Hudson Investment Group Limited v Australian Hardboards Limited & Ors [2005] NSWSC 716 | Case summary

Hudson Investment Group Limited v Australian Hardboards Limited & Ors [2005] NSWSC 716 | Case summary | Zoe

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Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 Allen v Carbone (1975) 132 CLR 528 Allied Marine Transport Ltd v Vale Do Rio Doce Navegacao SA [1985] 2 Lloyd's Rep 18 Amalgamated Television Services Pty Limited v Marsden [2002] NSWCA 419 Anaconda Nickel Holdings Pty Ltd, Re [2003] WASC 19 Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 ANZ Executors and Trustee Company Ltd v Qintex Australia Limited (1990) 2 ACSR 676 Associated Colour Laboratories Ltd, Re Bankruptcy of (1970) 73 WWR 566 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 Bailey v Mandala Private Hospital Pty Limited (1987) 12 ACLR 641 Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 Bonelli's TelegraphCompany, In re (Collie's claim) (1871) LR12Eq 246 Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61 Brick & Pipe Industries Ltd v Occidental Life Nominees Pty Ltd (1990) 3 ACSR 649 Bush v National Australia Bank Ltd (1992) 35 NSWLR 390 Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 CGM Investments Pty Ltd v Chelliah [2003] FCA 79 Chamberlain v Thornton (1892) 18 VLR 192 Charterbridge Corporation Ltd v Lloyds Bank Ltd [1970] Ch 62 Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd (2001) 3 VR 526 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Commissioner of Stamp Duties (NSW) v Carlenka Pty Limited (1995) 95 ATC 4620 Commonwealth Bank of Australia v Cluness (1997) 8 BPR 15,467 Crane v Hegeman-Harris Co Inc [1939] 1 All ER 662 East Norfolk Tramways Company, In re (Barber's Case) (1877) 5 Ch D 963 Equiticorp Finance Limited (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 Etablissements Georges et Paul Levy v Adderley Navigation Co Panama SA (The Olympic Pride) [1980] 2 Lloyd's Rep 67 FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343 Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR [97023] Fowler v Fowler (1859) 4 De G & J 250 Geebung Investments Pty Ltd v Varga Group Investments (No 8) Pty Ltd (1995) 7 BPR 14,551 GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No 4) (1990) 9 BPR 17,461 Great Northern Salt and Chemical Works; Ex parte Kennedy, In re [1890] 44 Ch D 472 Halt Garage (1964) Ltd, Re [1982] 3 All ER 1016 Harris v English Canadian Co (1905) 3 Western Law Reporter 5 Helmos Enterprises Pty Limited v Jaylor Pty Limited [2005] NSWCA 235 Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 Hindle v John Cotton Ltd (1919) 56 Sc LR 625 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 Howard Smith Ltd v Ampol Petroleum Ltd [1974] 1 NSWLR 68 Inland Revenue Commissioners v Raphael [1935] AC 96 Integrated Computer Services Pty Limited v Digital Equipment Corporation (Australia) Pty Limited (unreported, Court of Appeal of New South Wales, McHugh, Mahoney and Hope JJA, 23 December 1988, BC8801158) International Fina Services AG v Katrina Shipping Ltd ("The Fina Samco") [1995] 2 Lloyd's Rep 344 CASES CITED : Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 Joscelyne v Nissen [1970] 2 QB 86 Kinsela v Russell Kinsela Pty Ltd (in liq) (1986) 4 NSWLR 722 Kofi-Sunkersette Obu v A Strauss & Co Ltd [1951] AC 243 Lakatoi Universal Pty Limited & Walker [2000] NSWSC 113 L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 Lloyd v Stanbury [1971] 1 WLR 535 Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 76 ALJR 246 Magnacrete Ltd v Douglas-Hill (1988) 48 SASR 565; 15 ACLR 325 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2001) 38 ACSR 404 Masters v Cameron (1954) 91 CLR 353 Meehan v Jones (1982) 149 CLR 571 Merchants and Shippers SS Co Ltd, In re (1916) 17 SR (NSW) 21 Mitropoulos v The Greek Orthodox Church and Community of Marrickville & District Ltd (1993) 10 ACSR 134 Muriti v Prendergast [2005] NSWSC 281 Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 Optus Vision Pty Ltd v Australian Rugby Football League Ltd [2004] NSWCA 61 Paal Wilson & Co A/S v Partenreederei Hannah Blumenthal [1983] 1 All ER 34 Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114 Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 Pobjie Agencies Pty Ltd v Vinidex Tubemakers Pty Ltd [2000] NSWCA 105 Poliwka v Heven Holdings Pty Ltd (No 2) (1992) 8 ACSR 747 Prenn v Simmonds [1971] 1 WLR 1381 Pukallus v Cameron (1982) 180 CLR 447 Pulbrook v Richmond Consolidated Mining Co (1878) 9 Ch D 610 R v Byrnes & Hopwood (1996) 20 ACSR 260 Raguz v Sullivan (2000) 50 NSWLR 236 Reardon -Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 Ryan (Receiver and Manager of Homfray Carpets Australia Pty Limited) v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153 Sandwell Park Colliery Co, In re; Field v The Company [1929] 1 Ch 277 Slee v Warke (1949) 86 CLR 271 Smith and Fawcett Ltd, In re [1942] Ch 304 State Bank of South Australia v Macintosh (unreported, Supreme Court of New South Wales, Young J, 31 May 1995, BC9504827) Summers v Commonwealth (1918) 25 CLR 144 Swiss Screens (Australia) Pty Ltd v Burgess (1987) 11 ACLR 756 Sydlow Pty Limited (in liq) v Melwren Pty Limited (in liq) (1994) 13 ACSR 144 Tankrederei Ahren Keil GmbH v Frahuil SA (The Multitank Holsatia) [1988] 2 Lloyd's Rep 486 Taylor v Johnson (1983) 151 CLR 422 Thai-Europe Tapioca Service Ltd v Seine Navigation Co. Inc [1989] 2 Lloyd's Rep 506 Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Versteeg v R (1988) 14 ACLR 1 Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32 Walker v Wimborne (1976) 137 CLR 1 Wallera Pty Ltd v CGM Investments Pty Ltd [2003] FCAFC 279 Whitehouse v Carlton Hotel Pty Limited (1987) 162 CLR 285

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[AHL was incorporated on 22 June 1999 under the name Hudson Frame and Truss Limited. It changed its name to its current name on 3 September 1999. HTP was incorporated on 27 February 1998. It changed its name to Hudson Timber & Hardware Limited on 8 April 1998 and listed on the Australian Stock Exchange (ASX) on 23 December 1998. On 4 June 2003, it changed its name to Hudson Timber Products Limited.] Acronyms 4 One can become quickly confused by reason of the different acronyms utilised by the parties in their submissions and by witnesses in their affidavits. It may be convenient then to keep in mind that: · Hudson Investment Group Ltd was variously referred to as "HIG" [presently adopted], "Group" and "HGL"; · Australian Hardboards Ltd was variously referred to as "AHL" [presently adopted] and "Hardboards"; · Hudson Timber Products Ltd was variously referred to as "HTP" [presently adopted] and "Timber". Directorships 5 At all material times anterior to the 2003 Group restructure the directorships of each of HIG, AHL and HTP included the fourth defendant, Mr McLeod and the first defendant, Mr Holland. Mr Hughes was at all material times company secretary of HIG, AHL and HTP. The present post 2003 restructure circumstances of relevance involve Mr McLeod remaining a director of HTP and AHL and Mr Hills remaining a director of AHL. AHL's factory 6 AHL at all material times operated a factory in Ipswich, Queensland located 25 kilometres south-west of Brisbane. Its manufacturing operations were profitable. It owned over 300 hectares of land. The timber and building products manufacturing operations are located on 22 hectares of this land. For the purposes of the issues raised in these proceedings it is apparent that the most significant of the associated assets was the land ["the Land"] utilised by the factory to discharge process waste water. The factory produced large quantities of waste water, approximately one million litres per day, and discharged this waste water via an irrigation system over the otherwise unused 300+ hectares of land. Wingate Properties Pty Ltd 7 Some short time after AHL was acquired by HIG, the Land was identified by a property developer, Wingate Properties Pty Limited ["Wingate"] as having significant development potential. It was decided that, were the factory to dispose of its water through a water treatment facility (to be constructed on the grounds of the factory site), the remaining 300+ hectares of land could be then used for property development purposes. Heads of Agreement - 27 November 2000 8 On 27 November 2000 Heads of Agreement ["the Heads of Agreement"] were entered into between Wingate, AHL and HIG for the purpose of considering proposals for the development of the Land. Clause 4 was in the following terms:

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[Clause 1 defined deposit to mean "$3.5 million", mortgage to mean "the mortgage in the form required by Hudson", and "Sunset date" to mean "the fifth anniversary of this deed".] AH Bremer Park Pty Limited 16 In August 2000, the third defendant, AH Bremer Park Pty Limited ["Bremer"] [previously "AH Group Limited"] was incorporated. Mr McLeod and Mr Holland were appointed directors. Mr Hughes was appointed as company secretary. The shareholdings of Bremer consisted of two shares, both held by AHL. 17 Between December 2001 and January 2003, Bremer acquired the Land which had been owned by AHL. It appears that Bremer was intended to be the vehicle by which the land would be developed and the profits shared between HIG/AHL and Wingate, the property developer. References to defendants 18 As a matter of convenience the first three defendants, AHL, HTP and Bremer will be referred to as "the defendants" and fourth and fifth defendant, Mr McLeod and Mr Holland will together be referred to as "the defendant directors". 2003 restructure 19 On an overview basis it is apparent that in about May and June 2003, HTP underwent a major restructure which involved: · the sale of its timber and hardware division; · the change of the company's name from "Hudson Timber & Hardware Limited" to "Hudson Timber Products Limited"; · HTP buying back and cancelling 220,000,000 of its shares from HGL for $17.6 million which was satisfied by a discharge of $17.6m intercompany loan owed by HIG to HTP; · the sale by HIG of 14,000,000 shares in HTP which raised $2.1 million, which was then paid by HIG to HTP to discharge the balance of HGL's indebtedness to HTP; · the disposal by HTP of other non-core assets including Hudson Imports Pty Ltd; and · a raising of capital by HTP through the offer of shares under a prospectus dated 28 May 2003 (the Prospectus) (the Restructure). 20 On completion of each of the steps referred to above, HIG's shareholding interest in HTP decreased from 91.69% to 22.2%. HTP remained the owner of 100% of the share capital of AHL. 21 Over the period from around July 2003 to August 2003, HGL sold the balance of its shareholding in HTP on market. AHL proposal of partial sale of its shares in Bremer to Wingate - March 2003 22 In March 2003, AHL proposed to sell one of its shares in Bremer to Wingate for $200. This agreement has not been carried out to date. The Bremer Share Sale Agreement 23 In a separate 2003 transaction ["the Bremer Share Sale Agreement"] HTP is said to have agreed to sell one-half of the issued shares in Bremer, to HIG for $100. The sale was approved by HTP in general meeting on 16 June 2003 pursuant to an Explanatory Memorandum dated 16 May 2003. HIG contends that the agreement was effected by a countersigned letter dated 23 July 2003. HTP has refused to execute a transfer of the Bremer shares. The context concerned the above-described agreement that 220,000,000 of HIG's shares in HTP would be cancelled in return of the cancellation of $17,600,000 of debt owed by HIG to HTP. HTP proceeded to issue a prospectus for public subscription of 47,381,167 shares in order to raise approximately $7.1 million. The prospectus issued in relation to the HTP shares referred to the proposal that the one share in AH Bremer held by AHL would be sold by AHL to HIG for $100. 24 A Masters v Cameron issue arises as to whether the Bremer Share Sale Agreement was intended to have binding effect. The First Deed of Amendment 25 The defendants contend that a First Deed of Amendment which bears the date 20 June 2001 is valid and has the effect of deleting HIG's mortgage entitlement from the Entitlement Deed. The instrument is sealed and witnessed, for HIG, by Mr McLeod and the company secretary and, for AHL, by Mr Holland and the company secretary.

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(b) The first cross claimant must on the date of Disposal pay to the cross defendant an amount up to $10 million from the net profit received by the first cross claimant on the development and disposal of the Land in accordance with the Heads of Agreement between Wingate, the cross defendant, the first cross claimant and A H Group dated 27 November, 2000. [Declaratory relief and rectification of the Entitlement Deed to reflect this alleged common intention is sought in the cross-claim] The issues concerning the directors 33 It is plain that the case against the fourth and fifth defendants is confined to the events of 2001 and to the First and Second Deeds of Amendment. Notwithstanding that no complaint is made against the directors in relation to the Bremer Sale Agreement or in relation to the events of 2003, should the defendants case in relation to abandonment prove successful, this would impact on the question of damages should the Court find that the directors were in breach of their fiduciary duties. 34 No contention was advanced by Mr McLeod or Mr Holland to the effect that they wished to contend that the plaintiff had not always been understood as pleading breaches of fiduciary obligation [transcript 670,671]. And this notwithstanding the precise state of the Summons. 35 Should HIG succeed in setting aside the first and second Deeds of Amendment any questions of equitable compensation in HIG's claims against the directors fall away. The Evidence Reliability of witnesses Mr McLeod 36 Mr McLeod was an unreliable witness. Reasons for this finding are given in a number of places throughout the judgment. Under cross-examination his evidence was given haltingly and it was quite clear that in many of his answers he was about assessing the reasons for the question and promoting the interests of the defendants in the litigation. On many subjects in high contention he prevaricated, now giving an answer to one effect and later altering that answer. His evidence cannot be accepted as reliable unless corroborated by contemporaneous documents or the evidence given by other witnesses who are accepted as reliable. His continued failure to accept the reality which was that so-called 'single agenda' meetings were really never meetings at all, is only one example of the reason why his evidence cannot be regarded as reliable. When asked whether he considered the practice of the company in terms of single agenda meetings, later referred to in the judgment, to be an 'honest practice', his answer was that he thought it was an 'acceptable practice'. 37 It is appropriate to note that the gravity of the findings concerning the backdating of minutes has required that these reasons include a deal of detail in particular pertinent to the credit of Mr McLeod. I make no apology for setting out certain sections of Mr McLeod's cross examination verbatim for the reason that a paraphrasing of that evidence does not provide the same emphasis as is sought to be highlighted by those excerpted sections.

