Plaintiff v Defendant

CROWN - extent to which Crown bound - whether Secretary is an emanation of the crown and excluded from the operation of Part IV of the Trade Practices Act 1974 (Cth)

FORESTS ACT - Sawlog licences - defences with respect to representations by the Secretary under the Forests Act 1958 (Vic) - effect of Fair Trading Act and Trade Practices Act provisions, and s 109 of the Australian Constitution

1 The plaintiff, Auswest Timbers Pty Ltd, owns and operates timber mills at Bussleton in Western Australia, in the Australian Capital Territory and, relevantly for the present proceedings, the Orbost Mill, which is situated at Brodribb, which is near the town of Orbost in East Gippsland.

2 The defendant, the Secretary to the Department of Sustainability and Environment ("DSE"), is a corporation established under s 6 of the Conservation Forests and Lands Act 1987 (Vic). The State department of which the defendant is Secretary has, at various times, been known by other names, including the Department of Conservation Forests and Lands ("DCFL"), the Department of Conservation and Environment ("DCE") and the Department of Natural Resources and Environment ("DNRE"). For present purposes, it is sufficient to treat the department as a continuing entity, in spite of its name changes from time to time. For convenience, it is referred to as "the Department". In any event, it was common ground that the Secretary of the Department is a legal person capable of being sued. Issues do, however, arise as to the nature of this legal personality, in the context of issues as to whether the defendant is an emanation of the Crown in right of the State of Victoria and whether the defendant is a "trading corporation" within the meaning of the Trade Practices Act 1974 (Cth) (the "TPA"). In relation to the activities of the defendant, questions also arise as to whether they are "in trade and commerce" within the meaning of relevant provisions of the TPA and the Fair Trading Act 1999 (Vic) (the "FTA").

3 On 17 April 1998, the plaintiff purchased from Monier Roofing Ltd ("Monier") its Orbost timber operations, including the Orbost Mill, for the sum of approximately $2.9 million. Monier was then a subsidiary of CSR Ltd and its significant, if not only, operational role was to provide roof battens from its various timber mills which were utilised as part of the home building and other construction operations of CSR Ltd. As part of these arrangements, the plaintiff entered into an agreement with CSR Ltd to provide roof battens, in place of the arrangements that had previously existed within the CSR Ltd structure with Monier Roofing Ltd, as it was then known.

4 Forest timber cutting and extraction in Victoria is regulated under the Forests Act 1958 (Vic) (the "Forests Act"). The regulatory process has at all relevant times been, and continues to be, regulated by the defendant and the Department. Under this regime, it was necessary for the plaintiff, as the purchaser of the Orbost Mill, to obtain a right to timber so that its sawmilling operations could continue at Orbost. Consequently, on or about 23 September 1998, the plaintiff took a transfer of timber licence No. S000355 from Monier, which by this time had changed its name to 099 639 847 Ltd.

5 Broadly speaking, the plaintiff's case is that on or about 4 March 1998, the defendant represented, and continued to represent until 30 June 2005, that the holder of the licence which the plaintiff had taken from Monier would be the subject of an offer of renewal for 15 years with the same volume and log quality provided for in that licence, subject only to agreement on the price for the timber the subject of the licence. The defendant denied any such representation and, further, submitted that the plaintiff could not succeed on the basis of the relief which it claimed because the defendant was an emanation of the Crown, the activities of the defendant were not, at any relevant time, in "trade and commerce" and, in any event, if there were any representation made, the plaintiff did not establish that it had relied upon the representation in any relevant sense for the purpose of establishing its cause of action. The parties also joined issue with respect to the nature and extent of the loss and damage claimed by the plaintiff.

6 In 1998, the plaintiff was contemplating purchasing the Orbost Mill for a price in the vicinity of $3 million.

7 The Orbost Mill produced milled timber which was obtained for this purpose from the East Gippsland forests to the extent that they are State forest for the purpose of the provisions of the Forests Act. The timber was provided to the Orbost Mill under licence from the Crown, pursuant to s 52 of the Forests Act. Licensing of this nature is required, as the grant of licences in respect of any Crown land (pursuant to the Land Act 1958 (Vic)) is prohibited under s 51 of the Forests Act. Consequently, the Forests Act exclusively governs the ways in which property rights in 'reserved forests' may be allocated or granted.

