Leveraged Equities Limited v Goodridge

The issues on the appeal 27 The issues which arose on the appeal fall into two separate groups. The first concerns what may be called the margin call case. The second may be called the transaction case. 28 The transaction case issues arise because the primary judge held that the Transaction Documents under which Macquarie's margin loan book was sold to Leveraged Equities were ineffective to novate or assign the LSA to Leveraged Equities. Accordingly, his Honour held that Leveraged Equities was not entitled to exercise any rights under the LSA, in particular to make a margin call or sell Mr Goodridge's securities. 29 His Honour made those findings notwithstanding the provisions of cl 21 of the LSA which included the following powers: 1.2 The Bank may assign, transfer, novate and otherwise grant participations or sub-participations in … all or any part of the benefit of this agreement … without the consent of the Borrower … 1.4 Without limiting the previous provisions of this Clause 21, the Bank … is entitled to assign its rights and novate its obligations … to any trustee or manager of any securitisation programme. [emphasis added]

The issues arising on the margin call case 30 The issues which arise on the margin call case are largely issues of construction of the LSA. 31 The first issue is whether upon the proper construction of cl 5.2 the discretion conferred on the lender authorised it to shorten the period within which Mr Goodridge was required to comply with the margin call to a period of less than three business days. 32 The second issue is whether clause 5.7 contained an independent power to sell so many of the MCW Trust units as were required to produce sufficient funds to satisfy the amount by which Mr Goodridge's Total Loan Balance exceeded the Market Based Limit of the units (and a prescribed Buffer), even if no margin call was actually made. 33 The third issue is one of fact. It is whether the primary judge was in error in concluding that Mr Goodridge had withdrawn his instruction to sell all of his units in the MCW Trust. 34 The fourth issue is causation. This issue arises because his Honour found that Mr Goodridge's friend and solicitor, Mr Firth, would have lent Mr Goodridge $400,000 on 25 February 2009. That would have been sufficient to meet the margin calls within the three day period which his Honour found to be the period required under cl 5.2. 35 However, Mr Goodridge failed to take up Mr Firth's offer, or to go back into the market to acquire units in the MCW Trust. Thus, a question arises as to whether Mr Goodridge's loss was caused by Leveraged Equities, or by his own failure to re-acquire the units in the MCW Trust. Ultimately, the issue is one of loss which only arises in the event that Leveraged Equities and Macquarie fail on the other issues in the appeal.

The issues in the transaction case 36 Five issues arise in the transaction case. The first is whether upon the proper construction of clauses 21.2 and 21.4 of the LSA, Macquarie was authorised to novate its rights and powers under the LSA to a third party without obtaining the further consent of Mr Goodridge. 37 The second issue is whether, if clauses 21.2 and 21.4 operated as if Mr Goodridge had given his prospective consent, the Transaction Documents by which the loan book was sold to Leveraged Equities were effective to constitute a novation. 38 The third question is whether the Transaction Documents were effective to assign, whether at law or in equity, Macquarie's rights and powers under the LSA to Leveraged Equities. 39 The fourth question is whether Mr Goodridge received written notice of the assignment in accordance with s 12 of the Conveyancing Act 1919 (NSW) ("Conveyancing Act"). This issue arises because the primary judge accepted Mr Goodridge's evidence that he did not receive the relevant letter, notwithstanding that his Honour found that the system proved in evidence by Macquarie and Leveraged Equities adopted by them for the despatch of important documents was "generally reliable". 40 The fifth issue is whether the primary judge was correct in finding that, even if the relevant notice of assignment was not given to Mr Goodridge, Leveraged Equities was not entitled to rely upon the provisions of s 170 of the Conveyancing Act. 41 This issue arises because his Honour rejected the proposition that a notice proved to have been sent in accordance with s 170 was sufficient to satisfy the requirements of notice under s 12. His Honour said at [155] that: A notice served merely in accordance with s 170 is insufficient unless the debtor … actually receives it.

Other issues arising on the appeal 42 Two further issues arise in addition to those arising under the margin loan case and the transaction case. 43 The first is whether the primary judge was correct in finding that Leveraged Equities engaged in unconscionable conduct under s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) ("ASIC Act") in selling Mr Goodridge's units in the MCW Trust. 44 This issue turns on whether the services provided under the LSA, namely the advance of funds to a borrower for the purpose of acquiring shares on a margin may be said to be services of a kind ordinarily acquired for personal, domestic or household use. 45 The second supplementary issue only arises if Macquarie and Leveraged Equities fail on issues going to liability. The issue is one of quantum. It arises because the primary judge ordered Leveraged Equities to go into the market and acquire in the name of Mr Goodridge 5,603,562 units in the MCW Trust. 46 By the time of his Honour's order, the price of units in the MCW Trust had risen to approximately 60¢ so that the total cost to Leveraged Equities of acquiring the units was in excess of $3.2 million. 47 Leveraged Equities contends that if it is otherwise unsuccessful, the proper remedy is in damages. Leveraged Equities also contends that any damages order would need to be addressed in light of the failure of Mr Goodridge to take up Mr Firth's offer to lend him $400,000 to meet the margin calls.

The LSA 48 The LSA was a standard form document. It was expressed to be made between inter alia "the Borrower", who was defined as the person noted as such in the application, and Macquarie. Mr Goodridge was the person named in the Macquarie Margin Lending Loan Application dated 12 May 2003. 49 The LSA described the facility extended to Mr Goodridge in cl 1. The purpose for which the facility was granted was stated in cl 1.2, namely that Mr Goodridge was entitled to draw up to the amount of the credit limit, initially $3 million, on the terms of the LSA. 50 Clause 1.2 continued as follows: The Bank is authorised by the Borrower and the Securities Owner to apply the Loan from time to time to purchase Securities nominated by the Borrower and related expenses. 51 Under cl 1.5, Macquarie was not required to carry out the purchase of any securities if: (a) that purchase or transfer would be likely to result in: (i) the Total Loan Balance exceeding, or in the Bank's opinion is likely to exceed, the aggregate of the Market Based Limit and the Buffer; or (ii) the Credit Limit being exceeded; or (b) the Bank is otherwise entitled to make a Margin Call. 52 The term "Market Based Limit" was a defined term as set out in the Interpretation Clause of the LSA, cl 25. It was defined, in part, by reference to other defined terms, namely Eligible Securities, Market Value and Lending Ratio. 53 The definition of "Market Based Limit" was as follows: "Market Based Limit" means the value of the Eligible Securities determined by multiplying the Market Value of those Securities by the Lending Ratio applying at the relevant time to those Eligible Securities. 54 The term "Eligible Securities" was defined as follows: "Eligible Securities" means those Securities (or any other type of Secured Property in the Banks absolute discretion) approved by the Bank from time to time and to which the Bank has allocated a Lending Ratio. 55 The definition of "Lending Ratio" was: "Lending Ratio" means the percentage allocated to particular Eligible Security or class of Eligible Security (or any other type of Secured Property in the Bank's absolute discretion) … 56 The term "Market Value" was defined as follows: "Market Value" means on any day, the value of the relevant property as determined by the Bank from time to time in its absolute discretion. 57 The "Buffer" over and above the Market Based Limit was defined as the percentage determined by Macquarie. 58 Clause 1.8 corresponded generally with cl 1.5. It provided that Mr Goodridge was not entitled to draw funds under the LSA if, to do so, would result, inter alia, in the credit limit being exceeded or the Market Based Limit exceeding the Total Loan Balance. 59 Clause 3 provided for Mr Goodridge to pay interest to Macquarie at the Macquarie Margin Lending Rate, as determined from time to time. That rate was to be the rate determined by Macquarie as applicable to margin loans. 60 The interest rate initially applying to the facility seems to have been 7.7%. Provision was made in the LSA for variations in the applicable rate to be published in the Australian Financial Review. 61 Clause 4 dealt with repayment of the loan. Clause 4.1 provided that Mr Goodridge must repay the loan with all interest, fees and other moneys then accrued due: immediately upon a declaration by Macquarie of an Event of Default under cl 13.2; or within seven days of Macquarie issuing demand to Mr Goodridge requiring repayment of the loan with interest and other moneys. 62 Clause 4.4 provided that the Facility was subject to annual review. On each annual review Macquarie was entitled to require immediate repayment of the loan if, in its opinion, there was a Material Adverse Change. That term was defined as a change which, in the Bank's opinion, had a material adverse effect on Mr Goodridge's financial condition or his ability to perform his obligations under the LSA. 63 Clause 5 is central to the case and I will set out the clause in full: 5. Margin Calls 5.1 If at any time the Total Loan Balance exceeds or, in the Bank's opinion, is likely to exceed, the aggregate of the Market Based Limit and the Buffer, then the Bank may in its discretion require the Borrower to pay to the Bank a sum of up to the amount ("the Margin Call") by which the Total Loan Balance exceeds, or in the Bank's opinion is likely to exceed, the Market Based Limit (together with any costs incurred by the Bank in respect of such a payment). 5.2 The Borrower shall comply with any Margin Call by 2.00 pm on the Business Day following the Margin Call. 5.3 The Bank may, as an alternative to the payment referred to in Clause 5.1, at its sole and absolute discretion, accept additional security over property which in value and in form is acceptable to the Bank as security for the due and punctual performance, fulfilment and observance of the obligations of the Borrower and the Securities Owner under this Agreement, with the intent that the Total Loan Balance shall not exceed the Market Based Limit. 5.4 If the Borrower elects to lodge, or causes the Securities Owner to lodge with the Bank, further Eligible Securities to be held subject to the terms of this Agreement, including the terms of Clause 12, in satisfaction of the Margin Call, the Borrower or the Securities Owner shall lodge or cause to be lodged with the Bank all such Eligible Securities or such other documents as the Bank may require. All such Eligible Securities lodged with the Bank will form part of the Secured Property for the purposes of this Agreement. Such lodgment must occur by 2pm on the Business Day following the Margin Call. 5.5 In the event that the Borrower or the Securities Owner provides cash by way of additional security under this Clause 5, the amount must be provided to the Bank in cleared funds by the time specified in Clause 5.2. 5.6 Any amount deposited under Clause 5.5 may, in the absolute discretion of the Bank, be held in the Deposit Account or applied to the Total Loan Balance. The Borrower and the Securities Owner shall not be entitled to withdraw, charge, encumber or otherwise deal with the Deposit Account until all of their respective obligations to the Bank have been satisfied in full. The Deposit Account shall be a non-interest bearing account and shall otherwise be subject to the terms of the Agreement. 5.7 Without limiting the Bank's rights following a Margin Call, if at any time the Total Loan Balance exceeds the aggregate of the Market Based Limit and the Buffer, the Borrower and the Securities Owner irrevocably authorise the Bank (and its officers and agents), as their respective several attorney, to sell or redeem (at the Bank's discretion) all or any part of the Secured Property as would produce sufficient funds to enable the Borrower to satisfy a Margin Call. If it becomes necessary to sell Securities which are listed for quotation on the ASX, such Securities may be sold through any broker nominated by the Bank at the broker's prevailing private client brokerage rates. 5.8 The Borrower is responsible for monitoring the Total Loan Balance and the Market Based Limit and is liable for payment of any Margin Call at the time at which the relevant Margin Call arises, irrespective of when or whether or not any notice to pay a Margin Call is given by the Bank. 64 Clause 8 contained a number of representations and warranties by Mr Goodridge. One of them was that the loan would be applied by Mr Goodridge wholly or predominantly for business or investment purposes: cl 8.1(d). 65 Clause 9 contained a number of undertakings given Mr Goodridge. One of them permitted Mr Goodridge to sell the secured property (that is, the shares or securities purchased with the funds advanced by Macquarie) provided that the proceeds of sale were: applied in reduction of the loan; or deposited to an account opened with Macquarie; or applied to the purchase of further secured property pursuant to the LSA. 66 Clause 13 dealt with events of default. Clause 13.1 listed 12 classes of events which constituted Events of Default under the LSA. 67 The Event of Default relevant to the present case is cl 13.1(a). It was an Event of Default for Mr Goodridge to fail to make any payment when due in accordance with the LSA. Clause 13.1(b) also provided that it was an Event of Default for Mr Goodridge to fail to duly and punctually perform any of his obligations under the LSA. 68 Other Events of Default stated in cl 13.1 provided protection to Macquarie in various circumstances. One of them was a complete market wide collapse under which the All Ordinaries share price index maintained by the ASX fell 10% on any business day: cl 13.1(g). 69 Clause 13.2 dealt with the consequences of an Event of Default. If such an event occurred, Macquarie was entitled to exercise a number of stipulated rights: …in addition to any other rights or remedies conferred by this Agreement or by law. 70 Macquarie's rights as stated in cl 13.2 if an Event of Default occurred included: declaring the loan and all other sums accrued due to be immediately due and payable; and/or declaring the facility terminated, whereupon its obligations ceased immediately; and/or selling the secured property. 71 Clause 19 entitled Macquarie to set off any credit balance on any account of Mr Goodridge with Macquarie, against the "Secured Moneys". That term was defined as any moneys, obligations and liabilities, whether actual or contingent, owed by Mr Goodridge to Macquarie under the LSA. 72 Clause 20 dealt with notices. Clause 20.1 provided that all notices required by the LSA to be in writing were to be sent, relevantly, by pre-paid post or electronically. 73 Clause 20.2 provided relevantly as follows: 20.2 A notice or other communication shall be deemed to be duly received: (a) if sent by hand, when left at the address of the recipient; (b) if sent by pre-paid post, 3 days after the date of posting; (c) if sent by facsimile, upon receipt by the sender of an acknowledgment or transmission report generated by the machine from which the facsimile was sent indicating that the facsimile was sent in its entirety to the recipient's facsimile number; or (d) if sent electronically, simultaneously with the sender initiating the electronic delivery of that notice unless the sender's machine receives a report indicating the notice was not delivered. 74 Clause 21 was headed "Assignment" but it dealt with assignment and novation. It is central to the transaction case and I will set out the relevant parts of the clause, as follows: 21.1 The Borrower, the Securities Owner and the Director shall not assign or otherwise transfer the benefit of this Agreement or any of their respective rights, remedies, powers, duties, undertakings or obligations under this Agreement without the prior written consent of the Bank. 21.2 The Bank may assign, transfer, novate and otherwise grant participations or sub-participations in, and can otherwise deal in any manner (including to grant any Security Interest over), all or any part of the benefit of this Agreement and any of its rights, remedies, powers, duties and obligations under this Agreement to any person, without the consent of the Borrower, the Securities Owner and/or the Director. In exercising these powers, the Bank may, subject to any relevant law, disclose to any person information about the Borrower, the Securities Owner, the Director, the Loan, the Facility, the Securities or this Agreement. … 21.4 Without limiting the previous provisions of this Clause 21, the Bank and/or its assignee or transferee is entitled to assign its rights and novate its obligations under this Agreement, or any part of this Agreement, to any trustee or manager of any securitisation programme. [emphasis added] 75 Clause 24 contained a number of miscellaneous provisions, some of which are relevant to the appeal. 76 Clause 24.4 provided that Macquarie may at any time vary any of the terms and conditions of the LSA by newspaper advertisement or notice in writing. 77 Clause 24.7 provided that a waiver by Macquarie would only be effective if it was in writing and signed by at least two officers of Macquarie. 78 Clause 24.10 was as follows: Any consent requested of, or determination by, the Bank may be given or withheld by the Bank in its absolute discretion and conditionally or unconditionally except where this Agreement otherwise expressly provides. 79 Clause 24.14 provided that time would be of the essence in respect of all of Mr Goodridge's obligations under the LSA. 80 Finally, cl 25.2, under the heading "Interpretation", provided that references to any party to the LSA included references to its respective successors and permitted assigns.