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Mr Holland 38 Mr Holland was also an unreliable witness. His evidence cannot be accepted save where corroborated by contemporaneous written documents or by evidence given by witnesses who are regarded as reliable. His evidence was inconsistent with the evidence given by a number of the other witnesses, who far more openly accepted that in truth the so-called 'single agenda' meetings were not meetings at all when one looked closely at what actually happened. His evidence was unreliable for many reasons mostly only able to be understood by a full reading of the transcript of his cross-examination. Some examples of that evidence included: Negotiation of the Entitlement Deed and his understanding of that Deed · His evidence that notwithstanding that he had played no part in the negotiation of the Entitlement Deed [Transcript 385] his understanding of the Entitlement Deed simply gained from what the document said, was that AHL would pay HIG $10 million out of profit of the side of the land [Transcript 381.46]. [However he could not recall Mr McLeod ever telling him that 'the deal' was with respect to profit, nor discussing with Mr McLeod whether profit was intended or not-(transcript 382.47, 385.26)]. He could not recall whether or not at the time when he read the Entitlement Deed he did not see any reference to any profit in the Deed. He could not even say in the witness box, whether or not the document made any reference to profit, because, so he contended in the witness box, he had not read the document since it was signed. But he was quite firm in his evidence that the sole source of his understanding that the deal had concerned profit was his reading of the Entitlement Deed [Transcript 388.11]. Yet his evidence was that he had no understanding in this context of the difference between profit before tax or profit returns above a pre-approved valuation and that this was not something that entered his mind [Transcript 387.5]] Second Amending Deed and his understanding in that regard · His evidence was that his understanding of the change to the Entitlement Deed leading to the Second Amendment Deed "was to clarify issues in the Deed [Transcript 390.12]. [Yet in being asked what these issues were, his answer was that he simply did not know and could not recall [transcript 390.17]]. Understanding as to what is asserted against him in the proceedings · He was asked whether he understood what was asserted against him in the proceedings and his answer was "not particularly" [transcript 390.43]. He was asked whether he understood that it was asserted against him that he had breached a fiduciary duty to the Hudson Group. His answer was that he did not so understand. Evidence concerning conflict of interest · In relation to minutes [cf for example the meeting of the board of HTP of 17 May 2001 PX 655] in which the minutes stated that he had not attended a meeting as it was considered that conflict of interest issues arose pursuant to his respective positions as directors of certain of the companies within the Group , his evidence was that he did not turn his mind to the question of whether or not the fact that different companies in the Group had interests which were not the same. This was, he accepted because he did not understand as a director of the different companies that he ought to look at the interests of each separately. 39 His lack of recall of detail is a further indicator of the need to treat his evidence with the greatest of care. I formed the view that on the balance of probabilities he simply carried out the requests of Mr McLeod without giving the matters the subject of such requests, any or any real consideration. He had originally been a petty officer in the Navy. Mr Holland readily accepted that he had had no expertise in the construction of complex commercial documents or the restructuring of companies: his expertise was in the building industry at the level of building industry operations. Reliability of other witnesses 40 It is unnecessary to specifically treat with questions concerning the reliability of other witnesses. The judgment is generally self-explanatory where the evidence of a particular witness is found to be unreliable. Generally the findings concerning the unreliability of many of the documents purporting to be minutes of meetings, carries with it a finding rejecting as unreliable the evidence given by any witnesses to the effect that any such meeting had taken place. Sometimes that finding may be consistent with Mr McLeod having discussed certain matters [later appearing in minutes] with one or other of those persons. For reasons given in the judgment, discussions of that type have not been shown to constitute 'meetings' within accepted principle.

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Mr McLeod's evidence 46 The evidence given by Mr McLeod on this topic [as well as on the topic of conversations with Mr Tan anterior to the signing of the Entitlement Deed] was unsatisfactory in the extreme. So much appears from his cross-examination. His affidavit evidence cannot be read in isolation from that cross-examination which is examined below. Further and as is apparent from the judgment below, the defendant's rectification case as pleaded does not conform with the evidence as to his own understating, given by Mr McLeod who was the defendants principal witness on the issue. Mr McLeod's evidence as to the earlier background 47 It is convenient to first shortly outline Mr McLeod's evidence of the earlier background. 48 His evidence was that by early March 2001 HTP had experienced a significant drop in its revenues placing it in breach of a number of financial covenants required by ANZ as part of its financing arrangements. Hence he commenced discussions with ANZ with a view to HTP restructuring its balance sheet by reducing debt, the most effective way to carry out which objective would be to raise equity. His evidence was that HTP directors resolved on 20 March 2001 to in principle seek to raise $5 million by way of a preference share issue. Mr Tan however is said to have indicated that his shareholding group would not support a raising of equity as this would dilute their shareholding. 49 Thereafter there were further discussions with ANZ turning to the alternative of a transfer of the shareholding in AHL to HTP, the fact being that AHL should generate approximately $5 million in free funds over the following 12 months. 50 The discussions included the integer that the Master Plan for Bremer was anticipated to be completed by the middle of 2002 and that this would generate extra funds in the group which could then be used to repay debt. 51 The ANZ generally agreeing in principle to the proposed sale of the shareholding in AHL to HTP, Mr McLeod became involved in negotiating the terms and conditions of the transfer, in which negotiation he represented the interests of HTP and Mr Tan represented the interests of HIG. These negotiations took place in late April/early May 2001. 52 Mr Tan had proposed that the Surplus Land be transferred to HIG for no cost prior to the sale. Mr McLeod had opposed that suggestion making the point that neither AHL nor the ANZ would permit any such course. 53 It is in the suggested evidence of Mr McLeod as to what then occurred in the negotiation, that the evidence of Mr McLeod as to the parameter of HIG obtaining a pre-determined profit share is rejected as unreliable. The precise evidence given by Mr McLeod in his affidavit was in this regard as follows: · [They] had a conversation to the following effect:

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"Attached is a deed in which I have attempted to document what I understand to be the arrangements in place between Hudson Investment Group and Australian On boards in respect of the development of certain land and the payment of 10,000,000 to HIG Given my limited knowledge of the details of this agreement we will need to discuss the agreement to review its accuracy in documenting the arrangements . Also, while I have discussed this agreement in principle with Danny Simmons he has not yet had a chance to review it, so for those reasons please treat the attached as a draft agreement only." [PX3/0750] 61 Mr Restas gave evidence that he had not seen this covering e-mail in the course of his preparation of the documents and only came to see it at the time of preparing his affidavit in these proceedings. [Transcript 126.5] 62 In the days following his having first been asked to assist Mr Simmons with the documentation, Mr Restas made a number of amendments to the Share Purchase Agreement with respect to the view that he had formed that various approvals were required by the shareholders either of HTP or of HIG and his view that Chapter 11 of the Listing Rules may be relevant. Atanaskovic Hartnell acting for HIG 63 Mr Restas' evidence was that on about 31 May 2001 he had a telephone conversation with Mr McLeod in which he confirmed that his firm were acting for HIG and receiving instructions from Mr McLeod on its behalf [which Mr McLeod said was correct] [cf confirmatory email PX3/751]. Mr Restas recommended that HTP retain independent lawyers to act on its behalf but was informed by Mr McLeod that HTP would not do that. Rather HTP would get an independent director plus Mr Scadden to review the contract on behalf of HTP. 64 Further communications passed between Mr Restas and Mr McLeod between 31 May 2001 and 5 June 2001 by way of routine drafting and regulatory issues. 6 June 2001 65 On 6 June 2001 Mr McLeod telephoned Mr Restas and they had a discussion concerning options which Mr McLeod said would now be issued to HIG. Mr McLeod also raised a need to amend the entitlement Deed to reflect the fact that AHL would pay HIG a deposit of $3.5 million. 66 On 6 June 2001 Mr Restas reviewed the draft of the Entitlement Deed and made a note of certain points which he wished to discuss with Mr McLeod. That handwritten note reads as follows: "- Issue regarding 1st $10 mill

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Mr McLeod: "That is fine. The formula in the deed of amendment needs to be played with to be consistent with the joint venture agreement. I will amend the formula." · Mr McLeod then sent me a facsimile… I reviewed his amendments and considered that it would be easier to prepare a consolidated version of the Entitlement Deed, incorporating all of the amendments. At 5.06pm I sent through an email attaching my proposed deed... · On the following morning, I sent an email to Mr McLeod at 10.16am containing the advice referred to in my email of the previous afternoon. In that email I confirmed both my instructions and my advice that I had given to that point. In particular I recorded at the second bullet point that the proposal put forward to amend the Entitlement Deed, which provided that HIG change its right to the first $10 million received in connection with a "disposal" to a right to receive $10 million only if the amount received in connection with the "disposal" was equal to or greater than $24.667 million, amounted to HIG giving to AHL a "financial benefit" for the purposes of the Corporations Act… The final paragraph of my email contemplates that I would prepare a draft ASX announcement in relation to the change. 6 September 2001 · On 6 September 2001 I received from Mr Hughes a facsimile attaching copies of the previous ASX announcements, as requested by me in my email... · I do not recall any further conversations with Mr McLeod or Mr Hughes concerning this further amendment to the Entitlement Deed prior to my leaving the employ of Atanaskovic Hartnell on 11 October 2001. Evidence given by Mr Knox 88 Before proceeding further it is convenient to shortly summarise the evidence given by Mr Knox [the Group chief financial officer] which is accepted as reliable. Effectively what occurred is that in August 2001, during the course of preparation of the financial statements for the two companies for the half year ended 30 June 2001 (they each have December year ends), Mr Seaton, a partner in PricewaterhouseCoopers informed, Mr Knox, that the terms of the Entitlement Deed required that the first $10 million of value of the surplus land (being its then entire value at directors' valuation) could not be shown as an asset in the books of Hardboards. This was because under the terms of the Entitlement Deed the first $10 million of proceeds were to go to Group. 89 Mr Knox had not previously been shown the Entitlement Deed and upon reading the Deed, it was clear to him that the Entitlement Deed meant that the first $10 million of proceeds for the land was to be paid to Group; consequently Hardboards could not have it in its books at $10 million. That meant a reduction in the net assets of the Timber side of the group of $10 million and the inclusion of an insupportable figure for goodwill on the acquisition of Hardboards which would have to be written down thereby producing a loss in the books of Timber. This was a serious issue. 90 Mr Knox accepted that the only way this could be fixed was if the terms of the Entitlement Deed were changed so that there "didn't have to be shown up a big black hole of $10 million in the books of the Timber group" ("T 346-351") with the critical passage at T 349 Line 56 to T 351 line 27).

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[Cf Company Directors - Principles of Law and Corporate Governance, Austin Ford and Ramsey, Lexis Nexis Butterworths 2005 at 2.79 identifying the minimum pre-requisites for a formal meeting as: · all directors had prior notice of the meeting or when together, they waived notice; and · directors amounting to a quorum made themselves available at the same time to act in their capacity as directors and to consult together as necessary about the company's affairs.] 119 This is, of course, not to deny the capacity of a corporation to include in its articles a provision that a resolution in writing agreed by all directors may be deemed to have been passed at a duly constituted board meeting. [cf Article 122 set out above] The 'single agenda meetings' did not constitute directors meetings within the meaning of that concept known to the law 120 The Court's finding in the present proceedings is none of the so-called 'single agenda meetings' were valid meetings of directors. The clearest evidence before the Court is to the effect that no such meetings ever took place. What actually occurred is not able to be reliably established from the evidence. Most likely Mr McLeod oversaw the preparation of the so-called 'minutes' of what he was minded to call 'single agenda meetings'. It is possible that from time to time he may have spoken to one or other of his fellow directors about some matters which may or may not have been included in the so-called minutes. It is impossible to tell in relation to any particular purported single agenda meeting, whether or not he spoke to all of the directors, in any particular terms, or whether or not all or some of the other directors and if so which, spoke to one another about any particular matters which may have been raised with any of them by Mr McLeod. The fact is that this extraordinary state of affairs amounts to little more than a fiction, the legal effect being that the so-called "single agenda meetings' did not constitute directors meetings and the purported 'minutes' of such 'meetings, as a matter of law, were nothing more than writ in water [that is to say having no validity in law whatever]. 121 Mr Stevenson accepted [transcript 569] that the articles did not permit the conduct shown under the cross-examination to have occurred. 122 The separate issue of the evidence as to the 'scheduled meetings' will be examined in more detail below in the judgment. The Court's finding for reasons given below deals carefully with whether or not material minutes of alleged single agenda meetings may on the evidence be seen to have been adopted or ratified at particular later scheduled meetings 123 I do not cavil with the proposition that it would have been possible for duly convened later scheduled meetings to have concurred in a resolution affirming or ratifying or relevantly approving a set of inaccurate minutes purporting to record [but not in fact recording] events said to have taken place at informally held earlier meetings. This could for example have happened where a later scheduled meeting could, on the evidence, be seen to have demonstrated an expression of the will of the directors attending such scheduled meeting, where [whatever the particular words used at the later scheduled meeting may have been], directors in attendance can be seen to have effectively concurred and adopted and effectively ratified that which the minutes of the earlier meeting [albeit not being authentic], recorded as matters to which the directors [shown in the earlier minutes to have attended the single agenda meeting], appear to have assented or to have recorded as resolutions that particular steps be taken by the relevant company. 124 The analysis is certainly somewhat difficult and it is important to be extremely cautious in this regard. It seems to me that essentially one is dealing with a question of fact as to what precisely occurred at any particular later scheduled meeting. The whole of the circumstances which obtain at the later scheduled meeting require to be examined, including the precise words used, as for example the word "ratify" or the words "adopt as a true record of earlier proceedings" . 125 The possibilities at least include:

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" The imprimatur analysis " · The circumstance that the scheduled meeting [when using some form of words generally confirmatory of earlier minutes] is about lending its now consensus and imprimatur to whatever is recorded as having been the material earlier occurrence, intending to do so notwithstanding any possible irregularity attending the events purportedly recorded in such purported previous set of minutes: effectively a decision to adopt the earlier events/acts "at all events and under all circumstances". In this case the scheduled meeting is about achieving a consensus and adopting a particular corporate position. 126 Overlaying all of this and making the analysis even more difficult are questions concerning whether or not there is any relevance of the state of knowledge of the directors at any of the scheduled meetings: if relevant raising the question of whether or not they were acting on an informed basis as to the past events. In this regard I proceed upon the basis that outside of questions arising in relation to other issues such as ratification of breaches of fiduciary duty, all that is necessary to represent the informed knowledge of directors who purport to adopt the earlier minutes is that this is what they are doing. 127 In the main the finding is that two of the critical scheduled meetings [namely the HIG meetings of 5 September and 20 November] simply did not take place. But even if they had taken place, the facts proven by the evidence shows that those meetings stand a dimension apart from establishing what I have called the "imprimatur analysis". The irregularities, mistakes and uncertainties exposed by the evidence are examined below. They extend not only in relation to the supposed single agenda earlier minutes, but also in relation to the supposed later scheduled meeting minutes. 128 It is presently convenient to turn directly to the challenges to the accuracy of particular minutes. Evidence given by Mr Nicholas Johnson 129 Before proceeding further it is appropriate to shortly deal with the evidence given by Mr Johnson put forward by the plaintiff as a computer specialist in support of the Plaintiffs allegation that particular minutes of meetings said to have been held many months earlier were altered by Mr McLeod on 27 August 2001. 130 One assertion made by the plaintiff is that Mr McLeod falsified documents. The submission is that Mr McLeod wished to convince the auditors that the words of the entitlement deed did not reflect the intention of the directors. To this end, he is alleged to have changed the words in two minutes (2 May 2001 and 17 May 2001) to convince the auditors thus. This was, so the plaintiff's submits, a dishonest act, as Mr McLeod is said to have known that the directors had signed and approved of the unmodified minutes, but not the modified version. In short, Mr McLeod is said to have presented documents to the auditors which purported to have been approved by the directors, when in fact, they had not been. 131 In seeking to make good this submission, the plaintiff relies upon three electronic files that are supposedly the electronic versions of the hard-copy document forwarded to the auditors, representing the minutes of 2 May 2001 and 17 May 2001. There is no issue that these electronic files are the one's from which the hard-copy documents were produced. 132 The plaintiff submits that the 'properties' summary of these three files show that the files were 'last modified' on 27 August 2001. 27 August 2001, it must be remembered, is the date on which Mr McLeod submitted the 2 May 2001 and 17 May 2001 minutes to the auditors. On the plaintiff's case, this is not a mere coincidence, but shows that the document was modified on that date to achieve the aim of deceiving the company's auditors. 133 Mr Johnson, a computer specialist formerly employed by Coudert Brothers, gave evidence as to what this 'last modified' date of 27 August 2001 may mean. 134 His evidence was that, first, he was unable to tell what changes were made to the electronic file on 27 August 2001. Further, his evidence was that the 27 August 2001 'last modified' date could have been a result of what might (in light of the allegations made against Mr McLeod) be termed 'innocent' reasons. The 27 August 2001 'last modified' date could have been a result of one or more of a number of technical factors, vide: (a) the dates and times displayed in a properties box are generated by the computer's date and time settings. If the computer's date and time settings are incorrect, then the properties box will be incorrect; (b) depending on the email system installed on the computer, if a file is emailed, the modified time can be rewritten as the time the file was sent; (c) there exists certain software, the specific purpose of which is to change the properties of files. This means that, with the use of this software, an author could manually change the dates or times recorded in a properties box of a file; (d) if one were to open a file, make a change (such as merely capitalize a letter), but then delete that change, the user would be prompted to save the document and thus the modified date could be changed, even though no net change had been made to the file; (e) if one opens a file (for example to print or look at it), moves the cursor around but does nothing to the actual content of the document, and then saves the file through force of habit before closing it, the modified date could change without the actual content of the file being altered; and (f) if a document is created on a system which uses some sort of document management system, it is entirely feasible that that system could automatically save that document every time it is closed, whether or not the user has manually asked the system to save the document. Every time that document is automatically saved by the system a new 'modified' date could appear in the properties box. 135 In summary, Mr Johnson could not conclude that Mr McLeod had made the changes to the electronic file on 27 August 2001 which the plaintiff asserts he made. 136 Mr Johnson's evidence was that the forensic electronic evidence could not decide one way or the other as to whether Mr McLeod amended certain words in the two minutes on 27 August 2001. 137 On the balance of probabilities, I am unable to decide what happened to the three electronic files in question on the 27 August 2001. The sinister explanation contended for by the plaintiff is not proved by the evidence of this witness. Challenges to the accuracy of minutes of directors meetings 138 During the cross-examination of many of the witnesses much time was taken in challenging the accuracy of documents in evidence purporting to be minutes of directors meetings. 139 In what follows examples of the matters the subject of the cross-examination are given. 2 May 2001 minutes [AHL] 140 The minutes of the meeting [of what is said to have been a single agenda meeting] of the directors of AHL purporting to have been held on 2 May 2001 [PX 0601] state that Mr Hughes was present as secretary and record as present:

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Q. It worked well for the company to bring into existence false documents, did it? A. It's not a false document. It reflected the intent of those directors at that point in time. It was circulated. It was put in a board pack for the next full board meeting and it was ratified by all those people at that meeting. If they had any problem with that minute at that point in time they could have brought it up and they would have altered it at that point in time." [Transcript 270] 145 There were in evidence two versions of the minutes of directors of AHL of 2 May 2001: · the draft PX 1224/1123 [part of the Board Working papers for a meeting of 19 June 2001] recording that Mr McLeod had been chairman and recording a resolution: "that the Company formalise HIG's right to the first $10 million of profit before tax derived from the development of [the Land] resulting from AHL's acquisition of the land from CSR Ltd on behalf of the Company and which is within the terms and conditions of the joint venture agreement between the Company and Wingate Properties Pty Ltd." · the signed version PX 0601 recording that Mr Holland had been chairman and recording a resolution: "that the Company formalise HIG's entitlement to profit returns above the Pre Approval valuation of $10 million derived from the development of the [land], within the terms and conditions of the joint venture agreement between the Company and Wingate Properties Pty Ltd." [It was the latter apparently signed version PX 601-602 which were enclosed under cover of Mr McLeod's 27 August 2001 letter to Mr Seaton - cf exhibit BWM 1 Volume 2 tab 58] 10 May 2001 - purported meeting of HTP 146 As to the purported meeting of Timber of 10 May 2001, the only remnant of a Timber meeting is a draft minute at 2/601. There is no explanation as to how that minute came to be in existence. There is a similar minute, unexecuted, in the name of Group (B 2/609). Purported meeting of HIG of 17 May 2001 [PX 647] 147 The minutes of a so-called 'single agenda' directors meeting of HIG said to have been held on 17 May 2001 also dealt with the proposal for HIG to sell 100% of its shareholding in AHL to HTP. Those recorded as present are Mr McLeod (Chairman), Mr Holland (by telephone) and Mr Meers. Mr Hughes is recorded as in attendance as the Secretary. The minutes PX 647 include:

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148 Mr McLeod had difficulty giving evidence as to the date on which these minutes were signed being unable to be clearer as to that day. The Company Secretary, who is recorded as in attendance, said he did not attend any such meeting and did not prepare the minutes (Hughes, 19/11/2004, para 7). Mr Meers, who was a director recorded as having been in attendance, gave evidence which is accepted as reliable that he did not attend any such meeting, did not receive a board pack for any such meeting, had never seen any valuation of the land at $10 million and was not ever present when the board of Group resolved to revalue the surplus land. The meeting is not noted in the diary kept by Mr Meers. He could not recall having seen at that time any valuation of the property and he would have recalled this had he been notified of such valuation for the reason that he was so heavily involved in the negotiations for refinancing from various banks. Mr Holland gave evidence that he did not recall any Hudson company board ever resolving to revalue the surplus land to $10 million. This evidence is accepted as reliable as it is consistent with the evidence inter alia given by Mr Meers. 17 May 2001 minutes - HTP 149 The minutes of a meeting of a so-called 'single agenda' directors of HTP said to have been held on 17 May 2001 dealt with the acquisition by HTP of 100% of the issued capital in AHL. Mr Hughes is recorded as in attendance as secretary. His evidence accepted on this issue as reliable, was that he had not been in attendance and had not prepared the minutes. The version of the minutes [appearing at PX 655/656] include a statement that Mr McLeod declared "that he had a conflict of interest in relation to the transaction by virtue of his position as a director of HIG and abstained from voting on the transactions". The minutes record Mr Holland, Mr Little and Mr Grice as not having attended the meeting "as it was considered that a conflict of interest issue arose pursuant to their respective positions as directors of either or both of HIG and AHL". The proposition put to Mr McLeod in cross-examination was that after he had learned at the audit meeting of the problem, he had written to Mr Seaton on 27 August 2001 [PX1956] enclosing a copy of the minutes dated 17 May 2001, which minutes he had amended so as to include a reference to a pre-approval valuation [transcript 312.32]. 150 Under cross-examination Mr McLeod gave evidence [transcript 279] that it was possible that he signed this minute [which bears his signature as "17 May 2001"] on 27 August 2001 [his explanation (transcript 280.5) was that he did not believe that he would have signed this minute that far after the date of the meeting unless that was the next time that there was a scheduled board meeting]. He was asked:

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"The Company will benefit from the development of Bremer Business Park being approximately 322 hectares of land adjacent to AHL plans at Ipswich. This land will be developed in a joint venture with Wingate Properties Pty Ltd over the next 3-5 years. Mr McLeod noted that the profit returns above the Pre Approved Valuation of $10 million derived from the development of Bremer Park land will revert to [HIG] as part of the Purchase and Sale Agreement. The profit will be paid to [Hickson] on an after-tax basis." [The handwritten changes are reflected in the words which I have italicised] [PX 677] 153 Under cross-examination Mr McLeod gave evidence that the handwritten words "Bremer" and "Business" was in the handwriting of Mr Hughes and that the balance was in his own handwriting [transcript 284.10]. 154 The proposition that the singular agenda minutes for the meeting of HTP of 17 May 2001 received authentication [in the imprimatur sense described above] by reason of the events at the scheduled HTP meeting of directors of 22 May 2001 is rejected. The minutes of the scheduled HTP meeting of 22 May 2001 purported to resolve that approval be given for the chairman to sign inter alia the tabled minutes of the meeting of 17 May 2001 "as at true record of proceedings at [that meeting]". However the board pack version of the minutes of the 17 May 2001 meeting before the scheduled meeting of 22 May 2001 was a version with the handwritten amendments to the explanation of the first $10 million earlier referred to. This is yet another example of a circumstance in which the evidence did not establish that the later scheduled meeting retrospectively approved, ratified, or assented to or authenticated as signifying the consent of those present at the scheduled meeting, inchoate events which had not occurred at a previous meeting as if they had occurred. 155 The purported meeting of HTP on 17 May 2001 refers to a conflict of interest in respect of Messrs Holland, Little, Grice and McLeod. The only persons alleged to have been present were DH Sutton and R Mendez, neither of whom was called by the defendants to give evidence. Minutes of 19 June 2001 - AHL - Scheduled meeting 156 This scheduled meeting records as being present, Mr Holland as chairman, Mr McLeod, Mr Grice Mr Little and Mr Hills. Mr Hughes is recorded as in attendance as Secretary. The minutes record as tabled at the meeting minutes of previous directors meetings including that of 2 May 2001. The minutes purport to resolve that approval be given for the chairman to sign the minutes of inter alia the 2 May 2001 meeting "as a true record of proceedings at that meeting]. 157 Bearing in mind the significant problems earlier indicated in the Court accepting the authenticity of the 2 May 2001 minutes of AHL, it is clear that even if the 19 June 2001 meeting took place and resolved as is noted in those minutes [PX 1204], that resolution is ineffective. The board pack for the 19 June 2001 meeting [PX 1217 et seq] included the version of the minutes of the meeting of AHL said to have been held on 2 May as a meeting where Mr McLeod was chairman. Yet what was apparently signed or said to be signed, on 19 June [PX 601], was a version of the minutes which recorded Mr Holland as chairman. Hence at the very least what the 19 June 2001 meeting, if it took place, resolved to approve, presumably in accordance with the version of the minutes in the board pack, was not what was in fact signed. Further the significant problems identified above in there having been two versions of the minutes of AHL of 2 May 2001 also has the result of the exploding any suggestion that the 19 May 2001 scheduled meeting could have authenticated the earlier minutes. This is another example of a circumstance in which the evidence did not establish that the later scheduled meeting retrospectively approved, ratified, assented to or authenticated as signifying [in the imprimatur sense] the consent of those present at the scheduled meeting inchoate events which had not occurred at a previous meeting as if they had occurred. The balance of probabilities favours a finding that the directors attending the meeting neither discussed nor resolved to accept nor assented to nor lent their approval in the imprimatur sense discussed above to the matters set out in whatever version of the 2 May 2001 AHL minutes may have been before the 19 June meeting.

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HIG meeting - 5 September 2001 163 The minutes record as being present Mr McLeod (Chairman), Mr Holland and Mr Meers. Mr Hughes (Secretary) is recorded as in attendance. The minutes state that with the permission of those directors in attendance the agenda was restricted to approving the Deed of Amendment. 164 As to the purported HIG meeting of 5 September 2001, the uncontested evidence of Mr Hughes is that he had not before seen the email from Mr Restas to Mr McLeod dated 5 September 2001 recorded in the minute as having been tabled (PX6/2012). These HIG "minutes" were not dated by Mr McLeod and the date it bears (namely 20/11/01) is not in his handwriting. Mr Hughes gave evidence accepted as reliable that he did not recognise the handwriting of which person had dated the minutes. Mr Meers' evidence was also that he had not seen Mr Restas email and had no recollection of a meeting of directors of Group on that day. He did, however, have a meeting earlier that day with Messrs Paul and Mizen which he recalls. He has no recollection of any meeting of directors approving any amendment to the Entitlement Deed (Mr Meers, 16/11/04, paras 14-16). 165 The Court's finding is that on the balance of probabilities no such meeting took place. In consequence no authority was given to any person on 5 September 2001 to attend the company seal to the second Deed of Amendment. No resolution was passed to the effect of that suggested by these fictional minutes. AHL meeting - 5 September 2001 166 These purported minutes identify as being present, Mr Holland (Chairman) and Mr McLeod. Apologies are noted as having been given by Mr Grice, Mr Hills and Mr Little. Mr Hughes is recorded as in attendance as Secretary. He could not recall attending any such meeting. His evidence was that the minutes were in a format which he commonly used when preparing minutes but he could not recall specifically whether or not he had prepared these minutes. His evidence was that it was possible that he prepared the minutes without such meeting being held if he was asked to do so by the directors. 167 The minutes record that a Deed of Amendment was tabled at the meeting it being noted:

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"that the proposed amendments to the Entitlement Deed as set out in the Deed of Amendment be adopted and that Messrs Holland and Hughes are hereby authorised to execute the Deed under the Common Seal of the Company." 168 It appears that no subsequent minute of AHL purporting to ratify or approve the document purporting to be the minutes of the AHL meeting of 5 September 2001 was tendered [Transcript 500-501]. The Court's finding is that on the balance of probabilities no such meeting took place. In consequence no authority was given to any person on 5 September 2001 to append the company seal to the second Deed of Amendment. No resolution was passed to the effect of that suggested by these fictitious minutes. Minutes of meeting of directors of HIG of 6 September 2001 169 These minutes [bundle 2066] were signed by Mr McLeod but dated by someone else. He could not recall how this had happened. On occasion minutes were adjusted at a meeting, taken away to be changed and brought back for his signing and then dated by the company secretary. [Transcript 314] HIG Directors Meeting of 20 November 2001 - Scheduled meeting 170 The events of 20 November 2001 become important in relation to the issues in these proceedings for the reason that the purported minutes [PX 2205] record that at this meeting, minutes of the previous directors meetings held on 5 September 2001, 6 September 2001, 27 September 2001, 28 September 2001 and 31 October 2001 were tabled. There is a head-on factual dispute as to whether any such 20 November meeting took place. The significance of this dispute is that it was at this meeting that Group is asserted by the defendants to have ratified the 5 September 2001 minutes (PX7/2205). Interestingly, as earlier noted, there appears to be no minute purporting to ratify the minutes of Hardboards of 5 September 2001. 171 The minutes then record that the above described tabled minutes were taken as read and that following a review of the tabled minutes, it was resolved that approval be given for the chairman to sign the minutes of 5 September 2001, 6 September 2001, 28 September 2001 and 31 October 2001. It was further resolved "that the chairman having signed the minutes of the Directors meeting held on 27 September 2001 as a true record of the proceedings at that meeting, be (sic) and is hereby ratified." 172 The purported minute of Group records Messrs McLeod, Holland and Meers as present with Mr Hughes in attendance as secretary. Mr Hughes gave evidence that he had no recollection of attending any such meeting (Mr Hughes, 19/11/04, paragraph 27). Mr Meers gave evidence that he did not recall receiving a board pack for the meeting (Mr Meers 16/11/04, para 18) and there is no evidence of any notice to him of the meeting. 173 The plaintiff submits that if it be the fact that no such meeting occurred the ratification of a document as a true record of it is nothing more than a fraud. It is submitted that it cannot be characterised as a valid and legitimate resolution of any decision where the directors are applying their mind to the business concerned. They are not on its face even purporting so to do. Mr Meers 50th birthday - his evidence 174 20 November 2001 was the date of Mr Meers 50th birthday. He gave evidence and was closely cross-examined. His evidence is accepted as reliable. His evidence was that he did not attend the Group board meeting of 20 November 2001. He could not recall whether or not he had received Board papers for that meeting. He had deposed as follows in his affidavits:

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My recollections of the events of 20 November 2001 are: · that I left for work by car at approximately 8am from my house in Pymble. Annexed hereto and marked "B" is a copy of my mobile phone account for the period including 20 November 2001. I note that it records that at 8.08am I received a call directed via the Turramurra Optus base station which is near my home. I further note that it records that at 8.10am I made a call via the Koola Shop Optus base station to telephone number 9904 6774 which is my mother's telephone number. The fact that this call went via the Koola Shop base station suggests to me that it was made on my way to work as I was driving through Koola Park; · I arrived at work at the Hudson offices on Macquarie Street at approximately 8.45am. On arrival, as always, my first task was to review the amounts due and overdue for settlement on trades on the ASX; · following this at around 9am there was a small gathering in the boardroom in honour of my 50th birthday. I recall that I was presented with a birthday card, a copy of which is annexed hereto and marked "C", and that a birthday cake was also presented to me; · at approximately 10am I left Hudson's offices in Macquarie Street and drove to my home at Pymble. When I arrived at home at approximately 10.30am I met John Farey who drove there independently and we had a cup of tea with my wife; · at approximately 11am I left home in John Farey's car with him driving and we drove to Wyong, on the Central Coast, and arrived there at approximately 12 noon; · at approximately 12 noon we met Paul Coffey of C4ES Pty Limited for a cup of coffee in Wyong near Wyong Shire Council Chambers. The three of us had a cup of coffee and then walked a short distance to the Council Chambers where we met Neil Rose (the Mayor), Greg Best (SP Mayor) and Ian McNicol (Senior Planner). We then had a meeting with the Council representatives and shared a sandwiches lunch with them in Council chambers. Copies of Mr Rose's, Mr Best's and Mr McNicol's business cards, as well as the business card of Mr Coffey, all of which I received from them on 20 November 2001, are annexed hereto and marked "D"; · at approximately 2.00pm the meeting and lunch at Council Chambers concluded and Mr Farey and myself drove in Mr Farey's car to HIG's property in Warnervale (the Warnervale Land) for the purpose of inspecting a property which was part of the Warnervale Land. The Warnervale Land had been the subject of our meeting with members of Wyong Shire Council. I recall that on our way to the Warnervale Land we got lost. Mr Coffey called us on to enquire where we were and gave directions to get to the Warnervale Land. The inspection of that property with Mr Farey and Mr Coffey took a short time, following which Mr Farey drove me back to my home in Pymble; · we arrived at my home at approximately 4.00pm and my wife greeted us at the car. My wife invited Mr Farey into our home for a drink with us however I recall that he declined; and · for the remainder of the evening I remained at home and had dinner with my family as has been my practice for many years on my birthday. I note that my mobile phone account records a telephone call made by me at 6.23pm via the St Ives Optus base station which is also near my home." 175 Mr Stevenson put to Mr Meers inter alia the proposition that he had become confused as to his recollection about when he had travelled to Wyong Council and that he had confused a meeting which he had with the Council on 27 September 2001 with the meeting which he now gave evidence had occurred on 20 November 2001. 176 It does not seem appropriate to go through the whole of this cross-examination in detail. Other matters were raised. Essentially Mr Meers evidence to which he had deposed was not departed from. Under cross-examination he said:

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"It was my [50th] birthday, I remember very clearly that particular morning, what happened that morning, the trip to, the trip to Warnervale, sorry, Wyong Shire Council. I don't recall much of that. I certainly can still recall the meeting had with Mia Rose and I can recall a trip up to Warnervale land that I had with Mr Farey where we unfortunately got lost for a short time and then subsequently met Mr Coffey at the Warnervale site. And I can certainly recall coming home, meeting my wife, inviting Mr Farey into our place and Mr Farey leaving and I enjoying my family for a function that night. Plus also I have tabled a record of my mobile phone for that particular day which gives me further substance to what I am saying to you of my location as of around 6pm that night." [Transcript 71.1] Mrs Meers evidence 177 Mrs Meers had deposed as follows: · "20 November 2001 was my husband's 50th birthday; · it was a school and work day for my husband and our children, and I recall them leaving for work and school respectively at some time on that morning; · it was my understanding and belief that my husband was required to attend on that day a luncheon engagement for his work somewhere on the Central Coast or Newcastle, and that he also had to attend something else on the Central Coast, though I do not now recall where precisely (the Luncheon Engagement); · at some point before 12 noon I recall my husband arriving home to our house in Pymble to drop his car off prior to the Luncheon Engagement; · shortly thereafter, Mr John Farey (Mr Farey), who I know is a work colleague of my husband, arrived at our house in Pymble to pick up my husband for the Luncheon Engagement; · I recall that I chatted with Mr Farey for a short while but I do not now recall the substance of that conversation; · subsequently, Mr Farey and my husband left for the Luncheon Engagement in Mr Farey's car; · at approximately 3.30pm to 4pm I recall that Mr Farey and my husband arrived back at our home in Pymble in Mr Farey's car. I can recall the time of their arrival as our daughter, Katherine, had just arrived home from school, which normally occurred between 3.00pm and 3.30pm; · when Mr Farey and my husband arrived at our home in Pymble I went out to Mr Farey's car to greet my husband and invited Mr Farey for a cup of tea, however I recall that he declined; · my husband and I then went inside and prepared for a family birthday dinner which was to occur at home with our family (the Birthday Dinner); · I recall that at approximately 6 or 6.30pm one of our children (I cannot now recall which) telephoned us to pick him or her up from Pymble railway station, which I did. This was approximately a 10 minute round trip; · subsequently, with all of our family home, we had the Birthday Dinner for my husband.

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It is our family's usual practice to celebrate each other's birthday with a family dinner at our home in Pymble. On the very rare occasions that this has not occurred, we have had dinner at a restaurant to celebrate, however as this rarely occurs I recall specifically that this did not occur on the night of the Birthday Dinner, which was at our home." 178 Mrs Meers was also cross-examined closely on her recollections. She was asked whether she actually recalled her daughter being home when her husband and Mr Farey had arrived. Her answer was in the affirmative. 179 Other answers of hers in relation to her recollections that she had picked her daughter up between 3 pm and 3.30 pm on the day and her daughter having just arrived home from school, may well have been because it was her practice to pick her daughter up every day and she seemed in one of her answers to elide an assumption as to what usually happened with evidence of actual recall. However her general evidence was given strongly and I was impressed with her demeanour. I accept her evidence as reliable particularly because this was the day of her husband's 50th birthday. Evidence given by Mr John Farey 180 Mr Farey was not required for cross-examination by the defendants on his affidavit. His evidence had been as follows: Initial affidavit 16 November 04 · "he is a director of HIG and was appointed on 1 February 2002; · he was previously a director of HTP appointed on 2 April 2003 and resigned on 10 July 2003; · he had checked his diary for 2001 and confirmed that it recorded that he attended Wyong Shire Council, in Wyong, New South Wales, for a luncheon meeting with the Lord Mayor on 20 November 2001; · he recalled attending this meeting with Mr Peter Meers and that the meeting commenced at about 12.30 p.m. on He also recalled that the meeting lasted for approximately 2 hours; · he also recalled visiting a Hudson Pacific Group's property at Warnervale, New South Wales with Mr Peter Meers after the meeting. His recollection was that this visit lasted for approximately an hour or so; · after that site visit he drove Mr Peter Meers back to Sydney. In his experience, at that hour of the day, it would have taken over an hour to drive to Sydney. The earliest possible time at which Mr Peter Meers and he could have arrived back in Sydney would have been 4.30pm, although he could not recall now exactly what time he had arrived back in Sydney." Subsequent more detailed affidavit of 31 March 05 181 His more detailed evidence in his subsequent affidavit was as follows: · "In my previous affidavit, I recorded events primarily concerning the afternoon of 20 November 2001. I will now set out my full recollection of the events of that day. · As at 20 November 2001 I had been working full time in the offices at 131 Macquarie Street, Sydney (Hudson Offices) for approximately 5 years. It had been my practice during that time to arrive at the Hudson Offices at approximately 8am each day. I do not recall arriving any earlier or any later on 20 November 2001. · I was aware on that morning that it was Peter Meers' (Mr Meers) 50th birthday. When I arrived at the Hudson Offices, I asked one of the secretaries, Daria Clark, to purchase a cake and birthday card for Mr Meers. I recall that the card was brought around to each office in a manila folder so that it could be signed discretely. Annexed hereto and marked "A" is a copy of Mr Meers' birthday card and I recognise my signature on that card. I recall that early that morning there was a gathering on level 2 of the Hudson Offices for Mr Meers' 50th birthday. I do not now recall precisely where it was held but it must have been on level 2. I do not now recall who was present but I do recall that a chocolate cake was presented to Mr Meers. · Shortly thereafter I drove by myself in my car to Mr Meers' house in Pymble. I arrived at around 10am. When I arrived I went inside and had a cup of tea with Mr Meers and his wife. At around 10.30am I left in my car with Mr Meers as a passenger and headed towards Wyong, on the Central Coast. · At about 11.30am we arrived outside the Wyong Shire Council Chambers and Paul Coffey, an environmental consultant, was waiting for us. We went to a nearby coffee shop to discuss the strategy for our meeting. At around 12.30pm we arrived at the Chambers of the Lord Mayor, Neil Rose. We met the Lord Mayor and his executives and had lunch with them. There were extended discussions concerning the re-zoning of the land at Warnervale owned by Hudson Pacific Group Limited. We also inspected various plans of the site. · At around 2.00pm we both left council chambers and drove to the Warnervale site. Shortly after leaving the chambers I took a wrong turn which resulted in us arriving late at the Warnervale site at around 2.30pm. When we arrived, Paul Coffey was already at the site. · After inspecting the site, Mr Meers and I left in my car at around 3.00pm. I drove him to his home at Pymble, arriving at approximately 4.00pm. When I arrived, Mrs Meers invited me inside for a coffee but I declined. I drove by myself back into the city and arrived at the Hudson Offices at approximately 5.00pm. I went directly to my office of level 2 of the Hudson Offices. I did not see Mr Meers return to the Hudson Offices that day. · Annexed hereto and marked "B" is a copy of my diary for 20 November 2001. At the foot of the column for 20 November 2001 there is some "white out". I recall that I had to undergo blood tests on the morning of 21 November 2001 and I had to remind myself to "fast from 12 [midnight]" for the blood tests. The blood test was rescheduled for 22 November 2001 and I "whited out" the entry to fast as it would no longer be necessary to do so for 21 November 2001." Evidence of Mr Holland/Mr McLeod 182 Mr Holland gave evidence to the contrary which is rejected. Mr McLeod gave evidence to the contrary which is rejected [transcript 292] He could not recall there being a small gathering in the board room to honour Mr Meers 50th birthday nor did he have any recollection of the presentation of a birthday card to him. [Transcript 293] 183 Mr Holland's unreliability as a witness has already been dealt with. His evidence on this 20 November issue is rejected as unreliable. Further examples of his general lack of reliability include: · he was shown the document purporting to be minutes of the meeting of directors of AHL of 2 May 2001 [PX 601]. He accepted that he had signed these minutes on the 19 June 2001 [Transcript 379]. It was put to him that neither Mr Grice nor Mr Hills were present, the minutes recording them having been present by phone. Mr Holland could not recall the meeting. He was asked how it had come about that Mr Hills could have tabled a recent letter at the meeting when he was not present. His answer was that he did not know how Mr Hills had done that [Transcript 380.20]. His evidence included:

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Decision - The scheduled HIG meeting of 20 November 2001 never took place 191 All that Mr Stevenson was able to submit in seeking to justify the forensic decision by the defendants not to cross-examine Mr Farey, was that his evidence had been that he dropped Mr Meers at home in Pymble at approximately 4 pm, and that this only tended to indirectly support the evidence on the subject given by Mr Meers. The submission is not of substance. Mr Farey's evidence very significantly supports the version of events given by both Mr and Mrs Meers particularly where his evidence was not tested at all. 192 The consequence of this finding is that the purported ratification on 20 November, of the minutes of a directors meeting held on this 5 September 2001, never occurred. Notice of the purported meeting 193 Additionally the finding is that the evidence does not establish the requisite giving of notice of the meeting to each director either personally or by posting of a notice in a prepaid letter: the outdated reference to telegrams no longer requires to be dealt with. Mr Meers was shown by Mr Stevenson, a bundle of documents which became MFI D (1) (2) but was never tendered. Mr Stevenson put to Mr Meers that this bundle was in fact the original of the board pack for the meeting of 20 November 2001. Mr Meers had no memory of receiving a board pack for the meeting in the form of the documents shown to him or at all. The further contention by the defendants that notice was given by a written schedule of board meetings circulated at the beginning of the year has no substance. The proposition is not sustained by the materials in evidence. In any event, any such schedule would not constitute a notice in the form necessary to comply with the relevant Article of Association. 21 December 2001 - Scheduled HIG board meeting 194 There is in evidence a board pack for a meeting of HIG to be held on 21 December 2001 [PX 2366] and minutes of such a meeting [PX 2359]. The minutes record Mr McLeod as chairman being present, Mr Meers being present and Mr Holland being present (by telephone) and Mr Hughes being in attendance as secretary. The minutes record that there was tabled at the meeting, minutes of previous directors meetings including that held on 20 November 2001 and that following a review of the tabled minutes it was resolved that approval be given by the chairman to sign the tabled directors minutes as a true record of proceedings at those meetings. 195 Mr Meers was cross-examined by Mr Stevenson in relation to these documents. He could not recall receiving the board pack for the meeting [Transcript 55.20/57.35]. Later his evidence was that it could have happened that he received Board papers for the 21 December meeting although he had no memory of that [Transcript 61.1 2]. On being shown the version of the 20 November 2001 minutes forming part of the board pack in the documents he did recall the substance of matters dealing with Clean Energy Products as particularly relating to himself [in that part of that company's relationship with HIG was part of his particular responsibility]. What was recorded in this version of the 20 November 2001 minutes was consistent with his recollection of what was happening in relation to Clean Energy Products Pty Ltd prior to 21 December 2001 196 Likewise he had no memory of having participated on 21 December 2001 in a resolution approving inter alia the minutes of a previous meeting held on 20 November 2001. His evidence was that he not only had no memory of attending a meeting of 21 December 2001, but that if that meeting did occur he had no memory of documents relating to that meeting. 197 His evidence was that had he seen the Board papers and noticed the 20 November date referred to in them as recording an earlier directors meeting, he believed he would have objected but his memory was not very clear on the matter generally [transcript 61]. At [transcript 62.5] in being asked whether he was present at the meeting of 21 December, his evidence was that he had no memory of this "but I think there is good reason to say that I would have been there". As to the resolution recorded in the minutes of the 21 December 2001 as having approved the minutes of 20 November 2001, his evidence was as follows:

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Q. And you participated in the resolution, didn't you? A. If I was there, yes." [Transcript 63.1-.9] 198 The defendants tendered the handwritten notes of Mr Hughes taken of the events of the meeting of 21 December. The notes did record Mr McLeod and Mr Meers as being present, and Mr Holland as being present by telephone. Decision in relation to the 21 December 2001 HIG board meeting 199 Notwithstanding the many problems attending other evidence of meetings already set out above, the balance of probabilities likely favours the proposition that the 21 December 2001 HIG board meeting did take place. However the finding is that there was no review of the tabled minutes by the directors and that there was no discussion about the fact that the 20 November 2001 meeting had never taken place, nor about the fact that the document purporting to be minutes of that meeting were entirely fictitious. Further the finding is that the directors attending the meeting neither discussed, nor resolved to accept, nor assented to, nor lent their approval [in the imprimatur sense] to the resolution [approving the Chairman signing the tabled directors minutes as a true record of proceedings at the earlier meetings] being accepted as authenticating a fictitious resolution which: · albeit appearing in the minutes of the HIG board meeting purporting to have been held on 20 November 2001, had never been held; · had in turn, purported to ratify the minutes of yet another fictitious meeting of HIG purporting to have been held on 5 September 2001 [resolving that the proposed amendments to the Entitlement Deed as set out in the Second Deed of Amendment be adopted and resolving that Mr McLeod and Mr Hughes were authorised to execute that Deed under the Common Seal of the company]. 200 Additionally it should be noted that the actual resolution passed on 21 December 2001 fell well short of purporting to ratify the minutes of a board meeting of 20 November 2001. The resolution was that approval be given by the chairman to sign the tabled directors minutes as a true record of proceedings at [the 20 November 2001 meeting]. This seems to me to fall far more likely into what I earlier referred to as "the notation analysis" than into 'the imprimatur analysis'. This was only a mechanical exercise noting the previous minutes. 201 At this point it is material also note that the Court finds that clearly Mr Meers acted mechanically without noticing the reference to be 20 November 2001 minutes. The finding is that in all of the circumstances which obtained, the directors who participated in the meeting did not intend by the above described form of resolution to ratify [in terms of conferring validity upon an ineffective execution of the Second Deed of Amendment] the minutes of the alleged board meeting of 20 November 2001 or to ratify [in terms of conferring that former validity] the minutes of the 5 September 2001 alleged meeting. Retrospective alteration and backdating of minutes 202 Clearly enough the allegations as to the backdating of the minutes of the board meetings of AHL of 2 May 2001 [PX 601], and of the board meeting of HIG of 17 May 2001 [PX 647] are serious in the extreme. The irregularity in the documents purporting to be authentic minutes, not only of these meetings but of the many others earlier referred to, make plain that the Court requires to treat extremely carefully in presently endeavouring to work through the precise genealogy of any particular set of minutes. Notwithstanding the gravity (cf Evidence Act 1995 section 140(2)(c); Amalgamated Television Services Pty Limited v Marsden [2002] NSWCA 419 at [61]) of the allegation that the minutes of the board meetings of AHL of 2 May 2001 [PX 601], and of the board meeting of HIG of 17 May 2001 [PX 647] which were sent to Mr Seaton on 27 August 2001 were changed and backdated [after Mr McLeod had learned from Mr Seaton that on Mr Seaton's understanding of the Entitlement Deed the value of the land in the consolidated accounts of HTP would be nil as there was an obligation to pay HIG the first $10 million of proceeds], the finding based upon all of the evidence is that this is in fact what occurred. The further finding is that the minutes before the HTP board meeting of 17 May 2001 were at or about 27 August 2001 likewise altered and backdated. Ultimately the issue is one of credit based upon all of the evidence before the Court. 203 The following matters must be kept in mind: · Mr McLeod was quite adamant that the first time he came to appreciate that the Entitlement Deed did not reflect what he contended had been the commercial agreement reached between himself and Mr Tan was when Mr Seaton made the above observation; · Mr McLeod took no action to prevent, but to the contrary oversaw, both shareholders meetings of HIG and HTP going forward on the above described basis where shareholders had been informed:

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"…often with minutes at the board meeting, at the scheduled board meetings there would be discussion on the minutes and there would be some amendments made to them. The company secretary would take them away and make those amendments and then bring the minutes back to sign them and that would be within a day or at some future point in time he would ask me to sign them and I would sign them at that point"] · In relation to the minutes of the HTP 17 May 2001 board meeting [PX 655-657] which bear his signature and are dated "17 5 01", Mr McLeod said that he did not know whether or not he had signed those minutes on 27 August 2001 but it could be possible that he did; he did not recall signing minutes and he did not believe that he would have signed them that far after the date of the meeting unless that was the next time when there was a scheduled meeting. [cf the above explanation given in re-examination]; · The version of the minutes of the HTP 17 May 2001 board meeting provided to Mr Restas and reviewed by him leading to his discussions with Mr McLeod of 6 June 2001 was the version to be found at PX 677 [but excluding the handwritten changes]: in short he was not provided with the version to be found at PX 655 which refers to [HIG's] entitlement to profit returns above the pre approval valuation of $10 million; · Mr McLeod's evidence was that after the meeting with Mr Seaton, Mr Tan in a private meeting with Mr McLeod said that no money was required to be spent on lawyers in relation to clarification of the Entitlement Deed "as it is an in-house deal anyway and as far as I am concerned, it is clear enough"; · No credible evidence was adduced from Mr McLeod or any other witness as to the dates when or circumstances in which the subject minutes were altered. 204 In short the evidence simply does not reveal any other explanation as to any occasion prior to 27 August 2001 when it would for some reason have been necessary for earlier minutes to have been amended. Affixation of the HIG companies seal on the Second Deed of Amendment un-authorised 205 The consequential finding is that the affixation of the HIG company seal on the Second Deed of Amendment was unauthorised. Authority to fix the company seal cannot be found as given by:

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the scheduled HIG board meeting of 31 December 2001 206 However even if above findings concerning these meetings be incorrect it is clear for reasons given below that Mr McLeod breached his fiduciary obligations to HIG in each aspect of his conduct concerning the Second Deed of Amendment. He was disentitled from participating in any resolution that HIG enter into the Second Deed and he was disentitled from affixing the HIG common seal to the Deed. In consequence the Deed cannot be enforced as against HIG. The First Deed of Amendment 207 The position with respect to the First Deed of Amendment is a fortiori. Deletion of the mortgage was an act entirely for the benefit of AHL and entirely in disregard of the interests of HIG. As too with the deletion of the benefit of interest on the deposit payable to the party entitled to it under clause 2(d). 208 It is clear that deletion of the mortgage [and the deletion of the benefit of interest on the deposit payable to the party entitled to it under clause 2(d)], were acts entirely for the benefit of AHL and entirely in disregard of the interests of HIG. 209 It has not been suggested by any of the defendants that there was any commercial justification for this or that it was in the interests of HIG in any way. 210 Moreover, the signatories to the First Deed of Amendment were Mr McLeod and Mr Holland and so knowledge of the breach is to be attributed to AHL, against whom the transaction is voidable. 211 It is not suggested that those matters were the subject of any agreement or were contemplated by either the form or the substance of the proposed commercial arrangements. 212 There was some dispute at the Bar table as to the references [at PX 2069 in a set of minutes of HIG] to Deeds of Amendment dated 25 June 2001 [the submission from Mr Nell being that a typographical error is apparent and that one of the deeds referred to was the First Deed of Amendment]. The context involves no minutes at all purporting to record a meeting of AHL relating to the First Deed of Amendment. From a date perspective Mr Restas had given evidence of forwarding the First Deed of Amendment to Mr McLeod on 20 June 2001. Further it is necessary to compare the document purporting to record minutes of the meeting of HTP of 17 July 2001 [PX 1678 at 1680]: here one has a reference to a Deed of Amendment of 25 June 2001 describing an amendment to the terms of the Share Purchase Agreement of 8 June 2001. Additionally it is to be noted that the Explanatory Memoranda for the shareholder's meetings of HIG and HTP of 6 August 2001 [called pursuant to Notices of General Meeting of 5 July 2001] both made plain that under the terms of the Entitlement Deed, AHL would need to provide HIG with a mortgage over the Land to secure the payment promised to be made to HIG. 213 The state of the minutes being in the order of disarray examined in this judgment, the finding is that there is no reliable evidence of any meeting of directors of either HIG or AHL authorising the execution of the First Deed of Amendment. As the plaintiff has submitted, the very existence of this Deed is a clear example that Mr McLeod and those under his direction were prepared to execute any document which they thought convenient to their purposes at the time, without regard to its legitimacy or their fiduciary obligations. 214 It is appropriate to add that the proposition that there was little prospect of obtaining the approval of the ANZ Bank to such mortgage does not detract from simple fact that HIG had obtained a contractual entitlement which was then simply withdrawn from it. 215 It plainly follows that the First Deed of Amendment should be declared void. Rectification The principles 216 There was no serious issue as to the principles underpinning relief in the form of rectification: · the remedy is available where it is established by clear and convincing proof that at the time of execution of the instrument the relevant party or parties as the case may be had an actual intention as to the effect that the instrument would have which was inconsistent with the effect which the instrument as executed did have in some clearly identified way. Proof of an intention which persists to the moment the document to be rectified is executed must be convincing but is not limited to the existence of outward acts: Commissioner of Stamp Duties (NSW) v Carlenka Pty Limited (1995) 95 ATC 4620 (CA) (per Sheller JA, 4626) cf Fowler v Fowler (1859) 4 De G & J 250 at 265; 45 ER 97 at 103; Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54 at 65; Crane v Hegeman-Harris Co Inc [1939] 1 All ER 662 at 669; Joscelyne v Nissen [1970] 2 QB 86 at 98; Etablissements Georges et Paul Levy v Adderley Navigation Co Panama SA (The Olympic Pride) [1980] 2 Lloyd's Rep 67 at 73; Pukallus v Cameron (1982) 180 CLR 447 at 452.); · it has often been said in proceedings for rectification that the most clear and strong evidence is required and that a court is very chary of acting on the evidence of a single witness (Meagher, Gummow and Lehane's Equity Doctrines & Remedies, 4th edition, paragraph 26-050); · in Fowler v Fowler (1859) 4 De G & J 250 at 265; 45 ER 97 at 103, Lord Chelmsford LC, said that: "It is clear that a person who seeks to rectify a deed … must be able to show exactly and precisely the form to which the deed ought to be brought. [Applied in (Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54 at 64; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 349)]" 217 Proof of mistake in a rectification case must be "convincing" and "mere suspicion although strong" is likely insufficient: Chamberlain v Thornton (1892) 18 VLR 192 [applied in Lloyd v Stanbury [1971] 1 WLR 535. 218 Drawing together a number of these principles, White J in Muriti v Prendergast [2005] NSWSC 281 (at paragraph [105], [132]-[137]) put the matter as follows: · "rectification on the basis of the parties' common intention requires proof that at the time when the contract was executed, both parties had an intention to include in their agreement, a term which, by mutual mistake, was omitted from the agreement, or not properly expressed. (Pukallus v Cameron (1982) 180 CLR 447 at 452, 456; Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350-351)….

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In Bush v National Australia Bank Ltd Hodgson J said (at 407): It is necessary that the common intention be such that the Court can conclude, with the appropriate clarity, both the substance and the detail of the precise variation which needs to be made to the wording of the instrument. The parties are not required to have a common intention as to the precise words in which the term should be expressed. It follows, in my view, that it is not necessary for a plaintiff to show that the parties had a common intention as to the detail of the precise variation to be made to the instrument. It is sufficient that the Court can ascertain the parties' common intention with sufficient clarity, that it can be satisfied that the substance and the detail of the precise variation to be made to the wording of the instrument will give effect to, and not go beyond, the intention which both parties held." The case pursued by the defendants 219 It is clear that the case pursued by the defendants was that the Deed of Entitlement was intended to document an agreement that AHL would pay to HIG the first $10 million profit received by it on the development of the Land. In tabular form the defendants contention as to the formula for distribution of the funds amounts to the following: HIG AHL Wingate If aggregate consideration received by AHL is less than or equal to $10,000,000 Nil Aggregate consideration received Nil If aggregate consideration received by AHL is greater than $10,000,000 and less than or equal to $14,000,000 50% of aggregate consideration received in excess of $10,000,000 $10,000,000 50% of aggregate consideration received in excess of $10,000,000 If aggregate consideration received by AHL is greater than $14,000,000 and less than or equal to $24,666,666.66 $2,000,000 plus 75% of aggregate consideration received in excess of $14,00,000 $10,000,000 $2,000,000 plus 25% of aggregate consideration received in excess of $14,00,000 If aggregate consideration received by AHL is greater than $24,666,666.66 $10,000,000 $10,000,000 plus 75% of aggregate consideration received in excess of $24,666,666.66 $4,666,666.66 plus 25% of aggregate consideration received in excess of $24,666,666.66

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Comparison of Concepts 225 If one looks at either the Wingate heads of agreement, the entitlement deed or second deed of amendment, one can see that the formulae stated therein (in order to calculate the distribution of funds), are functions of one concept. In the case of the heads of agreement, this concept is 'profit', in the case of the Entitlement Deed and Second Deed of Amendment, the concept is 'aggregate consideration'. The defendants' case simply contends that "it is beside the point that the word 'profit' is not used in clause 4 of the Second Deed of Amendment". 226 Originally the defendants had pleaded that on the true construction of the Entitlement Deed it had the effect of the Second Amending Deed. That contention has now been abandoned. It is quite apparent in any event that the terms of the Entitlement Deed are clear. It provides for the first $10 million of aggregate consideration received on sale of the Land. 227 The relation between the two concepts, it appears from the papers, is that whereas 'aggregate consideration' is the total amount received by AHL for the sale of its land (presumable after development), 'profit' only represents that amount of moneys received by AHL for the sale of its land which exceed its expenses. It also appears that whatever expenses are incurred, at the very minimum, they include the $10,000,000 agreed pre-development value of the Land, even though $10,000,000 was never spent by AHL in acquiring such. 228 Albeit that the evidence given by Mr McLeod left so very much to be desired in terms of clarity and internal consistency, he appears to have sought to contend that it had always been his intention and that of Mr Tan that: · the first $10 million of gross proceeds would be paid to AHL; · the first $10 million of profit would be paid to HIG. 229 Plainly the defendants case does not conform with this evidence given by their principal witness. 230 The true formula as put forward by Mr McLeod is a function of two concepts, 'profit' and 'gross proceeds'. The two concepts, on Mr McLeod's evidence, are related. The relationship being that gross proceeds less total expenses equals profit Worked Example 231 The mismatch between the formula asserted by Mr McLeod and the formula in the pleadings can be shortly shown. 232 Assume the land is sold for $24 million, the total cost of development having been $6 million. The cost of the land is agreed at $10 million. Therefore the profit is $8 million (being $24M less $6M less $10M). 233 Under the case as pleaded by the defendants, in regard to the distribution of the $24 million in funds received: · the first $10 million goes to AHL; · the remaining $14 million is shared between HIG and Wingate. 234 Under the formula put forward by Mr McLeod: · the first $10 million goes to AHL (being the first $10 million of gross proceeds); · there is only $8 million in profit, and this is shared between HIG and Wingate; · the remaining $6 million is not accounted for directly. However, because it forms no part of profit, it can be presumed to go to AHL (as HIG only shares in profit under Mr McLeod's formula, and Wingate only shares in profit in the Wingate heads of agreement.). 235 Under the defendants pleaded case, AHL receives $10 million, and HIG and Wingate share in $14 million. Under Mr McLeod's asserted formula, AHL receives $16 million and HIG and Wingate share in $8 million. 236 In the result the foundational proposition for which the defendants have contended in terms of the rectification case which is pleaded is rejected. In short the broad overview circumstances are quite simply as follows: · the essential witness who has given evidence before the Court in relation to what is said to have been the intent in respect of the arrangement documented by the Heads of Agreement is Mr McLeod; · for reasons given in the judgment his evidence is unreliable; · even if his evidence was able to be regarded as reliable, that evidence supports an intent/arrangement quite disparate from that pursued in the defendants case; · whilst it is true that there is some contemporaneous documentary material which may be said to be consistent with either Mr McLeod's evidence as to what the real arrangement was or with the arrangement posited by the defendants case, the difficulties in reaching a finding of fact upholding the defendants case include:

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the very clear situation outlined to the shareholders in the Explanatory Memoranda issued for the purposes of the General Meetings of 6 August 2001. 237 In relation to the discussion which took place between Mr Restas and Mr McLeod it should be recalled that under cross-examination Mr McLeod conceded that Mr Restas had said to him on 6 June 2001 that it would be more appropriate if the first 10 million of consideration was paid to HIG rather than the first 10 million of profit, given that the asset was worth 10 million and that he, Mr McLeod, had understood that Mr Restas was drawing a distinction between consideration and profit and was pointing up a terminological difference between the term "profit" and the term "consideration". [Transcript 234] 238 Returning to the contemporaneous materials and first to the 17 May letter from Mr McLeod to the ANZ enclosing a copy of draft announcements of the same day by HTP and HIG to the ASX it is to be noted that: · the announcement on behalf of HTP states, inter alia, "HGL has the rights to the first $10 million in development profit generated from the 322 hectares of land; · the announcement on behalf of HIG states, inter alia, "the Company [HIG] will receive the first $10 million of pre-tax profits generated from the development of the Bremer Park joint venture". 239 It has to be recalled in this context that Mr McLeod's evidence was that aggregate consideration can mean profits in certain situations. This proposition likely carries within it the opposite as also being the case (that is, that profits can mean aggregate consideration). This loose approach to language was made clear by Mr Restas when discussing the drafting of the Entitlement Deed. As mentioned above Mr Restas made clear to Mr McLeod that 'profits' and 'aggregate consideration' were different concepts, in the context of the significance of the Entitlement Deed requiring to be quite clear as to what was proposed. 240 These difficulties in following Mr McLeod's loose use of language considerably lessen such weight as otherwise might have been able to be given on the rectification case both to these communications as well as to the 8 May 2001 letter of instructions sent to Mr Simmons.

