Milner, B.J. & Ors v. Delita Pty Ltd & Ors [1985] FCA 478

Judiciary Act 1903: s. 79. Federal Court of Australia Act 1976: s. SIA.

BRYAN JOHN MILNER AND ORS. v. DELITA PTY. LIMITED, ROGER McMILLAN

DELITA PTY. LIMITED ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

JOHN CHRISTOPHER BENNETT First Cross-Respondents and Second Cross-Claimants ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

Applicants DELITA PTY. LIMITED ROGER McMILLAN GLASSON MORRIS WALTER LEWIN

JOHN CHRISTOPHER BENNETT First Cross-Respondents and Second Cross-Claimants AND: ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

THE COURT ORDERS THAT the applicants bring in Short Minutes of Order

Settlement and entry of orders is dealt with in Order 36 of

DELITA PTY. LIMITED ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

ROBERT CHARLES GOOCH MORRISON and JOHN CHRISTOPHER BENNETT First Cross-Respondents and Second Cross-Claimants ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

No. G85 of 1983 ALLAN JAMES GILL & ORS. Applicants DELITA PTY. LIMITED ROGER McMILLAN GLASSON MORRIS WALTER LEWIN

AND: ROBERT CHARLES GOOCH MORRISON and JOHN CHRISTOPHER BENNETT First Cross-Respondents and Second Cross-Claimants AND: ROGER McMILLAN GLASSON and MORRIS WALTER LEWIN

This case concerns guavas. In 1980 four people, Roger Glasson, Morris Lewin, Robert Morrison and John Bennett decided to promote a scheme for the growing and processing of guavas in the far north coast of New South Wales and for the marketing of guava puree. Guavas had not been grown previously in this country on any large scale. The scheme which they promoted involved approaching people to contribute funds to the scheme for the purpose of establishing and

Each trust venture was to be divided into two parts. First, a unit trust in respect of wnich a company would act as trustee. The

trust was to purchase the land. Each investor was to acquire a beneficial interest in the totality of the land equivalent to his share. For example, in Guava Property Trust No. 3 each investor would

have a share equivalent to 5.7 acres, 5 acres of which were to be

planted and .7 acres of which was river. In other cases, the investor's share of the plantation was a five acre particivaticon. No separate titles were to be offered to each investor. It was envisaged that in the third year the crop would return more than sufficient to cover expenses; in the fifth year the plantation would he properly established, yielding a steady income for the investors. Second, a partnership was to be formed by the participants to lease the property from the trustee of the property trust and to undertake the development of the plantation. The partnership would pay all development expenses. Tax losses, if any, in the formative years would be allocated to the partners in proportion to their interests in

the partnership. The person who required the tax deduction was to be the partner. The units in the guava property trust would be held by that same person or his family or family company or trust. All land,

trees and improvements were to be totally owned by the investors.

"Australian Plantations" 1s a trust which supplied the trees; when the plantation was established its role was to take over the total maintenance and care of the plantation as manager and pursuant to an agreement with the partnership. It was envisaged that there would be one document governing the terms upon which the investors would become owners of units in the property trusts and another document being the partnership agreement between themselves and their fellow investors. The terms under which Australian Plantations would act as manager were to be and in fact were set out in a separate

document. The processing and marketing of the guavas was proposed to

be done by a firm "Ballina Plantations" which had four principals

namely, Messrs. Glasson, Lewin, Morrison and Bennett.

It was intended by the promoters that Eallina Plantations would purchase che guava fruit at prevailing world prices. Ballina Plantations also would undertake the initial cultivation and

It is convenient to say something about the four promoters themselves. Mr. Glasson has grown avocados, guavas, lychees and macadamias and conducts a nursery business on the far north coast of New South Wales. He is a former president of the Richmond Avocado Growers Association and a member of the Avocado Marketing and Promotion Board. Dr. Lewin is a medical practitioner: a gynaecologist with an extensive practice in the Lismore district. He is an experienced financial entrepreneur and has other business activities. Mr. Morrison, is an investment adviser and chief consultant to a

newsletter called the "Investment Advisor". Mr. Bennett, who manages and owns his own marketing research company, is an expert in the

Delita Pty. Limited ("Delita") was incorporated in June 1979. Its shareholders and directors at all material times have been Lewin and Glasson. Delita was the proprietor of the firm "Australian

Glasson has been associated with the tropical fruit industry in Australia since 1972. He became interested in guava production in

about 1976. He visited Hawaii in 1977 and there met Harold Quinton,

Chairman of Lifesavers Limited and they discussed the prospects of successfully growing and marketing guavas in Australia. Subsequentiy Lifesavers decided to create a commercial plantation for quavas in Australia and Glasson entered into a contract with Lifesavers to

manage its plantation, at least so far as horticultural matters were

Later, Glasson was approached by Lewin about the growing of guavas and they assert that at this time (1978) their intention was to use their own money and borrow funds to engage in the growing of guavas. But before committing themselves to the investment they decided to travel to Hawaii to evaluate the guava industry. They assert that they made various enquiries there of different persons and institutions and obtained copies of relevant documents. They aiso

In 1980 the respondents invited persons to participate in the project of growing and processing guava fruit. Brochures and other written materials were sent or handed to prospective investors or otherwise came to their attention, including the applicants in these two sets of proceedings which are heing heard together by consent. The applicants rely on the statements contained in this written material to found their case in this Court, alleging that 1t contained representations which were made to them by the respondents and which are said to be false and to constitute misleading and deceptive conduct, or conduct that is likely to mislead or deceive within s. 52

of the Trade Practices Act 1974 ("the Act"). The applicants claim

damages and other relief against the respondents. Each of thes applicants asserts that he, she or it invested substantial sums cf money in the guava projects, that they made these investments by reason of the representations made to them by the respondents and in the result suffered loss and damage. The documents which wers received by the applicants, and upon which they primarily found their case of misleading conduct emanated from a business investment advisory firm known as Messrs. Robert Morrison & Associates. Morrison is a principal of that firm and it is alleged by the applicants that those documents were distributed by Robert Morrison & Associates as servant or agent of the respondents or with the consent of the

There are over 50 applicants. They are the persons or companies who invested funds in the guava ventures either as members of the property trusts or as partners in the development of the plantations. The applicants are resident in various States and Territories of Australia. They follow a wide variety of vocations and unclude a solicitor, medical practitioners, accountants, engineers, a grazier, a pharmacist, a psychologist, hairdressers, retired business men, a senior officer of a statutory authority, trustees of a religious order, together with the wives of some of those persons. Not only do the participants follow a wide variety of vocations but they had varied reasons for entering the schemes including the securing of a source of income for their retirement, a means of minimising income tax, a source of capital growth for their

investments, or a combination of these various elements.

There were four guava property trusts established. The trustee of Guava Property Trust No. 1 was Novera Pty. Limited. The trustee of Guava Property Trust No. 2 was Natran Pty. Limited. The trustee of Guava Property Trust No. 3 was Metral Pty. Limited. The trustee of Guava Property Trust _No. 4 was Hevilla Pty. Limited.

Various brochures were issued in respect of the property trusts, but

the contents of each brochure are not materially different. I will refer to differences where appropriate throughout these reasons. Some people who became members of a particular property trust in fact

received a brochure referable to another property trust other than the

one to which they ultimately subscribed. Other documents in the form of newsletters or otherwise were from time to time issued to various

The guava is a large shrub or small tree native to tropical America. It was first introduced into the Hawaizan islands in the early 19th Century by Don Francisco de Paula Marin, a Spanish horticulturalist. The guava fruit is round to pear-shaped and its interior flesh ranges from white to cream and from pink to salmon-red in colour. The fruit has an acid pulp within which is a juicier pulp full of small hard kidney-shaped seeds. The guava raw or processed is a valuable source of nourishment. Its vitamin C content considerably exceeds that of oranges; it is also rich in vitamins A and B and contains fair amounts of calcium and phospherous and some iron thiamine and niacin. Guavas are processed into nectars, juices, jams,

jellies, preserves, sherbert and baked products. Fruits preferred for

processing are those with a thick outer flesh and a small seed cavity. The fruit of the guava tree has a rough exterior texture and measures up to 3 inches in diameter. The guava grows wild in many parts of the Hawaiian islands and it is only in comparatively recent years that it has been grown commercially in plantations. In 1970 5.1 million pounds of guava fruit were processed in Hawaii, of which only 625,000 pounds (12.5%) were derived from 70 cultivated acres. This may be contrasted with the position in 1979, when of the 6.5 million pounds of guava fruit processed in Hawaii, 4.5 million pounds (70%) were derived from 940 cultivated acres. The guava is also produced in large quantities in South Africa, Brazil and Mexico, all of which grow

The case was the subject of many directions hearings and evidence was taken by me in Hawaii as a Commissioner appointed by this Court for the taking of evidence from residents of Hawaii in June 1984, The trial itself occupied 44 days. Evidence was taken from witnesses, most of whom had sworn affidavits. The exhibits are voluminous. Although all matters were "heard together, they are in fact separate from each other because each applicant sues in his own capacity and different considerations apply to each applicant although there are many points of commonality between the applicants. Counsel and solicitors for the parties are to be commended for their efforts in seeking to shorten the proceedings and confine their disputes to matters that were really in issue rather than merely technically in dispute. Were it not for their efforts the trial would have taken a

The vespondents are Delita, Glasson and Lewin. They nai earlier cross-claimed against Morrison and Bennett who in turn cross-claimed against Glasson and Lewin. The cross-claims were later not pressed because the parties to them resolved their differences, a

I propose to divide my treatment of the case into two broad divisions. First I will deal with questions that are common to all of the applicants or many of them; then I will turn to the case of each

applicant in so far as it raises issues other than common issues.

The applicants allege in paragraph 6 of their amended statements of claim that Delita, by Glasson and Lewin acting as its directors and agents, engaged in conduct that is misleading or deceptive or likely to mislead or deceive in contravention of s. 52 of

(a) The respondents, through an entity, Australian Plantations, had carefully monitored the

development of a guava fruit growing and processing industry in Hawaii.

(b) That there existed a substantial demand on the Mainland of the United States of America and in Japan for the products of the guava fruit growing and processing industry and that the extent of such demand was known to the

tC Atenienenetnenaiiie aaiatasaliasteeaed Mile Lyte

I propose to make my findings of fact referable to these

separately and to make separate findings of fact. The reason for

That there existed in Hawaii 4 lack of production to cater for local demand and that Hawaiian processers would tae ali of the guava puree which could be supolied by guava plantations as projected by or on behalf of the respondents and that the extent of such demand was known to the respondents.

That a guava fruzrt growing and processing industry in Australia was commercially viable both domestically and in export terms in 1980 and thereafter.