Background facts, 12 May 2003 to 5 February 2009 81 As I have said, Mr Goodridge signed the Macquarie Lending Application on 12 May 2003. He listed his occupation as "barrister" and appointed Mr Martin Lakos of Macquarie as his adviser. 82 The application included a statement of Mr Goodridge's financial position which included assets in the form of residential property valued at $1.6 million, investment property valued at more than $400,000 and shares valued at $250,000. The statement showed a healthy surplus of assets over liabilities. 83 As mentioned earlier, Mr Goodridge requested a facility credit limit in his application of $3 million. 84 The application included an acknowledgment by Mr Goodridge that the loan provided pursuant to the application would: be applied wholly or predominantly for business or investment purposes. 85 Mr Goodridge's application was approved on, or shortly after 13 May 2003. The LSA contemplated that there would be a confirmation letter from Macquarie to Mr Goodridge confirming the details of the facility after Macquarie had accepted the application. It is not clear whether a confirmation letter was in evidence but nothing turns on this because the matter proceeded on the basis that the LSA was entered into in or about May 2003 and that the LSA contained the terms described above. 86 In March or April 2004, Macquarie sent Mr Goodridge his portfolio transaction statement for the quarter ending 31 March 2004. The statement contained information under the heading "News & Notices" which included an item entitled "Margin Calls and How to Avoid Them". It referred to an enclosed flyer, to which I will refer shortly, and went on to make the following statement about the information in the flyer: It also highlights one important change - we have now extended the margin call satisfaction period from 1 day to 3 days. This means you now have more time to decide what action you would like to take. It also gives the market more time to recover, which may take you back out of your margin call. 87 There was a dispute between the parties in the argument on the appeal as to the relevance of this statement to the case which Mr Goodridge advanced at the trial. I will deal with this, as well as the relevance (if any) of the flyer later in my reasons for judgment. 88 The flyer which accompanied Mr Goodridge's portfolio transaction statement purported to explain, by reference to a number of different scenarios, how a margin call may occur, and how the borrower could meet it. Scenario 3 was described as follows: Here the Current Gearing Level is greater than the Maximum Gearing Level plus the Buffer. In this case a Margin Call is made and action is required within 3 business days. 89 The flyer also contained the following under the heading "Market Rally": Your Margin Call can be satisfied by a 'market rally'. This means that if your Current Gearing Level is sufficiently reduced by a rally in the prices of shares in your portfolio, within the satisfaction timeframe, your Margin Call will be satisfied. 90 On 13 October 2004 Macquarie wrote to Mr Goodridge informing him that his credit limit had been increased, at his request, to $4.8 million. 91 Mr Goodridge's portfolio transaction statement for the quarter ending 30 September 2007 contained a notification in the "News & Notices" section, of a change to his LSA. The change was an important one because it was an amendment of the terms of cl 5.2 of the LSA dealing with the critical question of the period required to comply with a margin call. 92 The amendment to cl 5.2 was effected pursuant to Macquarie's power under cl 24.4 of the LSA unilaterally to amend the terms. The notice stated incorrectly that the amendment was made pursuant to cl 25.4 but that error does not affect the validity of the amendment. 93 The notice of the amendment to cl 5.2 was as follows: CHANGES TO YOUR LOAN AND SECURITY AGREEMENT Pursuant to clause 25.4 of the Macquarie Investment Lending Margin Loan, Loan and Security Agreement (LSA), we have replaced clause 5.2 of the LSA with the following: "The Borrower shall comply with any Margin Call by 2pm on three (3) Business Days following the Margin Call unless otherwise notified by Macquarie Bank Limited in its absolute discretion." This change will take effect from 15 December 2007. Please note that Macquarie Investment Lending will confirm with you the date you need to satisfy a Margin Call at the time of issuing the Margin call. [emphasis added] 94 The News & Notices section of the portfolio statement for the quarter ending 30 September 2007 also notified Mr Goodridge of a change to his interest rate. It stated that, due to volatility in global equity and credit markets, interest rates had increased. As a result, the Macquarie Margin Loan variable interest rate was increased to 9.60% p.a., effective 1 October 2007. 95 Up until late 2008 Mr Goodridge had held a portfolio of shares worth in the order of $6.7 million However, by 31 December 2008 Mr Goodridge had liquidated almost all of his portfolio and retained, as the only security financed through his margin loan from Macquarie, nearly $1 million worth of units in the MCW Trust. Mr Goodridge had acquired those units between 22 April 2008 and 28 January 2009 at prices between 20¢ and $1.37. 96 As at 31 December 2008, the market price of units in the MCW Trust was 21¢. The market value of Mr Goodridge's portfolio on that date was approximately $945,000 but the LVR of the units was 70% so that the Market Based Limit under the LSA was just in excess of $662,000. Mr Goodridge's Current Loan Balance then stood at just over $640,000, leaving a surplus of only $21,420. 97 Macquarie sold its margin loan book to Leveraged Equities in January 2009. I will set out the facts in relation to that when addressing the transaction case.

Background Facts relating to margin call of 5 February 2009 98 On 5 February 2009 the listed market price of MCW Trust units fell to 18¢. Mr Goodridge's portfolio consisted of just over 5,600,000 units having a market value on the ASX of slightly over $1 million. However with an LVR of 70%, the Market Based Limit was approximately $700,000 but Mr Goodridge's Current Loan Balance was in the order of $865,000. This left a required margin call of nearly $160,000. 99 On 5 February 2009 Mr Norval (who by then had become an employee of Leveraged Equities) sent an email to Mr Goodridge's nominated advisor, Mr Lakos, making a margin call of $159,076.40. The email stated: We require this margin call to be satisfied by 2 pm (Eastern Standard Time) on Tuesday 10/2. 100 Mr Lakos passed the margin call on to Mr Goodridge who then discussed the matter with Mr Norval on 10 February 2009. In the course of those discussions Mr Norval accepted a proposal put to him by Mr Goodridge that the margin call be satisfied out of a dividend which Mr Goodridge was expecting to receive from the MCW Trust in an amount of $200,000 on 20 February 2009. 101 Mr Goodridge and Mr Norval had a further discussion about the margin call on 12 February 2009. Mr Norval informed Mr Goodridge that one of the "senior risk guys" at Leveraged Equities had approved the proposal to pay the margin call out of the forthcoming dividend but there was an extra risk factor because of the continuing fall in the price of units in the MCW Trust. 102 Importantly, Mr Norval conveyed to Mr Goodridge that his proposal had been approved "provided the stock does not fall below 15 cents" because if that were to occur Mr Goodridge would still be in margin call after appropriation of the dividend. Mr Goodridge accepted this. 103 The conversation then continued, as recorded in a transcript which was in evidence. The relevant portion of the transcript is set out in [37] of the reasons of the primary judge. The effect of it is that Mr Norval informed Mr Goodridge that, because his portfolio consisted of a single stock, there was a possibility that the LVR would be reconsidered thereby exposing Mr Goodridge to the risk of a large margin call. Mr Goodridge said: nothing you've said would surprise me 104 Mr Goodridge had arranged for his dividend from the MCW Trust to be credited to a margin loan account nominated by Mr Norval. Due, apparently, to a processing problem the dividend was credited to Mr Goodridge's cash management account with Macquarie on 20 February 2009 rather than to the margin loan account. However, the funds were then transferred to the correct account on 23 February 2009. 105 The primary judge found that Mr Goodridge was not in default even though payment of the margin call was not made to the appointed account on the specified date.

The margin calls made on 23 February 2009 106 On the morning of 23 February 2009, before the dividend from the MCW Trust was transferred to Mr Goodridge's margin loan account, Mr Norval sent an email to Mr Goodridge stating, inter alia, that the listed price of the MCW Trust had fallen to 14¢. 107 About 20 minutes later Mr Goodridge and Mr Norval had a telephone conversation. In the course of the conversation Mr Goodridge acknowledged that, as a result of the drop in the price of the units, he would be receiving a further margin call. The following statements made by Mr Goodridge in the telephone conversation are relevant: Ross: …. So I'll transfer the money across and I understand I'll get a margin call today and umm we'll deal with it. …. Ross: And, if you, umm, I know it's short, but I'll try and sort it, if you take a 165 across, $165,000 obviously across and I'll obviously get a call from you and I'll scratch the money together and sort it out and sort out what to be sold later on. 108 At 2.05 pm on 23 February 2009 Mr Norval sent an email to Mr Goodridge as follows: Hi Ross Further to our discussion this morning, and following the transfer in of $165k, your facility is in margin call for $131,363.67. Can you please advise how this will be satisfied by 2pm tomorrow. Kind regards Jason Norval, Account Manager, Leveraged Equities 109 The email of 2.05 pm is referred to in my reasons as "the 2.05 pm margin call". It is said by Leveraged Equities to have constituted a margin call for $131,363.67 payable at 2 pm on 24 February 2009. The margin call is said to have been made upon the basis that the price of units in the MCW Trust had fallen to 14¢ during the morning of 23 February 2009. 110 The price of units in the MCW Trust continued to fall on 23 February 2009. At 4.33 am on the following day, Leveraged Equities' log recorded the Current Loan Balance of Mr Goodridge's account at $700,125.21 with a Market Based Limit of $509,924.14 based upon a unit price for the MCW Trust of 13¢. This required a margin call of $190,201.07. 111 At 6.29 pm on 23 February 2009 Mr Norval sent an email to Mr Goodridge. The email made, what is said by Leveraged Equities to be a margin call of $190,201.07 even though it allowed Mr Goodridge only until the close of business on 24 February 2009 to satisfy the call. I will refer to the email as "the 6.29 pm margin call". It was in the following terms: Hi Ross I have been unable to reach you this afternoon. I have been informed by our Senior Risk Manager that MCW is likely to have its LVR removed over the next few days. This will leave you with a loan of $700,125.21, which will effectively be a margin call. Currently, with the LVR at 70%, you are in margin call for $190,201.07. This must be satisfied by COB tomorrow. Please advise what you [sic] chosen satisfaction method will be ASAP. If you have any stock, either in your name or a third party name, I can arrange to transfer this in for you. Please let me know your thoughts and I will do my best to assist. Kind regards Jason Norval, Account Manager, Leveraged Equities

Events following upon the 2.05 pm margin call and the 6.29 pm margin call 112 At 10.05 am on 24 February 2009 Mr Norval sent a further email to Mr Goodridge informing him that Mr Norval had tried without success to telephone him three times on the evening of 23 February 2009 and three times on the morning of 24 February 2009. The email continued by stating that, based upon the opening price on the morning of 24 February 2009, Leveraged Equities would be force selling all of Mr Goodridge's units at 12 noon that day if the margin call was not satisfied by that time. 113 At 1.58 pm on 24 February 2009 Mr Norval and Mr Goodridge made telephone contact. A transcript of the conversation was in evidence. Mr Goodridge said he had "just come out of court" and had seen Mr Norval's email. Mr Goodridge said he would see if he could "scratch it together" to satisfy the margin call. Mr Norval said he had not sold any of the portfolio. 114 Mr Goodridge and Mr Norval had a further telephone conversation at 2.10 pm which was also recorded. Mr Goodridge said he had put 1.6 million units in the MCW Trust on the market at 12¢ and: I think I can scratch together the rest of it … and I'll speak to you shortly. 115 There was a further telephone conversation at 2.37 pm on 24 February 2009. Mr Goodridge indicated his intention "to have it sorted by close of business." He then told Mr Norval to put "the whole lot" on the market at 12¢. There was some discussion about brokerage after which Mr Goodridge repeated his earlier statement: … put them all on at 12 cents if you want mate, no problems 116 The 2.37 pm conversation then continued with Mr Norval foreshadowing the possibility of having to sell out the entire portfolio at 3.50 pm if the position was not resolved. Mr Goodridge again said: … put it all on at 12 cents, no problem mate 117 Mr Norval sold 1 million of Mr Goodridge's units at 10.5¢ before the close of business on 24 February 2009. He notified Mr Goodridge of the sale by email at 5.14 pm on 24 February 2009. The email informed Mr Goodridge that Leveraged Equities would sell the balance of the units the next day. 118 At 6.24 pm on 24 February 2009 Mr Goodridge replied to Mr Norval's email advice of the sale at 10.5¢. Mr Goodridge said this is "not what we discussed". Mr Goodridge went on to assert that the units should have been sold some two weeks earlier when the price was 15¢.

