation, Mr Moody accepted on behalf of TPL the "Offer to Transfer Loans, Cash and Equipment to Settle Debts" from TROM dated 28 May 1998. An attack on Mr Purcell's evidence had been unsuccessful. An application was made to the Court of Appeal to adduce evidence from Mr Moody. Mr Thomas' legal representatives had learned after the hearing in the District Court that Mr Moody was prepared to give evidence to the effect that he did not ever accept the offer orally or otherwise. The Court of Appeal referred to the direct conflict between Mr Moody's proposed evidence and the evidence given by Mr Purcell and concluded that there were no special grounds to receive Mr Moody's evidence, and there was a basis for challenging the reliability of his recollection of events of 1998. 37Judgment of the Court of Appeal in Thomas v HP Mercantile Pty Ltd was given on 20 November 2008. On 23 December 2008 Mr Purcell gave evidence in an examination by the liquidator of TROM in which he recanted his earlier evidence. He said that the documents containing the purported contract under which TROM undertook to pay TPL $18 million and the offer by TROM to assign its assets to TPL in satisfaction of that debt were not brought into existence until after the appointment of voluntary administrators to TROM on 20 July 1998. He said the purported minute of the meeting of directors of TPL of 10 July 1998 was not created until "some time before the end of 1998". He said there was no such meeting as recorded in the minute. 38In the present case Mr Purcell adhered to his recantation of the evidence he had given in other proceedings. Mr Purcell deposed that while the purported contract creating the debt of $18 million owed by TROM to TPL was dated 28 May 1998, it was not brought into existence until some time later. He said that TROM never had funds to pay that debt and the reason he prepared the document was to create a debt owing from TROM to TPL which could then subsequently be forgiven by a subsequent offer from TROM to TPL to settle the debt in exchange for the loan book and other assets. He said that after TROM was placed into administration he prepared the document containing the offer to settle the debt. Mr Purcell said that there was never any oral acceptance of the purported offer. He said that the meeting referred to in the purported minute of 10 July 1998 of directors of TPL never occurred. 39Mr Moody admitted signing the contract dated 28 May 1998 between TROM and TPL whereby TROM agreed to pay TPL $18 million and TPL agreed to undertake TROM's obligations as manager of six projects. In an affidavit sworn in other proceedings of 3 March 2008 Mr Moody deposed that between March and May 1998 Mr Purcell told him that he (Mr Purcell) wanted TPL to take over the management of the Tumut River Orchard Scheme projects. Mr Moody deposed that he wanted Treetops to stay with the project known as the Supersweet project which had been promoted by TPL and not to be involved with the projects of which TROM was manager. According to Mr Moody, Mr Purcell said that TROM would pay $18 million if TPL took on the projects. Mr Moody was agreeable to TPL taking on TROM's projects if TROM paid $18 million and said that TPL needed the cash if it were to do the work that would be needed to be done on the TROM orchard projects. 40Mr Moody said that the $18 million was never paid, and as far as he was concerned, the contract of 28 May 1998 "never came into effect". Mr Moody said that the first time he saw the document entitled "Offer to Transfer Loans, Cash and Equipment to Settle Debt", also dated 28 May 1998, was in 2006 when it was shown to him by a solicitor acting for defendants in the District Court of New South Wales. Mr Moody deposed that he was unaware of the "offer" during the time he was a director of TPL. He denied accepting the offer. He disputed the purported minutes of meeting of 10 July 1998 and said that no such meeting took place. 41Mr Benjamin John Purcell was a director of TROM in May to July 1998. He suffers from dementia and was not capable of giving evidence. The third director of TROM was Mr Peter Forsyth. He deposed that whilst he ceased to hold office as a director of TROM on 11 July 1998, he had no involvement with the company from 29 March 1998. He had no knowledge of the contract for the payment of $18 million to TPL and its agreement to take over TROM's functions as manager of the six projects. He had no knowledge of the document entitled "Offer to Transfer Loans, Cash and Equipment to Settle Debt". He was not involved in any discussions relating to TPL. 42The third director of TPL was Mr James Howson. He deposed that he became a director of TPL in January 1998. TPL was the manager of the project known as Supersweet. He also assisted Mr Purcell with respect to the marketing and exportation of fruit from the Coonabarabran project and the Tumut project. Mr Howson deposed that in about May 1998 Mr Purcell discussed the restructuring of the projects and told him that TROM was not performing well financially. Mr Purcell said "the projects need to be restructured, otherwise we'll lose the lot." According to Mr Howson, in about June 1998 Mr Purcell said to him words to the effect: "The ATO is chasing TROM for money. TROM owes about $6 million. Treetop can take over the projects from TROM. There will be enough money coming in from the Supersweet investors for Treetop to run Supersweet and the others as well. Would you agree to Treetop taking them over?" 43Mr Howson said he would think about it. Mr Howson sought legal advice. He told his solicitor that he thought TROM's assets were being stripped and being put into other projects as he had seen equipment having been taken off the orchards. He told his solicitor that he believed that Mr Purcell was trying to protect TROM's assets from administrators. He was advised against TPL's taking any part in the taking over of TROM's projects and was advised to resign as a director of TPL. He told Mr Purcell on 30 June 1998 that: "I don't agree with what you are doing with the projects. I've gotten legal advice and I don't want to be involved in taking on any of the projects. I am also going to resign as a director of Treetop." 44Mr Howson said that Mr Purcell became angry and distressed. Mr Howson resigned as a director of TPL on 2 July 1998. He said that about two years later he became aware of the existence of the document purportedly dated 28 May 1998 entitled "Contract between [TROM] and [TPL]", and the document entitled "Offer to Transfer Loans, Cash and Equipment to Settle Debt" also purportedly dated 28 May 1998, and the purported minutes of the meeting of directors of TPL of 10 July 1998. Mr Howson said that no mention of any assignment nor the existence of the documents was made to him at any of his meetings with Mr Purcell or Mr Moody prior to 30 June 1998. 45Mr Howson and Mr Forsyth were not cross-examined. I accept their evidence. 46Mr Moody's evidence was taken on commission. He said that what made Mr Howson furious at a meeting on 30 June 1998 was that Mr Purcell offered him one share in TPL. Mr Moody did not recall that Mr Howson was upset about anything to do with an assignment of assets from TROM to TPL. In the absence of cross-examination of Mr Howson, I accept his evidence in preference to Mr Moody's evidence on this topic. 47Mr Purcell is wholly without credit. On his own evidence he has either lied repeatedly in the past, or was lying in his evidence given in these proceedings. The question is why Mr Purcell has changed his evidence. Mr Ross Chapman is a consultant to HPM. He describes his role as "project managing" HPM's portfolio of debt and other receivables. Mr Chapman said that HPM is the trustee of a trust and he is a beneficiary of the trust. Although he is not a director of HPM, he established the trust structure and arranged for others to become directors of HPM. In 1999 Mr Chapman was consultant to TPL. Mr Chapman said that in mid 2001 he was approached by Mr Purcell who asked if he was interested in purchasing the loan books that had been acquired by Arnott-Smith Holdings. He deposed that Mr Purcell said that Mr Arnott-Smith did not want the loan books any more. Mr Chapman said that following that inquiry, Merilbah (formerly Arnott-Smith Holdings) assigned the loan books to HPM. Mr Chapman said that Merilbah undertook to provide assistance if required to HPM in the process of recovering the loan debts and Mr Purcell was retained as a consultant for Merilbah. He said that Mr Purcell was to assist HPM on terms that Merilbah would be paid a fee for Mr Purcell's time. According to Mr Chapman, Mr Purcell said that he was not getting enough money for the work he was doing for HPM and wanted a percentage of recoveries. Mr Chapman said that he rejected that request, and in response Mr Purcell told him that he would not sign any more statements or affidavits for HPM until he got what he wanted. 48Mr Purcell said that the reason he changed his evidence was that in co-operation with Mr Arnott-Smith, he had arranged for the assets to be assigned to Mr Chapman and HPM had been created for that purpose. He said there was a side agreement with Mr Chapman that Mr Chapman would press for a legal determination that investors' loans were full recourse loans. I understood this to refer to loans of other projects in respect of which the Commissioner of Taxation had refused to allow deductions for investors on the basis that the loans were without recourse. Mr Purcell said that if there had been such a determination or restructure, that would have allowed a settlement with investors "on an equitable basis" and answered their problems with the tax department. He said Mr Chapman did not honour that arrangement, but spent his time collecting money from defaulters, rather than getting on with the job of obtaining such a "legal declaration". In the meantime the projects were falling to pieces. 49Whatever the truth of these matters, it is clear that Mr Purcell changed his evidence because of a falling-out with Mr Chapman. However, that in itself does not indicate whether the evidence he gave in earlier proceedings was accurate and his present evidence was false, or whether his present evidence is accurate and his earlier evidence was false. 50Mr Moody's evidence was not seriously shaken in cross-examination. However, one matter emerged that is greatly to his and Mr Purcell's discredit. In April 1998 Mr Moody was seeking a loan from the ANZ Bank. On 30 April 1998 Mr Purcell, writing as managing director of TPL, wrote a letter to the ANZ Bank advising that Richard Moody and Associates Pty Ltd would be paid an annual retainer from TPL of $150,000 commencing from 1 May 1998 at the rate of $12,500 per month. On the same day Mr Moody, writing as director of Richard Moody and Associates Pty Ltd, wrote to Mr Purcell advising that Mr Purcell would be paid an annual retainer from Richard Moody and Associates of $150,000 commencing from 1 May 1998 at the rate of $12,500 per month. On the following day Mr Moody signed another letter addressed to Mr Purcell stating that in consideration of TPL's advising the ANZ that Richard Moody and Associates Pty Ltd would be paid an annual retainer from TPL of $150,000 commencing 1 May 1998 that he and Richard Moody and Associates Pty Ltd indemnified TPL against any liability to the ANZ Bank that might arise because of that letter. This was an attempted fraud on the ANZ Bank. It also indicates that as at April 1998 there was no falling-out between Mr Purcell and Mr Moody. 51Other documents were created dated May and July 1998 that are consistent with the oral acceptance of the offer to assign TROM's assets. Mr Moody produced on subpoena a copy of a document purporting to be minutes of a meeting of directors of TPL held at Mascot Airport on 21 May 1998. The minutes record the board's agreeing to act as manager for TROM projects for a price of $10.3 million with payment to be made in the form of an assignment of Treetop Apple's loan book to the extent of the minimum payments required from investors. Mr Moody said that this was another fictitious document produced by Mr Purcell. Mr Moody also produced on subpoena a document purporting to be a minute of a meeting of directors of TPL held in Tumut on 8 July 1998 attended by Mr Moody and Mr Purcell that purportedly noted that Mr Moody accepted the offer to transfer loans, cash and equipment to settle debt from TROM on 30 May 1998 and ratifying that TPL's undertaking the role of manager. This was said to be another such fictitious document. 52There is no doubt that Mr Purcell and Mr Moody intended that TPL take over TROM's role as manager. This was necessary because TROM's financial position meant that it was no longer qualified to hold a dealer's licence. By May 1998 it was contemplated that TROM would be placed into administration. Mr Purcell knew that if assets were to be transferred from TROM, that would have to be done before TROM went into administration. TPL would not wish to take over the responsibilities of management of the projects without payment or transfer of assets. The deed of retirement of TROM and appointment of TPL as manager for each of the Schemes is dated 30 June 1998. It can be inferred that the common seals of TROM and TPL were affixed prior to 3 July 1998. Mr Moody witnessed the affixation of the common seal of TPL to the deed of retirement and appointment. Mr Purcell witnessed the affixing of the common seal of TROM. Mr Moody's position was that he was prepared for TPL to take over TROM's responsibilities as manager only if TROM paid the $18 million referred to in the document described as a contract between TROM and TPL dated 28 May 1998. But Mr Moody knew that TROM had not paid $18 million by early July 1998. Why then would he have committed TPL to carry out TROM's obligations as manager unless he was satisfied that TROM was obliged to transfer assets to TPL to satisfy, or at least partially discharge, that liability? 53Counsel for Mr and Mrs Dierickx submitted that the contract dated 28 May 1998 was a sham, that is, that neither party intended it to take effect according to its tenor. There was no evidence to support that submission. Mr Moody's evidence was to the contrary. He understood that TPL had agreed and was bound to take over the role of manager on being paid the consideration of $18 million. Mr Moody said that he did not change that position, that is, he did not agree to TROM satisfying its liability to pay $18 million by transferring assets. But there was no satisfactory explanation as to why, if that were so, he signed the deed providing for the retirement of TROM and the appointment of TPL as manager of the schemes. 54In cross-examination Mr Purcell admitted that it was "quite possible" that in mid July 1998 he caused notices of assignment to be sent to the debtors under loan agreements informing them that their debts had been assigned from TROM to TPL. HPM tendered a copy letter from TPL addressed to "Dear Investors" dated 8 July 1998 signed by Mr Purcell. The letter stated: "Following the successful issue of the Treetop Super Sweet prospectus by Treetop Projects Limited it has been decided to consolidate all of your projects (Treetop Projects and Tumut River Orchard Management Projects) under the management of Treetop Projects Limited. This will enable Treetop Projects Limited to be the largest single producer in Australasia which means huge advantages in infrastructure and market share. ... Your Growers Representative, the Australian Rural Group, has agreed effective 30 June 1998. Your Investment loan has also been transferred over to Treetop Projects Limited." 55In September 1998 the Australian Securities and Investments Commission (ASIC) was concerned that moneys paid by investors to TPL in respect of a scheme known as the Treetop Apples Project could be at risk. This was one of the six projects from which TROM retired as manager and TPL was appointed as manager in its place. ASIC sought and was given undertakings for the purposes of ensuring that amounts paid by investors which were represented by loan prepayments were available for the purpose of having the work performed as part of the Treetop Apples Project Scheme. The undertaking was given by TPL. Mr Moody and Mr Purcell witnessed the affixing of TPL's common seal to the undertaking. The undertaking is dated 22 September 1998. The undertaking recited that: "1.11 At some time between 28 May 1998 and 31 July 1998 TROM transferred to TPL the rights of TROM under the Investor Loan Agreements entered into with investors in the Treetop Apples Project, and other rights under loan agreements, cash and equipment in consideration for TPL assuming the duties and obligations of TROM under the Deeds, such duties and obligations including those set out in the Licence Deed and Farming Agreements entered by TROM with investors in the Treetop Project Limited." 56The only basis upon which it could be said that TROM transferred its rights under the Investor Loan Agreements in respect of the Treetop Apples Project was pursuant to the purported assignment said to have taken place through the oral acceptance of the offer dated 28 May 1998. 57Thus there are persuasive objective factors that make questionable Mr Moody's and Mr Purcell's denials of the oral acceptance of the written offer, and make questionable Mr Purcell's evidence that the documentation was not created until much later and probably after TROM went into administration. 58Nonetheless, there is some objective support for those denials. Mr Purcell sought legal advice on 27 May 1998 in relation to a draft of the document providing for the assignment of TROM's loan book and other assets to TPL, as well as related documents. In a letter dated 28 May 1998 Mr Green of Verekers noted that at the conference on the previous day, he had been asked to consider a number of draft documents, including an assignment and a proposal for TROM to pay a commission to a firm of the merchant banker Mr Arnott-Smith referable to its "'underwriting' loans to investors who elect to participate in the Super Sweet Project using borrowed funds." This was a reference to TPL's promotion of the Supersweet project. It seems that its willingness to take over the role as manager was dependent in part upon the successful raising of funds in respect of that project. In his letter of 28 May 1998 Mr Green said that the draft "assignment" document was unsatisfactory both having regard to the objectives sought to be achieved and having regard to the possible application of the Stamp Duties Act 1920. He advised that effecting any dealings with TROM's loan book and its management rights pursuant to the Farming Agreements required a valuation to be made as to the current values of the loan book and the management rights. Mr Green advised that if TROM's loan book were to be assigned, TROM would have to receive present market value for the loan book. He drew Mr Purcell's attention to s 37A of the Conveyancing Act and said that evidence of true market value should be obtained to support the consideration for any assignment so as to rebut an allegation of fraudulent disposition of property within the meaning of s 37A. 59It appears from other correspondence from Mr Green of Verekers that no assignment of TROM's loan book had been effected by 3 June 1998. On that day he wrote to Mr Arnott-Smith advising that he had been instructed to act for TROM in respect of a proposed loan of $2 million, the security for which would be book debts owed by TROM that were then part of a security which TROM had granted to QIDC. Apparently QIDC consented to the release of its charge. So far as the evidence reveals, the proposed loan from Mr Arnott-Smith or his company did not proceed. Nonetheless it is clear that according to Mr Green's instructions as at 3 June 1998 TROM still owned its loan book. There is no evidence that a valuation was obtained of TROM's loan book that Mr Green had advised was necessary if the proposed assignment were to proceed. 60It is clear from Mr Forsyth's and Mr Howson's evidence that the directors of TROM and TPL did not consider and agree to the assignment of TROM's loan book. It would not have been within Mr Purcell's authority as managing director of TROM and TPL to have bound either company to the assignment without the approval of the boards. On the other hand, if there had been a purported offer and acceptance of an assignment of TROM's assets, the absence of authority could be cured by ratification. Ratification might be inferred from the subsequent conduct of TROM and TPL referred to below, but ratification was not pleaded by HPM. If no offer were made and accepted, then HPM's case that there had been an effective assignment prior to the appointment of an administrator to TROM on 20 July 1998 depends on its argument that TROM is estopped from denying such an assignment and that it can take advantage of the estoppel against Mr and Mrs Dierickx. 61There is no direct evidence that TPL through Mr Moody accepted an offer from TROM contained in the document dated 28 May 1998. For the reasons above, the objective probabilities are that such a document was brought into existence, and there was an oral acceptance of the offer, prior to TPL's assuming the obligations of manager of the six schemes of which TROM was formerly the manager. It may be that the offer document was not brought into existence on 28 May 1998, but clearly a draft of the offer was in existence. Mr Purcell was not definite that the document was brought into existence only after TROM went into administration. That is unlikely to have been the position because Mr Purcell knew that the assignment would have to take effect before an administrator was appointed. The objective evidence against an assignment is the advice given by Mr Green of Verekers to Mr Purcell. But Mr Purcell subsequently acted as if the assignment had taken effect, even though there is no evidence of an independent valuation having been obtained of TROM's assets. Mr Purcell and Mr Moody allowed TPL to assume the role of manager of the projects formerly managed by TROM. They could not properly have allowed TPL to assume such liabilities unless TPL was adequately remunerated. They had no basis to think that TROM had paid, or would pay, $18 million. Both men subsequently acknowledged to ASIC that such an assignment had taken place. Mr Purcell did not follow Mr Green's advice. 62Notwithstanding their denial, the objective probabilities are that Mr Moody did purportedly accept TROM's offer by early July 1998. There is no evidence that that acceptance was in writing. Mr Purcell had repeatedly sworn in other litigation that there was an oral acceptance. He produced the minute of the meeting of 8 July 1998 (that he now disavows) that there was such an oral acceptance. Neither Mr Purcell nor Mr Moody was a reliable witness. I conclude on the balance of probabilities that the document dated 28 May 1998 containing the offer was prepared prior to 3 July 1998 and the offer was orally accepted by Mr Moody prior to that date. In any event, I conclude that there was such an agreement between Mr Purcell on behalf of TROM and Messrs Purcell and Moody on behalf of TPL for the assignment of the loan debts by 8 July 1998, being the date on which Mr Purcell wrote to investors advising them of the transfer of the loans. 63However, I do not conclude that the offer and acceptance were considered by the directors of both companies acting as a board. I accept the evidence of Messrs Forsyth and Howson to this effect. The question of whether an agreement between Messrs Purcell and Moody bound the companies was raised on the pleadings. HPM pleaded that it was entitled to rely on the statutory assumptions in ss 128 and 129 of the Corporations Law. But HPM did not deal with TROM or TPL. Nor would the assumptions in those sections be of assistance to TROM or TPL. The relevant assumption in s 129 would be that the companies' constitutions had been complied with, that the directors had the authority customarily exercised or performed by a director of a similar company, and that the officers properly performed their duties (s 129(1), (2) and (4)). The offer document was not executed in accordance with s 127(1). It was signed by Mr Purcell as director, but not by a second director or a company secretary in addition to the director. Mr Moody was also the company secretary, but he was not the sole director. As Mr and Mrs Dierickx submitted, Mr Purcell, who acted for both sides, knew that the offer and acceptance had not been considered by all the directors (s 129(4)). Nor would the transaction fall within the customary authority of a managing director. 64The constitution of neither company was in evidence. Section 226A of the Corporations Law provided for the business of a company to be managed by, or under the direction, of the directors. This was a replaceable rule that could have been modified by the companies' constitutions (s 135(1)(a) and (2)), but there is no evidence that it was. 65In the absence of ratification the offer and acceptance would not have been binding on TROM or TPL. HPM did not plead ratification and no submissions were made about it. 66I therefore conclude that no binding agreement for assignment was reached before TROM went into administration. 67The question of whether the agreement between Mr Purcell and Mr Moody was binding on TROM and TPL was not considered in HP Mercantile Pty Ltd v Thomas. 68Had there been an agreement binding on TROM and TPL, there would have been an effective assignment of the loan debt in equity. For the reasons given by his Honour Judge Rein (as his Honour then was) in HP Mercantile Pty Ltd v Meakes (District Court of New South Wales, 24 June 2004, unreported) (at [27]-[31]) the assignment would not take effect as a legal assignment under s 12 of the Conveyancing Act because there was not an "absolute assignment by writing under the hand of the assignor". The only document under the hand of the assignor was an offer of assignment. At the time that document was produced there was no assignment, absolute or otherwise. An oral acceptance of the assignment for valuable consideration that passed from TPL to TROM, being the acceptance of the assets assigned in satisfaction of the debt of $18 million, would be an effective assignment in equity. TROM is a defendant to the proceedings. 69Had there been an agreement binding on TROM and TPL, it would not have failed for the reasons advanced by Mr and Mrs Dierickx summarised at [19] above. The offer document provided: "OFFER TO TRANSFER LOANS, CASH AND EQUIPMENT TO SETTLE DEBT TO: Treetops Projects Limited (ACN 081 209 298) ('TPL')