That the respondents had during 1980 a first-class management team in relation to the growing and processing of guava fruit.

That returns on overseas and local experience available to the respondents in relation to the growing and processing of guava fruit showed a lucrative early return, rising to an anticipated

That the costs of growing and processing guava fruit as projected by or on behalf of the respondents were a true and accurate representation of such costs,

That the costs and expenses of growing and marketing guava fruit as projected by or on behaif of the respondents represented a reasonable and proper charge in respect of such costs.

That the Department of Primary Industry through its Research Station at Nambour in Queensland had made certain data available to the respondents in relation to the growing of guava fruit.

That the New South Wales Department of Agriculture had made certain statements to the respondents, repeated by the respondents as having allegedly been made by the New South Wales Department of Agriculture as to the acreage requirements to meet the Australian demand for guava fruit."

taking this course is because, obviously, there is considera

In paragraphs 7, 8 and 9 of the statements of claim the applicants allege that Delita, by Glasson and Lewin acting as its directors and agents, engaged in conduct that is misleading or deceptive or likely to mislead or deceive in contravention of s. 52 of the Act "namely the distribution and the dissemination by themselves their servants or agents or with their consent by a business investment advisory firm known as Robert Morrison & Associates of a document entitled "Reasons for Recommending the Guava Property Trust" (paragraph 7) anda brochure related to the establishment of Guava Property Trusts including "Reasons for Recommending the Guava Property

Trust" (paragraph 8) and of a Progress Report (paragraph 9).

• During 1980 they paid sums of money representing deposits on

account of units and partnership shares (capital) in relation to Guava

• On 11 November 1980 the Guava Property Partnerships Nos. Il, 2, 3 and 4 of which the various classes of applicants are members,

• During 1980 the applicants received summaries and uni

certificates in respect of their interest in the Guava Property Tvs:

and Partnerships from a firm of solicitors, Messrs. Stone and Poulos.

• During 1981, 1982 and 1983 the applicants made further payments in cespect of the Guava Property Partnerships of which the

• On 2 July 1982 the applicants instructed Delita to undertake

• On 27 July 1982 demands were made on behalf of Delita upon

the applicants requiring payment of certain moneys.

• On 9 September 1982 Delita, through its solicitors, purported to accept repudiation of the agreement between Delita and the various

Guava Property Partnerships of which the applicants are members.

• The conduct of Delita mentioned above is in contravention of

• Glasson and Lewin aided, abetted, counselled or procured the said contravention or induced it or were directly or indirectly

• Declarations that Delita has engaged in misleading or

deceptive conduct or conduct that is likely to mislead or deceive in

contravention of s. 52 and declarations that Glasson and Lewin have aided, abetted, counselled or procured or induced or have been directly or indirectly skmowingly concerned in or party to the

• A Declaration that the agreements of 11 November 1980 between

Delita and the applicants are void and of no effect, and an injunction

restraining Delita from taking any proceedings to enforce any of the

• Orders declaring the four agreements of 11 November 1980 to be void ab initio and directing Delita to refund to the applicants all moneys paid by them pursuant to the agreements and to pay to the applicants any loss or damage sustained by them as a result of the alleged contraventions, and orders directing Glasson and Lewin to pay

Claims are also made generally for damages, interest and

In their defences the respondents answer the allegations made

• net admitting the making and implementation of invitations ts

persons to participate in the investment in the growing and processin

of guavas and the establishment of the Guava Property Trusts;

• denying that Delita (by Glasson and Lewin acting as its directors and agents) engaged in misleading or deceptive conduct or conduct that was likely to be misleading or deceptive in contravention

• not admitting that the respondents made the representations

alleged in paragraph 6 of the statements of claim; and

• saying that if the respondents did make any of those representations nevertheless the representations did not constitute misleading or deceptive conduct in contravention of s. 52 (paragraph 3

In paragraphs 4, 5 and 6 of their defences the respondents answered the allegations made in paragraphs 7, 8 and 9 respectively of the statements of claim. Those three paragraphs are in all material respects the same although each relates to the different document the subject of the allegations in paragraphs 7, 8 and 9 of the statements of claim. It 1s sufficient therefore to summarise paragraph 4 of the defences which is in answer to paragraph 7 of the statements of claim.

• they do not admit making and implementing the invitaticns 45

• they deny that Delita (by Glasson and Lewin acting as 1ts directors and agents) engaged in conduct that was misleading or deceptive cr was likely to be misleading or deceptive in contravention

of s. 52 as alleged in paragraph 7 of the statements of claim or at

• they deny that they or any one acting for or on their behalf or with their consent distributed or disseminated the particular

document referred to in paragraph 7 of the statements of claim.

Counsel for 'the applicants submitted that the respondents had not denied in their defences that the three documents, the distribution and dissemination of which was alleged by the applicants to constitute misleading or deceptive conduct, were misleading or deceptive and therefore must be taken to have admitted that they were misleading or deceptive. Counsel relied in particular upon a comparison betweer paragraph 3 of the defences on the one hand with paragraphs 4, 5 and 6 of the defences on the other other. He stressed that in paragraph 3 the respondents specifically allege that if they did make any of the alleged representations nevertheless those representations did not constitute misleading or deceptive conduct in

contravention of s. 52. Counsel for the applicants emphasised that

there was no corresponding allegation in paragraphs 4, 5 and 6 of the

The submission is unsound. In each of paragraphs 3, 4, 5 and 6 of the defences the respondents denied that the conduct alleged by the applicants in the_ statements of claim to constitute misleading os deceptive conduct in contravention of s. 52 was misleading or deceptive. The applicants did not allege in their statements of clain that the three documents specified in paragraphs 7, 8 and 9 were misleading or deceptive: the allegation is that the misleading or deceptive conduct was constituted by the distribution and dissemination of those documents. Doubtless there is inherent in that allegation either an implied statement or an assumption that the documents are themselves untrue or misleading or deceptive; but the applicants cannot complain if the respondents take the statements of claim as they find them and answer the allegations made therein and not other allegations which rest on assumptions or implications in the

The case was fought throughout on the basis that the parties were at issue on the question of whether the three documents were untrue or misleading or deceptive and the question whether distribution or dissemination of them, assuming the relevant statements made therein were untrue, was misleading or deceptive conduct. If I had upheld the pleading points taken in final address by counsel for the applicants I would have granted leave to the

respondents to amend their defences to remedy the defects and I would

not have imposed any terms or conditions upon the respondents in

granting that application save the usual term that the respendents

ae the applicants' costs of and incidental to the amendment, a purely

The case against Glasson and Lewin was based on s.. 755 of the Act, namely that they were persons said to be involved in the contraventions of s. 52 by Delita. In summary, paragraphs 24 to 29 of the statements of claim, echoing the language of paragraphs (a), (b) and (c) of s. 75B, allege that Glasson and Lewin each aided abetted counselled or procured the contravention, induced the contravention, was directly or indirectly knowingly concerned in or a party to the contravention. Counsel for the respondents submitted that the statements of claim were defective in that paragraphs 24 to 29 do not allege the material facts supporting the allegations made in them, in particular the existence of knowledge by Glasson and Lewin of the essential elements of the alleged contravention. In my opinion there is no substance in this submission. As the complaint of the respondents is essentially one of absence of particularity, it does not, in my opinion, vitiate the pleading itself. Further, an application was made by the respondents well before the commencement of the hearing of this matter to another Judge of this Court to strike out the statements of claim, but the application was refused. Finally, the case was fought throughout on the basis that the parties were squarely at issue on all relevant questions of fact and law relating to- the alleged involvement of Glasson and Lewin in the

contraventions of Delita. Hence if any amendment was necessary I

would have taken the same course I mentioned above in relation to the

Counsel for the respondents made a further challenge to the statements of claim, namely, that paragraphs 7, 8 and 9 were said to be defective in that the only material allegation made in them is that the conduct alleged to be misleading or deceptive is the distribution of the three specified documents. Counsel submitted that the mere act of distribution of the documents cannot constitute misleading or deceptive conduct. The making of representations that are misleading or deceptive may constitute such conduct; also the distribution of a document which itself contains false statements, may constitute misleading conduct, but neither of these latter matters is alleged in paragraphs 7, 8 or 9. I reject the submission as unsound. The three paragraphs in question, when read in conjunction with paragraph 23 which asserts that Delita's conduct contravened s. 52, do not particularise the respects in which distribution of the documents is said to be misleading or deceptive; for example, whether they contain materially false statements or not. However, again this is essentially a complaint of absence of particularity; the absence of the particular respects in which the conduct is said to have contravened s. 52 does not vitiate the pleadings. It will be recalled that the earlier application by the respondents to strike out the statement of claim was unsuccessful and that the case was fought throughout on the basis that the conduct of Delita which was said to be misleading or deceptive was the distribution of the relevant

documents each of which contained materially false statements inducing

the applicants to invest in the quava projects. I say again that I would have allowed the applicants to amend the statements of claim to overcome the defects asserted by counsel for the respondents 1t I had

Although the allegations made in paragraphs 7, 8 and 9 of the statements of claim refer to the distribution and dissemination of the relevant documents the word dissemination adds nothing to distribution. Also, aithough the relevant paragraphs of the statement of claim refer to relevant conduct as being misleading or deceptive or likely to mislead or deceive I shall throughout my reasons simply refer to allegations of misleading or deceptive conduct. This should be taken as incorporating in those references a reference also to

What were the representations and how and by whom were they made?

Neither Glasson nor Lewin was called by the respondents to give evidence. Nor was Morrison or Bennett called as a witness by any party. A document was tendered in evidence, being a deed dated 24 September 1984 whereby Delita, Glasson, Lewin, Morrison and Bennett agreed to resolve the differences between them relating to the questions involved in this case. In brief. the deed provided that (i) Morrison and Bennett indemnified Delita. Glasson and Lewin as to one-third of the monetary value of any judgment which the applicants may obtain against Delita, Glasson and Lewin in this or other

proceedings based on the same, or substantially the same facts; (ii)

Delita, Glasson and S"ewin indemnified Morrison and Bennett 4 £0

two-thirds of the monetary value of any judament which the aoolicants may obtain in any proceeding against Morrison and Bennett; (iii. the parties would share the costs of these and any other proceedings in certain agreed proportions; (iv) Morrison and Bennett, Delite,

Glasson and Lewin would pay certain sums of money to each other in

consideration of the discontinuance of their respective cross-claims.