Leveraged Equities sells Mr Goodridge's units 119 The primary judge set out at [59] a table which usefully summarises the sales made by Leveraged Equities of Mr Goodridge's units in the MCW Trust. The table includes the initial sale of 1 million units referred to above. I reproduce the table as follows: 120 During the course of the sales Mr Goodridge appears to have accessed his margin loan account on regular occasions through a website known as the "Gear Up" website. 121 Also, on 25 February 2009 and 26 February 2009, Mr Goodridge emailed Mr Norval repeating his earlier assertion that there was a prior agreement between them that the whole of his position in MCW Trust would be sold out if the unit price fell to 15¢.

Offer to lend Mr Goodridge $400,000 122 In cross-examination by Mr Sheahan, Mr Goodridge said that on the morning of 25 February 2009 he received a "representation from somebody that was not called upon" that "they had the funds [namely $400,000] available." Mr Goodridge identified the person in question as his solicitor, Mr Firth. Mr Goodridge went on to say that he had "an understanding" that Mr Firth could have lent him the money on that day.

The primary judge's construction of cl 5.2: the time for compliance with a margin call 123 The primary judge considered that the discretion conferred on Macquarie or Leveraged Equities under cl 5.2 did not permit them to shorten the period of notice for a margin call to a period of less than the period of three business days specified in the clause; see primary judgment at [64] - [65]. 124 His Honour's reasons for reaching this construction were based, in part, upon the view that the amount required to meet the margin call, or indeed the liability to satisfy it, would be affected by movements in the market between the date of the call and the time and date specified for compliance. He said at [67]: A rally will reduce the amount of money necessary to be paid or perhaps eliminate it, if it rises sufficiently to reduce the total loan balance to below the aggregate of the market base limit and the buffer. Alternatively, if the market falls further, then the borrower is entitled to know, with certainty, whether the earlier determination of market value stands or another has been substituted. 125 He said that the ordinary and natural meaning of the exception contained within the last part of cl 5.2 was to excuse the borrower from compliance with the three day limit if Macquarie, in its absolute discretion, notified Mr Goodridge accordingly. 126 The primary judge considered that the period of notice stated in cl 5.2 allowed the borrower time to organise his or her affairs in order to comply with a call. He said that at the time of entry into the LSA, Macquarie and Mr Goodridge knew that margin calls would be made in volatile market conditions "that may or may not continue." He said: They were aware that the market may rally and so enable compliance with the margin call without the customer ultimately needing to do anything: see primary judgment at [69]. 127 His Honour also took into account the provisions of cl 5.4 which permitted a borrower to satisfy a margin call by providing additional security. If that course were adopted, the additional security was to be lodged by 2 pm on the business day following the margin call. His Honour considered that this was inconsistent with the characterisation of the LSA as an on-demand facility. 128 The primary judge's approach to the proper construction of cl 5.2 therefore led him to the view that neither the 2.05 pm margin call nor the 6.29 pm margin call was authorised by the LSA because each of them purported to shorten the period for compliance to less than 2 pm on the third business day following the call.

The primary judge's construction of cl 5.7 129 Leveraged Equities' contention before the primary judge was that cl 5.7 created an independent right to sell Mr Goodridge's securities after a margin call had been made, whether or not the time had arrived for compliance with the call. 130 His Honour said that this approach to construction "produces a very unreasonable and uncommercial result" and he rejected it. He did so because he considered that the words "if at any time" in cl 5.7 must be read with the preceding words, "following a margin call". He said: The rights of the Bank "following a Margin Call" arose only if it had not received payment or the margin call were not otherwise satisfied (e.g. by a market rally) by the due time. 131 In coming to this view, the primary judge referred to cl 5.8 which provides that the borrower is liable for payment of any margin call at the time when the relevant margin call arises. However, he considered that the call "arises" at the time fixed for compliance in cl 5.2. 132 His Honour drew support for his construction of cl 5.7 from a decision of the NSW Court of Appeal in Morgan v BNP Paribas Equities (Aust) Ltd [2006] NSWCA 197 ("Morgan v BNP"). In that case Santow JA (with whom Giles and McColl JJA agreed) concluded that a margin call could not be made "sub silentio" by a provision similar to cl 5.7 of the LSA. 133 The primary judge accepted that the language of the LSA was different from the agreement in Morgan v BNP but he was of the view that similar considerations inform the construction of cl 5 of the LSA. He rejected a submission that the provisions of cl 5.8 of the LSA were sufficient to distinguish the present case from Morgan v BNP. 134 In his Honour's view it was "nonsensical" to read cl 5.8 as ignoring the provisions of cl 5.1 which provides for the making of a margin call. He said: I am of opinion that cl 5.8 does not relieve the Bank from making an actual requirement of the borrower by communicating it to him or her if it chooses to exercise its discretion to make a margin call. 135 In summary therefore, the primary judge's conclusion was that cl 5.7 did not confer upon the lender a freestanding right to sell securities without making and communicating a margin call to the borrower. Nor, in his Honour's view did cl 5.7 authorise Macquarie or Leveraged Equities to sell any part of the secured property after a margin call was made, and before the time for compliance provided for under cl 5.2.

Preliminary observations on the approach to construction of cl 5 136 It is well established that the proper construction of a contract is to be determined objectively. Ordinarily, this requires consideration of the text, the surrounding circumstances known to the parties and the object of the transaction: Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at [40]. 137 The primary judge appears to have approached the question of construction, at least in part, on the footing that the relationship between Mr Goodridge and Macquarie was one of banker and customer. He referred, in that regard, to the judgment of Atkin LJ in Joachimson v Swiss Bank Corporation [1921] 3 KB 110 at 126 - 127. 138 In my view, the relevant relationship between the parties in this case was not that of banker and customer. Rather, it was a relationship of lender and borrower under a special form of revolving credit facility which enabled the borrower to obtain funds from the lender for the purchase "on a margin" of listed securities. The proper construction of cl 5 is therefore informed by the fact that the parties to the LSA were parties to a margin lending agreement under which both borrower and lender had substantial exposure to movements in the market price for the securities which formed Macquarie's security for the advances. 139 Clause 5 was one of a number of provisions in the LSA which were intended to give protection and assurance to the lender that the loan would be repaid in full despite the volatility and unpredictability of markets for listed securities. 140 Our attention was drawn to a number of Canadian authorities in which it has been stated that the lender under a margin loan facility is not a "co-speculator" with the borrower on the securities exchange: Janic v TD Waterhouse Investor Services (Canada) Inc (2001) 2001 CarswellOnt 1268 (Ont. S.C.J.) ("Janic") at [50]; Paciorka v TD Waterhouse (2007) 2007 CarswellOnt 4717 (Ont. S.C.J.) ("Paciorka") at [59], [65]. 141 So much may be accepted. The funds which were to be advanced under the LSA were to be lent at a commercial rate of interest and the lender was not to share in any appreciation in the price of the underlying securities. 142 A deterioration in the market price was intended to be at the risk of the borrower and the provisions of cl 5 were intended to protect the lender against that risk by imposing an obligation to satisfy margin calls in accordance with the terms of that clause. Thus the risk of deterioration in the market was transferred to the borrower by the entitlement of the lender to make a margin call. The price of a failure to satisfy a call was that the borrower was in default under cl 13. The price carries with it the liability of the borrower, and the right of the lender, to sell all of the securities purchased by the borrower with the funds advanced by the lender for their purchase. 143 Nevertheless, the proposition that the lender is not a co-speculator with the borrower does not of itself answer the essential questions of construction raised in this proceeding. The margin call provisions in the Canadian authorities were in quite different terms to those in the present case. Whilst it may be accepted that the contractual power to make a margin call on a short period of notice was intended to protect the lender against the risks which are inherent in speculation, it does not answer the question of what period of notice is required by the terms of the contract to satisfy a margin call. 144 That question, as well as the question of whether the lender was granted a free-standing right to sell the securities regardless of whether a margin call was communicated to the borrower, (or prior to the time fixed by the margin call) turns ultimately on the language of cl 5 of the LSA. 145 Senior counsel for Mr Goodridge, Mr Rayment QC, sought to rely upon the "News & Notices" item dated March or April 2004, referred to in [86] above, and the flyer referred to in [88] - [89] as matters going to the construction of the LSA. He submitted that the "News & Notices" item, which included a statement that Macquarie had extended the margin call satisfaction period from 1 to 3 days, constituted a variation of the LSA or a surrounding circumstance which bears upon its construction. 146 The short answer to the suggestion that the 2004 "News & Notices" item constituted a variation is that, even if it did amount to the exercise by Macquarie of the power of unilateral amendment under cl 24.4, that amendment was superseded by the express notice of the amendment to cl 5.2 given on or shortly after 30 September 2007. The terms of that notice are set out in [93] above. 147 The terms of the notice demonstrate a clear intention to vary the earlier terms of the LSA. Even if the 2004 document was equally clear (which I doubt), the 2007 document is in different terms from the "important change" made in 2004. The 2007 document includes the critical words, not referred to in the 2004 document, namely "unless otherwise notified by Macquarie … in its absolute discretion." 148 This is sufficient to satisfy the test stated by the High Court as to what constitutes a variation by a subsequent agreement. The intention of the parties, as disclosed by the 2007 document was that this was to replace the earlier terms of cl 5.2 of the LSA, and indeed the 2004 document assuming that to have been a contractual variation: Tallerman & Co Pty Limited v Nathan's Merchandise (Victoria) Pty Limited (1957) 98 CLR 93 at 144 (Taylor J); see also Seddon NC and Ellinghaus MP, Cheshire & Fifoot's Law of Contract (9th Australian ed, LexisNexis Butterworths, 2008) at [22.5]. 149 The 2004 document cannot amount to a surrounding circumstance which bears upon construction of the LSA because it post-dates the LSA by approximately 11 months. The same may be said of the contents of the flyer. 150 It follows that in the absence of any claim of misleading or deceptive conduct, or estoppel, neither of which was advanced, the 2004 document and the flyer are irrelevant to the disposition of the appeals.

The contractual scheme of cl 5 151 Before turning to the questions of construction raised on the appeal, I will set out a number of propositions which emerge from a consideration of cl 5 as a whole. These propositions demonstrate some elements of the contractual scheme embodied in the clause but I do not consider that the scheme is expressed in a way which leaves it free from debate. 152 Indeed, in my view, it is the failure of the draftsperson(s) of the scheme to express it in the clarity of language which ought to be expected from such a document, that gives rise to the difficulties which have arisen in this litigation. 153 First, Macquarie (or its successor) may make a margin call if the borrower's Total Loan Balance exceeds, or in Macquarie's opinion, is likely to exceed the Market Based Limit and the Buffer: see cl 5.1 of the LSA. The amount of the margin call which Macquarie may require the borrower to pay is a sum certain. It is the amount fixed by Macquarie, namely an amount up to the sum by which the Total Loan Balance exceeds the Market Based Limit. 154 Second, it is implicit in cl 5 and cl 5.2 that the exercise by Macquarie of its discretion to require the borrower to pay a margin call will be communicated to the borrower in writing. The borrower must then comply with the margin call by 2 pm on the third business day following the call unless the proviso to cl 5.2 is engaged. 155 It is, of course, the construction of the proviso to cl 5.2 which is at the heart of the case. I will deal with that question later. 156 Third, the margin call may be satisfied by the borrower in any of the following ways: By payment in full of the amount specified in the margin call. The amount so specified must be paid by 2 pm on the third business day following the call "unless otherwise notified …" (cl 5.1 and cl 5.2); or By electing to lodge Eligible Securities, approved by Macquarie, in satisfaction of the margin call. If that course is adopted, the Eligible Securities must be lodged by 2 pm on the next business day after the margin call (cl 5.4); or By the lodgement of additional security over property, acceptable to Macquarie, in satisfaction of the margin call. If the property is cash, it must be provided by the time specified in cl 5.2, that is to say by 2 pm on the third business day, unless otherwise notified (cl 5.3 and cl.5.5). 157 It is clear from what I have said about the first way in which a margin call may be satisfied that I reject the view of the primary judge that the amount required to meet a call may be affected by market movements. 158 The reason for this is, as I have said, the effect of cl 5.1 and cl 5.2 is that a margin call is an amount being a sum certain, specified by Macquarie in accordance with the formula prescribed in cl 5.1. I do not see how cl 5 could otherwise have any sensible operation because if the amount were to be determined by reference to the market value of the Securities at 2 pm on the date when the call is to be satisfied, the borrower could not know in advance what amount is required to be paid to satisfy the Margin Call. 159 It will nevertheless be evident from what I have said above that cl 5.2 to cl 5.5 provide for different time limitations for satisfaction of a margin call, depending upon the manner selected by the borrower. If the borrower elects to pay the margin call in full or to provide additional security in the form of cash, the call must be satisfied on the third business day, unless otherwise notified: see cl 5.2 and cl 5.5. 160 By contrast, if further Eligible Securities are lodged, this must occur by 2 pm on the next day after the margin call: see cl 5.4. 161 The inconsistency between the times stipulated for satisfaction of a margin call, as stated above, is a matter which bears upon the question of construction of cl 5.2 which I will address below. 162 The fourth proposition in respect of the contractual scheme is one of considerable importance. It is that if the borrower fails to pay the amount of the margin call when due (or fails to satisfy it by the due date in accordance with the alternatives prescribed by cl 5.3 to cl 5.5) the borrower commits an Event of Default under cl 13.1(a) or cl 13.1(b). 163 Upon the borrower committing an Event of Default, the rights conferred upon Macquarie include the right to sell any or all of the secured property provided by the borrower as security for the loan: cl 13.2(c)(iii). 164 The fifth proposition as to the contractual scheme is one which depends upon the proper construction of cl 5.7. I will address that later. But it is sufficient to note at this stage that cl 5.7 confers upon Macquarie rights which are different in terms of those that flow from an Event of Default. 165 In particular, the right conferred on Macquarie under cl 5.7 is to sell so much of the secured property as would produce sufficient funds to enable the borrower to satisfy a margin call. 166 I will deal below with the question of whether this power is enlivened as an independent or free-standing right which may be exercised regardless of whether the margin call is communicated to the borrower, or, if communicated, before the time specified for compliance.