1. Tumut River Orchard Management (CAN 003 501 611) ('TROM'), (a) acknowledges it owes you $18,000,000 as set out in the schedule for your agreement to take over its obligations as manager of the projects described in the following deeds: I. Tumut River Orchard Project Deed (as amended) 31 December 1990 II. Coonabarabran Orchard Project (as amended) 26 May 1993 III. Queensland Orchard Project Deed (as amended) 24 May 1994 IV. Treetop Plum Project Deed 18 March 1996 V. Treetop Apple Project Deed 17 January 1997 VI. Harcourt Vines Project Deed 4 June 1997 (b) offers to transfer loans (agreed value of $15,327,081), cash ($1,172,919) and equipment (freehold; $500,000, leased or on hire purchase; $1,000,000) to you, details of which are set out in Annexure 'A' hereto ('the Loans, Cash and Equipment'), in full satisfaction of that debt.
2. This offer may only be accepted orally. It lapses if not accepted by 31 July 1998.
3. Title to Loans, Cash and Equipment will vest in you on such acceptance.
4. On request TROM will do all things necessary, at the cost of TPL, to transfer the Loans into your name and Cash and Equipment into your possession, but subject to any agreement which may exist from time to time between us in relation to the management of loans.
5. Unless you otherwise request, TROM will retain possession of all loan documents on your behalf. If you do otherwise request TROM must transfer all loan documents to you.
6. TROM warrants that it is the beneficial owner of the Loans and has full right and power to make this offer and to give effect to the transfer so as to give you a good title to the Loans.
7. TROM hereby offers to assign the benefit of all land, improvements and licenses necessary for the conduct of the projects to TPL to use as TPL sees fit.
8. By accepting this offer you will: (a) acknowledge that no other warranties or representations have been made to you in respect of the Loans; (b) confirm that you have carried out your own due diligence to verify the value of the Loans; (c) become entitled to all interest payments and all principal repayments on the Loans, subject to the terms of any management agreement between us. (d) undertake to pay TROM a fee of 15% of the Management Fee received as cash by you as the Manager under the relevant Farming Agreements associated with each of the projects in 1(a) above." 70It was not a condition of the assignment that TROM and TPL enter into an agreement for the management of the loans. TROM agreed to transfer the loans into TPL's name if TPL so requested and then subject to any agreement which might exist in relation to the management of the loans. If there were no such agreement there would be no qualification to TROM's obligation under clause 4. I do not know what would be entailed in the transfer of the loans into TPL's name, given that the offer stipulated that title to the loans would vest in TPL on acceptance. 71The transaction may well have been improvident to TROM and TROM's creditors, but that is not a reason for concluding that there was no valid agreement. Such improvidence was an element in the causes of action that TROM and its liquidator later brought against TPL to set the assignment aside. It is not a ground of initial invalidity. 72I do not accept that the borrowers' consent to the assignment was required. The loan agreement created a separate debt. There is no term in the loan agreement that prevents assignment of the debt. The fact that TROM had obligations to the plaintiffs under the Farming Agreement and could need the income from the loan agreements to manage the project, does not mean that the loan debt was unassignable. If TROM breached the Farming Agreement a question might arise as to whether the borrower could set off against its loan debt damages for which TROM would be liable if it breached the Farming Agreement, but that is not a reason for the loan debt's being unassignable. 73Counsel for Mr and Mrs Dierickx submitted: "42. Further, s. 128(4) provides that a person is not entitled to make the assumptions in s.129 if at the time of the dealings they knew or suspected that the assumption was incorrect (see above para 37[)].

The second assignment: TPL to Merilbah 91On 15 March 2000 TPL entered into an agreement called an Asset Sale Agreement with Arnott Smith Holdings Pty Ltd (Merilbah). By clause 2.1 of that agreement, TPL agreed to sell "the Assets" to Merilbah for "the Purchase Price". The "Assets" included the "Grower Loans". These included the loan to Mr and Mrs Dierickx, whether owned by TPL or TROM. 92Counsel for Mr and Mrs Dierickx submitted that at the time of the second assignment TPL was the manager of the project and had the benefit of owning all of the assets necessary to undertake its functions as manager, including the right to seek recovery of any loans in default (on the assumption that the first assignment was valid). Counsel submitted that by the Asset Sale Agreement TPL put itself fundamentally in breach of the Loan Agreement when read together with the Farming Agreement and the Investment Deed. The sale of the assets, including the loan books, broke the nexus between those assets and the manager. This was said to be a breach of those agreements. As Merilbah was not the manager of the project, it had no right, so it was submitted, to step into the shoes of the lender. Counsel submitted that on execution of the Asset Sale Agreement, TPL lost the right to sue on the Loan Agreement and could not assign the benefit of the Loan Agreement to Merilbah. 93The Loan Agreement created a separate debt from the debts payable by Mr and Mrs Dierickx under the Farming Agreement or the Licence Deed. The legal basis for the submission that TPL could not assign the loan debt where Merilbah did not become the manager of the project was not clear. As I understand the submission it is that it was an implied term of the Loan Agreement that the debt could not be assigned, except to a manager or, could not be assigned if the assignment would result in the assignor being in breach of any associated agreement, in particular, the Farming Agreement or the Investment Deed. 94There is no express term in the Loan Agreement to that effect. Any such term must be implied. The test for the implication of such a term would be the test in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 282-283, namely: "(1) It must be reasonable and equitable; (2) It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) It must be so obvious that 'it goes without saying'; (4) It must be capable of clear expression; (5) It must not contradict any express term of the contract." 95The suggested term does not meet these requirements. In the Loan Agreement TROM was described as "the Lender". "Lender" was defined to include TROM, its successors and assigns. Clause 5 provided that in consideration of the loan the borrower charged to the lender its right, title and interest in the Farm Business and in the Farming Agreements relating thereto. Clause 8.3 provided that the Lender could assign the benefit of any Security. Clearly the loan debt was assignable. There was no restriction on the persons to whom a loan debt could be assigned. 96Moreover, TROM was not required personally to undertake the obligations of manager under the Farming Agreement. Clause 16 of the Farming Agreement provided that the Manager should be entitled to appoint or contract with any person to assist it to carry out all or any of the works or services it agreed to perform under the Farming Agreement. Clause 16.2 provided that delegation by the Manager of any of its obligations did not release it from liability under the Farming Agreement. It may be inferred that there was a novation of the Farming Agreement following change of manager in 1998. 97Under the Farming Agreement the grower was required to pay the manager's estimated cost of providing the services for the relevant financial year as approved by the auditor, and as notified to the grower at least two months prior to the end of the immediately preceding financial year, as well as five per cent of the grower's share of the gross sale proceeds. It is not obvious that the manager had to be entitled to receive the interest on the loan, and repayment of the principal when repayment of the principal became due, in order to fulfil its obligations under the Farming Agreement. 98In any event, it is not necessary to imply any such term in order to give business efficacy to the contracts. The manager under the Farming Agreement was obliged to provide the works and services specified in that agreement, irrespective of whether it was entitled to receive payment of the interest or principal under the loans. It was entitled to be paid the estimated costs of those works and services by the grower. The financial modelling at the time of the issue of the prospectus projected that these expenses would be fully funded out of the orchard revenue and that the growers would not be called on to make any such payments. 99In other words, it is not necessary to imply a term that the debt payable under the Loan Agreement could only be assigned to a manager of the project, or could not be assigned if it would result in the manager being in breach of the Farming Agreement or the Investment Deed because: a. Such a term is not necessary to give business efficacy to any of the agreements. The manager was required to comply with its obligations under the Farming Agreement and the Investment Deed whether or not it was entitled to the debt payable under the Loan Agreement; b. It is not so obvious that it goes without saying for the same reason and also because it is not obvious that a manager could only perform its obligations if it were entitled to the debt payable under the Loan Agreement; and c. whilst the suggested implied term does not necessarily contradict the express term of the Loan Agreement, the fact that the Loan Agreement provides for the debt being assignable without any qualification as to the identity of the assignee or circumstances in which an assignment can be effected suggests that the parties did not intend there to be any such qualification or restriction. 100Counsel for Mr and Mrs Dierickx also said that the assignment from TPL to Merilbah was at a massive undervalue as TPL sought to quarantine the assets transferred from claims by potential creditors, including the growers. That may well be, but it does not affect the validity of the assignment. 101Following the appointment of a liquidator to TPL on 9 February 2001 the liquidator alleged that the sale agreement of 15 March 2000 was an uncommercial transaction under s 588FB of the Corporations Act and an insolvent transaction under s 588FC and was voidable against the liquidator under s 588FF. On 31 August 2001 Merilbah assigned the loan debts to HPM. On 18 April 2002 TPL and its liquidator entered into a settlement deed with Merilbah pursuant to which Merilbah agreed to pay a settlement amount of $380,000. The liquidator of TPL confirmed that neither he nor TPL had any claim to or against any of the assets acquired by Merilbah from TPL pursuant to the Asset Sale Agreement of 15 March 2000. 102I conclude that the second assignment of the debt owed by Mr and Mrs Dierickx under the Loan Agreement from TPL to Merilbah was effective.

Third assignment: Merilbah to HPM 103Counsel for Mr and Mrs Dierickx submitted that if Merilbah were entitled to the loan book debts under the second assignment, nonetheless the third assignment was unenforceable in equity because of the plaintiff's unclean hands. This was because it was said that HPM knew that the liquidator of TPL was seeking to recover the assets, HPM knew that it was paying an undervalue for the assets and the purpose of the assignment from Merilbah to HPM was to seek to remove the assets from the creditors of TPL, including the growers. 104The same individuals were behind all of the assignments. I accept that the purpose of the assignment was to seek to remove the assets from the challenge by the liquidator of TPL to the assignment from TPL to Merilbah. It does not follow that there was not an effective equitable assignment. HPL paid $10,000 in consideration for the assignment which was sufficient to support a simple contract. The face value of the loan debts assigned was millions of dollars, although HPM says that to date, its recoveries have not exceeded the cost of recovery. As the consideration for the assignment has been paid the question of whether the agreement to assign would be unenforceable because of unclean hands does not arise. Considerations applicable to cases of specific performance where the contract is still to be completed do not arise where the contract has been completed by the payment of the consideration (Meagher, Gummow & Lehane's Equity: Doctrines & Remedies at [6-050] and [6-270]). 105For these reasons I conclude that HPM has title to sue for the debt through the first, second and third assignments. It is unnecessary to consider the validity of the fourth and fifth assignments. However, in case I am wrong in the conclusions to which I have thus far come, I will deal with those questions.