A considerable bedy of evidence was tendered in this case concerning various companies, the trusts of which they were trustees and their interlocking relationships. The companies included Danille Pty. Limited, Ferric Pty. Limited, Renwell Projects Pty. Limited, Bennett Research Pty. Limited and Quialo Pty. Limited. In the end I do not think this evidence matters very much or at all. Ultimately the relevant facts are fairly simple and in a rather narrow compass. I see no point in traversing the whole of the evidence in the case. I

have considered it all and intend to state my conclusions.

On 7 September 1979 a letter was written to Mr. F. Stein, one of the investors and an applicant, on the letterhead of Australian Plantations and signed by Lewin. Stein received the letter in mid September 1979. Various statements which were made to investors in the documents sent to them by or on behalf of Robert Morrison &

Associates are echoed in this letter. The letter was sent to Morrison

In 1979 and 1980 Mr. Oswald Blake conducted a reali estace

agency in Alstcnville on the north coast of New South Wales. He knew

both Lewin and Glasson. Morrison telephoned Blake early in i760 saying that he intended to visit the north coast with Bennett to lcok at a macadamia nut plantation with a view to purchasing one. Biake told Glasson of Morrison's intentions and Glasson asked Blake to arrange for Morrison to have a talk with Glasson and Lewin about guavas. A letter dated 21 January 1980 was sent by Australian Plantations and signed by Glasson to Blake giving "an appraisal" of the present and future prospects of the guava industry in Austraiia. Again various statements made in this letter are reflected or echoed in the documents sent to the investors. On 2 February 1980 Morrison and Bennett travelled to the north coast and met Blake. Blake introduced them to Glasson and Lewin. Morrison, Bennett, Glasson and Lewin, in the presence of Blake, discussed guavas generally as well as other matters. It is plain that both Glasson and Lewin sought to interest Morrison and Bennett in the promotion of the guava industry. It is also plain that the letter of 21 January 1980 was sent to Blake

at least for the purpose of his giving it to Morrison. After the

"He had been to Sydney and met Robert Morrison and , was getting on very well with him and that I CBiakeJ did him CGlasson] a denn good turn in introducing him."

"Look, the avocado plantation, the syndication by Robert Morrison seems te be going well and if that is finalised there will be $10,500 in your pocket" He then went on to say that:

that if that one was syndicated as well, there would be $20,000 in my pocket."

Glasson, Lewin, Morrison and Bennett met again on the weekend of of 23-24 February 1980 and correspondence passed between them in late February 1980. Glasson and Lewin said "the spirit of co-operation with which we are entering into the arrangement has been accepted by us all". Glasson and Lewin agreed with Morrison and Bennett to maintain a guava plantation for them for a special rate of $750 per acre provided Morrison and Bennett syndicated 200 acres and ensured that Delita was the manager "at our usual rates" namely $1,200 per acre. By late March 1980 negotiations were weil in train for the purchase of a number of properties to be used for the syndication of the guava property trusts and instructions were given to a firm of

solicitors in Lismore, Messrs. Stone & Poulos, to act in relevant

On 28 April 1980 Glasson and Lewin visited Hawaii. They returned om 12 May 1980. On 5 May 1980 Lewin saw a draft of one of the brochures or other documents issued in mid 1980 by Robert Morrison & Associates to the investors. Glasson saw adraft of one such

Various drafts of the relevant document were prepared from time to time. It was submitted by counsel for the applicants tnat Lewin substantially drafted or at least approved the pink edition of the No. 1 Guava Property Trust brechure. The later editions contained relatively minor changes so far as matters material to this case are

concerned. Although I recognise some force in this submission I do

The relevant documents seen by the investors were a brochure

relating to the No. 1 Trust (pink), another brochure relating to the

same trust (yellow), a brochure relating to No. 2 Trust, and a

brochure relating to No. 3 Trust. There were also some three versions

of the document styled "Reasons for Recommending the Guava Property

It is clear, with perhaps some exceptions to which I shall refer later, that all applicants received or saw copies of the relevant brochures and that most received copies of the document "Reasons for Recommending the Guava Property Trust". I will refer to the position of.individual investors later. None of the brochures or the document "Reasons for Recommending the Guava Property Trust" were sent to investors by any of the respondents. They were all sent by Robert Morrison & Associates. The relevant statements contained in those documents in substance reproduce the statements made in the two letters to which I have referred namely, the letter to Stein of 7 September 1979 and the letter to Blake of 21 January 1980, (the

"Stein" and "Blake" letters) both from Australian Plantations. It is

clear that there was reasonably frequent communication between Lewin

and Glasson on the one hand and Morrison and Bennett on the other from

On 14 June 1980 Glasson, Lewin, Morrison and Bennett met in Sydney and had dinner together. They discussed the syndication of the guava property trusts and various questions relating thereto including the question of Morrison's commission. Mr. Stone of Stone & Poulos, solicitor, had sent one of the brochures relating to the Guava Property Trust No. 1 to Morrison on 9 June 1980, having previously

expressed considerable concern about a draft of it to Lewin.

I referred in the opening part of my reasons for judgment to the establishment of the relevant property trusts and partnerships and the involvement of the respondents in it. I need not repeat what I said except to say that those statements also represent my findings of fact. In the early part of 1980, probably on or about 23-24 February 1980, Glasson, Lewin, Morrison and Bennett decided to promote the scheme for growing and processing guavas the subject of this case. Delita was a party to the joint enterprise; it was the proprietor of Australian Plantations which itself was to act as the manager of the relevant plantations. Each of Glasson, Lewin, Morrison and Bennett was co bring his own particular expertise to bear in the promotion and establishment of the property trusts and partnerships. Although the relevant documents upon which reliance-is placed in this case were distributed by Robert Morrison & Associates and not by Glasson, Lewin

or Delita it is plain that Lewin, Glasson and Delita were aware of the

contents of the documents, of the fact that they were being distributed to potential investors for the purpose of involving then in a scheme for growing and processing guavas and that the distribution of the documents to potential investors fell within the tasks allotted to Morrison and Bennett. The evidence is not precisely clear as to whether there was any line of demarcation drawn between the activities required or expected of each of the participants in the joint enterprise, although some correspondence between the four tends

In a letter of 29 February 1980 from Morrison and Bennett to Lewin and Glasson the four are referred to as offering a "powerful combination which should cover all aspects of the guava project". Morrison described his role in the venture as to help in the formation

and marketing of the syndicate formation components of our plan". The

"I CMorrison3 also see my role as one of assisting John €Bennett3] in the formation of marketing ideas and no doubt all our roles will overlap to a certain degree. ... I see John's role as one of holding the responsibility of marketing guava puree, be it to distributors or direct to the market place ... John is of course the most able to provide the market research necessary to establish and prove potential markets, and to market in the most appropriate manner."

That all four benefited from the arrangements and received profits from the venture is evident in the letter of 25 February 1981 from

"Bustralian Plantations has received equal land profits as members of Ballina Plantations as well as acting as the principal contractors for the Trusteés. John Bennett has also received approximately one hundred thousand dollars from the profits of the land sales and preparation as you have, and like Australian Plantations he has not received any commissions."

The statements made to investors in the documents distributed by Morrison & Associates or made orally by or on behalf of Morrison were all made within the scope of the authority given to Robert Morrison & Associates by Delita, Glasson and Lewin. Indeed. the objectives of the persons concerned could not have heen fulfilled

without this involvement by Robert Morrison & Associates. It was an

Other companies, some of which I have mentioned earlier, performed roles in the establishment and furtherance of the guava growing project but nothing turns on this for presently relevant

In my opinion the relevant representations which are the subject of this case were made by Delita. They were conveyed by Robert Morrison & Associates within the scope of authority given to Morriso.: and Bennett by the consortium which included Delita. Throughout the relevant conduct, Robert Morrison & Associates, in making representations to the investors, plainly acted for the benefit of Delita and Delita plainly ratified its conduct and derived benefit

Each of the applicants sues the respondents for damages said to arise from materially false statements in the documents emanating from Robert Morrison & Associates and upon which they claim to have relied when investing funds in the guava projects. There are four guava property syndicates and partnerships mirrored in the grouping of the applicants into four sections in the statements of clain. The documents which came to the attention of the investors varied from syndicate to syndicate and to some extent from investor to investor within each syndicate. But the essential statements on which the applicants rely to establish their case and on which the proceedings turn are substantially the same in each of the brochures read by the investors in ail four syndicates and, although in condensed form, in the document "Reasons for Recommending the Guava Property Trust". They fall conveniently into statements relating to the following six

1. The overseas market for guava puree and guava products;

2. The Australian or the domestic market for guava puree and guava products; ,

3, The costs of growing, processing and marketing guavas and guava products;

4, The profits from the guava syndicates and the viability of the guava projects;

5. The respondents' knowledge of overseas and domestic markets

I see no purpose in analysing every relevant statement in each of the brochures and other documents relied on by the applicants. It is sufficient if I take one brochure as a fair sample, a course followed by the parties themselves before me in evidence and address and which is the only practicable course to follow. I take the first brochure (called because of its colour the pink brochure) relating to Guava Property Trust No. las a fair sample, although some of the statements made in it were not repeated in any of the other documents. It was the brochure to which most attention was devoted by the parties in the case as representing a reasonable sample. A copy of this brochure is attached to these reasons for judgment as a schedule. Before referring to the particular statements made in this brochure it is important to say that each document must be read as a whole. The impression which I gained from my first reading of the documents and indeed from all subsequent readings, an impression shared by the investors who gave evidence before me, was that the guava growing, processing and marketing projects were represented in glowing terms as safe, exciting and lucrative investments with excellent long term prospects providing safe and high yielding superannuation and income benefits and probable tax deductions. The existence of markets for Australian grown guavas and their products was obviously fundamental to the success of the venture and to inducing rcople to invest in it. The documents painted a picture of excellent potential both here and abroad for the marketing of guavas and guava products. The evidence from investors before me confirms that they regarded the statements in the documents relating to markets both here and overseas as vital in

deciding whether or not to invest money in the guava projects.

The various statements are summarised in paragraph 6 of the

statements of claim and the schedule thereto and may be conveniently growped as follows (my references hereunder are to the matters pleaded in the statements of claim (para. 6) and my references to sub-paragraphs are to the sub-paragraph of paragrapn 6- of the

Overseas Markets (b) "Chat there existed a substantial demand on the mainland of

the United States of America and in Japan for the products of guava

(c) "that there existed in Hawaii a lack of production to cater for local demand, that Hawaiian processors would take all of the guava puree which could be supplied by guava plantations as projected by or

(d) "that a guava fruit growing and processing industry in Australia was commercially viable, both domestically and in export

Domestic or Australian Market (da) "that a guava fruit growing and processing industry in

Australia was commercially viable, both domestically and in export

Costs of Growing and Processing Guavas and their products and

(g) "that the costs of growing and processing guava fruit as

projected by or on behalf of the respondents were a true and accurate

(h) "that the costs and expenses of growing and marketing guava fruit as projected by or on behalf of the respondents represented a

reasonable and proper charge in respect of such costs."