The proper construction of cl 5.2 167 The construction of cl 5.2 is not without difficulty. The difficulty arises from the proviso. The discretion conferred on the lender to "otherwise notify" the borrower is of wide import but it is silent as to whether the lender may notify the borrower of a shorter period for compliance than the three business days specified in the operative part of the clause. 168 Nevertheless, in my opinion, the correct construction of the clause is that the proviso authorises the lender to shorten the period for compliance to one which is less than the period of three business days. There are three reasons why I have reached that view. 169 First, to restrict the proviso to a power to extend the time for satisfaction of a margin call would render the proviso otiose. The lender requires no express power to relax or extend a contractual time limit inserted for its own benefit: see, in a different context, Perri v Coolangatta Investments Pty Limited (1982) 149 CLR 537 at 543, 552, 560 and 565. 170 Second, as part of the context in which cl 5.2 is to be construed, it is to be borne in mind that the clause was introduced as an amendment. The original form of cl 5.2, as it stood when Mr Goodridge entered into the LSA, obliged him to satisfy a margin call by 2 pm on the next business day. That clause contained no proviso permitting Macquarie to "otherwise notify" Mr Goodridge of the time for compliance. 171 In my view, the extension of the time for compliance from one business day to three business days, "unless otherwise notified" more naturally suggests that the meaning of the proviso was that it permitted Macquarie to reduce the time for compliance if it saw fit to do so. 172 Third, I think that some limited support for the view I have reached may be obtained from the commercial purpose and object of the transaction. 173 One of the objects of the LSA, to be gleaned from its terms, and the nature of the relationship between the parties, was the protection of the lender against a fall in the value of the securities purchased by the borrower and held by the lender as its security for the loan. 174 The Canadian authorities referred to above dealt with margin lending facilities between a broker and its client. The issue which arose was whether the broker was obliged to give the client a reasonable period of notice to satisfy the demand. The court rejected the client's contention that reasonable notice was required. The observations of Nolan J in Paciorka give guidance as to the way in which courts have recognised the interests of the lender in being able to act quickly to protect its interests in a falling market. 175 In both Janic and Paciorka, the margin lending accounts required the client to "maintain such margins as we may in our absolute discretion require", and to pay on demand any debit balance in the accounts. If the client did not "meet our margin calls promptly", the broker could, in its sole discretion and without notice, sell the client's securities. 176 In Paciorka at [58], Nolan J referred to Canadian authorities supporting the principle that where moneys are owed, payable on demand, a debtor must be given a reasonable period of time to satisfy the demand. The same principle applies in Australia: Bunbury Foods Pty Limited v National Bank of Australasia Limited (1984) 153 CLR 491. 177 In Janic and Paciorka, the Court held that the law with respect to reasonable time for payment and notice does not extend to circumstances involving margin accounts or margin calls: Paciorka at [63]. 178 Nolan J explained the reason for this in Paciorka at [64] - [65]. In doing so, he emphasised the primacy of the agreement and the surrounding circumstances or object of the transaction. He said at [65]: The courts give deference to these types of provisions because of clear policy concerns respecting the position of brokers who must be able to act quickly to preserve their own financial position. The nature of the securities being purchased and the volatility of the market for those sorts of securities require that those agreements which empower the broker to act must be respected. In these circumstances, any delay on the part of the broker could potentially put the broker's own money at risk. As has been established by the case law, a broker is not to engage in co-speculating with their customers. Thus, the obligation to make a demand and give reasonable time before acting that are typically imposed on a creditor are narrowed in this type of relationship, because of the unique circumstances associated with margin accounts where the security is publicly traded securities. 179 It seems to me that similar considerations apply to the construction of the LSA, although, as I have sought to emphasise, ultimately the question of construction turns upon the language of the relevant clause. 180 It is true, as the primary judge observed, that when cl 5.2 is read with cl 5.4, an inconsistency would arise if the lender were permitted to require payment of a margin call on demand. But that is not the issue in the present case. The essential issue is whether the lender was permitted to shorten the period of notice from three days to one day. In my view, the effect of cl 5.2 when read in light of cl 5.4, is that cl 5.4 imposes a limit on the ability of the lender to shorten the period within which the borrower can satisfy the margin call. 181 That is to say, Macquarie (or Leveraged Equities) was entitled to require a margin call to be satisfied by no earlier than 2 pm on the next business day following the call. It could not shorten the period to less than that time.

The proper construction of cl 5.7 182 I do not consider the language of cl 5.7 to be entirely clear but a number of incontrovertible propositions can be extracted from it. 183 First, the condition on which the power conferred by cl 5.7 may be exercised is different from the condition for the exercise of the power to make a margin call under cl 5.1. 184 This is because the power conferred by cl 5.7 is conditioned on the existence of an objective fact. The objective fact is that the Total Loan Balance exceeds the aggregate of the Market Based Limit and the Buffer. 185 By contrast, the power to make a margin call under cl 5.1 is conditioned upon the existence of an objective fact or the formation of an opinion. That is to say, the power under cl 5.1 is wider than the power conferred by cl 5.7 because the power to make the margin call under cl 5.1 arises not only where the Total Loan Balance exceeds the stipulated Limit, but also where Macquarie forms the opinion that it is likely to do so. 186 Stripped to its essence, cl 5.7 is enlivened where there is an existing shortfall between the amount of the loan and the value of the securities whereas cl 5.1 may be enlivened if Macquarie forms the opinion that there is likely to be a shortfall. 187 The second proposition is that the power of sale conferred by cl 5.7 is narrower than that which arises from a failure to satisfy the margin call in accordance with clauses 5.1 and 5.2. 188 This is because the failure to comply with the margin call by the time prescribed by cl 5.2 is an Event of Default under cl 13.1(a) and (b). This entitles Macquarie to sell all of the secured property. 189 The power of sale conferred by cl 5.7 is more limited and arises independently of an Event of Default. It authorises Macquarie to sell all or any part of the secured property as would produce sufficient funds to enable the Borrower to satisfy a margin call. 190 Thus, by contrast with the power which arises from a failure to comply with cl 5.2, the power of sale conferred by cl 5.7 limits the amount of the secured property able to be sold to that which would be needed to satisfy "a Margin Call". 191 The differences between cl 5.7 and cl 5.1 suggest that cl 5.7 has separate work to do. It is not unusual for lenders to provide for separate and independent rights of repayment, or remedies. As the High Court said in Pan Foods Co Importers and Distributors Pty Limited v Australia and New Zealand Banking Group Limited (2000) 170 ALR 579 at 581, "(l)enders may wear both belt and braces." 192 However, the difficulty which arises as to the construction of cl 5.7 is in determining when the power is enlivened. The primary judge considered that the power arose only if Macquarie had not received payment, or the margin call was not otherwise satisfied, for example by a market rally at the due time; see at [75]. 193 In my view the primary judge's approach cannot be correct. If it were, it would follow that the power conferred by cl 5.7 would only arise where an Event of Default occurs. But the existence of an Event of Default permits Macquarie to sell all the secured property whereas cl 5.7 permits it to sell only a limited amount. 194 The primary judge's approach to construction would therefore render cl 5.7 entirely otiose. I cannot accept the correctness of such an approach. 195 In coming to his view of the construction of cl 5.7, the primary judge considered that the words "if at any time" must be read with the preceding words, "following a Margin Call". He therefore concluded that the power to sell was only enlivened under cl 5.7 after a margin call had been made. 196 I do not agree with this approach which transposes the words "if at any time", and reads them in a way which is inconsistent with the syntax of the clause. 197 The words "if at any time" do not qualify the opening words of cl 5.7. Rather, they qualify the circumstances in which the power is enlivened, namely, if the Total Loan Balance exceeds the LVR. 198 That is not to say that the opening words of cl 5.7 are unimportant. Clearly enough, they must be given meaning. But it is these words which give rise to one of the difficulties of construction of cl 5.7. 199 The phrase "[w]ithout limiting the Bank's rights following a margin call" in cl 5.7 must be read as a whole and in light of the whole of the provisions of cl 5. Read in that way, it seems to me that the effect of the opening phrase is to carve out a specific power which may (subject to my comments below) be exercised where the power to make, and convey a margin call to the Borrower under cl 5.1, has not been exercised. 200 That is to say, the purpose of cl 5.7 was to create a free-standing power for Macquarie to sell a limited number of securities if the Total Loan Balance exceeds the LVR without the need to make a margin call or to await the expiration of the period fixed by the margin call before exercising its powers on an Event of Default. 201 The primary judge relied on the remarks of Santow J in Morgan v BNP as support for his view that cl 5.7 does not create a power of sale in the absence of an express margin call. But in my view the observations of Santow J are to be read in light of the terms of the relevant clause and in particular in light of the facts of the case. 202 What was significant in Morgan v BNP was that the only reason Mr Morgan's account was in deficit was because of a reversal made in the account made internally by the lender and not communicated to the borrower. Santow J referred to this at [57] - [60] of his judgment. His Honour also observed, at [64], that in the absence of any communication from the lender that the reversal had taken place, the borrower was not in a position to know that the trigger for the margin call had been activated. 203 These matters, which Santow J considered in light of the express provision of the clause, informed his view of the proper construction of the relevant clauses which he explained at [66] - [67]. 204 In my opinion, different considerations apply in the present case, in particular those which I have set out above to explain the free-standing nature of the power. 205 The separate nature of the power in cl 5.7 is also supported by the authorisation given to Macquarie and its officers and agents, as attorney for the borrower, to sell or redeem all or any part of the secured property as would produce sufficient funds to meet a margin call. 206 It would be an unnecessarily narrow view of cl 5 to read the words "a Margin Call" as being a margin call that has actually been communicated to the borrower. In their context in cl 5.7, the words "a Margin Call" mean the amount of the difference between the Total Loan Balance and the LVR. This is because what the clause creates is an independent power of sale enabling the lender to sell so much of the borrower's security as is sufficient to satisfy the condition which gives rise to the exercise of the power. 207 The relevant condition is the shortfall between the Total Loan Balance and the LVR. The power of sale is exercisable without notice to the borrower so as to enable the lender to satisfy the shortfall, but no more. The words "to satisfy a Margin Call" mean to satisfy the amount of the shortfall. 208 I do not think this approach to construction treats the meaning of the words "Margin Call" in cl 5.7 differently from their meaning in cl 5.1. What alters is the context so that in some instances the clause contemplates the communication of the margin call whereas in others it does not. What remains constant is that a margin call is a sum certain. 209 It is true that in cl 5.1 the definition of "the Margin Call" is the amount by which the Total Loan Balance exceeds the LVR or the amount which the lender determines, in its opinion to constitute the difference. By contrast, in cl 5.7 there is no provision for the amount to be determined by reference to the lender's opinion. The words "a Margin Call" in cl 5.7 are limited to an objective determination of the difference between the Total Loan Balance and the LVR. 210 This approach to construction of cl 5.7 is supported by the terms of cl 5.8 to which I will refer shortly. 211 Finally, it is necessary to point out that the approach which I take to the construction of cl 5.7 leaves no room for the application of that sub-clause if a margin call is made and communicated to the borrower. This is because, as I have emphasised, the power conferred by cl 5.7 is separate and independent from, and narrower than, the power of sale that arises upon a failure to satisfy a call within the time specified under cl 5.2. 212 To construe cl 5.7 as authorising the lender to sell some of the security before the time fixed for compliance with the margin call seems to me to be contrary to the scheme contemplated by cl 5. What is contemplated by the scheme is that the lender either makes and communicates the margin call and exercises its power of sale under cl 13.2 in the Event of Default, or it acts without notice and sells a limited part of the security to satisfy the amount by which the account is in margin call. 213 It is not necessary to consider whether this approach to construction is arrived at to achieve "business commonsense". That is a topic on which minds may differ. Rather, the construction which I adopt is based upon semantic and syntactical analysis and a consideration of the scheme established by cl 5: cf Maggbury Pty Limited v Hafele Australia Pty Limited (2010) 210 CLR 181 at [43].