Fourth assignment: TPL to HPM 106On 22 December 2004 TPL and its liquidator executed a deed that recited TPL's agreement with Merilbah at 15 March 2000 and the asset sale agreement between Merilbah and HPM of 31 August 2001. The deed recited that in the process of recovering amounts owing to HPM under the loans assigned from TPL to Merilbah and other receivables, HPM was being met with various defences, including the claim that the assignment from TPL to Merilbah was not an effective legal assignment. The deed provided that in consideration of HPM paying $1,750, TPL assigned to HPM any residual right, title and interest it had in the loans and certain other receivables. As with the other assignments, notice of the assignment was given to Mr and Mrs Dierickx. 107Mr and Mrs Dierickx's objection to this assignment is that the cause of action on a debt owing under the loan agreement was extinguished on 30 June 2004, that is, six years after the date for repayment of the loan (Limitation Act 1969, s 14(1)(a) and s 63(1)). 108To this HPM makes three answers. First it contends that the time during which the limitation period ran was extended because of the confirmation of the debt (Limitation Act, s 54). Secondly, it says that because the debt was secured by a charge over the borrower's interest in the Farm Business (meaning the business of farming stone fruits on the farming allotments) and the Farming Agreements related thereto, the limitation period was 12 years, not six years (Limitation Act, s 42). Thirdly, it says that the action was brought on the cause of action to recover the debt before the expiration of the six-year limitation period notwithstanding that when the proceedings were commenced HPM relied on the first three assignments only and the fourth assignment had not taken place. 109Section 54 of the Limitation Act relevantly provides: "54 Confirmation (1) Where, after a limitation period fixed by or under this Act for a cause of action commences to run but before the expiration of the limitation period, a person against whom (either solely or with other persons) the cause of action lies confirms the cause of action, the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation. (2) For the purposes of this section: (a) a person confirms a cause of action if, but only if, the person: (i) acknowledges, to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made, or (ii) makes, to a person having (either solely or with other persons) the cause of action, a payment in respect of the right or title of the person to whom the payment is made, (b) a confirmation of a cause of action to recover interest on principal money operates also as a confirmation of a cause of action to recover the principal money, and (c) a confirmation of a cause of action to recover income falling due at any time operates also as a confirmation of a cause of action to recover income falling due at a later time on the same account. ... (4) An acknowledgment for the purposes of this section must be in writing and signed by the maker. (5) For the purposes of this section a person has the benefit of a confirmation if, but only if, the confirmation is made to the person or to a person through whom the person claims. (6) For the purposes of this section a person is bound by a confirmation if, but only if: (a) the person is a maker of the confirmation, ..." 110Two acts of confirmation are relied on. The first, was a payment of $4,344.50 made by Mr and Mrs Dierickx to TPL on 3 May 1999. This comprised $2,000 on account of licence fees for the 1998/99 year and $2,344.50 for interest on the loan. By a letter dated 13 April 1999 TPL had demanded payment of that amount of interest as being payable for the current year. Under the loan agreement the principal sum was repayable on 30 June 1998. Interest was payable on "the Principal Sum outstanding from time to time ...". Pursuant to s 54(2)(a)(ii) and (b) of the Limitation Act the payment of interest was a confirmation of TPL's cause of action to recover both interest and principal. The payment extended the limitation period under s 14(1) to 3 May 2005. 111The second confirmation relied on by HPM was a letter responded to by Mr Dierickx on or about 6 December 1999. On that date TPL wrote to Mr and Mrs Dierickx offering to capitalise interest and licence fee payments to their loan account. On some day which is not clear Mr Dierickx ticked a box to indicate his and his wife's agreement to the interest for the 1998/99 year being capitalised. He signed the letter and returned it, apparently by fax, on 29 December 1999 to TPL. This was an acknowledgment by him of TPL's cause of action for the debt. He, but not Mrs Dierickx, was bound by the confirmation which extended the limitation period under s 14(1) to six years from 29 December 1999. 112Section 42 of the Limitation Act provides: "42 Action for principal, possession or foreclosure (1) An action on a cause of action: (a) to recover principal money secured by mortgage, (b) to recover possession of mortgaged property from a mortgagor, or (c) to foreclose the equity of redemption of mortgaged property, is not maintainable by a mortgagee under the mortgage if brought after the expiration of a limitation period of twelve years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims. (2) Paragraph (a) of subsection (1) applies to a cause of action: (a) to recover principal money from any person, whether as principal, surety or otherwise, or (b) to recover principal money by way of: (i) the appointment of a receiver of mortgaged property or of the income or profits of mortgaged property, (ii) the sale lease or other disposition or realization of mortgaged property, or (iii) other remedy affecting mortgaged property." 113"Mortgage" includes a charge for securing money or money's worth (s 11(1)). 114Section 43(1) of the Limitation Act provides: "43 Action for interest (1) An action on a cause of action to recover interest secured by a mortgage is not maintainable by a mortgagee under the mortgage if brought after the expiration of: (a) a limitation period of six years running from the only or later of such of the following dates as are applicable: (i) the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims, and (ii) where a mortgagee under a prior mortgage is, on the date mentioned in subparagraph (i), in possession of all or any of the property comprised in the mortgage securing the interest, and after that date discontinues his or her possession-the date of discontinuance, or (b) the limitation period fixed by or under this Act for an action between the same parties on a cause of action to recover the principal money bearing the interest, whichever limitation period first expires." 115As noted above clause 5 of the Loan Agreement included a charge over the borrower's interest in the Farm Business and in the Farming Agreement. Pursuant to s 42(1) the limitation period for the cause of action to recover the principal of the loan was 12 years and did not expire until 30 June 2010. The limitation period for the cause of action to recover interest was six years (s 14(1) and s 43(1)). 116Pursuant to s 14(1), s 42(1) and s 43(1)(a)(i) the limitation period commences from the date the cause of action for principal or interest first accrued to TROM, being the person through whom HPM claims. 117By reason of the payment made on 3 May 1999 the cause of action for recovery of principal and interest was not extinguished at the time of the fourth assignment. If HPM's title to the debt depended upon the fourth assignment, it had no title to the debt when it commenced proceedings on 28 June 2004. It amended its claim to rely on the fourth assignment on 13 September 2006, which was more than six years after the limitation period had been extended under s 54 by payment of interest and (in the case of the claim against Mr Dierickx) by his acknowledgment of the debt. The question then is whether, if the earlier assignments were ineffective, HPM could rely upon the fourth assignment which did not occur until after it had commenced the proceedings and whether the cause of action for recovery of interest was statute-barred before it amended its claim to plead the fourth assignment. There could be no issue about its reliance on the fourth assignment to recover the principal of the debt and interest accruing after 13 September 2000 because that cause of action was not statute-barred. The question is whether it could maintain a cause of action for interest becoming due before 13 September 2000 if it had to rely on the fourth assignment. 118Section 64 of the Civil Procedure Act 2005 relevantly provides: "64 Amendment of documents generally (1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. ... (3) An order under this section may be made even if the amendment would have the effect of adding or substituting a cause of action that has arisen after the commencement of the proceedings but, in that case, the date of commencement of the proceedings, in relation to that cause of action, is, subject to section 65, taken to be the date on which the amendment is made." 119If a cause of action based on the fourth assignment is a different cause of action from that based on the first, second and third assignments, then, subject to s 65, the claim for pre-September 2000 interest would be statute-barred because the proceeding on the cause of action relying on the fourth assignment was not commenced until more than six years after the extension of the limitation period by payment and acknowledgment. On the other hand, if the amendment had been made under s 65, the amendment would be taken to have had effect as from the date on which the proceedings were commenced unless the court ordered otherwise. Section 65 provides: "65 Amendment of originating process after expiry of limitation period (1) This section applies to any proceedings commenced before the expiration of any relevant limitation period for the commencement of the proceedings. (2) At any time after the expiration of the relevant limitation period, the plaintiff in any such proceedings may, with the leave of the court under section 64 (1) (b), amend the originating process so as: ... (c) to add or substitute a new cause of action, together with a claim for relief on the new cause of action, being a new cause of action that, in the court's opinion, arises from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process. (3) Unless the court otherwise orders, an amendment made under this section is taken to have had effect as from the date on which the proceedings were commenced. (4) This section does not limit the powers of the court under section 64. (5) This section has effect despite anything to the contrary in the Limitation Act 1969. ..." 120The statement of claim was amended pursuant to an order of Judicial Registrar McDonald made on 6 September 2006. The order was made by consent. The order was simply that the plaintiff have leave to file and serve an amended statement of claim by 13 September 2006. The amendment was not expressed to be made under s 65 with leave given under s 64(1)(b). Both the order and the amendment are silent as to the parts of ss 64 or 65 which may have been engaged. 121I understand the plaintiff to have submitted that the amendment did not plead a new cause of action. According to the plaintiff, the cause of action was on money lent and was the same whether the plaintiff's title to the debt depended on the first, second and third assignments, or on the first and fourth assignment. I do not accept this submission. In Read v Brown (1888) 22 QBD 128 Lord Esher MR said (at 131, citing Cooke v Gill (1872-73) L. R. 8 CP 107) that a cause of action is the entire set of facts that gives rise to an enforceable claim and comprises every fact which, if traversed, must be proved in order for the plaintiff to obtain judgment. Where the plaintiff claims to be entitled to judgment pursuant to an assignment of the debt, the assignment relied upon is a fact that must be proved and is part of the cause of action. Read v Brown so decided. 122The amendment that relied upon the fourth assignment in the alternative to the earlier claim pleaded a new cause of action. Pursuant to s 64(3) the proceedings on the new cause of action are taken to have been commenced when the amendment was made (unless s 65 applies). By the time of the amendment the new cause of action, in so far as it claimed interest payable before 13 September 2000, was extinguished by the operation of s 63 of the Limitation Act. That would not be so if s 65(2)(c) applies unless the court were to otherwise order. Section 65(2)(c) will apply if the new cause of action arises from the same or substantially the same facts as gave rise to the cause of action originally pleaded. In New Cap Reinsurance Corporation v Reaseguros Allianza SA [2004] NSWSC 787; (2004) 186 FLR 175 I said of the then Supreme Court Rules, Pt 20, r 4(5) that was in materially the same terms: "[90] In Rodgers v Federal Commissioner of Taxation (1998) 158 ALR 220; 28 ACSR 42, the Full Federal Court considered the meaning of the expression "substantially the same" where it appears in O 13 r 2(7) of the Federal Court Rules which are in substantially the same terms as the Supreme Court Rules. There the liquidator sought to recover payments made to the Commissioner of Taxation as voidable transactions. The statement of claim alleged that eight payments were made to the Commissioner for group tax when the company was insolvent and that each payment was a voidable transaction. The amendment which was sought was to set aside two additional payments as voidable transactions where they also were made in respect of group tax and in the same financial year as the original eight payments. The company's obligation to make the payments of group tax was common to all of the payments. The payments were part of a pattern of regular remittances although each was a separate transaction. The additional payments were made within five weeks of the date of the last payment specified in the original application. The Full Federal Court held that the new causes of action arose out of substantially the same facts as the causes of action raised in the existing pleading. In reaching that conclusion their Honours adopted what was said by Lord Hanworth MR in Burford v Clifford [1932] 2 Ch 122 at 138 where his Lordship referred to the words "substantially the same" as dealing with a case where the same facts have to be conned over in order to ascertain liability. [91] It is true, as counsel for the defendant submitted, that the authorities cited in Rodgers v Federal Commissioner of Taxation for the meaning of "substantially the same facts" dealt with different Rules of Court which raised different issues. The questions raised in the authorities considered by the Full Federal Court were whether there was a substantial similarity in the relief claimed between different parties, or substantial similarity between issues. Counsel rightly submitted that the issues and claims for relief may be substantially the same, although the facts giving rise to the issues or claims for relief may not be. [92] Nonetheless, the Full Federal Court regarded those authorities as being of assistance in construing the present Rule. The approach adopted in Rodgers is consistent with the way in which Pt 20 r 4, or a cognate Rule of Court, has been approached in other cases. Brickfield Properties Ltd v Newton [1971] 3 All ER 328 is an authority frequently cited. There the addition of a claim against an architect for breach of a duty of design was held to fall within the rule because on the existing claim for negligent supervision it would be necessary for the architect's design to be examined closely, especially if the design required amplification during the course of construction. (At 336). The Court of Appeal applied the Rule to the substantial similarity of the evidentiary facts which would be examined at the hearing of the existing claim, rather than the ultimate facts to be proved by that evidence. Both Brickfield Properties Ltd v Newton and Rodgers applied the expression to a substantially similar series of events. (See Glebe Administration Board v National Australia Bank, Bainton J, 4 March 1996 unreported; BC 9600362 at 35, 37. [93] The question is one of degree and impression. Applying the approach in Rodgers and Brickfield v Newton, if it were necessary to apply Pt 20 r 4(5), and having regard to the matters in para 89, I would be satisfied that the alleged causes of action to avoid transactions characterised as the "first payment" and the "third payment" arise from substantially the same facts as those the subject of the existing pleading which seeks relief in respect of the "second payment". However I would not be satisfied that there was a sufficient similarity in the evidentiary facts or series of events relating to the existing claim and those which relate to the cause of action for the fourth payment. It was made almost three months after the existing claim. I do not think that the plaintiff has discharged the onus which lies on it to show a substantially similar identity of facts in relation to that cause of action." 123Applying that approach, I do not consider that a cause of action relying on the first and fourth assignments arises from the same or substantially the same facts as a cause of action based on the first three assignments. Whilst the facts giving rise to the debt are the same, the differences in relation to the time and circumstances of the assignments are so wide that there is not a substantially similar identity of facts in relation to the causes of action. 124Counsel for HPM cited Stone v ACE-IRM Insurance Broking Pty Ltd [2003] QCA 218; [2004] 1 Qd R 173. There the plaintiff sued an insurance broker for allegedly negligent advice as to the scope of a life insurance policy on the life of her husband. After the cause of action had accrued on her husband's death, she became bankrupt and the chose in action passed to her trustee in bankruptcy. After her discharge from bankruptcy, but before taking a reassignment of the chose, the plaintiff commenced proceedings. At that time she did not have title to the right of action. She commenced the proceedings within six years of her husband's death. The plaintiff claimed that there had been an effective equitable assignment from the trustee in bankruptcy to her. Whether this was so and whether or not the claim was statute-barred was not decided. The primary judge struck out the proceedings on the ground that the proceeding was a nullity and could not be cured by amendment. The Court of Appeal overturned the decision. It held that the proceedings were not a nullity. The judgments do not address the question as to whether the claim based on a reassignment of the chose by the trustee in bankruptcy to the plaintiff would be barred by the statute of limitations. McMurdo J, with whom McPherson JA and Holmes J agreed, stated (at [28]) that the cause of action had accrued at the commencement of the proceedings. However, there was no analysis in the judgments as to why that was so. It was accepted (at [23]) that under the Queensland Rules of Court a plaintiff could amend to plead a cause of action that arose after the commencement of proceedings (displacing the rule in Weldon v Neal (1887) 19 QBD 394). 125The authorities on the question of whether proceedings are a nullity were comprehensively reviewed by Ward J in Hewitt v Gardner [2009] NSWSC 705. 126In my view, to ask in this case whether proceedings were a nullity is to ask the wrong question. The proceedings as originally filed in reliance on only the first, second and third assignments were clearly not a nullity. If the pleadings had not been amended and if it had been determined (contrary to my view) that the first three assignments were not effective in equity to assign the debt to HPM, it would not mean that the proceedings were a nullity. It would simply mean that the plaintiff's claim failed. The pleading could be amended to plead a cause of action that arose after the commencement of the proceeding, but the time at which that amendment took effect was determined by ss 64 and 65 of the Civil Procedure Act. The question whether the proceeding is a nullity simply does not arise. 127It is unnecessary to express any view on the conclusion in Stone v ACE-IRM Insurance Broking Pty Ltd at [28] of the reasons for judgment that the cause of action in that case had accrued at the commencement of the proceedings. I do not think that that conclusion was necessary for the decision, having regard to the issues raised in that case. Moreover, there is a significant factual difference between that case and the present. In that case the cause of action was originally vested in the plaintiff. On one view it would be for the defendant to assert that the plaintiff had lost title to the claim by reason of her becoming bankrupt and that defence might be met by a plea of a subsequent reassignment of the claim back to the plaintiff. Even if the plaintiff's new claim, depending upon the reassignment of the cause of action to her, were a separate cause of action, it would be arguable that it arose out of substantially the same facts as the cause of action originally sued on. 128For these reasons had it been necessary for HPM to rely on the fourth assignment, its claim for interest becoming payable before 13 September 2000 would have failed. The amendment would have been taken to have taken effect only on the date of the filing of its amended pleading. The claim for the recovery of the principal sum and interest becoming payable after 13 September 2000 would not have been statute-barred.

Fifth assignment 129HPM also relied on the decision in Stone v ACE-IRM Insurance Broking Pty Ltd to support its claim based on the fifth assignment. But the cause of action for both principal and interest had become statute-barred in the case of Mrs Dierickx on 3 May 2011, which was before the date of the fifth assignment. The cause of action against Mrs Dierickx would have been extinguished pursuant to s 63. Unless the amendment pleading the fifth assignment were to take effect from the time the proceedings were commenced, the claim against her relying on the fifth assignment was statute-barred. For the same reasons as given in relation to the fourth assignment, the amendment would not take effect as from the commencement of the proceedings, and accordingly the claim was statute-barred. 130On the other hand, the limitation period against Mr Dierickx did not commence until 29 December 1999. The cause of action to recover principal was not statute-barred either at the date of the fifth assignment, or the date when the statement of claim was further amended to plead the fifth assignment. If it were necessary for HPM to rely on the fifth assignment, it could do so to seek to recover the principal and interest becoming payable after 7 December 2005 from Mr Dierickx.

Conclusion in relation to the first issue 131For these reasons I conclude that TROM is estopped from denying that HPM is an equitable assignee of the loan debt pursuant to the first, second and third assignments and HPM is entitled to sue Mr and Mrs Dierickx. Its claim is not barred by the Limitation Act.