Profitability and Viability of Guava Ventures (d) "that a guava fruit growing and processing industry in

Australia was commercially viable, both domestically and in export

(ft) "that, based on overseas and local experience available to the respondents, returns in relation to the growing and processing of guava fruit showed a lucrative early return, rising to an anticipated

The Respondent's Knowledge of Markets Both Overseas and

Domestic and of the Guava Industry Generally and their endorsement of

statements made in the documents relating to those matters.

(a) "The respondents, through an entity Australian Plantations, had carefully monitored the development of a guava fruit growing and

(b) "That there existed a substantial demand on the mainland of the United States of America and in Japan for the products of guava

fruit growing and processing industry and that the extent of such

{c) "That there existed in Hawaii a lack of production to cater

for local demand, that Hawaiian processors would take all of the guava puree which could be supplied by guava plantations as projected by or

on behalf of the respondents and that the extent of such demand was

Miscellaneous (j) "That the New South Wales Department of Agriculture had made

certain statements to the respondents, repeated by them as having allegedly been made by that Department as to the acreage requirements

Turning to the pink brochure, the relevant statements

appearing therein may be broadly classified as follows:-

1. OVERSEAS MARKETS - "The drink has also been promoted in

Hawaii, Japan and America, and the demand is so strong that it

"The guava can produce up to 500lbs per tres. There are approximately 500 acres of guava trees planted, or piamned to be planted in Australia. Over 80% of this is under our management. Within four years this will produce around 8,000 tons of oburee,

"THE MARKET" - "As mentioned, an extensive export market exists for our puree, ... A recent trip to Hawaii has confirmed reports that Hawaiian processors will take all the puree we can give them. They do not have enough production to cater for their local demand, let alone

to supply the rest of America or the Japanese market.

In other words, it appears our total production could be sold to export markets."

"As mentioned we have ourselves fully covered with an eager domestic and overseas market. ... To be conservative, we have deliberately kept the number of acres under plantation down, and have established export markets prior to further planting. We are neither solely dependent upon the export market nor the domestic market to sell our produce." (These last mentioned statements were not repeated

"The guava can produce up to 500lbs per tree. There are approximately 500 acres of guava trees planted, or planned to be planted in Australia. Over 80% of this is under our management. Within four years this will produce around 8,000 tons of puree,

",.. it appears our total production could be sold to export

markets. This is not the intention, as the domestic fruit juice market will be promoted with some fruit juice distributors offering

large promotional budgets in return for the supply of initial puree."

"As mentioned, we have ourselves fully covered with an eager domestic and overseas market. ... To be conservative, we have deliberately kept the number of acres under plantation down, and have

established export markets prior to further planting. We are neither solely dependent upon the export market nor the domestic market to

sell our produce." (These last mentioned statements were not repeated

3. COSTS OF GROWING AND PROCESSING GUAVAS AND THEIR PRODUCTS AND

Various references in the brochures including the pink brochure, to land cost or land preparation costs and other related matters which I will for convenience not mention here but refer to

later when considering this particular subject matter.

"Developing plantations makes a lot of investment sense,

On page 2 of the brochure reference is made to Options I and II, and reliance is placed by the applicants under this head on all

_ "Participation in this venture must be viewed as ~more of a business undertaking than an investment with accurate and defined

"The guava can produce up to 500ilbs per tree. There are approximately 500 acres of guava trees planted, or planned to be planted in Australia. Over 80% of this is under our management. Within four years this will produce around 8,000 tons of puree,

"6. Plantations do not have the traditionally uncertain

nature of general farming. Plantations are enormously capital intensive, and the use of irrigation and modern science removes the

reliance upon the whims of Mother Nature. Plantations are more a

"7. Be it boom or bust, future security must be in the production of food. Further, Australia is predicted to become the "Peeder of the Worid", as the world's growing population restricts the

"In the income earning years, liquidity would increase and

There are six paragraphs on page 7 under the head "Capital Gain Potential" all of which are relied upon by the applicants under

"As we see it, the risks are not so much in the growing of the guava but in the marketing. As mentioned, we have ourselves fully covered with an eager domestic and overseas market. ... To be conservative, we have deliberately kept the number of acres under plantation down, and have established export markets prior to further planting. We are neither solely dependent upon the export market nor the domestic market to sell our produce." (These last mentioned

statements were not repeated in the other documents.)

The appendix to the brochure contains detailed figures with respect to both Options I and II. All of this material is relied on

5. THE RESPONDENTS' KNOWLEDGE OF MARKETS BOTH OVERSPAS AND

DOMESTIC AND OF THE GUAVA INDUSTRY GENEPALLY AND THEIR ENDORSEMENT OF

STATEMENTS MADE IN THE DOCUMENTS RELATING TG THOSE MATTERS.

The applicants rely upon the whole of the document and the

particular statements made in it which directly relate to the

knowledge of the respondents of these matters including the following:

"The guava can produce up to 500lbs per tree. There are approximately 500 acres of guava trees planted, or planned to be planted in Australia. Over 80% of this is under our management.

Within four years this will produce around 8,000 tons of puree,

"As mentioned, an extensive export market exists for our puree, ... A recent trip to Hawaii has confirmed reports that Hawaiian processors will take all the puree we can give them. They do not have enough production to cater for their local demand, let alone to supply

In other words, it appears our total production could be sold

to export markets. This is not the intention, as the domestic fruit

juice market will be promoted with some fruit juice distributors offering large promotional budgets in return for the supply of initial

"As we see it, the risks are not so much in the growing of the guava but in the marketing. As mentioned, we have ourselves fully covered with an eager domestic and overseas marnet. ... To be conservative, we have deliberately kept the number of acres under plantation down, and have established export margets prior to further

planting. We are neither solely dependent upon the export market nor

the domestic market to sell our produce." 6. MISCELLANEOUS

No part of the pink brochure is relied on under this head but

the applicants rely upon statements in the Blake and Stein letters to

_the effect that agricultural officials have estimated 500 acres will

be needed to satisfy 5% of the Australian fruit juice market. Ina sense this is reflected in the brochures in statements which were made to the effect that Australian Plantations expected 500 acres to produce 8,000 tons of fruit sufficient for 40 million litres of guava

For convenience I shall discuss the statements made in the

Most of the evidence concerning this issue was given by witnesses in Hawaii before the Commission which was held there in June

1984 and from documents tendered there. In the main this evidence was

admitted without cbjection at the final hearing. Tne witnesses who

gave evidence before the Commission included the following:-

Dr. Frank Scott, a highly qualified agricultural economist whose speciality is market potential and market development of various tropical products including guavas. He has been continuously involved since 1954 in tropical crops in Hawa1i including guavas. In dune 1984 he was Professor of Agriculture and Research Economics at the University of Hawaii. He was head of the Department of Agricultural Economics for 11 years. He is a highly qualified expert

Mr. Kanai, the Secretary and Treasurer of Suisan Company Limited and Suisan Fruit Processing Co. Inc. The latter isa wholly owned subsidiary of Suisan Company Limited and is one of the major fruit processing companies in Hawaii. I accept

Professor Gordon Shigeura, a highly qualified horticulturalist especially in fields of tropical fruits including guavas. In June 1984 he held the rank of Emeritus Horticulturalist in the College of Tropical Agriculture, University of Hawaii. From its inception he has served on the Guava Industry Analysis Group of the Department of Planning and Economic Development, Hawaii. Although

Professor Shigeura's qualifications were primarily in the

field of horticulture, he had a real knowledge of the guava industry in Hawaii including matters celating tc markets. I

Mr. Farais, an agricultural consultant with high qualifications and one time Chairman oftne Board and direccor of the Hawaiian Department of Agriculture. He was alsoa member of the Governors Agricultural Co-ordinating Committee (1976-1981) and President of the Western Association of State Departments of Agriculture (1979) and director of the National Association of State Departments of Agriculture

(1979-1980). He was an impressive witness and again highly

Mr. Putnam Clark, a witness called by the respondents. He was a Master of Business Administration (University of New York) with a major in corporate finance. Between 1979 and 1980 he was the Director of the New Product Development Division of C. Brewer and Company in Honolulu, Hawaii with responsibilities specifically in the area of guava market development. I accept Mr. Putnam Clark as a truthful witness, although on some relevant issues his evidence differed from the evidence of other witnesses. Where theic evidence conflicts I prefer the evidence of the other witnesses. I do not intend to derogate from the evidence of Mr. Clark, but he did not have the expertise and qualifications in relevant fields to the same extent as did

The Hawaiian exhibits were numerous and diverse in character. They included various publications of persons expert in the growing, processing and marketing of guavas including some of the persons who gave evidence on the Commission, statistics of the Hawaiian Department of Agriculture, analyses of the agricultural industry with specific reference to guavas, analyses of consumer demand for guavas in Hawaii

Other evidence given before the Court at the final hearing

In and about 1980 the Hawaiian market was saturated with guavas and guava puree and there was no reason to support the view that any change or upsurge in market potential was likely. However, some people in Hawaii including some experts were giving encouragement to farmers and to others to enter into guava production and to produce more guavas, thus reflecting the fact that there was amood of optimism amongst some people in the relevant field in Hawaii as to the future of guavas there, including its export potential to the mainland of the United States and to other countries. This optimistic view was, however, against the preponderance of informed opinion. Although there was a large increase in and about 1980 in the production of guavas in Hawai1t this reflected heavy plantings that had been in

existence for the preceding three years -or so and did not reflect any

rapid escalation in the demand fer guavas or guava products. There was no shortage of suitable land in Hawaii for the growing of guavas. but the problem was one cof marketing. Guava juice is produced as the result of the processing of the guava puree which in turn results from the initial processing of the guava fruit itself. There is a very high yield of pulp and of juice from the guava fruit. On the supermarket shelves (supermarkets being the primary outlet for guava juice and for frozen guava nectar and many other guava products) guava must compete with other well established juices, particularly orange and apple juice. Guava simply could not compete at the relevant times with these juices because they held most of the market share in Hawaii

There was some importation of guava puree into Hawaii in the period 1977 to 1982, but it was essentially to meet an immediate need. Generally speaking the production of guavas in Hawaii from those grown wild or cultivated by farmers exceeded the demand for guavas and guava

It was not feasible for guava puree to be imported into Hawaii from Australia at any relevant time including approximately May 1980. Two factors which militated strongly against the feasibility of guava puree being imported into Hawaii from Australia were (i) local supply was plentiful and (ii) the U.S. government's policy

From 1979 to at least 1980-1981 there was a general over-supply of guava puree from Local production in Hawaii. Alisc, it was reasonabiy foresesable in 1980 that Australia would not be able to compete with South American countries in the production of guavas as they were able to supply guava puree at much lower prices because of

lower costs, including lower production and freight costs.