The proper construction of cl 5.8 214 The opening words of cl 5.8 are uncontroversial. They impose an obligation on the borrower to monitor the loan balance and the Market Based Limit. The purpose of this seems plain enough. It is to place an obligation on the borrower to determine whether there is a shortfall between these two figures so as to be able to act promptly to eliminate the deficit. 215 Clause 5.8 then goes on to impose a liability on the borrower for payment of any margin call at the time at which it arises, irrespective of when or whether any notice to pay a margin call is given to the borrower. 216 The primary judge construed this part of the clause as imposing a liability to pay the margin call at the time fixed for compliance in cl 5.2. He said, at [76], that this was the point of time at which the margin call must have been intended to have arisen. 217 His Honour went on to construe the concluding words, "irrespective of … whether … any notice to pay a Margin Call is given …", as referring to the borrower's obligation to monitor the state of the loan. 218 I cannot agree with this construction of cl 5.8. First, it treats the clause as largely restating cl 5.2, thereby making cl 5.8 redundant. Second, it reads the concluding words of cl 5.8 out of syntax and thereby treats the clause as imposing an obligation for which there is no sanction. 219 In my view, the natural meaning of cl 5.8 is quite clear. It imposes a liability on the borrower for a margin call as soon as there is a shortfall between the Total Loan Balance and the Market Based Limit. The borrower is liable for the margin call irrespective of whether notice of the margin call has actually been given to the borrower. 220 That is why the borrower is responsible for monitoring the Total Loan Balance and the Market Based Limit. As soon as there is a shortfall, the borrower is liable for it. The liability arises immediately (even if the date for payment is fixed under cl 5.2) and the amount for which the borrower is liable is the margin call. 221 The margin call is therefore a debt due at present, though it may be paid in the future if notice of payment is given. It is debitum in praesenti solvendum in futuro if notice is given. But the liability arises immediately irrespective of whether the lender gives notice to pay the amount. 222 This construction of cl 5.8 is consistent not only with the natural meaning but also with the contractual scheme of cl 5. 223 The contractual scheme imposes on the borrower an obligation to ensure that the loan does not fall into a margin deficit, that is to say, a shortfall between the Total Loan Balance and the Market Based Limit. The obligation is imposed on the borrower regardless of whether the borrower is advised of the fact by the lender. Moreover, the lender is given the power under cl 5.7 to sell so much of the secured property as is sufficient to take the loan out of margin deficit. The lender may do so without notice to the borrower. 224 In this way, cll 5.7 and 5.8 seek to protect the lender by giving it power to sell immediately in a volatile market. But cl 5.8 also seeks to protect the borrower because the obligation to monitor the loan and to prevent it from falling into margin deficit seeks to alert the borrower to the need to satisfy the deficit urgently. The urgency arises because the liability for the margin call arises immediately upon the loan falling into margin deficit, even if the lender gives the borrower a short period of time to satisfy the call by giving notice of payment in accordance with cll 5.1 and 5.2.

Was the 2.05 pm margin call valid? 225 The 2.05 pm margin call was sent to Mr Goodridge by email on 23 February 2009 at 2.05 pm. The terms of that document are to be read in light of its opening words which refer to the discussion between Mr Goodridge and Mr Norval "this morning". 226 The discussion took place at 11.06 a.m. on 23 February 2009 and was recorded in a transcript. I have reproduced the relevant part of the transcript at [107] above. The discussion was about the transfer of the funds from Mr Goodridge's cash management account to satisfy the earlier margin call made on 5 February 2009 but in the course of the discussion Mr Goodridge specifically acknowledged that he would receive a margin call. 227 Mr Goodridge said in the 11.06 am conversation that he would transfer $165,000 and that "obviously" he would get "a call" from Mr Norval and that he would "scratch the money together". 228 This is the background to the 2.05 pm margin call which, as I have said, commences by referring to the conversation. It then goes on to say that "following the transfer in of $165K", namely the amount discussed in the 11.06 am conversation: … your facility is in margin call for $131,363.67. Can you please advise how this will be satisfied by 2 pm tomorrow. 229 Mr Goodridge's submissions did not suggest that the request to advise the manner in which the call would be satisfied was insufficient to constitute a request to pay the margin call in accordance with cl 5.1. Nor did he suggest that the email did not specify a time for compliance. Rather, the gravamen of his attack was that the time that was stipulated was too short because the clause does not permit the lender to shorten the period of notice. 230 For the reasons I have set out above as to the proper construction of cl 5.2, I reject Mr Goodridge's submission that the 2.05 pm margin call was not valid. 231 I should add that, in my view, considered in its context which included the 11.06 am telephone conversation, the 2.05 pm margin call was sufficiently clear to convey the intention that the call was to be satisfied by 2 pm on 24 February 2009: see for example the approach taken by the courts as to the construction of a notice of exercise of option, Ballas v Theophilos (No 2) (1957) 98 CLR 193 at 196, 205. 232 No particular form was prescribed by the LSA for the giving of notice of a margin call. In those circumstances it seems to me that the approach which I have taken to the form and content of the document is appropriate. Nevertheless, for abundant caution, lenders may do well to ensure that notices such as this are drafted in a manner which puts the issue of the meaning of the document beyond any doubt.

Was the 6.29 pm margin call valid? 233 The 6.29 pm margin call was sent to Mr Goodridge by email on 23 February 2009 at 6.29 pm. It stated that the call of $190,201.07 must be satisfied by "COB tomorrow". 234 It is true that the notification was sent to Mr Goodridge after ordinary business hours but, lest anything may be said to turn on this, preliminary advice of the margin call for $190,201.07 was communicated to Mr Goodridge by email at 3.57 pm on 23 February 2009. 235 It was clear from the terms of the 6.29 pm margin call, read in light of the email sent earlier that afternoon at 3.57 pm, that the margin call was based upon the fall of the price of the units in the MCW Trust to 13¢. 236 The 6.29 pm margin call was therefore a further call, made after the 2.05 pm margin call. It was not a variation of the 2.05 pm margin call, and was based upon the continuing deterioration in the market price of units in the MCW Trust. 237 Having regard to the view I take of the proper construction of the LSA, it seems to me that the 6.29 pm margin call was valid and in accordance with the terms of that agreement. 238 I can see nothing in the terms of the LSA to prevent successive margin calls from being made, even before the time has arrived for compliance with an earlier call. Ordinarily, this must be seen as a risk undertaken by a borrower who enters into a margin lending facility in which the liability to meet margin calls arises from a deterioration in the price of the underlying security. 239 Mr Rayment submitted that the email sent by Mr Norval to Mr Goodridge at 10.05 am on 24 February 2009 was an invalid attempt to accelerate the time for compliance with the 6.29 pm margin call. The 10.05 am email stated that Leveraged Equities would be force selling the units in the MCW Trust at 12 pm on 24 February 2009 if the margin call was not satisfied by "this time". 240 There is some force in Mr Rayment's submission. I do not consider it was open to the lender to accelerate the time for compliance stated in a notice of margin call after the notice had been given. Nor, on the view I have taken of cl 5.7, was it open to the lender to exercise the limited power of sale conferred by that provision. 241 However, ultimately nothing turns upon the question of whether it was open to Leveraged Equities to accelerate the time for payment. This is because, as Mr Norval told Mr Goodridge in the conversation at 1.58 pm on 24 February 2009, he (Mr Norval) had not sold any of the units.

Was there an Event of Default at the time of sale? 242 Leveraged Equities commenced the sale of Mr Goodridge's units in the MCW Trust on the afternoon of 24 February 2009 at some time after the conversation which took place between Mr Goodridge and Mr Norval at 2.37 pm. 243 By that time Mr Goodridge had failed to comply with the 2.05 pm margin call and an Event of Default had occurred under cl 13.1(a) and (b) of the LSA. Subject to the question of assignment or novation, Leveraged Equities was entitled to sell all of Mr Goodridge's securities in accordance with cl 13.2(c)(iii).

Whether Mr Goodridge authorised Leveraged Equities to sell at 12¢ 244 It seems clear to me that in the conversation at 2.37 pm on 24 February 2009, Mr Goodridge authorised Leveraged Equities to sell all of his units in the MCW Trust at 12¢. 245 The primary judge found at [63] that Mr Goodridge withdrew his authorisation in his email to Mr Norval at 6.24 pm on 24 February 2009. I do not agree with his Honour that the email withdrew the authorisation given earlier that afternoon. 246 The 6.24 pm email was a response to Mr Norval's email of 5.13 pm advising Mr Goodridge that he had sold 1 million units at 10.5¢. It is true that a sale at 10.5¢ was "not what we discussed". However, Mr Goodridge's 6.24 pm email went on to assert (contrary to the fact) that Mr Norval had earlier agreed to sell the units at 15¢ but had failed to do so. 247 The 6.24 pm email went on to make an incorrect assertion as to what had been stated in one of the conversations that took place on the afternoon of 24 February 2009. Mr Goodridge complained that Mr Norval was "not working with me", but there is nothing on the face of the email to suggest a withdrawal of the express authorisation to sell at 12¢. 248 It follows that even if I am wrong on the views I have reached as to the proper construction of the LSA, all but three of the forced sales of Mr Goodridge's units were made with his express authority. 249 The first three sales set out in the table at [119] above were made at less than 12¢. The remaining sales were made at 12¢ or more. Accordingly, at most, Mr Goodridge suffered a loss on the first three sales. The loss would be the difference between the price of 12¢ and the lower prices (10.5¢, 11.78¢ and 11.42¢) realised by Leveraged Equities.

Background facts 250 In January 2009 Macquarie sold its margin lending loan portfolio to Leveraged Equities. The total value of the portfolio was nearly $1.5 billion. The transaction was announced to the ASX on 8 January 2009. 251 The sale was recorded in a series of complex transaction documents. It involved two essential steps. The first was a sale or transfer of the portfolio from Macquarie to BNY Trust Company of Australia Ltd ("BNY") as Trustee of the Series 2008-1 PANTHER Trust. The second was a transfer from BNY to Leveraged Equities under which Leveraged Equities replaced BNY as Trustee of the Trust. 252 The reason why the two step process was adopted was that BNY, as trustee of a securitisation program established in 2007, held a beneficial interest in most of Macquarie's margin loan book at the time of the sale. The documentation for the securitisation program included a document entitled the PANTHER Trusts Master Trust Deed. 253 Macquarie wrote to Mr Goodridge and other affected borrowers in January 2009 notifying them of the sale and stating that Leveraged Equities was now the Lender under the LSA. 254 The letter of notification to Mr Goodridge was dated 19 January 2009 but the primary judge found that Mr Goodridge did not receive it. That finding is challenged on the appeal. 255 In order to consider the issues raised in relation to the transaction case, it is necessary to refer to the relevant parts of the documents by which the sale to Leveraged Equities was documented.

The PANTHER Trusts Master Trust Deed 256 The Master Trust Deed for the PANTHER Trusts was dated 16 November 2007. It was made between Macquarie Securitisation Ltd ("MSL") as Manager and BNY as Trustee. 257 The Background to the Master Trust Deed recited that it was intended by the Deed to provide for the establishment of Series Trusts to be known collectively as "The PANTHER Trusts". 258 The Deed went on in the Background to recite that each Series Trust would be established for the purpose of funding, inter alia, the acquisition of pools of Approved Financial Assets by the Trustee in its capacity as trustee of the Series Trust. 259 The term "Approved Financial Assets" was defined in broad terms to mean any form of present or future indebtedness or financial indebtedness or financial accommodation. 260 The Master Trust Deed contained a definition of "Transaction Documents" which stated that this term, in relation to each Series Trust, meant a large number of specified documents including: (k) any other document which is agreed by the Manager and the Trustee to be a Transaction Document in relation to the Series Trust. 261 Clause 13 provided for MSL as Manager to be able, not less than five business days (or such other period as agreed by BNY) prior to the date specified in a Transfer Proposal, to issue a Transfer Proposal for Assigned Assets specified in the Transfer Proposal: see Master Trust Deed cl 13.1. 262 A "Transfer Proposal" was defined in cl 1.1 to mean a proposal by the Manager to the Trustee. "Assigned Assets" were defined to mean the Trustee's entire interest in the Assets specified in the Transfer Proposal. 263 Clause 13.3 of the Master Trust Deed went on to provide for the transfer of the Assets specified in the Transfer Proposal from the Disposing Trust to the Acquiring Trust. The effect of the clause was that the Trustee would hold the benefit of the assets specified in the Transfer Proposal as trustee of the Acquiring Trust. 264 Clause 16.11 of the Master Trust Deed contained a limitation of liability of the Trustee. The following paragraphs are relevant: (a) The Trustee enters into Transaction Documents (other than this Deed) as trustee of the relevant Series Trust and in no other capacity. … (c) Except in the case of and to the extent of fraud, gross negligence or wilful misconduct on the part of the Trustee, the Trustee will not be liable to pay or satisfy any Obligations except out of the Assets against which it is actually indemnified in respect of any liability incurred by it as trustee of the relevant Series Trust. … (j) In this clause 16.11 the 'Obligations' means all obligations and liabilities of whatever kind undertaken or incurred by, or devolving upon, the Trustee under or in respect of this document, and 'Assets' includes all assets, property and rights real and personal of any value whatsoever.

The Transfer Proposal 265 On 7 January 2009, Macquarie, MSL and BNY entered into a document entitled the Transfer Proposal. MSL entered in the document as the Manager of the Disposing Trust. BNY entered into the document in two capacities. The first was as trustee of the Acquiring Trust. The second was as trustee of the Disposing Trust. 266 The Disposing Trust was the Series Trust provided for in the Master Trust Deed, and known as the Series 2007-1 PANTHER Trust. 267 The Acquiring Trust was the Series Trust known as the Series 2008-1 PANTHER Trust. 268 Clause 1.3 provided that the Transfer Proposal was a Transaction Document for the purpose of the Disposing Trust and the Acquiring Trust. It was therefore a Transaction Document within the definition contained in the Master Trust Deed. 269 Clause 2 of the Transfer Proposal provided that in executing and delivering the Deed, the Manager issued it to the Trustee as a Transfer Proposal in accordance with cl 13.1 of the Master Trust Deed in relation to the Disposing Trust, namely the Series 2007-1 PANTHER Trust. 270 Clause 3 of the Transfer Proposal went on to state that the assigned assets to which the Transfer Proposal related were specified in Schedule 1. The Schedule referred to each margin loan and each security for the margin loan identified in a computer disk. An extract from the disk was in evidence and included the loan to Mr Goodridge. 271 The details of Mr Goodridge's loan described in the Schedule showed the total loan balance as $640,603.75 and the number of units held by him in the MCW Trust as 4,503,562. The unit price was shown as 21¢ with a total market value of the holding as $945,748.02. 272 Clause 4 stated that the Transfer Amount for the purposes of the Transfer Proposal was $1,480,504,562.47. 273 That amount was comprised of the aggregate principal sum outstanding under the assigned assets together with certain adjustments. 274 Clause 5 of the Transfer Proposal provided for an assignment of Macquarie's legal interest in the Assigned Assets (which included Mr Goodridge's loan) to BNY as the Acquiring Trustee. 275 The terms of cl 5(a) were as follows: On and with effect from the Acquiring Trustee coming to hold the benefit of the Assigned Assets in accordance with clause 13.3 of the Master Trust Deed, MBL, as the holder of the legal interest in the Assigned Assets, will thereupon, and without any further act by any person, assign (and be taken to have assigned) all of MBL's legal right, title and interest in the Assigned Assets to the Acquiring Trustee. 276 Clause 5(b) went on to provide for Macquarie to execute and deliver to each borrower listed in the Schedule, a notice of assignment in such form as Leveraged Equities and BNY may approve. 277 Clause 6 dealt with the assumption by BNY as Acquiring Trustee of Macquarie's obligations in respect of Mr Goodridge's loan. It was in the following terms: The parties agree that on and with effect from the Assignment Date, the Acquiring Trustee will assume the duties, obligations and liabilities of MBL under or in respect of each Assigned Asset which arise or accrue on and from the Assignment Date and undertakes to discharge those obligations and liabilities as and when required under each Assigned Asset. Nothing in this clause limits clause 2.13 of the Sale and Servicing Deed or releases MBL from any of its duties, obligations or liabilities under or in respect of any Assigned Asset which arose or accrued prior to the Assignment Date. 278 On 8 January 2009, $1,480,504,562.47, being the Transfer Amount specified in the Transfer Proposal, was paid by BNY to Macquarie.

