Koonara Management Pty Ltd v Rockliff

Koonara's claims 14 Koonara's claims against Mr Rockliff are based on the following invoices issued by Huntley: (1) Invoice 2011182 dated 7 December 2010 for $6,300; (2) Invoice 120317 dated 8 November 2011 for $35,784.18; (3) Invoice 140359 dated 10 February 2014 for $3,192.90; and (4) Invoice 015177 dated 27 November 2014 for $3,192.90 plus interest on the earlier invoices. 15 Koonara's claims against Ms Rockliff are based on four invoices issued by Huntley on the same dates as the invoices set out above, for lower amounts corresponding to her single participation in the Project. 16 Koonara alleged that the amounts claimed in the invoices were due pursuant to the provisions of the "Constitution for the Coonawarra Winegrape Project" (Project Constitution) and the joint venture agreements (JVAs) which, Koonara alleged and the Rockliffs disputed, were agreed between the Rockliffs, the "Manager", and the "Land Owner" at the time of their initial investment in the Project. The relevant provisions of the Project Constitution and the JVAs are set out in full later in these reasons. 17 Koonara relied on the following terms of the Project Constitution to support the invoices: (1) Clause 3, by which the Constitution had effect as a contract between, relevantly, Huntley as "Manager" and the Rockliffs each as a "Member", and the Rockliffs agreed to observe and perform the Constitution insofar as it applied to them. (2) Clause 4.2, by which the Rockliffs were obliged to pay the "Manager" certain "Annual Management Fees". (3) Clause 4.4, by which the Rockliffs were obliged to pay the "Manager" a "Lease Rent Contribution Fee". (4) Clause 4.5, by which the "Manager" was entitled to be paid "Winery Expenses" and a "Winery Fee". As amended in October 2005, cl 4.5 permitted the "Manager" to require the Rockliffs to pay the Winery Expenses annually in advance at the same time and in the same manner as the Annual Management Fees, if there was insufficient "Gross Estate Wine Proceeds" or "Gross Income". (5) Clause 4.6, by which the "Manager" was entitled to be paid a "Harvest Fee". (6) Clause 4.7, by which the "Manager" was entitled to be paid "any other expenses required to be paid by the Member as provided in this Constitution". 18 Additionally, Koonara relied on the following terms of the JVAs: (1) Clause 2.9, by which the Rockliffs each became a member of the Scheme and were bound by the terms of the Project Constitution. (2) Clause 5.1, by which the "Manager" was entitled to be paid certain "Annual Management Fees" by the Rockliffs. (3) Clause 5.4, by which certain expenses of the Project not to be borne by the "Manager" were to be borne by the Rockliffs "in proportion to their interest in the Joint Venture out of the Gross Income of the Joint Venture". (4) Clause 6.1, by which the Rockliffs were required to pay the "Lease Rent Contribution Fee" to the "Manager". (5) Clause 9, by which the Rockliffs bore liabilities for goods and services tax or taxes. 19 In addressing Koonara's claims, I proceed upon assumptions (in Koonara's favour) that the Rockliffs were bound by the terms of the Project Constitution and the JVAs, that Huntley was the "Manager" who was entitled to be paid any amounts owing by the Rockliffs pursuant to the Project Constitution and the JVAs, and that any debts owed by the Rockliffs to Huntley pursuant to the invoices were validly assigned to Koonara.

2010 invoices 20 The 2010 invoices are expressed to be for "Various Fees and charges". Although they include the words, "[p]lease refer to the attached sheet listing the fees and charges", no sheet was attached to the invoices that were in evidence. 21 In closing submissions in reply, Koonara sought leave to re-open its evidence to tender a chain of emails, the last of which was sent by John Knox, the managing director of Huntley, to Mr Reschke. The emails were sent between 18 February and 8 March 2011. The final email contained two attachments, including one described as "CWGP Invoicing 2008-2010-P2 debtor sheet.pdf". Other emails in the chain show that Mr Knox had asked Therese Melville to review an attached schedule and say if "these amounts are those that would be invoiced if Burke was to purchase the wine stocks on the original basis of his proposal". Ms Melville appears to have been Huntley's accountant. 22 In response, Ms Melville stated, relevantly, that she had prepared invoices "for P1 $3,179.22 (BR $3,179.18) & P2 $2,100 (BR $2,102.70)". The references to "P1" and "P2" are probably a single participation pursuant to the first and second prospectuses respectively. 23 The second attachment to the email chain is entitled "Coonawarra Wine Grape Project Combined Invoice P2", which sets out a list of 23 items totalling $2,100.00 next to the words "Total Invoice Amount Per Lot - P2". The 23 items include 15 itemised fees and charges and eight deductions. The deductions are expressed to be referrable to particular project years and comprise two refunds and six amounts for sales, variously of stock, bottled wine and bulk wine. 24 Koonara sought to tender the documents to prove the fees and charges that were the subject of the 2010 invoices. 25 I indicated that I would rule on Koonara's application for leave in these reasons. 26 In F.Y.D Investments Pty Ltd v Promptair Pty Ltd [2017] FCA 1097 at [30]-[33], White J set out the relevant principles on an application for leave to re-open as follows: [30] The principles upon which the Court acts on applications of the present kind are settled. The overriding principle is the interests of the administration of justice having regard to all the circumstances of the case: Inspector General in Bankruptcy v Bradshaw [2006] FCA 22 at [24], [26]; Brown v Petranker (1991) 22 NSWLR 717 at 728; Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471 at 478; Harrington Smith (on behalf of the Wongatha People) v Western Australia (No 8) [2004] FCA 338, (2004) 207 ALR 483 at [121]; Walsh v Greater Metropolitan Cemeteries Trust (No 2) [2014] FCA 456, (2014) 243 IR 468 at [48]. [31] In Bradshaw, Kenny J identified at [24] four overlapping classes of cases in which a court may grant leave to reopen: fresh evidence; inadvertent error; mistaken apprehension of the facts; and mistaken apprehension of the law. Although it is not necessary to categorise the present case into any of those classes, the second and fourth seem to be the most apt. [32] The matters bearing on the interests of justice in a case like the present are various. They include: • the public interest (and the interest of the particular parties) in litigation being conducted efficiently and expeditiously; • the public interest in the finality of litigation, with the consequent expectation that litigants will present all their evidence and submissions at the one hearing; • the significance of the proposed new evidence and submissions in the context of the trial; • the explanation for the evidence not having been led at the trial; • the likely prejudice to the opposing party if the application is allowed; • the potential detriment to the applying party if the application is refused, and; • any delay by an applicant in seeking leave to reopen. [33] Regard should be had generally to the overarching purpose stated in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). It is a relevant consideration that evidence was not led, or submissions were not made, at trial because of a tactical decision from which the applying party wishes to resile. It is also relevant that a mistake leading to the matter not having been agitated at trial is attributable to the litigant's legal representatives and not to the litigant personally. However, the circumstance that the evidence was not led, or the submissions were not made, by reason of the negligence of the party or its legal representatives, is not necessarily fatal to an application for reopening being allowed. In LED Builders Pty Ltd v Eagle Homes Pty Ltd [1999] FCA 1141 at [34] Lindgren J said: Clearly, the fact that a failure to make submissions on a point is, as here, solely attributable to the neglect or default of the party seeking leave will militate against the granting of the application for leave. But it will not necessarily defeat the application in all cases. 27 I will not grant leave to Koonara to re-open to tender the chain of emails and accompanying attachment for the following reasons: (1) The significance of the proposed new evidence is uncertain. Although it may provide some explanation of the fees and charges referred to in the 2010 invoices, the email chain post-dates the invoices by some months and refers to invoices yet to be sent. Accordingly, it is not clear that the email chain relates to the 2010 invoices. More importantly, the relationship between the 15 itemised fees and charges and the amounts liable to be paid by the Rockliffs under the Project Constitution and the JVAs is unclear. There is no evidence explaining how the 15 items were calculated or verifying that the 15 items are proper charges under the Project Constitution and the JVAs. Further, there is no supporting documentation for the 15 items. (2) No explanation was given for why the evidence had not been adduced earlier including following a claim made by senior counsel for the Rockliffs, Mr Clarke SC, from the bar table that his instructors had previously requested the "attached sheet" referred to in the 2010 invoices. (3) If the evidence was admitted, the Rockliffs would be entitled to an opportunity to make inquiries to test the evidence. It would be contrary to the public interest in the efficient and expeditious conduct of litigation to delay the resolution of this matter for further inquiries to be made on the issue of proof of debt, which has been central to Koonara's claim from the time that it was made. 28 If I am wrong in the exercise of my discretion to refuse leave, I note that I would not have been satisfied on the balance of probabilities from that material, taken together with the 2010 invoices, that the amounts claimed were due by the Rockliffs in the absence of evidence verifying the Rockliffs' liabilities to pay the amounts claimed or contemporaneous financial records supporting the existence of the liabilities. 29 Finally, I note that Koonara submitted a schedule containing a statement about the 2010 invoices that "Huntley calculated the Invoices by reconciling prior invoices issued for the years 2007, 2008, 2009, 2010". There was no evidence given by any person to verify that statement. Although the Rockliffs agreed in cross-examination that they had ceased making payments in relation to invoices issued by the previous RE, Koonara did not point to particular amounts that were admitted by the Rockliffs to have been owing and that were included in the 2010 invoices. 30 The evidence is manifestly insufficient to prove that the Rockliffs owed any liability pursuant to the 2010 invoices. 31 Accordingly, Koonara's claim based on those invoices fails.

2011 invoices 32 The 2011 invoices include amounts described as: (1) "Annual Vineyard Management Fees" for 2010-2011 and 2011-2012. (2) "Lease Payment" for 2010-2011 and 2011-2012. (3) Selling Costs for 2008 Vintage. (4) Bottling Expenses for 2008 Vintage adjustment. (5) Winery Fee (bottle sales) 2011. (6) "Sale of Stock - did not proceed as Project not wound up". 33 Again, the amounts claimed by Huntley in the invoices are unverified and are not supported by contemporaneous records. 34 Koonara's submissions acknowledged that, insofar as the claims were for the Manager's remuneration payable pursuant to cl 5.1 of the JVAs and the "Lease Rent Contribution Fee" payable pursuant to cl 6.1 of the JVAs, they could not be explained by simple calculations in accordance with the formulae set out in those clauses. Rather, they simply noted that the differences between the invoiced amounts and the projected figures in the second prospectus were relatively small amounts (in the order of about $300 per participation for the Manager's remuneration and less than $50 per participation for the "Lease Payment" charges). 35 Without more evidence, I am not satisfied on the balance of probabilities that Huntley was entitled to charge the "Annual Vineyard Management Fees" and the "Lease Payment" charges in the amounts claimed. 36 Nor am I satisfied that Huntley was entitled to charge the other amounts included in the invoices. The evidence does not disclose how the amounts were calculated, or satisfy me on the balance of probabilities that Huntley was entitled to charge them under the JVAs. 37 There is, however, a further question: to what extent does the evidence prove that Huntley was entitled to charge a portion of the "Annual Vineyard Management Fees" and the "Lease Payment" amounts pursuant to the entitlements to charge amounts under cl 5.1 and cl 6.1 of the JVAs (together with cl 4.2 and cl 4.4 of the Project Constitution)? 38 As to cl 5.1, the "Annual Management Fees" were required to be paid "[i]n consideration of the Manager carrying out the Management Services". Koonara did not seek to prove that Huntley had provided the necessary consideration for the relevant periods. I infer from the invoices that the relevant periods were 1 July 2010 to 30 June 2011 and 1 July 2011 to 30 June 2012. As to the former period, the evidence as to what services were performed that fall within the meaning of "Management Services" in the JVAs is sparse. However, I note that the Reschke parties sought a finding, which I make, that no wines were produced by the Project in 2011. As to the latter period, Huntley was directed to wind up the Project on 9 March 2012. Without more evidence, I am not satisfied, on the balance of probabilities, that the necessary consideration was provided to support an entitlement on the part of Huntley to receive from the Rockliffs any amount pursuant to cl 5.1 of the JVAs for the periods 1 July 2010 to 30 June 2011 and 1 July 2011 to 30 June 2012. 39 As to cl 6.1, that clause requires payment of the "Lease Rent Contribution Fee", which is defined in cl 1.1 of the JVAs as the "annual amount that the Farmer must pay to the Manager in accordance with clause 6 hereof as the Farmer's contribution to the Lease Rent for that year". The "Lease Rent" is also defined in cl 1.1 to mean the "annual rental payable by the Manager to the Land Owner under the Lease". In turn, "Lease" is defined in cl 1.1 to mean "the lease of the Land entered into between the Land Owner as Lessor and the Custodian as agent for the Manager as Lessee for a period of twenty (20) years commencing on the Commencement Date". 40 As explained below, there was no "Lease" within the meaning of the JVAs, although that is not to say that the Project did not have access to land for its purposes. Thus, there was no "Lease Rent" within the meaning of the JVAs. It follows that cl 6.1 does not provide a basis for the charges described as "Lease Payments" in the 2011 invoices. 41 For these reasons, Koonara's claims based on the 2011 invoices also fail.

2014 invoices 42 The February 2014 invoices are for items described as: (1) Responsible Entity Fee 1/7/2010 - 31/12/2013; (2) Responsible Entity Expense Recovery; and (3) Winery Fee (Bottle Sales). 43 The November 2014 invoices are for items described as: (1) Interest payable on outstanding amounts in accordance with the Constitution; (2) Annual management fees for the 2012/2013 and 2013/2014 financial years; (3) Annual vineyard lease fees for the 2012/2013 and 2013/2014 financial years; (4) Winery expenses for 2012 vintage; (5) Winery expenses for 2008, 2009 and 2010 vintages - adjustment for undercharged fees; and (6) Responsible Entity Expense Recovery. 44 As for the earlier invoices, Koonara did not adduce evidence from Huntley to verify its entitlements to charge the various amounts in the invoices, or other evidence to prove those entitlements, apart from the Project Constitution and the JVAs. As for the 2011 invoices, I am not satisfied, on the balance of probabilities, that any of the amounts charged was a proper charge under the Project Constitution and the JVAs. 45 Accordingly, Koonara's claims based on Huntley's February and November 2014 invoices must fail.

Framework governing the winding up of the Project 46 There is an additional reason why I am not satisfied that Huntley was entitled to the amounts claimed in the 2014 invoices, arising out of the fact that the Project was being wound up when the invoices were issued. 47 Clause 7.7 of the Project Constitution provides that the Scheme must be wound up by the Manager if the Court makes an order directing the Manager to wind up the Scheme. As noted above, an order in those terms was made in March 2012. 48 Clause 7.11 provides: Subject to clause 7.13, the Law and any orders of any relevant court, as soon as practicable after determination of the scheme, the Manager must on behalf of the Members: a) sell, call in and convert into money or cause to be sold, called in and converted into money, that part of the scheme property which does not consist of ready money; b) pay thereout all proper costs and disbursements commissions brokerage fees legal fees and other outgoings required of the Manager and all proper provisions for liabilities; and, c) pay the balance to each Member in proportion to each Member's interest therein subject to deduction therefrom of any monies required to be paid to the Manager ... that are owed at that date by that Member ... AND PROVIDED ALWAYS that the Manager is entitled to retain its respective costs charges and expenses and such further amount for such reasonable period of time which in its opinion may be required to meet all claims demands and expenses incurred or expected to be incurred by the scheme." 49 The Rockliffs submitted, based on cl 7.11, that the process of winding up the Project involved only the three steps set out in that clause. 50 The Rockliffs noted that cl 7.11(c) provides for the deduction from any final distribution to Members of any amounts owed at that date by the Member. The Rockliffs submitted that amounts owed must be amounts that had become payable to the Manager as at the date of the winding up order. I accept this general proposition, although the fact that they have not been invoiced prior to the date of the winding up order would not prevent an amount from being payable if otherwise payable under the Project Constitution and the JVAs. 51 However, cl 7.11 does not contemplate the making of claims for payments by Members in the course of the winding up. Rather, any outstanding liabilities of Members are to be deducted from the payments to Members in accordance with cl 7.11(c). 52 Clause 9 of the Project Constitution is also relevant. It provides: 9.1 The Manager is hereby indemnified only out of the assets for the time being comprising the Scheme Property against liabilities incurred by it in the proper performance of its duties as the responsible entity. 9.2 The liability of any Member hereunder is limited to the amount unpaid (if any) and payable by him under the Scheme Agreement and to any other amounts he may become liable to pay under the terms of this Constitution. 53 Having regard to cl 9 and cl 11, I accept that the Constitution makes no provision for the rendering of invoices by the Manager to Members once the winding up of the Project has commenced, including in respect of expenses that may be incurred during the winding up or expenses that may otherwise have been referable to the operation of the Scheme. 54 Support for this interpretation of the Project Constitution is found in Young J's description of the nature of a winding up of a trust in Horwath Corporate Pty Ltd v Huie [1999] NSWSC 583; (1999) 32 ACSR 413 at [16] to [18], as follows: [16] One must also focus on what a winding up really is. Traditionally it has been described by saying that it is the process of turning the horse around and leading him back to the stable; that is, that the corporation, figured by the horse, makes its way out of the stable, goes about its business, at the moment of winding up the horse turns around and starts moving back towards the stable. Thus the horse is still there, it is the same animal, it has got the same burdens, but it gradually releases its burdens until the moment of dissolution when it gets put back in the stable and dies. Thus winding up or liquidation is a process whereby assets are realised, claims are assessed and the assets cease to be assets of the corporation, the claims are satisfied, as much as they can be, and then the company dies. [17] Putting that concept into the realm of trust law is rather difficult. As Grbich and others say in Winding Up Trusts (CCH, Sydney, 1984) at p 28 and following, it is very difficult indeed to release the equitable obligations and fiduciary duties that flow between trustees and beneficiaries, and to a more limited extent in the reverse direction. It is not feasible just to say that a trust comes to an end. One has not only got to deal with the assets and liabilities, one has also got to consider what is to happen to the equitable obligations. [18] Thus when looking at the word "termination" in cl 23.1 of the trust deed there is a lot to be said for the proposition that the word merely means that the business of the trust is to terminate. It cannot mean that the equitable obligation of trustee to beneficiaries, or beneficiaries to trustee ceases. In fact the opposite must be the case. The trustee in realising the assets will have expended money. There will be some implied right, at least prima facie, for the money to be reimbursed, which there would not be if the trust as a whole had come to an end. 55 Based on the framework I have set out above, I do not accept that Huntley was entitled to issue invoices to the Rockliffs after the commencement of the winding up of the Project. In respect of amounts owing to it by the Rockliffs as Members, it was entitled only to deduct those amounts in accordance with cl 7.11.

Other matters 57 In case I am wrong, I have considered the following defences raised by the Rockliffs.

Defence based on breach of fiduciary duty 58 The Rockliffs contended that Koonara breached a fiduciary duty owed to them by procuring Huntley to issue the invoices the subject of Koonara's claim. Except to the extent that Huntley's invoices charged fees for its expenses, it is fair to say that they were issued at Koonara's request (although not on their instructions). 59 In making those requests and in subsequently obtaining an assignment of Huntley's rights under the invoices, Koonara was undoubtedly acting in its own interests and preferring its interests to those of the Rockliffs, but I do not accept that this involved any breach of fiduciary duty. Koonara's fiduciary duties did not extend to refraining from seeking to exercise rights acquired by assignment. Nor is that conduct fairly characterised as an attempt to profit from Koonara's position at the expense of the Rockliffs.

Rockliffs' claim that they had no obligation to pay fees 60 The proposition was that the Rockliffs had no obligation to pay until the RE was "ready and willing" to perform its obligations, which the Rockliffs say was never the case. 61 The starting point for this argument was that, in the absence of an express provision, a right to withhold performance may arise as a matter of contractual construction or implication. The Rockliffs noted that "[w]here A's obligation to perform is dependent on prior performance by B, A is entitled to withhold its performance until B has performed": Carter JW, Breach of Contract (2nd ed, LexisNexis Butterworths, 2011) at [33-32]. The Rockliffs did not identify any relevant dependency in this case. 62 Next, the Rockliffs referred to Professor Carter's observation (at [29-28]) that: It might be argued that where A must perform prior to B, but A reasonably doubts the ability of B to perform, A should be permitted both to demand an assurance of performance from B and to suspend its own performance in the meantime. 63 In that passage, Professor Carter continues: However, the common law does not recognise any general right to demand an assurance or to suspend performance until resolution of an apparent doubt as to a promisor's ability to perform. The most that can be said is that if a promise demands an assurance, the failure of the promisor to provide a satisfactory response may be taken into account when deciding whether the promisor is able to perform. 64 The Rockliff's reference to Professor Carter's text does not advance their case in any respect, whether or not it is read in its proper context. 65 The Rockliffs next identified several obligations imposed upon the "Manager" under the JVAs and observed that the remuneration of the "Manager" was payable by way of "Annual Management Fees" in advance "in consideration of the Manager carrying out the Management Services". 66 The next proposition was that, by at least 2007, after Huntley became the RE, it "admitted that it did not stand ready and willing to perform its obligations as RE and Manager going forward, through the fault of Koonara as the true manager of the Scheme". The label "true manager" is not useful. Based on the evidence set out below, after its appointment as RE, Huntley expended significant effort seeking to discharge its roles as RE and Manager. In December 2007, Huntley had formed the view that Koonara's failures were placing Huntley in default of its own obligations. However, it continued to seek to perform its obligations under the Scheme. 67 I accept that Huntley found itself in a position where it was unable to perform all of its obligations under the Scheme. However, I do not accept that Huntley's inability to perform all of its obligations had the consequence that investors were entitled to withhold performance of their own obligations. The only legal basis apparently identified for that contention is set out above and is no basis at all.

RCF's claims 68 As set out in more detail below, investors in the Project had an option to finance their investment by way of a loan from RCF. RCF's claims are based upon the following allegations: (1) The Rockliffs each entered into an agreement with RCF on terms contained in a "loan deed" in a form that appears in the second prospectus (loan deeds), described in more detail below. (2) By cl 3.1 and cl 4.1 of the loan deeds which RCF alleged, and the Rockliffs disputed, were entered into between them around the time of the Rockliffs' initial investments, the Rockliffs agreed to repay funds advanced to them by payments of $1,560 per participation per annum each commencing on the fifth anniversary of the "Settlement Date" and thereafter on each anniversary of the Settlement Date until the principal was repaid in full, as well as payments of interest. (3) RCF advanced to Mr Rockliff five amounts totalling $46,800 between 30 June 2001 and 30 June 2005, which were paid to the then RE, Australian Hardwood Management Ltd (AHM) in discharge of Mr Rockliff's obligations to AHM. (4) Similarly, RCF advanced to Ms Rockliff five amounts totalling $15,600 between 30 June 2001 and 30 June 2005, which were paid to AHM in discharge of Ms Rockliff's obligations to AHM. (5) By cl 5.1 of the loan deeds, the whole of the amount outstanding became repayable on the happening of certain events and without the necessity of any notice of demand. (6) By cl 7.1 of the loan deeds, the Rockliffs were also liable to pay RCF's expenses and costs of and incidental to enforcement of the loan deeds. (7) A certificate complying with cl 7.2 of the loan deeds would be prima facie evidence of the facts stated therein. (8) Between 2001 and 2007, the Rockliffs made partial repayments of amounts due and owing to RCF. (9) Those payments are admissions of the Rockliffs' liabilities under the loan deeds and confirmation of those liabilities. (10) In breach of their respective obligations under the loan deeds, the Rockliffs failed to make payments owing to RCF and, consequently, the whole of the remaining amounts owing became immediately due and payable.

Efficacy of loan deeds 69 By their defence, the Rockliffs admitted only that the loan deeds were "purported to be entered into" between them, RCF and Mr Reschke. 70 The loan deeds relied upon by RCF were in evidence. Both are dated 30 June 2001 and are signed "for and on behalf of" each of the Rockliffs by Alan Jessup as the borrower's attorney under an undated power of attorney. 71 Mr Jessup was a solicitor who was also a director of AHM as at 30 June 2001. 72 Participation application forms signed by the Rockliffs in connection with the Project contained the following words: D. Power of Attorney This section of the form comprises a Power of Attorney made on the day specified at the end of the form, by the person or company that executes the Application Form. Who and how you appoint 1. You hereby appoint Australian Hardwood Management Limited ACN 079 695 051 and each of its directors, company secretary and such other person as that company may nominate separately as your attorneys. Specifically and only for the purposes of executing the Management Agreement with the annexed Licence Agreement and where applicable, the Loan Deed on your behalf. 2. You agree to formally approve what the attorney does under this Power of Attorney. You agree and declare that this Power of Attorney is given for valuable consideration and agree that you may not revoke the appointment. The powers you give under the Power of Attorney. 3. Your attorney may, in your name: a] do everything required to sign, seal and deliver the Coonawarra Winegrape Project Joint Venture Agreement and the Loan Deed, if a loan has been applied for under the Application Form. b] do anything that you can do as a participant in the Coonawarra Winegrape Project or anything that you can do or are obliged to do in relation to the transactions contemplated by the Coonawarra Winegrape Project Joint Venture. Agreement and the Loan Deed, if a loan has been applied for under the Application Form; c] stamp and register this Power of Attorney and any of those documents if necessary. 73 The Rockliffs contended that, as the forms were signed in Sydney, the powers of attorney were governed by New South Wales law. The Reschke parties did not dispute this, or that the relevant law was the common law and any applicable provisions in the Conveyancing Act 1919 (NSW). 74 At the time that the Rockliffs signed the participation application forms, s 163(2) of the Conveyancing Act provided that, where an instrument is executed creating a power of attorney, any deed (not being a lease or agreement for a lease for a term not exceeding three years) executed by the attorney under the power in pursuance of the power was not of any force or validity whatsoever unless the instrument creating the power had been registered. RCF did not dispute that the loan deed was a deed. Section 163(2) was subject to a proviso that relevantly, on registration of the instrument creating the power, every deed executed by the attorney under the power shall take effect as if the instrument creating the power had been registered before the execution of the deed. 75 There was no evidence that the powers of attorney in the Rockliffs' participation application forms were ever registered. 76 The Reschke parties' submissions concerning the efficacy of the powers of attorney were as follows: (1) Mr Rockliff acknowledged that he understood that he had appointed certain people as his attorneys when he signed the participation application form and he was familiar with how powers of attorney operated and that it was not "controversial" to him; (2) Mr Rockliff acknowledged various other facts concerning his appointment of attorneys, including that the power was given for valuable consideration and was not revoked, and that anything done in exercising the power would be binding on him; and (3) accordingly, the claim that the power of attorney had no relevant effect could not be seriously advanced. 77 These submissions do not engage with the effect of s 163(2). Based on that provision, I accept that the loan deeds purportedly executed by Mr Jessup on behalf of the Rockliffs were of no force or validity whatsoever. 78 It follows that RCF is not entitled to relief against the Rockliffs pursuant to the loan deeds and its claims made pursuant to the loan deeds must fail. 79 The Rockliffs also contended that in the absence of evidence that AHM separately nominated Mr Jessup as the attorney of each of the Rockliffs, the Court should not be satisfied that Mr Jessup's execution of the loan deed was a valid exercise of the power of attorney. This submission involves a misinterpretation of the form of the power of attorney set out above. The form has the effect of appointing each of AHM's directors (including Mr Jessup) as an attorney of the Rockliffs and "such other person as [AHM] may nominate separately".