Second issue: Loan not without recourse 132The second issue is not whether Mr and Mrs Dierickx were misled into believing that the loan was only repayable out of their share of the net proceeds to be derived from the farming operation. The present question is whether this is the effect of the contractual documents. 133The plaintiffs applied to purchase farming allotments (comprising the Licence and Farming Agreement) using the forms of application contained in the prospectus. The application for the loan was on a form headed "Application For Investor Loan". It relevantly stated: "The Investor Loan is extended to applicants approved by the Lender Tumut River Orchard Management Limited in its sole discretion upon receipt of a signed application form. A. INTEREST AND REPAYMENT The applicable interest rates and principal repayment dates are summarised as follows: Higher Interest Rate: 20% Lower Interest Rate: 15% Principal repayments of one thousand, five hundred dollars ($1,500.00) per Farming Allotment shall be made by the expiry of each of the following periods after the date of the loan; 3 calendar months and 6 calendar months and thereafter will [be] made out of the proceeds of all amounts payable by the Representative to the Borrower in pursuance of clause 17.8 of the Investment Deed representing the income of the Borrower in respect of the Borrower's Farming Allotments or Farm(s). B. NOMINEE AND AGENT I/We agree to enter into the Investor Loan agreement in the form contained in the prospectus on the terms and conditions contained therein, and acknowledge that by signing this Application, I/We authorise Permanent Trustee Co. Ltd. as my/our nominee and agent to enter into the Investor Loan agreement on my/our behalf and to bind me/us to the terms of the Agreement as if I/we had signed the same. ..." 134The plaintiffs emphasised that under paragraph A of the application it is stated that after two initial repayments of principal of $1,500 per farming allotment, principal repayments would thereafter to be made out of the amounts payable to the borrower by the Representative under the investment deed. The "Representative" was Permanent Trustee Company Limited. Clause 17.8 of the investment deed made on 31 December 1990 provided for the Representative to pay amounts standing to the credit of the account of each Grower to be paid to the Grower. This part of the application form was a representation that repayments of principal would be made from amounts so payable. 135Mr and Mrs Dierickx completed the form without any material amendment. On 30 June 1992 Permanent Trustee Company Limited as their attorneys entered into the agreement entitled "Form of Investor Loan Agreement". Clause 3 of that agreement relevantly provides: "3. Interest and Principal 3.1 The Borrower hereby authorises the Lender to remit the Principal Sum (the receipt whereof is hereby acknowledged) to the Representative to be applied by Permanent Trustee Company Limited towards any obligation of the Borrower to make payments under the Farming Agreements. 3.2 The Borrower shall: (a) repay the Principal Sum in the amounts and on the dates set forth in Item 4 of the Schedule hereto; (b) subject to the operation of paragraph (f) of this sub-clause, pay interest to the Lender upon the Principal Sum at the Higher Interest Rate specified in Item 5 of the Schedule hereto to be computed from the date hereof calculated on the Principal Sum outstanding from time to time adjusted daily and paid on the Interest Payment Days specified in Item 6 of the Schedule hereto during such time as the Principal Sum shall remain unpaid PROVIDED FIRSTLY that if the Principal Sum shall become immediately due and payable under or by virtue of this Agreement interest shall thenceforth accrue and be payable from day to day and PROVIDED SECONDLY that if within fourteen (14) days after each of the Interest Payment Days interest shall have been paid at the Lower Interest Rate specified in Item 7 of the Schedule hereto and if the amounts specified in Item 4 are paid within fourteen (14) days after each of the due dates and the Lender is then not entitled to immediate payment of the Principal Sum the Lender shall accept payment of interest at the Lower Interest Rate in lieu of the Higher Interest Rate; ... 3.3 The balance of the Principal Sum and accrued interest on all other monies which may from time to time be owing under this Agreement to the Lender shall except as hereinafter provided be repaid to the Lender on the due dates for payment by direct deduction from monies payable by the Representative to the Borrower in pursuance of clause 17.8 of the Investment Deed representing the income of the Borrower in respect of the Borrower's Farming Allotment or Farm and the Borrower by his execution hereof hereby authorises the Representative to pay the Lender all such monies PROVIDED THAT to the extent that such monies are unavailable or insufficient, the Borrower shall pay all monies owing under this Agreement on the due dates for payment. 3.4 Subject to Clause 3.2(f), the Borrower agrees to pay, on demand, interest on any amount payable under this Agreement from when it becomes due for payment during the period that it remains unpaid. Interest is payable at the rate mentioned in Item 5 of Schedule 1 and shall at the option of the Lender, be capitalised by the Lender at intervals which the Lender determines from time to time or, if no determination is made, at yearly intervals. Interest is payable on capitalised interest at the rate and in the manner referred to in this clause. The Borrower's obligation to pay the outstanding amount on the date it becomes due for payment is not affected by this clause." 136Items 4, 5, 6 and 7 of schedule 1 provided: "Item 4: PRINCIPAL REPAYMENT DATES Per Farming Allotment A. 3 calendar months after the date of this Agreement $1,500.00 B. 6 calendar months after the date of this Agreement $1,500.00 C. Balance of the Principal Sum by direct deduction from monies payable by the Representative to the Borrower in pursuance of clause 17.8 of the Investment Deed representing the income of the Borrower in respect of the Borrower's Farming Allotment or Farm(s) [in] accordance with clause 3.3 until fully repaid or if not repaid on the expiration of six (6) years from the date hereof ('the Due Date'), then on the Due Date. Item 5: HIGHER INTEREST RATE The Higher Interest Rate shall mean the rate of interest five per cent (5%) per annum more than the Lower Interest Rate. Item 6: INTEREST AMOUNT AND PAYMENT DAYS A. In respect of the period from the date hereof to 30 June 1993, an initial interest payment of $1,569.50 per Farming Allotment to be made on the date hereof. B. Thereafter the Borrower shall, within fourteen (14) days of 30 June in each year, pay to the Lender interest calculated on daily rests, after taking account of any repayments made in accordance with Clause 3, 5.2 and 7.1 and Item 4, in respect of the preceding 12 months. Item 7: LOWER INTEREST RATE 15% per annum" 137The proviso to clause 3.3 expressly provides that the Borrower is to pay all moneys owing under the Agreement, both interest and principal, whether or not there are sufficient moneys available to the borrower's account pursuant to clause 17.8 of the investment deed from which the payments or repayments are to be made. The concluding words of Item 4C provide for repayment of principal after six years, even if principal has not been paid out of the application of farm income. 138The fact that those terms are not contained in the application form is relevant to the question as to whether the prospectus was misleading or deceptive, or likely to mislead or deceive, but does not permit the loan agreement to be construed contrary to its express terms. 139The loan was not a "without recourse" loan.