The First Deed of Termination and Appointment 279 On 8 January 2009, BNY as Trustee, Macquarie as Outgoing Servicer, MSL as Outgoing Manager, Leveraged Equities as Incoming Servicer, and another company as Incoming Manager, entered into a Deed of Termination and Appointment ("the First Deed of Termination"). 280 The First Deed of Termination provided for Leveraged Equities to replace Macquarie as Servicer of the Series Trust and for the replacement of MSL as the Manager.

The Second Deed of Termination and Appointment 281 On the same date, 8 January 2009, BNY as the Outgoing Trustee, Leveraged Equities as the Incoming Trustee, and the new Manager of the Series Trust, entered into a Deed of Termination and Appointment which provided for Leveraged Equities to be appointed as Trustee of the Series Trust ("the Second Deed of Termination"). 282 The termination of BNY as Trustee and the appointment of Leveraged Equities as the Incoming Trustee was effected by cl 2 of the Second Deed of Termination. That clause went on to provide for BNY to be released from its obligations and liabilities under each Transaction Document in relation to the Series Trust and for the assumption of all such obligations by Leveraged Equities. 283 Clause 3(b) provided that in consideration for Leveraged Equities assuming BNY's obligations and liabilities: all of the assets of the Series Trust would vest in Leveraged Equities; and BNY transferred and assigned all of its rights, title and interests in the Assets of the Series Trust to Leveraged Equities.

Transitional Services Agreement 284 One further agreement forming part of the suite of documentation for the sale needs to be mentioned. It is the Transitional Services Agreement made on 8 January 2009 between, inter alia, Macquarie and Leveraged Equities. 285 The Transitional Services Agreement provided for Macquarie to deliver certain services to Leveraged Equities on a transitional basis following the acquisition of Macquarie's margin loan portfolio. The services included human resources and information technology. Clause 9 provided for Macquarie to act as settlement agent in the processing of margin loans and for the settlement of accounts between Macquarie and Leveraged Equities in relation to advances under LSAs. 286 Clause 12.3 provided that Macquarie was acting as an independent contractor in furnishing the services, and nothing in the Agreement was to be construed as creating a partnership, trust or agency between Macquarie and Leveraged Equities. 287 Clause 25.2 provided for an indemnity from Leveraged Equities to Macquarie for any third party claims against Macquarie with respect to liabilities arising out of or in relation to a margin loan.

The 19 January 2009 letter 288 The letter of 19 January 2009 from Macquarie to Mr Goodridge stated that, effective 8 January 2009: his loan facility was sold to BNY as trustee for the Series 2008-1 PANTHER Trust; and BNY was replaced by Leveraged Equities as trustee of that trust; and the Series 2008-1 PANTHER Trust was renamed Leveraged Equities 2009 Trust. 289 The letter went on to say: This means that Leveraged Equities is now the Lender for Macquarie Margin Loans and Macquarie Investment Multiplier loans. Your Loan and Service Agreement will remain unchanged at this time other than to enable Leveraged Equities to become and operate as the Lender. Please note that if you have an adviser they will also be notified of this change.

Novation: The primary judge's approach 290 The primary judge considered that the question which arose on the issue of novation was whether one party to a contract can authorise the other party to novate the contract without any further involvement by the first party. 291 His Honour was of the view that this question must be answered in the negative. He seems to have reached this conclusion both as a matter of general legal principle and upon the proper construction of the contract. He reached this view of the legal principle notwithstanding his recognition of text book authorities and judicial pronouncements in favour of the proposition. 292 The primary judge considered the language of cll 21.2 and 21.4 to be "nebulous". The effect of his reasoning was that it amounted to no more than an agreement to agree. 293 Nor did the primary judge consider that Mr Goodridge's dealings with Mr Norval in February 2009 amounted to a consent to the substitution of Leveraged Equities for Macquarie. His Honour's view appears to turn largely upon his finding that Mr Goodridge did not receive the letter of 19 January 2009 from Macquarie. 294 Although his Honour was of the view that the LSA had not been novated, he dealt with the question of whether the Transaction Documents were (or would have been) effective to transfer Macquarie's rights under the LSA to Leveraged Equities. 295 The first question that arose was as to the period of notice required to be given under cl 13.1 of the Master Trust Deed for the Transfer Proposal. His Honour accepted that BNY had exercised its right to proceed on less than the prescribed period of notice. 296 However, the primary judge considered that the Second Deed of Termination was ineffective to substitute Leveraged Equities as Trustee of the Series 2008-1 PANTHER Trust. 297 His Honour came to that view because he considered that upon the proper construction of cl 3(b) of the Second Deed of Termination, Leveraged Equities did not assume the obligations and liabilities of some 18,500 borrowers, including the obligations owed by BNY or Macquarie to Mr Goodridge. 298 His Honour went on to conclude that Leveraged Equities could only rely on any right, title or interest in Mr Goodridge's loan if it acquired such rights by way of assignment from BNY under cl 3(b) of the Second Deed of Termination.

Can a party prospectively authorise novation? 299 The primary judge was of the view that it was "impossible" for one party to a contract to prospectively authorise a novation to be made by another party unilaterally: see at [103] and [106]. His reason for adopting that view appears to be that, in a case such as the present, the lender cannot impose a contract between the borrower and a third party where the borrower has no participation in, or knowledge of, the new contract, and in particular the new contracting party: see at [106]. 300 His Honour relied on the well known statement of principle of Windeyer J in Olsson v Dyson (1969) 120 CLR 365 at 388. There, novation was described as the making of a new contract between a creditor and its debtor in consideration of the extinguishment of the obligations under the old contract; if the new contract is to be fully effective, the third person must be a party to the novated contract: see also Fightvision Pty Ltd v Onisforou (1999) 47 NSWLR 473 ("Fightvision") at [78] (Sheller, Stein and Giles JJA). 301 In Olsson v Dyson, Windeyer J at 390 pointed to the foundation of the concept of novation in Roman law. He referred to some of the conceptual difficulties of the development of the doctrine in Roman law but observed that the requirements of the common law are satisfied by a tacit agreement to extinguish the former obligation, and this may be inferred when an inconsistent obligation is, by agreement, substituted. 302 There are three separate lines of authority which in my opinion make it clear that the primary judge was in error in coming to the view that it is impossible for a contracting party to prospectively authorise a novation to be made by another party unilaterally. 303 First, the proposition is contrary to the views expressed authoritatively by two members of a Full Court (Finn and Sundberg JJ) in Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (2006) 149 FCR 395 ("Pacific Brands") at [32]. 304 It is true that their Honours' observations in that case were obiter but they expressed them in setting out a number of "relatively non-contentious propositions". The seventh of the propositions included the statement that: Novation will, ordinarily, require the agreement of the original and the substituted party although the original contract may, on its proper construction, authorise a party to substitute a contracting party in its place without need for a further tri-partite agreement. 305 Their Honours cited the decision of King CJ in Harry v Fidelity Nominees Pty Ltd (1985) 41 SASR 458 at 460 as authority for the proposition. However, the primary judge sought to distinguish Harry's case emphasising the observations of King CJ as to the unusual character of such a provision, and pointing to the need for the original contract to be quite clear (see at [110]). 306 Nevertheless, in my view, Harry's case is consistent with the proposition stated by Finn and Sundberg JJ. The only issue in each case is whether substitution is authorised in advance by the proper construction of the original contract. 307 Second, English authority, both before and after the primary judge's decision, supports the proposition that a contracting party may authorise the other contracting party, in the terms of the original contract, to novate the contract to a third party. 308 The position was considered, approximately five years before the primary judge's decision, by Aikens J in Argo Fund Limited v Essar Steel Limited [2005] 2 Lloyd's Law Reports 203 ("Argo"). In that case the clause in question was contained in a syndicated loan facility which permitted participating lending banks to transfer their rights and obligations by the delivery of an executed Transfer Certificate in favour of a bank or other financial institution. 309 The essential question in Argo was whether the transferee fell within the description of a financial institution. However, in the course of his judgment, Aikens J observed at [50] that the delivery of the Certificate effected the transfer, with nothing more being required to be done. He observed that the borrower had no role to play and went on to explain how, as a matter of legal analysis, the novation came about. 310 This was explained by Aikens J at [51] upon the basis that the contract was a unilateral one which contained a standing offer in the transfer clause. The offer to terminate the old contract was made to each original participant and the offer to conclude a new contract was made to all those who were eligible, namely, those who fell within the description of "bank or other financial institution". 311 He referred to the classical authorities of Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 ("Carlill") and New Zealand Shipping Co Limited v A.M. Satterthwaite & Co Limited (The Eurymedon) [1975] AC 154, to support the analysis. He also observed that there is mutual consideration for the novation because the borrower and the lender each agrees to give up its respective rights and obligations under the original contract. The decision of Aikens J was affirmed on appeal, but the Court of Appeal did not refer to the contractual analysis of the standing offer which was not in issue on the appeal. 312 In the present case at [120] the primary judge distinguished Carlill upon the basis that the offeror had made an identified proposal that could mature into a contract by the other party proffering the stipulated consideration. He did not consider that the "nebulous" words of cll 21.2 and 21.4 did so. However, that is a different question and does not detract from the issue of principle which was explained by Aikens J in accordance with principles that have governed the law of contract for over 100 years. 313 The decision of the primary judge in the present case was strongly criticised by Cooke J in Habibsons Bank Ltd v Standard Chartered Bank (Hong Kong) [2010] EWHC 702 (Comm). His Lordship observed at [28] that the primary judge said that there was no support for the proposition that a party can consent in advance to a novation. Cooke J went on to describe the primary judge's decision as "wholly uncommercial", and a "purist point" which is contrary to the development of the law of contract. 314 Cooke J's views were endorsed on appeal by Moore-Bick LJ (with whom Rix LJ agreed), though without the level of criticism contained in the first instance judgment: Habibsons Bank Ltd v Standard Chartered Bank (Hong Kong) Ltd [2010] EWCA (Civ) 1335 ("Habibsons") at [20] - [22]. 315 Third, the position in the United States is that a contracting party may provide advance consent to a novation. In 216 Jamaica Avenue LLC v S & R Playhouse Realty Co 540 F 3d 433 (2008), Sutton J, who delivered the opinion of the United States Court of Appeal, 6th Circuit, said at 438: There is nothing exceptional about permitting two parties to a contract to establish ahead of time the ground rules for consenting to the substitution of one party to the contract for another. Sutton J referred to a line of American Authority to support that proposition, including leading text writers and the Restatement (Second) of Contracts. 316 In summary therefore, I consider that the approach to the issue of general principle apparently adopted by the primary judge cannot be supported. The position is aptly summed up by Moore-Bick LJ in Habibsons at [22]. His Lordship did not think that the primary judge entirely rejected the possibility that a party can consent in advance: … since he distinguished Carlill v Carbolic Smoke Ball Co on the grounds that the clause he had to consider was too nebulous, but if he did, I agree with Cooke J that the decision does not represent English law. 317 Nor does it represent Australian law.

Do cl 21.2 and cl 21.4 constitute an agreement to agree? 318 As Moore-Bick LJ observed in Habibsons, the true basis upon which the primary judge proceeded may not be at odds with established law. What appeared to underlie his Honour's reasoning was that a party cannot consent in advance to an unspecified means of novation that will subsequently be binding at the election of another party: see at [102]. 319 Thus, his Honour went on to observe at [105] that while cl 21.2 recorded Mr Goodridge's agreement that a novation could occur without his consent, "it is difficult to conceive of the content of the consent". His Honour went on to pose a number of rhetorical questions which apparently suggested that the terms of any future contract were at large. 320 I accept that the language of cl 21.2 and cl 21.4 are at the heart of the matter. I also accept that the language of those clauses falls short of the clear terms of a clause such as that which was the subject of consideration by Aikens J in Argo. 321 The primary judge correctly identified the essence of novation, as stated by Windeyer J in Olsson v Dyson¸ namely the making of a new contract between a creditor and a debtor, in consideration for the extinguishment of the obligations of the lender under the former contract. 322 The draftsperson of cl 21.2 and cl 21.4 seems to have thought it was unnecessary to make express reference to the assumption of liabilities by the new lender and the release of the obligations of the original lender. By contrast, the agreement in Argo provided expressly for the means of which novation was to take place and for the assumption of liabilities by the new party as well as the release of the outgoing lender. 323 The question which arises in the present case is whether the terms of the relevant clauses contain a consent by the borrower to the introduction of a new lender to assume the rights and obligations of Macquarie as well as to the release of Macquarie from its rights and obligations under the LSA. 324 It may well be that the draftsperson failed to give sufficient attention to the distinction between assignment and novation in drafting the clauses. But I think that the better view is that the references to "novate", "obligations" and "without the consent of the borrower" make it sufficiently clear that the borrower was giving prospective consent to all the elements required to give effect to a novation. 325 I also consider that cl 21.2 and cl 21.4 make it sufficiently clear that the borrower gave prospective consent to the novation of the LSA to any third party who was prepared to assume the obligations of the lender. 326 I do not consider that the primary judge was correct in his view, at [116], that "there was no identified new contract [in cl 21.2] to which he [Mr Goodridge] could have 'consented' to become a party". Nor in my view was he correct in concluding at [120] that Mr Goodridge's consent was to a "non-existent future transaction on uncertain and unidentified terms". 327 It is clear, in my view, that cl 21.2 and cl 21.4 only permit novation of Macquarie's duties and obligations under the LSA. The words "under this Agreement" explicitly qualify the obligations which may be novated. Mr Goodridge's consent was therefore given to the introduction of a new lender who was substituted for Macquarie on the same terms and conditions as the LSA. 328 There was therefore no uncertainty about the terms and conditions of the new contract to which Mr Goodridge consented to be a party. Clause 21.2 and cl 21.4 did not amount to an agreement to agree.