8 The licence held for the Orbost Mill at the time of its purchase by the plaintiff was granted to Monier for a period from 19 October 1993 to 30 June 2003. The licence was number S000355 and was subject to various terms and conditions as set out in Schedule 1 to that licence, which provided as follows:

" SCHEDULE 1

Area of Supply: East Gippsland Forest Management Area

Annual

Allocation Period Quantity

(m3 nett) from to (m3 nett)

31 345 19/10/1993 - 30/06/2003 Grade D and better sawlogs 31 345

Licence Fee:

The licence fee for 1993/94 will be $1.64 per cubic metre (nett) and will be indexed annually to changes in sawlog royalty rates in subsequent years.

Licence Renewal:

After the fifth year of this licence the annual allocation will be reviewed for the period following the expiry of the licence. The Secretary and the licensee may negotiate an agreed licence fee for the renewal of this licence. If agreement is not reached before the beginning of the ninth year of this licence, rights to a renewal licence will be put to public tender during the ninth year. The licensee will be given the opportunity to match competing tenders.

Licence Conditions:

This licence is subject to the attached Licence Conditions for licences granted pursuant to the Forests Act 1958 and as amended from time to time and any Additional Conditions hereunder.

Additional Conditions:

1. 1. Notwithstanding the date of issue of this licence, the annual allocation of 31 345 m3 (nett) will be made available in 1993/94.
2. 2. This licence has been issued following the surrender of all rights, entitlements and obligations held under licences S000098 and S000200 on the condition that those rights - entitlements and obligations are transferred and incorporated into a single consolidated licence."

For convenience, this Licence is referred to as "the Original Licence".

9 The Original Licence was renewable at the discretion of either the Director-General (which was also referred to in the relevant legislation at various times as the "Secretary"; more recently this power has been designated to the "Minister"), under s 52 of the Forests Act. The accepted practice with respect to renewals of licences such as the Original Licence was reflected in the provisions of Schedule 1 of that Licence. Namely, that the annual allocation of timber would be reviewed for the period following the expiration of the licence, and that the "Director-General" and the licensee may negotiate an agreed licence fee for the renewal of the licence. If agreement in this respect was not reached before the beginning of the ninth year of the licence, the rights to renew the licence would be put to public tender during its ninth year. As Schedule 1 indicates, if the renewal process was put out to public tender, the licensee would be given the opportunity to match competing tenders. The purpose of this renewal process was to provide licence holders with certainty of supply of timber as a result of the renewal of existing licence arrangements or, at least, to enable them to make alternative supply arrangements in the event that existing licence arrangements were not to be renewed.

10 In exercising its discretion to renew a licence, the defendant considered issues such as value adding the timber (i.e. utilising timber as a value added resource). In the event that commercial value adding did not occur in the hands of the licensee, the defendant may, if it decided to renew the licence, reduce the grade of timber available under the renewed licence. During discussions between the plaintiff and the defendant with respect to the former's intended purchase of the Orbost Mill, the plaintiff was advised by the defendant that it would be expected to engage in commercial value adding of the timber or the grade of timber available to it under the licence would be reduced.

11 In mid-1997, the plaintiff, having decided that the Orbost Mill could be a potential acquisition, embarked on a process of due diligence and discussions with its bankers and also with the defendant in relation to the prospects of renewal and the basis of renewal of the Original Licence. This process, which occurred in late 1997 and early 1998, culminated in -

(1) the purchase of the Orbost Mill and associated timber operations from Monier by the plaintiff for approximately $2.9 million on 17 April 1998; and

(2) the transfer of licence no. S000484 (which had replaced the Original Licence, licence no. S000355) to the plaintiff, and the assumption of all the obligations and entitlements by the plaintiff.

It is the plaintiff's position that, having purchased the Orbost Mill and taken a transfer of the licence, it organised its timber milling business conducted at the Orbost Mill and invested and expended moneys on the basis that, as the holder of the licence which had been transferred to it, it would be offered a renewal of that licence for 15 years with the same timber volume and log quality.