Alleged advances 80 In their opening written submissions, the Reschke parties stated that RCF made the relevant advances to the Rockliffs by promissory notes issued by it to AHM and endorsed by AHM to Koonara. 81 Mr Reschke acknowledged that, on or before 30 June of each of 2001-2005 (and 2000), he arranged for RCF to draw, execute and deliver to Fergus McLachlan, one of the original directors of AHM, on behalf of AHM, promissory notes for the total amounts lent by RCF to borrower-investors in each of the first five years of the Project under both the first and second prospectuses. The notes contained provisions for subsequent endorsements by AHM to Koonara and by Koonara to RCF. 82 In Rocky Castle Finance Pty Ltd v Taylor [2014] SASCFC 1; (2014) 118 SASR 349 (Taylor), the Full Court of the Supreme Court held that the issue of and dealings with promissory notes in connection with the Project did not comprise advances or payments within the meaning of loan deeds in the same terms as the loan deeds in this case. As explained below, the Reschke parties contended that the "factual landscape" presented to this Court is materially different from the facts in Taylor. However, on its face, the reasoning in Taylor applies to the effect of the promissory notes relied upon by RCF to make its claims against the Rockliffs. 83 Taylor concerned claims by RCF against two investors pursuant to the first prospectus. RCF relied on different promissory notes but the transaction relied upon by RCF was similar in nature to the transactions upon which it now seeks to rely. That is, the relevant transaction (as identified by Blue J (Stanley J agreeing) at [79]) was the delivery of a promissory note by RCF to AHM and the acceptance of the note by AHM as evidenced by its endorsement in favour of Koonara. As Blue J recorded at [79], RCF contended that, by this transaction, advances and payments within the meaning of cl 2.1 of the relevant loan deeds were effected. 84 In their closing submissions, the Reschke parties contended that, through the use of the promissory notes, debts were created and satisfied including the Rockliffs' liabilities to AHM for management fees. The latter submission corresponds with RCF's argument in Taylor, referred to by Blue J at [82], that "the discharge pro tanto by AHM, procured by Rocky Castle, of the obligations of Mr Taylor and Mr Gillen to pay Participation Fees was sufficient by itself to establish the defendants' liability under the Loan Deeds and that 'payment' may extend to any form of discharge of a pecuniary obligation". 85 At [19] and [20], Vanstone J concluded that RCF did not make any payment to AHM but only made a promise to pay, which was not performed. At [15], her Honour observed: It is true that the Loan Deed did not specify in what form the advance was to be made; but neither did it purport to redefine the words advance or payment in such a way as to rob the words of their usual meaning. The Loan Deed required no less than a payment. While Hardwood's acknowledgment that the obligation had been met might affect legal relations between Hardwood and the investors, it could not affect the question whether or not an advance of the balance of the management fee had been made, which is a question of fact. 86 At [135], Blue J concluded that there was no "advance" or "payment" within the meaning of cl 2.1 of the loan deed, construed in accordance with the relevant participation application forms and the Project Constitution. At [115], his Honour accepted that the Constitution required that all "Participation Fees" and "Lease Fees" received from Participants be paid into the Scheme Bank Account, whether paid directly by a Participant to AHM or paid on behalf of a Participant by a lender. At [117] and [118], Blue J referred to terms of the first prospectus, which his Honour concluded: … explicitly contemplate that AHM will utilise the funds received by way of Participation Fees to pay the viticulture, establishment and maintenance expenses and lease rent. They contemplate that the Participants have an interest in AHM having adequate funds to meet those expenses and completing the tasks required of it. The Other Undertakings section discloses that AHM was the manager of two other managed investment schemes. The Participants had an interest in AHM keeping its activities and funds for their Joint Venture separate from its other activities. 87 The second prospectus, pursuant to which the Rockliffs invested in the Project, contained most of the terms identified by Blue J, although it did not contain a similar breakdown of the expenses of the RE that referred explicitly to expenditure on "viticulture, establishment and maintenance expenses and lease rent". 88 Blue J concluded: (1) "The delivery and acceptance of each Promissory Note was not in accordance with, and was contrary to, the mandate by the Borrowers to Rocky Castle contained in clause 2.1 of the Loan Deed and section B clause 2 of the Application Form. It did not comprise a "payment" within the meaning of clause 2.1(a)-(e) or form part of an "advance" within the meaning of clause 2.1 of the Loan Deed" (at [119]). (2) It followed "that the indebtedness of Mr Taylor and Mr Gillen to AHM was not affected by the making or the indorsement of the Promissory Notes. As the transaction involving each Promissory Note was outside the mandate conferred by Mr Taylor and Mr Gillen on Rocky Castle, their indebtedness to the Manager remained the same as it had been before the transactions" (at [121]). (3) As a matter of construction of cll 4.2, 4.3, and 4.4 of the Project Constitution and cll 5.1, 6.1, and 7.1 of the JVAs, participants were not entitled to effect "payment" by the delivery of a promissory note to the Manager (at [124]). (4) "Given the wording, context and apparent purpose of clause 2.1 of the Loan Deeds and the overall context of the Joint Venture, the references to "advance" and "payment" are to payments capable of being banked into a bank account of the Manager. A promissory note does not qualify" (at [127]). 89 The Reschke parties' argument that RCF advanced funds to the Rockliffs relied on the following matters of fact: (1) RCF's balance sheet as at 30 June 2001 included a current asset described as "Loan -Various External Investors" in an amount of $1,437,000. This asset, in different amounts, appears in later balance sheets, as at 30 June 2003, 30 June 2004 and 30 June 2005. (2) AHM issued invoices to the borrowers recording receipt of the full amount of the management fees and showing that part of the required fees had been paid by RCF by way of advance or loans. (3) As between RCF and AHM, it was agreed and acknowledged that the delivery of the promissory note by RCF to AHM would be accepted as part payment of the management fees of the borrowers on the understanding that Koonara would accept AHM's subsequent endorsement of the note. 90 RCF's balance sheets record that RCF had made loans to investors and the "Various External Investors" probably include the Rockliffs. The balance sheets are prima facie evidence of the matters they record: s 1305 of the Corporations Act 2001 (Cth) (Corporations Act). 91 AHM's invoices record amounts paid on account of fees due by the Rockliffs pursuant to the Project Constitution and the JVAs. They also record amounts "financed" in reduction of the fees due. 92 Based on Mr Reschke's evidence, I also accept that, as between RCF and AHM, it was agreed and acknowledged that the delivery of the promissory note by RCF to AHM would be accepted as part payment of the management fees of the borrowers on the understanding that Koonara would accept AHM's subsequent endorsement of the note. 93 In oral evidence, Mr Reschke maintained that RCF had funds available to it in the ANZ account to support its promissory notes issued in June 2001. He said that, to ensure the amounts on the notes fitted within RCF's capacity, he cancelled a promissory note in the sum of $912,000 and replaced it with the two notes for $456,000 each. 94 However, the only relevant bank statements in evidence were for a fully drawn advance account with a debit balance of $3,391,286 as at 29 June 2001 and a cheque account with a balance of $255.19 as at 29 June 2001. In the face of those bank statements, I do not accept that RCF had the requisite funds available to it at that time in the ANZ account or at all. 95 Concerning the financial position of RCF as at 30 June 2001, the parties agreed that RCF had fully drawn its advance facility of $3.33 million from ANZ and had on-lent funds to Koonara of approximately $969,000 and had loaned Reschke Vineyards Pty Ltd (Reschke Vineyards) (another company associated with Mr Rescke) over $400,000 and Mr Reschke himself over $440,000. The balance sheet referred to by RCF shows that the Rocky Castle Finance Trust had net assets of $10.00. 96 The significance for the Reschke parties' case of RCF's asserted capacity to support its promissory notes was not immediately obvious. It may have related to advice given by Mr Jessup in July 2000 referred to at [318] below. In any event, on the facts set out above and in the absence of any other identified source of funds, I do not accept that RCF had the financial capacity to honour the promissory notes by which it purported to advance funds to the Rockliffs in June 2001. 97 The Reschke parties argued that, on the proper interpretation of the loan deeds, the words "payment" and "advance" permitted the Rockliffs' liabilities to AHM to be satisfied by the mode adopted. That submission is contrary to the conclusion of the Full Court in Taylor. The relevant provision of the loan deeds is cl 2, which provides: 2. LOAN 2.1 The Lender hereby agrees to advance the Principal to the Borrower or as he may direct, and the borrower hereby authorises and directs the Lender to so advance the Principal as follows: (o) no later than the Settlement Date to the Manager the sum of $8,000.00 per Participation in part payment of the first year's Annual Management Fee payable by the Borrower as a Farmer under the terms of the Joint Venture Agreement; (p) provided that the Borrower is not in default under this Loan Deed, no later than the first anniversary of the Settlement Date to the Manager the sum of $2,500.00 per Participation in part payment of the second year's Annual Management Fee payment by the Borrower as a Farmer under the terms of the Joint Venture Agreement; (q) provided that the Borrower is not in default under this Loan Deed, no later than the second anniversary of the Settlement Date to the Manager the sum of $2,500.00 per Participation in part payment of the third year's Annual Management Fee payment by the Borrower as a Farmer under the terms of the Joint Venture Agreement; (r) provided that the Borrower is not in default under this Loan Deed, no later than the third anniversary of the Settlement Date to the Manager the sum of $1,500.00 per Participation in part payment of the third year's Annual Management Fee payment by the Borrower as a Farmer under the terms of the Joint Venture Agreement; and (s) provided that the Borrower is not in default under this Loan Deed, no later than the fourth anniversary of the Settlement Date to the Manager the sum of $1,100.00 per Participation in part payment of the fourth year's Annual Management Fee payment by the Borrower as a Farmer under the terms of the Joint Venture Agreement. 98 For the same reasons given by their Honours in Taylor, set out above, I do not accept that RCF advanced funds to the Rockcliffs by means of the promissory note transactions. 99 In particular, I do not accept the Reschke parties' contention that the meaning and purpose of the loan deeds was that, if the creditor AHM accepted that the borrower's debt to AHM was discharged by the financial transaction with RCF, there was a "payment" to AHM sufficient to achieve satisfaction of RCF's loan deed obligation to make an "advance" to that extent. 100 The premise of the argument is that the promissory notes transactions had the effect of satisfying Rockliffs' liabilities to AHM for management fees, as evidenced by AHM's invoices. However, as Vanstone J observed in Taylor at [15], while AHM's acknowledgements that the investors' obligations had been met might affect the relationship between the Rockliffs and AHM, they do not prove that an "advance" or a "payment" was made. 101 As part of their argument, the Reschke parties submitted that each borrower directed RCF "to apply the proceeds of the loan to be advanced" to AHM towards payment of the total liability of each investor for management fees payable to AHM. The relevant direction is contained in the participation application form and is the same language that Blue J found gave rise to the mandate by the borrowers to RCF. It is a direction "to apply the proceeds of the loan to be advanced to you to payment of the Management Fees for each such Participation". 102 Thus, it is not a direction to pay a "liability", but rather a direction to pay "Management Fees". The direction reveals that the purpose of the loan deeds was to enable payment of fees for participation in the Project. 103 Accordingly, even if the Rockliffs' liabilities to AHM were satisfied by the promissory note transactions, those transactions did not involve any advance of monies by RCF to the Rockcliffs in the absence of any payment which, as Blue J put it, was capable of being banked into a bank account held by AHM. 104 Thus, I find that RCF did not advance funds to the Rockliffs in about June 2001 pursuant to the relevant loan deeds. Further, RCF did not provide funds to AHM in about June 2001 pursuant to the loan deeds for the purposes of the Project. 105 In the light of these findings, it is not necessary to make findings concerning the authenticity of various promissory notes relied upon by RCF or whether they were created on the dates they bear. It is also unnecessary to make detailed findings about the "round robin" transactions involving promissory notes, which took place around 30 June 2002, 30 June 2003, 30 June 2004 and 30 June 2005, except to find that they are not relevantly different to the 30 June 2001 "round robin" transaction. Consequently, I find that RCF did not advance funds to the Rockliffs by any of these transactions. 106 Finally, I do not accept that the Rockliffs' payments to RCF between 2001 and 2007 are admissions of the Rockliffs' liabilities under the loan deeds in the absence of evidence that they were aware that RCF had purported to advance funds to them by way of the promissory note transactions, and not by way of actual funds paid to AHM. Similarly, I do not accept that the Rockliffs' payments can give rise to an estoppel in RCF's favour concerning the effect of the promissory note transactions or that the Rockliffs were unjustly enriched by the promissory note transactions in which RCF chose to participate.

Conclusion 107 RCF's claims fail because the loan deeds are unenforceable or, alternatively, because it did not make the pleaded advances to the Rockliffs. 108 RCF's claims must be dismissed. Costs should follow the event.

Mr Rockliff's cross claim 109 Before entering into the detail of the cross-claim, it is appropriate to consider what Mr Rockliff seeks to achieve by the cross-claim. As ultimately formulated, the principal relief sought was recorded in a seven page proposed short minute of orders. The short minute contains 43 separate orders, although they are not numbered consecutively. The proposed orders are organised under the following headings and sub-headings: (1) Misleading and deceptive conduct: (a) Section 12DA of the Australian Securities and Investments Commission Act 1989 (Cth) (ASIC Act 1989) and s 995 Corporations Act 1989 (Cth) (Corporations Law). (b) Section 12DB ASIC Act 1989. (c) Section 12DC ASIC Act 1989. (d) Section 12DF ASIC Act 1989. (e) Section 999 Corporations Law. (2) Unconscionable conduct in respect of the second prospectus: ss 12CA and 12CB ASIC Act 1989. (3) Unconscionable conduct in operation of the Scheme: s 12CA Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act 2001). (4) Unconscionable conduct in operation of the Scheme: equity. (5) JVA not to be enforced. (6) Loan Deed not to be enforced. (7) Involvement in breaches by RE. (8) Breach of fiduciary duty. 110 On examining the precise relief sought, it is apparent that some claims fall away as a result of the failure of the claims made by Koonara and RCF. These claims are: (1) Ten proposed orders expressed to be sought "to the extent that" amounts are claimed or continued to be claimed against Mr Rockliff by the Reschke parties (proposed orders 4, 4A, 4B, 5, 5A, 8, 8A, 9, 13 and 14). The closing submissions did not identify the relevant amounts or explain the basis upon which orders to this effect might be made. There was no evidence of any amount claimed by Mr Reschke against Mr Rockliff. Nor was there evidence of claims by Koonara and RCF against Mr Rockliff apart from the claims that have failed in this proceeding. Assuming that the orders sought were intended to operate against the failed claims made by Koonara and RCF, there is no basis for the proposed orders. I note that proposed orders 4A, 4B and, implicitly, proposed orders 4 and 14, are predicated on the misconception that the Reschke parties might seek to enforce the JVA to which Mr Rockliff is a party. None of the Reschke parties were a party to the JVA with any right to enforce the JVA. (2) Three proposed orders that concern the debts claimed by Koonara (proposed orders 17, 18 and 19). Proposed order 17 seeks a complicated form of declaration directed to Koonara's alleged instructions to charge fees to investors and the 2014 deed of assignment from Huntley. Since I have dismissed Koonara's claims, it is unnecessary to address the proposed relief in any detail. There is also no outstanding issue concerning the enforceability of the November 2014 invoice rendered to Mr Rockliff (proposed order 18) or whether the deed of assignment between Huntley and Koonara was "voidable and unenforceable and should be set aside" (proposed order 19).

Claims for declaratory relief 111 Mr Rockliff seeks 17 declarations that various of the Reschke parties contravened various laws or were involved in contraventions of various laws. 112 As appears below, with one exception, I have not found any relevant contravention. 113 However, in any event, I do not consider that this is an appropriate case for the exercise of the power to make a declaration in relation to the conduct of a party in contravention of the law. 114 Such orders may be made to mark disapproval of a party's conduct: Australian Competition and Consumer Commission v Chen [2003] FCA 897; (2003) 132 FCR 309 at [35] and [36], and are frequently made in cases brought in the public interest by a regulator. It is necessary to consider whether the party seeking the declaration has a real interest in obtaining that relief and that sufficient consequences flow from the making of the declaration so that it is appropriate for the Court to exercise its discretion: Forster v Jododex Australia Pty Ltd [1972] HCA 61; (1972) 127 CLR 421 at 437. 115 In Warramunda Village Inc v Pryde [2001] FCA 61; (2001) 105 FCR 437 at [8], the Full Court said: The remedy of a declaration of right is ordinarily granted as final relief in a proceeding. It is intended to state the rights of the parties with respect to a particular matter with precision, and in a binding way. The remedy of a declaration is not an appropriate way of recording in a summary form, conclusions reached by the Court in reasons for judgment. This is even more strongly the case when the conclusion is not one from which any right or liability necessarily flows. 116 Mr Rockliff submitted that it was appropriate in the circumstances of this case to make a declaration to mark disapproval of the contravening conduct. I am not satisfied that Mr Rockliff has any real interest in obtaining such relief or that there is any utility in making a declaration to record a contravention in the circumstances of this case, which is essentially a commercial dispute between private litigants. Further, Mr Rockliff did not identify any significant public interest in making such a declaration: cf. Tobacco Institute of Australia v Australian Federation of Consumer Organisations Inc (No 2) [1993] FCA 105; (1993) 41 FCR 89 at 94 (Sheppard J), 106 (Foster J) and 107 (Hill J).

Claims for monetary relief 117 Although the cross-claim refers to a claim for loss "by not obtaining the income and benefits which should have been received from participation in the Project", ultimately Mr Rockliff essentially sought to be put in the same monetary position as if he had never invested in the Project. 118 Proposed order 21 of the short minutes is an order for payment of damages in the sum of $125,967.80, comprising seven amounts paid by Mr Rockliff between 26 June 2001 and 30 June 2008, and any further amount Mr Rockliff is required to pay as a result of or arising from an undertaking given to lodge amended personal income tax returns. As particularised in the cross-claim, the total of $125,967.80 comprises: (1) $35,130.00 paid to Australian Rural Group Limited (ARG), which had been appointed as the "Custodian" for the Project, on or about 26 June 2001; (2) $12,697.20 to ARG on or about 28 June 2002; (3) $13,365.30 to AHM on or about 29 June 2003; (4) $14,948.39 to AHM on or about 30 June 2004; (5) $11,899.56 to AHM on or about 29 June 2005; (6) $14,555.31 to AHM on or about 1 June 2006; (7) $13,754.76 to Huntley on or about 30 June 2007; (8) $7,862.40 to RCF on or about 30 June 2007; and (9) $1,754.88 to Huntley on or about 30 June 2008. 119 These payments were not admitted in the defence to the cross-claim and were not agreed in the parties' agreed narrative of facts. Despite its length, Mr Rockliff's affidavit proves the payment of only the first amount in terms. As for the others, he merely says: "I subsequently paid monies from time to time to AHM following receipt of invoices relating to the Project from AHM and subsequently to Huntley …". 120 Specifically, Mr Rockliff did not give evidence of his asserted payment of $7,862.60 to RCF. 121 In accordance with Mr Rockliff's affidavit evidence, the parties agreed only that Mr Rockliff paid monies from time to time to AHM and then to Huntley following receipt of invoices of the Project. 122 The evidence included several invoices issued to Ms Rockliff (including an invoice from RCF), but not the invoices allegedly paid by Mr Rockliff. 123 Without more evidence, I am not satisfied that Mr Rockliff made payments in the amounts asserted except for the payment of $35,130.00 in June 2001. 124 In oral closing submissions, Mr Clarke SC clarified that the amount claimed by way of equitable compensation (proposed order 20 in the short minutes) corresponds to the damages claim in proposed order 21. 125 The amounts sought by way of repayment, refund or return in proposed orders 6, 6A, 10 and 15 and the amounts sought by way of compensation in proposed orders 7, 7A, 11 and 16 are also amounts included in the total claim of $125,967.80. The orders refer to various different legal bases for the making of the orders, namely, ss 12GM(1), (2) and (7) and s 12GF of the ASIC Act 2001, equity and ss 1325(1), (2) and (5) of the Corporations Act.

Relief sought pursuant to s 12GM of ASIC Act 2001 126 Section 12GM provides relevantly: (1) Without limiting the generality of section 12GD, if, in a proceeding instituted under, or for an offence against, this Division, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in in contravention of a provision of this Division, the Court may, whether or not it grants an injunction under section 12GD or makes an order under section 12GF, 12GLA or 12GLB, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (7) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. (2) Without limiting the generality of section 12GD or 12GNB, the Court may, on the application of: (a) a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in in contravention of a provision of this Division; … (b) make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (7)) if the Court considers that the order or orders concerned will: (c) compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage; or … (7) Without limiting the generality of subsections (1) and (2), the orders referred to in those subsections include the following: … (d) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage; (e) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage; … 127 The power conferred by s 12GM(1) is engaged where the following pre-conditions are satisfied: (1) There is a proceeding instituted under or for an offence against Div 2 of Pt 2 of the ASIC Act 2001; (2) The court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person; and (3) The relevant conduct was engaged in in contravention of a provision of Div 2 of Pt 2 of the ASIC Act 2001. 128 In this case, the cross-claim satisfies the first requirement because it includes a claim for damages under s 12GF: cf. New Cap Reinsurance Corporation v Daya [2008] NSWSC 64; (2008) 66 ACSR 95 at [38]. 129 The power conferred by s 12GM(2) is engaged where the following pre-conditions are satisfied: (1) There is an application by a person who has suffered loss or damage by conduct of another person that was engaged in in contravention of a provision of this Division; and (2) The court considers that an order will compensate the person who made the application in whole or in part for the loss or damage. 130 Division 2, entitled "Unconscionable conduct and consumer protection in relation to financial services" includes, relevantly, ss 12CA, 12CB, 12DA, 12DB, 12DC and 12DF of the ASIC Act 2001.

Claims for repayment, refund or return of monies 131 The relief sought by Mr Rockliff includes orders, expressed to be pursuant to s 12GM(1) or s 12GM(7) of the ASIC Act 2001, that: (1) Koonara and Mr Reschke repay, refund or return all moneys paid by Mr Rockliff under the JVA (proposed order 6); and (2) RCF and Mr Rescke repay, refund or return all moneys paid by Mr Rockliff under the purported loan deed between RCF and Mr Rockliff (proposed order 10). 132 These proposed orders broadly reflect the terms of s 12GM(7)(d). 133 However, Mr Rockliff did not pay any sums to Koonara or Mr Reschke pursuant to the JVA and there is no evidence that money paid by Mr Rockliff pursuant to the JVA was transferred to Koonara or Mr Reschke. Any monies payable by Mr Rockliff pursuant to the JVA were payable to AHM or Huntley. On his own case, Mr Rockliff did not pay any amount to either Koonara or Mr Reschke. 134 Nor did Mr Rockliff pay any amount to Mr Reschke pursuant to the loan deed. 135 Finally, there is no evidence that Mr Rockliff made the alleged payment of $7,862.40 to RCF. 136 It follows that there is no basis upon which any of the Reschke parties can be ordered to "repay, refund or return" monies paid by Mr Rockliff. 137 By parity of reasoning, there can be no basis for making such an order by reference to equitable principles (proposed order 6A) or pursuant to s 1325 of the Corporations Act (proposed order 15).

Claims for compensation 138 The relief sought by Mr Rockliff includes orders, expressed to be pursuant to s 12GM(1) or s 12GM(2) of the ASIC Act 2001, that: (1) Koonara and Mr Reschke compensate Mr Rockliff for all loss and damage suffered by him "by reason of participating as an investor in the Scheme" (proposed order 7). (2) RCF and Mr Reschke compensate Mr Rockliff for all loss and damage suffered by him "by reason of participating as an investor in the Scheme" (proposed order 11). 139 In order to grant relief under either s 12GM(1) or s 12GM(2), the Court must first find that Mr Rockliff has suffered loss or damage by conduct of another person that was engaged in in contravention of a provision of Div 2 of the ASIC Act 2001. 140 Mr Rockliff alleged contraventions of the following provisions: (1) sections 12DA, 12DB, 12DC, 12DF, 12CA and 12CB of the ASIC Act 1989; and (2) section 12CA of the ASIC Act 2001. 141 For the reasons set out below, there was no relevant contravention and the claims for compensation pursuant to s 12GM(1) or s 12GM(2) fail.

Relief sought pursuant to s 1325 of the Corporations Act 142 Section 1325 provides relevantly: (1) Where, in a proceeding instituted under, or for a contravention of … Chapter 5C … or Part 7.10, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage because of conduct of another person that was engaged in in contravention of … Chapter 5C … or Part 7.10, the Court may, whether or not it grants an injunction, or makes an order, under any other provision of this Act, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5)) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. (2) The Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage because of conduct of another person that was engaged in in contravention of … Chapter 5C … make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5)) if the Court considers that the order or orders concerned will compensate the person who made the application … in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person. 143 The power conferred by s 1325(1) is engaged where the following pre-conditions are satisfied: (1) the proceeding is instituted under or for a contravention of Ch 5C or Pt 7.10; (2) the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage because of conduct of another person; and (3) the relevant conduct was engaged in in contravention of Ch 5C or Pt 7.10. 144 The cross-claim satisfies the requirement that it be a proceeding instituted for a contravention of Ch 5C because it includes claims that Koonara was involved in contraventions of s 601FC(1) by AHM as RE. Section 601FC(5) provides that any person who is involved in an RE's contravention of s 601FC(1) contravenes s 601FC(5). 145 The power conferred by s 1325(2) is engaged where the following pre-conditions are satisfied: (1) there is an application by a person who has suffered loss or damage because of conduct of another person that was engaged in in contravention of Ch 5C; and (2) the court considers that an order will compensate the person who made the application in whole or in part for the loss or damage. 146 As explained above, Mr Rockliff has made an application based on an allegation that he has suffered loss or damage because of conduct of persons that was engaged in in contravention of Ch 5C.

Claim for repayment, refund or return of money 147 Mr Rockliff seeks an order that Koonara and Mr Reschke repay, refund or return all moneys paid by Mr Rockliff under the JVA "after the contraventions referred to in the preceding order" pursuant to s 1325(1) or s 1325(5) (proposed order 15). 148 As explained above, I do not accept that there is any basis for an order to this effect where there is no evidence that Mr Rockliff paid any amount to Koonara or Mr Reschke pursuant to the JVA and there is no evidence that money paid by Mr Rockliff under the JVA was transferred to Koonara or Mr Reschke.

Claim for compensation 149 Mr Rockliff seeks an order that Koonara and Mr Reschke compensate Mr Rockliff for all loss and damage suffered by him "after the contraventions referred to in the preceding order, by reason of participating as an investor in the Scheme" pursuant to s 1325(1) or s 1325(2) (proposed order 16). I understand the relevant contraventions to be the alleged contraventions of s 601FC(1), in which Koonara and Mr Reschke were allegedly involved. 150 For the reasons set out below, Mr Rockliff did not demonstrate an entitlement to the relief claimed.

Claim based on contravention of s 995 of the Corporations Law 151 As appears below, I have found that Koonara contravened s 995 of the Corporations Law. 152 The seven page short minute of orders does not set out a claim for relief expressly based on this alleged contravention except for a declaration of contravention of s 995 by Koonara and RCF. 153 There is a single reference to s 1041H of the Rockliff parties' closing submissions, which reflects an intention to claim damages for contravention of this provision on the basis that it was "carried over": see s 1400 of the Corporations Act. Assuming in Mr Rockliff's favour that any liability under s 995 was indeed carried over, that it is not statute barred and that it may give rise to an entitlement to relief under s 1325, as explained below, I am not persuaded that Mr Rockliff suffered any loss or damage "because of" Koonara's conduct in contravention of s 995. As also explained below, I do not find that RCF contravened s 995 or was involved in Koonara's contravention of s 995.

Equitable compensation 154 I have found below that none of the Reschke parties engaged in unconscionable conduct under the general law. Consequently, Mr Rockliff's claim in equity against Koonara and Mr Reschke in respect of loss and damage suffered by reason of his participation as an investor in the Scheme (proposed order 7A) must fail. 155 Mr Rockliff made a general claim for equitable compensation (proposed order 20), which was said to seek recovery of the amounts paid by him pursuant to the Scheme. In the absence of any identified basis for equitable compensation apart from unconscionable conduct, this claim must fail. In particular, Mr Rockliff did not seek equitable compensation for breach of a fiduciary duty by the misuse of or failure to protect scheme property.

Damages 156 Mr Rockliff claimed damages under s 12GF of the ASIC Act 2001, s 1005 of the Corporations Act and at common law in the amounts that he paid pursuant to the Scheme and any further amount that he is required to pay as a result of or arising from his undertaking to lodge amended personal tax returns (contained in the cross-claim) (proposed order 21). 157 Section 12GF operates upon a finding of conduct in contravention of a provision of Subdiv C or Subdiv D of Pt 2 Div 2 of the ASIC Act 2001. In the absence of such a finding, Mr Rockliff has no basis for relief pursuant to s 12GF. 158 The reference to s 1005 of the Corporations Act was not explained. It suffices to say that Mr Rockliff has not demonstrated an entitlement to damages under statute or at common law.

Conclusion 159 It follows that Mr Rockliff's cross-claim fails and must be dismissed. Costs should follow the event.

Introduction to findings and detailed analysis of cross-claim 160 The findings set out below provide the basis for my conclusion that Mr Rockliff's cross-claim must fail. The findings also set the terms of the documents that governed the Project and which Koonara and RCF relied upon in support of their debt claims. 161 Of particular significance, I have found that the second prospectus, upon which the Rockliffs relied to make their investments in the Project, was misleading or deceptive in the following two respects: (1) it represented that no director of Coonawarra Property Holdings Ltd (CPH) had an interest in any property proposed to be acquired for the purposes of CPH in connection with its formation or promotion, when Mr Reschke owned five shares in Trevor Reschke Nominees Pty Ltd (TRN), the registered proprietor of section 235, which was part of the land identified in the second prospectus as land available to be acquired by CPH; and (2) it represented that RCF was able to and would advance loan funds to investors upon a loan deed being entered into when, at the time of the issue of the second prospectus, this was not the case. 162 Otherwise, I was not satisfied that the second prospectus was deficient in the respects alleged by Mr Rockliff. 163 Further, I have found that the operation of the Project deviated from the terms of the Project agreements in several respects. Most notably: (1) despite the published arrangements for assisting investors to finance their investments in the Project, RCF did not advance funds to the investors but instead purported to discharge its obligations through its participation in round robin transactions with AHM and Koonara by which promissory notes were transferred; and (2) when income was generated from grapes grown on the Project vineyard, those proceeds were not deposited into the Scheme Bank Account. 164 As explained below, the adverse conclusions that I have reached concerning the second prospectus and the operation of the Project more generally are insufficient to justify the grant of relief in Mr Rockliff's favour on the cross-claim.

Background to the establishment of the Coonawarra Wine- grape Project

Land and ownership 165 In 1997, Trevor Reschke, Mr Reschke's father, was the registered proprietor of land in Coonawarra including sections 226, 227 and 228 in the Hundred of Comaum contained in Certificate of Title Volume 5585 Folio 237. TRN, as trustee for the Reg Reschke Family Trust, was also the registered proprietor of land in Coonawarra, being section 235 in the Hundred of Comaum contained in Certificate of Title Volume 5789 Folio 31 (formerly Volume 867 Folio 45). 166 TRN was registered as a company on 30 December 1986. Vivian Reschke and Dru Reschke, Mr Reschke's mother and brother respectively, are now the directors and shareholders of TRN. Mr Reschke owned five of the original issued capital of 20 ordinary shares. The evidence does not disclose when his shares were transferred to his mother or brother. According to ASIC records, Mr Reschke was also a director of TRN from its registration until 30 January 2002. 167 In about 1997, Mr Reschke resolved to exploit part of the land then owned by Trevor Reschke and TRN to develop a vineyard by obtaining capital from outside investors to finance the vineyard establishment and development. This resolution appears to have been made in the context of a statement by Trevor Reschke to Mr Reschke that, upon his death, Trevor Reschke intended to leave part of his substantial property holdings to Mr Reschke, including sections 226, 227 and 228. Trevor Reschke told Mr Reschke that he could establish and develop a vineyard business on the land that Mr Reschke could expect to inherit. 168 In February 1998, Mr Reschke sought preliminary advice from his accountant, Shaun Allan, about obtaining control of the land upon which he sought to develop a vineyard. It is unnecessary to make findings about the various steps taken (and not taken) by Mr Reschke to explore and develop plans for the establishment of vineyards on land that included sections 226, 227 and 228, including the grant of a mortgage over those lands to secure a loan facility obtained in connection with another vineyard project. What is not in dispute is that Mr Reschke made very substantial personal, physical and financial commitments to establishing a series of new enterprises on the "family farm", which led to the planting of a significant area of the farm to vines for the first time, and Mr Reschke took responsibility for the conduct of the farming business as a whole and the management of the farming properties. 169 Trevor Reschke died on 21 June 2008, leaving sections 226, 227 and 228 to Reschke Vineyards under his will. This is one of several facts, not in dispute between the parties, concerning ownership of the land the subject of the Project. It is unhelpful to recount the details of that land ownership, in the context of this overly complex dispute. It is sufficient to note that Mr Reschke has expressed and acted in a manner that reflects beliefs as to his proprietary entitlement to the "family farm", which apparently includes sections 226, 227 and 228 as well as other properties, and as to his position as the current custodian of that land. One point sought to be made by the Rockliffs, as I understood it, was that Mr Reschke did not appreciate and did not acknowledge the interests of investors in the land the subject of the Project. I accept the point. Its significance, and the significance of other points made concerning sections 226, 227, 228 and 235 (Project Land), is considered below.

Henry Albert Project 170 The Rockliffs sought detailed findings concerning another vineyard project, which Mr Reschke put together during 1997 using other sections of land that formed part of the "family farm" (Henry Albert Project). Except as set out below, I have not made detailed findings about the Henry Albert Project because it is not relevant to this proceeding.

Development of the Project 171 Between 1998 and 2002, Mr Reschke spent the majority of his working hours on the initiation, structuring, promotion, sale and establishment of the Henry Albert Project and the Project. It is not in dispute that Mr Reschke ultimately determined the essential structure of the Project, after discussions with various persons including his father and Fergus McLachlan, the then directors of Koonara, and his professional advisers. 172 In early 1998, Mr Reschke retained Thomson Playford, lawyers, in relation to plans involving both the land to be used for the Henry Albert Project and the Project Land. 173 Immediately after the closure of the Henry Albert Project to investors in June 1998, Mr Reschke began to explore the possibility of an information memorandum offering to a small group of investors for the establishment of a vineyard on land including the Project Land. Soon after, Mr Reschke decided to investigate the raising of funds through a prospectus.

June 1998: Incorporation of Koonara, RCF and Reschke Vineyards 174 Koonara and RCF were registered as companies on 12 June 1998. 175 At all relevant times, the sole shareholder, managing director and company secretary of Koonara has been Mr Reschke. Mr Reschke has been the sole director of Koonara since 8 October 2003. 176 Between September 1998 and October 2003, the following individuals were also directors of Koonara: Richard Blair Mollison (a friend of Trevor Reschke), Andrew Tolley (a winemaker) and Stanislaw Gawel (also known to Trevor Reschke). 177 At all material times, Koonara was and is the trustee of the Koonara Management Trust. In its day to day operations, Koonara acted as trustee of that trust of which Mr Reschke is a beneficiary. 178 At all relevant times, the sole shareholder, sole director and company secretary of RCF has been Mr Reschke. At all relevant times, RCF was and is the trustee of the Rocky Castle Finance Trust and in its day to day operations, RCF acts as trustee of that trust of which Mr Reschke is also a beneficiary. RCF's involvement in the Project was in its capacity as trustee of the Rocky Castle Finance Trust. 179 Reschke Vineyards was also registered as a company on 12 June 1998. At all material times, it was the trustee of the Koonara Property Trust. 180 At all material times, Mr Reschke was the sole shareholder and sole director of Reschke Vineyards and was a beneficiary of the Koonara Property Trust. 181 It was not in dispute that these three companies (Koonara, RCF and Reschke Vineyards) were incorporated by Mr Reschke for the purposes of his proposed business of vineyard development and management and sale of wine from the proposed vineyards. Mr Reschke has described Reschke Vineyards as his "property holding trustee company". 182 The parties agreed that, as at 12 June 1998, Mr Reschke's intention was that: (1) Koonara would be the vineyard manager for his proposed business; (2) RCF would be the company which could obtain the necessary finance for the proposed vineyards; and (3) Reschke Vineyards would be the land holding company, that is, the company that would own or lease the land for proposed vineyards. 183 Neither of Koonara and RCF traded in their own right and neither of them owned any significant assets in their own right.

Initial approach to AHM 184 AHM was incorporated as a company in August 1997. On 18 October 2006, AHM changed its name to Advanced Horticultural Management Ltd. In 2012, the company's name was again changed, to Advanced Horticultural Management Pty Ltd. 185 The original directors of AHM included Fergus and Dugald McLachlan. On 13 February 1998, Mr Jessup was appointed a director of AHM. 186 Mr Reschke had known Fergus McLachlan since 1988 and his father, Ian McLachlan, was a friend of Trevor Reschke. 187 Sometime in 1998, Mr Reschke approached Fergus McLachlan to obtain AHM's advice and assistance with obtaining capital from outside investors to assist in the finance of the establishment and development of a vineyard. 188 In late 1998, Mr Reschke asked Fergus McLachlan whether AHM would be interested in acting as a responsible entity for a vineyard project on land that comprised at least part of the Project Land.