Termination of liability 329 A further reason given by the primary judge for finding that the contractual arrangements were ineffective to novate the LSA was that his Honour found at [111] that there was a "substantive difference" between the obligations of Macquarie under the LSA and those of BNY and Leveraged Equities. The difference was said to arise from cl 16.11 of the Master Trust Deed, and from the terms of the 2007 Series Supplement and the 2008 Series Supplement. His Honour considered that Macquarie's: previous unlimited liability would no longer apply to events occurring after any novation and Mr Goodridge never agreed in advance or otherwise to such a change. 330 I do not consider that the clauses to which his Honour referred altered the obligations owed by the lender to Mr Goodridge. It seems to me that the clauses in question merely identified the capacity in which BNY and Leveraged Equities agreed to enter into the novated contracts, that is to say, as trustee of specified trusts. Accordingly, the property to which a borrower may have recourse to enforce the lender's obligations was limited to the assets of the specified trusts. 331 This view is supported by cl 21.4 which specifically provided for novation to any trustee or manager of any securitisation programme. 332 By contrast with the clause in issue in the Argo case, cl 21.2 and cl 21.4 did not restrict the class of persons to whom Macquarie was permitted to novate the LSA. Clause 21.2 permits novation to "any person" and as, I have said, cl 21.4 authorises novation to a trustee. 333 The effect of the primary judge's approach was to preclude Macquarie from novating the LSA to a trustee, in its capacity as such. For reasons set out above, I am unable to agree with his Honour's conclusion.

Whether Leveraged Equities assumed Macquarie's obligations 334 The primary judge found at [137] that the Second Deed of Termination was ineffective to constitute an assumption by Leveraged Equities of the obligations of Macquarie to the 18,500 margin borrowers, including Mr Goodridge. In coming to that view his Honour focused upon the terms of cl 3(b) of the Second Deed of Termination. 335 I do not need to set out the terms of cl 3(b) because I do not consider it to be the operative clause by which the assumption was effected. 336 In my view, the operative clause under which Leveraged Equities assumed the relevant obligations was cl 2(a)(v)(A) of the Second Deed of Termination. That clause provided, with effect from 8 January 2009, that Leveraged Equities assumed all obligations and liabilities imposed on BNY under each Transaction Document. 337 The primary judge referred to cl 2(a)(v) at [135] but he dismissed it as irrelevant because he said the "Transaction Documents" did not include Mr Goodridge's LSA. 338 However, the definition of "Transaction Documents" in the Master Trustee Deed includes any other document which is agreed by MSL and BNY to be a Transaction Document in relation to a Series Trust. Clause 1.3 of the Transfer Proposal, to which MSL and BNY were parties, provided that the Transfer Proposal was a Transaction Document for the purposes of the Series 2007-1 PANTHER Trust and the Series 2008-1 PANTHER Trust. 339 Clause 6 of the Transfer Proposal provided that BNY assumed the duties, obligations and liabilities of Macquarie in respect of each assigned asset, which included Mr Goodridge's loan. 340 It follows that when Leveraged Equities undertook in cl 2(a)(v) of the Second Deed of Termination to assume the obligations of BNY under each Transaction Document, that undertaking extended to the obligations owed by Macquarie to about 18,500 margin borrowers including Mr Goodridge.

Consent to novation by conduct 341 Macquarie submitted that even if the contractual documents were not effective to achieve a novation of Macquarie's rights and obligations under the LSA, the primary judge ought to have concluded that a novation of the LSA to Leveraged Equities was to be inferred from the facts and circumstances. 342 It may be accepted that a novation can be express or implied from the circumstances: Fightvision at [78]. 343 Macquarie relied in particular on the dealings between Mr Goodridge and Mr Norval in February 2009, and upon other factual considerations affecting Mr Goodridge's knowledge of the sale of the margin lending business to Leveraged Equities. 344 However, the primary judge found at [124] that he was not satisfied that Mr Goodridge appreciated that his relationship with Macquarie had ceased. He also found that Mr Goodridge did not give his consent to this in the events which occurred in February 2009. 345 Since I have come to the view that the novation was effected by the contract documents it is unnecessary for me to consider whether there is appellable error in the primary judge's factual finding.

Assignment: the primary judge's approach 346 The primary judge gave two principal reasons for his finding that Macquarie had failed to assign its rights under the LSA to Leveraged Equities. First, his Honour considered that Macquarie's obligations to Mr Goodridge under the LSA were so interconnected with its rights against him that the rights were incapable of assignment. 347 The second reason why his Honour considered that no valid assignment was effected was that no notice in writing had "been given" to Mr Goodridge so as to satisfy the requirements of s 12 of the Conveyancing Act. His Honour came to this view because he found that Mr Goodridge did not in fact receive the letter of 19 January 2009 from Macquarie, and because he considered that s 12 requires actual notice to be given. He found that service in accordance with s 170 of the Conveyancing Act is not sufficient to satisfy the requirements for a valid statutory assignment. 348 His Honour was of the view that the contents of the letter of 19 January 2009 would have been sufficient to constitute notice of the assignment, if the rights were capable of assignment, and if the letter had in fact been received by Mr Goodridge.

Impossibility of assignment: the primary judge's reasons 349 The primary judge's conclusion that Mr Goodridge's margin loan and the rights attaching to it were incapable of assignment was based on a series of propositions which he drew from the terms of the LSA. 350 First, he said at [175] that the margin loan was not "static". Whilst Mr Goodridge was not in default, he could draw down under the LSA up to his credit limit. He went on to say at [176] that it was Macquarie which had the continuing obligation to make the advances because it was contractually obliged to Mr Goodridge to do so. 351 Second, his Honour considered the tripartite arrangements under which Macquarie continued to be the lender, whilst Leveraged Equities was the creditor, as assignee, to be "byzantine" and "unworkable": see at [177], [184] and [188]. 352 What seems to have driven the primary judge to this conclusion was his view that each of Macquarie and Leveraged Equities could exercise the rights of the lender. In particular, his Honour considered that the discretion to determine the Market Based Limit might be exercised by Leveraged Equities in a different manner from Macquarie, thereby triggering an obligation to meet a margin call in circumstances in which Macquarie may not have determined to enliven that obligation. 353 Third, his Honour considered that the wide discretion to determine the Lending Ratio, which was an integer of the Market Based Limit, suggested that the identity of the lender was important to Mr Goodridge so that the lender's rights were not capable of assignment: see at [179], [192]. 354 The primary judge accepted that cll 21.2 and 21.4 of the LSA expressly provided for assignment but in his view, the three considerations I have endeavoured to summarise above over-rode the effectiveness of those clauses: see at [191] - [192]. 355 Fourth, his Honour's ultimate conclusion was that Macquarie's rights as a creditor and security holder could not be separated from its obligations as lender under the LSA and therefore were not capable of assignment. He expressed this view at [200] as follows: In my opinion there cannot be a separation of the Bank's existing legal right to a debt and supporting security owed by Mr Goodridge from its continuing obligation to lend to him and to assist his acquisition of further securities on the same terms and conditions. This was not simply an assignment of a debt free standing from an ongoing relationship between the assignor and debtor. The Bank and Leveraged Equities were seeking to assign pieces of the relationship to give effect to a commercial objective. But the mechanism that they chose could not assign what the Bank and Mr Goodridge had agreed would be the criteria and use of powers on which the Bank would be bound to lend him more money. That part of the loan and security agreement was inseverable from the obligation of the Bank to lend on the terms of that agreement.

Were Macquarie's rights capable of assignment? 356 In my view, the rights in question in the present case were capable of assignment. I do not agree with the primary judge's conclusion or his reasons for arriving at that view. There are four reasons for this. 357 The first, and most fundamental reason I disagree with the primary judge is that his Honour's reasons do not properly take account of the express provisions of cl 21.2 and cl 21.4 of the LSA. Clause 21.2 provided that Macquarie was entitled to assign all or any part of the benefit of the LSA, and any of its rights, remedies and powers without Mr Goodridge's consent. Clause 21.4 provided that, without limitation to this, Macquarie was entitled to assign its rights, or any part of the LSA to any trustee of a securitisation programme. 358 Thus, the LSA not only provided for assignment of Macquarie's contractual rights and powers, but it specifically contemplated that this may occur. That no doubt explains the provision for assignment in the context of a securitisation programme. 359 Moreover, this was re-enforced in cl 25.2(d) which stated that references to any party to the LSA included references to its respective successors and assigns. Indeed, successive assignments were contemplated because cl 21.4 permitted Macquarie "and or its assignee or transferee" to assign its rights to the trustee of a securitisation programme. 360 Second, the primary judge's approach to the question of whether Macquarie's rights were capable of assignment seems to me to be contrary to the principles stated in well-established authorities. 361 His Honour proceeded on the basis that Mr Goodridge had a real interest in the identity of the lender and that Macquarie's rights were therefore personal and not capable of assignment: see at [179]. 362 It may be accepted that the benefit of a contractual obligation cannot be assigned in cases where the identity of the person to whom the obligation is owed is a matter of importance to the person on whom the obligation rests: Tolhurst v Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660 at 668; affirmed on appeal [1903] AC 414 at 417, 420. 363 But the short answer to the proposition that the rights were unassignable in the present case is that the question is essentially one of construction of the contract. This is aptly explained in a decision of the New Zealand Court of Appeal in which it was observed that where there are no express terms in a contract covering assignability, the court will closely examine the contract to see whether the obligations are so closely linked to the personal qualifications of a party that the court should imply an intention that the benefit could not be assigned: But, where assignment is expressly dealt with, there can be no occasion, as a general rule, to examine the contract for the purpose of implying terms, because the parties have expressed their intentions: C.B. Peacocke Land Co Limited v Hamilton Milk Producers Co Limited [1963] NZLR 576 ("C.B. Peacocke") at 582. 364 C.B. Peacocke was followed and applied by a Full Court (Northrop, Gummow and Hill JJ) in Devefi Pty Limited v Mateffy Pearl Nagy Pty Limited (1993) 113 ALR 225 ("Devefi") at 235. Devefi was cited with approval by Lightman J in Don King Productions Inc v Warren [2000] Ch 291 ("Don King") at 319. See also Pacific Brands at [32]. 365 Devefi is authority for the proposition that even if rights are not otherwise assignable, the contract may, on its proper construction, permit the assignment of such rights: Devefi at 235, Don King at 319, Pacific Brands at [32]. 366 That proposition may be subject to the qualification that the character of the obligation may be such that any purported assignment will have no effect at law or in equity; see Don King at 319, where Lightman J gave as an example, the inability of an employer to assign the benefit of an obligation of the employee to serve the employer. 367 I do not think that the character of the obligation on which the primary judge apparently relied, namely the obligation to meet a margin call where the lender exercised a discretion to determine the Market Based Limit was analogous to the personal obligations discussed in the authorities to which I have referred. 368 The primary judge appeared to take into account the "pronounced change of attitude" of Leveraged Equities to Mr Goodridge's stake in the MCW Trust, as an indicia of the personal nature of the contractual relationship with Macquarie. He said at [189] that he did not consider that Macquarie would have classified the units in the MCW Trust, which bore the Macquarie brand name as a "penny dreadful". 369 But that was irrelevant to a consideration of the nature of the relationship. The character of the relationship was to be determined, objectively, from the LSA and any material surrounding circumstances. The terms of the LSA were applicable to many thousands of other margin borrowers. The LSA was intended to provide margin loan facilities for the acquisition of a wide range of securities. The LSA was to be administered by Macquarie through its diverse corporate structure which contemplated and took into account changes in relevant executive personnel. There was nothing to suggest that Mr Goodridge stipulated for the LSA to be administered solely by Macquarie. Indeed, the clauses to which I have referred demonstrate the contrary effect: see Australis Media Holdings Pty Limited v Telstra Corporation Limited (1998) 43 NSWLR 104 at 118 - 120. 370 In any event, the terms of cl 21.2, cl 21.4 and cl 25.2(d) make it abundantly clear, in my view, that Macquarie's rights under the LSA were capable of assignment. As the learned authors (Meagher R, Heydon D and Leeming M) of Meagher Gummow & Lehane's Equity Doctrines and Remedies (4th ed, Lexis Nexis Butterworths, 2002) observe at [6-455], a contract may in terms make provision for the assignment of benefits under it and [i]f so, then the benefit of the contract may be assigned, even if it would otherwise be "too personal". 371 Third, the issue before the primary judge was not whether all of the rights granted to Macquarie were capable of assignment but whether the rights relied upon by Leveraged Equities to issue a margin call notice (cl 5) and the right or power to sell securities upon an Event of Default (cl 13) were assigned. 372 As was pointed out in Don King at 319, the benefit of some obligations of a party under a contract may be assignable while others, under the same contract may not: assignability is not a mater of all obligations under a contract or none at all. 373 Here the question which arose before the primary judge was whether Macquarie's rights in respect of Mr Goodridge's margin loan which then stood at an amount of $640,603.75 advanced under the terms of the LSA, and the securities attaching to it, were capable of assignment (and were effectively assigned) to Leveraged Equities. 374 Those rights were choses in action which were capable of assignment unless they fell within one of the few exceptions to the rule that all property is assignable: Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 ("Norman") at 26 per Windeyer J; Meagher et al (2002) at [6-010]. 375 The primary judge considered that the rights were incapable of assignment, inter alia, because they were inseverable from Macquarie's obligation to make further advances. In my view, that is contrary to the principles referred to above. 376 Fourth, even if the Transaction Documents did not constitute an effective novation of the LSA, there is no real difficulty in the proposition that Macquarie retained the obligation to lend further funds under the LSA while Leveraged Equities held the right to give notice of a margin call and exercise the power of sale on default. 377 The difficulty which his Honour saw was that there were, in his opinion, two "Banks" under the LSA, each of whom could exercise independently the rights of a lender. He considered this to be unworkable because it was, in his view, impossible to bifurcate the lending obligations and the rights which were the subject of the assignment: see at [184], [192]. 378 However, in my view, his Honour's approach is not correct. Leveraged Equities, as the assignee, was the only entity which had the right to exercise the rights that were assigned to it by Macquarie, including the rights under cl 5 and cl 13. Contrary to his Honour's views, there seems to me to be a sufficiently clear division between the rights of Leveraged Equities and the continuing obligations of Macquarie in the relevant Transaction Documents. 379 It is true that the contractual arrangements under which Macquarie's margin loan book was sold were complex. But the ultimate effect of the Transaction Documents, so far as they concerned assignment, was that Macquarie bore the ultimate financial responsibility of providing further advances to the borrower, whilst Leveraged Equities, as assignee, had the right to repayment of the funds and the right to exercise powers on default. The contractual scheme appears in the provisions of the Transaction Documents to which I will refer briefly. I have described the details of the Transaction Documents above and will not repeat them. 380 The effect of cl 13.3 of the Master Trust Deed, including the definition of "Assets" and "Assigned Assets", when read with cl 5(a) of the Transfer Proposal was that Macquarie assigned to BNY all of its right, title and interest in the chose in action comprised in Mr Goodridge's margin loan (as well as the other margin loans identified on the computer disk). The Assigned Assets were defined in the Transfer Proposal as each identified margin loan. Mr Goodridge's LSA was one of the identified margin loans. The choses in action were then transferred and assigned by BNY to Leveraged Equities by cl 3(b) of the Second Deed of Termination. 381 The assignments so effected consisted of assignments of existing and future book debts, that is to say, future advances to the borrower under the LSA. It is well established that such an assignment is effective to transfer the beneficial interest in the property immediately it comes into existence: Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 ("Everett") at 450, citing, inter alia, the seminal authorities of Holroyd v Marshall (1862) 10 HLC 191 and Tailby v Official Receiver (1888) 13 App Cas 523. 382 Although, as I have said, Macquarie retained the ultimate obligation to make further advances to Mr Goodridge, the effect of cl 6 of the Transfer Proposal and cl 2(a)(v) of the Second Deed of Termination was that Leveraged Equities assumed that obligation. 383 The logistics involved in giving effect to the future conduct of the loan book were dealt with in the Transitional Services Agreement. In particular, the effect of cl 9 of that Agreement was that Macquarie agreed to act as settlement agent in relation to, inter alia, advances under the LSA, with a regime being established in cl 9.3 for daily settlement of accounts between Macquarie and Leveraged Equities. 384 The arrangements may be complex, and perhaps not easily understood by all those within Macquarie and Leveraged Equities who may come to read the contractual detail, but the arrangements are not unworkable. His Honour considered that Leveraged Equities might "simultaneously" determine the Market Based Limit differently from Macquarie and thereby exercise a power of sale which would not have been exercised by Macquarie: see at [188]. But that is not a correct description of the contractual regime. 385 The right to determine the Market Based Limit was assigned by Macquarie to Leveraged Equities which therefore stood in Macquarie's shoes and had the sole right to make that determination; see Everett at 447. Mr Goodridge's consent was not required for this: see LSA cl 21.2, cl 21.4 and cl 25(2)(d). Whether or not there was any bifurcation of rights as the primary judge suggested, there was certainly no duplication.