1995 exit agreement 140By June 1995 Mr Dierickx understood that the Tumut Project was experiencing difficulties, particularly as a result of hailstorms. On 1 June 1995 Mr Purcell of TROM wrote to Mr and Mrs Dierickx attaching the latest quarterly orchard report. It reported the loss of a substantial quantity of otherwise good fruit due to hail. Mr and Mrs Dierickx also received another letter from TROM dated 1 June 1995. It noted that they had prepaid interest for the 1994/95 financial year. The letter stated there was opportunity to prepay interest for the 1995/96 year which, after discount, would total $1,953.79. The letter advised that maintenance fees and licence fees of $1,848 and $500 per allotment would be payable in advance at 30 June 1995. TROM advised that a decision would be made shortly whether to debit those sums to Mr and Mrs Dierickx's grower's account or to require payment of them directly. The letter added that: "The opportunity to apply to exit the Project at minimal cost as mentioned in previous correspondence is almost filled. Any investors wishing to apply should do so soon. Please call me to discuss these or any other matters." The letter was signed by Mr Purcell. 141The previous correspondence referred to was not in evidence. 142Mr Dierickx deposed that by this time he and his wife had made repayments of principal and payments of interest totalling $12,224.13. He was alarmed that it could cost them further money to exit the project, given that they would in any event lose their investment. Some time prior to 14 June 1995, Mr Dierickx telephoned Mr Purcell. He deposed that there was a conversation to the following effect: "25. I subsequently telephoned Mr Purcell (sometime between 1 June and 14 June 1995) to discuss the performance of the Tumut Project and my concerns about our investment. During that telephone discussion, words to the following effect were said: Me: 'What's happening with this project? Why is it in this state? Why have we got to this?' Mr Purcell: 'We've had numerous problems including hail and problems with water. Things are not going well. Potentially, if you don't exit the project there may be future costs that might not be covered by the project's income.' Me: 'Why would it cost us to exit the project? Does it not have any value? I'm annoyed enough at losing our investment - why should we pay now to exit the project?' Mr Purcell: 'Considering you have made all your payments on time, if you decide to exit today, I'll allow you to exit the project at no cost.' Me: 'I'm not really happy about it, but I accept the offer. What happens now?' Mr Purcell: 'I'll send a statement to you stating that you've exited the project on these terms, and that we've agreed you will not have to make an exit payment. You won't have to make any further payments, and you will no longer be a part of the project.'" 143Mr Purcell neither confirmed nor denied this conversation. He deposed he recalled having a conversation with Mr Dierickx in mid-1995 in which Mr Dierickx was cross about the performance of his investment and undertakings he felt had been given by Mr Purcell as to what would happen if the project returns didn't cover the costs of his investment in the project. Mr Purcell did not otherwise elaborate. He said "It is possible that I agreed to let the defendants exit the project at no cost during a telephone conversation with Mr Dierickx at that time and that I forgave the defendants' debt owing under their loan agreement." Given Mr Purcell's lack of credit, his evidence would be of no weight even if he had either supported or denied Mr Dierickx's version of events. 144On 14 June 1995 Mr Purcell sent another letter to Mr and Mrs Dierickx. The letter stated: "Dear Mr & Mrs Dierickx RE: EXIT OFFER - TUMUT RIVER ORCHARD PROJECT Further to our previous correspondence and conversations regarding your investment, we attach schedule of 'Possible Future Charges' plus an 'Application to Exit' for each investment. Please read both pages carefully and do not hesitate to contact either Jan Davidson or myself should you have any further queries. Should you wish to exit the project, you should complete the Application and return it within ten days of this date. We stress that each application to exit will be assessed on an individual basis and that acceptance of applications will be at the sole discretion of the Manager." 145The last paragraph of this letter is inconsistent with there being a concluded oral agreement for Mr and Mrs Dierickx to "exit" the project. 146The enclosed schedule of "Possible Future Charges" noted that licence agreement fees for 1994/95, 1995/96, and 1996/97, and maintenance charge payable under the farming agreement for 1995/96, and interest under the loan agreement for 1995/96 and 1996/97 would be $11,385.10. These were described as "possible future charges before allotments become self-funding". The document described an "Exit Offer" as follows: "EXIT OFFER Each application to exit the Project will be based on the [sic] each applicant[']s circumstances but a broad guide to the financial imposts of withdrawing would be that all interest to the date of the application plus Licence Fees, if not already paid, would be payable upon approval of the exit application. In your case this is an amount of $NIL. Acceptance of the application will be at the Manager's sole discretion and may be subject to future events. Upon our acceptance and your payment, all obligations that you have to us and we have to you would come to an end." 147Also enclosed was a form entitled "Application to Exit Tumut River Orchard Project" addressed by Mr and Mrs Dierickx to TROM. The form stated: "I hereby apply to exit the Tumut River Orchard Project in respect of the Farming Allotments set out above. Upon acceptance of this application I accept that all my rights and obligations under Project Agreements; the Licence, Farming and loan Agreement (including the outstanding loan balance of $15,630.34), shall extinguish and also that I/we shall have no further recourse to Tumut River Orchard Management Ltd in regard to any matter arising from the Project or my involvement with it. Please find enclosed a cheque for $NIL This is made up of interest 1993/94 unpaid: $PAID interest 31/4/95 of: $PAID Licence Fees 1994/95 $PAID I understand that the Manager may accept or reject this application at its sole discretion. I tend [sic] the sum of $NIL in full and final satisfaction of all outstanding interest payable under the loan agreement, the repayment of the loan balance (which I understand to be $15,630.34) and all outstanding charges. I accept that the Fruit Proceeds from the 1995 harvest have been fully expended in meeting my obligations for farm Maintenance, Management fees and Harvesting and Marketing costs and any balance outstanding in respect of these and all charges payable [pertaining] to the Project Agreements are also discharged by the acceptance of this payment." 148This document was signed by Mr and Mrs Dierkickx on 24 June 1995 and sent back to TROM who received it on 30 June 1995. 149HPM produced from the records of TROM an unsigned copy letter from TROM addressed to Mr and Mrs Dierickx dated 23 June 1995. This letter stated: "Dear Mr & Mrs Dierickx, Exit Application - Tumut River Orchard Project Unfortunately we have not been able to confirm your exit from the Project. This may change, so we will retain your application. Until then your rights and obligations under the Project agreements remain in place. A decision on whether to charge Licence and/or maintenance fees will be postponed until 1 October, 1995, when a clearer picture of the Tumut River Orchard Trust's position will emerge. Interest and other fees (if applicable) will accrue until you are able to exit. Interest and Licence fees for 1994/95 are payable if you did not prepay interest or did not pay Licence fees before applying to exit. If you sent a cheque in respect of those amounts as part of your exit application we shall apply it to any outstanding interest or fees unless we hear from you within 10 days of this date. Please note that additional interest will be payable if you are able to exit the Project in the future. To minimise this amount we will contact you if and as soon as it is possible for you to exit." 150There was no evidence from HPM as to when the letter was printed, or whether it was posted. TROM's computer records treat Mr and Mrs Dierickx as an ongoing investor. The document produced may have been a form letter, subsequently printed out, with the insertion of Mr and Mrs Dierickx's details. Mr Dierickx denied receiving this letter. He noted that the letter pre-dates Mr and Mrs Dierickx's signing their application to exit the Tumut River Orchard Project. That application was signed on 24 June 1995 and received by TROM on 30 June 1995. It would make no sense for TROM to have sent this letter before it received Mr and Mrs Dierickx's application. Indeed the record states that their application would be retained, but no such application had been sent at this time. I accept Mr Dierickx's evidence that this letter was not received. 151Mr Dierickx deposed that after 30 June 1995 he and his wife received no further requests for payments in respect of the Tumut Project until 1999, and that they ceased to declare any primary production income or claim expenses in relation to the Tumut Project. Mr Dierickx said that he regarded the letter of 14 June 1995 as a "form letter" for general circulation and he focused on the application form that showed that he and his wife did not have to pay any further moneys to be released from the project. Although the form stated that "the manager may accept or reject this application at its sole discretion" Mr Dierickx's evidence was that he understood that that discretion had already been exercised. 152I would not reject Mr Dierickx's evidence of his conversation with Mr Purcell on the ground of the inconsistency between that conversation and the correspondence received from TROM dated 14 June 2005, nor from the fact that when the application to exit the project was remitted by Mr and Mrs Dierickx to TROM they did not write a covering letter asserting that the discretion to permit them to exit the project had already been exercised. 153I formed a generally favourable impression of Mr Dierickx. He was prepared to make concessions against interest. For example he said that he read the complete prospectus and other documents that were given to him. It was his case that he was misled into thinking that the loan was without recourse. He did not attempt to take shelter, as a less than truthful witness might readily have done, behind an assertion that he did not read the fine print of the investor loan agreement. 154Nonetheless, in deciding whether to accept his evidence as to the agreement he said he made with Mr Purcell in June 1995, I have regard to the observations of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319 that: "... human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self interest as well as conscious considerations of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience." 155One test of the evidence is whether after 30 June 1995 Mr and Mrs Dierickx ceased to declare any primary production income or to claim deductible expenses in relation to the Tumut Project. 156Mr Dierickx acknowledges receiving a letter dated 15 September 1995 enclosing a tax statement. This related to the tax year ended 30 June 1995. The letter is not inconsistent with an exit agreement having been made. 157No demand was made on Mr and Mrs Dierickx in the following financial year for the payment of interest, licence fees or management fees. This is consistent with an exit agreement having been arrived at, but might be explained by the charges being paid from Mr and Mrs Dierickx's share of orchard income. However, it does appear from the statement accompanying the letter of 14 June 1995 that TROM then anticipated that investors would have to pay licence fees, farm management fees and interest out of their own pockets at least up to June 1997. However, the document stated that the figures provided were only estimates and actual cash demands might decrease or increase. 158Mr Dierickx was an investor in other orchard projects managed by TROM or TPL. On 25 June 1993 he had signed an application to acquire two farming allotments in a managed investment scheme managed by TROM known as the Coonabarabran Orchard Project and applied for a loan in respect of that project. Mrs Dierickx was not an investor or borrower in respect of that project. 159On 24 June 1996 Mr Dierickx applied to acquire two farming allotments in another managed investment scheme managed by TROM known as the Treetop Plums Project Investment. Again Mrs Dierickx was not an investor in that project. Mr Dierickx also invested in two other agricultural projects, one involving tea tree oil, and another involving macadamia nuts. 160On 29 August 1996 TROM sent a letter to Mr and Mrs Dierickx which read as follows: "Dear Mr & Mrs Dierickx TUMUT RIVER ORCHARD PROJECT ALLOTMENT NUMBERS: 486, 487 Please find attached your Taxation Schedule for the Tumut River Orchard Project for the year ended 30 June 1996. A net cash distribution of $464.93 per allotment was achieved. This has resulted in a cash and tax neutral position after interest on your investor loan. Your Annual Report will be forwarded shortly. Should you have any queries please contact Heather Pow of this office." 161Enclosed with that letter was a statement headed "Net Cash Distribution Schedule" in respect of the two farming allotments 486 and 487 for the Tumut River Orchard Project. It showed taxable income being "net orchard proceeds" of $7,335.75. It also included the following: " Description of Deduction Tax Act Tax Deduction Works & Services Section Allowable B. Harvesting & Marketing 51(1) $4,520.96 C. Orchard Maintenance 51(1) $1,782.90 (12 months to 30.6.96) D. Administration Fee 51(1) $102.02 E. Net Income Distribution $929.87 F. Interest 51(1) $929.87 G. Other Expenditure 51(1) ..........." 162If an exit agreement had been made as Mr Dierickx deposed, and if he had paid attention to the documents he received, he would have appreciated that TROM was treating him and his wife as if they were still investors in the project, and presumably still liable under the loan agreement. Mr Dierickx did not recall receiving the documents, but they were included in the documents of which he gave discovery and so he must have received them. In cross-examination he said that in 1997 his wife had started a business. She was in Adelaide. Most of his time was spent in Sydney. They got behind in their tax returns and it was not until three or four years later that he provided all documents for three or four years' tax returns to his accountant. The accountant prepared the returns. 163Mr Dierickx was cross-examined about his wife's tax return for the year ended 30 June 1996. Mrs Dierickx's tax return for 1996 included an item 49 for business income and deductions. Under the heading "Primary Production" the tax return recorded the figure of $7,335. Under the heading "Expenses" there were three items, namely: "Total interest expenses $930 Repairs and maintenance $1,783 All other expenses $4,622 totalling $7,335" 164This was in accordance with the net cash distribution schedule enclosed with TROM's letter of 29 August 1996. 165It is not clear when this return was signed. But I infer it was after 2000. It is clear that Mr and Mrs Dierickx were often substantially late in having their tax returns prepared. For example, Mrs Dierickx's 2001 tax return was not prepared until July 2008 (exhibit D). 166Mr Dierickx supplied the documents he had received from TROM to his accountant. I infer that he did not tell his accountant that he and his wife had ceased to have any involvement in the Tumut River Orchard Project after 30 June 1995. I infer that the documents were sent many years after 1995. The accountant used the documents and incorrectly included all of the income and all of the expenses in Mrs Dierickx's return. I infer that there was none in Mr Dierickx's return. Mrs Dierickx relied on her accountant and her husband in relation to the preparation of her tax returns. I find that neither she nor Mr Dierickx gave the returns any close attention. Had they done so, one of two things should have been done. Either, if the exit agreement were made as is now alleged, the items for business income and expenses should have been excluded from Mrs Dierickx's return. Alternatively, 50 per cent of the figures for income and expenses should have been included in both returns. Given that there is no difference between income and expenses, it is understandable that no-one may have paid too much attention to the matter. Mrs Dierickx's 1996 tax return goes some way to casting doubt over Mr Dierickx's evidence on this topic, but is not conclusive. 167On 26 September 1997 TROM wrote to Mr and Mrs Dierickx as follows: "Dear Mr & Mrs Dierickx, TUMUT RIVER ORCHARD PROJECT - ALLOTMENT Nos: 486, 487 STATEMENT OF INCOME AND EXPENSES Please find attached your details for inclusion with your 1996/97 taxation return. The audit of the Trust Accounts has not yet been finalised. However, these are expected to be through within the next few weeks. It is unlikely that there will be any adjustments required, but this is not impossible. We have had many enquiries from investors to get the statements out so, at the risk of some minor modifications, we have proceeded with their preparation. As you will see, revenue is up and costs are down. Revenue for 1991 and 1992 Tumut investors went from $1.56 million last year to $2.17 million, and expenses per tree and tray were down. This produced a Net Distribution of $1,772.30 per Allotment which was almost twice the revised projection of $926.00, and we look forward to further improvement next year. The distribution has allowed us to meet interest costs and prepay a portion of the license fees for 1997/98, which are payable in advance. I urge you to read about all the other activities going on in the Treetop group in the Annual Report, as you will see that they are directly complementary to the viability of the Tumut River Orchard. If you have any queries, please contact either Dianne Johnson or myself." 168The distribution schedule accompanying the letter of 26 September 1997 stated that in respect of the two allotments in the Tumut River Orchard Project of Mr and Mrs Dierickx, there had been taxable income derived of $11,445.52 and deductible expenditure of the same amount. The expenditure consisted of harvesting and marketing costs of $4,308.29, orchard maintenance of $4,008.86, an administration fee of $48.69, interest of $2,344.50, and licence fees paid in advance for the following financial year of $735.19. 169Mr Dierickx admits receiving this correspondence and attached statement. If he gave it any attention, he must have appreciated that TROM was asserting that he and Mrs Dierickx had not exited from the project. He did not raise a query or make any complaint. He attributes this to the pressure of work. 170I infer that none of the information included in the 30 June 1997 distribution schedule was incorporated into the tax returns of Mr or Mrs Dierickx. Their tax returns for 1997 were not tendered. 171Mr Chapman deposed that a statement of deductible expenditure was forwarded to Mr and Mrs Dierickx by TPL in respect of the year ended 30 June 1998. Mr Dierickx denied receiving such correspondence and I accept that denial. No tax return for the 1998 financial year was tendered. This is of some significance because the statement of deductible expenditure allegedly sent to Mr and Mrs Dierickx for the year ended 30 June 1998 showed an excess of expenditure over income (including licence fees, but not including interest) of $1,289. Had Mr or Mrs Dierickx received this document and thought that they were still participants in the project, they could be expected to have included deductions for the year ended 30 June 1998. 172On 16 March 1999 TPL made demands on Mr and Mrs Dierickx in respect of licence fees payable in respect of the two allotments in the Tumut River Orchard Project. On the same day it demanded payment of interest of $2,344.50 in respect of the loan which was said to have a balance as at 30 June 1998 of $15,630. Mr and Mrs Dierickx admit having received notice of assignment of the loan dated 29 May 1998. I infer it was sent with the letter dated 8 July 1998 referred to in paragraph [54]. 173Mr and Mrs Dierickx did not pay immediately any of the amounts demanded. Neither after receiving notice of the assignment of the loan, nor after receiving the demands of 16 March 1999 did they write back to TPL stating that their loan and the licence fees had been discharged in 1995. 174TPL made a follow-up demand on 13 April 1999. Mr Dierickx deposed that when he received this correspondence on the letterhead of TPL, he believed that the payments demanded related to the Treetop Plums project. He said that that project had previously used the TROM letterhead and that contributed to confusion. At that time he had changed employment, was commuting from Adelaide to Sydney for work, had a newborn son, was helping his wife run a new business from home, and had little time to deal with bills and correspondence. 175Mr Dierickx sent TPL a cheque dated 3 May 1999 for $4,344.50. This was the same amount as the two licence fees of $1,000 said to be payable for the 1997/98 and 1998/99 financial years, and $2,344.50 for the interest claimed. Mr Dierickx said that it was only during the course of these proceedings that he had come to realise that the payments related to the Tumut project and not the Treetop Plums project. The difficulty with that evidence is that Mr Dierickx must have had before him the demands from TPL for interest of $2,334.50 and two years' payment of licence fees of $2,000 when he drew the cheque. The demands expressly referred to the moneys as being payable with respect to the Tumut River Orchard Project. Mr Dierickx drew the cheque on his and his wife's joint account. The Tumut River Orchard Project was the only project in which they were both investors. 176On 4 November 1999 TPL sent a further letter to Mr and Mrs Dierickx attaching an Operating Loan Account Interest and Licence Fee Statement for the 12 months ended 30 June 1999. The letter said that the statements were "in relation to your investment in the Tumut River Orchard Project". TPL asserted that the interest was payable "under the full recourse loan". It also said that licence fees were due. 177On 6 December 1999 TPL sent what appears to be a pro-forma letter to Mr and Mrs Dierickx stating: "Re: TUMUT RIVER ORCHARD PROJECT - ALLOTMENT(S) 486, 487 We wish to offer to capitalise your Interest and License Fee Payments to your loan account. Please tick and sign the appropriate box and return this letter to us within 14 days.  Capitalise 1998/99 Interest as previously billed to my Loan Account (please tick)  Capitalise 1990/00 License Fees as previously billed to my Growers Account (please tick)" 178Mr Dierickx ticked the two boxes and faxed the copy letter back to TPL on 29 December 1999. He wrote on the letter "I get so much paperwork from you guys that I don't know where I'm at anymore." In cross-examination Mr Dierickx said that he was confused when he received the letter of 6 December 1999, but accepted that the reason he was confused was because he understood that the document related to the Tumut River Orchard Project. When it was put to him that he did not ring up anyone at TPL to say that there was a mistake and there was no interest or licence fee to be capitalised, Mr Dierickx suggested that that was the effect of his handwritten note. He had to accept that that was not the effect of the note. Mr Dierickx gave the following evidence as to his understanding of what was involved in capitalising the debt: "Q. I suggest you agreed to capitalise and you understood what capitalising meant, didn't you? A. What I understood by capitalising meant that I didn't have to pay it. Q. Yes, that it became part of your debt that you didn't have to find the cash at the moment? A. That's correct. ... Q. You've given your understanding of what capitalising was and involved in that Mr Dierickx was the proposition that you were accepting there would be an on going indebtedness which would now include the amounts for which you were ticking? A. No, I didn't see that from that. HIS HONOUR Q. I think you gave two answers at least as to your understanding of what capitalising interest meant or what it involved. Could you just explain to me again what you say you understood capitalising interest to involve at that time? A. Well that the payment didn't have to be made and that I guess it would be, look I'm not sure whether I thought it meant at the time that Treetop would get a tax deductibility for the fact that we hadn't paid it and that it had been capitalised. I certainly didn't understand at the time that that invalidated my exit agreement." 179The overall effect of this evidence is that Mr Dierickx was saying that he believed that by ticking the two boxes, he would not have to pay the amounts of interest or licence fees, although at one point he accepted that he understood that what capitalising meant was that he did not have to find the cash at the moment to pay that part of the debt that would be capitalised. I think the latter was Mr Dierickx's understanding. 180Mr and Mrs Dierickx were also cross-examined about their tax return for the year ended 30 June 1999. Mr Dierickx's tax return for that year included a sum for primary production of $5,894 and expenses totalling $17,483. Mrs Dierickx's return for that year included a figure of $3,697 as being a distribution from trusts and other deductions relating to that distribution of $8,394. 181It was suggested to Mr Dierickx that these figures were only explicable on the basis that they included income and expenses for the Tumut River Orchard Project as identified in the distribution statement for the 30 June 1999 financial year (which they denied receiving). It is not possible to reconcile the figures. I need not go through the attempted cross-examination in that respect. The cross-examination did not show that the figures for expenses were in accordance with distribution statements received in respect of the three projects managed by TPL. Moreover, there are two other projects which would also affect the figures. In any event, even if some parts of the figures were derived from a statement provided by TPL to Mr and Mrs Dierickx, which was forwarded to their accountant for the purposes of preparation of tax returns, I do not think that they gave any sufficient attention to the detail of the returns that any adverse inference could be drawn on the present issue. 182Mrs Dierickx was also cross-examined in relation to her 2001 tax return. It included a reference to the Tumut River Orchard Project and to two other projects, although no amounts were included in the return in respect of income or expenses. I do not think that anything can be drawn from this, except to reinforce my conclusion that Mr and Mrs Dierickx did not give careful attention to their tax returns. Mrs Dierickx's 2001 tax return was prepared in July 2008. Mr and Mrs Dierickx had filed a defence in March 2008 in these proceedings in which they pleaded the exit agreement. No conclusion could be drawn from this reference in the tax return to the Tumut River Orchard Project that Mrs Dierickx's or Mr Dierickx's claim that the exit agreement had been made was recent invention. As previously mentioned, all it shows in my view is the lack of attention to the tax returns. 183Taking into account the warning of McLelland CJ in Eq in Watson v Foxman, I am not satisfied that an exit agreement was made as Mr Dierickx deposed to. Whilst I would not reject his evidence on the basis of the preparation of his or his wife's tax returns, the fact is that he made two payments on 3 May 1999 referable to his and his wife's asserted liability under the Tumut River Orchard Project. He agreed to the capitalisation of further interest and licence fees. Whilst I can accept that under the pressures that Mr and Mrs Dierickx were experiencing at the time their tax returns were being prepared that they did not give full attention to the contents of the returns, I think that if Mr or Mrs Dierickx had the belief in 1999 that Mr Purcell had agreed that they should have no further involvement in the Tumut River Orchard Project, they would not have paid the moneys claimed, nor agreed to the capitalisation of interest and licence fees. 184My rejection of Mr Dierickx's evidence on this part of the case must have some impact on my assessment of his credibility in respect of other parts of the case. However, I should make it clear that in rejecting his evidence in respect of this part of the case, I do not consider him to have been an untruthful witness. Rather, I think there has been the process of subconscious reconstruction to which McLelland CJ in Eq referred in Watson v Foxman.

Misleading and deceptive conduct: representations that the loan was without recourse 185Mr and Mrs Dierickx pleaded: "7. Representations were made to the defendants by TROM, or alternatively by Ivan Price of Personal Financial Planners as agents of TROM within the meaning of section 84(2) of the Act and therefore by TROM itself, in relation to the liability of the defendants in respect of the repayment of the balance of the loan and interest that: (a) loan repayments, interest and orchard costs should be paid out of orchard income; and (b) such liability was limited to the defendants' net proceeds of their investment in the Project (First Representations). Particulars (a) Document titled 'Project Summary', attached to and forming part of the defendants' loan application dated 23 June 1992, which provides: 'Loan repayments, interest and orchard costs should be paid out of orchard income'. (b) The defendants repeat the particulars to paragraph 4.2 above." 186The first representation was said to be misleading and deceptive because it was not made on a reasonable basis. The reason for that was said to be that the prospectus disclosed that $11,500 per allotment would be required in the 1992/93 year to meet orchard enhancements and maintenance costs. However, virtually all of the moneys raised from the loans were repaid to TROM's financier so that very little money came into the project. This was said to be the round-robin transaction. It is convenient to deal with this aspect of the claim when dealing with the claim arising from the non-disclosure of the round-robin transaction. 187About two months before the hearing the defendants had applied for leave to amend their defence to cast on the plaintiff the burden of establishing reasonable grounds for making representations as to future matters. I refused that leave, being of the view that the proposed amendment would impose real prejudice to HPM if it were allowed to be raised at that late stage. 188What was said in the prospectus and in certain other materials about projected income, profits and risks is material to the defendants' claim that TROM represented that their liability was limited to their initial investment. 189Mr Dierickx was alerted to the potential to invest in the Tumut River Orchard Project by a friend who referred him to a financial planner, Mr Ivan Price, who carried on business under the business name Personal Financial Planners ("PFP"). On 6 June 1992 Mr Price sent to Mr Dierickx four documents. One was called a "Project Investor Model", another contained cashflow projections for years 1-7, the third was headed "Project Summary" and the fourth was an advertising brochure. These documents together were described by Mr Purcell as "Proposed Investor Packs". He gave evidence on which he was not cross-examined that those packs were provided to him by PFP for review and approval before being made available to potential investors, and that he did approve the documents. TROM marketed the project using the services of PFP which received a commission. It seems that PFP introduced 190 investors to the project and received commission accordingly. PFP was TROM's agent in conveying the representations in the documents sent to Mr Dierickx. Mr Purcell said that some of the documents were created by TROM and some were created by PFP, but all were approved by TROM. At the very least, TROM was a person involved in the making of the representations conveyed in the documents. 190These documents formed the initial frame of reference for Mr Dierickx's consideration of the prospectus. The investor model contained projections of orchard revenue, costs and profit from 1991/92 (the previous year) and then from 1992/93 (Year 1) to 2005/06 (Year 14). The model was based on a two-farming allotment. It contained estimates of orchard revenue, orchard costs, profit, interest, tax savings, investor profit and available cash after tax profit or loss. The model allowed for investors from 1992/93 to be making capital repayments of $6,000 in the first year, but with no cash outlays thereafter. The project was estimated to be profitable from the first year and to provide tax savings in the first two years. The total projected return over 14 years was estimated to be $107,776. 191At the foot of the model was the following statement: "This financial model has been prepared as a guide only for use by Professional Advisors when researching this project. It should be used as internal document only and not as an inducement to invest. ANY DECISION TO INVEST SHOULD BE MADE ONLY AFTER READING THE WHOLE OF THE PROSPECTUS." 192The document entitled "Cashflow Projections" projected what I infer are tax savings in years 1, 2 and 3 (1992/93-1994/95). It projected orchard profit of $390 in 1992/93, and then annual profit thereafter of $2,220, $5,170, $8,084 and thereafter an annual profit of $8,864. The cashflow projection based upon these anticipated profits provided for payment of interest and capital on the loan. The document projected that the loan would be repaid by year 7. The document included the following notes: "Notes: (1) Tax calculations assume highest marginal rate (2) In year 4 investor will receive a cheque for $1,500 as part distribution of Orchard Profit (3) In year 5 investor will receive a cheque for $3,000 as part distribution of Orchard Profit (4) In year 6 investor will receive a cheque for $2,841 being balance of Orchard Profit after payment of interest and final loan payment Note: This cashflow projection is based on information supplied by the project manager and we believe it to be correct and reliable. However, it's [sic] accuracy and completeness cannot be guaranteed and personal Financial Planners, it's [sic] directors and employees accept no liability for the results of any action taken as a result of this projections, or for any negligent misstatements, errors or omissions." 193The document headed "Project Summary" stated as follows: "Established for 5 years with over 72,000 trees growing. Each farming allotment has 150 peach or nectarine trees. 14 year term. 100% finance available to approved investors applying for 2 or more farming allotments. Income of $107,776 per two farming allotments projected to be earned over the 14 year period. Loan repayments, interest and orchard costs should be paid out of orchard income. In all projects such as this there is always a rural risk factor. No yields or prices can be guaranteed and Investors should make their own enquiries before contemplating investment. Any application to invest must be made only through the registered prospectus dated 20th April 1992." 194In smaller type there was a disclaimer that read as follows: "DISCLAIMER We believe the statements and calculations herein are based upon correct and reliable information. However its accuracy and completeness can not be guaranteed and Personal Financial Planners, its Directors and employees do not accept liability for the results of any actions taken or not taken on the basis of the information contained herein, or for any negligent misstatements, errors or omissions. Those acting upon such information do so at their own risk." 195The document also included a disclosure of the payment of brokerage. 196The advertising brochure stated in capital letters and on its front page: "THE TUMUT RIVER ORCHARD PROJECT YES IT'S ALREADY THERE YES IT'S GENERATING CASHFLOW NOW YES IT'S TAX DEDUCTIBLE YES IT OFFERS A LUXURIOUS COUNTRY LIFESTYLE IT'S AFFORDABLE IT'S AVAILABLE THROUGH A REGISTERED PROSPECTUS" 197It included the following statement: "If you purchase two Farming Allotments in the Tumut River Orchard Project, you could be earning an extra $8,870 p.a. in five years ($3,250 in two years) and you could get an $18,466 deduction off this year's taxable income ... instantly. You'll also benefit from additional deductions in the following two years. You could also be eligible for the finance package. That means all these benefits, with only $2,000 initial outlay ... and even more tax benefits!" 198These were marketing materials. They did not spell out what would happen if the project did not generate income as projected or incurred materially higher costs than projected. Mr Dierickx said that from reading these documents it was his understanding that: "(a) by investing in the Tumut Project, we would become primary producers of stone fruit (requiring a license for which license fees were to be paid annually) and be entitled to certain tax deductions for expenses associated with that business; (b) as investors in the Tumut Project, we would be required to make two payments of $3,000, payable after 3 months and 6 months, being required principal repayments under an investor loan; (c) we would also be required to pay interest on the balance of an investor loan and that interest would be calculated at 15 per cent per annum (or 20 per cent); (d) all other obligations that we would take on by investing in the Tumut Project and by taking out an investor loan would be automatically deducted from the proceeds of our investment (until paid off); (e) that the project would in any event generate sufficient proceeds from the sale of fruit to pay off the loan balance and would thereafter (after about 6 years) allow us to recoup our initial payments and would provide good returns; and (f) the only risk which we would take on by investing in the Tumut Project, if our investment failed, was losing $6,000 (the required principal repayments under an investor loan) and interest payments, and that we would not otherwise be liable for any other payments." 199Interestingly Mr Dierickx deposed that he understood that he and his wife could be required to make interest payments. One of the statements on which he said he relied was the note to the cashflow projections document that stated that in year 6 the investor would receive a cheque for the balance of orchard profit after payment of interest and the final loan payment. Similarly he relied on the statement in the document entitled "Project Summary" which stated "loan repayments, interest and orchard costs should be paid out of orchard income". 200The prospectus included a section headed "Key Data Summary". It was found near the front of the document. Under the heading "Estimated Net Cash Distributions to the Grower" the prospectus stated: "The Grower's Farming Allotments will be enhanced, maintained and the fruit therefrom harvested and marketed by the Manager. On this basis and on the basis of the information provided by R J Pattison & Associates and Anderson Valentine Associates whose reports appear respectively on pages 18 and 26 of this prospectus, the Grower's net cash distributions per Farming Allotment in the first five years are estimated to be: 92/93 93/94 94/95 95/96 96/97 $195 $1,121 $3,774 $4,066 $4,432