August 1998: Financing arrangements 189 In August 1998, the ANZ Bank offered RCF, as trustee for the Rocky Castle Finance Trust, loan facilities totalling $2,510,000. Part of the proposed security for the loans was first registered charges over sections 226, 227 and 228. The parties agreed that ultimately, a registered mortgage dated 20 August 1998 was given over sections 226, 227 and 228 by Trevor Reschke to secure a finance facility granted in favour of RCF in connection with the Henry Albert Project. 190 In his December 2010 affidavit in proceedings brought by Koonara and others against Thomson Playford (Thomson Playford proceeding), Mr Reschke explained that he and his father partly financed the establishment of the vineyard for the Henry Albert Project out of this facility. Mr Reschke stated that initially the facility was $2.5 million, and it later increased "in steps" to $4.5 million.

September 1998 and March 1999: Appointment of additional directors of Koonara 191 In September 1998, Mr Reschke procured the appointments of Mr Mollison and Mr Gawel as directors of Koonara. 192 In March 1999, Mr Reschke procured the appointment of Mr Tolley as a director of Koonara.

Late 1998/early 1999: Development of structure of the Project 193 In late 1998 and early 1999, Mr Reschke decided to establish the project that came to be known as the "Coonawarra Wine-Grape Project". His plan became to raise funds by way of a managed investment scheme, for the establishment of a vineyard on up to 240 hectares. 194 As noted earlier, it is not disputed that Mr Reschke determined the essential structure of the Project. 195 A point emphasised by the Rockliffs was that the essential structure did not involve the acquisition of the Project Land by CPH, but rather that the Project Land would be leased from Trevor Reschke (and, presumably, TRN, if section 235 was ultimately used for the Project), who would also give CPH an option to purchase the land. In turn, CPH would grant an under-lease to the custodian trustee for the benefit of investors. As I understood the point, it was that investors were never intended to have their interest in the Project Land adequately protected in the manner represented in the prospectuses. However, it was not suggested that the Project was affected by want of access to the Project Land. 196 According to the Reschke parties, another essential aspect of the Project structure was that Koonara, in the course of providing management services, would sell the Project's wine through a related entity, being Reschke Pty Ltd, which would hold the liquor licence required for that purpose. 197 At a time which is not clear, Mr Reschke calculated that the initial vineyard establishment and management costs would likely be more than adequately funded by the cash component of each grower's investment. Accordingly, Mr Reschke's view was that it was unlikely for there to be any need for the Project to obtain external funds to provide any of the finance requested by investors to be provided by RCF by way of loan to investors, at least in the first three years of the project. Mr Reschke determined that such loans could be provided by a "round robin" of cheques or promissory notes. 198 Mr Reschke and Fergus McLachlan decided that the minimum subscription under the first prospectus would be 100 units. This was based on Fergus McLachlan's assessment of the "break even situation for sale of units given the fee structure for AHM". 199 Mr Reschke and Fergus McLachlan also discussed the fee structure for Koonara. Mr Reschke calculated a figure of $9 per bottle of bottled wine, which was to be relied upon to set a "winery fee" payable by investors. Mr Reschke also determined, or at least participated in the determination of amounts to be charged to investors, including by identifying a figure of $5,900 per tonne (subsequently contained in the formula in the JVA for "Winery Expenses"), comprising $2,000 per tonne wine making, $2,500 per tonne labelling and $1,400 per tonne selling costs, which Mr Reschke considered would be close to actual costs. 200 In January 1999, Mr Reschke, together with Fergus and Dugald McLachlan and his accountant, Mr Allan, met with lawyers from Thomson Playford. At this meeting, Mr Reschke outlined to the lawyers the broad structure of the Project. The meeting discussed the requirements for capital raising by prospectus and the requirements for a product ruling request to be made to the Australian Taxation Office (ATO). Thereafter, Mr Reschke attended a meeting with lawyers from Thomson Playford, and also with Mr Jessup, to advance the preparation of the prospectus for the Project. Mr Reschke contributed suggestions for the content of the proposed prospectus. In particular, Mr Reschke instructed Mr Jessup and the Thomson Playford lawyers that the prospectus was to have an expiry date 12 months after issue, and that it was to be open for the maximum term permissible. The first prospectus reflected these instructions. 201 Mr Jessup was engaged to draft the Project Constitution, the form of JVA attached to the Constitution, a form of loan deed, a Compliance Plan and agreements between AHM and Koonara. In turn, Thomson Playford was retained to comment on Mr Jessup's draft documents. Mr Reschke also reviewed and made comments on the draft documents.

February 1999: Agreement between Koonara and AHM to establish Project 202 On 3 February 1999, Fergus McLachlan attended a meeting of the board of Koonara. Minutes of the meeting record that Fergus McLachlan informed the board that he was happy to be the single RE for Koonara's next project and, so that AHM could become the single RE, several things were required to happen. The meeting records, relevantly: • The budgets must be in order as soon as possible and sent to Denis Lear so that he may apply for a product ruling from the ATO. • An agreement must be signed by Koonara and AHM. … • The risk and controls of the two companies' must be finalised so as to clearly differentiate the role that each company will play. Fergus explained that Koonara could be relinquishing a lot of control over the Project if they have an outside SRE. 203 On 24 February 1999, Koonara entered into a written agreement with AHM for the establishment of a managed investment scheme (First AHM/Koonara agreement). The agreement contains the following recitals: A. AHM has or will obtain a licence from the Australian Securities & Investments Commission ("ASIC") authorising AHM to act as the responsible entity for a proposed managed investment scheme of interests in a vineyard development in the Coonawarra region of south-east South Australia ("Scheme"). B. Koonara has experience and expertise in managing and operating vineyard developments. C. AHM is proposing to register and issue a prospectus offering interests in the Scheme to the public ("Prospectus"). Koonara will assist in the preparation of the Prospectus and development of the Scheme. D. AHM has agreed to engage Koonara as its subcontractor to manage the operations of the Scheme. The parties intend that this Agreement will be supplemented by a more detailed agreement recording the terms on which AHM sub-contracts the management of the Scheme operations to Koonara at a later date. 204 Clause 6 of the First AHM/Koonara agreement provides: COMMERCIAL DECISIONS AHM agrees that Koonara shall be solely responsible for all Commercial Decisions regarding the Scheme and Prospectus, other than any decision relating to the remuneration, compensation, entitlement or any other right or obligation of AHM under the documents constituting the Scheme or the Prospectus. 205 "Commercial Decisions" is defined in the agreement to mean "decisions relating to matters which do not involve compliance with the Corporations Law or any other law or enactment and matters which do not involve considerations of risk or liability to AHM".

February - April 1999: Land and soil surveys, viticultural report and valuation; product ruling application and drafting prospectus 206 In February 1999, Mr Reschke commissioned a land survey of the proposed vineyard for the Project and a soil survey. 207 Around this time, Mr Reschke arranged the clearing of the Project Land. He also obtained a property valuation for the purpose of preparing a prospectus. 208 There is a valuation report dated 27 March 1999 from Colin Gaetjens in relation to the Project Land, included in each of the two prospectuses for the Project. The valuation is based, relevantly, on instructions provided by Mr Reschke, including as to the existence of grape supply contracts. 209 In March 1999, Dennis Lear was retained to prepare an application to the ATO for a product ruling. Fergus McLachlan and Mr Reschke instructed Mr Lear to write the taxation opinion for the proposed prospectus and to apply for a product ruling. The applicant for the product ruling was AHM. 210 On 5 March 1999, there was another meeting of Koonara's directors. The minutes of the meeting noted the various steps that had been taken to develop the proposed new vineyard, including that Mr Jessup "had commenced writing agreements, but would require budgets to complete them". In March 1999, Thomson Playford provided a letter of advice to Koonara following a review of the Constitution and Compliance Plan for the Project. Thomson Playford noted that they had focused on risks to Koonara as subcontractor for the Project. The advice included relevantly: Koonara is only obliged to discharge obligations specified in the subcontract. Accordingly, Koonara should not be concerned with the constitution or the compliance plan as this is AHM's concern, except to the extent that these documents impact on AHM's ability to pay Koonara the fees under the subcontract. 211 In April 1999, Mr Reschke commissioned a viticultural report on the suitability of the land for a vineyard. Reports by Davidson Viticultural Consulting Services appear in both prospectuses. 212 There is no dispute that Mr Reschke was involved in the drafting of the first prospectus, with the benefit of advice from Thomson Playford, mostly in regard to implementing the commercial aspects of the vineyard from planting through to the selling of the final product. Mr Reschke was also concerned to ensure that the first prospectus reflected accurately the scope of the proposed roles of Koonara, RCF and CPH.

March and April 1999: Incorporation of CPH and Reschke Pty Ltd 213 CPH was registered as an unlisted public company on 24 March 1999. At the time of registration of the Project in May 1999, CPH's directors were Mr Reschke, Mr Tolley and Mr Mollison. On 10 June 1999, Mr Gawel was also appointed as a director of CPH. Mr Mollison ceased being a director on 20 March 2002, and Mr Tolley and Mr Gawel ceased being directors on 8 October 2003. On 9 December 2003, Fergus McLachlan and Guy Stratford were appointed as directors. Mr McLachlan ceased being a director on 6 May 2005 and Mr Stratford ceased being a director on 13 September 2005. Mr Stratford was a fellow student with Mr Reschke and an employee of Koonara. 214 On 2 December 2004, CPH was converted to a proprietary company and changed its name to Coonawarra Property Holdings Pty Ltd. After 13 September 2005, Mr Reschke was the sole director of CPH. 215 At all material times, Reschke Vineyards has been the majority shareholder of CPH. 216 The parties agreed that the purpose of CPH's incorporation was to take a head lease over the land for the Project and to receive the grant of an option to purchase the land from Trevor Reschke. Further, its purpose was to "grant an underlease to a custodian trustee who would hold the underlease for the benefit of investors under the Project". 217 There was also no dispute that CPH and Reschke Pty Ltd were incorporated by Mr Reschke for the purposes of his business of vineyard development and management and sale of wine from vineyards that included the vineyards established for the Project. 218 Reschke Pty Ltd was registered as a company on 1 April 1999. At all material times, Mr Reschke was the sole shareholder and sole director of Reschke Pty Ltd. 219 The parties agreed that the reason Mr Reschke wished to incorporate Reschke Pty Ltd was to establish a separate vehicle to carry on the business of selling wine, to own the intellectual property in the brands that he intended to establish, and to sell wines from vineyards managed by Koonara. 220 The parties agreed that Mr Reschke intended that Reschke Pty Ltd would also be the maker of the wine for Koonara, in relation to the Project, and he regarded its activities as being different from the activities of Koonara. The parties also agreed that Mr Reschke considered, both before and after the incorporation of Reschke Pty Ltd, that there might be some taxation benefit to him from being able to "spread" profits and losses over a further company that he wholly owned. 221 The parties further agreed that Mr Reschke caused the incorporation of each of Koonara, RCF, Reschke vineyards, CPH and Reschke Pty Ltd for the purpose of carrying on the businesses of developing and managing vineyards on the "family's land" and the subsequent sale of wine from grapes produced by those vineyards and related activities. 222 The parties also agreed that the separation of the winemaking and selling activities from the vineyard management activities of Koonara was effected by the incorporation of Reschke Pty Ltd in 1999 and was a decision of Mr Reschke.

April 1999: Approval of Project Constitution 223 In about April 1999, Mr Reschke read and approved the Project Constitution.

May 1999: Agreement between Koonara and AHM to sub-contract management services 224 By letter dated 23 April 1999, Mr Jessup wrote to Thomson Playford concerning a proposed agreement between Koonara and AHM, and suggested various amendments. Concerning the Project Land, Mr Jessup stated relevantly: The Land Owner will grant a lease to the Custodian who holds the same as agent for the Manager who holds the same on trust for the Members. The Members pay a rent contribution fee to the Manager who then pays the same as rent to the Land Owner. 225 On or about 5 May 1999, Koonara and AHM entered into a written agreement entitled "Sub-contract of Management Services" (AHM/Koonara management services agreement). The agreement describes AHM as "Manager" and Koonara as "Contractor". The agreement contains the following recitals: A. The Manager expects to enter into numerous joint venture agreements in the form annexed in Schedule 1 ("Joint Venture Agreements") with various persons ("Farmers") and Coonawarra Property Holdings Limited ACN 086 860 933 ("Land Owner") for the purpose of carrying on an investment in the business of acquiring, planting, growing and cultivation of grape vines for the production of wine grapes, and the harvesting, marketing and sale of the wine grapes and bulk wine produced therefrom ("Project"). B. The Land owner will lease the land ("Lease") which is used in the Project ("Vineyard") to an independent custodian who will hold the benefit of the Lease as agent of the Manager who, in turn, will hold the benefit of the Lease for the Farmers generally. Each Farmer will have an interest in the Project equal to their proportionate interest in the joint venture ("Participation"). C. The Manager will be, by the terms of the Joint Venture Agreements, appointed as the manager of the Project. D. The Manager will, in the Joint Venture Agreements, reserve the right to sub-contract to a third party the management of the Project. E. The Manager, in exercise of its right to sub-contract, wishes to engage the Contractor to perform its management obligations under the Joint Venture Agreements. 226 Clause 1 of the AHM/Koonara management services agreement sets out Koonara's obligations under the agreement. Clause 1.1 sets out the following general obligations: 1.1.1 The Contractor will manage all land subject to Joint Venture Agreements ("Vineyards") for the term of the Joint Venture Agreements ("the Management Period"). … 1.1.3 The Contractor shall use reasonable endeavors to assist the Manager in carrying out the Manager's obligations under the Joint Venture Agreements. 1.1.4 The Contractor shall conduct the Project in a commercial manner and in accordance with accepted industry standards. 227 Clause 1.2 sets out specific management services required to be performed by Koonara, and is directed to the operation of the Project "in keeping with accepted horticultural standards in the viticultural industry". 228 Clauses 1.3, 1.4 and 1.5 provide: 1.3 Maximise Return and Viticultural Methods 1.3.1 The Contractor must in carrying out the Management Services do so with a view to maximising the return from the wine grapes, bulk wine or bottled wine from the vineyard and must market the sale of the same with a view to maximising the profit and long term viability and profitability of the joint venture with respect to the Project. 1.3.2 The Contractor must use good viticultural methods in the preparation and maintenance of the grape vines for the purpose of maximising the return from marketable wine grapes, bulk wine or bottled wine therefrom. 1.4. Compliance with Laws and Regulations The Contractor must comply with all laws and regulations that apply with respect to the Project including (without limitation) taking such measures as are in accordance with good viticultural practice to keep the Vineyard free of noxious pests, noxious animals, noxious weeds and noxious plants and exterminating any of the same that may enter or grow upon the Vineyard. 1.5 Viticultural Consultant The Contractor must engage the services of a reputable expert in the field of viticulture and wine production to provide the Contractor and Manager with all such expert advice and assistance that the Contractor requires to carry out its obligations under this Agreement and to provide expert reports to the Farmers. 229 Clause 1.9 provides: All contracts for sales of wine grapes, bulk wine and bottled wine produced using wine grapes Harvested from the Vineyard shall require the purchaser to make all cheques payable to "Coonawarra Winegrape Project - Scheme Bank Account". 230 Clause 3A.1 provides: By 31 May of each year of the term of the Project, the Contractor must submit an annual budget and operational plan to the Manager for the Project for the next financial year (1 July to 30 June). The budget and operational plan must show cash flow projections including projected income and expenses. 231 There is no dispute that Mr Reschke caused Koonara to enter into this agreement. 232 On 18 May 1999, there was a meeting of the directors of Koonara. An action list, apparently prepared following the meeting, notes various tasks to be done to advance the Project. Fergus McLachlan provided an update to the meeting. Clearly, at this stage both Koonara and AHM were actively working to advance the Project.

May 1999: Project registration and constituent documents 233 On 11 May 1999, Mr Jessup in his capacity as director of AHM, lodged an application for registration of the "Coonawarra Wine-Grape Project" as a managed investment scheme with ASIC. The application was accompanied by the Project Constitution. The Constitution was executed by AHM as "Manager" and CPH as "Landowner". 234 The Project was registered by ASIC as a registered managed investment scheme on about 4 June 1999. Chapter 5C of the Corporations Law and, subsequently, Chapter 5C of the Corporations Act set out a detailed regime for the regulation of the Project as a managed investment scheme.

Project Constitution 235 The Constitution identifies the name of the Project and states that it is a "Managed Investment Scheme for primary production purposes". 236 The Project is defined by cl 30.1 of the Constitution to mean: [T]he carrying on by the Joint Venture in the business of acquiring, planting, growing and cultivation of grape vines for the production of wine grapes, and the harvesting, marketing and sale of the wine grapes and bulk wine produced therefrom to be managed by the Manager pursuant to the Joint Venture Agreement upon the Vineyard. The Manager may engage in the production of bottled wine. 237 Clause 2.1 of the Constitution provides that the parties to the Constitution are: a] [AHM] ("Manager") who is the responsible entity for this Scheme; b] [CPH] ("Land Owner") who is or will become the registered proprietor of the Scheme Land upon which the Vineyard is located; and, c] Each person who becomes a Member of this Scheme (referred to as a "Farmer" in the Joint Venture Agreement). 238 As to cl 2.1(a), by cl 30.1, the "Scheme" means the scheme established by the Constitution and "Manager" is defined to include "the Manager for the time being hereof and any person authorised by this Constitution to act in that capacity". 239 As to cl 2.1(b), by cl 30.1, "Land" is defined to mean "the Land upon which the Vineyard acquired by Members are located"; "Vineyard" is defined to mean "that area of Land upon which the Project is to be carried out"; and "Member" is defined to mean "a person who becomes a Member to this Constitution and his or her legal personal representatives [referred to as a "Farmer" in the Joint Venture Agreement]". 240 As to both cl 2.1(b) and (c), by cl 30.1, "Joint Venture Agreement" is defined to mean "the agreement entered into between a Member, the Manager and the Land Owner the terms and conditions of which are set out in the Prospectus being substantially in the form contained in Schedule Two hereof". Clause 30.1 also defines "Land Owner" to mean CPH, its successors and assigns. 241 Clause 3 of the Constitution provides: 3.1 This Constitution has effect as a contract between: a] the Manager, the Land Owner and each Member; and, b] each Member and each other Member. 3.2 Each person referred to in clause 3.1 above agrees to observe and perform this Constitution insofar as they apply to that person. 242 Clause 4 of the Constitution sets out the consideration payable by "Members" of the "Scheme". Clause 4 provides relevantly: 4.2 Annual Management Fees Payable to the Manager A member must pay the Manager the following Annual Management Fees; … d] for the 12 month period commencing on the third anniversary of the Settlement Date, the sum of $1,300.00 per Participation in advance on that date; e] for each 12 month period thereafter an amount per Participation being the greater of: i] the amount calculated in accordance with the following formula: M = $1,300 x A B Where - M is the Annual Management Fee for the relevant year A is the CPI for the last quarter in the year immediately prior to the start of the year for which this calculation is made B is the CPI for the quarter ended 30 June, 1999, or ii] the Annual Management Fee for the previous 12 month period plus three per centum (3%), annually in advance on the relevant anniversary of the Settlement Date thereafter until the termination of the Joint Venture. … 4.4 Lease Rent Contribution Fee Each Member must pay a Lease Rent Contribution Fee to the Manager being: a] for the Initial Period the sum of $300.00 per Participation in advance on the Settlement Date: b] for each 12 month period thereafter the greater of: i] an amount per Participation calculated in accordance with the following formula: R = $300 x A B Where - R is the Lease Rent Contribution Fee for the relevant year A is the CPI for the last quarter in the year immediately prior to the start of the year for which this calculation is made B is the CPI for the quarter ended 30 June, 1999, or ii] the amount of the Lease Rent Contribution Fee for the previous 12 months plus three per centum (3%); annually in advance on the relevant anniversary of the Settlement Date until the termination of the Joint Venture 4.5 Winery Expenses Where the Manager engages in the production and sale of private or estate labelled wine produced from wine grapes produced from the Vineyard then the Manager must be paid: a] the Winery Expenses; and, b] the Winery Fee of 40% of the amount by which the Gross Estate Wine Proceeds exceeds an amount of $9.00 per bottle sold. The above costs and expenses and fees may be deducted by the Manager from the Gross Estate Wine Proceeds or if there be insufficient then from the Gross Income. The balance of the Gross Estate Wine Proceeds shall form part of the Gross Income for distribution to Members. 4.6 Harvest Fee The Manager shall also be entitled to be paid the Harvest Fee out of the Gross Grape Sales Proceeds. 4.7 Other Expenses In addition to the consideration referred to in clauses 4.2 to 4.7 above the Manager shall be entitled to be paid any other expenses required to be paid by the Member as provided in this Constitution. 243 Clause 4.5 was amended on about October 2005, as set out at [537] below. 244 By cl 30.1, "Lease" is defined to mean: [T]he lease of the Land entered into between the Land Owner as Lessor and the Custodian as agent for the Manager as Lessee for a period commencing on the Commencement Date and expiring on 30th June, 2021. 245 There is a similar definition of "Lease" in the JVA.

Scheme Property 246 The Constitution defines the "Scheme Property" to mean: [A]ll the property of the Scheme including without limitation: a] contributions of money or money's worth to the Scheme; and b] money that forms part of the Scheme Property under provisions of the Law; and c] money borrowed or raised by the Manger for the purposes of the Scheme; and d] property acquired, directly or indirectly, with, or with the proceeds of, contributions or money referred to in paragraph (a), (b), (c) or (d); and e] income and property derived, directly or indirectly, from contributions, money or property referred to in paragraph (a), (b), (c), or (d). 247 The "Scheme Property" included the wine grapes produced pursuant to the Project and the wine produced from those grapes. 248 Mr Rockliff relied upon cl 15.2 and cl 15.8 of the Constitution, which provide: 15.2 Application Monies The Manager must on receipt of application monies and the completed and signed Application Form, if the Application Form is not rejected by the Manager pay those monies as soon as practicable after their receipt but not later than the close of business on the next working day after the day of receipt into the Applications Bank Account and must, in all prospectuses and other representations relating to the Scheme Interests, direct that all cheques and other payment orders in respect of applications for Scheme Interests be drawn in favour of the Manager, or the Custodian where there is one, on account of the Scheme and the applicant. … 15.8 Scheme Bank Account Upon acceptance of an Application Form pursuant to clause 15.4, the Manager shall, or the Custodian, as the case may be, transfer the relevant application monies from the Application Bank Account to the Scheme Bank Account. 249 The "Scheme Bank Account" is defined to mean: [T]he bank account maintained by the Manager or the Custodian as the agent of the Manager, as the case may be, into which all monies received by the Manager for and on behalf of Members are to be paid other than any monies required to be banked into the 'Applications Bank Account'. 250 Mr Rockliff noted cll 18.1, 18.2, and 18.3 of the Constitution, which provide: 18.1 Gross Income All Gross Income received with respect to the Scheme must be paid by the Manager into the Scheme Bank Account. 18.2 Payment of Monies Out of Scheme Bank Account The Manager shall be entitled to pay all monies required to be paid by or for and on behalf of the Members pursuant to this Constitution or the Joint Venture Agreement in accordance with the relevant provisions out of the Scheme Bank Account including without limitation the Annual Management Fees, the Vineyard Establishment, Lease Rent Contribution Fee, Winery Expenses and Winery Fee. 18.3 Expenses of the Scheme Paid out of Fees All expenses of the Scheme other than: a] Lease rent; b] Winery Expenses and Winery Fee; c] any other expenses to be paid by the Member under the terms of this Constitution, during the term of the Scheme to the extent that they relate to the management duties of the Manager set out in the Joint Venture Agreement to be performed by the Manager hereunder shall be borne and paid by the Manager out of the Annual Management Fees and the Vineyard Establishment Fees. 251 "Gross Income" was defined to mean: "Gross Income" in respect of a Scheme Interest all amounts which are or would be liable to be included in the total assessable income of a Scheme if that Scheme were a taxpayer and liable to pay income tax thereon under the provisions of the Income Tax Assessment Act, 1936 or Income Tax Assessment Act, 1997 ["1997 Act"] (together with exempt income under those Acts) and includes money or property which is or would be included in the total assessable income by virtue of Parts 3-1, 3-3 and 3-5 of the 1997 Act or any other provision of those Acts although such receipts may be of a capital nature.

Duties and obligations of RE 252 Mr Rockliff further noted that the duties and responsibilities of the "Manager" are set out in cl 22.1 of the Constitution, in terms said to mirror the provisions of s 601FC(1) of the Corporations Law (and subsequently the Corporations Act). In particular, he noted that the Manager was required to comply with the Project's Compliance Plan; ensure that "Scheme Property" was clearly identified as scheme property; and held separately from property of the Manager and property of any other scheme. 253 Mr Rockliff also noted the following obligations on the "Manager" under the Constitution: 19.4 Manager to Comply The Manager must comply with the terms of the Compliance Plan. 19.5 Compliance Committee The Manager must establish a compliance committee if less than half of the directors of the Manager are external directors as defined in section 601JA(2) of the Law. Further, the Manager must establish a compliance committee within 14 days after it is required to do so by section 601JA(1) of the Law or within any longer period that the Commission has agreed to in writing. … 25.1 Financial Records The Manager must keep written financial records that: a] correctly record and explain the Scheme's transactions and financial position and performance; and b] would enable true and fair financial statements to be prepared and audited. The financial records must be retained for 7 years after the transactions covered by the records are completed. If financial records are kept in electronic form, they must be convertible into hard copy. Hard copy must be made available within a reasonable time to a person who is entitled to inspect the records. The Scheme Auditor have a right of access to the records. … 25.7 Report to Members The Manager must report to Members for a financial year within 3 months after the end of the financial year by either: a] sending Members copies of the financial report for the year, the directors' report for the year and the Scheme Auditor's report on the financial report; or b] sending Members a concise report for the year that consists of: i] a concise financial report for the year drawn up in accordance with accounting standards; ii] the directors' report for the year, and iii] a statement by the Scheme Auditor that the financial report has been audited, whether, in the auditor's opinion, the concise financial report complies with the accounting standards and a copy of any qualification in, and of any statements included in the emphasis of matter section of, the auditor's report on the financial report; and iv] a statement that the report is a concise report and that the full financial report and auditor's report will be sent to the Member free of charge if the Member asks for them.

Joint Venture Agreement 254 As previously noted, the JVA was an agreement between a Member, the Manager and the Land Owner. Each of these terms was defined in the Constitution. AHM and CPH were also defined in the JVA as the "Manager" and "Land Owner" respectively. 255 The recitals to the JVA states: A. The Farmers have each agreed to enter into this Agreement to carry out the Project [as herein after defined] as a Joint Venture and to appoint the Manager as the manager of the Joint Venture on the terms therein after set forth. B. The Land Owner is or will become the registered proprietor of the Land. C. The Land Owner has granted or will grant to the Custodian as agent for the Manager a Lease of the Land and the Manager is holding or will hold the same upon trust for the Farmers. 256 Thus, the JVA contemplated CPH's acquisition of the "Land" on which the "Vineyard" was to be located by CPH, and a lease over that land that would be held on trust for the investors in the Project, defined as "Farmers" in the JVAs. 257 Clause 2.7 of the JVA provides: The parties agree: a] to be just, true and faithful to each other in all matters concerned with the Joint Venture and the Project; b] to act in the best interest with due diligence and to the best of their abilities in all matters concerned with the Joint Venture and the Project; and c] to at all times furnish to each other all information and details in respect of matters undertaken relating to the Joint Venture or the Project. 258 Clause 3.1 of the JVA provides: The Farmers hereby appoints the Manager as the Manager of the Joint Venture and the Project in accordance with this Agreement and the Manager hereby agrees to so act. 259 Clauses 3.3 to 3.8 of the JVA provide: 3.3 The Manager agrees with the Farmer to perform the Management Services and to do so in an efficacious and timely manner and must do all things as may be necessary or incidental thereto. 3.4 The Manager must in carrying out the Management Services do so with a view to maximizing the return from the wine grapes or bulk or bottled wine from the Vineyard and must market the sale of the same with a view to maximising the profit and long term viability and profitability the Joint Venture with respect to the Project. 3.5 The Manager must use good viticultural methods in the preparation and maintenance of the grape vines for the purpose of maximising the return from marketable wine grapes, bulk wine or bottled wine therefrom. 3.6 The Manager must conduct the Project in a commercial manner and in accordance with accepted industry standards. 3.7 The Manager must comply with all laws and regulations that apply with respect to the Project including without limitation taking such measures as are in accordance with good viticultural practice to keep the land free of noxious pests, noxious animals, noxious weeds and noxious plants and exterminating any of the same that enter or grow upon the Land. 3.8 The Manager must engage the services of a reputable expert in the field of viticulture and wine production to provide the Manager with all such expert advice and assistance that the Manager requires to carry out the Management Services and to provide the expert reports to the Farmers which the Manager has agreed to provide under the Scheme Constitution. 260 The "Management Services" are defined in cl 1.1 of the JVA to mean "the services the Manager is to provide to the Joint Venture with respect to the Project", including 14 specified matters. 261 The Reschke parties relied on the following provisions of the JVA to support their claims: (1) Clause 2.9, which provides: The Famer by entering into this Agreement becomes a member of the Scheme and is bound by the terms of the Scheme Constitution. (2) Clause 4.2, which provides: The Manager must maintain proper books of accounts, ledgers, cash books, journals and other financial records that properly record and reflect the transactions and financial affairs of the Joint Venture. (3) Clause 5.1, which provides: In consideration of the Manager carrying out the Management Services the Manager must be paid the following Annual Management Fees by the Farmer as follows: a] for the Initial Period the sum of $13,430.00 per Participation in advance on the Settlement Date; b] for the 12 month period commencing on the first anniversary of the Settlement Date, the sum of $5,000.00 per Participation in advance on that date; c] for the 12 month period commencing on the second anniversary of the Settlement Date, the sum of $5,000.00 per Participation in advance on that date; d] for the 12 month period commencing on the third anniversary of the Settlement Date, the sum of $1,300.00 per Participation in advance on that date; e] for each 12 month period thereafter an amount per Participation being the greater of: i] the amount calculated in accordance with the following formula: M = $1,300 x A B Where - M is the Annual Management Fee for the relevant year A is the CPI for the last quarter in the year immediately prior to the start of the year for which this calculation is made B is the CPI for the quarter ended 30 June, 1999, or ii] the Annual Management Fee for the previous 12 month period plus three per centum (3%), annually in advance on the relevant anniversary of the Settlement Date thereafter until the termination of the Joint Venture. (4) Clause 5.4, which provides: Any expenses of the Project not to be borne by the Manager pursuant to clause 5.3 above, must be borne by the Farmer in proportion to their interest in the Joint Venture out of the Gross Income of the Joint Venture. (5) Clause 6.1, which provides: The Farmer must pay the Lease Rent Contribution Fee to the Manager being: a] for the Initial Period the sum of $300.00 per Participation in advance on the Settlement Date; b] for each 12 month period thereafter the greater of: i] an amount per Participation calculated in accordance with the following formula: R = $300 x A B Where - R is the Lease Rent Contribution Fee for the relevant year A is the CPI for the last quarter in the year immediately prior to the start of the year for which this calculation is made B is the CPI for the quarter ended 30 June, 1999, or ii] the amount of the Lease Rent Contribution Fee for the previous 12 months plus three per centum (3%), annually in advance on the relevant anniversary of the Settlement Date until the termination of the Joint Venture. (6) Clause 9, which provides: 9. GOODS AND SERVICES TAX 9.1 The Famer must in addition to any other amounts payable by the Famer herein bear and pay any goods and services tax or taxes payable with respect to any taxable supplies including without limitation those for which payments are made by the Farmer to the Manager or on the sales of wine grapes and wine from the Vineyard or on any other goods supplied or services provided for or in respect of the Project. 9.2 the Manger shall be entitled to deduct from any amounts due or payable to the Farmer any liability for goods and services tax or taxes referred to in clause 19.1.