In my opinion the statements made in the documents relating to the overseas markets for guava puree had no factual foundation to support them at the time they were made or at any other relevant time. Although they may have been made at a time of some optimism about the guava industry in this country and elsewhere the evidence points

overwhelmingly to the conclusion that the statements were unrealistic

Evidence of the actual and potential domestic market for guava and for guava puree and guava products in and about 1980 and

subsequent years in Australia was given by a number of witnesses

x Russell Norman Phillips, the General Manager of Southern Cross Beverages Pty. Limited, a witness of considerable experience over many years in the fruit juice and fruit processing industries. He is also experienced in relation to matters of sales and marketing. He was an impressive witness and I accept the substance of his

evidence especially with respect to domestic markets.

• Peter Holdsworth, Director of Mangrove Mountain Fruats Pty. Limited and also Mangrove Mountain Fruit Juices Pty. Limited anda Fijian company, Southern Pacific Foods Pty. Limited. He is a witness with experience in the production and marketing of fruit juices and

their products at relevant times. He too was an impressive witness.

x Dr. Cyril Maxwell Martin, regional chief executive of Fielder Gillespie Davis Pty. Limited, a highly qualified food technologist with experience and qualifications essentially in the field of product technology in the food industry involving the extension of old products to new products and the development of new products especially in the fruit juice industry. He is alsoa man of considerable experience in the field of developing and marketing tropical fruits. For a period of 5 years he served as a senior technical adviser to the United Nations Food and Agricultural Organization. Although counsel cross-examined this witness for the purpose of establishing that, while highly qualified and experienced in the field of food technology, he was without qualification or experience in relation to marketing, the attempt failed. The positions (including managerial positions) held by the witness over the years in various companies show to my mind that he had considerable experience and knowledge in relation to the marketing of fruits and fruit products, including guava. Dr. Martin's marketing knowledge is essentially based on experience through his business

activities. I accept the substance of his evidence including his

evidence in the field of markecing. Even if I were to ignore his evidence in relation te marketing, however, there is a consideraple

body of other evidence which supporcs the substance of the conclusions

• Peter Lewis, manager in charge of technical Cevelopment at Percentum Products Pty. Limited, a qualified industrial chemist and an associate of both the Royal Association of Chemical Institutes and the Australian Association of Food Science and Technology. He is an expert in research and development of fruit juices and fruit products. His evidence with respect to matters of marketing was very limited,

but I accept it to the extent that it concerned the real issues in the

x Richard Moran, Managing Director of Tweed Valley Fruit Processors Pty. Limited, the largest processor of minor fruits in Australia including guavas. He was basically a reliable witness and I

The conclusions which I draw with respect to matters relevant to the domestic market so far as the statements in the documents are

• There has never been a significant domestic market in Australia for guavas or their products. In 1979 or 1980 and at no other material time was there any sign of any significant domestic market in existence or developing within a reasonable time thereafter

or within the period of years contemplated by the brochures.

a In 1979 and i980 there were no indications of the development

in the future of a market for anything of tne order of 500 tons of

x In 1980 sensibly based predictions would have concluded that

the 1983 or 1984 domestic consumption market for guava puree would be not more than 100 tons. In 1979 and 1980 there was very little guava

juice or guava product sold on the Australian market. In 1980 the prospects of the domestic market absorbing the then domestic production of guavas and guava products were dim and the prospects of

• In 1979 and 1980 there were no signs of any real improvement

in the Australian market for guava puree or guava products.

In my opinion the statements made in the documents relating to the domestic market which plainly convey: the impression to the reader that there will. be large, developing and buoyant domestic

market for guava products including guava juice are entirely

I have made allowance for the fact that one must not look back upon the events of 1980 with the wisdom of hindsight and for the further fact that there was some degree of optimism both here and

abroad with respect to guavas at or about that time.

4. Costs OF GRONING AND PROCESSING GUAVAS AND THEIR PRODUCTS AND

Statements in the documents relating to costs of the guava projects are most easily and conveniently considered together with the

statements relating to profitability and viability.

The documents contained detailed figures, cashflow statements, costs rélating to purchase of land and trees, costs involved in land preparation and maintenance, tax deductions, projected income and profits and other matters of this kind. The figures were all based on the critical assumption that there would be a market for the produce, that is for the guava fruit. To the extent that this assumption is, as I have found it to be, false, then the assessments and estimates of costs and returns must also be false in consequence. But the applicants challenged many of the statements and figures in the documents relating directly to questions of costs and profits independently of their incorrectness in consequence of the

falsity of the representations relating to markets. The matters challenged by the applicants included:-

• Estimates of picking costs which were said to be unreasonably

and was trustee at the time the management agreament with Delita was entered into. Both companies were made applicants in the proceedings. Mr. Duncan received a copy of the Guava Property Trust No. 2 Brochure and the "Reasons for Recommending the Guava Property Trust". He alss received the Guava Property Trust No. 1 Brochure (pink). He said ic was the statements in the brochures together with those made by Morrison to whom he spoke that induced him to invest in the scheme. I

accept his evidence in relation to his own investment and that of the

William Sprott was cross-examined. He invested in his own right. An investment was also made by him and Mr. H.B. Turner as trustees for the Bill Sprott Settlement Trust. It was not disputed that the evidence given by Sprott covered the investment of himself and the trust. Sprott received the Guava Property Trust No. 3 Brochure end the document "Reasons for Recommending the Guava Property Trust" together with another document being a letter which he received from Robert Morrison & Associates relating to the guava investment. He specified the information upon which he relied and I accept that he relied heavily upon the statements made about the export masrkec

Neil Robert Gilbert, psychologist, and Mary Carmel Gilbert,

secretary, were not cross-examined. They swore an affidavit in which

they said that they received the Guava Property Trust No. 1 Brochure

(pink) and later the Guava Property Trust No. 3 Brochure together with acopy of the "Reasons for Recommending the Guava Property Trust". Their decision to invest was made cn the basis of the material contained in the documents and in particular various items of

information including information about markets here and abroad.

Jonathon Barber was cross-examined. He is a mining engineer. Mr. Barber received a copy of the Guava Property Trust No. 2 Brochure and possibly he received another brochure as well, but the evidence is a little unclear about this. He also relied on statements made cto him by Morrison. I accept his evidence and that of his wife, Astrid Elizabeth Barber, who herself studied the Guava Property Trust No. 2 Brochure with her husband and was present during the relevant

Allan Joseph Bridger (""Dr. Bridger) invested in his own right

as a partner. An investment was also made by George Patrick Bridger as trustee for the A.J. Bridger Family Trust. The trust acquired units. Dr. Bridger's evidence was accepted as governing both his own investment and that of the trust. Bridger received the "Reasons for Recommending the Guava Property Trust" and the Guava Property Trust

No. 1 Brochure. Bridger also spoke with Morrison on two occasions. f

Arthur Edward Perrott was not cross-examined.- He first

became aware of the Guava Property Trusts in 1980 in the course of nis

association with Morrison and Mr. Charles Weir, the Melbourne

representative of Robert Morrison & Associates, Indeed, Perroct was at that time doing part-time work for Robert Morrison & Associates. He has access to the "Reasons for Recommending the Guava Property Trust" document and the Guava Property Trust No. 2 brochure. He also spoké on numerous occasions with Morrison and Weir about the investment, and their statements to him were consistent with the

material contained in the documents. I accept his evidence.

Lillian Joan Perrott, the wife of Mr. Perrott, relied solely on her husband's statement that, having read 'the "Reasons for Recommending the Guava Property Trust" and the brochure of Guava

Property Trust No. 2, it appeared to be a good investment.

Bryan John Milner was cross-examined. He is a qualified accountant and formerly a company secretary. He was also the manager of the guava enterprise from May 1983. That was of course well after any investment decisions were made with respect to the guava projects. Milner received the Guava Property Trust No. 1 Brochure and the "Reasons for Recommending the Guava Property Trust" document. He also received a Progress Report of July 1980, but in my opinion the relevant investment decisions were made before he received the last mentioned document. He specified the reasons which supported his investment including the statements in the brochures about markets. He had a conversation with Mr. Bruce McAllen of Robert Morrison &

Rober: Ian Evans was crcess-examined. fe isa a Lujivu Pty. Limited which in its capacity as trustee for the Boaida Trading Trust is a unit holder in the Guava Property Trust No. 3 and a partner in the Guava Property Partnership No. 3. Evans' evidence related to this investment. He received the Guava Property Trust No. 3 Brochure. He also had conversations with Dwyer and Morrison, both of whom indicated that the overseas market for guavas had been investigated and that 'there would be no difficulty in selling the puree. He said that the documentary material together with

discussions with Dwyer and Morrison led to his making an investment.

Pamela Ann Tingle was not cross-examined. She read the Guava Property Trust No. 2 Brochure and the "Reasons for Recommending the Guava Property Trust". She also had conversations with a representative of Robert Morrison & Associates. She relied upon the information about the markets for guavas amongst other things and I

cross-examined. He received a Guava Property Trust Brochure and spoke to someone from the office of Robert Morrison & Associates. Among the factors which influenced him when making his anvestment were statements as to overseas markets and the financial projections which

were regarded by him as most attractive. I accept his evidence.

Keith Colin Reece was cross-examined. Mr. Reece is an accountant. He received a copy of the "Reasons for Recommending Guava Property Trust" and the brochure relating to Guava Property Trust No. 3. He also spoke to Morrison on matters relating to casnilow and

markets. He too relied on the statements made in the brochures and by

Morrison. I accept his evidence. : Walter yanz Bock was cross-examined. Mr. Bock is a

hairdresser. He saw the Guava Property Trusts Brochure (yellow) and

he spoke toaMr. Keith Stone of Robert Morrison & Associates. He

also received a copy of the "Reasons for Recommending the Guava Property Trust" and he gave that document together with the brochure

Mr. Bock's wife, Franziska Bock was not cross-examined. She relied for the investment decision upon the recommendation of her

husband and her perusal of the documents received by hin. I accept

Ann Margaret Michaelis was cross-examined. She 1s a retired

psychologist. She received the Guava Property Trust brochure (yellow) and the "Reasons for Recommending the Guava Property Trust". She also spoke to Morrison and Dwyer. She specified the matters upon which she

placed particular reliance including the statements about markets. I

Frederick Arthur PBanzs, a manager, and Moilic Marquerits

Banks invested through Stacon Projects Pty. Limited as trustee far the

Sopac Trust. Mr. Banks received and read the Guava Property Trust No. 3 Brochure and "Reasons for Recommending the Guava Property Trust" and spoke to Dwyer. Mr. Banks latsr spoke to his wife about tha prospective investment. He said that it was the information contained in the documents together with statements by Dwyer which constituted the primary reason for the investment being made. Soon after the investment was made Mr. and Mrs. Banks were divorced and as fart of the property settlement Mr. Banks received his former wife's share in

John Large was not cross-examined. He was the person in control of Lausanne Pty. Limited which invested in the guava property trust as trustee for the Lausanne Trading Trust trading as Lausanne Investments. All aunformation received by Lausanne on the Guava Property Trust No. 4 was received by Large on its behalf. Large received the "Reasons for Recommending the Guava Property Trust" and the Guava Property Trust Brochure No. 3. He also had discussions with Charles Weir of Robert Morrison & Associates. He relied primarily on the statements in the brochures together with the statements made by

The Trustees of the Order of the Blessed Sacrament Fathers

also took up a unit in Guava Property Trust No. 4. Application forms

were filled in by Father Ouvrier and two other trustees. I accept

Father Ouvrierc's evidence in relation to the investments.