12 The development and implementation of government policy with respect to the logging and management, more broadly, of forests in Victoria, and elsewhere in Australia, has been the subject of significant public debate and policy development. Anyone living in Victoria for the last 10 to 20 years who took a modicum of interest in State issues would be aware of the community and political controversy in relation to the management of timber resources and the logging of State forests. East Gippsland and the Wombat State Forest readily come to mind.

13 The plaintiff was not, of course, a mere bystander, as it had a direct interest in the movements in this community and political debate and consequent developments and changes in Victorian Government policy. It had a direct economic interest, though this is not to imply that it did not have an interest as a corporate citizen in sustainable forests and environmental issues generally.

14 Evidence was led by both the plaintiff and the defendant in relation to the community and political debate and the development of Victorian State Government policy. For present purposes, a sensible starting point is 1992.

15 In late 1992, the then Prime Minister, Mr Paul Keating, and all State Premiers and Territory Chief Ministers signed a National Forest Policy Statement (the "Statement").[1] The Statement commenced with the following introductory material:[2]

"This Statement outlines agreed objectives and policies for the future of Australia's public and private forests.

It is the joint response of the Commonwealth, State and Territory Governments to three major reports on forest issues - those of the Ecologically Sustainable Development Working Group on Forest Use, the National Plantations Advisory Committee, and the Resource Assessment Commission's Forest and Timber Inquiry - and it builds on the 1983 National Conservation Strategy for Australia initiated by the Commonwealth Government and the 1986 National Forest Strategy for Australia developed by the Australian Forestry Council.

The three levels of government in Australia have specific interests in and responsibilities for forest management. State and Territory governments have primary responsibility for forest management, in recognition of the constitutional responsibility of the States for land use decisions and their ownership of large areas of forest. The States and Territories have enacted legislation that allocates forest land tenures and specifies the administrative framework and policies within which public and private forests are managed."

This introductory material was followed by a vision statement and the identification of important characteristics of that vision. The vision, broadly stated, was:[3]

"The Governments share a vision of ecologically sustainable management of Australia's forests."

16 The National Forest Policy Statement also contained an elaboration of specific objectives and policies. In particular, reference was made to these objectives and policies with respect to "Efficient use and value adding" and "Wood pricing and allocation". In these respects, reference was made to the following:

"Efficient use and value adding

...

The Governments are committed to providing certainty and security for existing and new wood products industries to facilitate significant long-term investments in value-adding projects in the forest products industry. To this end the Governments have agreed, subject to statutory requirements, on the following initiatives to satisfy the commercial requirements of potential investors:

• • Completion of comprehensive regional assessments, as outlined in Section 4.3, and negotiation of a Commonwealth-State regional agreement to form the basis for meeting wood production, nature conservation and other forest allocations. In this respect the Commonwealth will give full faith and credit to accredited State assessment processes, practices and procedures, consistent with the Intergovernmental Agreement on the Environment.

...

The Governments will continue to support the introduction of higher value adding uses of wood and greater log recovery and utilisation rates through new technologies. In this context the Industry Commission will conduct an Inquiry into opportunities for adding value to Australia's forest products. The Inquiry will examine possible impediments to the expansion of the forest products industry and recommend ways of removing those impediments. These objectives will also continue to be supported through research funding and as priority areas under the research and development program (see Section 4.10).

...

• • Commonwealth-State regional agreements based on comprehensive regional assessments (see Section 4.3) or agreements between a State and the Australian Heritage Commission on the management of forests listed on the Register of the National Estate (including the application of harvesting codes of practice) will constitute the basis on which the Commonwealth will meet its legislative obligations under s. 30 of the Australian Heritage Commission Act 1974. For areas not covered by comprehensive regional assessments, existing processes and annual export approvals will apply."

Wood pricing and allocation

The pricing and allocation system for wood from public native forests has a major bearing on the structure and efficiency of the wood products industry and on the return to the community from use of a publicly owned resource. The State Governments will encourage the use of logs for their highest net value-added end use. Accordingly, they will adopt the following principles as the general basis for pricing and allocation arrangements for wood from public native forests:

• Prices will be market based, at least cover the full cost of efficient management (including regeneration) attributable to wood production, include a fair return on capital, and provide an adequate return to the community from the use of a public resource.