Lease Rent Contribution Fee 262 One of Mr Rockliff's contentions is he should not have been charged any amount for the "Lease Rent Contribution Fee". The "Lease Rent Contribution Fee" is defined in the JVAs to mean "the annual amount that the Farmer must pay to the Manager in accordance with clause 6 hereof as the Farmer's contribution to the Lease Rent for that year". The "Lease Rent" is defined to mean "the annual rental payable by the Manager to the Land Owner under the Lease". The "Lease" is defined to mean "the lease of the Land entered into between the Land Owner as Lessor and the Custodian as agent for the Manager as Lessee for a period of twenty (20) years commencing on the Commencement Date". 263 The "Commencement Date" is defined to mean "the day when the Manager has accepted Application Forms from Farmers [including the Farmer] taking up a total of 200 Participations in the Joint Venture". Based on the figures set out below, this day occurred when AHM accepted Applications Forms received pursuant to the second prospectus, since 102 participations were acquired following the issue of the first prospectus and 130 participations were acquired following the issue of the second prospectus. 264 By cl 6.1 of the JVAs, the "Lease Rent Contribution Fee" was $300 per participation for the first year of the investment and the higher of a figure calculated by reference to a formula taking into account changes in the Consumer Price Index for each year thereafter or "the amount of the Lease Rent Contribution Fee for the previous 12 months plus three per centum (3%)". 265 Clause 6.2 of the JVAs provides: "The Manager must apply the Lease Rent Contribution Fee to payment of the annual rent payable by the Manager under the Lease to the Land Owner." 266 As explained below, although CPH and ARG entered into an "underlease" in respect of sections 226, 227 and 228 (which was the land on which the Project vineyards were established), that agreement did not satisfy the definition of "Lease" in the JVAs. However, in my view, there was probably a tenancy by estoppel on the terms of the underlease and there is no suggestion that ARG did not acquire the right to exclusive possession of the land. 267 Accordingly, while there was no rental payable under the "Lease", ARG was probably estopped from denying the existence of the "underlease", including the obligation to pay rent under that agreement. Further, it was not suggested that the "Manager" did not apply amounts received on account of the "Lease Rent Contribution Fee" to the payment of the annual rent payable by ARG under the underlease to CPH in accordance with cl 6.2 of the JVAs. 268 Accordingly, while I accept that Mr Rockliff was not liable to pay the "Lease Rent Contribution Fee", it is not clear that he was not otherwise liable to pay a commensurate amount on the basis of a tenancy by estoppel.

Winery Expenses 269 Clause 8.2 of the JVAs provides that "the Manager must be reimbursed the Winery Expenses out of the Gross Estate Wine Proceeds". Clause 8.3 provides "[i]n addition the Manager shall be entitled to be paid a Winery Fee of "40% of the amount by which the Gross Estate Wine Proceeds exceeds the sum of $9.00 per bottle sold". 270 "Winery Expenses" is defined to mean an amount of $5,900 per tonne of wine grapes adjusted in accordance with a formula for changes to the Consumer Price Index. The definition does not specify what types of expenses fall within the definition. However, an indication is given by cl 8.1, which provides: The Manager may engage in the production, marketing and sale of private or estate labelled wine using grapes grown on the Vineyard including without limitation the establishment of a Winery. 271 "Vineyard" is defined to mean "that area of the Land upon which the Project is to be carried out". 272 "Winery Fee" is defined to mean "the fee payable to the Manager in addition to the Winery Expenses being the amount referred to in clause 8.3".

Compliance Plan 273 There is a compliance plan for the Project, dated 29 April 1999. The stated purpose of the plan is "to ensure that the Manager complies with the Law and the Scheme's Constitution and to ensure that the interests of Members are protected". Among other things, the Compliance Plan identified major areas of risk to Members and states what the Manager will do to protect Members in relation to those risks. 274 The plan includes the following, concerning the proceeds of sale of the harvest and the collection of income: 5. How will the Manager ensure that it accounts for the proceeds of sale of the harvest and the collection of income? 5.1 The Compliance Officer for the Manager will check that the Custodian opens and maintains a Scheme Bank Account which will be a trust account and entitled "Coonawarra Winegrape Project - Scheme Bank Account" or similar name. Because the Scheme Bank Account is a trust account it is fully protected in the event of the failure of the Manager or the Custodian and will always remain the property of the Members. 5.2 The Compliance Officer for the Manager will check that all cheques from the proceeds of sale of the harvest or other income of the Scheme are drawn to the Custodian as trustee for the "Coonawarra Winegrape Project - Scheme Bank Account" and will bank all such cheques into the Scheme Bank Account not later than the next working day after receipt. 5.3 The Compliance Officer will check that the Custodian has an accounting system that records receipts and cheques in numerical order, enters the same into the cash book and relevant ledger and prints out monthly cash book receipts and payments journal entries and trial balance. The cash book must be reconciled with the bank statement within 21 days of the end of each month. 5.4 Before withdrawing any monies from the Scheme Bank Account there shall be a cheque requisition prepared by the Compliance Officer that sets out the reason for the drawing of the cheque and other appropriate evidence as to entitlement to payment which must be retained in duplicate one copy to be retained by the Manager with its records and another copy by the Custodian with its records. 5.5 The Compliance Officer will ensure for the Manager that no monies are drawn from the Scheme Bank Account except to meet expenses that are permitted under the Constitution to be paid from that account. 5.6 The Farm Manager will undertake all reasonable measures to ensure that all grapes harvested will be stored securely until collected by or transported to the purchaser and will use an invoicing system to ensure that all produce that leaves the Vineyard arrives at the point of sale of place of further processing without loss. 5.7 The Farm Manager will ensure that while goods are under the care of a wine-maker that the wine-maker will be responsible for ensuring the quality and quantity of the Scheme assets are protected in accordance with the contracts between the Manager and the wine maker and will ensure that invoices are used to track progress of bottles and cases that are Scheme Property until such time as the produce is paid for. 5.8 The Farm Manager will endeavour to inform the Custodian of critical factors such as the date of harvest and the purchaser.

Arrangements for financing investments in the Project 275 The prospectuses contained a form of the loan deed that would be entered into between RCF and each investor who sought a loan. 276 There was an intended arrangement, which the Reschke parties acknowledged to involve "round robins" of promissory notes, described by the parties as follows: (1) AHM Deposit Agreement between AHM and RCF: AHM agreed to deposit with RCF the proportion of the joint venture fees which RCF had lent to the investors which was paid by RCF to AHM at the direction of those investors, repayable on demand on written notice by AHM to RCF; (2) CPH Deposit Agreement between CPH and RCF: CPH agreed to deposit with RCF the rent paid to CPH (pursuant to the underlease between CPH and ARG as agent for AHM), repayable on demand on written notice by CPH to RCF; (3) Koonara Deposit Agreement between Koonara and RCF: Koonara agreed to deposit with RCF the first year's management fees paid to it by AHM, repayable on demand on written notice by Koonara to RCF; (4) Promissory note from RCF to AHM to have inserted the amount of the advances made by RCF to investors for their first year's fees, with provision for endorsement by AHM to RCF for the deposit of that amount pursuant to the AHM Deposit Agreement who accepted the same for payment; (5) Promissory note from RCF to AHM to have inserted the amount of the advances made by RCF to investors for their first year's rent contribution fees with provision for endorsements by AHM to CPH in payment of the rent under the underlease with provision for a further endorsement by CPH to RCF for deposit pursuant to the CPH Deposit Agreement; (6) Promissory note from RCF to AHM to have inserted an amount to be withdrawn by AHM from RCF pursuant to the AHM Deposit Agreement equivalent to the fees payable by AHM to Koonara out of the first year's management fees received by AHM on settlement with provision for endorsement by Koonara to RCF for deposit of that amount pursuant to the Koonara Deposit Agreement.

June 1999: Appointment of Custodian and "lease" of sections 226, 227 and 228 277 By agreement dated 7 June 1999, AHM appointed ARG as the Custodian for the Project. By that agreement, ARG was appointed to hold the "Project Property" as agent for AHM. The "Project Property" was defined to mean: All assets of the Project required by the Law to be held by the Custodian and which are collectively held by the Custodian under this Agreement. Without limiting the generality of this definition this includes - (a) application money paid by applicants to the Project pending its use to acquire interests in the Project; (b) primary produce and products produced therefrom generated under the Project and held pending sale on behalf of Members. 278 The evidence included a "Memorandum of Underlease" dated 30 June 2000, but possibly executed after that date, by which CPH purported to lease to ARG the whole of the land comprising sections 226, 227 and 228 for the period of 21 years from 1 July 1999, at a rent being: [T]he total amount of the Lease Rent Contribution Fees which the Lessee (or the Manager on its behalf) is entitled to receive pursuant to the Joint Venture Agreement in each twelve (12) month period of the term of this Lease commencing on the 1st day of July. The rent is subject to review as provided for in the Joint Venture Agreement and set out in clause 1.14 of this Lease. The rent shall be payable upon receipt by the Manager or the Lessee (as the case may be) or within one month of the date upon which the Manager is entitled to receive the relevant Lease Rent Contribution Fees (whichever occurs first)". 279 The Memorandum of Underlease contains the handwritten notation "Received 11.9.00". There is a letter dated 7 July 2000 from Thomson Playford to Mr Reschke, which enclosed a lease to CPH and an underlease to ARG for execution. The executed underlease was provided by ARG to Mr Jessup under cover of a letter dated 30 August 2000. By letter dated 5 September 2000, Mr Jessup forwarded the underlease to Thomson Playford for stamping and registration. 280 By letter dated 12 September 2000, Thomson Playford told Mr Jessup that the document was not in a format acceptable to the Land Titles Office for registration purposes. Thomson Playford requested three executed copies of the underlease, in the required format and with certain blanks completed. Thomson Playford also requested advice about the status of the lease to CPH and copies of that lease which, according to their letter, needed to be lodged for registration prior to the underlease. 281 Thereafter, the correspondence suggests that Mr Jessup did not respond to the 12 September 2000 letter. By letter dated 27 April 2001, Mr Jessup wrote to Thomson Playford requesting a copy of the "Lease" for the Project, for provision to ARG. By facsimile dated 23 May 2001, David Beer of Thomson Playford wrote to James Dickson of Piper Alderman, copied to Mr Jessup, saying that he believed both lease and underlease were with Mr Jessup. 282 The evidence does not reveal what, if anything, was done by either Mr Jessup or Thomson Playford to resolve the question of the location of a relevant lease or leases.

CPH's interest in the Project Land 283 CPH did not ever become the registered proprietor of any of the Project Land, as foreshadowed by the Constitution and the JVA. Although it may have acquired an option to purchase the land, or some of the land, the option was not exercised. 284 As previously noted, the Constitution and the JVA contemplated the existence of a "Lease", meaning "the lease of the Land entered into between the Land Owner as Lessor and the Custodian as agent for the Manager as Lessee for a period of twenty (20) years commencing on the Commencement Date". Although the precise "Commencement Date" is unclear, it must have been after 1 July 2000, because insufficient "Application Forms" were received pursuant to the first prospectus for 200 participations, and therefore the underlease was not for the duration required by the definition of "Lease". 285 There is also a question about whether the underlease is a "Lease" in circumstances where CPH did not have title to the subject land. In order to grant a leasehold interest in the relevant land, it was necessary for CPH to give the Custodian the right to exclusive possession of the land. CPH was never able to give that right to the Custodian in respect of any of sections 226, 227, 228, or 235. 286 Accordingly, there was never a "Lease" within the meaning of either the Constitution or the JVA. 287 However, that is not to say that CPH had no rights in relation to sections 226, 227 and 228. A tenancy by estoppel arises where A, having no title to grant a lease, purports to grant a lease to B: Edgeworth B, Butt's Land Law (7th ed, Thomson Reuters, 2017) p 337-338. That text notes that a tenancy by estoppel gives the tenant no interest in the land, since by definition it arises only where the landlord has no title to the land, and so it is not strictly within his definition of "lease". However, "as both parties are prevented from denying the existence of a lease between them, it is as though they held under a tenancy - a tenancy which gives the parties and their successors the rights and liabilities of a legal tenancy on the terms which they purported to create." 288 The evidence descended into complicated issues concerning options to purchase sections 226, 227 and 228, including as to the value of that land. It is unnecessary to make detailed findings on those matters. For the Rockliffs, the main points are that CPH never had a secure title to the Project Land, contrary to what was promised or contemplated by the second prospectus; this reflected Mr Reschke's sense of entitlement to the "family farm" and an indifference to the interests of investors in the Project to the extent that those interests did not align with his own. For the Reschke parties, the main points are that the investors were not disadvantaged by CPH's lack of title because the Project was in fact conducted on the Project Land; and the Rockliffs did not take up the option of acquiring shares in CPH. Broadly speaking, each point is supported by evidence. 289 Strangely, by letter dated 11 August 2000, Mr Reschke apparently on behalf of CPH, Koonara and Reschke Pty Ltd, wrote to investors referring to share certificates "for those who bought shares in the land owning company". The letter said, relevantly: It is the Company's intention to allow 50% of these shares to be sold, but as some investors did not take this option, some shares are still available for purchase to existing investors only. As the company owns the land, sale of these shares is not imperative, but if you are interested in purchasing any of these shares, please contact us and we will forward the relevant documentation to you. 290 Mr Reschke was prepared to acknowledge that this passage involves a "poor choice of words". The passage, which falsely suggests that CPH owned the Project Land, was repeated in a similar letter to investors dated 7 November 2000 and in marketing material. 291 At various times, Mr Reschke has agreed with certain shareholders regarding the transfer of their shares in CPH to Reschke Vineyards.

June 1999: First Prospectus 292 A prospectus entitled "The Coonawarra Wine-Grape Project Investment", dated 11 June 1999, was lodged with ASIC on about 17 June 1999. This prospectus expired on 11 June 2000. 293 As noted above, Mr Reschke contributed to the content of the first prospectus. In particular, the first prospectus contained projections of returns to investors and included a sensitivity analysis and cashflow budget with and without the "finance option". Mr Reschke prepared this material with the assistance of his accountant. The parties did not dispute that, at all times, Mr Reschke believed that the projections and the underlying assumptions were reasonable. 294 Nor was it disputed that Mr Reschke was the source of most of the content of the first prospectus concerning the Project, which he provided to Mr Jessup. This included the specifications of the vineyard, the optional financing of investors, contributions by RCF and the purchasing and leasing of the Project Land. 295 The first prospectus included a tax opinion from Mr Lear addressed to AHM and dated 31 May 1999. 296 The first prospectus also included an investigating accountant's report from Court & Co addressed to AHM and dated 10 June 1999. 297 No serious marketing of the first prospectus was attempted in the financial year ended 30 June 1999 because no product ruling had yet been obtained. 298 In about August 1999, Mr Reschke explored the possible incorporation of a company to be controlled by him, and which could potentially act as the RE for the Project and other managed investment schemes. A written advice was provided by Thomson Playford, addressed to Mr Reschke as managing director of CPH, but the invoice for the advice was paid by Koonara.

March 2000: Product ruling 299 In about June 1999, Mr Reschke and Fergus McLachlan agreed that AHM should terminate Mr Lear's instructions in relation to the product ruling and instead engage Mr Schurgott of Thomson Playford. It was agreed that Mr Reschke would arrange this on behalf of both Koonara and AHM, and would keep Fergus McLachlan informed. On behalf of AHM, Fergus McLachlan authorised Mr Reschke to deal with, and give instructions to, Mr Schurgott in relation to the obtaining of the product ruling for the Project. 300 Thereafter, in about July 1999, Mr Reschke instructed Mr Schurgott to obtain a product ruling for the Project as soon as possible. Mr Reschke told Mr Schurgott that he had both AHM and Koonara's authority to engage him, but that he was to refer to Mr Reschke for instructions throughout the course of the product ruling application. 301 When, on 9 July 1999, the ATO sought more information from Lear & Co, Mr Lear forwarded the request to both Thomson Playford and Mr Reschke and offered to assist with the reply. 302 Thereafter, there was correspondence and regular telephone conversations between Mr Schurgott and Mr Reschke regarding the product ruling. As Mr Reschke put it in his December 2010 affidavit in the Thomson Playford proceeding, Mr Schurgott sent correspondence to the ATO in relation to the product ruling application "on my instructions for Koonara and AHM". Mr Reschke referred to it as "Koonara's product ruling application". 303 In a facsimile dated 26 July 1999, Mr Schurgott referred to financing arrangements concerning the product ruling application and said: The Tax Office wants to see that the funding for the Project is provided by an outsider (either directly or indirectly) and is not a mere round robin. This is why they are insistent on having an external financier. It would not matter if the external financier was a related party provided real cash flowed to the finance company. It is not clear to me how much funding the Tax Office require to be sourced from outside [RCF]. … [A]bout $1 million would be necessary in the first year and this is the minimum external facility that you could expect the Tax Office to accept. I do not think there is any real way around this apart from obtaining the ANZ or alternative bank a clear undertaking to extend funding to [RCF] for this purpose. The letter dated 22 June 1999 was too vague in this regard. I am afraid you need to put the finance in place. 304 In cross-examination, Mr Reschke affirmed that he understood that the ATO was insistent on the provision of "real cash flow" by the financier. 305 During one telephone conversation with Mr Schurgott, Mr Reschke informed Mr Schurgott that he "wanted to commence marketing of units in the Project" and could not do so, as a matter of practicality, without the product ruling. 306 In November 1999, the Treasurer announced changes to the taxation law which, as Mr Reschke understood them, would deny income tax deductibility for payments for services made in advance, which related to services provided in periods beyond the financial year of payment. However, as Mr Reschke understood the announcement, the changes would not apply to managed investment schemes where a product ruling had been sought before the date of the announcement. Mr Reschke understood that such schemes were described as "grandfathered". 307 In March 2000, the ATO issued product ruling PR2000/10 "Income tax: Coonawarra Wine-Grape Project Investment". Mr Reschke duly received the product ruling from Mr Schurgott.

Marketing the first prospectus 308 In 1999, Mr Reschke had investigated obtaining an independent expert report analysing the Project, with the intention of using that report in marketing the Project. 309 After March 2000, Mr Reschke arranged for an independent investment report on the Project to be prepared by Property Investment Research. Mr Reschke used the report when marketing the first prospectus. 310 The evidence included marketing letters from AHM to various potential investors in April and August 2000.

Increase in units offered under first prospectus 311 In about April 2000, Mr Reschke instructed Mr Jessup and Mr Schurgott to increase the total number of units available to be offered under the first prospectus to take maximum advantage of the "grandfathered" applicability of the 13 month rule and to raise funds to establish a vineyard on the maximum amount of the Project Land. 312 Supplementary prospectuses were prepared and lodged with ASIC dated 17 April 2000, referring to the product ruling and extending the Project to 1100 units and 220 hectares of vineyard, and dated 26 May 2000 and 10 July 2000, extending the expiry of the prospectus from 11 June 2000 to 11 July 2000, and later to 11 September 2000. 313 Mr Reschke and Koonara were significantly involved in the marketing of the first prospectus. It is unnecessary to make detailed findings concerning that involvement because Mr Rockliff's investment in the Project was not made pursuant to that prospectus.

Units purchased under first prospectus 314 Minutes of a board meeting of Koonara on 30 June 2000 record that applications had been received for 57 units. The meeting noted that Mr Reschke would purchase 43 units, taking the subscriptions up to the minimum 100, to be paid for by Koonara in the form of an "exertion fee" to Mr Reschke in return for his work in marketing the scheme to investors at large. 315 Mr Reschke says that he financed his investment in the Project by taking up the RCF loan option and, as to the balance for the years 2000-2004, through a loan from Koonara. 316 Ultimately, investors purchased 102 units under the first prospectus. The parties agreed that the cash receipts journal for ARG, the custodian, records the application funds. The journal shows that payments for 23 units were deposited after 30 June 2000; Mr Reschke applied for 42 units on 6 July 2000 and applications for a further 5 applications were made between 10 July and 13 September 2000. 317 Thus, Mr Reschke held approximately 41% of the participations in the Project following the issue of the first prospectus.

"Round robin" 318 By letter dated 6 July 2000, Mr Jessup wrote to AHM saying relevantly: [O]n settlement in this matter, [RCF] issued a promissory note for the loans to the members of AHM which in turn deposited the money back on deposit with [RCF]. Please note my earlier comments that the Promissory Note will only be valid if Burke arranged the finance facility with ANZ as he stated to the ATO that he had done. I enclose a Deposit Agreement that was entered into on 30th June, 2000 between AHM and [RCF] for execution by both parties. You will then need to withdraw the deposit so that you can pay [Koonara]. I enclose a Promissory Note for this purpose. Koonara will then redeposit the money with [RCF]. … The other monies will be withdrawn from the Applications Account to the Scheme Account and then to AHM's account. You will then need to pay Koonara and Coonawarra their respective monies. 319 The evidence includes two "Promisery Notes" dated 30 June 2000 from RCF to AHM in the sums of $800,000 and $998,000. 320 There is also a third "Promisery Note" dated 30 June 2000 from RCF to AHM in the sum of $736,000. This third note is endorsed to Koonara and then to RCF. 321 The parties agreed that RCF lent Koonara some funds borrowed from ANZ to fund the establishment of the Project, but did not specify the relevant amount. Financial statements for Koonara, Reschke Vineyards and RCF for the period ended 31 December 1999 show that the total financing for the Henry Albert Project was $3,689,982, including a fully drawn advance in an amount of $3,325,000. Koonara's liabilities as at 31 December 1999 included a loan from RCF of $2,902,743.47. The balance sheet for the Rocky Castle Finance Trust as at 31 December 1999 showed, as a non-current liability, "ANZ Bank - Fully Drawn Advance" in an amount of $3,325,000. 322 An ANZ bank statement shows that as at 30 June 2000, RCF owed the bank $2,905,000. 323 Financial statements for Koonara, Reschke Vineyards, and RCF for the period ended 31 December 2000 appear to show that, as at 31 December 2000, Koonara owed RCF $1,709,333 (that is, about $1.2 million less than one year earlier). 324 A balance sheet for the Rocky Castle Finance Trust as at 31 December 2000 appears to show, as a non-current liability, "ANZ Bank - Fully Drawn Advance" in an amount of $2,905,000 as at 30 June 2000 and in an amount of $3,331,286.00 as at 31 December 2000.

2000: Establishment of Reg Reschke 1 vineyard 325 Between July and December 2000, a vineyard of 21 hectares known as the Reg Reschke 1 vineyard was established under Mr Reschke's supervision on part of the Project Land. The vineyard comprised six hectares of cabernet and 15 hectares of merlot grapes. 326 Evidently, the size of the vineyard was only about 10% of the 220 hectares envisaged in the first prospectus as supplemented by the supplementary prospectuses. 327 Frost protection was not installed at the time of the vineyard's establishment. Mr Reschke's evidence was that he planned to install frost protection at a later time on vineyards that he expected to develop to the south and the east of the Reg Reschke 1 vineyard. 328 Koonara's board minutes of 18 August 2000 record that Mr Tolley and Mr Gawel expressed concern in relation to frost on the Reg Reschke vineyard if there was no frost protection in place. Mr Reschke stated that a lot of the vineyard was on a high area, therefore there was minimal risk. Mr Tolley noted that some frost would attack high areas. The minutes record "Frost would only be a risk for young vines, therefore needed to be careful whether to plant early (September) or later (October)". The minutes noted that Mr Reschke was to get advice. 329 In February 2001, Fergus and Dugald McLachlan reported to an AHM board meeting that they had visited the Project and were "well pleased with the results". The vineyard was said to be in excellent condition and the vines were growing well.

May 2001: Second Prospectus 330 In August 2000, Mr Schurgott advised Mr Reschke that further units could be offered in the Project under a new prospectus, called a "rollover prospectus", if it was for substantially the same project as the previous prospectus. 331 In about late 2000, Mr Reschke instructed Mr Jessup and Thomson Playford to prepare a second prospectus for the Project on substantially the same terms as the first prospectus. 332 There is no doubt that Mr Reschke and Koonara were substantially involved in advancing the preparation of the second prospectus. For example, minutes of meetings of the directors of Koonara on 30 January 2001 and 13 March 2001 refer to updates on preparation of the second prospectus. By email dated 27 March 2001, Mr Reschke told Mr Schurgott that he had spoken with Mr Jessup in relation to a change to the duration of the Project Constitution. Mr Reschke also asked Ian McLachlan to write the introductory letter in the second prospectus, and Mr McLachlan did so. There was also evidence that Koonara incurred significant costs in relation to the second prospectus. 333 By letter dated 29 March 2001, Fergus McLachlan authorised Mr Reschke to act on behalf of AHM "in regards to registering the … Project". 334 By letter dated 18 May 2001 from Anderson Legal (where Mr Jessup was by then a director) to Mr Reschke, Anderson Legal made numerous criticisms of the draft prospectus. Mr Jessup was retained by AHM to finalise the second prospectus. 335 Eventually, Mr Reschke instructed Mr Jessup (and Mr Dickson) to finalise the second prospectus and lodge it. The second prospectus was lodged with ASIC on 29 May 2001. 336 By letter dated 31 May 2001, Fergus McLachlan on behalf of AHM authorised Mr Reschke to make changes to the prospectus for the Project dated 29 May 2001. 337 The tax opinion included in the second prospectus is dated 14 May 2001 and is from Mr Schurgott to AHM. There is no dispute that it was prepared on Mr Reschke's instructions and was sent to him. 338 As with the first prospectus, the second prospectus contained projections of the returns that investors in the Project might receive, that Mr Reschke at all times considered reasonable. 339 The second prospectus also contained an expert report to AHM from Ian Whan, an independent wine grape consultant, giving his views on the future of the grape and wine market, which Mr Reschke considered were reasonable. 340 On 8 June 2001, a supplementary prospectus was lodged with ASIC that, amongst other things, reduced the total number of units on offer from 1100 to 900. Mr Reschke said that this document was issued on his instructions. At the top of the supplementary prospectus is the following notation: This is a supplementary prospectus intended to be read together with the prospectus issued by [AHM] and [CPH] dated 29 May 2001 ("Prospectus") relating to the offer of interests in the [Project]. 341 The supplementary prospectus contains statements that the issue of the document is authorised by the directors of AHM and CPH.

June 2001: product ruling 342 Mr Reschke stated that in about February 2001, with AHM's authority, he instructed Mr Schurgott, on behalf of Koonara and his other companies and on behalf of AHM, to obtain a product ruling for the Project under the proposed second prospectus. 343 By letter dated 28 March 2001, on behalf of AHM, Thomson Playford applied to the ATO for a product ruling in connection with the proposed "reissue" of a prospectus in respect of the Project. The application incorrectly stated: "Each participant or its related entity must take up shares in the landholding company, [CPH] and in consequence has an indefinite involvement in the project." 344 Under the heading "External Borrowings", the letter stated: [RCF] has an external facility provided by ANZ Bank of $4.01 million of which $1.6 million is for the purposes of the [Project] … The only change is that the overall facility has been reduced to $3.0 million but will probably be increased again in the near future. 345 By letter dated 3 April 2001, Mr Schurgott corrected the application, saying relevantly: Burke Reschke has asked me to draw to your attention [to] the fact that my comment in relation to question 13 "Intended Life" is in fact not correct. Each participant or its related entity has the opportunity to take up shares in [CPH]. There is no obligation to do so. In this regard, the intended life of the project may or may not be indefinite. If a joint venturer only acquires a participation interest in the joint venture then the life of the project will be 22 years (the term of the lease). 346 Mr Reschke was involved in progressing the product ruling application. For example, Mr Reschke wrote directly to the ATO to answer a request for information in April and May 2001. 347 Product ruling PR2001/93 was obtained on 20 June 2001. Mr Rockliff referred to cll 10, 15, 37, 38 and 124 of the ruling. In particular, Mr Rockliff noted that the ruling did not apply if an investor entered into a finance agreement that included "funds borrowed, in whole or in part, [that] are not available for the conduct of the Project, but are transferred … back to the lender or any associate". 348 A second supplementary prospectus dated 21 June 2001 was lodged with ASIC on 21 June 2001 on the instructions of Fergus McLachlan. This prospectus referred to product ruling PR2001/93.

Marketing the second prospectus 349 As with the first prospectus, Mr Reschke was personally involved in and oversaw the marketing of the second prospectus. 350 The parties agreed that, by the time Koonara had suspended marketing of the Project, Koonara had also incurred legal expenses of over $24,000 in respect of the Project and other expenses of $350,000 in production and printing of prospectuses and documents.

Units purchased under second prospectus prior to 30 June 2001 351 A total of 130 units were purchased under the second prospectus prior to 30 June 2001. The total commission fees for units sold through the second prospectus up to that time was $337,984.14 exclusive of GST. The average commission fee per unit was $2,599.88.

Extension of second prospectus 352 The second prospectus was originally issued with an expiry date of 29 May 2002. On 21 May 2002, a further supplementary prospectus was issued extending the expiry date of the prospectus to 29 June 2002. 353 The Rockliffs sought findings in relation to facts concerning an alleged defect in the product ruling, of which Mr Reschke was informed in about May 2002. As I understood their case, the "defect" concerned the fact that the product ruling did not apply to investors who invested after 30 June 2001. The Rockliffs complained that they were not told of the fact that Mr Reschke's intentions to issue further prospectuses changed because the product ruling did not apply to investments after 30 June 2001. 354 The Reschke parties contended that this issue was not relevant, because the Rockliffs were not denied any tax benefit. I accept the Reschke parties' contention on this point. The Rockliff parties did not identify any legal obligation or duty owed by any of the Reschke parties to provide that information to the Rockliffs. 355 Accordingly, I have not made findings on the facts concerning the "defective" product ruling, except as set out below.

June 2001 to 30 June 2008: Rockliffs' investments in the Project 356 On 19 June 2001, Mr Rockliff was introduced to the Project during a telephone conversation with David Stewart of Ord Minett. Subsequently, Mr Rockliff met with Mr Stewart and Mr Reschke, and Mr Reschke presented the second prospectus to Mr Rockliff. 357 Mr Rockliff, a lawyer, carefully reviewed the second prospectus. He also read the supplementary prospectus. 358 Around the same time, Ms Rockliff, also a lawyer, was provided with information about the Project and given a copy of the second prospectus by Stephen Triglone, a Westpac Private banker who attended the offices of Rockliffs Lawyers. In her turn, Ms Rockliff carefully reviewed the second prospectus. 359 On about 26 June 2001, Ms Rockliff decided to invest in the Project and completed a participation application form and power of attorney for one participation. Ms Rockliff elected to take up the finance option and sent the relevant documents with a cheque in the sum of $11,710 to AHM. 360 Also on about 26 June 2001, Mr Rockliff completed a participation application form and power of attorney for three participations, and drew a cheque for $35,130. Mr Rockliff also elected to take up the finance option. He returned his documents and the cheque to Ord Minett. 361 There is no reason to doubt that each of the Rockliffs took into account and relied upon the terms of the second prospectus in deciding to invest in the Project (including in deciding to borrow funds from RCF), and I make that finding.

Payments made by the Rockliffs 362 Mr Rockliff's alleged payments pursuant to the Scheme are set out at [118] above. As set out at [123], I have not found that the payments were proved except for the initial payment of $35,130. 363 In contrast, Ms Rockliff's affidavit evidence proved her payments of the following amounts in addition to the amount of $11,710 referred to above: (1) $4,232.50 to AHM in around May 2002; (2) $4,455.10 to AHM in around June 2003; (3) $1,795.76 to AHM in around June 2004; (4) $3,966.52 to AHM in around June 2005; (5) $4,584.91 to Huntley in around June 2007; (6) $584.96 to Huntley in around June 2008; and (7) $2,620.80 to RCF in around June 2007.

First group of Mr Rockliff's claims: misconduct in connection with second prospectus 364 In the cross-claim, Mr Rockliff contended that each of Koonara and RCF engaged in, or alternatively, each of the Reschke parties was involved in, conduct in contravention of ss 12DA, 12DB, 12DC and 12DF of Div 2 of the ASIC Act 1989 and s 995 and s 999 of the Corporations Law "by the issuing of" the second prospectus which, it is alleged, contained false, misleading or deceptive representations in respect of the Project. 365 In closing submissions, the conduct complained of was expressed as "making, causing to be published and disseminating … statements" contained in the second prospectus. These statements were said to be, variously: (1) misleading and deceptive or likely to mislead and deceive; (2) false representations that the establishment and operation of the Scheme would be of a particular standard, quality and grade; (3) false and misleading representations that CPH had, or would have through the grant and exercise of an option to purchase, an interest in land the subject of the Scheme; (4) statements which were liable to mislead the public as to the nature, characteristics and suitability for their purpose of an investment in the Scheme; (5) statements that were false in a material particular or materially misleading and likely to induce and investment in the Scheme; and (6) statements contained in the second prospectus in relation to the establishment and operation of the Scheme, which were false. 366 Further, this conduct was said to be unconscionable conduct on the part of Koonara and RCF in contravention of s 12CA and s 12CB of the ASIC Act 1989, and that Mr Reschke and RCF were involved in Koonara's contraventions of those provisions.