For the next five years of the Project, the Grower's Net Cash Distributions are expected to be at the same level as 1996/97, with the orchard having reached maturity. In the last four years of the Project it is expected that average yields will fall, reducing Growers' Net Cash Distributions by up to 22 percent. These net cash distributions cannot be guaranteed. The above figures are based on assumptions (see Summary of Significant Assumptions at page 29)." 201The assumptions on page 29 of the prospectus were set out under a heading "Cash Distribution Estimates". It included the following table and information: "NET CASH DISTRIBUTION - FIRST 5 YEARS PER FARMING ALLOTMENT OF 150 TREES 92/93 93/94 94/95 95/96 96/97 GROSS SALE PROCEEDS 4,009 5,865 10,228 12,604 13,221 LICENCE FEE 500 500 511 630 661 MAINTENANCE 1,600 1,800 1,800 2,871 2,864 HARVESTING & MARKETING 1,514 2,151 3,631 4,407 4,603 MANAGEMENT FEE 200 293 511 630 661 NET CASHFLOW 195 1,121 3,774 4,066 4,432

For the subsequent five years of the Project, the net cash distributions (projections) are expected to be at the same level as 1996/97, with the orchard having reached maturity. For the 11th, 12th, 13th and 14th years of the Project it is expected that average yields will decline reducing net cash flow to Growers by up to 22 percent. Projections in this prospectus vary from those in the original prospectus. (See explanation on page 4 under Income Entitlements.)" 202The explanation on page 4 was that the projections for the first two years in the prospectus were considerably lower than originally projected for existing investors for the equivalent years in the original prospectus. There was thus disclosure that the projections in the previous prospectus were now considered too high. 203Page 29 of the prospectus then included a price sensitivity analysis as to the outcome if there had been a 20 per cent price reduction or 20 per cent price increase from the prices on which the estimates were made. This showed that the effect of a 20 per cent price reduction would be a loss of $527 per allotment in the first year (rather than a profit of $195) and then profits from $65 in the following year increasing to $2,185 in the fifth year. 204The summary of the significant assumptions on which the estimates were based indicated that the assumptions were that the expected price for fruit assumed production of generally high quality fruit and competent marketing, the prices might fluctuate from year to year due to variation in supply, (the sensitivity analysis was said to show the effect of typical price variations on the projections), that yields used in the projections were equal or lower than those estimated by R J Pattison & Associates in a report that was also included in the prospectus, and that the expenses associated with the establishment of farming allotments were payable out of the initial amounts received from growers under the farming agreements. 205The report of R J Pattison & Associates included in the prospectus included a report on the proposed orchard management and yield practices, including irrigation systems, soil fertility and the like, likely yields and projected prices. The report on production by Anderson Valentine Associates reported on land suitability, orchard design and identified risks. In relation to operating costs Mr Valentine of Anderson Valentine Associates wrote: "BACKGROUND TO OPERATING COST PROJECTIONS Preparation of the operating budgets involved the examination of the land itself, the orchard design, water supply requirements, the need for cool rooms, packing and machinery sheds, anticipated volumes of fruit and labour requirements as well as transport, storage and machinery costs. Projections of revenue and costs for the total existing and projected plantings have been supplied to the Manager as part of this report. Yield and price data included in these projections were supplied by R J Pattison & Associates. Estimates of orchard operating costs were prepared by Anderson Valentine Associates with the aim of projecting reasonably foreseeable costs involved in producing, harvesting and marketing fruit on each Farming Allotment. All known costs, fees and expenses have been included in the projections." 206The page headed "Cash Distribution Estimates" included the statement: "NEITHER THE MANAGER, ANDERSON VALENTINE ASSOCIATES, NOR THE REPRESENTATIVE CAN GUARANTEE THAT THE ABOVE PROJECTIONS WILL BE ACHIEVED." 207The prospectus also included the Investor Loan Summary of Terms. It stated: "The Investor Loan is available to investors taking up two or more Farming Allotments. Principal Amount - $24,050 per 2 Farming Allotments Minimum Principal Repayments - per 2 Farming Allotments: a) 3 Calendar months from the date of the Investor Loan $3,000 b) 6 calendar months from the date of the Investor Loan $3,000 c) balance of outstanding principal to be repaid out of all amounts payable by the Representative to the Borrower in pursuance of clause 17.8 of the Deed representing the income of the Borrower's Farming Allotments or Farm(s) or if not repaid from orchard operations or on expiry or earlier termination of the loan. Maximum Term - 6 years. Interest Rate - 15% per annum fixed, if both Interest and the first two Minimum Principal Repayments paid by due dates. Interest Payment - Payable in cash annually in arrears within 14 days of the 30th June in each year except for the initial Interest Payment. Initial Interest Payment - $3,139 per 2 Farming Allotments payable with application. Lender - Tumut River Orchard Management Limited. Security - Charge over title and interest in Farming Allotments and Farming Agreements. Costs - Stamp Duty and other statutory fiscal imposts - payable by the Borrower with the first Minimum Principal Repayment (eg. two Farming Allotment loan - $50, 10 Farming Allotment loan $480. Estimate only.) For full details investors should refer to the Form of Investor Loan Agreement commencing at page 50 of this prospectus. PLEASE NOTE: IT IS IMPORTANT FOR PROJECT CASHFLOW REQUIREMENTS THAT MINIMUM PRINCIPAL REPAYMENTS, COSTS AND INTEREST PAYMENTS SHOWN ABOVE, BE MADE BY THE DUE DATE. IF NOT THE BORROWER WILL CEASE TO BE ELIGIBLE TO PAY THE 'LOWER' INTEREST RATE OF 15% P.A. AND THE 'HIGHER' RATE OF 20% P.A. WILL BECOME IMMEDIATELY DUE AND PAYABLE." 208The prospectus did not include the operating budgets. 209Mr Dierickx deposed that after considering all of the documents he decided that he and his wife should invest in the project. 210Mr Dierickx also said that he read the form of investor loan agreement and item 4 of the schedule to the loan agreement. He said that he understood from item 4 that the proceeds of the investment would be automatically applied to the loan balance so that the loan would be fully repaid within six years, and that if the loan was not fully repaid by that time, that at the end of the sixth year, any remaining amount would be paid from the proceeds of the investment in that year. He also said that after considering the documents: "Since the commencement of these proceedings I have come to learn that the plaintiff asserts that investors, including Wendy and myself, were liable to personally repay the loan balance, even if the Tumut Project turned out to be a complete failure." 211In cross-examination Mr Dierickx acknowledged reading the statements that there was always a rural risk factor and that returns could not be guaranteed. He said that the risks were offset by a couple of factors, being the size of the project and that investors were pooling their resources so that if one part of the orchard did not perform as well as others, the returns would be averaged. Moreover it was a long-term project so that if there were a mishap in one year, there would be plenty of years to recover. He acknowledged that climatic fluctuations could affect yield and there were other risks that he appreciated from reading the horticulture reports, such as disease or hail damage that could affect the crop. But he said that whilst such matters could affect the crop, with a good manager, those things could be managed. Whilst acknowledging that there was a risk that the returns would not meet those that were projected, he considered the risks to be minimal, and that overall the whole thing was acceptable. 212The overall impression from the horticultural reports is that the risks identified could be managed. Thus the report of Anderson Valentine Associates under a heading "Reduction of Major Risks" referred to the intention to install an under-tree irrigation system and a frost protection system based on the overhead application of water at critical times in the development of buds, flowers and fruit. In relation to risks arising from excess water, Anderson Valentine Associates stated that the manager had allowed for considerable earthworks to be carried out for the construction of drainage channels. It was said that whilst a hailstorm had been recorded on 31 December 1991, local knowledge suggested that such events were unusual. Anderson Valentine Associates opined that crop losses due to hail damage were likely to be minimal. The report of R J Pattison & Associates on production yields and prices noted that correct marketing was essential to achieve consistently high returns, but said that the manager was well aware that that was a critical factor and the management structure had been designed to encourage and reward performance at all stages of production. R J Pattison & Associates said that the frost mitigation system proposed was adequate and that adequate provision was made for the control of pests and diseases. 213Mr Dierickx described the worst case scenario, as he understood it to be, as follows: "The worst case scenario that I understood to be was that there would not be sufficient funds to pay the loan off and then make your cash distribution to growers, but it was certainly my understanding that the loan was the first thing to be repaid and if the loan was repaid and there was anything left over, it came to the grower." 214He then gave the following evidence: "Q. But these numbers are all projections into the future of what was estimated? A. Yes. Q. And it was inherent in the thing and obvious to you, wasn't it, that they might not be met? A. That's correct. Q. They might be exceeded or there might be shortfall? A. That's correct. And there was a safety net there for the grower. Q. Well, what safety net? A. That essentially the loan was of limited recourse. Q. What do you mean by limited recourse? A. That the recourse to, for the loan was limited to the proceeds of the orchard project." 215When asked to identify where that was stated, Mr Dierickx referred to the application for the investor loan which is set out at para [133] above. He gave the following further evidence: "Q. But you read the loan agreement in the prospectus as to what was going to be signed on your behalf? A. Yes. ... Q. We can look at the loan agreement in volume A at page 70? A. Page 70 of? Q. Sorry, that is in the affidavit. It is page 50 of the prospectus. You have a copy of the prospectus there? A. Yes. Form of investor loan agreement. Q. Yes, and if you go to page 51 of the prospectus? A. Yes. Q. Clause 3.3? A. Yes. Q. Provides for the balance of the principal sum and accrued interest and so on? A. Yeah, I recognise that clause is there. Q. And I will just draw your attention particularly to the words after the capitals, "Provided that, namely to the extent that such moneys are unavailable or insufficient, the borrower shall pay all moneys owing under this agreement on the due dates of payment"? A. In that case I guess that conflicts with the investor loan and I would say I would have put more weight on this thing that I signed rather than that one there (indicates). Q. What thing that you signed? The application? A. The application for investor loan. ... Q. Well, really the documents showed to you that that might not occur because they disclosed risks that were associated with the project? A. As I explained before, I believe those risks related to the eventual, after the loans were repaid the eventual payment of income in cash to the grower. ... Q. Then in your affidavit you have referred to a great number of documents that you say gave you that understanding, but in the end you are telling the court that all of your understanding about your obligation with respect to the loan should the proceeds from fruit be insufficient to cover your obligations on it was all gained from what you read in the application for a loan? A. No, I am not saying that. I am saying that I gained that from reading the complete prospectus and the other documents which were given to me. Q. All right. You did read all of that? A. Yes, I did. Q. And specifically to consider what those documents showed you with respect to your liability for the borrowing A. Whether I understood some parts of the prospectus to the same degree, I can't vouch for and I certainly would have put more weight on parts of the prospectus than others and I think I have outlined that in my affidavit under paragraph 10." 216The case run at trial was not that there was no reasonable basis for the projections in the prospectus and other documents. Rather, the case is that the prospectus and other documents induced Mr Dierickx to believe that the worse case scenario was that the loan would be repaid from their share of net income and they did not appreciate that they would have to repay the loan out of their own pockets if there was insufficient net orchard income with which to repay the loan. 217The first difficulty with this contention is that Mr Dierickx acknowledged reading the clause of the loan agreement that expressly provided to the contrary. His evidence is that that did not affect the belief that he had otherwise formed as a result of reading other parts of the prospectus, including the application form. 218I accept that the impression Mr Dierickx gained from reading the documents to which he referred (other than clause 3.3 of the loan agreement and item 4 of schedule 1 to the loan agreement) was that the loan, both principal and interest, would be paid from the proceeds of the orchard. Whilst there were warnings of risk and the fact that projected returns could not be guaranteed, the prospectus also conveyed that these risks could be managed and showed the loan being repaid from the projected returns. Apart from clause 3.3 and item 4 of schedule 1 to the loan agreement, there was no statement that if orchard returns were insufficient, investors would have to repay the loans from their own pocket. Such a warning might be gleaned from the description in the Summary of Terms (see [207] above) of the Minimum Principal Repayments, but the inclusion of the additional "or" before "on expiry" makes the sentence difficult to comprehend. 219If the question whether the prospectus and accompanying documents were misleading and deceptive was to be assessed having regard to a class of persons who might be minded to invest, and the relevant members of the class were taken as being reasonable persons, I would accept that the prospectus and accompanying documents were misleading and deceptive. It requires a close attention to detail to find the statements which state the true contractual position. However, the question of whether the documents are misleading or deceptive is to be assessed having regard to the particular reader in this case, namely Mr Dierickx (Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 at [36] and [37]). Mr Dierickx made the decision to invest on behalf of his wife. She signed the applications for the purchase of the farming allotments and for the investment loan, but left the decision whether to invest to her husband. She did not give evidence of having relied on anything emanating from TROM or its agent. 220Accordingly, the question of whether TROM engaged in misleading and deceptive conduct is to be analysed in relation to Mr Dierickx alone, who read the entirety of the documents. 221It would be easy to conclude as HPM urged me to do, that because Mr Dierickx read the last clause of clause 3.3 of the loan agreement, and as he was quite capable of understanding that sentence, TROM's conduct was not misleading or deceptive, and Mr Dierickx was not misled or deceived into believing that this was a without recourse loan. I was invited to reject Mr Dierickx's evidence that notwithstanding that he read clause 3.3 and item 4 of schedule 1 to the loan agreement, he still believed that the lender's recourse was limited to the proceeds of the orchard project. 222A difficulty faced by judges and litigants in cases such as these is that inevitably one approaches the assessment of what the representee understood by the documents he read by adopting, at least in the first instance, a rational or logical analysis. If I concluded that Mr Dierickx was reasoning rationally and logically, and that his beliefs were as much formed by the detail of the investor loan agreement he read as they were by the earlier promotional documents, then I would not accept his evidence as to the belief he formed. 223It may be doubtful as to the extent to which a court can take judicial notice of current psychological studies of how people's initial perceptions affect their thinking and their decision-making. However, I do not conclude that merely because Mr Dierickx read and comprehended the statement in clause 3.3 of the loan agreement that "to the extent that such moneys are unavailable or insufficient, the Borrower shall pay all moneys owing under this Agreement on the due dates for payment" that he must thereby necessarily not have been of the belief to which he deposed. To do so would itself involve an assumption about how the mind works. 224The question is one of fact. Essentially it is whether I believe Mr Dierickx, notwithstanding his having read the whole loan agreement. Two other matters might be relevant to that question. The first is that Mr and Mrs Dierickx applied to leave the project in 1995 and on Mr Dierickx's evidence he agreed with Mr Purcell to exit the project. If he believed that he and his wife were not obliged to make any further contributions, then there would be no reason to exit the project. However, this was not a factor that was put to Mr Dierickx in cross-examination and I do not take it into account because he may have had an explanation. 225The second matter is that on 3 May 1999 Mr Dierickx signed the cheque in favour of TPL for $4,344.50 for interest and licence fees in respect of the Tumut River Orchard Project. That conduct is inconsistent with Mr Dierickx's then believing that the loan was without recourse, unless he did not appreciate what the cheque he was signing was for. Mr Dierickx was cross-examined about the signing of that cheque in the course of being cross-examined about his evidence of having reached an exit agreement with Mr Purcell. The payments were inconsistent with such an agreement as well as being inconsistent with his being under the belief that the loan for the Tumut River Orchard Project was without recourse. The cross-examiner could not press him on this last point because Mr Dierickx said that when he drew the cheque in favour of Treetop Projects Limited, he believed that the payment was in relation to the Treetop Plums Project, and not the Tumut River Orchard Project. He accepted that he would not have drawn the cheque without looking to see what it was for and that the moneys were really owed. The letters demanding payment (initially on 16 March 1999 followed up by a letter dated 13 April 1999) clearly identified the moneys claimed as being for that project. Mr Dierickx must have written the cheque with the correspondence before him that showed that the cheque was for licence fees and interest payable in respect of the Tumut River Orchard Project. The letter of 13 April 1999 stated that the loan agreement required payment of interest when due and failure to pay would constitute a default that would make the loan become fully due and payable. I think he must have known that the cheque was being written in respect of that project and not the Treetop Plums Project because the correspondence he must have had in front of him when he wrote the cheque referred to the Tumut River Orchard Project. It was also addressed to both him and Mrs Dierickx. Mrs Dierickx was not an investor in the Treetop Plums Project. 226I do not accept that when he wrote and signed the cheque, Mr Dierickx did not appreciate that he was signing a cheque in respect of the Tumut River Orchard Project. His action was inconsistent with his believing that the loan was without recourse. 227I conclude that at the time Mr and Mrs Dierickx signed the application for the investor loan that Mr Dierickx expected that after the identified initial payments, the loan would be funded out of the orchard proceeds. But I do not conclude that he also believed that if for any reason the orchard proceeds were insufficient, he and his wife could not be called on to make interest or principal payments. Whilst I accept that that impression could have been gained from the documents he was given, and once gained might have persisted so as to influence his conduct, notwithstanding his reading of the full terms of the loan agreement, his later conduct was inconsistent with his having entered the agreement on that basis. The best guide to Mr Dierickx's state of mind at the time of entering into the investor loan agreement is his later actions. Having regard to them, I reject his evidence that he believed the loan was without recourse. It follows that so far as Mr and Mrs Dierickx was concerned TROM did not engage in misleading and deceptive conduct in representing that their liability was limited to the initial investment.