• Harvesting rights will reflect security of supply for wood users, will be clearly defined, and will be transferable when this does not result in the creation of excessive market power.

• The allocation system will be flexible and will involve competitive bidding arrangements for appropriate amounts of the resource, thus enabling the entry of new processors and allowing small operators to compete for niche markets.

Forest services have made significant changes to their pricing and allocation systems. They will continue to develop their systems to reflect the foregoing principles, including approaches involving competitive bidding systems where regional wood markets exist. Where competitive markets are not achievable, prices set through administratively determined allocation systems should at least cover the efficient costs of wood production and provide an adequate return to the community.

• • Forest services will, where feasible, allocate a substantial proportion of harvesting rights through competitive bidding, with varying time frames and varying wood volumes, to allow opportunities for the entry of new processors and niche operators.
• • Following the current review of competition policy, the State Governments will consider options for increasing the public accountability of their commercial forest operations, including through the possible application of the principles and provisions of the Trade Practices Act 1974."

17 My reason for setting out some of the material contained in the National Forest Policy Statement at some length is to provide some context to the thinking, nationally and in Victoria, in relation to the management of forests and the pricing policies that were thought to be appropriate for the use of a publicly owned resource in the context of an overall forest management policy.

18 The National Forest Policy Statement and the inter-government and industry discussions that one would expect to have been taking place were reflected in various documents internal to the defendant and also in documents passing to and from sources external to the defendant. For example, on 4 May 1995, Mr Wareing, Manager, Forest Commerce, wrote a memorandum, endorsed by Mr R. Rawson, Director, Forests Services, and Mr A. Thompson, Secretary of the Department, that was approved by the then Minister. The memorandum recommended a comprehensive review of the timber licensing system and the suspension of renewal of licences pending that review. In December 1996, Mr Pendrigh, then Acting Manager, Commercial Forestry, drafted a paper entitled "Licence Renewal Considerations" which he circulated to the Commercial Forestry Managers Group within the defendant for comment. In that document, reference was made to deficiencies in the then current licensing system with a number of options put forward, including the conversion of all timber licences to sales contracts on renewal and removal of the Royalty Equation System, by which royalty rates were then determined. A number of responses were received by Mr Pendrigh from Forestry Managers, including, on 29 March 1997, a response from Mr Geoff Scales, which contained a discussion of possible approaches, including the implementation of an options system. Mr Pendrigh's paper was circulated as a draft and, apart from this comment from Mr Scales, its ultimate fate was not clear.

19 In 1994 the Council of Australian Governments endorsed the principles of national competition policy reform outlined in the Hilmer report.[4] As a result of the review, the States were obliged to review legislation to assess whether or not it complied with national competition policy and, if necessary, make appropriate legislative changes. The requirements of the national competition policy led to a variety of reviews and assessments of the content and operation of the Forests Act.

20 On 30 July 1997, Margaret Matthews, Manager Competition Policy in the Department sent a paper entitled "National Competition Review of the Forests Act 1958" to the Executive Director, Forestry and Fire within the Department. The express purpose of this inter-departmental memorandum was to provide information about the process for the national competition policy review of the Forests Act. It also attached, in draft, proposed terms of reference for the review process, review arrangements and reform options. Under the heading "Reform Options", the draft paper set out the following:

"The review should specifically address the appropriateness of:

• provisions which prescribe for the granting of licences and permits for grazing, timber harvesting and other forest produce;
• provisions which regulate activities with resultant restrictions on competition;
• provisions which provide for the granting of leases for the use of land in State forests."

It was proposed that written submissions from the public should be called for and provided by 3 October 1997, with the review reporting its findings and recommendations to the Minister by 23 December 1997. The terms of reference for this legislative review of the Forests Act were also sent to Mr Paul Myers of the Department of Premier and Cabinet, and to Mr David Briggs of the Department of Treasury and Finance, by facsimile transmission from Mr Rod Grace of the defendant on 14 August 1997.