Koonara and RCF did not issue the second prospectus 367 I have previously found that the second prospectus was lodged with ASIC on 29 May 2001 and that supplementary prospectuses were also lodged with ASIC. On the facts and evidence set out above, I find that the second prospectus and its accompanying supplementary prospectuses were the documents of AHM and CPH, notwithstanding the contributions of Mr Reschke (including, arguably, on behalf of Koonara) to the content of the documents. These documents were lodged with ASIC by AHM and CPH. 368 No doubt having regard to these matters and the form in the prospectus entitled "Participation application form and power of attorney" addressed to AHM and the form entitled "Application form for [CPH]", Mr Rockliff did not press the contention that the second prospectus was issued to him by either Koonara or RCF.

Did Koonara or RCF make or cause to be published and disseminated statements contained in the second prospectus? 369 I do not accept that either Koonara or RCF made the statements contained in the second prospectus because it was not published by either of them. Rather, the second prospectus was published by AHM and CPH. 370 I accept that Koonara caused the second prospectus to be given to Mr Rockliff because Mr Reschke presented the document to Mr Rockliff and Koonara paid for the printing of the second prospectus. Thereby, Koonara caused the statements contained in the second prospectus to be published to Mr Rockliff. 371 I accept that RCF caused to be published the form of loan deed between it and borrowers that was contained in the second prospectus. Otherwise, I do not accept that RCF engaged in any conduct that can fairly be described as causing to be published or disseminating the second prospectus or statements contained in the second prospectus to Mr Rockliff.

Koonara and Mr Reschke, but not RCF, were involved in contraventions by the publication of the second prospectus 372 When the Rockliff parties contended that the Reschke parties were "involved" in the identified contraventions, I understood them to refer to involvement in a contravention in the sense defined by s 79 of the Corporations Act. That is because, as I understood the Rockliffs' case, the findings of involvement in contraventions gave rise to claims for relief based on substituted liabilities by s 276 of the ASIC Act 2001, including s 12GM of the ASIC Act 2001. Section 12GM provides for the making of orders against a person "who was involved in" a relevant contravention. By s 5(2) of the ASIC Act 2001, that expression has the same meaning in the ASIC Act 2001 as in the Corporations Act. 373 Section 79 of the Corporations Act provides: A person is involved in a contravention if, and only if, the person: (a) has aided, abetted, counselled or procured the contravention; or (b) has induced, whether by threats or promises or otherwise, the contravention; or (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention; or (d) has conspired with others to effect the contravention. 374 In order to establish, in civil proceedings, that a person is liable as an accessory to a statutory contravention, all of the elements of that contravention must be proven, as must be the alleged accessory's knowledge of the essential facts constituting the contravention: Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 670. 375 Mr Rockliff's case was based on several propositions, which may be summarised as follows: (1) Mr Reschke was involved in the drafting of the second prospectus; (2) Mr Reschke drafted the substance of the 20 pleaded representations, on his own behalf and on behalf of Koonara and for the benefit of each of the Reschke parties; (3) Mr Reschke and Koonara were responsible for printing, publishing and disseminating the second prospectus and Mr Reschke was personally involved in the promotion and marketing of the Project to investors; (4) in respect of the promotion, marketing and operation of the Project, AHM acted in accordance with the instructions and directions of Mr Reschke who in turn acted on behalf of the Reschke parties and CPH and for the benefit of the Reschke parties; and (5) each of the Reschke parties was involved in the issuing of the second prospectus that contained false, misleading or deceptive representations in respect of the Project. 376 Mr Reschke marketed the second prospectus to Mr Rockliff personally. By that conduct, he impliedly represented that the second prospectus was accurate, to the extent that it made statements of fact and, generally, that Mr Rockliff could rely on the contents of the second prospectus in deciding whether to invest in the Project. 377 The next question is whether Mr Reschke's efforts in marketing the second prospectus are to be attributed to Koonara. I accept that those efforts should be attributed to Koonara, having regard to its evident involvement in the development of the prospectus, as seen in its minutes of meetings, and Mr Reschke's own evidence from which I infer that in relevant respects (such as obtaining the product ruling for the prospectus) he was acting on behalf of Koonara. 378 Finally, it is necessary to consider whether Mr Reschke's efforts in marketing the second prospectus are to be attributed to RCF. Unlike the case of Koonara, the evidence did not include minutes of meetings of RCF which might have shown decisions made by RCF in connection with the second prospectus. Mr Rockliff alleged that RCF benefited from the Project but did not identify any particular benefit. The Rockliffs final submissions did not address either issue. In those circumstances, I am not satisfied that the efforts of Mr Reschke to market the second prospectus (and, consequently, the statements made in the second prospectus) should be attributed to RCF. 379 Accordingly, I find that Koonara and Mr Reschke, but not RCF, were involved in the publishing of the second prospectus by AHM and CPH to Mr Rockliff.

Did the second prospectus convey the alleged misrepresentations? 380 Mr Rockliff's cross-claim sets out what, at first blush, appear to be 20 statements that are alleged to be misleading and deceptive. On closer inspection, several of the "statements" incorporate allegations of "implied" statements in addition to statements identified by reference to pages of the second prospectus. I am satisfied that the alleged statements were made to the extent set out below.

Ownership of the Project Land and lease of the Project Land to ARG 381 The Reschke parties admitted that the second prospectus contained statements to the effect of the statements set out in paras 34.1 to 34.10 of the cross-claim and identified as express statements. Based on those admissions and the terms of the second prospectus itself, I find that the following statements were made, listed in the order in which they appear or first appear in the prospectus: (1) The "Land Owner" was CPH (page 1). (2) Persons who wished to participate in the Project would enter into agreements with CPH as Land Owner (of the Property the subject of the Project) and AHM as the Manager (page 1). (3) Shares in the land owning company, CPH, were available to participants in the Project. Investors who took shares in CPH would have an ongoing equity stake in the Property after the 22 year Joint Venture had finished (page 4). (4) The Land on which the Project would be conducted would be leased to the Custodian as agent for the RE who would hold the lease on behalf of the participants (page 4). (5) Upon investing in the Project, the Participants would have the option of becoming shareholders in the company that owned the vineyard, being CPH (page 10). (6) The Reschke family currently owned the Land on which the Project would be undertaken, which was being acquired by the "Land Owner" for the purpose of the Project (page 22). (7) The "Land Owner" of the Project Land was or would be CPH (pages 22 and 55). (8) CPH had obtained an option to purchase the whole of the Project Land on or before 30 July 2002 and it was intended that CPH would purchase such part of that land as was necessary to satisfy the land area required for the purpose of the Project (page 27). (9) CPH intended to exercise the option at the close of the second prospectus, or if AHM decided to make further offerings of interests in the Project, at the time of closure of the prospectus or prospectuses for those further offerings. This was subject to CPH obtaining a variation of the option to allow the option to be exercised beyond 30 July 2002. If such a variation could not be obtained, CPH would exercise the option before it expired (page 43). (10) The total number of ordinary shares available for subscription in CPH was 9,000,000 and each Participant could subscribe for an interest in CPH comprising 10,000 Ordinary Shares of a total cost of $5,000. Reschke Vineyards would take up any shortfall in subscriptions to provide sufficient funds in CPH to fund the purchase of the land for the Project at the represented option price of $25,000 per hectare (page 43). (11) The Land on which the Project was to be conducted was owned by Trevor Reschke and TRN. Trevor Reschke and TRN had agreed to lease the Land on which the Project was to be conducted to CPH which had, in turn, agreed to lease the Land to the Custodian (pages 65-66). 382 Evidently, these statements are not entirely consistent. In particular, the following inconsistent propositions can be drawn from them: (1) CPH was the owner of the Project Land; (2) Trevor Reschke and TRN were the owners of the Project Land; (3) CPH had an option to purchase the Project Land which it intended to exercise; and (4) CPH would lease the Project Land from Trevor Reschke and TRN. 383 Thus, I do not accept that, read carefully as a whole (that is, in the manner in which the Mr Rockliff read the second prospectus), it conveyed that CPH was (or would be, by the exercise of an option to purchase) the land owner of the Project Land that would be leased to ARG as Custodian. Rather, it conveyed inconsistent and confusing information about the intended role of CPH beyond the fact that it was to be the "Land Owner" within the meaning of the Scheme documents and that CPH would lease the Project Land to ARG as Custodian (which, of course, conveyed the representation, that CPH would be in a position to grant a lease over the land). 384 In particular, I do not consider that a reasonable reader would have construed the repeated references to CPH as "Land Owner" to mean that, as at the time when the second prospectus was issued, CPH was in fact the registered proprietor of the Project Land where that expression is capitalised and defined in the JVA and the loan deed included in the Prospectus, and in the light of the references to an option and the statements that the current owners of the relevant land were Trevor Reschke and TRN. 385 Mr Rockliff contended that the true position was: (1) at all material times, CPH did not hold an enforceable option to purchase that part of the Project Land comprising section 235 from TRN; (2) as at the date that investors were investing in the Project pursuant to the first prospectus 1, between 26 May and 30 June 2000, CPH did not hold an option to purchase that part of the Project Land comprising sections 226, 227 and 228 from Trevor Reschke, as an option purportedly entered into on 26 May 1999 expired on 26 May 2000, and no other option was entered into until that purportedly entered into on 30 June 2000; (3) as at May 2001, the second prospectus (in draft) still referred to the option to purchase purportedly entered into in May 1999, which was then expired; (4) at a date unknown but purportedly 30 June 2000, a further option to purchase that part of the Project Land comprising sections 226, 227 and 228 from Trevor Reschke, was purportedly entered into with an expiry date of 1 January 2002, and purportedly amended by hand to 30 July 2002; (5) at no time was any option to purchase stamped and thereby enforceable; (6) at no time did CPH exercise the option and become the registered proprietor of any part of the Project Land, "i.e. become the 'Land Owner'", and at no time did CPH take any step to protect the option by caveat or otherwise; (7) at all relevant times, Mr Reschke chose not to exercise the option to purchase that part of the Project Land comprising sections 226, 227 and 228 from Trevor Reschke, but instead chose to seek and be granted an extension of time within which to exercise the option; and (8) at all material times, Mr Reschke on behalf of CPH, did not intend to exercise any option to purchase the Project Land, or only intended to exercise the option to purchase the Project Land if he had no other choice by reason of the insistence of his father, Trevor Reschke. 386 These alleged facts are relevant to the claim that CPH would be, by the exercise of an option to purchase, the land owner of the Project Land. However, pages 65-66 of the prospectus stated: The land on which the Project is to be conducted is owned by Trevor Reschke and [TRN]. Trevor Reschke and [TRN] have agreed to lease the land on which the Project is to be conducted to [CPH] which has, in turn, agreed to lease the land to the custodian [ARG]. The leases to [CPH] will be for the life of the Project, will be for rent of one dollar per annum (if demanded), will oblige the lessee to pay all rates, taxes and utilities and permit use of the land for general agricultural use and the establishment and operation of a vineyard and winery. The Lease to [ARG] will be on substantially the same terms except that rent […] [sic] 387 In my view, a reasonable reader would not ignore the statement set out above when carefully reading the second prospectus. Rather, reading the document as a whole, a reasonable reader would conclude that it contained conflicting information as to the circumstances by which CPH would place itself in a position to grant a lease to ARG.

Frost protection 388 The Reschke parties admitted that the second prospectus contained statements to the effect of the statements set out in paras 34.11, 34.17 and 34.18 of the cross-claim and identified as express statements. Based on those admissions and the terms of the second prospectus itself, I find that the following statements were made in the second prospectus: (1) approximately 50% of the total vineyard area would have frost protection in the form of frost protection sprinklers to limit detrimental effects of frost; (2) the vineyard would be drip irrigated, and the intention of the management was to install additional overhead frost control irrigation in the frost prone areas (up to 50%). AHM had been advised by Koonara that the system would be designed and installed by a professional irrigation company and experienced local contractor; and (3) frost was the most significant climatic risk to the Project but the use of overhead frost control irrigation on at least 50% of the vineyard would minimise the risk. 389 Mr Rockliff contended that the true position was: (1) Koonara's original vineyard development plan in 1999 was to provide frost protection to the Project vineyard by means of frost sprinklers; (2) no frost protection was provided for the Reg Reschke 1 Vineyard at Mr Reschke's direction; and (3) Mr Reschke had decided at the time of establishing the Reg Reschke 2 vineyard that Koonara would not install a sprinkler frost protection system as part of the Reg Reschke 2 vineyard, but intended to consider such protection when establishing the proposed Reg Reschke 3 vineyard in the future following a further prospectus. 390 The fact of the original vineyard development plan is consistent with the representations. 391 The fact that no frost protection was installed does not falsify the representations in the absence of evidence that there was no reasonable basis for the statements in the second prospectus concerning frost prospection. 392 Thus, assuming the correctness of these facts contended for by Mr Rockliff, they do not demonstrate that the second prospectus was relevantly misleading or deceptive or likely to mislead or deceive.

The intention to pay "Gross Income" into a "Scheme Bank Account" 393 Page 30 of the second prospectus, entitled "Principal Provisions of the scheme constitution", states relevantly, under the heading "15. Income, expenses and distributions": "Gross Income is paid into the Scheme Bank Account." 394 Mr Rockliff contended that the true position was: (1) by the time of the second prospectus, monies were released from the Scheme Bank Account before a lease to the Custodian in registrable form had been granted or registered, or caveat lodged to protect the interest until the lease was registered; (2) fees received by the "Manager" were not intended to be paid into the Scheme Bank Account; and (3) income generated from the sale of grapes or wine from the Project was not intended to be paid into the Scheme Bank Account. 395 As the Rockliffs put it in their final submissions, the statement set out at [393] should be read as, or as conveying, a future representation, that is, a statement as to how "Gross Income" would be dealt with in the course of the Project. 396 Point (1), even if true, says nothing about that matter. I understand Mr Rockliff's case to be that the representation was false because there was no intention on the part of any relevant person, at the time of the issue of the prospectus, to pay the relevant fees and income (which were to be received by the "Manager", namely AHM or Huntley) into the Scheme Bank Account. 397 Assuming this fact in the Rockliffs' favour, I am not satisfied that the second prospectus was relevantly misleading or deceptive or liable to mislead or deceive. As noted above, "Gross Income" has a complex definition under the Project Constitution. In my view, a reasonable reader of the second prospectus, noting the capitalisation of the expression, would look to the definition in the Constitution. The Rockliffs did not seek to demonstrate that the fees and income were "Gross Income" within that definition. Where that definition centres on the concept of "total assessable income of a Scheme if that Scheme were a taxpayer", I do not infer that those amounts were "Gross Income".

Project would be conducted in accordance with law, including under the Compliance Plan and the duties imposed by the Corporations Law, and the RE would make full disclosure of material matters 398 The Reschke parties admitted that the second prospectus contained statements to the effect of the statements set out in paras 34.23, 34.24 and 34.26 of the cross-claim and identified as express statements. Based on those admissions and the terms of the second prospectus itself, I find that the following statements were made in the second prospectus: (1) a Compliance Plan had been lodged with ASIC, the purpose of which was to ensure that the RE complied with the law and the Project Constitution and to ensure that the interests of investors would be protected; (2) the RE had various duties imposed on it by the Corporations Law; (3) AHM would make full disclosure of all material matters to the investors and in particular, make known all necessary information to enable investors to make decisions about their holdings. 399 Mr Rockliff contended that the true position was: (1) at all material times the ability of the RE to comply with such obligations to the investors was wholly dependent upon Koonara complying with its obligations under the subcontract; and (2) in turn, the ability of Koonara to comply with its obligations under the subcontract was dependent on the conduct of Mr Reschke and Reschke Pty Ltd in their arrangements and dealings with Koonara. 400 I accept each of these two propositions. However, they do not support an inference that the second prospectus was misleading or deceptive or likely to mislead or deceive, either individually or together.

Minimum subscription in the Project 401 The Reschke parties admitted that the second prospectus contained statements to the effect of the statements set out in para 34.29 of the cross-claim and identified as express statements. Based on that admission and the terms of the second prospectus itself, I find that the following statements were made in the second prospectus: (1) there was no minimum subscription level because "Reschke Vineyards Limited ACN 082 859 142" would subscribe for such shares as would be necessary to provide CPH with the funds to purchase the required area of land for the Project; (2) Reschke Vineyards Limited had the financial capacity to take up any shortfall in subscriptions to provide sufficient funds to CPH to fund the purchase of the land for the Project; and (3) there were 100 interests taken up under the first prospectus. 402 The "minimum subscription" in the first statement concerns the equity investment in CPH, which is a different thing from the interests offered in the Project. This is made clear at page 43 of the second prospectus, which states relevantly: Each participant in the … Project (or a person or entity they nominate) may subscribe for an interest in [CPH] comprising of 10,000 ordinary shares of a total cost of $5,000. Investors or their nominee may only subscribe for 10,000 ordinary shares for each participation they have in the … Project. 403 However, as to the first two statements, they were made in the context of the statement referred to above to the effect that CPH would lease the Project Land from Trevor Reschke and TRN. I also note that the company referred to in those statements appears to be a different company from Reschke Vineyards, which is a proprietary limited company having a different ACN (082 858 142). 404 Mr Rockliff contended that the true position was: (1) Reschke Vineyards did not have the independent financial capacity to subscribe for shares in CPH, as was necessary to provide CPH with the funds to purchase the required area of land for the Project, without finance being provided from Mr Reschke or his corporate entities; (2) there was a minimum subscription level of 100 units, which was not satisfied under the first prospectus as less than 100 interests were taken up by 30 June 2000 (or independent of Mr Reschke); (3) Mr Reschke had purported to take up 43, and then 42, participations or interests in the Project (contrary to cl C2.7(a) of the Compliance Plan), which were not paid for; (4) refunds and/or discounts were offered to participants in the Project (contrary to cl C2.7(c) of the Compliance Plan); (5) the Scheme and Project should not have commenced under cl C2.7(a) and cl C2.7(c) of the Compliance Plan, when determining whether the minimum subscription level had been reached. 405 I do not accept that the second prospectus was misleading on the basis of (1) because it did not convey anything about the source of its financial capacity. 406 Propositions (2) to (5), even if correct, are not relevant to the truth of statement (1), because that statement was concerned with the proposed investment in CPH and not the investment in the Project. 407 None of (1) to (5) says anything about the truth of statement (2). 408 As to statement (3), on the facts set out earlier in the judgment, I accept that there was a minimum subscription of 100 units for the first prospectus. However, the Rockliff parties did not explain why any of propositions (1) to (5) (and specifically (2) to (5)) lead to a conclusion that statement (3) was misleading or deceptive or likely to mislead or deceive. 409 It follows that I do not find that the second prospectus was misleading or deceptive or likely to mislead or deceive by reason of its inclusion of these three statements.

Whether Mr Reschke had no interest in property proposed to be acquired for the purposes of CPH 410 Page 45 of the second prospectus states relevantly: No director or proposed director of [CPH] or any expert has any interest now, or which existed in the period of 2 years before lodgement of this Prospectus 2 with [ASIC] in the promotion of CPH, or in any property proposed to be acquired for the purposes of CPH in connection with its formation or promotion. 411 Mr Reschke was a director of CPH when the second prospectus was issued. 412 The Rockliffs alleged that this statement conveyed the representation that no director of CPH, which included Mr Reschke, had or would have any interest in the Project Land. I accept that the statement conveyed the representation that Mr Reschke did not have any interest in any property proposed to be acquired for the purposes of CPH in connection with the Project. However, the statement needs to be considered in the context of the whole prospectus including the statement referred to above to the effect that CPH would lease the Project Land from Trevor Reschke and TRN. 413 Mr Rockliff contended that the true position was that, at all material times, Mr Reschke had an interest in the Project Land as: (1) the ultimate and controlling shareholder of CPH, via his ownership and control of Reschke Vineyards, which shares he acquired for nominal consideration; and (2) a shareholder and director of TRN, owner of part of the Project Land (available for use of the Project). 414 I do not accept that it is accurate to describe Mr Reschke as the "ultimate and controlling shareholder" of CPH. The majority shareholder of the company was Reschke Vineyards which held its shares in CPH as trustee of the Koonara Property Trust. I do not accept that the ownership of CPH by Reschke Vineyards gave rise to facts which render the pleaded representation misleading or deceptive. 415 The evidence does not reveal when Mr Reschke disposed of his five shares in TRN. The Reschke parties conceded that he might have had a remote interest in section 235 by virtue of this shareholding. This is a matter about which Mr Reschke should have been able to give evidence. On balance, I find that Mr Reschke did own five shares in TRN when the second prospectus was issued to Mr and Ms Rockliff. 416 I accept that a reasonable reader of the second prospectus could have understood the statement above to convey that Mr Reschke had no shareholding in TRN, which was arguably an interest in section 235. Section 235 was identified in the prospectus as part of the total area available under the second prospectus. On that basis, I accept that it was identified in the second prospectus as property proposed to be acquired for the purposes of CPH in connection with its formation or promotion. 417 Thus, I accept that the second prospectus was false, misleading or deceptive or likely to mislead or deceive in this respect.

Role of RCF 418 The Reschke parties admitted that the second prospectus contained a statement to the effect of the statements set out in para 34.35 of the cross-claim. That statement was based on the terms of the loan deed. In final submissions, the relevant representation was expressed as a representation that RCF was able to and would advance loan funds to investors upon a loan deed being entered into, which is not materially different from the representation pleaded in the cross-claim. 419 Mr Rockliff alleged that the true position was: (1) RCF did not have actual external finance available with which to make the purported loans/advances to investors under the loan deeds; (2) the purported "round-robin" of promissory notes utilised investor funds being lent back to themselves: RCF did not pay or advance actual money and RCF did not pay annual management fees to AHM; and (3) the purported "round-robin" had not in fact occurred in the preceding year, i.e., as at 30 June 2000. 420 In support of (1), Mr Rockliff referred to the following statement by Mr Reschke in his December 2010 affidavit in the Thomson Playford proceeding: As to the offer for finance to growers which was part of the Project, although I (and Koonara and RCF) had access to the facility from the ANZ Bank which could be used to provide the finance, on my calculations of the initial vineyard establishment and management costs there was, unlikely to be any need for the Project or RCF to obtain external funds to provide any of the finance requested by investors, as the outlays on the vineyard establishment and development would likely be more than funded by the cash component of each grower's investment, so that the balance provided by RCF by way of loan to investors could in fact be provided by a round robin [of] cheques. This proved to be the case with the first 3 years' vineyard establishment and maintenance costs under both prospectus 1 and prospectus 2. 421 In cross-examination, Mr Reschke was asked to affirm the correctness of this passage. Mr Reschke declined, saying that the evidence concerned a third prospectus, which followed the first and second prospectuses. Mr Reschke agreed that the facility referred to in the passage was the $2.5 million facility, although he said that it may have grown. As noted above, by 29 June 2001, RCF was in debt to the ANZ bank in an amount of $3,391,286. 422 In the light of the bank statements referred to earlier and in the absence of other documentary evidence, I find that, at the time when the second prospectus was issued to the Rockliffs, RCF did not have external finance available with which to make advances to investors under the loan deeds. In my view, notwithstanding Mr Reschke's evidence to the contrary, this conclusion is corroborated by Mr Reschke's intention that RCF's borrowings to investors be given by a round robin of cheques (ultimately effected by a round robin of promissory notes, which Mr Reschke understood to be the same thing). 423 Multiple propositions are involved in (2). However, the point is that the transactions by which RCF purported to discharge its obligations involved the circulation of promissory notes. 424 Proposition (3), even if correct, is not relevant to the truth of the representation. 425 In my view, a reasonable reader would have understood the second prospectus to convey that the role of RCF in relation to the Project was to loan funds to investors, being funds that would, in fact, be advanced to AHM for the purposes of the Project. Such a reader would not have understood that RCF would seek to provide loan funds by the means of a promissory note that would form part of a "round robin" transaction. Based on Mr Reschke's evidence and RCF's bank statements, such a reader would have been misled. 426 Thus, I accept that the second prospectus was false, misleading or deceptive or likely to mislead or deceive in this respect. 427 Mr Reschke said that the reference to "the finance requested by investors" was not a reference to finance required under the prospectuses, but did not explain this evidence. There is no reason to conclude that the words refer to anything other than the finance sought by investors in the Project, including pursuant to the second prospectus.

Does the conduct of Koonara and RCF in connection with the second prospectus constitute a relevant contravention of the ASIC Act 1989 or the Corporations Law?

Section 12DA 428 Section 12DA(1) of the ASIC Act 1989 provided that a corporation must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or likely to mislead or deceive. By s 12DA(1A), s 12DA does not apply to dealings in securities. 429 By s 9 of the Corporations Law, "deal" was defined to mean relevantly, in relation to securities: … (whether as principal or agent) acquire, dispose of, subscribe for or underwrite the securities, or make or offer to make, or induce or attempt to induce a person to make or to offer to make, an agreement: (i) for or with respect to acquiring, disposing of, subscribing for or underwriting the securities; or (ii) the purpose or purported purpose of which is to secure a profit or gain to a person who acquires, disposes of, subscribes for or underwrites the securities or to any of the parties to the agreement in relation to the securities. 430 In final submissions, Mr Rockliff rejected the contention that s 12DA did not apply on the basis that he did not bring a case against the issuers of the prospectus. This contention misses the point: his claim, relevantly, is that the Reschke parties were involved in a contravention of s 12DA(1) by causing the publication of the second prospectus which was self-evidently an offer to make an agreement with respect to subscribing for securities. Mr Rockliff's claim necessarily seeks to apply s 12DA to dealings in securities, contrary to s 12DA(1A). 431 Accordingly, there is no relevant contravention of s 12DA.

Section 12DB 432 Section 12DB regulated certain false or misleading representations but also does not apply to dealings in securities. 433 For the reasons given in connection with s 12DA, the proposed claim seeks to apply s 12DB to dealings with securities and must therefore fail.

Section 12DC 434 Section 12DC(1) regulated certain conduct "in connection with the sale or grant, or the possible sale or grant, of a security that consists of or includes an interest in land, or in connection with the promotion by any means of the sale or grant of an interest in land". The following conduct was prohibited in that connection: (1) a representations that the corporation has a sponsorship, approval or affiliation that it does not have; (2) a false or misleading representation concerning the nature of the interest in the land, the price payable for the security, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put or the existence or availability of facilities associated with the land; or (3) offers of gifts, prizes or other free items with the intention of not providing them or of not providing them as offered. 435 By s 12DC(3), "interest", in relation to land was defined to mean: (a) a legal or equitable interest or interest in the land; or (b) a right of occupancy of the land, or of a building or part of a building erected on the land, arising by virtue of the holding of shares, or by virtue of a contract to purchase shares, in an incorporated company that owns the land or building; or (c) a right, power or privilege over, or in connection with, the land. 436 The second prospectus stated relevantly: Shares in the land owning company, [CPH] are available to participants in the Project. Investors who take shares in CPH will have an ongoing equity stake in the land after the 22 year joint venture has finished. Reschke Vineyard Pty Ltd will hold at least 505 of the shares in CPH, giving investors confidence and ensuring long-term management commitment. 437 Assuming in the Rockliffs' favour that, by issuing the second prospectus, AHM or CPH engaged in conduct in connection with the sale or possible sale of a security that consists of or includes an interest in land, none of the alleged misrepresentations falls within the scope of any of s 12DC(3)(a), (b) or (c) above. 438 Accordingly, the claim based on a contravention of s 12DC fails.

Section 12DF 439 Section 12DF provided: A corporation must not, in trade or commercial, engage in conduct that is liable to mislead the public as to the nature, the characteristics, the suitability for their purpose or the quantity of any financial services. 440 In Australian Securities and Investments Corporation v Westpac Banking Corporation (No 2) [2018] FCA 751; (2018) 357 ALR 240 at [2308] to [2311], Beach J explained the proper construction of s 12DF as follows: [2308] First, the same principles apply to the element of conduct in trade or commerce as have been considered earlier in relation to ss 12CB and 12CC of the ASIC Act. [2309] Second, the expression "liable to mislead the public" is in one sense narrower than the expression "likely to mislead or deceive". The difference may be explained in part by the different language employed in the two sections and in part by the consequences of a contravention (Australian Competition and Consumer Commission v Turi Foods Pty Ltd (No 4) [2013] ATPR 42-448; [2013] FCA 665 at [79] per Tracey J). What needs to be shown is "an actual probability that the public would be misled" (Trade Practices Commission v J & R Enterprises Pty Ltd (1991) 99 ALR 325 (J & R Enterprises) at 339 per O'Loughlin J). Otherwise, the same principles apply as in the context of statutory proscriptions employing "likely to mislead or deceive". [2310] Third, reference to the public is not to the world at large or the whole community. It has been said that there will be a sufficient approach, engagement or reference (if you like) to the public if, taking approach as an example, the approach is general and at random and the number of people who are approached is sufficiently large (J & R Enterprises at 347-8). [2311] Fourth, the references to "nature", "characteristics" and "suitability for their purpose" in s 12DF have comparators with the language of s 55 of the Trade Practices Act and now s 33 of the Australian Consumer Law. It seems to be accepted that no narrow or technical meaning should be attributed to those terms in that context. Given that s 12DF of the ASIC Act has a similar purpose and similar language to s 33 of the Australian Consumer Law, no different approach should be taken. 441 In Shahid v Australasian College of Dermatologists [2008] FCAFC 72; (2008) 168 FCR 46, Jessup J (Branson and Stone JJ agreeing) concluded that representations in a handbook published by a college of dermatologists were not addressed to "the public", saying (at [206]): … I consider that it would be artificial to treat the representations as though they were addressed to "the public". I accept, of course, that the concept of "the public" is, in an appropriate context, narrower than the world at large, and narrower even than all persons who, for example, live or work within a particular area. I would accept that a representation might be regarded as being addressed to the public in the relevant sense notwithstanding that the potential users of the services in question were, in the nature of things, few in number. I have in mind, for example, a representation made in an advertisement for services of a very specialised kind. It would be the generality of the range of persons to whom the representation was addressed, rather than the practical likelihood of many of them being interested in acting upon the representation, that would justify the conclusion that it was addressed to the public: see Lee v Evans [1964] HCA 65; (1964) 112 CLR 276 and J & R Enterprises 99 ALR at 347-348. However, in the present case the representations were not made to the public at all. They were made to medical practitioners who enquired about, or showed an interest in, becoming Fellows of the College, and even then only to such practitioners as had passed the Part 1 examination or its equivalent. In this respect I would add that, in their endeavour to persuade us that s 55A was activated in the circumstances of the present case, counsel for the appellant referred to no evidence as to the public availability of the training handbooks, or to the public accessibility of the College's web site, from which the appellant downloaded at least some of those handbooks; and his Honour made no findings on these questions. In the circumstances, I do not think it has been established as a matter of fact that the representations upon which the appellant sued were addressed to the public for the purposes of s 55A of the Trade Practices Act. 442 The Rockliffs submitted that Mr Reschke's affidavit evidence in the Thomson Playford proceeding showed that the relevant conduct was directed at members of the public. 443 However, the passages identified by the Rockliffs (paras 151-175 of Mr Reschke's 20 December 2010 affidavit in the Thomson Playford proceeding) concern the first prospectus, and not the second prospectus. The affidavit addresses the marketing of prospectus 2 at paras 205-225. On the basis of that latter evidence, I am not satisfied that the prospectus was published sufficiently generally that it could be said that representations made in the prospectus were made to "the public". Rather, the evidence indicates that the second prospectus was marketed by promoters to their respective clients and by various efforts undertaken by Mr Reschke. The evidence does not reveal the number of people who received the prospectus, or whether any person randomly received the prospectus. 444 Accordingly, I am not persuaded that there is a basis for the claim based on contravention of s 12DF.

Section 995 445 Section 995(2) provided relevantly that a person shall not, in or in connection with any dealing in securities, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 446 The Reschke parties accepted that the relevant representations are representations "in connection with dealings in securities". 447 It follows from my earlier findings that Koonara and RCF each contravened s 995(2). In the case of Koonara, the relevant conduct was the publication of the second prospectus to Mr Rockliff containing the two representations that I have found were misleading or deceptive or likely to mislead or deceive. 448 In the case of RCF, the relevant conduct was causing the form of loan deed to be published in the prospectus, where the terms of the loan deed contained the representation that I have found was misleading or deceptive or likely to mislead or deceive.