That completes the analysis of the evidence of each of the

It was submitted on behalf of the respondents that the following applicants in particular cannot rely upon any of the relevant representations in the documents: Mrs. Bock, Colnor Pty. Limited, Ibtec Pty. Limited, Mr. Jones, Mrs. Mitchell, Mrs. Planner, Mrs. Ryan, Mrs. Sprankling and the estate of the late Eric Robertson. The reason for this is that all of the above, with the exception of the estate of the late Eric Robertson, relied on what they were told by either their spouse or a representative from Robert Morrison & Associates. It was submitted that none oF the above relied on the documents to make their decision to invest; but in the case of the estate of Robertson it was not clear on what documents the deceased did rely. I have already dealt with all of these matters earlier. [I

It was submitted that the applicants are sophisticated investors, that they knew or must have known that the investment contained a substantial element of speculation, that they were "getting in on the ground floor" of a new type of investment, that they were to be involved in primary production with all the attendant uncertainties that this entailed. It was submitted that the

applicants must have realised from the documents and from anythin

ard oraily ts them by cr on behalt of Rcbert Mors Associates that nothing contained in the documents or representatrons was guaranteed either with respect co markets, capital gains, inccme returns, costs and expenses or otherwise. Reliance was placed upon the fact that it is particularly difficuit to state with any degree of precision the expected returns from the conduct of primary producticn especially primary production of a new fruit. It was said that it was in this context that the documents and other representations must be read to determine whether they could be misleading or not and if they are whether they were in fact relied upon by the investors. I have carefully considered all these submissions, but for the reasons

"on the question of damages counsel for the applicants put the case on the basis that the applicants were entitled to recover what they had lost, namely, the monies that had-been paid by them towards the guava property trusts or partnerships reduced by the value of what was left to which should be added some allowance for the loss of the use of the monies in the meantime, that is, damages in the nature of interest. He, I think, correctly dissected the heads of loss into those sustained by contributions to the property trusts and those sustained by contributions to the partnerships. He said each snould be considered separately. Counsel for the applicants tendered detailed schedules of calculation of losses of the applicants. Some of the contents of the schedules are dependent upon my findings of fact in this case. The course I propose to follow is not' to find

specific sums of money that have been sustained by way of loss by each

applicant, but to indicate in general terms what damages snou

awarded, then direct the applicants to bring in short minutes of crde

I should say at this stage that in cross-examination of some of the applicants attempts were made by counsel for the respondents to lay the ground for a submission that the applicants or some of them had not taken steps to mitigate their loss after it became apparent that the guava ventures were in serious financial difficuities and

that the markets for the sale of guavas, guava puree and their

products did not exist or at least did not exist except to a small degree. But no submissions were finally made to me on this question, so I do not propose to consider it except to say that it would have

been in my view impossible for a submission along these Lines to have

It was common ground that the proper approach to the question

of damages should be that adopted by Fox J. in Brown v. Jam Factory

Pty. Limited (supra) and by Fitzgerald J. in Frith v. Gold Coast Mineral Springs Pty. Limited (1983) 47 A.L.R. 547, that is, that

damages should be assessed as on an action for deceit. Hence Tf

approach the assessment of damages on this footing.

The issues between the parties on the question of damages are

(a) Whether tax savings of partners resulting from claims to deduct losses should be taken into account in mitigation of their loss. Some applicants made claims to the Commissioner for Taxtaion for contributions made by them to the partnership trusts to be treated as allowable deductions. Some of the claims were allowed, others were disallowed but objected to, In some cases the objections have not been determined by the Commissioner, while in others they have been determined adversely to the taxpayers but are awaiting determinations before Boards of Review. It is not disputed that the partnerships carried on the business of primary production for the purposes of the

Income Tax and Social Services Contribution Assessment Act 1936. In

my opinion the tax savings, if any, by the applicants should not be

taken into account in reduction of their claims under s. 82 against the respondents. The monies contributed by the applicants to the partnerships were applied for the purposes of those partnerships. Although it was envisaged by the brochures that tax losses could be claimed by the taxpayers it seems to me to be an irrelevant consideration in deciding the question presently before me. I do not see that there is any relevant nexus between the contraventions of the Act by Delita and any benefit gained by applicants by reason of the allowability of the claimed losses. See Simpson Limited v. Hubbards Pty. Limited (1982) 44 A.L.R. 695.

(b) The applicants claim that they should be awarded a sum by way of damages in the nature of interest for the loss of the money which they contributed to the property trusts and partnership trusts and of which they have been deprived in the meantime. They place reliance

upon the decision of Morling dg. in Gilchrist v. ATS Amusements P::. Limited (1582) 41 A.L.R. 558; and a decision cf a Full Bench cf tn2 Court (Sweeney and Woocward JJ., Neaves J. dissenting) in Centrepo:nt

Freeholds Pty. Limited v. IT.N. Lucas Pty. Limited, unreported, 22

April 1985 which concerned a claim for damages for contraventions of

the Trade Practices Act and damages at common law in the exercise of this Court's accrued jurisdiction. The causes of action arose beftcre

s. SIA of the Federal Court of Australia Act came into operation on 22

November 1984. The applicants claim that s. 94 of the Supreme Court

Any discussion of this question must commence with s. 79 of

"The laws of each State or Territory including the laws relating to procedure evidence and the competency of witnesses shail except as otherwise provided by the Constitution or the laws of the

Commonwealth be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable."

The majority of the Court (Sweeney and Woodward JJ.) in

Centrepoint Preeholds held that s. 79 of the Judiciary Act picked up s. 79A(1) of the Supreme Court Act 1958 (Vic) which reads as follows:-

"(1) The Judge upon application shall in all actions for the recovery of debt or damages give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as he thinks fit from the commencement of the action until the entry of the judgment unless good cause is shown to the contrary over and above the debt or damages awarded by the court or jury."

Sweeney and Woodward JJ. said, at p. 17 of theis joaznac

"In the present case, the award of damages in favour of the applicant was based upon findings in favour of the applicant on the cause of action arising under s. 52(1) of the Act, and causes of action arising under the common law in the exercise of the accrued jurisdiction of the court. These latter causes of action would otherwise have been tried in the courts of the State of Victoria and judgments upon them could have included damages by way of interest in accordance with s. 79A.

Section 79 of the Judiciary Act is not limited to laws relating to procedure and evidence and the competency of witnesses but includes them in the laws of the State which subject to the exceptions set out in the section are binding on all courts exercising federal jurisdiction in that State. The policy of that section is that except as otherwise provided by the Constitution or the laws of the Commonweaith there should be uniformity in the law applicable to the resolution of a matter whether it is tried ina federal court in that State or bya court of that State. On principle, it seems that this policy should apply in a case such as the present toa judgment based upon the law of the State."

Their Honours noted the judgment of Mason J. in Australian

National Airlines Commission v. The Commonwealth (1975) 49 A.L.d.R.

338 where his Honour characterised s. 94 of the Supreme Court Act 1970 (N.S.W.), which gave the Supreme Court of New South Wales power to

award interest in respect of damages as part of the judgment, in these

"However, it is my view that s. 79 does not operate to pick up and apply in proceedings in the High Court a provision such as s. 94 which is contained ina statute designed to define and reguiate the

confece power on that Court to order inceres= on damages in judgments entered by that Ccurct in preceedings before it. No matter how widely it may travel in some respects s. 79 does not in my view pick up and apply in this Court a provision which empowers a particular court of a State tao make orders and enter judgments in proceedings in thaz court. The relevant powers of this' Court are conferred by the Judiciary Act and the High Court Procedure Act 1903-1966, as amended; as I see it they are not to be supplemented by the operation of s. 79 of the Judiciary Act in the manner suggested. Section 26A of the High Court Procedure Act, which provides that judgments of the Court shall carry interest, should be regarded as a comprehensive expression of the entitlement in this Court of a litigant to interest on damages to the exclusion of any provision in State law which would otherwise be made applicable by virtue of s. 79."

The opinion expressed by Mason J. was adopted by me in

Hubbards Pty. Ltd. v. Simpson (1982) 41 A.L.R. 509 at pp. 525-6 with

respect to s. 30C of the Supreme Court Act 1935 (S.A.), a provision

comparable to s. 94 of the Supreme Court Act of New South Wales in its

It should be noted that s. 79A of the Supreme Court Act of

Victoria differs from s. 94 of the Supreme Court Act of New South

Wales and s. 30C of the Supreme Court Act of South Australia in that the former requires the Supreme Court of Victoria to award damages in the nature of interest unless good cause 1s shown to the contrary, whilst the latter provisions confer a power upon the Supreme Court to

award interest in respect of damages up to judgment.

In Centrepoint Freeholds Sweeney and Woodward JJ. differed

from the opinion expressed by Mason J. in Australian National Airiines

Commission and said that s. 79A of the Supreme Court Act of Victoria

is mot so much cencerred with the definition and rerulation of th powers and procedures of the Supreme Court as it is with confercing upon a successful plaintiff an additional right to receive damages by way of interest unless good cause is shown to the contrary. Theic Honours sought to distinguish Mason J's cbservations on the ground that the Supreme Court Act of Victoria contained in the same Part (Part VII) of that Act both ss. 79A and 60, the latter having no counterpart in the Supreme Court Act of New South Wales with which

"The several rules of law enacted by Part VII of this Act shall unless express provision is otherwise made be in force and receive effect in all courts whatsoever so far as the matters to which such rules relate shall he respectively cognizable by such courts."