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241 The defendants' submission that the form of the Entitlement Deed "was born of an error of drafting on the part of Atanaskovic Hartnell " cannot stand is exploded by the very clear evidence given by Mr Restas of his specific telephone conversation with Mr McLeod in which he raised the very issue of the initial $10 million. The rejection of the evidence given by Mr McLeod carries with it a rejection of his evidence that he did not read the critical clause of the Entitlement Deed as being inconsistent with the instructions which he had given to the solicitors. The explanatory memoranda describe the Entitlement Deed in crystal clear terms and the Court rejects as against the balance of probabilities the proposition that Mr McLeod would have been twice mistaken on such a critical issue. Likewise the explanation proffered by Mr McLeod that he read the critical clause of the Entitlement Deed on the assumption that the proposed joint venture arrangements between AHL and Wingate were in fact in place cannot be accepted as reliable evidence and is in any event imprecise in the extreme. 242 No submissions were addressed to the alternative version of the claim to rectification which uses the words "net profit". For that reason it is not necessary to deal with that alternative save of course to make the point that rectification claims made in the alternative often have obvious problems. The alleged breaches of fiduciary duty The principles 243 The following matters of principle are unexceptional: · in exercising their powers, directors occupy a fiduciary position whereas the members in general meetings do not (Ford's Principles of Corporations Law, 11th ed, para 7.120); · a director must exercise his powers and discharge his duties in good faith, in the best interests of the corporation and for a proper purpose; Whitehouse v Carlton Hotel Pty Limited (1987) 162 CLR 285, Bailey v Mandala Private Hospital Pty Limited (1987) 12 ACLR 641; · each company in a group must be treated as having its own interest even where they are wholly owned subsidiaries; Walker v Wimborne (1976) 137 CLR 1 at 6-7, Equiticorp Finance Limited (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 92 ff, Sydlow Pty Limited (in liq) v Melwren Pty Limited (in liq) (1994) 13 ACSR 144 at 147 per McClelland CJ in Eq [wrongly referred to in Ford at para 8.140 as Santow J], ANZ Executors and Trustee Company Limited v Qintex Australia Limited (1990) 2 ACSR 676. Equiticorp Finance Ltd v Bank of New Zealand 244 In Equiticorp Finance Ltd v Bank of New Zealand (1993) 32 NSWLR 50 Clarke and Cripps JJA had occasion to examine the principles which obtain in respect of breaches of fiduciary duty where directors of a number of companies within a group are required to act. 245 Notwithstanding the complexity of the group structure under consideration in Equiticorp Finance it may be seen that relevantly there was a vertical structure such that Equiticorp Financial Services Ltd (Aust) was a wholly-owned subsidiary of Equiticorp Australia Ltd which was in turn wholly-owned by the New Zealand company Equiticorp Finance Group Ltd. This latter company was wholly-owned by the ultimate holding company Equiticorp Holdings Ltd. 246 In the judgment of Giles J [quoted by Clarke and Cripps JJA at 139-140] the following appeared:

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"In Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd (2001) 38 ACSR 404, Bryson J also expressed reservations about the test in Charterbridge and stated (ACSR at 452) that he preferred the alternative test put forward by the Court of Appeal of the Supreme Court of New South Wales in Equiticorp Finance. However, his Honour did apply the test in Charterbridge and found that the two defendant directors had breached their duty to act in the interests of the company (ACSR at 479). "The two defendants (Duncan and Ambler) were directors of Maronis Holdings Ltd. Its principal asset was a single property, for which there existed development plans. Maronis Holdings Ltd was a member of the Girvan group of companies. At the top of the group of companies was Girvan Corp Ltd, a company listed on the Australian Stock Exchange. Girvan Corp Ltd had many subsidiaries. One of these was Girvan Corp (New Zealand) Ltd, a New Zealand company with shares listed on the New Zealand Stock Exchange. Girvan Corp Ltd, through a 100% owned subsidiary held 74% of the shares in Girvan Corp (New Zealand) Ltd. The remaining 26% of the shares were held by others, mostly members of the New Zealand public. Girvan Corp (New Zealand) Ltd, through a chain of subsidiaries, beneficially owned all of the shares in Maronis Holdings Ltd. The two defendant directors were directors of Girvan Corp Ltd, Girvan Corp (New Zealand) Ltd and Maronis Holdings Ltd. Nippon Credit provided a loan of $15m to Girvan Corp Ltd. The loan to be used exclusively by Girvan Corp Ltd and was of no commercial benefit to Maronis Holdings Ltd. The two defendant directors caused Maronis Holdings Ltd to mortgage the company's property to Nippon Credit to secure the loan to Girvan Corp Ltd. At the time the security was provided, Duncan and Ambler were aware that Girvan Corp Ltd was experiencing serious cash-flow problems and there was a real possibility that it might not be able to discharge the loan of $15m. The two defendant directors did not consider what protection Maronis Holdings Ltd needed against the risk of Girvan Corp Ltd defaulting on the loan. Bryson J found: · The powers of directors of a company must be used for the purposes of that company. · This does not preclude the exercise of a power with a view to an advantage to be received by another company if the transaction is one for the benefit of the company entering into it. The benefit need not be direct and immediate; it may arise indirectly. The purpose of obtaining an advantage for a related company does not necessarily result in a breach of duty. There would not be a breach of duty where a benefit is derived from a transaction by two or more companies or if the company entering into the transaction receives some indirect benefit. Considering the interests of the group does not automatically result in a breach of duty. What does result in a breach of duty is lack of regard for the interests of the company entering into the transaction. · A reasonable person in the position of a director of Maronis Holdings Ltd would have been aware that there was a real possibility that Girvan Corp Ltd would be unable to discharge the loan to Nippon Credit. · The two defendant directors did not consider the interests of Maronis Holdings Ltd when having that company grant security for the loan to Girvan Corp Ltd. The interests of Maronis Holdings Ltd were wholly disregarded by the defendant directors and no person in the position of a director of Maronis Holdings Ltd could have reasonably believed that the transaction was for the benefit of Maronis. The company obtained no tangible benefit from the loan yet gave security over all its assets without obtaining protection of any kind." "In Sydlow McLelland J (in liq) v Melwren Pty Ltd (in liq) (1994) 13 ACSR 144 at 147, Santow J found that the process by which two directors restructured operations within a group breached their duty to act in good faith for the benefit of Sydlow (S). In that case, the group restructure resulted in one of the companies, S, of which the two defendants were directors, relinquishing its assets to another group company. The recipient company was to carry out the operations. No consideration was provided by the recipient company to S other than an agreement to guarantee S's overdraft. His Honour found that the directors' decision to relinquish assets in such circumstances amounted to a breach of their duty to S, as being an act not in the best interests of S." 253 In terms of the New South Wales Court of Appeal there has been no further development since Equiticorp Finance. In consequence although it seems to me that the objective test favoured by the Court of Appeal is clearly the correct approach I propose to consider the breach of fiduciary obligation cases pursue in the present litigation by reference to each of the alternative tests. Returning to the facts 254 Ultimately there are relatively few facts which require to be referred to on the subject of breaches of fiduciary obligation. As earlier outlined, although AHL was a wholly owned subsidiary of HTP and although the controlling shareholding interests in both HTP and HIG were apparently common, the critical foundational structure involved there being shareholders in HIG who were not shareholders in HTP and vice versa. Hence the structure was different from that before the Court in Equiticorp Finance. 255 Clearly enough at some material time Mr McLeod appreciated that he had a conflict of interest in relation to the acquisition by HTP of AHL "by virtue of his position as a director of [HIG]". The purported minutes of HTP's board of 17 May 2001 included precisely such an express declaration. The very same minutes include in the statement of those who were said not to have attended, the proposition that "likewise Mr Holland [as well as Messrs Little and Grice] did not attend this meeting as it was considered that conflict of interest issue (sic) arise pursuant to their respective positions as directors of either or both [HIG] and [AHL]". 256 Mr McLeod in those circumstances gave evidence that he had abstained from voting on the transaction. He was asked why he had not abstained from voting on the transaction when the Entitlement Deed was amended. His evidence was "I have no answer for that" [transcript 285.35-45]. The real reason which underlay the Second Deed of Amendment 257 As already stated, prior to the Second Deed of Amendment, the auditors, PricewaterhouseCoopers, advised that the $10,000,000 value attributed to the Land in the books of AHL could not be maintained. This was so because, under the wording of the original entitlement deed, AHL was not entitled to the first $10,000,000 of monies receivable from the ultimate sale of the land. Accordingly, as I interpolate, AHL could not show in its books that it had a certain entitlement to $10,000,000 when, as the Entitlement Deed provided, it only had a certain entitlement to share in whatever was recoverable surplus to this $10,000,000. 258 As the evidence established, a reduction in the value of assets of AHL of $10,000,000 would result in a corresponding increase in the goodwill of AHL of $10,000,000. However, because this increased value of goodwill would not be a true and accurate representation of the position of AHL, the result would be that this increase in goodwill would have to be written-off. Hence the ultimate result would be a loss of $10,000,000 being entered into the books of AHL. 259 Because AHL was a wholly owned subsidiary, this $10,000,000 loss would also be reflected in the books of its parent company, HTP and correspondingly, HIG. 260 Accordingly, the advice of the company auditors was that without an amendment to the entitlement deed, the books of AHL would have to be changed to record a $10,000,000 loss. 261 The Second Deed of Amendment sought to meet this predicament. 262 As the financial advice went, if the Second Deed of Amendment had the effect of reserving to AHL the first $10,000,000 of monies receivable from the sale of the Land, it would not have make any change to the asset value, and therefore, would not have to book a $10,000,000 loss in its financial reports. 263 An important finding in terms of the whole of the evidence is that Mr McLeod was at all material times aware that the Deed of Entitlement was intended to document an agreement whereunder HIG would receive the total of the aggregate consideration received by AHL upon the sale of the land up to the amount of $10 million. 264 In light of: · that finding as to Mr McLeod's material state of mind · the finding reached on all of the evidence before the Court that the Deed of Entitlement:

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there can be no doubt but that Mr McLeod breached his relevant fiduciary obligations owed to HIG in the circumstances. And this whether one applies the subjective or the objective test. 265 The real gravaman of the defence by the defendants and Mr McLeod to the allegation that he had breached his relevant fiduciary obligations owed to HIG was that the Second Deed of Amendment accurately recorded the true arrangement between the parties. The finding is to the contrary. These findings carry with them the necessary further finding that Mr McLeod breached his fiduciary obligations owed to HIG. This flows from the fact that the Second Deed of Amendment contained terms which were clearly adverse to HIG and favourable to AHL. It was only if the true arrangement between the parties intended to have been recorded in the Entitlement Deed had been incorrectly therein recorded as later corrected by the Second Amending Deed, that the defence to the breach of fiduciary obligation may have succeeded. 266 HIG was deprived of its entitlement to receive the total of the aggregate consideration received by AHL upon the sale of the Land up to the amount of $10 million. No consideration moved to HIG in this regard. Nor could there be any defence by way of a suggestion that both HIG as well as AHL were receiving a benefit from the transaction, as they were not. Nor could it be suggested that HIG was to receive some indirect benefit from the transaction. The only factor which could have justified the Second Deed of Amendment was if it had been the case that a mistake had been made in the terms of the Deed of Entitlement. Such a mistake would have been made if the Deed of Entitlement had always been intended to provide the terms which the Second Deed of Amendment sought to put in place. No such mistake had been made. Mr McLeod was well aware of that fact. In all of those circumstances an intelligent and honest man in the position of Mr McLeod as a director of HIG, could not have reasonably believed that the transaction was for the benefit of HIG. 267 The position in relation to Mr Holland is that he acted in ignorance, entirely unaware of what had been the anterior position and entirely unaware that the effect of the Second Deed of Amendment would be to dramatically alter the position ante. His duty was to seek to be informed as to what the anterior position was and as to what the effect of the Second Deed of Amendment would be and as to precisely why it was necessary to enter that Deed of Amendment. He did none of these things. He acted only [and unthinkingly] at the dictate of Mr McLeod. Whilst on the balance of probabilities he may have been told at the time that the purpose of the Second Amendment Deed was to clarify 'issues' in the Entitlement Deed, he had to do more to become properly informed and did not. He had to endeavour to find out precisely what was happening and why. He did not. Objectively viewed, the Deed was adverse to the interests of HIG. Finally he simply accepted that he did not turn his mind to the question of whether or not the fact that different companies in the Group and interests which were not the same and this because he did not understand that as a director of the different companies he had an obligation to look at their interests separately. Hence he also breached his relevant fiduciary obligations owed to HIG in the circumstances and this whether one applies the subjective or the objective test. The position is a fortiori in regard to his breaches of fiduciary obligation. Claim to be excused from breaches of fiduciary duty 268 Both Mr McLeod as well as Mr Holland have sought to be excused from any breaches of fiduciary duty pursuant to s 1317S or alternatively 1318 of the Corporations Act 2001. Had it been necessary to proceed to make findings on the matter the holding would be that there are no grounds for the court acceding to that application. The position is quite clear insofar as Mr McLeod is concerned. His pivotal position is dealt with in detail in the judgment. 269 Whilst the position with respect to Mr Holland is a considerably different one the holding would be that there are also no grounds for acceding to his application to be so excused. The matter is discretionary. He occupied an important position as a director of HIG, a public listed company. Shareholders were entitled to his attention being given to his acts as director. His general approach having been found to simply act unthinkingly at the direction or dictate of Mr McLeod, the particular circumstances revealed in the evidence make it clear that the discretion to excuse would also not have been exercised in his case. 270 In any event as is made plain at the end of the Judgment, in the light of the findings the plaintiff apparently will not be seeking equitable compensation from the director. AH Bremer Share Sale Agreement The Issues 271 The issues raised in respect of the 23 July 2003 letter are as follows:

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The second relevant principle is that post-contractual conduct is admissible on the question of whether a contract was formed: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77; Barrier Wharfs Ltd v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668, 669 and 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 at 9149 and 9154-9156; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 at 9255. The third relevant principle is that post-contractual conduct is not admissible on the question of what a contract means as distinct from the question of whether it was formed. As explained by Priestley JA (Meagher JA agreeing) in Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 326-330, the status of the relevant High Court authorities is unclear: hence unless it is demonstrated that the later decisions of the Victorian Full Court and Court of Appeal against admissibility, Ryan v Textile Clothing & Footwear Union of Australia [1996] 2 VR 235 and FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343, are clearly wrong or they are overruled, they should be followed in New South Wales. No attempt was made to demonstrate that they are clearly wrong. The fourth relevant principle is that the construction of a contract is an objective question for the court, and the subjective beliefs of the parties are generally irrelevant in the absence of any argument that a decree of rectification should be ordered or an estoppel by convention found." 279 Hence in determining the circumstances surrounding the formation of the agreement, the matrix of facts, it is the objective intent that is paramount. Whether any relevant individual representative thought that an agreement existed or that it did not exit, is irrelevant to the exercise unless there exists an argument concerning estoppel. As Lord Wilberforce has said: "When one speaks of the intention of the parties to the contract one speaks objectively - the parties cannot themselves give direct evidence of what their intention was - and what must be ascertained is what is to be taken as the intention which reasonable people would have had if placed in the situation of the parties." [ Reardon -Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989]

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In so far as acts or statements of the kind referred to, not involving communications between the parties, are claimed to be relevant in a case such as the present upon the ground that they constitute an admission, it seems to me that it will often be necessary to identify with some care the fact which is said to have been admitted. As was noted, there may be cases in which the issue is such that the fact of the subjective state of mind of one or other of the parties is relevant. Normally, however, what is in issue is not their subjective state of mind but their "intention as expressed" (cf Inland Revenue Commissioners v Raphael [1935] AC 96 at 142 per Lord Wright) and caution may need to be exercised in relating the fact which is said to be admitted to the fact which is legally relevant." [emphasis added] Commercial contract/certainty/construction 287 The court is dealing with a commercial document. In endeavouring to discern the parties intent and in construing the meaning of the words used, the Court will strive to give the document a commercial, reasonable and rational operation: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; Hide & Skin Trading v Oceanic Meat (1990) 20 NSWLR 310. 288 There is abundant authority that "the court should be astute to adopt a construction which will preserve the validity of the contract": per Mason J, Meehan v Jones (1982) 149 CLR 571 at 529; Biotechnology Australia Pty Ltd v Pace (1988) 15 NSWLR 130 at 132, per Kirby P. Further the court will strive in dealing with a commercial contract to discern the objective intent of the business relationship or other parameters of a contract in order to give effect to that which the parties may be seen to have bargained for. But always it is to the words of the document [here suggested as amounting to a binding contract] that the court must attend looking in that regard to the whole of the document to discern the parties' intent. 289 Where mechanical provisions intended to operate over an extended period of time are concerned the court endeavours to follow the mechanics and provisions expressed in the contract in the endeavour to follow, always by looking at the manner in which the matter is expressed, how the parties saw the contract as a working guide to the way forward. As pointed out in Biotechnology at 135, the court will however not be in a position to in effect spell out that which the parties have for themselves failed to agree upon. Nor will the court be in a position to clarify that which is irremediably obscure. Nor will the court accept for itself a discretion which the parties have, by their agreement, reserved to one or other of them. To do so would not be to give effect to the contract but to change it: Kofi-Sunkersette Obu v A Strauss & Co Ltd [1951] AC 243 at 250 (PC). 290 Generally the proper approach is summarised in Halsbury's Laws of Australia volume 6 as follows:

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"To this I would add the observation of Lord Steyn, writing extra-judicially on "The Intractable Problem of the Interpretation of Legal Texts" (2003) SLR 1 at 7. After pointing to the shift from literal to purposive interpretation, he adds the caveat that it would be an oversimplification to say that there has been a homogenous shift towards a purposive interpretation of all legal texts. Nonetheless he says: " In a network of contracts governing a construction project, parties ought generally to be able to rely on the obvious meaning of the interlocking texts". 297 Hence I take it as axiomatic that: · the Court endeavours to give primacy to unambiguous words used in a written contract, this matter generally being approached in the manner outlined by McColl JA in Peppers Hotel Management supra; · the proper approach seeks the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably been available to the parties in the situation in which they were at the time of the contract" (Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at 188 citing Lord Hoffmann, Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912; [1998] 1 All ER 98 at 114; Peppers Hotel Management Pty Ltd supra at [66 et seq]; · commercial contracts should be construed so as to be given a sensible commercial operation: Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; Hide and Skin Trading v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-4; Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15 per Giles JA at [64]. 298 Against that setting of principle I return to the issues principally commencing with issues 2 and 3 as described above. Was the 23 July 2003 letter legally binding? If so, what were its terms? 299 Clearly enough one commences with the background leading to the 23 July 2003 letter but also requires to deal with the events following the signing of that letter in order to ascertain the parties objective intent in signing the letter. The background Events leading up to letter of 23 July 2003 Late 2002 300 In late 2002, steps were taken by Group, Timber and Wingate to endeavour to agree on the terms of the joint venture contemplated by the Heads of Agreement. 301 In December 2002 Timber entered into a Facility Agreement with GE Capital Finance Pty Limited. 302 At around this time Timber business was under capitalized and trading results were poor (eg. T318.45). The GE facility 303 The GE facility comprised a Revolving Loan Facility Limit of $40 million, which was reducible to $30 million no later than 30 June 2003 and a Bridging Loan Facility of $5.1 million which was repayable no later than 30 June 2003 (B13 Tab 373 at 4412). 304 From a reading of the facility agreement, it is clear that one concern that GE Capital had was that HTL might not recover the debt of $20 million [in the Facility described as the "Inter-Company Loan] that was owing to it from HIG. An outstanding debt of this magnitude would adversely affect HTL's liquidity and potentially its capacity to meet its obligations to GE Capital. To this end, clause 15.1(s) was included in the facility agreement. This clause provided that HTL would be in default if it failed to prove by 31 March 2003, to GE Capital's satisfaction, that $8 million of this inter company loan debt had been repaid to HTL. 305 Apart from this clause of the facility agreement, HIG was otherwise under pressure to repay at least part of the $20 million owing to HTL [see email at PX Vol 9, tab 242]. To this end, a meeting of directors of HTL and Mr Tan and Mr Knox was held on 21 March 2003 at which it was agreed that: · HIG would capitalise $13 million of the loan owed to HTL; · HIG would cancel 234.4 million shares its held in HTL; · HTL would raise $5 million in share capital; · AH Bremer would be transferred to HIG; and · The remaining $4.5 million owing to HTL would be paid by HIG from the sale proceeds of the Land, however, a minimum of $2 million would be paid immediately from the proceeds of another project (Capral). [see PX, vol 8, tab 243] 31 March 2003 - Hardboards- Shareholders Agreement 306 On 31 March 2003 Hardboards entered into the Shareholders Agreement with Wingate pursuant to which Hardboards agreed to transfer to Wingate one of the two shares it held in AH Bremer Park Pty Limited for $200.00 (Clause 2.1 at 3107). The purpose of the agreement was to set out the basis upon which the shareholders of AH Bremer would regulate its operations: (Clause 3.1). 307 In the agreement it was acknowledged that the share in AH Bremer was subject to the GE 's charge and that Hardboards' obligation to transfer the share to Wingate only arose once GE's requirements were satisfied (Clause 2.1 and 4.1). 308 The Shareholders Agreement also contained conditions that:-

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Mr Tan: No that's fine and that is what the lawyers should be working off. I just need something that is a little less formal and simpler for my banker." 324 Mr McLeod gave affidavit evidence that he assumed Mr Tan was utilising this letter in an attempt to raise finance for the water treatment plant. On the basis of that assumption, he had made the changes to Mr Tan's letter, with the intention that it was not to form a new agreement, but rather it was a confirmation that the parties intended that certain steps would be undertaken in accordance with the 5 June Agreement. 325 Under cross-examination it was put to Mr McLeod that Mr Tan had in Mr McLeod's presence, asked Mr Scadden to review the letter and that Mr McLeod subsequently signed the letter. He was unable in cross-examination to recall any involvement in the process by Mr Scadden at all. Under cross-examination Mr McLeod continued to maintain that he had said that there was no way he could sign the letter although it was put to him that this was never said by him. 326 As earlier indicated Mr McLeod's evidence was not generally reliable unless corroborated by other acceptable evidence. In those circumstances it is particularly difficult to reach a finding as to whether or not this particular section of the evidence should be accepted. To my mind the only and correct approach to take is to accept that some conversation took place between Mr McLeod and Mr Tan at the time when the letter was drafted but to reject as unreliable, Mr McLeod's evidence that the gist of his discussion with Mr Tan amounted to the letter being no more than indicative of an understanding that HTP would undertake certain actions to ensure the progress of the transaction and that the letter had only the limited purpose of being provided to Mr Tan's bankers. The defendant's submissions 327 The defendants in support of their proposition that what occurred is seen to have been an objective intention by the parties that they were not binding themselves to an enforceable agreement unless a formal document was executed, not only rely upon the anterior documents but also point to the course of correspondence between the parties post 23 July 2003, this correspondence being put as an indicator that the parties conducted themselves as if no binding or enforceable agreement was in place. The contention is that in particular, the parties refrained from describing the letter of 23 July 2003 in a manner which suggested it contained the terms of any agreement between them. 328 The defendants rely upon the following matters in their written submissions: · The 30 June 2003 annual report of Timber (dated 17 September 2003: at 2996 and thus published when there was no dispute between the parties) recorded its arrangement in relation to AH Bremer in the following terms (B9 Tab 237 at 3013):

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We are instructed that these requirements are well documented and have been known by Mr Tan since April 2003." · Deacons' reply of 10 November 2003 (B10, tab 305 page 3690) asserts that the obligation of Timber to transfer a 50% shareholding to Group is "acknowledged by HTP as follows" and then lists the relevant passages of the prospectus and supplementary prospectus and explanatory memorandum without reference to the letter of 23 July 2003. The letter of 23 July 2003 is enclosed and referred to, with no suggestion that it provides the basis for the obligation to sell a share of AH Bremer. Indeed the Deacons letter indicates that Group is "ready, able and willing to consummate this transaction on the basis that has been disclosed to HTP's shareholders". The transaction was disclosed to Timber shareholders in the prospectus and annual report of Timber as including an obligation on AH Bremer to build a water treatment plant, repay debt, and give Timber rights over the land until completion of the WTP. · As at November 2003, the parties agreed that the terms of the sale were not yet finalized and that there were conditions precedent to be satisfied (McLeod paras 234 to237 and the 6 November 2003 note at B10 Tab 303 at 3688). · After 23 July 2003 Group continued to negotiate critical terms of the agreement, both directly (see B10, tab 303 page 3688) and through its legal representatives, including:- · Whether the matters stated in the 23 July 2003 letters as being relevant to GE Capital's agreement to release its charge were matters of mere acknowledgement or conditions precedent (see for example B11 Tab 311 page 3725, tab 321 page 3766 (Group ultimately agreed they should be conditions precedent: see B11 Tab 323 page 3828). · The issue of an easement by AH Bremer in favour of Hardboards (a matter not referred to in the 23 July 2003 letter). · Whether the agreement should incorporate what was described as a "drop dead" date (see B10 Tab 307 page 3693). · Whether, and the terms on which, Group should guarantee various payments. · The manner in which the requirements of GE Capital should be accommodated (GE Capital's solicitors contributed to correspondence from late January 2004 - see B11 tab 345 page 4071). · The draft agreement prepared in November 2003 (B11 Tab 316 page 3731), and provided by the solicitor for Group as reflecting the "agreement reached between the parties" contains terms for the funding of the WTP and repayment of debt (page 3737) and includes as a condition precedent AH Bremer's obligation to provide a lease containing the right to dispose of water on the land until construction of the WTP (page 3739). · In December 2003 McLeod was able to provide to GE Capital (Tab 322 page 3767) documents relating to the sale of shares in AH Bremer including an easement, fixed and floating charge and loan agreement, and to anticipate the provision of a novation deed, equitable mortgage of shares and guarantee and indemnity, demonstrating that the documentation required to effect the deal greatly exceeded the terms of the letter agreement. · In the result, so far as the evidence reveals, negotiation towards final documentation of the deal ceased in February 2004 without final agreement being reached. Dealing with the issue 329 There is no doubt but that the task of determining on the materials in evidence, whether or not the parties intended to enter a legally binding agreement in terms of the 23 July 2003 letter, poses difficulties. The problem really lies in the shifting sands of the parties anterior proposals essentially reaching as far back as the original Heads of Agreement. The background history chronicled above records the movements in the thinking of those who were involved in the late 2002 - 2003 restructuring proposals. The concerns of GE Capital had also to be taken into account as without its acquiescence very little could be achieved. 330 There are different possible indicators to assist in the determination of what was the parties objective intent in signing the 23 July 2003 letter. Representations to shareholders 331 One approach to endeavouring to ascertain the parties objective intent in signing the letter is to focus upon the fact that by the date of the letter, the proposals had moved through into representations made to shareholders. As is apparent, the very first paragraph of the letter makes express reference to the HTP Notice of Meeting and Explanatory Statement dated 16 May 2003 and to the shareholders meeting held on 16 June 2003. 332 The Shareholder Booklet for the meeting to be held of shareholders of HTP for 16 June 2003 had included [PX 3541] the following:

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[Arguably however if communications to shareholders are to be given primacy in the attempt to discern the objective intent of the letter, the HTP Annual Report dated 17 September 2003 provides a counter balancing picture referring as it does, to the disposal of Bremer being subject to unsatisfied pre-conditions including the construction of the water treatment plant.] The Minter Ellison Letter 334 It may be thought that there is a further factor which is consistent with the presage perspective mode of looking at the parties objective intent. I refer here to the letter from Minter Ellison of late April 2003. The letter identified a number of shortcomings in the Shareholders Agreement of 31 March 2003, one being that there was as yet no binding obligation on any party to buy out AHL's shareholding and to assume AHL's obligations under the Shareholders Agreement to fund the Project [as defined in the Shareholders agreement]. This left AHL exposed to the risk that it would remain a shareholder and not be in a position to fund as required under the Shareholders Agreement. [PX 3169.2] 335 One reason for the 23 July letter may very well have been an attempt to treat with the stated concern by Minter Ellison. Hence it is therefore arguable that on the balance of probabilities, this may, at least in part, have been a reason for the 23 July letter being drawn and intended to bind the parties. The instrument itself 336 As earlier indicated the instrument itself is given primacy on the matters of construction where unambiguous words are used. Although the Masters v Cameron question is somewhat different in it's focus it remains clear that a very close examination of the instrument said to bind the parties will usually be foundational, or at least of the utmost significance in the task of ascertaining objective intent. 337 Form is also sometimes of special relevance. Hence together with other considerations I have taken into account the degree of formality in the letter. It is of course important to take into account the fact that such a document is prepared by, one assumes, laymen who will often not be expected to use the terms of art which will later be used once the lawyers become involved. 338 Paragraph 2 uses the words "has agreed". Paragraph 4 uses the word "agrees". Paragraph 6 uses the words "will then be used" which it seems to me are reasonably formal. Paragraph 7 expressly states that the letter has been prepared to set out "the general terms agreed" between the named parties. 339 Whilst it is true that the word "request" is a curious one to find at the point where one of the parties is executing such an agreement, the fact is that the document is formally signed by HIG by its then director Mr Tan, and by HTP by Mr McLeod as managing director. The signatures provide an indication of a real degree of formality attached by the parties to the letter, although the effect of the word 'request' may suggest something less than a binding agreement. If indeed Mr Tan had had the above described discussion with Mr Mcleod to the effect that the letter was to be submitted to Mr Tan's bankers, use of the word 'request' may be explicable. The issue cannot be resolved on the state of the evidence. Remaining uncertainties 340 Another particularly significant approach to the question of objective intent concerns a very close focus upon the number of remaining uncertainties which still required clarification and the fact that when one looks at the whole of the material transaction proposed, the ultimate Agreement foreshadowed in the last sentence of the letter would have to be executed by a number of additional parties in order for it to be binding on all necessary parties. This is likely why the final paragraph refers to "the general terms agreed" and seeks confirmation that the letter is in no way meant to replace or prejudice the Shareholder Agreement or the Profit Share Indeed of 11 April 2003 between AHL, AHB and Wingate.