Section 999 449 As at June 2001, s 999 provided: A person must not make a statement, or disseminate information, that is false in a material particular or materially misleading and: (aa) is likely to induce other persons to subscribe for securities; or (a) is likely to induce the sale or purchase of securities by other persons; or (b) is likely to have the effect of increasing, reducing, maintaining or stabilising the market price of securities; if, when the person makes the statement or disseminates the information: (c) the person does not care whether the statement or information is true or false; or (d) the person knows or ought reasonably to have known that the statement or information is false in a material particular or materially misleading. 450 The cross claim did not plead facts as to the statement or information that was "false in a material particular or materially misleading" or as to the other elements of s 999. In closing submissions, the Rockliff parties provided a bundle of relevant legislation that contained a version of s 999 (albeit one that was materially different to the version set out above), but Mr Rockliff did not make any detailed submissions directed to the applicability of s 999. Nor did I detect any cross-examination of Mr Reschke addressed to either of the matters set out in s 999(c) and (d). In those circumstances, I am not satisfied that there was a contravention of s 999.

Section 12CA 451 Section 12CA provided: (1) A corporation must not, in trade or commerce, engage in conduct in relation to financial services if the conduct is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories. (2) This section does not apply to conduct that is prohibited by s 12CB. 452 Mr Rockliff sought a declaration that Koonara and RCF contravened s 12CA: …. by engaging in unconscionable conduct, by making, causing to be published and disseminating, in trade and commerce, statements contained in the second prospectus in relation to the establishment and operation of the Scheme, which were false, knowing that investors would rely upon such statements to invest in the Scheme and during the operation of the Scheme (proposed order 2); 453 The Reschke parties did not dispute that any conduct engaged in by Koonara and RCF of the kind alleged occurred in trade or commerce, and was conduct in relation to financial services. 454 However, they denied that either Koonara or RCF engaged in any conduct that was unconscionable within the meaning of the unwritten law. 455 I have found above that Koonara caused to be published statements contained in the second prospectus and that RCF caused to be published the form of loan deed in the second prospectus. Otherwise, I do not find that Koonara or RCF engaged in the alleged conduct. 456 The cross-claim does not identify particular statements in the second prospectus that are alleged to be false. There is only a global allegation that "[i]n the circumstances set out in paragraphs 34-37F", Koonara and RCF engaged in conduct that contravened various provisions (not including s 12CA) "by the issuing of Prospectus 2 which contained false, misleading or deceptive representations in respect of the Project". 457 I have found that the second prospectus contained the following two misrepresentations: (1) That no director of CPH had any interest in any property proposed to be acquired for the purposes of CPH in connection with its formation or promotion, when the true position was that Mr Reschke owned five shares in TRN, the owner of Lot 35. (2) That the role of RCF in relation to the Project was to loan funds to investors, being funds that would, in fact, be advanced to AHM for the purposes of the Project, when the true position was that RCF would seek to provide loan funds by the means of promissory notes that would form part of "round robin" transactions. 458 These representations were false statements contained in the second prospectus in relation to the establishment and operation of the Scheme. 459 There is no doubt that Mr Reschke knew the contents of the second prospectus. Further, there is no reason to doubt that Mr Reschke realised that Mr Rockliff was likely to rely on the contents of the second prospectus to invest in the Scheme. Having regard to his positions within Koonara and RCF, Mr Reschke's state of mind in connection with those matters should be attributed to the two companies. 460 In those circumstances, was the conduct of Koonara and RCF in causing the second prospectus to be published to Mr Rockliff unconscionable within the meaning of s 12CA? 461 In Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; (2003) 214 CLR 51, members of the High Court of Australia expressed differing views as to the standard to be applied under the corresponding decision in the Trade Practices Act 1974 (Cth). 462 At [5]-[7], Gleeson CJ said: [5] Although he was concerned to make the point that ss 51AB and 51AC of the Act have a wider operation than s 51AA, senior counsel for the appellant argued the case on the basis that the relevant form of unconscionable conduct in question was "the knowing exploitation by one party of the special disadvantage of another." He said that, by special disadvantage, he meant "a disabling circumstance seriously affecting the ability of the innocent party to make a judgment in [that party's] own best interests." Applied to a case such as the present, that approach is consistent with what the Act calls the unwritten law concerning unconscionable conduct, bearing in mind that the Act also allows for development of the law from time to time. It is also consistent with the legislative history of s 51AA. In the Second Reading speech when the legislation was introduced, it was said [Australia, House of Representatives, Parliamentary Debates (Hansard), 3 November 1992 at 2408]: "Unconscionability is a well understood equitable doctrine, the meaning of which has been discussed by the High Court in recent times. It involves a party who suffers from some special disability or is placed in some special situation of disadvantage and an 'unconscionable' taking advantage of that disability or disadvantage by another. The doctrine does not apply simply because one party has made a poor bargain. In the vast majority of commercial transactions neither party would be likely to be in a position of special disability or special disadvantage, and no question of unconscionable conduct would arise. Nevertheless, unconscionable conduct can occur in commercial transactions and there is no reason why the Trade Practices Act should not recognise this." [6] The Explanatory Memorandum referred to the decisions of this Court in Blomley v Ryan [[1956] HCA 81; (1956) 99 CLR 362] and Commercial Bank of Australia Ltd v Amadio [[1983] HCA 14; (1983) 151 CLR 447]. Those decisions were considered more recently in Bridgewater v Leahy [[1998] HCA 66; (1998) 194 CLR 457]. [7] These decisions mark out the area of discourse involved, and explain the approach of the appellant, which was accepted by the respondent. It was also the approach taken by French J, and by the Full Court. In the context of s 51AA, with its reference to the unwritten law, which is the law expounded in such cases as those mentioned above, unconscionability is a legal term, not a colloquial expression. In everyday speech, "unconscionable" may be merely an emphatic method of expressing disapproval of someone's behaviour, but its legal meaning is considerably more precise. 463 At [40], Gummow and Hayne JJ said: The reference by his Honour to the use in s 51AA of the term "conduct that is unconscionable within the meaning of the unwritten law" as identifying particular categories of case should be accepted as indicating the proper construction of s 51AA. The argument on the present appeal of all parties appeared to proceed on that footing. However, there then arises the question as to which particular manifestations of equity's concern with unconscientious or unconscionable conduct are reached by s 51AA. 464 At [77], Kirby J expressed the view that the reach of s 51AA goes further than the principles of unconscionable dealing as elaborated in cases such as Blomley and Amadio. 465 In Australian Competition and Consumer Commission v Samton Holdings Pty Ltd [2002] FCA 62; (2002) 117 FCR 301 at [46] and [47], the Full Court explained the concept of unconscionable conduct as used in the case law as follows: 46. ... Professor Finn (as he then was) himself identified "four not altogether distinct ways" in which the language of unconscionable conduct has been used in the case law: 1. As an organising idea informing specific equitable rules and doctrines which do not in terms refer to, or require, an explicit finding of unconscionable conduct - for example, rules on stipulations as to time and notices to complete. 2. In relation to specific equitable doctrines of which estoppel, unilateral mistake, relief against forfeiture and undue influence are examples. They are united by the idea that equity will prevent an unconscionable insistence on strict legal rights and are conditioned upon the explicit finding of unconscionable conduct in the persons against whom they are invoked - Waltons Stores (Interstate) Limited v Maher [1988] HCA 7; (1988) 164 CLR 387; Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489 and Taylor v Johnson [1983] HCA 5; (1983) 151 CLR 422. 3. In relation to the discrete doctrine of unconscionable dealing which concerns one species of unconscionable conduct - Commercial Bank of Australia Ltd v Amadio; Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621. 4. In relation to unconscionable conduct founding a cause of action not mediated by any discrete doctrine - Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137. Finn, "Unconscionable Conduct" (1994) 8 Journal of Contract Law 37 at pp 38-39. 47. Four classes of case attracting the application of the language of unconscionability are described in Laws of Australia, Vol 35 [at 31 January 2002] Unfair Dealing 35.5 Notion of Unconscionability [1]-[38]: (i) Exploitation of vulnerability or weakness. (ii) Abuse of position of trust or confidence. (iii) Insistence upon rights in circumstances which make that harsh or oppressive. (iv) Inequitable denial of legal obligations. These are said to be supported by three broad standards: (i) That those in positions of strength or influence should not take advantage of another's relative weakness. (ii) That people should not, by appeal to strict legal rights, cause hardship to others by violating their reasonable expectations. (iii) That those in fiduciary positions should act only in the interests of those to whom those fiduciary duties are owed. 466 In his submissions, Mr Rockliff focussed attention on cases concerning transactions where unconscientious advantage has been taken by one party of the disabling condition or circumstances of the other, referred to in Berbatis at [46] (Gummow and Hayne JJ). In Samton at [48], the Full Court noted that, "[u]nder the rubric of unconscionable conduct, equity will: (i) Set aside a contract or disposition resulting from the knowing exploitation by one party of the special disadvantage of another. The special disadvantage may be constitutional, deriving from age, illness, poverty, inexperience or lack of education - Commercial Bank of Australia Ltd v Amadio [[1992] HCA 61; (1992) 175 CLR 621]. Or it may be situational, deriving from particular features of a relationship between actors in the transaction such as the emotional dependence of one on the other - Louth v Diprose; Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457. 467 Mr Rockliff acknowledged that "the principle applied is not one which extends sympathetic benevolence to a victim of undeserved misfortune; it is one which denies to those who act unconscientiously the fruits of their wrongdoing": Blomley v Ryan [1956] HCA 81; (1956) 99 CLR 362 at 429. 468 Mr Rockliff argued that he was placed in a position of "special disadvantage" by reason of the fact that he lacked knowledge of the falsity of statements in the second prospectus, when Koonara had that knowledge. 469 I am not persuaded that, without more, Mr Rockliff's lack of knowledge of the two misrepresentations set out above placed him in a position of special disadvantage of the kind referred to in the case law. Mr Rockliff did not point to any authority for the proposition that the making of a false representation may place the representee in a position of special disadvantage within the equitable doctrine of unconscionable conduct. Further, I am not persuaded that either of Koonara or RCF took advantage of Mr Rockliff's lack of knowledge in any relevant sense. 470 Accordingly, I am not satisfied that Koonara engaged in conduct in contravention of s 12CA.

Section 12CB 471 Section 12CB of the ASIC Act 1989 provided relevantly: (1) A corporation must not, in trade or commerce, in connection with the supply or possible supply of financial services to a person, engage in conduct that is, in all the circumstances, unconscionable. ... (5) A reference in this section to financial services is a reference to financial services of a kind ordinarily acquired for personal, domestic or household use. 472 Section 12CB(2) of the ASIC Act 1989 sets out a non-exclusive list of matters that the Court may take into account for the purpose of determining whether a person has contravened s 12CB. Mr Rockliff's submissions did not rely on any of the matters listed in s 12CB(2). 473 I have assumed in Mr Rockliff's favour that Koonara's conduct occurred in connection with the supply or possible supply of financial services within the meaning of s 12CB(5): cf. Australian Securities and Investments Corporation v National Exchange Pty Ltd [2005] FCAFC 226; (2005) 148 FCR 132 at [49], Violet Homes Loan Pty Ltd v Schmidt [2013] VSCA 56 at [71] and following. 474 In Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; (2011) 15 BPR 29,699 at [291], Allsop P (as his Honour then was), with whom Bathurst CJ and Campbell JA agreed, stated that it was neither possible nor desirable to provide a comprehensive definition of unconscionability, and that the range of conduct was wide and could include "bullying or thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct". 475 In Paciocco v Australia and New Zealand Banking Group Ltd [2015] FCAFC 50; (2015) 236 FCR 199, Allsop CJ considered the observation of Spigelman CJ in Attorney-General (NSW) v World Best Holdings Ltd [2015] NSWCA 261; (2005) 63 NSWLR 557 at [121] that "[u]nconscionability is a concept which requires a high level of moral obloquy" and said, relevantly: [261] It is important to recognise that Spigelman CJ in World Best was using the phrase in a way to differentiate the moral or normative standard in unconscionability as higher than in unfairness or unjustness… [262] That a degree of morality lies within the word "unconscionable" is clear. "Unconscionability" is a value-laden concept. "Obloquy" is "the condition of being spoken against; bad repute; reproach; disgrace; a cause of detraction or reproach,"; "obliquity" is "a deviation from moral rectitude, sound thinking or right practice; a delinquency; a fault or error.": "The Shorter Oxford English Dictionary on Historical Principles" (3rd Ed, Oxford, 1969) Vol 2 p 1428. That unconscionability contains an element of deviation from rectitude or right practice or of delinquency can be readily accepted, as long as the phrase "moral obloquy" is not taken to import into unconscionability a necessary conception of dishonesty. The statutory language is "unconscionable": that is, against conscience. A sense of moral obloquy or moral obliquity can be accommodated within the meaning or conception of unconscientious or unconscionable conduct. That said, an understanding of the meaning conveyed by the word "unconscionable" in the statute is not simply restated by substituting other words for those chosen by Parliament; danger easily lurks in the use of other words to capture the meaning of the statutory language. The task involved is not the choice of synonyms; rather, it is to identify and apply the values and norms that Parliament must be taken to have considered relevant to the assessment of unconscionability: being the values and norms from the text and structure of the Act, and from the context of the provision. Parliament has given some guidance to its proper application (and to its meaning) by identifying in s 12CC certain non-exhaustive factors that may be taken into account by a court in deciding whether conduct was unconscionable. Given the value-laden character of the word, it is necessary to ascertain and organise the relevant values and norms by reference to which the meaning of the word is to be ascertained, and by reference to which the application of the section is to be undertaken (the two tasks being distinct). It must, however, be emphasised at the outset that the values and norms that are relevant are those that Parliament has considered, or must be taken to have considered, as relevant. 476 In Ipstar Australia Pty Ltd v APS Satellite Pty Ltd [2018] NSWCA 15; (2018) 356 ALR 440, Bathurst CJ (with whom Beazley P agreed) said, at [195]-[197]: [195] It seems to me that it is unhelpful to seek to redefine the statutory concept of unconscionability. However, the use of terms such as "moral obloquy" may be of assistance to the extent that they emphasise that what is required is such a departure from accepted community standards as can objectively be seen to be against conscience. [196] In this context, it is important to bear in mind that the question of whether certain conduct is unconscionable does not involve an idiosyncratic determination of what is "fair" and "just" in a particular case. Rather, it involves a consideration of all the circumstances to conclude whether or not the conduct in question falls below acceptable norms, standards or values such as to warrant it being determined to be unconscionable. [197] In considering that question, it is appropriate to have regard to, first, the terms of the statute itself, second, the approach taken by the courts in dealing with cases under the unwritten law, whilst recognising these cases do not limit the scope of the provision, and third, judgments in related areas including cases involving want of good faith. It is also necessary to have regard to all the circumstances surrounding the transaction. This was emphasised in Paciocco HC by Gageler J at [189] and Keane J at [294]. 477 Mr Rockliff relied upon the same facts to support his claims based on s 12CA and s 12CB. Accordingly, the issue here is whether, by causing the second prospectus to be published to Mr Rockliff containing, as it did, the two misrepresentations, Koonara or RCF engaged in conduct that was, in all the circumstances, unconscionable. 478 I do not accept that those facts are sufficient to support a finding of unconscionability in all of the circumstances, without more. 479 In relation to the first misrepresentation, the statement that no director of CPH had any interest in any property proposed to be acquired for the purposes of CPH in connection with its formation or promotion was relevant to the availability of property for the Project. There is no evidence that Mr Reschke ever had any intention that the Project would not have full access to the land required for the Project, or that he intended to take advantage of his interest in TRN to the detriment of Mr Rockliff or the Project. Further, there was no evidence that the first misrepresentation was made for the purpose of inducing Mr Rockliff to make his investment, which did not include the acquisition of shares in CPH. Finally, the representation concerned only one of the four parcels of land that comprised the Project Land. In those circumstances, I am not persuaded that Koonara's conduct in propounding this misrepresentation deviated from acceptable norms, standards or values to an extent that renders that conduct unconscionable. 480 In relation to the second misrepresentation, I am also not satisfied that the conduct of Koonara and RCF was unconscionable within the meaning of s 12CB. Mr Rockliff did not suggest that Mr Reschke knew or believed, or should have known, that his intention that RCF would provide funding via promissory notes might be detrimental to Mr Rockliff's interests, or to the viability of the Project. It was also not suggested that the misrepresentation was intended to trick Mr Rockliff to invest in the Project. Further, the evidence did not demonstrate that the viability of the Project was affected by RCF's purported provision of funding via promissory notes. I accept that the publication of a prospectus containing false information involves a departure from accepted community standards. However, based on the case law above and the terms of s 12CB(2) of the ASIC Act 1989, more is required to demonstrate that such conduct involves a contravention of s 12CB.

Did Mr Rockliff suffer loss or damage "because of" the conduct in contravention of s 995 of the Corporations Law? 481 For the purpose of considering this question, I have assumed that Mr Rockliff may be entitled to relief pursuant to s 1325 of the Corporations Act as a result of this contravention. Any such relief would arise by the operation of s 1400, pursuant to which a "substituted right or liability" may arise under the Corporations Act in relation to a "pre-commencement liability" under the Corporations Law. 482 In his cross-claim, Mr Rockliff alleged that he would not have taken up participations in the Project and made the various payments that he made in connection with the Project if he had been aware of the true state of affairs as set out in the cross-claim. Further, Mr Rockliff alleges that,"[i]n reliance on the Prospectus 2 statements and induced thereby", he suffered loss. The particulars of the alleged loss were stated as follows: [Mr Rockliff] has suffered and continues to suffer loss by not obtaining the income and benefits which should have been received from participation in the Project (but has paid monies in respect of such participation in the Project as set out at paragraph 42.4 above), other than tax deductions claimed in good faith in respect of the monies paid as set out in paragraph 42.2 above, which upon disallowance [Mr Rockliff] undertakes to lodge amended personal tax returns with the ATO, in which a taxation deduction was sought in respect to the Project, the subject of these proceedings at the conclusion of the proceedings and [Mr Rockliff] will as a result thereof suffer further loss. The winding up of the Scheme has not been completed as no final statement has been issued under clause 7.12 of the Constitution. 483 In closing submissions, Mr Rockliff maintained that his loss was "loss of income and benefits from the Project which should have been received". 484 At the outset, I do not accept that Mr Rockliff suffered any loss in the nature of a loss of income or benefits that should have been received from participation in the Project. There was no evidence of income or benefits that "should have been received from participation in the Project". There was also no evidence that Mr Rockliff would have used the money invested in the Project in some different way that would have produced income or benefits. 485 Reliance is not a substitute in this context for the question of causation: cf. Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at [143]. Whether or not a causal connection exists between conduct and loss or damage suffered is essentially a question of fact. 486 Mr Rockliff's affidavit evidence was, relevantly, as follows: After reading Prospectus 2 and induced by the various statements therein, on 26 June 2001, I completed a Participation Application Form and Power of Attorney incorporated as part of Prospectus 2, and drew a cheque for $35,130, which Participation Application Form and Power of Attorney along with a Participation Application Form and Power of Attorney completed by Michelle for one participation in the Project, which to the best of my recollection were uplifted by a representative of Ord Minnett Limited and delivered to Ord Minnett Limited along with Michelle's cheque for $11,710. 487 Mr Rockliff's lengthy affidavit did not say anything more to concerning the significance to him of the contravening conduct. In particular, and consistent with his claim for loss of income and benefits from the Project, Mr Rockliff did not give evidence that he would not have invested in the Project but for the false representations. 488 Further, in oral evidence, Mr Rockliff did not say that he would have acted in some other way if he had known of the falsity of the particular misrepresentations that I have found were contained in the second prospectus. 489 In Campbell, the plurality considered the position where there was no evidence of what the relevant witness would have done in the circumstances found by the trial judge. The witness had given evidence that he would not have entered into a share purchase agreement if he had been aware of certain matters. At [147], the plurality concluded: What is important in the present case is that the evidence that was given by Mr Weeks about what he would have done if he had known more than he did was expressed in a way that distinguished between cases where knowledge of either of two matters would have meant he would not proceed and cases where he attached significance to knowledge of both of two matters. This being the only direct evidence on the subject it was not open to the Court of Appeal to infer, from its own assessment of the materiality of the representation and its own assessment of whether the representation was calculated to induce entry into a contract, that Mr Weeks would not have proceeded with the share purchase. 490 In this case, Mr Rockliff's evidence is considerably less precise. It does not suggest that any statement contained in the second prospectus was any more or less important than any other in Mr Rockliff's decision to make the investment. The evidence generally does not identify the features of the investment that attracted Mr Rockliff. However, Mr Rockliff became aware of the investment on 19 June 2001, shortly before the end of the financial year. Mr Rockliff's notes of a 19 June 2001 conversation with David Stewart of Ord Minett indicate that Mr Rockliff was contacted by Mr Stewart concerning the Project. Mr Rockliff recorded "project ruling tomorrow", which I infer was a reference to a statement made by Mr Stewart to the effect that a product ruling was expected the following day. The timing and the reference to the product ruling suggest that Mr Stewart was marketing the investment by reference to the availability of income tax deductions. Mr Rockliff's note suggests that this feature of the investment was of significance to him. 491 Mr Rockliff's affidavit sets out at length the observations that he made when he read the prospectus, including that he noted the statements which gave rise to the two misrepresentations. 492 Although I accept that Mr Rockliff observed the matters that he identified, I am not able to make a finding about any relative materiality of those matters in Mr Rockliff's consideration of whether to make the investment. Without more detail, I am not prepared to infer that the matters identified by Mr Rockliff had any particular degree of materiality. 493 Mr Rockliff did not give evidence that, if he had known of Mr Reschke's ownership of five shares in TRN, the owner of Lot 35, he would not have invested in the Project. I am not satisfied that Mr Rockliff's evidence, expressed in such general terms, provides a basis to draw an inference to that effect on the balance of probabilities. If such an inference is open, I would not draw that inference because there was no reason to think, at the time when Mr Rockliff made his investment, that Mr Reschke's ownership of shares in TRN could have any adverse impact upon the security or value of Mr Rockliff's investment in the Project. 494 Mr Rockliff also did not give evidence that, if he had known that RCF would seek to provide loan funds by the means of a promissory note that would form part of a round robin transaction, he would not have invested in the Project. Again, in the absence of any evidence directed to this precise issue, I am not satisfied that Mr Rockliff's more general evidence provides a basis for an inference to this effect on the balance of probabilities. If such an inference is open, I would not draw that inference in the absence of any detailed evidence about the circumstances in which Mr Rockliff made the investment or the importance to Mr Rockliff of the fact that RCF would advance funds to the Project and not merely purport to do so by means of a round robin transaction. 495 Accordingly, I am not persuaded that the misrepresentations materially contributed to Mr Rockliff's decision to make the investment. It follows that I am not persuaded that Mr Rockliff suffered any loss or damage because of the conduct of Koonara and RCF in contravention of s 995.

Operation of the Project following the Rockliffs' investment

Establishment of Reg Reschke 2 vineyard and frost protection 496 The Reg Reschke 2 vineyard was established on part of the Project Land between July and December 2001. A total of 26.31 hectares was planted for the 130 units purchased under the second prospectus. The vineyard comprised 5.62 hectares of cabernet, 6.19 hectares of shiraz, 11.2 hectares of merlot and 3.3 hectares of petit verdot grapes. No part of section 235 was planted. 497 On 28 August 2001, Dugald McLachlan reported to an AHM board meeting that he had visited the Project and found that the existing plantings were looking very well and the vineyard looked very neat and tidy. 498 Koonara installed frost fans on the eastern blocks of the Reg Reschke 2 vineyard. Mr Reschke considered that this would be sufficient protection for "most" of the Reg Reschke 1 and 2 vineyards "in the short term". 499 The parties agreed that both prospectuses referred to an "intent" to provide frost protection for half of the vineyard, which would also benefit the vineyards not directly protected by sprinklers due to "frost shadow". 500 Mr Reschke says that, in hindsight, had he known at the time of establishing the Reg Reschke 2 vineyard that that would be the limit of the vineyards on the Project Land in the short to medium term at least, it would have been sensible and economically viable, and Koonara would have proceeded, to establish a sprinkler frost protection system in part of the Reg Reschke 2 vineyard, which would have given a little better protection to the Reg Reschke vineyards. Mr Reschke also says that it is possible that, if frost protection sprinklers rather than frost fans had been installed in the Reg Reschke 2 vineyard, there would have been less losses than the entire loss of the 2007 vintage crop which both the Reg Reschke 1 and the Reg Reschke 2 vineyards suffered. In his view, there would however have been some losses, possibly substantial. 501 The parties agreed that in 2001/2, Mr Reschke's plan, after selling further units in the Project under a third prospectus, was to complement the existing frost protection in the Reg Reschke 2 Vineyard and install frost protection sprinklers along parts of the vineyard to minimise the effects of frost on other areas. However, at some time in 2002, Mr Reschke apparently gave up on the idea of issuing a third prospectus as a result of the identification of the "defect" in the product ruling, mentioned above.

Vineyard management 502 Koonara was the manager of the Project and also the Henry Albert Project. Mr Reschke made decisions, in conjunction with Mr Stratford and the winemaker about which grapes, from which blocks, of which projects, (that is, including the Henry Albert Project) would be allocated to bulk wine or to particular labels, depending on both the quality of the grape and the sales demand in each year. 503 It is not clear when the vineyards commenced to produce grapes, however, the cash flows in the second prospectus do not provide for income from grape sales in the first two years of the Project, or from bottle sales for the first four years of the Project. 504 Despite the positive comments at AHM board meetings set out below, there is evidence of conflict between AHM and Koonara as early as April 2002. This was in the form of a letter from AHM to Koonara dated 18 April 2002, obtained from the files of Huntley. 505 By letter dated 1 July 2002, AHM wrote to Mr Reschke personally, noting that AHM had not received budgets required to be provided by Koonara under the AHM/Koonara management agreement. AHM requested that the position be corrected as soon as possible. 506 On 11 December 2002, Fergus and Dugald McLachlan reported to an AHM board meeting that they had visited the Project and considered all to be managed well. Both were happy with the growth and condition of the vines. 507 On 10 November 2003, Fergus McLachlan informed the AHM board that the Project vines had started to grow and all was looking well on the vineyard. 508 On 14 January 2004, Fergus McLachlan informed the AHM board that the Project vineyard continued to be well managed and that, in his opinion, Koonara were performing well. 509 On 1 March 2004, Fergus McLachlan informed the AHM Board that in his opinion, the Project vineyard was growing well and being well managed. 510 On 9 August 2004, Fergus McLachlan informed the AHM board that, in his opinion, the vineyard was being managed very well. However, Fergus McLachlan also informed the board that, "despite repeated verbal and written requests Reschke Wines had not fulfilled its reporting obligations to investors". The minutes also recorded: • Also the investors tax position, promised investors also by the end of July has not yet been completed. FM indicated that he had taken matters into his own hands and is organising this. • The board discussed the issue and was not happy with compliance on behalf of Koonara … If the outstanding matters are not rectified by the next Board meeting then the Board will take further action as it sees fit. This conveyed via letter to Mr Reschke. The Board sees this as a very serious matter. The deadline set for this is the 20th of August 2004. 511 By letter dated 16 August 2004 to Mr Reschke, AHM referred to its 9 August 2004 board meeting, saying: "AHM has had no indication of the amount of grapes taken through to Reschke Wines and the board is not confident of Reschke Wines ability to sell all this wine." 512 In September 2004, AHM responded to a complaint made by an investor and, relevantly, acknowledged that a newsletter with harvest information was owing to investors. 513 On 27 October 2004, Fergus McLachlan informed the AHM Board that in his opinion, the Project vineyard was being managed very well. He also informed the board that Koonara "had written out the newsletter as requested and this had been sent out to investors". 514 Minutes of a board meeting of AHM on 30 March 2005 record: • FM and DM did a site visit with Tim Lee and were impressed with the Quality of management on the site. • FM informed the Board that Koonara Management were doing well for investors given the disastrous time being had by most in the Coonawarra Region with many growers not being able to sell fruit and some taking massive losses. • DM concurred that Koonara Management were going a very good job. On the older vines they had not turned the water on this year. 515 Minutes of a board meeting of AHM on 23 May 2005 record: • FM informed the board that the vineyard was being well managed and that in his opinion was doing better than most in Coonawarra. FM stated that Coonawarra was undergoing a difficult time due to oversupply of Cabernet. • FM also informed the Board that Reschke Wines has managed to get a national distributor for wine and this was likely to significantly increase wine sales. 516 By July 2005, the relationship between AHM and Koonara was strained. In a letter dated 11 July 2005, AHM wrote to Koonara, relevantly: I have made repeated requests for Koonara's compliance with both the Corporations Law and the Sub Contract of Management Services between Koonara Management Pty Ltd and AHM Limited. Specifically I draw you [sic] attention to the letters of the 16th of August 2004, the letter dated the 20th of July 2004, the letter of 16th September 2004 and the letter dated the 26th August 2002. In these letters the following concerns were raised. The scheme property is not being properly accounted for in the project accounts. It is the view of AHM Limited that the scheme property is not easily identifyable [sic] and in the event of the liquidation of Koonara Management would be very difficult to secure. This is not acceptable and must be corrected immediately. Repeated requests for such have been met with the response that it is not easy and may not be possible. I am of the understanding that this is not the case and that the scheme property can be accounted for. Koonara Management Pty Ltd are therefore given 7 days to rectify the situation. There has been no independent viticultural report done on the project to date. This must be undertaken in accordance with the constitution and the Sub Contract of Management Services agreement immediately. Koonara Management Pty Ltd have 7 days from the date of this letter to authorise such a report to be undertaken. (As per clause 1.5 of the Sub Contract of Management Service s contract). There have again been no budgets provided to the RE for the project as per clause 3A.1 of the Sub Contract of Management Services Agreement. This also must be rectified within 7 days. It is with regret therefore that we also give notice that AHM Limited is actively looking for another company willing to take on the Responsible Entity position of the Coonawarra Wine Grape Project No. 1 & 2. We feel that due to the relationship of the principles [sic] involved in the 2 company's [sic] that investors would be better served having a different Responsible Entity. 517 In the later stages of the Project, between about 2007 and 2009, and because of rapidly declining grape prices, Mr Reschke gave instructions to Mr Stratford and others at Koonara to adopt viticultural practices so as to depress the yield of grapes that would otherwise be obtained from the Project. Mr Reschke's evidence was that he did so to increase the quality of the wine and to make it easier to sell and to create a return for investors.

Blending of "Project wine" 518 The parties agreed that, as early as 2000 (that is, before any grapes were produced), Mr Reschke discussed with Fergus McLachlan a plan to blend some of the "Project wine" (which I understood to mean wine produced from grapes grown pursuant to the Project) with other "Reschke wine". Based on Mr Reschke's evidence, he considered that this was necessary to produce superior wine. Mr McLachlan and Mr Reschke had a conversation to the following effect: McLachlan: How will we keep Project wine separate from other Reschke wine? Reschke: We can't, we will have to allocate a percentage of the wine to investors. McLachlan: OK. As long as good records are maintained. Reschke: All of the records will be transparent and all produce will be accounted for. 519 In 2008, Huntley wrote to investors and referred to the blending of "Project wine" as follows: We have considered dealing with the foregoing problems by replacing the Manager. While this could be considered as we have others willing to assume the role and that of the wine maker, it is complicated by the fact that project wine has benefited from the Reschke brand and some of the bottled wine has been blended with bulk wine from the adjoining vineyard owned and operated by Reschke.