Their Honours said (at p. 23) that: "The language of s. 60, when it speaks of 'all courts whatsoever' is wide enough to apply to the

Federal Court of Australia". The majority overruled the judgment of

the learned trial Judge in Centrepoint Freeholds (Jenkinson J. whose

judgment is reported in (1984) 52 A.L.R. 467 at pp. 506-514) on this

Neaves J. differed from Sweeney and Woodward JJ. on this question of interest. His Honour agreed with Jenkinson J. that the

language of those provisions (ss. 82 and 87 of the Act):

",.. is not apt to require or authoris= an ayvard of damages by way of interest to cecoup a loss entirely to delay in 'the payment of the roney

view, properly described as loss suffered by reason

"Section 79A of the Supreme Court Act 1958 does not enact a statutory cause of action enforceabl any court possessing the appropriate jurisdiction. It does not create a right to interest but con a discretion upon the judge of the Supreme Court, albeit a discretion which must be exercised favour of a successful plaintiff in the absence of

determining the rate of interest and in calculating the amount to be allowed in addition to the debt or

damages awarded by the court or jury. The p which the section confers is one exerciseable

in proceedings of the kind to which the sec refers: the benefit which it confers cannot be

subject of separate proceedings. The sec postulates that the plaintiff has establishe

Supreme Court a cause of acticn soundin or damages and that the monetary am

ascertained. The provision is, in form and substance, a command directed to the judge a how he is to act in ascertaining the amount t added to the monetary sum awarded in respect of the cause of action in order to arrive at the sum which judgment is to be entered. The nature of provision, which is within Part VII of the statute,

character by reason of the provisions of section 60 of the Act. That section provides:

'60. The several rules of law enacted by Part VII of this Act shall unless express provision is otherwise made be in force and receive effect in all Courts whatsoever so far as the matters to which such rules relate shall he respectively cognisable by such Courts.'

The effect of that provision is simply to direct a similar command to a judge of any other court of the State of Victoria determining an action of the kind mentioned in section 79A.

It may be accepted as the received opinion that, subiect to a qualification to be mentioned, section 79 of the Judiciary Act 1903 does not enable a court exercising federal jurisdiction to give an altered meaning to a State statute which it is required to apply. The qualification to the general principle is that a State law may in some circumstances be rendered applicable by section 79 to a court exercising federal jurisdiction which is not a State court notwithstanding that the law according to its own terms is limited in its application to the courts of the State: see Maguire v. Simpson (1977) 130 Csic] C.L.R. 362 at Pp. 376 per Gibbs J. (as the Chief Justice then was). That quaiification derives from what was said by the High Court 1n John Robertson & Co. Ltd.

v. Ferguson Transformers Pty. Ltd. (1973) 129 C.L.R. 65."

"Section 79A of the Supreme Court Act 1958 is not, in my view, adequately described as a law 'relating to procedure' within the meaning of that expression in section 79 of the Judiciary Act 1903. It partakes of the character of a substantive provision which will, in the cases to which it applies, operate to increase the amount awarded by way of damages to a successful plaintiff. Thus, the consideration which Mason J. regarded as decisive in the passage cited, namely the express inclusion in section 79 of a reference to the laws relating to procedure evidence and the competency of witnesses will not, of itself, provide a sufficient basis for holding that section 79 operates to make applicable in this Court section 79A of the Supreme Court Act 1958,

In my opinion, to conclude that section 79A was, by virtue of section 79 of the Judiciary Act 1903, made binding on the learned primary judge when determining the amount for which judgment was to be entered in this case would not simply be giving to that provision an operation which its language is wide enough to encompass but would be giving ita different meaning from that which it bears as an

anactment ef the State of Victoria. It woul involve converting it into a peovision requiring a judge of this Court to carry out tne function which by its terms it confers on a judge of the Supreme Court of Victoria when hearing and determining an action of the kind to which it refers. This, in ny view, it is not permissible tec do."

Centrevoint Treehclds is distinguishable from the present

case on this question cf interest in the nature of damages, It was

concerned with ss. 7SA and 60 cf the Supreme Court Act of Victoria.

This case concerns s. $4 of the Supreme Court Act of New South Wales, a provision which differs from s. 79A in the respects mencioned

earlier. Also, s. 60 of the Supreme Court Act of Victoria has no

counterpart in the Supreme Court Act of New South Wales, a point

emphasised by the majority in Centrepoint Freehoids. Mason J./'s

observations are in point here because they concern the very same section (s. 94) which applies in the present case. More importantly, however, Sweeney and Woodward JJ., held that s. 79A applied where this Court, in the exercise of its accrued jurisdiction, awarded damages on the common law cause of action of fraudulent misrepresentation. I agree with the observation of Toohey J. in Nella, Brown v. Kingia Pty. Limited, unreported, 6 August 1985 (at p. 7) that Sweeney and Woodward JJ. did not hold that in the case of a judgment of damages for

contravention of a section of the Trade Practices Act a similar

T am free therefore to choose for myself the particular path

that should be followed in this case. I propose to reaffiem the views

expressed by me in Hubbards Pty. Limited. v. Simpson Limited, thereby

agreeing with the approach of Mason J. in Australian Nationai Airlines

Commission and of Jenkinson J. and Neaves J. in Centresoins Freenold:.

The second basis on which the applicants claim what is in essence interest in the nature of damages is the Act itself: ss. 82 and 87. This is a question on which differing views have been expressed by Judges of this Court. Jenkinson J. said in Centrepoint

"The rationale of the common law denial of interest on damages for tort was stated by Latham CJ (70 CLR at 525) in terms which were adopted by the Court of Appeal in Simonius Vischer and Co. v. Holt and Thompson: 'The loss of the use of the money ultimately awarded as damages is not part of the loss occasioned by the tort or breach of contract. It is a loss due entirely to delay,in the payment of money ultimately held to be due, and is not recoverable as part of the damages.' The verbiage in which causation of damage is expressed in ss. 82(1) and 87 - 'suffers loss or damage by conduct'

• does not suggest to me a conception of causality inconsistent with the conclusion reached by the Court of Appeal. Ido not think that either of those provisions authorizes the allowance of the interest claimed."

Neaves J. said in Centrepoint Freeholds that the language of

ss. 82 and 87 is not apt to authorise an award of damages by way of interest to recoup loss due entirely to delay in the payment of money ultimately held to be due, and that it is not therefore loss suffered by reason of conduct in contravention of a provision of Part V of the

Sweeney and Woodward JJ. did not find it necessary to

These views may be contrasted with wnat Fitzgerald J. said in

Frith v. Geld Coast Mineral Springs Pty. Limited (1983) 47 A.L.R. 547.

"The broad statement of the appropriate measure of damages in deceit which was adopted in Dolby's case, supra, accords with the statutory test, if, as I think, applicants who -establish a cause of action under the Act are entitled to those losses which are the immediate result of the offending conduct and also to consequential losses if sufficiently direct. It is on that footing that I proceed in this case.

There is a further matter to be kept in mind in some cases, and this is one, in which damages are sought under the Act. A purchase of property may be one element ina course of conduct which is embarked upon in reliance on conduct which is misleading or deceptive or likely to mislead or deceive. The statutory entitlement to compensation is not restricted to losses involved in the single element constituted by the transaction of purchase. Applicants for relief under the Act are entitled to have each act or omission shown to have been taken in reliance upon offending conduct considered for the purpose of a determination of whether they thereby suffered loss or damage."

"As amatter of principle, if borrowing or the termination of an investment occurs in reliance upon misrepresentations, I cannot perceive why the cost of those steps to the injured party ought not be recoverable,"

Fitzgerald dg. adhered to these views in Sanrod v. Dainford

More recent attention has been given to this question by

Rurchett J. in Geale v. Glenncun Holdings Prv. Led. (In Liquidation),

unreported, 23 August 1985 and by Beaumont J. in Fenech v. Sterling, unreported, 12 Septembec 1985. Their Honours exprsssed views

substantially in accord with those of Fitzgeraid J..

I find myself in agreement with the approach of Fitzgeraid dg., Burchett J. and Beaumont Jd. on this question. In my opinion when money has been paid in consequence of misleading or deceptive conduct, the loss suffered as a direct consequence of that conduct may include the cost of borrowing that money or the costs of terminating an earlier investment and, perhaps, other loss. It must depend on the circumstances of the case and this requires that evidence be led to support any claim of this nature. I also agree, however, with the proposition, accepted by Jenkinson J. and Neaves J., that loss

suffered solely because of delay in the payment of money ultimately held to be due is not recoverable pursuant to ss. 82 and 87 of the

Act. I see no inconsistency between that proposition and the other

It was common ground 'that the agreements of 11 November 1980 relating to payments made to Australian Plantations by the applicants should be set aside ab initio if I am otherwise in favour of the case for the applicants because monies still cemain outstanding under them

by the applicants and they are the subject of proceedings in the

Supreme Court of New South Wales. It follows that the agresnenc

The costs of the applicants of the proceeding including any reserved costs should be paid by the respondents. This order for costs will encompass the costs of the Commission for the taking of evidence in Hawaii because the order of the Court relating to that Commission was that the costs and expenses of and incidental to the examination of witnesses in Hawaii shall be costs in the cause. The costs of that examination which shall be paid by the respondents are to include those referred to in orders 8 and 9 of the Court's order

I consider that the appropriate course for me to take is to adjourn the case for the purpose of hearing any further argument on the question of damages in the light of the findings which I have made. I have in mind especially that the detailed schedules prepared by the applicants may need further consideration in the light of my findings. So far as 1t is possible to do so, I request counsel and solicitors for the parties to agree on all matters of damages and in

I shall defer making any formal orders at this stage until the parties and their counsei and solicitors have had an opportun_ty to consider my reasons for judgment. I direct the applicants to bring in short minutes of order to give effect to my reasons for judgment.

The matter shall be adjourned to a date to be fixed.

preceding pages are a trua copy of the Reascns for Judgment herein of his Honour

THIS IS A PRIVATE ISSUE RESTRICTED TO EXISTING CLIENTS OF ROBERT MORRISON & ASSOCIATES

®. 'Australian Plantations' 75 Main Street ALSTONVILLE 2477

Robert Morrison & Associates 3 Winnie Street CREMORNE 2090

Developing plantations makes a iot of investment sense, especially for those in need of a tax shelter.

With a plantation, your investment funds are used to prepare land, buy and plant trees, lease irrigation, cultivate and undertake fertilisation and pest control programmes.

All these items are tax deductible expenses, as they are incurred for the purpose of deriving future 1ncome. It is not unlike being able to build a block of flats for investment, and to have the building costs a deduction against your other income.

Each investment unit consists of one 5 acre lat. In this financial year, (June 1980), the 'improved' land and trees

are bought. If this is done for cash, then the cash outlay is $22,250 and the deduction is $13,067.