Misrepresentation of sufficiency of net orchard income 228The defendants pleaded that TROM did not have reasonable grounds for representing that their share of the orchard income would be sufficient to cover loan repayments and interest and to result in net cash distributions to them. The only particulars of that allegation was that their investment did not result in proceeds becoming available sufficient to cover all loan repayments and interest, and did not result in any net cash distributions. That fact could not justify the conclusion that there were no reasonable grounds for the opinions expressed. The reports attached to the prospectus prima facie suggested that there were reasonable grounds for the projections. I did not understand this contention to be pressed in final submissions.

Misrepresentation that the principal sum advanced under the loan agreement would be available for use in orchard operations 229Mr and Mrs Dierickx pleaded that TROM represented that the principal sum of $24,000 ($12,000 per farming allotment) under the loan agreement would be used or would be available for use for the purpose of orchard enhancement and maintenance expenses ($11,500 per allotment) and the payment of a licence fee of $500 per allotment. This was said to be misleading or deceptive because the principal sum was not so used or available for use, but formed part of a round-robin transaction. 230The prospectus stated that it sought to raise funds by way of subscription for farming allotments. The subscription price per farming allotment was $12,000 payable in full on the application. The prospectus also stated that an investor loan of $24,050 per two farming allotments was available and, if taken up, the lender would be TROM. On or about 30 June 1992 TROM borrowed $3,848,000 from the Commonwealth Bank. It drew a cheque in that sum in favour of Permanent Trustee Company Limited (the agent for each investor entering into an investor loan). That cheque included the principal sum of $24,000 the subject of Mr and Mrs Dierickx's loan agreement. The cheque was deposited to Permanent Trustee Company Limited's account and on or about the same day, Permanent drew a cheque against that account in favour of TROM in the sum of $3,848,000. TROM used those funds to repay the loan from the Commonwealth Bank. This was the round-robin. The result of the transaction was that TROM's cash resources were not increased. Instead, it acquired debt. 231The prospectus did not state how TROM would finance the making of loans to investors. The investigating accountant's report disclosed that as at 30 June 1991, according to its last audited accounts, TROM had cash of only $189,149. The investigating accountant said that in his opinion no adjustments were necessary to the statement of assets and liabilities based on the 1991 audited accounts. 232Clause 5 of the prospectus included the following statement: "Charges Payable by Growers Payment of the subscription price of $12,000 per Farming Allotment is to accompany each Application. On issuing the Licence and Farming Agreement this amount will be paid as follows: (a) payment of orchard enhancement and maintenance expenses of $11,500 for the period from the date of issue of the Licence and Farming Agreement to 30 June 1993, including the fees of experts, consultants and contractors engaged by the manager, (refer clauses 19.1(b) and 19.2(b)(i) of the Farming Agreement at page 46 of the prospectus). The Manager shall not be entitled to seek any further payment in respect of such orchard enhancement and management expenses from the Grower and the Grower shall not be entitled to any refund should the costs and expenses be less than that sum; (b) payment of a Licence fee of $500 for the period from the date of issue of the Licence to 30 June 1993. The payment of $11,500 covers most but not all expenses for the period to 30 June 1993. There are other expenses which are deductible from the Gross Sale Proceeds of the Fruit, as follows. ..." 233Page 29 of the prospectus included the Cash Distribution Estimates quoted at [201]. A Summary of Significant Assumptions in relation to those estimates included: "Orchard Establishment Expenses The expenses associated with the establishment of Farming Allotments are payable out of the initial amounts received from Growers under the Farming Agreements. Orchard Operating Expenses The orchard operating expenses used in the projections were independently prepared by Anderson Valentine and Associates (see page 28) and then verified by the Manager." 234The Farming Agreement was made between TROM and the Grower (i.e. the investor). TROM (called the Manager) agreed to supply trees, erect a suitable trellis structure to support the trees, manage the trees, design, supply and install an irrigation system, fertilise the soil, construct buffer strips, excavation channels and other measures required to prevent soil erosion and land degradation, design the field layout and peg the rows of trees to prescribed standards, construct drainage works and channels, control pests and diseases, construct a gravel service road, maintain all structural improvements, carry out the harvest, cool, grade, pack and, if necessary, store the harvested fruit, and market and sell the fruit. TROM agreed to provide all facilities, equipment and machinery necessary for the care and maintenance of the land and the trees and their efficient harvesting, marketing and sale. It agreed to complete the Enhancement Works and Services in 13 months. This included tree planting, trellising, installing the irrigation system, erecting a frost mitigation system, supplying electricity for the operation of the irrigation system and associated equipment, soil fertilisation, soil erosion and drainage works, the construction of a service road and engagement of an independent consultant. Clause 19.1 provided: "19.1 In consideration of the Enhancement Works and Services undertaken or to be undertaken by the Manager the Grower shall pay to the Manager on the date of this Agreement:- ... (b) in the case of a Farming Allotment, the amount of nine thousand nine hundred dollars ($9,900) being the sum of the amount set out in Column 2 of Schedule 2." 235Schedule 2 was headed "Farm Enhancement Costs". It said: "The details of the costs of works and services referred to in clause 19.1 are as follows". 236These were then identified as $3,673 for the works and services in providing an irrigation system and frost mitigation system, $743 for the services associated with fertilisation of soil, $5,296 for the works and services involving control of soil erosion and drainage works, and $188 for the engagement of an independent consultant, a total of $9,900. 237Mr Dierickx deposed: "8. I have been asked what, if anything, I would have done had I known that: (a) none of the money which was to be advanced on our behalf under the Loan Agreement ($24,000) would be used for orchard enhancement and maintenance expenses and licence fees as described in the Prospectus; (b) that the only money that would be used in relation to our farming allotments would be the required repayments of principal of $3,000 referred to in paragraph 9(b) of my First Affidavit and payments of interest referred to in paragraph 9(c) of my First Affidavit; and (c) the Project would be funded primarily through loan repayments and interest payments made by investors. 9. If I had known any of the matters referred to in paragraph 8 above I would have thought differently about the Project and would not have invested in it. I would not have agreed to enter the Loan Agreement for an amount of money which was never to be used for the benefit of our farming allotments. I believed the success of the Project, and therefore our investment, depended on the future sales of fruit from the farming allotments and that cashflow was important for the Project to be successful." 238He was not cross-examined on this evidence. 239There was no dispute that TROM was a promoter and owed to Mr and Mrs Dierickx as prospective investors, a duty of utmost candour and honesty that required it to disclose all material information relevant to their decision to invest (Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628; (2001) 188 ALR 566 at [28]-[31]). Counsel for HPM submitted that TROM had no duty to disclose the round-robin transaction because it was immaterial to the investor's decision. In this case investors were borrowing from TROM, not from a third party (compare S E Vineyard Finance Pty Ltd (receivers and managers appointed) v Casey [2011] VSC 403). As they were borrowing from TROM and the funds were being applied to meet the debts incurred by the investors under the licence agreements and the farming agreements, it was immaterial that there was no change to TROM's cash position. 240However, whilst it is true that it was clear that the finance for the investors to meet their obligations to TROM was being provided by TROM itself, that does not meet Mr and Mrs Dierickx's contention that the statements in the prospectus set out above give the impression (or state expressly) that $9,900 to be paid by investors per farming allotment would be applied as farm enhancement costs, that is, towards the expense of establishing the orchard. 241Counsel for HPM submitted that this is not how the prospectus should be understood and that the costs referred to in the farming agreement and in the parts of the prospectus quoted above were the costs charged by TROM to the growers, that is, the investors, not the costs incurred by TROM in performing the work it undertook to perform. 242The difficulty with this contention is that it would be inferred that the orchard enhancement and maintenance costs for which the moneys were payable under the farming agreement were costs expected to be incurred by TROM. The section in paragraph 5 of the prospectus referred to at [232] above speaks of the manager not being entitled to seek further payment for orchard enhancement and management expenses from the grower, and the grower not being entitled to any refund should costs be less than the sum of $11,500. If it were anticipated that TROM's costs would be less than $11,500, so that it would be making a profit on the amount it charged for orchard enhancement and maintenance work over and above a five per cent share of gross sale proceeds from the sale of fruit provided for by clause 19.4 of the farming agreement, then TROM would have been required to disclose to investors the fact that it anticipated making such a profit. This would be material information for an investor to know. The report of Anderson Valentine Associates referred to the existence of operating budgets and projections of costs as well as revenue, and stated that all known costs, fees and expenses had been included in the projections. However, the prospectus did not include any operating budget other than the description of costs in the farming agreement. Mr Dierickx thought that the money he was borrowing from TROM which he was then paying to TROM would be used in and about the orchard for the benefit of his farming allotment. Even though he knew that TROM was the lender, he believed that the moneys were nonetheless working capital that was available to be spent on the orchard and orcharding activities. In my view, that was a natural impression to be formed from the prospectus. But it was not correct. 243Counsel for HPM pointed out that there was no issue that the promised works were not carried out. So far as evidence on that question went, there was evidence that the orchards were established and reports were provided to growers for many years. This is true, but does not meet Mr and Mrs Dierickx's allegation. That allegation is that had they known that the moneys raised would not be available for use in carrying out the works, they would not have proceeded. One can understand that a prudent investor would not have proceeded without inquiring how the work would be funded. If that inquiry revealed that the anticipated costs were materially less than were being charged under the farming agreement, then that would be a reason not to proceed. Whatever explanation might have been available, it would be prudent not to proceed on the basis of the prospectus if an investor was aware that working capital to meet the costs, so far as they were described in the prospectus, was not available. 244In my view TROM's failure to disclose in the prospectus its funding arrangements for the making of loans to investors that required immediate repayment of the loans to its funder, without provision to it of additional working capital to pay for the described orchard enhancement and maintenance costs, was misleading and deceptive. TROM had a duty to disclose the information as part of its obligations as a promoter to disclose all matters that might materially affect the investors' decision. 245The alleged breach of s 52 was not a breach by silence, but a positive misrepresentation that $11,500 per farming allotment would be used or be available for use for the purpose of orchard enhancement and maintenance expenses. I think that representation was impliedly conveyed by the prospectus and was false. This alleged contravention of s 52 is established. 246Counsel for HPM did not dispute that TROM owed what have been described as fiduciary obligations to Mr and Mrs Dierickx of candour and honesty that required disclosure of all material information that could affect their decision whether to invest. Whether those duties should be described in prescriptive terms, or whether the obligation can be recast proscriptively, as an obligation not to enter into the transactions with Mr and Mrs Dierickx without having made such disclosure, is of no moment. 247For the reasons I have given that duty was breached.