Project finances 520 Due to the time taken for vines once planted to produce grapes in commercial quantities, it was inevitable that investors in the Project would have no income, and therefore losses, in the initial stages of the Project. Mr Reschke's view, which was not challenged, was that this was an inevitability in at least the first two, if not three years of the Project. 521 Clause 1.9 of the AHM/Koonara management agreement, set out in full at [229] above, contemplated that all sales contracts for grapes, bulk wine and bottled wine produced using grapes harvested from the Project vineyard would require purchasers to make payments into the Scheme Bank Account. This is consistent with the definition of "Scheme Bank Account" in the Constitution (also set out above). In practice, money flowed differently as Mr Reschke explains in the following evidence: Reschke Pty Ltd is the company established by me to produce and sell all wine products for the group. It holds a liquor license to qualify it to do that. For this reason, it needs to receive all payments for the wine, both bottled and bulk wine. Reschke Pty Ltd was subcontracted by Koonara to carry out the wine processing and selling of project wine. Koonara received any payments from grape sales. Koonara needed to cover the cost of winemaking at the third party processing plant (winery). As the investors were only invoiced once a year on the 30th of June, some of the processing costs needed to be paid before this time. This cost was offset against wine and grape proceeds received. That arrangement was not covered by the constitution and the timing of the payment of some winemaking costs was also not covered in the constitution. 522 The parties were in agreement that the Project income did not go through the Scheme Bank Account. All proceeds for the sale of Project wines were received into an account of Reschke Pty Ltd apparently because, unlike AHM and Koonara, it held a liquor licence, which was required to receive revenue from alcohol sales. 523 It should go without saying that the lawful operation of the Project required that it be conducted in accordance with its constituent documents and not on the basis of the arrangements or "needs" described by Mr Reschke. 524 When Koonara received fees in respect of winemaking, bottling, labelling and selling activities under the AHM/Koonara management services agreement, being activities undertaken by Reschke Pty Ltd, Koonara paid the whole or such part of the fees as Koonara or Mr Reschke determined in their discretion, to the bank account of Koonara, Reschke Pty Ltd or such other related companies in such amounts, if any, as Koonara or Mr Reschke determined. 525 Although Mr Reschke's evidence was not completely clear, I understood him to say that the fees would be treated as income of the company that received the fees, noting that the recipient was determined by reference primarily to Mr Reschke's interests and tax considerations. 526 Further, neither Koonara nor Reschke Pty Ltd kept management accounts differentiating between the Project and the Henry Albert Project. As at 2010, it seems that Mr Reschke was engaged in a process of collating data concerning annual actual vineyard establishment costs, vineyard management costs and winemaking costs, and annual actual sales of bottled wine and harvest and winery fees. This process involved apportioning costs between projects, which the Rockliff parties submitted, must have been done arbitrarily. In the absence of evidence, I do not accept that submission. However, it necessarily casts doubts on the reliability of financial information produced by Koonara and Reschke Pty Ltd. 527 In these respects, the operation of the Project was utterly flawed and paid no recognition to the rights of investors such as the Rockliffs to the due administration of the Project in accordance with the terms of the Project Constitution.

Invoices to Project investors 528 Mr Rockliff contended that Koonara arranged the issuing of invoices to investors in respect of all fees payable under the Constitution. The parties agreed relevantly that: (1) Mr Reschke prepared information to send to AHM to enable them to invoice investors for the fees due as at 30 June each year. At least some of the information was sent in the form of draft invoices. (2) As part of this process, some costs were estimated in advance to enable invoices to be prepared before the end of the financial year to which they related. (3) Koonara's practice was to prepare information for AHM, and after June 2007, for Huntley, regarding tonnes of grapes crushed in each vintage, and stocks of bulk and bottled wine sold, for them to send invoices to investors. AHM and Huntley would then send out the invoices to investors and collect the monies, for which they were obliged to account to Koonara after deducting the fees that they were entitled to under the AHM/Koonara management services agreement. However, despite Mr Reschke's requests, Huntley did not send any invoices to investors after an invoice for the first quarter of 2008. 529 The Rockliffs also asserted but did not prove the following facts set out in their narrative of facts: 497 Fees paid to the RE as 'Manager' were not deposited into the Scheme Bank Account (as required under cl 18 of the Constitution, and thereafter able to be paid out under cls 18.2 and 18.3) but were paid directly to Koonara (Annual Management Fees), CPH (Lease Rent Contribution Fee) or on to Reschke Pty Ltd (Winery Expenses and Harvest Fee). Financial reports and records and books of account 498 At all material times, the RE of the Scheme did not keep and maintain its own proper books of account and records reflecting the transactions and financial affairs of the joint venture (as required under cl 4.2 of the JVA and cl 25.1 of the Constitution), but was forced to rely on Koonara to maintain such records which were not properly maintained. Protection of the interest in the Project Land 499 At all material times, the ability of the RE, and the Custodian on its behalf, to ensure that the interest of the investors in the Project Land was secure and protected, by ensuring there was a valid and enforceable option to purchase all parts of the land available to the Project (being Sections 226, 227, 228 & 235), and that such option was exercised, by ensuring there was a valid and enforceable lease of all parts of the Project Land, and which was registered on the title, were matters within the control of Mr Reschke and his corporate vehicles. At no time was the interest in the Project Land protected, which also puts investors' rights under clause 15.1 of the JVAs in jeopardy.

Scheme Bank Account 530 As earlier noted, the "Scheme Bank Account" is defined by the Constitution to mean: [T]he bank account maintained by the Manager or the Custodian as the agent of the Manager, as the case may be, into which all monies received by the Manager for and on behalf of Members are to be paid other than any monies required to be banked into the "Applications Bank Account". 531 Thus, the "Scheme Bank Account" was not intended to be maintained by Koonara. 532 A facsimile from ARG to Fergus McLachlan dated 3 July 2002, referred to the closure of account number 468 434 138 and a transfer of the balance of the account in the sum of $17,992.97 "as requested".

Change of custodian 533 In September 2002, an administrator was appointed to ARG. Liquidators were appointed in December 2002. The Rockliffs complain that Mr Rockliff was not informed of the appointment of the administrator, of the winding up of ARG, or of the appointment of a liquidator. 534 In about 2003, Huntley Custodians Limited replaced ARG as the "Custodian" for the Project. It appears that it did not hold a separate bank account for the Project as late as 27 July 2007.

Litigation against Thomson Playford 535 The Thomson Playford proceeding was commenced in 2004. By at least 2010, the plaintiffs included Koonara, AHM, CPH, RCF, Vivienne Reschke as executor of the estate of Trevor Reschke, TRN and Reschke Pty Ltd. 536 It is unnecessary to make detailed findings about the litigation. In summary, the claim was that Thomson Playford had failed to obtain a proper product ruling from the ATO causing the number of participations in the Project to be reduced and preventing the issue of a third prospectus.

October 2005: amendment to Project Constitution 537 In about October 2005, the Constitution was amended to add the following sentence at the end of cl 4.5: If there is insufficient Gross Estate Wine Proceeds or Gross Income, the Manager may require the Member to pay the Winery Expenses annually in advance at the same time and in the same manner as the Annual Management Fees. 538 At the same time, cl 8.2 of the JVA in schedule 2 of the Constitution was replaced as follows: The Manager must be reimbursed of the Winery Expenses out of the Gross Estate Winery Proceeds or if there is insufficient from the Gross Income. If the Gross Estate Winery Proceeds or Gross Income are insufficient to so reimburse the Manager, the Manager may require the Member to pay the Winery Expenses annually in advance at the same time and in the same manner as the Annual Management Fees.

Events from October 2005 including change of responsible entity 539 On 5 October 2005, Ian McLachlan ceased to be a director of AHM. 540 Minutes of an AHM Compliance Committee meeting on 10 April 2006 refer to "numerous" unsatisfied requests for Koonara to prepare a management report. The possibility of removing Koonara was mentioned but it was noted that, if that were done, "the investors would not have access to the Reschke label and the project would fail". 541 Minutes of the 4 September 2006 AHM board meeting record, relevantly: FM expressed some concerns about Burke Reschke's management and continued lack of disclosure to AHM. FM stated that in his view he may be too close to Burke Reschke to properly service the investors. Mr Reschke, because of his friendship with FM does not act in a proper manner in regard to reporting, budgets etc. This has been an ongoing issue. FM indicated that he would like to have AHM Limited have no involvement with projects not under its own control. FM states that this is for 2 reasons: • Firstly because there was a higher management risk. • Secondly this risk restricted the ability of the RE to merge or attract investors in AHM itself. FM stated that he had talked to Huntley Custodians and they had agreed to look at becoming the new RE. This process would take about 3 months. 542 On about 15 September 2006, Stewart Cameron was suspended as an auditor for nine months. Mr Cameron is the author of the investigating accountant's report in the second prospectus. The cross-claim alleges that he was the auditor of the Project, AHM and CPH.

Loss of 2007 crop 543 The entire 2007 crop was lost to frost. Minutes of an AHM Board meeting on 17 April 2007 record, relevantly: All the Board except GR visited the vineyard in the past month and were happy with the condition of the vineyard. Even though it is well managed there was no crop this vintage due to frost. Almost all of the vineyards in the Coonawarra also had no crop this vintage due to frost. 544 At this meeting, AHM informed Mr Reschke that it did not wish to continue to manage the Project. Although the minutes indicate that the decision was not put on the basis of dissatisfaction about AHM's dealings with Koonara and Mr Reschke, the minutes record: FM & DM advised the Board that they had been asking BR for 3 years for sales but to no avail. The Board asked FM if he had any idea of the number. FM commented that he did not know the number of sales, not through trying, but thought it was around 8,000 cases. 545 By letter dated 1 May 2007, AHM wrote to members of the Project, including Mr Rockliff, as follows: I am writing this letter to explain the proposal to change the Responsible Entity for the Coonawarra Wine Grape Project from Advanced Horticultural Management Ltd (AHM Ltd) to Huntley Management Ltd (Huntley). The Board of AHM has determined that AHM should only be the Responsible Entity for projects that it actively manages. The Board has made this decision completely independent of any regard to the Coonawarra Wine Grape Project and it should be stressed that this decision in no way reflects on either the project or the project manager Koonara Management Pty Ltd. This decision is purely based on the strategic direction that the AHM Board wishes to implement into the future. AHM's strategic direction is to use AHM as a means to raise capital only in projects that the Directors have a direct investment in. The Coonawarra Wine Grape Projects fall outside of this strategy. Huntley on the other hand are perfectly suited to act as the RE for these projects. Huntley are the external RE for a number of projects and are well versed with all the requirements needed to manage your interests. I wish you all the best with this project. 546 On or about 1 May 2007, AHM sent a Notice of Meeting of Growers dated 30 April 2007 and "Explanatory Memorandum - Notice of Retirement of Responsible Entity" to investors in the Project, including Mr Rockliff. 547 On 28 May 2007, by a resolution of investors pursuant to s 601FL of the Corporations Act, AHM was replaced by Huntley as the RE for the Project. Subsequently a notice of change of responsible entity of a registered scheme signed by Mr Jessup was lodged with ASIC. 548 From about 19 September 2007, there was a great deal of correspondence between John Knox of Huntley and Mr Reschke about the Project. 549 For example, by an email sent on 14 November 2007 from Mr Knox to Mr Reschke, Mr Knox said: Yesterday I spent the day in Bathurst with Therese Melville and now have a better understanding of some of the other issues. I confirm earlier advice that the Project auditors will require detailed accounts of the stock of bottled wine at 1 July 2006 and of subsequent bottling and sales for the year ended 30 June 2007. While the Tax Statements show credits in favour of investors for sales proceeds the figures have been determined from unsubstantiated figures provided by your staff to your accountants who in the absence of documentation have qualified their advice to investors by indicating that the amounts shown are those provided and have not been verified. I remind you of the obligation for all sales proceedings to be deposited into the Custodian account. 550 By email sent on 16 November 2007, Mr Knox wrote to Mr Reschke as follows: No payments will be made to Koonara until we have an accurate list of investors and understand the liability you have to the project. We also require a copy of your budget for the 2006/7 year which remains outstanding despite previous requests. I again confirm that you are required to deposit the proceeds of sales of bottled wine to the Huntley Custodians Ltd account and we will require all records of sales in the past year for audit purposes. I suggest you seek legal advice as soon as possible about the future of the project and decide whether you want us to continue as RE or whether another or a restructure is possible. Unless the Operational Management Agreement is agreed and signed within 14 days we will be forced to report braches [sic] to ASIC and to investors and commence the process of winding-up the project. 551 By December 2007, Mr Knox had commenced to explore steps towards the winding up of the Project. By letter dated 19 December 2017 from Huntley to Koonara, Mr Knox confirmed that Koonara "no longer wished to act as the operational manager for the Coonawarra Wine Grape Project and suggested that the Project should be wound up". The letter alleged that Koonara was in default of its obligations, causing Huntley to be in default of its obligations and required, inter alia, confirmation of an audit trail for grapes from the Project. 552 In a letter dated 3 January 2008 from Huntley to Koonara, Mr Knox noted that Koonara now wished to continue acting as operational manager for the Project and did not wish it to be wound up. Mr Knox said that before considering this option, he needed to establish if the Project was viable and could achieve its objectives as set out in the prospectus. Mr Knox acknowledged receipt of an expense budget for the year commencing 1 July 2007 which appeared satisfactory. He sought other information, saying: If upon receipt of the foregoing information it can be established that the Projects are viable I can then consider the ongoing management … My letter to you dated 19 December 2007 sets out the Koonara breaches of the former agreement which must be remedied … 553 By an email dated 1 February 2008, Mr Knox told Mr Reschke that he was "trying to determine whether the Project has sufficient income to cover expenses and therefore is viable". The email identified several issues, which according to Mr Knox, required urgent attention. 554 On or about 1 April 2008, Huntley sent a letter signed by its managing director, John Knox to investors in the Project including the Rockliffs. Ominously, the letter commenced: Many months have passed since we agreed to take over the Responsible Entity function for this project from Australian Horticultural Management Ltd. Although the former Responsible Entity retired due to an internal policy of only administering projects over which it had direct operational control, Huntley Management Limited was chosen as the replacement due to our history of operating externally managed projects and having a strong governance record. It was expected that because we had no personal relationship with the Operational Manager we could enforce our authority as responsible entity of the Project. This has not been the case. 555 The letter noted that Huntley "needed evidence of the project's viability". It then recounted that Huntley had not acceded to Koonara's requests for funds for reasons set out in detail. 556 The letter then continued: Despite the fact that we have not paid anything to the project manager, we are pleased to advise that the vineyard is in excellent shape and has been well and properly maintained. Our independent expert has visited the site on regular occasions and we attach his reports from recent inspections. We presume that the vineyard management expenses have been met from sales of Project bulk and bottled wine as nothing has been received by the Custodian. 557 The letter noted that Huntley had recently discussed with Mr Reschke the prospect of the project being privatised. 558 By email dated 13 May 2008, Malcolm Cleland, who had been engaged by Huntley, told Mr Reschke: As you will be aware all income for the project must be deposited with the Custodian and it is a breach of some significance that this procedure has not been followed. We will try to work out a pathway to rectify this error for you but we must have a full disclosure of any Project receipts forthwith. 559 Mr Reschke responded, acknowledging that "the procedures have not been followed" and setting out other matters including that Mr Cleland would "need to take our word" for the sale of wine to Dan Murphy's. By letter dated 2 June 2008, Mr Cleland gave Huntley a written explanation for the sales and inventory of the Project and expressed confidence that "the bulk wine is accounted for and … the list of sales of bulk wine is now accurate". Mr Cleland noted: "With an allowance for bottle sales I note that this represents more than $200,000 more than Burke declared as being his total sales." 560 By email sent on 8 July 2008, Mr Knox told Mr Reschke that a review of Koonara's charges led to the conclusion that investors had been overcharged. He also sought Mr Reschke's confirmation that he had asked Mr Jessup to proceed with a proposal to privatise the Project. 561 By letter dated 4 September 2008, Huntley wrote to Koonara saying that, if it did not receive information sought by the following day, Huntley would be left with no choice but to report the matter to ASIC; have a liquidator appointed to wind up the Scheme; and conduct an examination of Mr Reschke "in relation to what has happened to the monies for the bottled & bulk wine sales". 562 Subsequently, more financial information was provided by Koonara to Huntley but, as at March 2009, Huntley was still seeking to resolve discrepancies. 563 There is a document entitled "Independent Audit Report - 2006" for the Project dated 25 September 2008, prepared by Geoffrey Finall & Co, chartered accountants. The report was addressed to Huntley and was lodged with ASIC by Huntley on 5 November 2008. The report states that Mr Finall had audited the Compliance Plan of the Project, for the financial year ended 30 June 2006. The report stated, relevantly: Qualifications My audit of the compliance plan, for the year ending 30 June 2006, has identified instances of non-compliance with measures in the compliance plan relating to breaches of the Responsible Entity in regard to the following: i) That proceeds from the sales had not been processed through the Project's accounts but offset against expenses incurred by the operations manager. ii) No evidence of Net Tangible Assets (NTA) had been forthcoming from the responsible entity. iii) No evidence of three (3) monthly cash requirements on the file. iv) The lodgement of the 2004 and 2005, Audit on Compliance Plan, did not comply with the requirements of the Corporations Act. v) The monitoring of actual expenditure against budget forecasts was not provided. The effect of these breaches is that the former responsible entity has not fulfilled its statutory obligations in relation to the above breaches and in the absence of the above items, I can only conclude that the responsible entity was in breach of the scheme's compliance plan. Qualified Audit Opinion Because of the circumstances outlined above in the qualification section, I am unable to form an opinion as to whether: a) [AHM] has complied with the compliance plan for the Coonawarra Wine Project for the year ended 30 June 2006; however b) the plan continues to meet the requirements of Part 5C.4 of the Corporations Act as at that date.

2009 and following 564 On 14 April 2009, Huntley lodged financial statements for the Project for the year ended 30 June 2007 with ASIC. The Directors' Report noted that all revenue was applied to the payment of participants' project fees. The report also recorded: 8. Events Subsequent to Balance Date As a result of the Responsible Entity being unable to obtain reliable financial information from Koonara, the Responsible Entity intends to retire as it is unable to perform its functions in the absence of material information that is solely within the knowledge of this third party. 565 On 8 April 2009, Huntley sent out a notice of meeting of farmers in the Project, to be held on 4 May 2009. In an explanatory memorandum accompanying the meeting, Huntley stated that it wished to retire as RE and that, in the absence of another RE, the Project would have to be wound up. The explanatory memorandum stated that members were requested to vote on an extraordinary resolution for the Project to be wound up. By way of explanation, Huntley stated: In the absence of … information, Huntley has no alternative but to give notice to the Farmers that it wishes to retire as responsible entity for the Project because it is unable to perform its functions in the absence of material information that is solely within the knowledge of a third party. 566 The Reschke parties noted that Mr Rockliff expressed discontent concerning the Project at around this time. By a letter dated 16 April 2009, Mr Rockliff asked Mr Reschke to provide a detailed response to a list of issues regarding the Project (the list was not in evidence), and a detailed response to the proposed resolution that the Project be wound up. 567 By letter dated 24 April 2009, Huntley wrote to Mr Rockliff in terms that indicated there was a significant dispute between the RE and Mr Reschke. Among other things, the letter informed Mr Rockliff that sales proceeds, which were required to be paid into the Custodian account, had been banked into Mr Reschke's account. 568 By email dated 27 April 2009, Mr Rockliff wrote to Mr Knox questioning why it was in the best interests of the farmers to wind up the Project. Mr Rockliff also asked what were the alternatives to winding up the Project and whether the proposed extraordinary resolution was premature. 569 By email dated 29 April 2009, Mr Knox wrote to Mr Rockliff as follows: Our solicitor spoke with Reschke's solicitor this morning who reported that Burke wants the scheme wound up as it is not viable as a private company and if investors keep paying management fees there will be no return for their outlay so there is no point investors continuing to pay for something where there is no hope of a return to them. 570 At the 4 May 2009 meeting, the resolution to wind up the Project was ultimately not put, after Mr Reschke spoke to investors. 571 The Reschke parties criticised Mr Rockliff for ceasing to pay what he was required to pay, and for not taking legal action before his cross-claim filed in this proceeding in August 2016. The Reschke parties noted that Mr Rockliff had acted for 17 other dissatisfied investors in proceedings brought in the Supreme Court of New South Wales in 2011. 572 By letter dated 22 July 2009, Huntley told investors that Mr Reschke had not produced the information requested to allow for the completion of the 2008 financial reports. As a consequence, legal proceedings had commenced to obtain a court order to compel the provision of the necessary information. 573 In September 2010, Mr Knox informed Koonara of his view that the purpose of the Project could not be accomplished and therefore it was entitled to proceed to wind up the Project. Mr Knox commented: This should have occurred some years ago but has been held up as the result of Koonara's failure to provide the necessary information to enable the annual audits to be completed in breach of its obligations under the Management Agreement. 574 By letter dated 17 September 2010, Huntley wrote to the members noting the appointment of Rockliff Solicitors and a subsequent request for Koonara to provide "missing information relating to the sale of bulk and bottled wine in 2007". The letter recorded that, in May 2010, just prior to commencing court action, Mr Reschke had delivered records. The letter concluded: We continue to hold the view that the industry is in a disastrous state, the cost of running the project as a Managed Investment Scheme is inappropriate and the project should be wound-up as soon as possible. We understand that Mr Reschke agrees the project should be wound-up. He has indicated his willingness to offer those growers who wish to continue a relationship with the business, the opportunity to join him in a new corporate structure. Mr Reschke currently owns approximately 48% of the interests in the project. We expect to resolve the matter of the value of the wine stock as mentioned above and will then complete the financial statements and audit as soon as possible. Our next letter will be to advise of our intention to wind-up the project. 575 There were no Project wines produced in 2011 as Koonara was directed by Huntley not to process any of the grapes from the Project for the 2011 vintage.

Winding up of the Scheme 576 On 19 April 2011, there was a meeting of investors in the Project. A resolution was put to the meeting to the effect that the Project be wound up. The minutes of the meeting record that the resolution was neither proposed nor seconded and therefore failed. The minutes conclude: As at the previous meeting, the Chairman reiterated HML's intention to windup the Project as HML had formed the view that the project is not viable at present and is unlikely to be so in the future. He added that if agreement from the investors to windup the project could not be obtained, an application would be made to court to have the project wound up. 577 By letter dated 29 April 2011 from Huntley to the investors in the Project, Huntley wrote, relevantly: Given that we are still of the view that the best course of action for members is for the scheme to be wound up and we are unable to obtain the support of the members to do so, the only practical avenue open to us as the responsible entity is to make application [sic] to the Court to have the scheme wound up on just and equitable grounds. … The cost of obtaining a court order to wind-up the project will be significant, however as we have stated before, HML is not prepared to stand by and see investors not associated with Reschke Vineyards Pty Ltd (who now hold more than 50% of the interest in the scheme) locked in to paying significant annual fees with no reasonable prospect of a return on their investment. 578 As referred to at the commencement of these reasons, on 9 March 2012, this Court ordered that, pursuant to s 601ND(1)(a) of the Corporations Act, Huntley be directed to wind up the Scheme. At [6] of his Honour's reasons, Emmett J noted that the basis for the winding up application was that the Project was unlikely ever to make a profit, and that it was therefore just and equitable that the Project be wound up rather than continuing to incur further losses. At [7], his Honour noted expert viticultural evidence, based on projected future losses, that the Project was not commercially viable. 579 At [17], his Honour concluded: In circumstances where it is abundantly clear that the Project will not be profitable, and that its continuation will continue to incur losses, and where there is no opposition from the members, it seems to me to be appropriate to accede to the application by Huntley Management for a direction that the Project be wound up.

Assignment of debt claims from Huntley to Koonara 580 In a letter dated 2 December 2010, Kemp Strang, solicitors for Huntley, notified Crawford Legal, solicitors for Mr Reschke, of their concerns about Koonara having undertaken the 2010 vintage without consultation with Huntley. The letter stated that Huntley was prepared to invoice growers on the basis that the expenses of the vintage were properly incurred by Koonara but would accept no liability for them. The letter concluded: "The amounts will be assigned to Koonara but it must bear any recovery difficulties from Growers as a result of its aforesaid conduct." 581 In April 2011, Kemp Strang sent a letter to Crawford Legal dated 18 April 2011, in which it was stated that there had been an agreement with Koonara that the Project would be considered terminated as at 30 June 2010, and that there were no further "exit fees". Kemp Strang stated: 7. Our client instructs your client not to process any of the grapes from the 2011 vintage unless your client is prepared to bear the cost of the processing. In previous vintages your client has without the consent of our client undertaken processing at a cost in excess of the market value of the wine produced. This is unacceptable. … 9. It has also come to our client's attention that in fact, contrary to Recital C of the Joint Venture Agreement, there was in fact no lease between CPHL and the custodian as agent for our client. Further a search of the title reveals that the relevant land was owned by Trevor Reschke and that CPHL never held any estate or interest in the land which it could leave to the custodian as agent for our client. Therefore our client has been paying rent on behalf of the members to which CPHL was not entitled. Accordingly as part of the winding up of the Project our client will be investigating taking action against CPHL for recovery of the rent that has been improperly paid on behalf of the members. 582 In about 2012 a dispute arose between Huntley and Koonara relating to, among other things, continued non-payment of fees allegedly due from Huntley to Koonara and allegations that Koonara was in breach of its contractual obligations to Huntley. 583 In an affidavit sworn on 5 March 2014, in support of an interim injunction to prevent Koonara or Mr Reschke from selling certain bulk wine stock and bottled wine stock, Mr Knox asserted that, since at least 28 May 2007 (when Huntley became RE for the Project), Koonara had consistently failed to comply with its obligations under the AHM/Koonara management agreement, including: (1) failing to bank proceeds from the sale of Project wine and grapes into the Project Custodian's bank account; (2) failing to provide information to Huntley to enable Huntley to complete financial statements for the Project; (3) understating wine sales; (4) failing to account for stock discrepancies; and (5) refusing to allow Huntley access to the bulk wine stock and bottled wine stock held at the Project vineyard. 584 On 27 November 2014, Huntley, Koonara and the Reschke entities executed a Deed of Settlement dated 27 November 2014, which included arrangements in respect of all of the assets of the Project and the assignment of debts purportedly owing to Huntley by investors, including invoices to be issued by Huntley on the date of settlement.

"Control" of the Project 585 Mr Rockliff contended that Mr Reschke and his corporate entities controlled all material and significant aspects of the conduct and operation of the Project. The control was said to manifest itself in the following three respects: (1) control of the Reschke companies; (2) control of the operation of the Scheme; and (3) control of the assets of the Scheme.

Control of the Reschke companies 586 The first aspect of control is not contentious. As Mr Reschke himself put it in describing his dealings with Thomson Playford lawyers: [I]n all my communications … I was acting as agent for one or more of the companies which I controlled and which I had formed through Thomson Playford for the purposes of my business of vineyard development and management and sale of wine therefrom, namely, Koonara, RCF, Rocky Castle Holdings Pty Ltd (later Reschke Vineyards Pty Ltd) and, after April 1999, CPH and Reschke Pty Ltd.

Control of the operation of the Scheme including relationship between Reschke parties and AHM 587 The Rockliffs contended that Mr Reschke's control in this respect was demonstrated by the following matters: (1) Mr Reschke established, developed, promoted and marketed the Project. (2) In establishing, developing, promoting and marketing the Project, Mr Reschke did so for and on behalf of other participants in the Project, namely, the companies controlled by Mr Reschke and identified above as well as AHM, Trevor Reschke and TRN. (3) AHM, in contributing to the setting up, establishment, development, promotion and marketing of the Project, and its constituent documents, authorisations and approvals, did so for and on behalf of Mr Reschke and his companies for their joint benefit. (4) Almost all of the "Management Services" under the JVAs were sub-contracted to Koonara under the AHM/Koonara management services agreement (noting that important services were in fact provided by Reschke Pty Ltd). The obligation of the "Manager" to carry out the Management Services and other obligations of the JVAs was solely within the control of Mr Reschke and his companies, and all decisions in respect of the operation of the Project were made by Mr Reschke through Koonara and Reschke Pty Ltd. 588 As to (1), there is no doubt that Mr Reschke was heavily involved in the establishment, development, promotion and marketing of the Project, as the facts set out above demonstrate. AHM was also involved in those activities to the extent set out above. 589 As to (2), Mr Rockliff relied on the following allegations in the statement of claim in the Thomson Playford proceeding: (1) Mr Reschke was at all material times the agent for each of the plaintiffs (who included Koonara and RCF) with actual authority to retain Thomson Playford to provide legal and taxation advisory services with respect to the managed investment schemes the subject of instruction provided during the times pleaded in the statement of claim. (2) Mr Reschke retained Thomson Playford to provide advice to, and act on behalf of, the plaintiffs in respect of various matters and Mr Reschke was, at all material times, within the authority of, and acting on behalf of, the plaintiffs. (3) Mr Reschke in instructing Thomson Playford was acting as agent for disclosed principals, namely, on behalf of each of the plaintiffs. 590 These allegations serve as admissions by Koonara and RCF that Mr Reschke acted on behalf of the relevant companies, but only in relation to the retainer of Thomson Playford. 591 There is no doubt that Mr Reschke took steps on behalf of various of the companies that he owned and controlled in furtherance of the Project, particularly on behalf of Koonara and RCF, but that does not establish the broad proposition in (2). Further, the factual findings above do not support a conclusion that Mr Reschke acted generally for or on behalf of AHM, Trevor Reschke or TRN in connection with the Project. 592 In particular, I do not find that, in establishing, developing, promoting and marketing the Project, Mr Reschke did so for and on behalf of other participants in the Project, namely, the Reschke companies and for and on behalf of AHM, Trevor Reschke and TRN. 593 Reading propositions (2) and (3) together, there is a suggestion that while Mr Reschke was acting on behalf of AHM, AHM was also acting on behalf of the Reschke parties. In their written submissions, Mr Rockliff sought to rely on a litany of approximately 177 narrative facts to support proposition (3). However, he did not attempt to explain how those facts supported a conclusion that AHM was acting "on behalf of" any of the Reschke parties on any particular occasion, or in relation to any subject matter. In particular, with the exception of the First AHM/Koonara agreement (addressed below), Mr Rockliff did not point to any facts said to support a finding of an agreement between AHM and any of the Reschke parties pursuant to which AHM acted on their behalf. Nor did any of the 177 narrative facts include any direction by any of the Reschke parties to AHM on any occasion. Nor did any of those narrative facts include any communication by any of the Reschke parties to AHM in the nature of an authorisation to do any act or in the nature of an instruction to do or refrain from doing anything. 594 AHM's actions can broadly be construed as actions intended to benefit the Reschke parties, in the sense that the operation of the Project was intended to benefit the Reschke parties (and, generally, all concerned in the Project) but, without more, that does not support a conclusion that AHM was acting "on behalf of" the Reschke parties. 595 On this basis, I reject the contention that AHM, in contributing the setting up, establishment, development, promotion and marketing of the Project, and its constituent documents, authorisations and approvals, did so for and on behalf of Mr Reschke and his companies for their joint benefit. 596 As to proposition (4), it is correct that the management services of the RE were sub-contracted to Koonara. The performance of those services was undoubtedly within the control of Mr Reschke and Koonara. Generally speaking, I accept that all significant decisions concerning the operation of the Project were made by Mr Reschke. However, there are exceptions. For example, there were no Project wines produced in 2011. The parties agreed that this was the case because Koonara was directed by Huntley not to process any of the grapes from the Project for the 2011 vintage. 597 Another contention made by the Rockliffs was that "at all material times, AHM was acting under the control and direction of Mr Reschke for and on behalf of and for the benefit of the companies controlled and operated by him which were involved in and for the purposes of the Scheme, namely, Koonara and RCF". 598 The cross-claim contained several allegations that Mr Reschke gave directions and issued instructions to AHM, the most detailed of which is at para 37E of the cross-claim. Paragraph 37E alleges that AHM acted in accordance with the instructions and directions of Mr Reschke. However, none of the 12 particulars to para 37E is, in fact, in the nature of an action pursuant to an instruction or direction. Examples are: 37E.1.1 from time to time, sending on the letterhead of AHM, Koonara, CPH and Reschke Pty Ltd, promotional flyers for the Project and/or Prospectuses for the Project inviting potential investors to participate; 37E.1.2 from time to time, attending presentations with Mr Reschke to promote the Project to potential investors; 37E.1.3 permitting Mr Reschke to deal with ASIC to make changes to the Prospectus documents and to obtain a Product Ruling from the ATO that were in the interests of the [Reschke parties]. 599 Ultimately, Mr Rockliff did not identify any particular direction given by Mr Reschke to AHM either orally or in writing, let alone demonstrate that AHM acted under Mr Reschke's direction at all material times. To the contrary, by way of example, the Rockliffs' narrative of facts stated: On 3 February 1999, Fergus McLachlan attended a Koonara board meeting and stated AHM was happy to be the "SRE" (single responsible entity) for "Koonara's next project" and required certain matters to be attended to by Koonara … And In about June 1999, Mr Reschke and Fergus McLachlan agreed that AHM should terminate the instructions of Mr Lear in relation to obtaining the product ruling and instead engage Mr Schurgott … 600 Mr Rockliff also argued that Koonara engaged AHM to be the RE of the Project "effectively to act as RE on Koonara's behalf, rather than the other way round". Mr Rockliff claimed that the First AHM/Koonara agreement, the agreement to establish the Project, was proof of this proposition. The agreement proves no such thing. 601 Mr Rockliff contended that, under the First AHM/Koonara agreement, Koonara was responsible for developing and establishing the Project. This is not a fair summary of the terms of the agreement. Recital B provided that Koonara would "assist" in the preparation of the prospectus and development of the project. While AHM agreed that Koonara would be solely responsible for "Commercial Decisions", this did not include matters involving compliance with laws or matters involving considerations of risk or liability to AHM. 602 Evidently, Koonara procured AHM to be the RE for the Project on the basis that Koonara would manage the operations of the Project. AHM also agreed that Koonara would be solely responsible for commercial decisions regarding the Project, including commercial decisions affecting the terms of the prospectus. 603 However, there was no agreement that AHM would act as RE "on Koonara's behalf". Thus, the evidence does not support a finding that AHM was Koonara's agent.