21 Further correspondence and inter and intra departmental communications occurred in August and September 1997. This included a letter from the Secretary, the defendant, to the Minister for Conservation and Land Management regarding the terms of reference for the National Competition Review of the Forests Act, noting that the review had been listed as a "high priority/major Model 1 (review)" and was scheduled to be commenced in 1997. On 15 September 1997, the then Premier, the Honourable Jeff Kennett MLA, wrote to the then Minister for Conservation and Land Management approving the terms of reference. Various officers of the defendant's Department, including Mr Pendrigh, then advised that the National Competition Policy ("NCP") Review of the Forests Act would be undertaken from early October, to be completed by early January 1998. As the plaintiff submitted, it was clear that this review of the Forests Act was being dealt with at the highest level by the defendant, the defendant's Department and the Victorian Government as a "high priority" review.

22 In October 1997, KPMG submitted a "Proposal for a NCP Review of the Forests Act 1958" (dated 1 October 1997). This Proposal contained the following comment under the heading "Competition issues":[5]

"We note that the Guidelines contain a discussion, in Section 3.4 'Natural Resource Management Regulation' under the heading 'Forestry Policy', on matters that the author considers are key issues for review. These are the determination of royalty rates and the amounts of timber to be offered for logging. Regarding the former, DNRE operates an administered pricing system for hardwood logs. There is arguably a case on efficiency grounds for a greater market-based pricing of logs through competitive bidding for timber harvesting rights which are transferable."

23 On or about 2 October 1997, Mr Michael Taylor, the then Secretary of the Department, provided a memorandum to the then Minister, regarding the NCP Review of the Forests Act, together with a letter to the Premier for the Minister's signature replying to the former's request for more detail about the coordination of the National Competition Policy Review of the Act with a more general review of the Act. The attached letter was apparently sent to the Premier, the substantive part of which was as follows:

"You asked for some further information regarding the coordination of the NCP review of the Forests Act 1958 with the more general review of the legislation which is also occurring. There are two teams working on the review of the Act. One team is overseeing the NCP review while the other team is examining the basis for new legislation. These teams will have ongoing dialogue during the review process and, when reviews are completed, the proposal for new legislation will be developed incorporating the recommendations from the NCP review."

Mr Pendrigh identified Mr Richard Rawson's initials on this memorandum. He also gave evidence that he was only incidentally involved in the review of the Forests Act but that he recalled meeting the KPMG consultants as part of the review process they undertook. In any event, it appears clear from the memorandum and the 3 October 1997 letter to the Premier that two reviews of the Forests Act were occurring during this latter part of 1997. Mr Rawson appears to have been responsible for coordinating the issues the subject of those reviews.

24 On 19 December 1997, KPMG provided the defendant with a document entitled "Review of the Forests Act 1958". The primary issues the subject of the review were summarised as follows:[6]

"Legislative objectives

Provide for commercial use of the State's hardwood timber resource to meet present and future generations' requirements.

Outcome sought

Ongoing supply of timber resource.

Problem addressed

Negative externalities of unfettered private exploitation of timber resource. Without legislation forest resource would be exploited without taking account of full social costs and ongoing supply could not be assured."

The material which follows appears under the heading "Restrictions on competition". In relation to the determination of hardwood supply levels and price, in the context of consideration of restrictions on competition, the following statement was made:[7]

"A less restrictive option for determining royalty exists. Section 53 already provides for licences to be offered for sale by auction or tender. Reserve price is set by reference to the competitively neutral cost of supply. Market demand would determine the sawlog price. Licence fees should only cover the cost of administering licences, in effect the royalty becomes the price of sawlogs."

This KPMG document appeared to be either a preliminary summary document or merely a summary of the material and recommendations contained in the main KPMG Review. This appears from the concluding material in the 19 December 1997 Review document:[8]

1. 1 Remove provision granting exclusive control and management of commercial services regarding timber supply.
2. 2 Remove minimum sawlog supply provision.
3. 3 Change practices of administering pricing to sale of sawlogs by auction or tender.
4. 4 Change DNRE practices on lease, licence, permits et cetera to incorporate:
   • clear explicit criteria for issue;
   • transparent processes for issue including review where application refused or licence revoked;
   • charges to reflect competitively neutral cost of provision."