Equitable assignment 386 The primary judge accepted that an assignment may be effective as an equitable assignment even if the formalities required by s 12 of the Conveyancing Act were not satisfied: see at [165], [170]. This is supported by well-known authorities to which his Honour referred. The authorities include Norman's case at 28 and William Brandt's Sons & Co v Dunlop Rubber Co Limited [1905] AC 454 at 462. 387 As I said earlier, I do not agree with his Honour's view that Macquarie's rights were incapable of assignment. 388 I dealt earlier with the effect of the Transaction Documents. It is sufficient to refer to what I said at [380] to support the conclusion that Macquarie assigned its rights to Leveraged Equities through a two step process. The first was the assignment to BNY effected in particular by cl 5(a) of the Transfer Proposal. The second was the assignment by BNY to Leveraged Equities under cl 3(b) of the Second Deed of Termination.

Actual notice of the assignment 389 The primary judge held at [155] that s 12 of the Conveyancing Act requires the debtor to be given actual notice of the assignment. He held at [146] that he was: comfortably satisfied that Mr Goodridge was telling the truth when he said that he did not receive the letter of 19 January 2009. 390 This finding was based upon his Honour's assessment of Mr Goodridge's credibility. However, I have come to the view that the finding must be set aside in accordance with the principle stated in Fox v Percy (2003) 214 CLR 118. 391 In my view there were incontrovertible facts and uncontested testimony which demonstrates that the primary judge's conclusion was erroneous. At very least, his Honour's finding is contrary to compelling inferences, all of which follow from other findings he made in coming to his decision to accept Mr Goodridge's evidence. 392 First, there were two relevant letters of 19 January 2009. One was addressed to Mr Goodridge and the other to his company, Redroad Pty Limited. Macquarie gave evidence that its usual practices for despatch of bulk mail had been followed and that the letters addressed to both Mr Goodridge and Redroad had been despatched: see at [139]. 393 Importantly, his Honour accepted Macquarie's evidence of a "detailed and generally reliable system" for the despatch of important documents to Macquarie's former customers, including Mr Goodridge and Redroad. Moreover, his Honour found that there was no evidence that any correspondence directed to Mr Goodridge had been returned to Macquarie: see at [143]. 394 Second, his Honour found at [146] that Mr Goodridge's files "were not always in proper order." That finding, if anything, understates the force of concessions made by Mr Goodridge in cross-examination. One significant concession which Mr Goodridge made was at AB1274. He conceded that despite the fact that he was contemplating litigation as early as 27 February 2009, his correspondence files were not kept intact and it was "not possible to ascertain with certainty" what documents were in the correspondence files on 25 February 2009. 395 In addition, Mr Goodridge conceded that a letter from Macquarie dated 13 June 2006 notifying him of a concessional rate of interest was not on his files, which were kept for him by his partner, Ms Clay. 396 Third, the primary judge failed to pay regard to the caveat which he stated in the opening sentence of [146]. There he pointed out, correctly, that there is an obvious difficulty in any judge making demeanour based findings when there is other reliable evidence that supports a contrary view. 397 Here, there was evidence which his Honour accepted of a reliable system for despatching documents such as the two letters of 19 January 2009 and evidence that the system was followed. There was also no evidence that the letters were returned, or of any defect in the system. 398 Notwithstanding this, his Honour felt able to prefer Mr Goodridge's evidence, on demeanour grounds, to reliable evidence which pointed the other way. 399 In my opinion, the approach adopted by his Honour was contrary to common law and statutory presumptions embodied in the posting rule. As Beaumont J said in Australian Trade Commission v Solarex Pty Ltd (1987) 78 ALR 439 at 443, it is trite law that there is a prima facie presumption of fact that an envelope addressed and posted and not afterwards returned reached its destination in the ordinary course of post. Wilcox J made observations to the same effect at 446. 400 The presumption that an article sent by prepaid post was received is established in s 160 of the Evidence Act 1995 (Cth). The presumption is to be made unless evidence sufficient to raise doubt about the presumption is adduced. No such evidence was adduced by Mr Goodridge. Instead, his Honour said at [146] that ordinary human experience is that systems sometimes fail and people "tell the truth that the system did not operate as expected". This was not evidence that fell within the proviso to s 160. 401 That section was probably displaced by the provisions of the LSA: see Evidence Act s 160(2) and LSA cl 20.2(b). In any event, the effect of that clause in the LSA was to impose an evidentiary burden to similar effect on Mr Goodridge. That burden was not met. 402 The fourth reason why I am of the view that his Honour's finding cannot stand is to be found in his observations about the quality of Mr Goodridge's testimony. This appears in particular at [141] of his reasons. 403 His Honour noted Mr Goodridge accepted that his recollection at the time of the events in February 2009, and his subsequent recollection of those events, were unreliable. His Honour also noted Mr Goodridge's acceptance of the proposition that he had jumbled and inaccurately repeated conversations and events. The primary judge observed that Mr Goodridge was emotional and obviously distressed when he gave his evidence. 404 It follows that there were serious limitations in the extent to which the primary judge could make use of Mr Goodridge's denial that he received the letter. Indeed, this was a case in which there was much more than "an ounce of intrinsic merit" and nothing to resemble "pounds of demeanour" to be weighed against it: Fox v Percy at [30] citing the well-known aphorism of Lord Atkin. 405 Rather, this was a case where contemporary materials, objectively established facts and the apparent logic of events pointed only in one direction: Fox v Percy at [31]. 406 There was much debate between the parties as to the significance of the communication between Mr Norval and Mr Goodridge in February 2009. The gravamen of Macquarie's submissions was that these communications showed that it was "implausible" that Mr Goodridge would not have understood that the sale to Leveraged Equities had taken place. 407 There may be some force in Mr Goodridge's submission that the communications in themselves do not provide a logical basis for concluding that he had received the letter. But they do not provide a basis for a finding that he did not receive it. Moreover, the communications provide a strong basis for inferring that Mr Goodridge did not regard the letter(s) of 19 January 2009 as so important as to be retained for his records.

What notice is sufficient: the effect of s 12 and s 170 of the Conveyancing Act 408 The primary judge held at [155] that on its proper construction, s 12 of the Conveyancing Act requires the debtor to be given actual notice of the assignment. He held that a notice served merely in accordance with s 170 is insufficient unless the debtor actually receives it. 409 In coming to that view, his Honour relied upon the decision of the High Court in Consolidated Trust Co Limited v Naylor (1936) 55 CLR 423 at 438 - 439 (per Dixon and Evatt JJ) and the observations made, in dissent, by Evatt J in McIntosh v Shashoua (1931) 46 CLR 494 ("McIntosh") at 514 - 515. He declined to follow a decision of O'Keefe J in Tristan Head v Credit Corp Services Pty Limited [2000] NSWSC 488 at [11] - [14]. His Honour also apparently declined to follow the remarks of Cooper J in Smith v Corry & Co (1909) 28 NZLR 672 at 673. 410 It is strictly unnecessary for me to decide whether the primary judge was correct on this question because I have concluded that he ought to have found that the letter of 19 January 2009 was received by Mr Goodridge. 411 Nevertheless, I make the following observations. First, his Honour was correct to point out that O'Keefe J did not refer to either of the relevant High Court authorities. Second, it is true that the reference by Dixon and Evatt JJ in Naylor to a part of Evatt J's observations in McIntosh was not an express endorsement of all of Evatt J's remarks about the inapplicability of s 170. But there may well be implied endorsement of those remarks in Naylor at 439. 412 In particular, their Honours stated in Naylor that the purpose of the requirement made in s 12 by the words "of which express notice in writing shall have been given" is to make essential actual notice that the debt has been assigned. 413 However, the distinction between the requirements of s 12 and the provisions of s 170 may be more illusory than real. It is true that s 12 speaks of notice that is "given" whereas s 170 deals with service of a notice that is required to be served. But a notice that is sufficiently served by posting in accordance with s 170(1)(b) will be one which gives rise to the prima facie presumption contained in s 160(1) of the Evidence Act. 414 Thus, if s 170(1)(b) is satisfied, there will be an evidentiary presumption that the notice was received on the fourth day after posting, unless evidence sufficient to raise doubt about the presumption is adduced.

Unconscionability 415 His Honour held that the conduct of Leveraged Equities in requiring Mr Goodridge to meet the deadlines set in the margin calls of 23 February 2009 was an unconscientious insistence upon its rights: see at [207] - [208]. He found that this contravened s 12CB of the ASIC Act. 416 There are two short answers to this. First, s 12CB applies only to financial services of a kind ordinarily acquired for personal, domestic or household use: see s 12CB(5). Mr Goodridge acknowledged when he entered into the LSA that the funds would be applied wholly or predominantly for business or investment purposes. His evidence that the funds were invested for the purpose of providing for his retirement was not relevant to the question of whether s 12CB was engaged. 417 Second, absent some conduct on the part of Leveraged Equities or Macquarie which could be characterised as taking improper advantage of Mr Goodridge (which there was not), there is nothing unconscionable in a margin lender enforcing its legal rights to protect itself against a fall in the value of its security: Bacnet Pty Limited v Capital Partners Pty Limited (2010) 183 FCR 384 at [118] - [120].

Relief 418 Since in my view the appeals must be allowed, it is unnecessary to consider the question of the relief granted to Mr Goodridge.

Conclusion and orders 419 It follows from what I have said that the appeals brought by each of Leveraged Equities and Macquarie should be allowed. 420 It was common ground that if the appeals are allowed, the cross-claim brought by Leveraged Equities to receive the shortfall on the loan account must succeed. 421 In my opinion, orders should be made in accordance with orders 1 to 6 inclusive in Leveraged Equities' notice of appeal and orders 1 to 4 in Macquarie's notice of appeal. I certify that the preceding four hundred and ten (410) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.