Role of Reschke Pty Ltd 604 Reschke Pty Ltd was incorporated by Mr Reschke to establish a separate vehicle to carry on the business of selling wine; to own the intellectual property in brands (which Mr Reschke was in the process of establishing and intended to establish); and to sell wine produced pursuant to the Project and from other vineyards in which Mr Reschke or his family had an interest or which Koonara managed. 605 Mr Reschke also contemplated that Reschke Pty Ltd would be the maker of the wine for Koonara in relation to the Project and other projects. Mr Reschke considered that the activities of wine making were different from the viticultural activities principally carried on by Koonara. 606 The marketing and sale of both the bulk and bottled wine produced pursuant to the Project was largely undertaken by Mr Reschke and his staff employed by Reschke Pty Ltd, under Mr Reschke's direction. However, Koonara was the company which employed the people within the Reschke group of companies in the vineyard management, winemaking and barrel management processes. 607 Mr Reschke arranged for Reschke Pty Ltd to be the company that made the contractual arrangements for winemaking and with suppliers in connection with the Project. 608 Thus, there was a separation of the winemaking and wine selling activities arising from the vineyard management activities of Koonara, effected by the incorporation of Reschke Pty Ltd. Mr Reschke did not shy away from the fact that he made this separation for reasons concerning his own interests, including that the separation of these activities could enable profits and losses from the various activities to be allocated among and between at least Koonara and Reschke Pty Ltd in a way which could be more tax effective for Mr Reschke. 609 The arrangements between Koonara and Reschke Pty Ltd were undocumented. 610 However, they included the fact that Reschke Pty Ltd reserved rights to use trademarks for the initial sale of the wines from the Project. Reschke Pty Ltd also maintained a right to determine the way in which the wines entered the market under the Reschke label and the trademarks.

Control of the assets of the Scheme 611 The Rockliffs also contended that, at all material times, Mr Reschke controlled all of the major assets of the Project. 612 Mr Reschke accepted that, at all times, he controlled the land the subject of the Project and the improvements on it; as well as the grapes, the wine and the stock. Mr Reschke accepted that he controlled the income received from the sale of stock and the moneys the subject of the Scheme "to a lesser degree". Based on the facts set out above, Reschke Pty Ltd received the income from the sale of stock, and Mr Reschke dealt with those proceeds in the manner described above. However, it is relevant to note that the "major assets of the Scheme" (the expression used by Mr Rockliff) is a different thing from "Scheme Property" within the meaning of the Constitution. That expression is defined above. Notably, it does not include the Project Land. 613 It is not clear who ultimately received the amounts paid by investors or whether Mr Reschke controlled or spent those monies. Mr Reschke did not "control" the issuing of invoices, however, he prepared draft invoices. 614 On this basis, I accept that Mr Reschke and entities associated with him controlled important aspects of the Project.

Second group of claims: misconduct in operation of the Project

Unconscionable conduct 615 Mr Rockliff contended that the operation of the Project involved numerous, persistent and serious breaches of duties and obligations by Mr Reschke and entities associated with him. He contended that the "conduct and operation of the Scheme was marked by critical and significant failures and breaches by those entrusted to operate and manage the Scheme, and moreover critical non-disclosures of the way in which the Scheme and Project was being conducted and operated". 616 These contentions were intended to support Mr Rockliff's cross-claim that the Reschke parties engaged in unconscionable conduct by their operation of the Project, either in contravention of s 12CA of the ASIC Act 2001 or under the general law. Mr Rockliff seeks declarations of these contraventions, in terms which would state that the contravening conduct was "to the detriment of the investors and contrary to the representations and promises made" in the second prospectus. 617 In particular, although Mr Rockliff alleged that Koonara owed a fiduciary duty to investors in the Project including to protect and secure scheme property for the benefit of investors (para 117 of cross-claim), the allegations of breach of fiduciary duty were addressed to: (1) instructing the RE to render invoices (para 122 of the cross-claim); (2) failure to wind up the scheme and continuing to instruct Huntley to charge fees to investors (para 124 of the cross-claim); and (3) conduct after the scheme was wound up (para 126 and para 127 of the cross-claim). 618 As earlier noted, Mr Rockliff did not allege that Koonara had misused or failed to protect scheme property. As put in oral closing submissions, "the breach of fiduciary duty is that there was no proper basis for Koonara to instruct Huntley to issue the invoices relied on by Koonara as assignee of the debts alleged". 619 The alleged misconduct in the operation of the Project was grouped into the following six categories: (1) failure to fulfil representations made in the second prospectus; (2) events occurring during the operation of the Scheme; (3) failure by Koonara to comply with its obligations to the RE and to protect investors; (4) use of "round-robin" promissory notes; (5) improper issuing of invoices; and (6) non-disclosure of material and significant matters and events.

Failure to fulfil representations made in the second prospectus and use of "round-robin" promissory notes 620 As to (1), this allegation was made by reference to the representations that I have addressed earlier in these reasons. Of those representations, I have found two representations to be false. Of those, it is fair to say that RCF failed to fulfil the representation that it would advance funds to investors to finance their participation in the Project. 621 The complaint of a failure to fulfil a representation may suggest that Mr Rockliff's complaint here goes beyond the falsity of the representations, or whether they were misleading or deceptive, to the facts concerning whether representations (even if not misleading or deceptive) were fulfilled. Broadly, I accept that there were representations that were unfulfilled. An example is the representation identified above concerning the installation of frost protection. However, the allegation of "failure" to fulfil a representation seems to imply a duty of fulfilment. Except in relation to the two false representations, I do not accept that any of the Reschke parties owed any such duty. 622 As to (4), I have made findings above concerning the "round-robin" transactions that occurred and I have found that the Rockliffs were not advanced funds pursuant to those transactions. Despite this, in 2007, RCF sought repayment from Ms Rockliff on the false premise that it had advanced funds to her and she paid $2,620.80 to RCF. Mr Rockliff asserted but did not prove payment to RCF of $7,862.40.

Events occurring during the operation of the Scheme and non-disclosures 623 As to (2) and (6), the relevant events were: (1) The appointment of an administrator of ARG, the Project's custodian, in September 2002, which was not reported to investors in the Project including Mr Rockliff. (2) The subsequent winding up of ARG and the appointment of a liquidator which was not reported to investors including Mr Rockliff. (3) The appointment of Huntley as custodian for the Project in about 2003. (4) The cessation of Messrs Mollison, Tolley and Gawel as directors of CPH, Koonara and Reschke Pty Ltd in October 2003, leaving Mr Reschke as the sole director of each company, which was not reported to investors including Mr Rockliff. (5) The appointment of Fergus McLachlan and Guy Stratford as directors of CPH on 9 December 2003, which was not reported to investors including Mr Rockliff. (6) The commencement of the Thomson Playford proceeding without that matter being reported to investors including Mr Rockliff. (7) AHM did not provide members with reports for a financial year within 3 months after the end of the financial year, in accordance with clause 25.7 of the Project Constitution. (8) From time to time members made complaints to AHM, both verbally and in writing, prior to its ceasing to be the RE for the Project on 28 May 2007, and subsequently made complaints, verbally and in writing to Huntley, regarding lack of financial reports and information regarding the Project. (9) The change of CPH's status from an unlisted public company to a proprietary company in 2004, which was not reported to some investors, including Mr Rockliff. (10) The retirement of Fergus McLachlan as a director of CPH in May 2005 which was not reported to investors including Mr Rockliff. (11) The retirement of Guy Stratford was a director of CPH, leaving Mr Reschke as sole director, which was not reported to investors in the Project, including Mr Rockliff. (12) The retirement of Ian McLachlan as a director of AHM on 5 October 2005, about which AHM did not inform investors including Mr Rockliff. (13) The suspension of Mr Cameron as a registered company auditor in September 2006. (14) On or about 13 April 2007, Mark Taylor, an investor in the Project pursuant to the first prospectus, sent an email to Mr Reschke with a copy to Fergus McLachlan stating, relevantly, that he had not received the 2001, 2002, 2003, or 2004 financial statements for CPH. (15) On or about 1 May 2007, AHM sent a letter to investors in the Project including Mr Rockliff, signed by Fergus Mclachlan, purporting to explain the proposal to change the RE for the Project from AHM to Huntley. The letter is set out at [545] above. (16) On or about 1 May 2007, AHM sent to investors in the Project including Mr Rockliff the Notice of Meeting of Growers dated 30 April 2007 and Explanatory Memorandum - Notice of Retirement of Responsible Entity, referred to above. (17) On 28 May 2007, AHM was replaced by Huntley as the RE for the Project. Subsequently, a notice of change of responsible entity of a registered scheme was lodged with ASIC, signed by Mr Jessup. (18) Prior to 29 May 2007, AHM "as agents for the cross defendants" did not report to investors in the Project including Mr Rockliff "as required under the Constitution, Compliance Plan and Joint Venture Agreement for the Project and as represented in" the second prospectus. (19) Mr Finall's qualified audit opinion for the Project for the year ended 30 June 2006, dated 25 September 2008. (20) On about 1 April 2008, Huntley sent a letter to investors in the Project including the Rockliffs "which contained, inter alia, a number of statements relating to the Project, concerning the conduct of Mr Reschke and Koonara". (21) AHM did not report to investors in the Project, including Mr Rockliff, matters that were disclosed in Huntley's 1 April 2008 letter. (22) Huntley's lodgement of financial statements and reports for the year ended 30 June 2008 with ASIC by Huntley, in which under item 7 under the heading "DIRECTORS REPORT' there was a sub heading "Material uncertainty in financial information" and under Note 14 there was a heading "Issues relating to sub-contract of management services and project Under lease". (23) The death of Trevor Reschke, the owner of the land on which the Reg Reschke vineyards were located, on 21 June 2008. (24) The transfer of ownership of sections 226, 227 and 228 (on which the Reg Reschke vineyards were located) to Reschke Vineyards on 27 September 2010.

Failure by Koonara to comply with its obligations to the RE and to protect investors

Koonara's obligations 624 Mr Rockliff made complex and lengthy submissions directed to the existence of obligations owed to him by Koonara. 625 Those submissions implicitly recognised that Koonara did not have a contractual relationship with Mr Rockliff. 626 Koonara had a contractual relationship with AHM under each of the First AHM/Koonara agreement and the AHM/Koonara management services agreement. The evidence was not clear as to whether Huntley ever obtained the benefit of the AHM/Koonara management services agreement or whether that agreement was replaced by an agreement between Koonara and Huntley. 627 Mr Rockliff argued that Koonara was "in substance" the "Manager" of the Scheme. This contention was made in support of the existence of a duty of care owed by Koonara to Mr Rockliff and in support of the existence of fiduciary obligations owed by Koonara to Mr Rockliff. 628 The reference to "Manager" appears to be a reference to that term in the Project Constitution and the JVAs. Mr Rockliff noted that Koonara performed many of the functions of "Manager" within those two documents pursuant to the AHM/Koonara management services agreement. Mr Rockliff also observed that the RE was "dependent" on Koonara for financial information. 629 AHM was defined to be the "Manager" of the Project under the Constitution. By recital E to the AHM/Koonara management services agreement, AHM states its wish to engage Koonara to perform its management obligations under the JVAs. The Rockliffs noted that, by cl 3.1 of the First AHM/Koonara agreement, AHM agreed to sub-contract the "management and conduct of the operations of the Scheme" to Koonara. The Rockliffs referred again to cl 6 of the First AHM/Koonara agreement, by which AHM agreed that Koonara would be solely responsible for "Commercial Decisions". 630 Mr Rockliff contended that the services to be performed by Koonara under cl 1.2 of the AHM/Koonara management services agreement were "almost a complete sub-set" of the services AHM was obliged to provide members under the Constitution as "Manager". He noted that the services to be provided under cl 1.2.12 comprised "all other things that are necessary or incidental to the carrying out of the Project to produce a viable business of growing, marketing and sale of wine grapes, bulk wine of bottled wine". 631 In addition, Koonara agreed to perform the following service, which was not specified as one of the "Management Services" as defined by the Constitution: 1.2.1 ensuring that the Land Owner carries out the Land Owner's obligations under the Underleases in a proper and workmanlike manner and in an efficacious and timely manner; 632 However, Koonara was not engaged to perform the following "Management Services" as defined by the JVA: l. carrying out the accounting, financial control and reporting needs and functions of the Joint Venture; m. keeping of proper books of account for the Joint Venture; 633 Further, AHM could not contract out of its statutory duties as RE. Mr Rockliff did not suggest that Koonara was, or acted as, the RE of the Project. Rather, he argued that Koonara "undertook to act in the role of de facto RE of the Scheme; and thereby in the interests of the members of the Scheme. 634 In my view, there is no relevant sense in which Koonara was "in substance" the "Manager" of the Project. Koonara's role in the Scheme was primarily determined by its contractual relationship with AHM. In particular, the evidence does not support a finding that Koonara undertook to act in the role of "de facto RE". As evidenced by the AHM/Koonara management agreement, it undertook to perform the functions stipulated in that contract. 635 Thus, I do not accept that Koonara owed a duty of care to Mr Rockliff "to manage the Scheme and Project in the interests of the investors and to hold and/or protect and secure Scheme Property for the interests of investors in the Scheme (other than by the legitimate charging of fees for its services …)". Such a duty does not reflect Koonara's true role in the Project. 636 Similarly, to the extent that Mr Rockliff relied upon Koonara's situation as de facto "Manager" or RE to contend that Koonara owed him fiduciary obligations, I do not accept that contention. 637 Mr Rockliff also pointed to the fact that Koonara controlled and was responsible for scheme property and the assets of the Scheme. It is true that Koonara had actual control over important elements of the scheme property, particularly the grape vines and the grapes grown pursuant to the Project, and the wine produced from those grapes. Knowing that those assets were scheme property, Koonara was obliged to deal with those assets on the terms of the Project Constitution: Barnes v Addy (1874) 9 Ch App 244 at 251. Mr Rockliff contended that Koonara owed fiduciary duties in respect of trust property held by him citing Shepherd JC, Law of Fiduciaries (The Carswell Company Ltd, 1981) at pp 22-25; Finn P, Fiduciary Obligations: 40th Anniversary Republication with Additional Essays (The Federation Press, 2016) at [184], [187] and [194] and Soar v Ashwell [1893] 2 QB 390 at 397 per Bowen LJ. 638 Mr Rockliff contended that Koonara owed a fiduciary duty to Scheme members to ensure that CPH carried its obligations, but pointed only to a contractual obligation to do that very thing in cl 1.2.1 of the AHM/Koonara management agreement. I do not accept that Koonara owed such a fiduciary duty to Mr Rockliff. 639 Finally, Mr Rockliff contended that Koonara and Mr Reschke owed a fiduciary duty to the investors as the promoters of the Scheme and the Project, citing Elders Trustee and Executor Co Ltd v EG Reeves Pty Ltd (1987) 78 ALR 193 at 227-229; and see Tracy v Mandalay Pty Ltd [1953] HCA 9; (1953) 88 CLR 215 at 241-242; Fraser Edmiston Pty Ltd v AGT (Qld) Pty Ltd [1988] 2 Qd R 1 at 10. The duty was said to include a requirement to ensure that representations as to how the Scheme and Project would be conducted were made good and carried through.

Failure to protect scheme property 640 Mr Rockliff contended that Koonara and Mr Reschke failed: (1) to ensure the members had a secured interest in the Land and the Vineyard upon which the Joint Venture was to be carried on; (2) to protect moneys released inappropriately from the Scheme Bank Account; (3) to keep Project wine and grapes separate from wine and grapes from other projects operated by Mr Reschke; (4) to bank proceeds on the sale of grapes and wine into the Scheme Bank Account, which was to be maintained by the Custodian; and (5) to take adequate measures to ensure frost protection. 641 As to (1), it is plain that Mr Rockliff and other investors did not have a secured interest in the Project Land at any time, but not that either Koonara or Mr Reschke "failed to ensure" that they had such an interest. Mr Rockliff did not explain the basis on which it was suggested that either Koonara or Mr Reschke ought to have ensured the creation of such an interest. Nor did they suggest that Koonara, Mr Reschke, or any other entity deprived the investors of access to or use of land in a manner that was inconsistent with the proper operation of the Project. 642 As to (2), Mr Rockliff claimed that money was released from the Scheme Bank Account without a lease to the Custodian in registrable form. I have assumed that the relevant lease is the lease contemplated by the Constitution and the JVAs. As there was no such lease, it necessarily follows that any money released from the Scheme Bank Account was released without a lease to the Custodian in registrable form. However, Mr Rockliff did not explain why a lease in registrable form was a precondition to the release of money from the Scheme Bank Account. 643 Without more, I am not persuaded that money was "released inappropriately" from the Scheme Bank Account, or that Koonara or Mr Reschke "failed to protect moneys released inappropriately from" that account. 644 As to (3), based on the findings above, at least some of the wine produced from grapes grown pursuant to the Project was not kept separate but was blended with wine produced by Mr Reschke or his entities from other vineyards. The evidence does not reveal whether grapes were kept separate. The wine grapes produced pursuant to the Project and the wine produced from those grapes was "Scheme Property" and, accordingly, to the extent that Koonara received that property as agent for the Manager of the Project, it was required to deal with the property in accordance with the terms of the Constitution and the JVAs. Although the precise extent is unclear, there is ample evidence that Koonara did not deal with scheme property in the form of grapes and wine in accordance with the terms of the Project documents, and in accordance with its fiduciary duty to protect scheme property. However, as I have explained above, Mr Rockliff did not bring a case for relief based on this breach of fiduciary duty. 645 As to (4), Mr Rockliff did not identify any sales of grapes. However, based on Mr Reschke's evidence, proceeds of the sale of wine by Reschke (and, perhaps, Koonara) were not banked into the Scheme Bank Account. This was a breach of Koonara's fiduciary duty to protect scheme property. 646 As to (5), I have made findings above concerning the extent of frost protection. The complaint begs the question as to what were "adequate measures" and whether Koonara or Mr Reschke had an obligation to take such measures.

Maintenance of financial records and provision of information 647 Mr Rockliff contended that Koonara and Mr Reschke failed: (1) to provide budgets of expenditure and income; (2) to provide financial information to enable Project accounts to be prepared and/or audits to be conducted; (3) to provide a proper account of the Scheme Property and income, including failure to provide accounts and documentation supporting the price and quantity of bulk and bottled wine sales, bottled wine stock and failure to account for a shortfall discrepancy between vintage reports and stock reports; and (4) to account for litres of wine. 648 Broadly, the findings above support a conclusion that Koonara failed to discharge contractual obligations to AHM and Huntley to do these kinds of things.

Operation of Scheme not in best interests of members 649 Mr Rockliff contended that Mr Reschke and Koonara preferred their respective interests to the interests of investors by: (1) determining which grapes, from which projects, would be allocated to bulk wine or to bottled wine, which had different sales outcomes for the respective projects depending on such allocation; (2) adopting viticultural practices to depress the yields of grapes that would otherwise be obtained from the projects; (3) determined which wine from wines blended from all of the projects would be allocated to investors in the Project; (4) generating invoices with retailers themselves, so the RE had to take Koonara's "word" in relation to Scheme income; (5) determining how to allocate profits and losses between Reschke Pty Ltd and Koonara "in circumstances directly impacting on outcomes for investors, by determining what income to be allocated to Koonara on behalf of investors or to Reschke Pty Ltd, as Mr Reschke chose in his absolute discretion, having regard primarily to his own interests and taxation considerations"; (6) failed to keep management accounts for each individual vineyard project including as to which sales were made; (7) determining what income and expenses to be allocated to investors in the Project in invoices sent to investors, by mere estimation and where the creator of the invoices could not vouch for their accuracy; (8) charged for bottling and labelling of a significantly higher tonnage of grapes than actually bottled and overcharging investors; (9) failing to provide a reconciliation of units held by Reschke Vineyards in the Project and fees payable by Reschke Vineyards as a member of the Project; and (10) proceeding with the harvest of the 2010 vintage and wine production without consultation with Huntley and despite it being uneconomical. 650 Broadly speaking, the findings I have made above support the allegations at (1) to (7) above. Allegations (8) to (10) are allegations that were made by Huntley against Koonara but which were not proved by Mr Rockliff. 651 It is not obvious that Mr Reschke and Koonara owed a fiduciary duty to investors in relation to each of (1) to (7) above. In any event, the evidence does not support a conclusion that Mr Reschke and Koonara preferred their interests over the interests of investors by the conduct at (1) to (3) above. I accept that the conduct at (4) to (7) involved a failure to act in the best interests of the investors in relation to scheme property.

Failure to conduct Scheme in accordance with the Product Ruling PR2001/93 652 The relevant provisions of the product ruling are set out above. The "round-robin" transactions did not comply with the product ruling, although Mr Rockliff did not enter into the loan deed with RCF on the express basis that it included the impermissible feature that "funds borrowed … [were] not available for the conduct of the Project" and were arguably (to the extent that there was any transfer) "transferred … back to the lender". 653 Contrary to Mr Rockliff's contention, I do not accept that, to the extent that the Scheme was not conducted in accordance with the product ruling, that was a failure on the part of Koonara.

Improper issuing of invoices 654 Neither Koonara nor Mr Reschke issued any invoice to the Rockliffs. For the reasons given above, I accept that any invoices issued by RCF were improperly issued. There is only one such invoice in evidence: the invoice issued by RCF to Ms Rockliff in about June 2007. 655 Based on the findings above, I accept that there is a real doubt as to whether invoices issued by AHM were for amounts properly due by Mr Rockliff and Ms Rockliff.

Consideration 656 This aspect of Mr Rockliff's cross-claim is misconceived: even assuming that the various Reschke parties did and failed to do all of the things alleged by Mr Rockliff, that conduct was not relevantly "unconscionable". 657 I have set out above relevant principles concerning the nature of conduct that is "unconscionable within the meaning of the unwritten law". As Gleeson CJ noted in Berbatis at [7] (set out at [462] above), "[i]n everyday speech, "unconscionable" may be merely an emphatic method of expressing disapproval of someone's behaviour, but its legal meaning is considerably more precise". 658 The primary way that Mr Rockliff put his case on unconscionability was based on the proposition that he was in a position of "special disadvantage" in relation to the Reschke parties. A position of "special disadvantage" may establish a claim of unconscionable conduct where a party who knows or ought to know of that disability takes advantage of it: Berbatis at [55]. But Mr Rockliff did not attempt to make a case that his manifold complaints concerning the operation of the Scheme involved the Reschke parties in taking advantage of an opportunity created by virtue of Mr Rockliff's vulnerability or weakness. None of the matters complained of involved any relevant exploitation that amounts to unconscionable conduct in this sense. 659 Mr Rockliff put an alternative argument that, as a result of non-disclosures during the course of the Project, the investors were unable to consider and exercise rights available to them. In particular, Mr Rockliff contended that the Scheme ought to have been wound up on the just and equitable ground prior to March 2012. Mr Rockliff submitted that "it is to be inferred that the only reason that did not occur was because material omissions and misconduct was not properly disclosed to members". Mr Rockliff argued that the members were placed in a position of special disadvantage to exercise their rights to determine the Scheme and "it is unconscionable for Koonara, Mr Reschke and RCF to purport to rely on their strict legal rights and by so doing continue to take advantage of the position in which the members of the Scheme were placed (i.e. of disadvantage) by reason of the very conduct of Koonara, Mr Reschke and RCF". 660 This contention is expressed as though it is based on the species of unconscionable conduct that is unconscionable insistence on strict legal rights. However, there was no relevant insistence on legal rights by the Reschke parties. To the extent that Koonara and RCF's claims in debt might have been relevant, those claims have failed. 661 Accordingly, Mr Rockliff's claims that the Reschke parties contravened s 12CA of the ASIC Act 2001 or engaged in unconscionable conduct under the general law by their operation of the Scheme must fail.

Involvement in breaches by the RE 662 In his cross-claim, Mr Rockliff alleged that AHM, as RE, contravened ss 601FC(1)(a), (b), (c), (h) and (i) of the Corporations Act. He also alleged that Koonara was involved in those contraventions. 663 The relevant pleading is as follows: 114 Further and in the alternative, Koonara acted in breach of the Management Agreement, as set out at paragraph 68A above, and further: … 114.8 Reaching an agreement with AHM involving RCF for advances pursuant to Loan Deeds to be provided by way of round robin of promissory notes, in breach of the provisions of the Product Rulings for the Project, and the Loan Deeds purported to be entered into by RCF, with those investors electing to take up the finance option offered by RCF under both Prospectus 1 and Prospectus 2; 114.9 Being a party to the purported advance of monies by RCF pursuant to clause 2.1 of the Loan Deeds in respect to those Investors electing to take up the finance offer under both Prospectus 1 and Prospectus 2, by way of round robin of promissory notes which were backdated and/or fabricated; 114.10 AHM, as agent for Koonara and Burke Reschke on 1 July 2002, instructing the Custodian for the Project. Australian Rural Group Limited to close the Scheme Bank Account and remit the balance of the account to AHM in breach of the Constitution, Compliance Plan for the Project and the Joint Venture Agreements and Sub-contract. 114.11 Causing AHM, as agent for Koonara and Burke Reschke from 2003, submitting invoices to Farmers/Investors directing payment not to the Scheme Bank Account conducted by the Custodian for the Project but to AHM, in breach of the Compliance Plan and Constitution for the Project. 115 AHM as agents for the cross defendants: 115.1 Failed to take action against Koonara to enforce Koonara's obligations under the Management Agreement; 115.2 Failed to enforce CPH's obligations under the Constitution, Compliance Plan and Joint Venture Agreements to: 115.2.1 Exercise the option to purchase the Land the subject of the Project; 115.2.2 Execute the Memorandum of Lease purported to be granted by Trevor Stanley Reschke, Burke Reschke's father to CPH, which contained a covenant in accordance with clause 28 of the Constitution for the Project to have Memorandum of Lease stamped and registered and have the mortgagee of the Land, ANZ Bank, to enter into a Deed in accordance with clause 28 of the Constitution for the Project; 115.2.3 To have the Memorandum of Underlease purported to be granted by CPH in favour of Australian Rural Property Limited, to be in registrable form, stamped and registered, which contained a covenant in accordance with clause 28 of the Constitution for the Project, by the mortgagee of the Land the subject of the Project, ANZ Bank and for ANZ Bank to enter into a Deed as required by clause 28 of the Constitution for Project; 115.3 Failed to do all things and sign all necessary documents to assign the Memorandum of Underlease to the new Responsible Entity for the Project to be held by the new Responsible Entity for the Project on trust for the members of the Project in accordance with clause 28.6 of the Constitution for the Project and clause 14.1 of the Joint Venture Agreements, after AHM was replaced as the Responsible Entity for the Project by Huntley Management Limited on 28 May 2007; 115.4 Failed to ensure the implementation of the Scheme or Project was in accordance with the provisions of Product Rulings PR 2000/10 and PR 2001/93; 115A In the premises, AHM as Responsible Entity of the Scheme contravened s 601FC(i) (a), (b), (c), (h), (i) and Koonara was thereby involved in such contraventions. 116 The cross claimant has as a result of Koonara's conduct suffered loss and damages. Particulars The cross claimant repeats the particulars to paragraph 44. 664 Paragraph 68A of the cross-claim is in the following terms: 68A. During the course of the Project, Koonara breached the provisions of the Management Agreement and caused the Responsible Entity for the Project, AHM, to be in breach of its obligations to investors: 68A.1 Failed by 31 May of each year of the term of the Project, to submit an annual budget and operational plan to AHM, in its role as Responsible Entity for the Project for the next financial year showing cash projections including Project income and expenses in accordance with cl 3A.1 of the Management Agreement; 68A.2 Failed to furnish AHM with all reports, accounts and information in its possession or power necessary to enable the RE to comply with its obligations under the Constitution, the Compliance Plan and the Corporations Law in accordance with cl 3A.6 (second clause with that number); 68A.3 Failed to fully account for the proceeds of the sale of grapes, bottled wine and bulk wine of the Project and expenses in regard thereto; 68A.4 Failed to conduct the Project in a commercial manner in accordance with cl 1.1.4; 68A.5 Failed to require the purchaser of grapes, bulk wine, and bottled wine to make all cheques payable to "Coonawarra Winegrape Project - Scheme Bank Account" and bank the proceeds into the Scheme Bank Account conducted by the Custodian for the Project, in accordance with cl 1.9; 68A.6 Thereby failed to do all acts, matters or things under the AHM/Koonara management services agreement in breach of cl 3A.6 (First clause with that number), and failed to use reasonable endeavours to assist the RE for the Project, in accordance with cl 1.1.3, causing the RE to be in default of its obligations under the Compliance Plan and Constitution for the Project and the JVAs. 665 In his written submissions, Mr Rockliff extended his claim to contend that Mr Reschke and RCF were involved in contraventions by AHM of s 601FC(l) of the Corporations Act. 666 Section 601FC(1) provides relevantly: (1) In exercising its powers and carrying out its duties, the responsible entity of a registered scheme must: (a) act honestly; and (b) exercise the degree of care and diligence that a reasonable person would exercise if they were in the responsible entity's position; and (c) act in the best interests of the members and, if there is a conflict between the members' interests and its own interests, give priority to the members' interests; and …. (h) comply with the scheme's compliance plan; and (i) ensure that scheme property is: (i) clearly identified as scheme property; and (ii) held separately from property of the responsible entity and property of any other scheme; and 667 Mr Rockliff's case did not make any attempt to explain how each alleged breach constituted a contravention of s 601FC(1). To take as an example, Mr Rockliff did not explain how the agreement pleaded in para 114.8 contravened the separate duties in ss 601FC(1)(a), (b), (c), (h) and (i). The allegation that there was a contravention of s 601FC(1) by the pleaded agreement is a serious allegation. Mr Rockliff did not plead facts to support an alleged failure on the part of AHM to act honestly and nor did he make submissions to explain the basis of that allegation. Mr Rockliff did not explain how the pleaded agreement offended either of the duties in s 601FC(1)(b) and (c). Mr Rockliff did not identify how the agreement failed to comply with the Scheme's Compliance Plan, contrary to s 601FC(1)(h). It is self-evident that the pleaded agreement has nothing to do with the duty in s 601FC(1)(i). 668 However, even if the facts pleaded are proved, even if one or more of them constitute a breach of one or more of the RE's duties under s 601FC(1), and even if one of the Reschke parties contravened s 601FC(5) by involvement in the contravention, this aspect of Mr Rockliff's case goes nowhere because the evidence did not demonstrate that Mr Rockliff suffered any loss or damage because of the conduct that allegedly contravened s 601FC. 669 As noted above, Mr Rockliff has no basis for relief based on loss of income or profits. Mr Rockliff made no attempt to explain how any of the payments that he made during the course of the Project was a loss suffered "because of" any relevant conduct on the part of AHM. 670 Accordingly, this aspect of Mr Rockliff's claim is not proved and must fail.

Conclusion and costs 671 All parties have failed in their respective claims. 672 In the ordinary course, cost should follow the event. I have considered whether there is any basis for a different order. Towards the very end of the trial in this matter, the Rockliffs made an open offer that the proceedings be dismissed with each party to bear its own costs. In my view, that offer came too late to warrant a departure from the ordinary course. Accordingly, I will order the applicants to pay the costs of their respective claims and Mr Rockliff to pay the costs of the cross-claim. I certify that the preceding six hundred and seventy-two (672) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gleeson.

SCHEDULE OF PARTIES NSD 1357 of 2016 Cross-Respondents Second Cross-Respondent KOONARA MANAGEMENT PTY LTD (ACN 082 863 323) ATF KOONARA MANAGEMENT TRUST Third Cross-Respondent ROCKY CASTLE FINANCE PTY LTD (ACN 082 858 160) ATF ROCKY CASTLE FINANCE TRUST