If the investor borrows against his existing assets to purchase the land and trees, then the cash outlay is $7,214 and the deduction $14,000.

For the cash purchaser, the projected returns are as follows:

On the first year, (June 1981), a further cash outlay of $6,620 will result in a tax deduction of $7,280.

On the second year, (June 1982), a further cash outlay of $7,300 will result in a tax deduction of $7,300.

On the third year, the crop should return more than sufficient to cover expenses.

On the fourth year, we budget a $10,700 income for each five acre unt.

On the fifth and consecutive years, the income should be $12,800 per annum.

An excellent superannuation, or income protection assurance. THE FIGURES For each 5 acre lot, there are two options:

OPTION I is for the investor with cash reserves who does not need to borrow to purchase the 'improved' land and trees.

Expenses 22,250 6,620 7,300 7,300 7,300 Tax Deduction 13,067 7,280 7,300

This represents an estimated long term income return on net invested cash of 57% per annum. .

Net Profit Per Annum - $12,800 Net Outlay - $22,347

OPTION II where funds are borrowed against your existing assets

to purchase the 'improved' land. (We can organise this for you.) This will increase your profits, tax deductions and risk. At 2nd mortgage rate, (16%), the $17,500 needed for the land would cost

The estimated long term 1ncome return on net invested cash 1s 102% per annum.

Net Profit Per Annum - $10,000 Net Outlay - $ 9,790

Estimated selling price of the 5 acres at this stage would be $50,000. For Option II, this would give $32,500 after repayment

Obviously, on a pure investment and tax basis, the use of borrowed capital is the way to ge.

On the other hand, there is an emotional and psychological satisfaction in owning the investment outright. It is also much less bother, as there is work involved 1n obtaining and refinan- cing a mortgage.

Participation in this venture must be viewed as more of a business undertaking than an investment with accurate and defined per- formance estimates.

The guava is presently a little-known fruit to Australians.

It does however, have a very refreshing taste as a drink, and contains five times the vitamin C content of an orange.

In South Africa and Hong Kong guava juice enjoys 20% of the fruit juice market. The drink has also been promoted in Hawaii, Japan

and America, and the demand is so strong that it outstrips production.

Some of the uses of guava frurt are: dried snack bars, icecream, yoghurt, confectionary & as a fresh fruit.

The fruit has a yellow skin with a pinkish flesh and has a 'grittiness' similar to a pear.

The skin is very fine. 90% of the processed fruit ends as a puree. The guava tree produces fruit in only three years.

The tree is almost indestructible. It can withstand flooding and wind, and suifers from no disease or insect pest which cannot be treated.

Not only is the guava quick to produce, but it produces fruit in abundance. We budgeted 180 lbs of fruit from an irrigated four year old tree.

The guava can produce up to 500 lbs per tree. There are ap- proximately 500 acres of guava trees planted, or planned to be planted in Austrailia. Over 80% of this is under our management. Within four years this will produce around 8,000 tons of puree, sufficient for 40 million litres of guava drink.

As mentioned, an extensive export market exists fog our puree, and I have recently returned from Hong Kong, where we were given every encouragement by the Hong Kong Soya Bean Company, who presently export packaged guava juice under the Vita brand. They presently import from South Africa, and would prefer to deal with us because of the shorter distances involved.

A recent trip to Hawaii has confirmed reports that Hawaiian processors will take all the puree we can give them. They do not have enough production to cater for their local demand, let alone to supply the rest of America or the Japanese market.

In other words, it appears our total production could be sold to export markets.

This is not the intention, as the domestic fruit juice market will be promoted with some fruit juice distributors offering large promotional budgets in return for the supply of initial puree.

A major advantage guava holds is 1t can be produced for a third of the cost of orange juice.

'Australian Plantations' are the pioneers of the guava industry in Australia.

Ll. Mr Roger Glasson is a proven grower. He has successfully grown avocado, guava, lychee, & macedamias, and has a booming nursery business. He has been the president of the Richmond Avocado Growers Association, and is presently on the Avocado Marketing & Promotion Board.

He is the 'Mr Guava' of Australia, having pioneered the commercial growing of-the Zruit in this country with the assistance of the Department of Agriculture. He set up the first significant guava plantation for the Livesaver group. de has under his control and management around 80% of the Australian existing and planned guava plantations.

2. Mr Morris Lewin is the entrepreneur. Morris is a suc- cessful and competent negotiator, financier and admini- strator, and was primarily responsibie for the grouping of investors who have financed the earlier plantations.

This will be done by the firm 'Ballina Plantations'. The four principals are the two abovementioned, Mr John Bennett, and Mr

John Bennett is the marketing expert. He manages and owns one of Australia's leading market research companies, and his experi- ence and contacts, both local and overseas, are eRceptional.

Robert Morrison is the investment advisor. He is chief consultant to the 'Investment Adviser' newsletter. He is Australia's leading authority on property trusts and syndicates, and prin-~ cipal of his own Australia-wide broking organisation. Robert also has a marketing background.

All four men are competent and successful business men in their own right, and have a lot at stake in the success of the guava industry. They all have plantations of their own, and will be investing 1n and will be involved in the processing of the industry's output. This heavy commitment will ensure every effort is made for the industry's success.

1. All land, trees and improvements will be owned by the investors.

2. For security and taxation reasons, the land will be purchased in the name of a unit trust, where each invest- ment unit owns one fourteenth of the total plantation. It is far safer to have a one fourteenth share of a 70 acre plot than tc depend upon the success of the trees on a set five acre area.

3. There are severe penalties for investors who fail to make progress payments. If any one investor fails to make a cash contribution when requested it would unfairly burden the manager if he had to make up the shortfall, and would certainly prejudice the position of the other investors who had honoured their obligations. -

When a progress payment 1s required, each partner will be sent a statement saowing the amount and due date for payrent. Should the payment not be raceived, a second notice will be sent, and 1f not paid within 30 days, the Manager shall have the right to repurchase that partner's interest in the plantation at the price ne vaid for the land, plus the ongoing irrigation lease commitment. This represents a confiscation of all improvements made by that Partner to the plantation land. Every assistance will be given by the manager to prevent this situation from happening, and budgets of anticipated expenditure will be availabie.

(This clause has unfortunately been made necessary from experience in previous syndicates where the manager has had to carry delinquent investors. The manager feels the potential profitability of the project to be such that he should not have to carry this liability.)

The land fronts the main highway into Baltina, and is located on the outskirts of the town. It has already been zoned for a caravan park and motel. There is a motel on

the adjacent property, and another across the road. Bal- lina's future 1S rosier than ever, following the recent

announcement that it will be the site for a new DC9 sized airport.

Obviously, 1f£ all else goes wrong, profits must be made from the sale of the land.

A death and disability insurance cover will be taken out to cover all possible liabilities. If a partner should die before the plantation is profit earning, then his lia- bilities will be covered by a term assurance policy. This is not expected to be expensive, 1t will ensure the continuation of the syndicate, and w11l leave a worthwhile inheritance to the deceased's beneficiaries.

Plantations do not have the traditionally uncertain na- ture of general farming. Plantations are enormously capital intensive, and the use of irrigation and modern science removes the reliance upon the whims of Mother Nature. Plantations are more a manufacturing business than a farm.

Be it boom or bust, future security must be in the production of food. Further, Australia 1s predicted to become the 'Feeder of the Worlid', as the world's growing population restricts the amount of arable land in the Northern Hemisphere.

fee manager does not guarantee to buy back an investor's holdings. He dces, however, have at his disposai a large numper of pocential investors, from which he would seek the highest fair price, and charge a 8% handling fee. Under present conditions it would take around 6 to 3 weeks to sell a syndicate unit. .

In the inccme earning years, liquidity would increase and sig- nificant capital gains are likely to result.

Each five acre syndicate unit, on the fifth year, would, at today's prices, sell conservatively for $50,000.

This would assume our budgeted production, income, and a very conservative yield to buyer.

For the investor who paid cash for his land, this would represent a 129% capital gain on net invested cash.

For the investor who borrowed, the capital gain would be 230% on net invested cash.

Expressed as a percentage of the initial cost of the land plus the initial preparation necessary for planting, of $3,500 per acre, the eventual selling price of $10,000 per acre represents a 185% capital gain.

These figures are likely only if the plantation is sold as an income earning business. We would expect it would take longer for

the land to be worth $10,000 an acre in its own right. It would certainly be worth more than $3,500 an acre.

Progress Reports will be sent to investors at least every six months, and more frequently should new developments take place. All necessary information and accounts will be supplied, to enable your accountant to make the appropriate declarations. The

accounting practices have been accepted by the Taxation Com- missioner with our previous syndicates.

It is intended to be a longer term investment, with the manager providing a market for those who wish to sell out. All major decisions, including the sale of the plantation will be made by a 75% majority, where each five acre unit will represent one vote.

TEE RISKS . This is perhaps the most appealing feature of the guava plan- tation, the trees are almost indestructible, and there are no known pests which cannot be treated.

The trees are very hardy against wind, and can withstand flooding, and will withstand any frost they are likely to encounter.

As the trees will be irrigated, the lack of water wiil not be a problem.

As we see it, the risks are not so much 1n the growing of the guava but in the marketing.

As mentioned, we have ourselves fully covered with an eager domestic and overseas market. We have an enormous vested interest

To be conservative, we have deliberately kept the ngmber of acres under plantation down, and have established export markets prior

to further planting. We are neither solely dependent upon the export market nor the domestic market to sell our produce.

Any investor, the manager, or Robert Morrison will have the right to call a general meeting of investors. Each of the above parties will have access to the total list of ainvestors' names and addresses. Any matters proposed at such meetings shall be carried

by a 75% majority. Such a meeting would give investors the right to replace the manager.

The reason for Robert Morrison's right to call meetings 1s to allow him to protect his clients' long-term interests. Robert Morrison is not the manager.

OPTION I - for the investor with cash reserves who does not

IMPORTANT - The above figures are only a rough guide.

OPTION IT - where funds are borrowed to purchase the 'improved' land.

At second mortgage rate, the $17,500 needed for the land would

Net Outlay on a 50% Tax Bracket $7,214 ~ ($14,000 x 50%)

Interest Expense Remortgaging Expense Maintenance Irrigation Lease

IMPORTANT - The above figures are only a rough guide.

The reason why the taxation deductions can vary from total - expenses in the first few years is due to: '

l. Investment Allowance. 2. Amortisation of borrowing expenses. | 3. Some outlays have a capital component and are therefore o

the Schedule referred to in the te reasons for judgment of his Honour », . \ Mr. Justice Lockhart .