Limitation and other defences 248HPM submitted that even if Mr and Mrs Dierickx had a cause of action under s 82 of the Trade Practices Act for damages for breach of s 52, or a cause of action under s 87 of the Trade Practices Act declaring the contract of loan to be void or to be set aside ab initio, those causes of action were statute-barred after 30 June 1995. At that time the limitation period for causes of action arising from breaches of Part V of the Trade Practices Act was three years. HPM submitted that that limitation would be applied by analogy to the cause of action for breach of fiduciary duty. It also submitted that relief under s 82 or s 87 of the Trade Practices Act could only be given against a contravener and not an assignee of a contravener, or alternatively, relief under s 87 should not be granted if to do so would be to affect the rights of an assignee who was not a party to the contravention. 249Mr and Mrs Dierickx did not file a cross-claim until after leave to do so was given on 14 October 2011. 250HPM acquired no better title to sue for the debt than TROM had. Any defence, set-off or cross-claim that Mr or Mrs Dierickx could assert against TROM can be asserted against HPM (Re Harry Simpson & Co Ltd v Companies Act 1936 (1963) 81 WN (Part 1) (NSW) 207 at 209; Roxburghe v Cox (1881) LR 17 Ch D 520; Mitchell v Purnell Motors (1960) 78 WN (NSW) 26; Re Partnership Pacific Securities [1994] 1 QdR 410 at 422-423; Government of Newfoundland v Newfoundland Railway Co (1888) 13 App Cas 199; Meagher, Gummow & Lehane's Equity: Doctrines & Remedies at [6-495] and [6-500]). 251Had TROM sued Mr and Mrs Dierickx for the debt, they could have defended the suit by seeking an order for rescission of the investor loan agreement by reason of the non-disclosure of material facts by TROM in its promotion of the transaction. Rescission would have been available in equity for breach of fiduciary duty. (No argument was raised that rescission might be unavailable if restitution could not be effected, and as Mr and Mrs Dierickx did not receive any return for the moneys they paid, it is difficult to see that any restitution could be required. In the absence of argument this question does not arise.) The only answer to this claim is laches on the part of Mr and Mrs Dierickx in seeking rescission, or the application of the Limitation Act as it applies to the claim for breach of s 52 of the Trade Practices Act by analogy. 252Mr and Mrs Dierickx are not guilty of laches. They have had no occasion to maintain a claim for rescission of the loan agreement, except as an answer to the claim for debt. They were not sued for the debt until 2004 and had no occasion to do anything before then. The defence was not amended to plead the allegation of the round-robin transaction until 20 October 2011 (pursuant to the leave granted on 14 October 2011). But there is no evidence that there was any delay, let alone any delay that caused prejudice to HPM in raising that defence. The fact of the round-robin transaction was evidently a matter which was only ascertained during the course of preparation of the proceedings. It was not suggested that there was any unwarranted delay by the defendants in raising the defence after they became aware of the grounds for it. Nor was there any evidence of prejudice from delay. Nor was laches pleaded. 253Even if the claim based on breach of s 52 is barred by the limitation period under the Trade Practices Act, and even if it were necessary for the defendants to bring a cross-claim for rescission, the claim would not be barred by the analogical application of a statute of limitations. Before equity applies a statutory time limit by analogy, the court must be satisfied that it is just to do so (Duke Group (in liq) v Alamain Investments Limited [2003] SASC 415 at [114]; Barker v Duke Group Limited (in liq) [2005] SASC 81; (2005) 91 SASR 167 at [84]; Hewitt v Henderson [2006] WASCA 233 at [25]; Brightwell & Ors v R F B Holdings Pty Ltd [2003] NSWSC 7; (2003) 44 ACSR 186 at [63]; Short v Crawley (No. 30) [2007] NSWSC 1322 at [583]). It would not be just if HPM could rely upon a limitation defence in this case. 254Mr and Mrs Dierickx's cross-claim did not seek an order rescinding the loan agreement, otherwise than pursuant to s 87 of the Trade Practices Act. Nonetheless, they pleaded the breach of fiduciary duty (both in the defence and cross-claim) that would entitle them to such relief and the issue was raised during the course of the hearing. If it were necessary to do so, I would give leave to amend the claims for relief in the cross-claim to allow Mr and Mrs Dierickx to seek such an order. 255However, I think Mr and Mrs Dierickx are entitled to rely upon the non-disclosure of material facts which induced entry into the loan agreement as a ground that impeaches TROM's (and therefore HPM's) title to sue and establishes an equitable set-off (Rawson v Samuel (1841) CR & PH 161; 41 ER 451). 256It is unnecessary to decide whether the cause of action for relief under s 87 of the Trade Practices Act arose on 30 June 1992 when the transaction was entered into, or only at some later date, such as 1999 when further payments were made, or even in 2004 when Mr and Mrs Dierickx were sued. The cross-claim was not filed until 2011 and the limitation period had well and truly expired by then. In so far as Mr and Mrs Dierickx sought to rely on s 87 of the Trade Practices Act, the question is whether they could do so without bringing a cross-claim where a cross-claim would be out of time. 257The cross-claim filed sought relief under s 87(1) and 87(2)(a) of the Trade Practices Act. 258Accepting for present purposes, without deciding that the cause of action accrued at 30 June 1992, s 87 then relevantly provided: "87 Other orders (1) Without limiting the generality of section 80, where, in a proceeding instituted under, or for an offence against, this Part, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this sub-section) in contravention of a provision of Part IV, IVA or V, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 80A or 82, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. (1A) Without limiting the generality of section 80, the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IVA or V or on the application of the Commission in accordance with sub-section (1B) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in sub-section (2)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person. ... (1C) An application may be made under subsection (1A) in relation to a contravention of Part IVA or V notwithstanding that a proceeding has not been instituted under another provision of this Part in relation to that contravention. (1CA) An application under subsection (1A) may be commenced - (a) in the case of conduct in contravention of Part IVA - at any time within 2 years after the day on which the cause of action accrued; or (b) in any other case - at any time within 3 years after the day on which the cause of action accrued. ... (2) The orders referred to in subsection (1) and (1A) are: (a) an order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, or of a collateral arrangement relating to such a contract, to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after such date before the date on which the order is made as is specified in the order; ... (ba) an order refusing to enforce any or all of the provisions of such a contract; (c) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage; (d) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage." 259Later versions of the section are not materially different, apart from the extension of the limitation period from three to six years in s 87(1CA)(b). 260Section 87(1CA) prescribes a period for an application under subs 87(1A), but not under s 87(1). The reason for this is that s 87(1) applies where a proceeding has been instituted under Part V of the Act. If an action had been brought for damages pursuant to s 82 that action would have to have been brought within three years (later six years). No objection was taken on the basis that the relief sought could not be available under s 87(1) because there was no other proceeding instituted for relief under Part V. The parties proceeded on the basis that the limitation period provided for by s 87(1CA) applied and I take it that the application was for relief pursuant to s 87(1A). 261In Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9 Hodgson JA said (at [7]-[8] and [11]): "[7] ... The Trade Practices Act does not exclude such an application being made by a Notice of Motion in proceedings; and indeed, s.87(2)(ba) suggests strongly that the application may be made by or pursuant to a defence. In my opinion, if a remedy under s.80(1) or s.87(1A) is one appropriate to be sought by an interlocutory application or in a defence, there is no reason derived from the Trade Practices Act why the remedy cannot be sought in that way. [8] The basic complaint of the appellants is that one element of the cause of action brought against them, namely the non-service of a payment schedule, came about as a result of Parkline's breach of s 52; and that if a remedy is not provided by the Trade Practices Act, they suffer the substantial damage of having a judgment against them which is obtained by Parkline in reliance on its own misleading conduct. The Trade Practices Act discloses a legislative intention that persons should have a remedy to protect them from damage from the misleading conduct of a corporation, or to recover from the corporation compensation for such damage; and it would not be in accordance with that intention that a corporation should be permitted to obtain a judgment against a defendant on a cause of action one essential element of which has been created by that corporation's misleading conduct against that defendant. Subject to discretionary questions, it would in my opinion be appropriate for a court to give effect to that legislative intention by granting an injunction under s.80, or by making an order pursuant to s.87 dismissing proceedings (noting that the orders made available by s.87 include orders mentioned in s.87(2), but are not restricted to those orders). ... [11] In my opinion also, s.87(2)(c) and (d) of the Trade Practices Act make it clear that a remedy in the nature of damages can be sought without commencing an action, by application in some other proceedings; so I see no reason why a set off cannot be claimed, in a defence, on the basis of misleading conduct by the plaintiff associated with the circumstances of the plaintiff's claim. ..." 262Tobias JA agreed. 263The issue arises because, as has often been said, s 52 does not itself constitute a cause of action, but prescribes a norm of behaviour. The consequence of breaching the norm is the availability of remedies under Part V. At one time this was thought to exclude a defence of equitable set-off based upon the consequences of contravention of s 52 because an equitable set-off operates as a substantive defence to the other party's cause of action before proceedings are brought (Bank of New Zealand v Spedley Securities Limited (in liq) (1992) 27 NSWLR 91). There, the Court of Appeal disapproved of Rogers CJ Comm D's decision in Australian Mutual Provident Society v Specialist Funding Consultants Pty Ltd (1991) 24 NSWLR 326 where his Honour held that, notwithstanding s 82(2) which provided a three-year limitation period for the bringing of an action for damages for breach of s 52, a party could rely on a breach of s 52 as a defence that constituted an equitable set-off against a claim for recovery of a debt. However, this reasoning was not endorsed by Basten JA in Bitannia Pty Ltd v Parkline Constructions Pty Ltd with whose reasons Tobias JA agreed and Hodgson JA substantially agreed. Basten JA observed (at [99]): "[99] The gist of the construction argument is that the Trade Practices Act has three elements: first it contains prohibitions; secondly it provides remedies for contraventions and, thirdly, it confers jurisdiction to grant relief for contraventions: see SST Consulting Services Pty Ltd v Rieson (2006) 80 ALJR 1190 at [29]. The remedy is made available to persons aggrieved, on 'application to a court'. The next step in the argument is that an applicant must be a moving party, not a defendant. But the last step does not necessarily follow: an 'application' need not be an initiating process in a court and a defendant can 'apply' to have a claim dismissed." (My emphasis.) 264Basten JA also considered that the Court of Appeal in Bank of New Zealand v Spedley Securities Limited (in liq) and the Full Federal Court in Westpac Banking Corp v Eltran Pty Ltd (1987) 14 FCR 541 had failed to accommodate the judgment of the High Court in Carlton and United Breweries Limited v Castlemaine Tooheys Limited [1986] HCA 38; (1986) 161 CLR 543. The High Court held that the Supreme Court (which did not, and does not, have jurisdiction in Part IV matters) could nonetheless determine a defence to a claim brought on a contract said to have been entered into in breach of ss 45 and 45D of the Trade Practices Act. 265Counsel for HPM submitted that this was to draw more from the decision in Carlton and United Breweries Limited v Castlemaine Tooheys Limited than could be justified because the effect of contravention of ss 45 and 45D was that the contract sought to be enforced in the Supreme Court was void. Counsel submitted that the fact that the Supreme Court could give effect to that voidness was not of any real significance in determining the question whether a contravention of Part V could operate as a defence if remedies under Part VI were not available. 266It is not for me to examine critically the judgment of Basten JA in Bitannia Pty Ltd v Parkline Constructions Pty Ltd. But it may be observed that one of the passages from Carlton and United Breweries Limited v Castlemaine Tooheys Limited, which his Honour cited, was the passage (at 554) that concluded: "A number of sections clearly contemplate that the contravention of a provision of the Act may have legal consequences other than those provided by Part VI, which might affect the grant of remedies by courts other than the Federal Court; those sections show that it was not intended that Part VI should state exhaustively the consequences attaching to a contravention of a provision of Part IV or Part V." 267I am bound by the decision in Bitannia Pty Ltd v Parkline Constructions Pty Ltd. Quite apart from being bound, it seems to me, if I may respectfully say so, that it is eminently good sense and reflects the terms of s 87 itself, in particular s 87(2)(ba), to say that an application for an order refusing to enforce the provisions of a contract or to declare that a contract is void need not necessarily require an initiating process, but can be raised by defence. The practical justice of such a course should be given significant weight. 268Accordingly, I do not consider that the passage of the limitation period for bringing an application for relief under s 87(1A) is a bar to Mr and Mrs Dierickx relying on the breach of s 52 and asserting by way of defence that HPM is not entitled to sue for the debt because the contract on which it sues should not be enforced or should be set aside. 269Then it was said that such relief under s 87 could only be sought against a contravener or a party involved in the contravention, and was not available in defence of the suit brought by HPM. 270It must be recalled that the debt HPM seeks to enforce is owed to TROM. TROM is a party to these proceedings, both as third defendant to HPM's claim and as a cross-defendant to Mr and Mrs Dierickx's cross-claim. HPM's title to the debt is no better than TROM's. Why then should HPM be entitled to say that any relief that Mr and Mrs Dierickx may be entitled to against TROM is irrelevant because it is HPM that is seeking to enforce the debt? 271The cases relied on do not support its submission. HPM referred to the decision of Burchett J in Oraka Pty Ltd v Leda Holdings Pty Ltd [1997] FCA 297; [1998] ANZ Conv R 577 and of Logan J in Prosperity Group International Pty Ltd v Queensland Communication Company Pty Ltd (No. 3) [2011] FCA 1122. To these should be added the decision of Branson J in Krambousanos v Jedda Investments Pty Ltd [1996] FCA 144; (1996) 64 FCR 348 at 355, which Burchett J applied in Oraka Pty Ltd v Leda Holdings Pty Ltd. The short point is that none of these cases was concerned with a case of an assignee who took subject to equities. Branson J said (at 355-356): "[Section] 87(1) of the Trade Practices Act similarly requires, in my view, that the person or persons against whom orders may be made under that subsection:- (a) was or were the person or persons who engaged in the conduct complained of or was or were involved in such conduct; and (b) is a party or are parties to the proceedings. S87(1A), in my view, is to be similarly construed. S87(2), which particularises the orders referred to in s87(1) and s(1A), can not be construed as widening the powers given to the Court in s87(1) and s(1A)." 272In this case if it were necessary to make orders under s 87(1) or (1A) or (2) the orders would be made against the contravener, namely TROM. HPM's involvement would be no reason not to make those orders, because it took its title subject to whatever claims TROM's debtors could maintain against TROM. The fact that the individuals behind HPM appear to be many of the same who were involved with TROM and TPL and who have managed to stay a step or two or three ahead of the liquidators of TROM and TPL, would be no reason not to exercise the jurisdiction under those sections. 273Oraka Pty Ltd v Leda Holdings Pty Ltd concerned the making of orders that would set aside or vary a lease that had been assigned. An assignee of the reversion does not take subject to all equities that bind the assignor. Prosperity Group International Pty Ltd v Queensland Communication Company Pty Ltd (No. 3) concerned the assignment of contracts for the provision of telecommunications services. Logan J held that in so far as the applicant sought relief under s 87 against the assignee of assigned telecommunications service contracts its claim had to fail. His Honour cited Krambousanos v Jedda Investments Pty Ltd and Oraka Pty Ltd v Leda Holdings Pty Ltd. His Honour did not consider whether s 12 of the Conveyancing Act (or its Queensland equivalent) which provides for the assignee to take subject to the equities was relevant. Instead, his Honour found that the assignee had agreed to assume both the benefit and the burden of the assigned contracts (at [76]) with the result that the assignee was saddled with the consequences of the misleading and deceptive conduct engaged in by the salesman for the assignor which induced entry into the contracts. 274For these reasons Mr and Mrs Dierickx are entitled to say as a matter of defence that because they were induced to enter into the investment loan contract by TROM's misrepresentation and breach of fiduciary duty, they are not liable for the claimed debt. It is not necessary to make an order for rescission in equity of the contract of loan. That order was not sought, but if it were necessary I would give leave to amend and would make that order. The giving of judgment for the defendants will create a cause of action estoppel. There is nothing for Mr and Mrs Dierickx to restore.

Interest and Penalties 275In light of my conclusion above the question as to whether the rate of interest of 20 per cent is a penalty does not need to be decided. In case I am wrong I will state my conclusions briefly. 276Mr and Mrs Dierickx submitted that the higher interest rate of 20 per cent was imposed in response to a breach of the loan agreement by them and was not a genuine pre-estimate of the loss that might be suffered by TROM as the result of any breach of the loan agreement by them. They submitted that the rate was extravagantly and unconscionably disproportionate to any damage that might flow to TROM (or its successors) as a consequence of a breach and not commercially justified. 277However, the loan agreement used the conventional device of charging a higher rate of interest with a proviso that if payments were made punctually, the lender would accept the lower rate of 15 per cent in discharge of the borrower's obligation. It has long been settled that this does not amount to a penalty (O'Dea v Allstates Leasing System (WA) Pty Ltd [1983] HCA 3; (1983) 152 CLR 359 at 366-367; Acron Pacific Limited v Offshore Oil NL [1985] HCA 63; (1985) 157 CLR 514 at 518; Wallingford v Mutual Society (1880) 5 App Cas 685 at 702; C J Belmore Pty Ltd v AGC (General Finance) Limited [1976] 1 NSWLR 507). 278In King Investment Solutions Pty Ltd v Hussain [2005] NSWSC 1076; (2005) 64 NSWLR 441 Campbell J (as his Honour then was) observed (at [138]) that whilst there is a lot to be said for the view that equity should look to the substance, not the form, the law in this respect has been settled for too long for a first instance judge to construe such a clause as a penalty. In Kowalczuk v Accom Finance Pty Ltd [2008] NSWCA 343; (2008) 77 NSWLR 205 Campbell JA said (at [162]): "[162] There is a conventional view that a properly drafted mortgage containing higher and lower rates does not attract the law of penalties at all. That is because the law of penalties strikes down those provisions of a contract that state the consequences that will flow when there is a breach of contract, if those consequences are not a genuine pre-estimate of the damage likely to be suffered in consequence of that breach. If the mortgage is drafted so that the borrower agrees to pay a particular rate of interest, but the lender agrees to accept a lower rate of interest in full satisfaction of the borrower's obligation to pay interest at that particular rate provided that the lower rate of interest is paid timeously (and, sometimes, provided that there is no breach of any other provision of the mortgage) that provision is not one that states the consequences of a breach of contract, and hence the law of penalties does not apply to it." 279His Honour observed (at [164]) that he was not concerned in that case to consider whether the conventional view of the application of the law of penalties to mortgages containing higher and lower rates of interest is correct. But as his Honour had previously observed in King Investment Solutions Pty Ltd v Hussain, it is binding on a single judge. 280For these reasons I would have rejected Mr and Mrs Dierickx's argument that the higher rate of interest of 20 per cent was void as a penalty.

Conclusion and orders 281For these reasons I have concluded that HPM is entitled to sue for the debt. I have concluded that Mr and Mrs Dierickx have not established that there was an agreement made in 1995 for them to exit the project. I have concluded that the loan was not a without recourse loan and that TROM did not engage in misleading and deceptive conduct by representing that it was. 282However, I have found that TROM did misrepresent to Mr and Mrs Dierickx that the moneys it lent to them and they paid to it under the farming agreement would be available for the carrying out of the works described in the farming agreement, and that this was false. I have found that TROM thereby engaged in misleading and deceptive conduct in breach of s 52 of the Trade Practices Act. I have found that TROM failed to comply with its fiduciary duty to disclose to Mr and Mrs Dierickx all information material to their decision to invest in the project by failing to disclose that the moneys lent to them and paid back to TROM would not be available as working capital to pay the costs of orchard enhancement and maintenance. I have found that this entitles Mr and Mrs Dierickx to avoid the loan contract and that HPM is in no better position to enforce the loan than TROM. I have found that Mr and Mrs Dierickx were entitled to rely on the breach of s 52 of the Trade Practices Act and the remedies available under s 87(1A) and (2) by way of defence and that the limitation period in s 87(1CA) does not apply. 283In any event, if it were necessary for Mr and Mrs Dierickx to obtain an order for rescission, they would be entitled to an order for rescission in equity for breach of TROM's fiduciary duty and leave would be given to amend the cross-claim accordingly. I have concluded however that Mr and Mrs Dierickx are entitled to rely upon their right to avoid the contract as a matter of defence to the claim in debt. 284For these reasons I direct entry of judgment for the defendants and order that the cross-claim be dismissed. I will hear the parties on costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 31 August 2012