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the Court's finding is that the letter falls within third Masters v Cameron category: the terms of the letter/agreement were not intended to have, and did not have any the binding effect of their own. 343 As earlier indicated, one of the considerations which to my mind suggests that the parties objective intent is seen, in the light of all of the relevant evidence, not to have been to bind themselves by the letter to an enforceable agreement simply concerns the number of "loose ends" remaining to be 'tied', notwithstanding the terms of the letter. These are pointed up in the subsequent correspondence/negotiations between the solicitors for the parties but of course, importantly, include the manner in which the requirements of GE Capital should be accommodated, as well as the difficulties to be apprehended in obtaining a consensus as to precise details with respect to the funding of/arrangements concerning the proposed Water Treatment Plant. To my mind the "acknowledgment" [paragraph 3 of the letter] is insufficient to demonstrate that the letter coped with the loose ends. The many matters dealt with in the documents provided by Mr McLeod to GE Capital in December 2003 make plain the complexity of the arrangements and terms which remained to be agreed upon, and importantly agreed upon not only by the parties who had signed to the 23 July letter but also by the other parties affected. 344 Reference has already been made to the document entitled "Attachment 1" Shareholder Agreement dated 5 June 2003 and signed by Mr McLeod on behalf of HTP and by Mr Tan on behalf of HIG. That document had no independent contractual effect if only for the reason that Wingate was not a party to the document but additionally because the document simply reads as a type of action statement as opposed to an agreement. But the very matters which were dealt with in the document point up the number and type of arrangements/agreements remaining to be negotiated, not only on 5 June 2003 but also as at 23 July 2003. 345 Another consideration concerns the whole of what the parties 2003 path seemed to comprise. Clearly enough the 23 July letter proceeded on the presumption that HIG as well as HTP/ AHL would not contribute to the costs of the development and would not share in any of the profits: witness the timetable set out in both the Shareholders Agreement and the 23 July letter under which AHL would be repaid any and all debts owing to it by Bremer. 346 An important consideration it seems to me is to be found in the fact that the 23 July letter was clearly intended not to replace or prejudice the Shareholder Agreement of 31 March 2003 and it would plainly become necessary for Wingate to sign to a Shareholders Agreement which would comprehend the sale by HTP to HIG of the remaining 50% shareholding in Bremer. If it be that the parties were [as the defendants case would have it] proceeding against a background to the effect that the First and Second Deeds of Amendment were unexceptionable and enforceable, it would seem to have been necessary for the agreement contemplated in the last paragraph of the 23 July letter to treat with whether or not that agreement, either by itself, or read together with the earlier restructuring events of 2003, constituted the parting by AHL of its control or beneficial ownership of the Land otherwise than on arms length terms and in a circumstance where the consideration to be received was cash payable at the date of the disposal [cf Entitlement Deed clause 5]. This is the type of complexity which would require to be unravelled presumably by some form of agreement. Whilst the intent was for AHL to part with its shareholding in Bremer for the sum of $100 [AHL of course to receive other benefits from the disposal of its interest in Bremer], yet still these other benefits, at least as expressed in the subject documents to date, did not constitute "cash payable". Further there may have been debate concerning the question of the proper construction of clause 5 of the Deed of Entitlement [immaterially varied by the Second Deed of Amendment] and whether or not the terms of the agreement to be negotiated and signed by all necessary parties could or would amount to a "Disposal" within the meaning of clause 5. That matter would seem to have been important to be treated with. 347 In the above reference to the earlier restructuring events of 2003, I do not suggest that entry into the 31 March 2003 Shareholders Agreement would have constituted a "Disposal" within the meaning of clause 5 of the Entitlement Deed [immaterially varied by the Second Deed]. It seems clear that the entry into that Shareholders Agreement was wholly consistent with the commercial regime which both AHL and HIG had envisaged would be entered into at the time when the Entitlement Deed was signed. Nonetheless the path which had been taken during 2003 raised sufficiently closely, the question of the possible engagement of clause 5, to have meant that looking at the matter objectively, the parties would have needed to at least deal with the issue in the agreement which was to be negotiated. Abandonment The principles 348 It is clear that a contract can be terminated by abandonment. In Summers v Commonwealth (1918) 25 CLR 144 Isaacs J at 151-152 put the principle as follows:

[468]

But these views may be contrasted with those of two other Law Lords. Lord Diplock said (at 915): "To the formation of the contract of abandonment, the ordinary principles of the English law of contract apply. To create a contract by exchange of promises between two parties where the promise of each party constitutes the consideration for the promise of the other, what is necessary is that the intention of each as it has been communicated to and understood by the other (even though that which has been communicated does not represent the actual state of mind of the communicator) should coincide. That is what English lawyers mean when they resort to the Latin phrase consensus ad idem and the words that I have italicised [underlined] are essential to the concept of consensus ad idem, the lack of which prevents the formation of a binding contract in English law." Lord Brightman said (at 924): "To entitle the sellers to rely on abandonment, they must show that the buyers so conducted themselves as to entitle the sellers to assume, and that the sellers did assume, that the contract was agreed to be abandoned sub silentio. The evidence which is relevant to that inquiry will consist of or include: (1) What the buyers did or omitted to do to the knowledge of the sellers. Excluded from consideration will be the acts of the buyers of which the sellers were ignorant, because those acts will have signalled nothing to the sellers and cannot have founded or fortified any assumption on the part of the sellers. (2) What the sellers did or omitted to do, whether or not to the knowledge of the buyers. These facts evidence the sate of mind of the sellers, and therefore the validity of the assertion by the sellers that they assumed that the contract was agreed to be abandoned. The state of mind of the buyers is irrelevant to a consideration of what the sellers were entitled to assume. The state of mind of the sellers is vital to a consideration of what the sellers in fact assumed." The principal differences between the speeches of Lords Diplock and Brightman on the one hand and Lord Brandon on the other is the former Law Lords insistence that a party must in fact understand that the other is intending to abandon, or is consenting to the abandonment (as the case may be) of the arbitration contract; Lord Brandon however appears to impose no such requirement. However, the difficulty with the views of all the Law Lords is the emphasis they place on the classic principles of formation by "sequential offer and acceptance". Phillips LJ in Tankrederei Ahren Keil GmbH v Frahuil SA (The Multitank Halsatia) [1988] 2 Lloyd's Rep 486, 491, criticised this approach, correctly in my view, saying that "[s]uch an analysis necessarily provides a somewhat formal and artificial process by which an agreement to abandon an arbitration is reached by silence."

[477]

Proposition 5 · The Entitlement Deed is therefore seen to have been abandoned as the parties had entered into a new contract entirely [or to an extent going to the very root of their earlier contract], which earlier contract is inconsistent with the latter contract. Decision on Abandonment 355 There is no substance in the abandonment contention. 356 The Entitlement Deed was entered into on 18 June 2001 being the same date as the Share Purchase Agreement and being part of the same transaction. At that time HIG ceased to hold the issued shares in AHL and HTP acquired those shares, HTP continuing to be a wholly owned subsidiary of HIG. 357 The operative provision in the Entitlement Deed was the event of the ultimate control over or ultimate beneficial interest in the Land changing in any way ["the Disposal"], in which event AHL covenanted, on the date of the Disposal, to make the material payment to HIG. 358 HIG was to be secured by the mortgage provided for in the Entitlement Deed whereunder AHL was to grant a mortgage to secure the payment of the amounts to which HIG would be entitled in the event of a Disposal. 359 In December 2001/January 2002 AHL transferred the title of the Land to Bremer, then its wholly owned subsidiary. [PX 2341] 360 At that time there was no change in the ultimate control over or ultimate beneficial ownership in the Land. That control/beneficial ownership still remained with AHL. Hence even by this time, the defendants proposition 2 did not hold true. AHL was no longer the owner of the Land and strictly speaking had no entitlement [save of course in the looser sense of its capacity as shareholder], to receive the proceeds of sale. However even in this situation it was possible that the ultimate control over or ultimate beneficial ownership in the Land could change hence triggering the Disposal provision in clause 4 of the Entitlement Deed. So that the fact that AHL was no longer the owner of the Land did not mean that the operative provisions of the Entitlement Deed fell away or became impotent/ otiose. And the mortgage provided for in the Entitlement Deed continued to protect HIG in this circumstance. 361 Arguably the parties to the Entitlement Deed were entitled to proceed upon the assumption that in reality as long as AHL remained a shareholder in Bremer, in the event that the Land was developed by a joint venture agreement with an outside party [the likelihood being Wingate], HIG's clause 4 Entitlement Deed benefit would filter down to it from AHL's shareholding entitlement, as on distribution. 362 In any event it is apparent from the terms of the 2003 restructuring arrangements leading up to in the 23 July 2003 letter/agreement, that what was proposed was that AHL would transfer 50% of its shareholding in Bremer to HIG and what was anticipated was that the agreement contemplated in the last paragraph of the 23 July letter/agreement would be negotiated and that as part of that agreement, AHL would transfer the other 50% of its shareholding in Bremer to Wingate. 363 It was not impossible that the agreement contemplated in the last paragraph of the 23 July letter/agreement may never be consummated. The uncertainties at least included the need to obtain GE's approval to the Shareholder Agreement. That would have left HIG with its 50% shareholding in Bremer and AHL with the other 50%. In that circumstance it simply cannot be said that the 23 July letter radically or at all changed the contractual position which had obtained from the date of the Entitlement Deed, through the circumstance that saw the title to the Land transferred to Bremer. 364 Whilst it is not necessary to go further into the possibilities, the above reasoning makes quite clear that the parties had not by 23 July 2003, entered into a new contract which was inconsistent with the Entitlement Deed. And on the above Masters v Cameron findings the 23 July letter was itself not a binding agreement. 365 The other approach taken by the defendants was to refer to the lack of mention of the Entitlement Deed in the documentation throughout 2003 and to focus upon the Prospectus which went out to shareholders without any mention of the Entitlement Deed. The matter is dealt with below in relation to discretionary defences. However, in terms of the principles earlier set out, the lack of mention of the Entitlement Deed does not produce the inference necessary to establish an abandonment of the Entitlement Deed. 366 The abandonment submission is rejected.

[479]

Dealing with the issue 369 The Court is dealing with suggested hardship or unfairness to shareholders who subscribed for the prospectus offering, effectively being third parties to the proceedings. 370 Clearly in some circumstances hardship suffered by a third-party will afford a defence to a suit for specific performance: Meagher, Gummow and Lehane's Equity Doctrines Remedies, Fourth edition Butterworths LexisNexis 2002 at [20-110]; Spry Equitable Remedies, 4th ed, 198 et seq. 371 The hardship or unfairness which specific performance may cause, whether to a defendant or a third party, is to be balanced against the hardship and inconvenience that would be caused to the plaintiff should it be denied specific enforcement and confined to other remedies. Relief is granted or refused accordingly as the balance of justice is found to incline one way or the other: cf Spry supra at 183. 372 It is clear that the prospectus was verified as being not misleading or deceptive by the directors of both HIG as well as HTP and of Raffles Equities Ltd [a wholly owned subsidiary of HIG which also held shares in HTP]. 373 In truth at least as between HIG and HTP, it cannot be suggested that any blame for the failure to refer to the Entitlement Deed should be sheeted home only to HIG. 374 There are considerations which speak against a principled exercise of the Court's discretion being to refuse to grant specific performance of the Entitlement Deed on the above described grounds of suggested hardship/unfairness. 375 At a threshold level it is somewhat doubtful to be precise as to what is the hardship or unfairness caused to those prospective shareholders who viewed the HTP prospectus. This is highlighted by comparing the prospectus which was propounded ['the actual position'] against a hypothetical prospectus which recognised the original Deed of Entitlement (and not the Second Deed of Amendment) as in force ['the correct position']. 376 Under the actual position, the prospective shareholders were made aware that HTP was losing an asset worth $10 million for an aggregate sum of $200, plus other benefits (for example, the water treatment plant). 377 Under the correct position, the Bremer asset would be valued at nil in HTP's accounts (in accordance with the advice provided by the company's auditors in August 2001), with possibly a contingent liability of $10 million. Prospective shareholders would have thought that HTP was receiving the $200 plus other benefits for the cost of an asset which had no value, or for the cancellation of a $10 million contingent liability. The reason why prospective shareholders would think that the $10 million contingent liability was being cancelled was because, after the proposed disposal of Bremer to Wingate and HIG, it would not be receiving any monies as a result of the joint venture development, and accordingly, would not have to pay any monies to HIG. 378 As this shows, the prospective shareholders were shown, in the actual prospectus, a picture which involved HTP giving up more than the correct prospectus would have shown to be given up. 379 This is regardless of whether, under the correct position, this $10 million contingent liability was disclosed. To put it another way, under both the actual and the correct positions, HTP was receiving exactly the same thing: $300 plus other benefits (the water treatment plant for example). However, under both positions, HTP is shown to be giving up a different thing for what it is to receive. Under the actual position, the shareholders were told HTP was giving up a $10 million asset. Under the correct position, they would have been told that HTP was giving up a nil value asset. 380 That the plan that AHL would dispose of all its shares in Bremer has not been fulfilled to date is immaterial to this analysis, as in either situation regarding the prospectus, the position of the shareholders is the same. Under the actual and correct prospectuses, shareholders would have been led to believe that the plan to dispose of Bremer would be completed. 381 In those circumstances it is difficult to see that an order for specific performance should be refused on discretionary grounds in terms contended for by the defendants. 382 However in any event, and even if the above analysis be flawed, the balancing exercise [in weighing the hardship or unfairness which specific performance may cause, whether in a defendant or a third party, against the hardship and inconvenience that would be caused to the plaintiff should it be denied specific enforcement and confined to other remedies] seems to me to incline on HIG's side. The whole of the complex of circumstances is taken into account and against the whole of the background matrix, the principled exercise of the Court's discretion is to grant specific performance of the Entitlement Deed. Short minutes of Order 383 The above reasons ought to be sufficiently clear to enable the parties to bring in short minutes of order: · Appropriate declarations will be made declaring void each of the two purported amendments to the Entitlement Deed; · Specific performance is to be ordered in respect of the Entitlement Deed; · The specific performance suit in respect of the Bremer Share Sale Agreement fails; · The defendant's rectification cross-claim proceedings fail. 384 In the manner in which the plaintiff's claim proceeded, bearing in mind the above findings, I did not understand the plaintiff to pursue equitable compensation on its causes of action against the directors. 385 The parties will be given an opportunity to address on costs on the occasion when short minutes of order are brought in.

Hudson Investment Group Limited v Australian Hardboards Limited & Ors

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Judgment (482 paragraphs)

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Cases Cited (46)

Cited By (11)