25 On or about 22 December 1997, KPMG provided a first draft of the full Review of the Forests Act to the defendant. This draft report of 71 pages continued to reflect the general approach as summarised in the 19 December 1997 "Review of the Forests Act 1958", particularly with respect to timber pricing policy. In the discussion with respect to the determination of hardwood supply levels and price, the following recommendations and observations were made:[9]

"We recommend that the DNRE's administered pricing policy in relation to logs be changed to a more market-based determination of log prices. ...

A more market-based log pricing policy is consistent with current national policy on forest resource exploitation. As noted previously, the Victorian Government is a signatory to the National Forests Policy Statement (NFPS). The NFPS sets out the following pricing principles:

• prices will be market-based;
• prices should at least cover the full cost of efficient management attributable to wood production;
• prices should include a fair return on capital;
• prices should provide an adequate return to the community from the use of a public resource;
• harvesting rights will be transferable (tradeable) when this does not result in the creation of excessive market power;
• the allocation system will be flexible and involve competitive bidding arrangements for appropriate amounts of the resources; and
• where competitive markets are not achievable, prices set through administratively determined allocation systems should at least cover the efficient costs of wood production and provide an adequate return to the community.

The present pricing of logs by DNRE does not meet the pricing principles incorporated in the NFPS. In our view there should be increasing use of competitive tendering as the basis of price setting where practicable. A tendering system would reflect a market determination of prices and consequently eliminate the restriction on competition resulting from the present below-market administered prices.

A market-based approach to pricing could involve the abolition of the licence fee and royalty components of the present price of logs. We understand DNRE has a proposal currently under consideration to increase licence fees, perhaps partly in response to the apparent large premiums on traded sawlog licences. We consider increasing the licence fee to be an inferior means of capturing more of the 'market value' of the resource allocation embodied in licences. Alternatively, the licence fee could be set at a smaller amount related only to administrative costs, with the royalty level adjusting to demand conditions for licences. DNRE appears to be increasing confusion as to the appropriate roles of the licence fee and royalty components of log pricing.

The more efficient, and transparent, approach would be to have tender- or auction-based pricing. This need not involve a licence fee/royalty distinction, a single price could be paid by the successful bidder with the administrative costs of the selling system recovered either in a tender/bid fee or the cost-based reserve price or source combination of both.

..."

26 The KPMG first draft of the full Review of the Forests Act concluded with the following draft recommendation with respect to the reform of log pricing:[10]

"8.2.2 Reform log pricing

We recommend that the DNRE's administered pricing in relation to logs be changed to a more market-based determination of log prices...

A more market-based log pricing is consistent with current national policy on forest resource exploitation...

In our view, the present pricing of logs by DNRE does not meet the pricing principles incorporated in the (National Forests Policy Statement) ...

Also, we advocate an increasing use of competitive tendering where practicable. A tendering system would reflect a market determination of prices and consequently eliminate the restriction on competition resulting from the present below-market administered prices."

27 On or about 6 February 1998, KPMG delivered a second draft report to the Department entitled "NCP Review of the Forests Act 1958 - draft report" of 110 pages. The draft report is, as the plaintiff submitted, replete with references to the replacement of the licence system with an auction process. Thus, the following comments were made in the context of a discussion of sawlog allocation and pricing in the course of a discussion of less restrictive alternatives to current practices:[11]

"A more efficient system (to the existing administered licensing system) would seem to be one where timber quantities are allocated by tender either on a spatial or delivered quantity basis.

The NFPS sets out the following principles:

• Prices will be market based...
• The allocation system will be flexible and involve competitive bidding arrangements for appropriate amounts of the resource...
• Increased use of the competitive tendering is the base of price setting where practicable is desirable. The tendering system would reflect the market determination on prices and consequently illuminate the restriction on the competition resulting from the present below - market administered prices...

A more efficient transparent approach would be to have tender- or auction - based pricing. This need not involve a licence fee/royalty distinction; a single price could be paid by the successful bidder with the administrative costs of the selling system recovered either in a tender/bid fee for all the cost base reserved price or some culmination of both...

the price reserved system to prevent collusion or under bidding: reserves could be based on market assessments and entail a requirement to at least cover the competitively neutral cost of supply...

the important feature of this market-based pricing approach is not the increase in the revenues that would undoubtedly accrue at DNRE...it would decrease barriers to entry to hardwood timber markets, and enhance the position of efficient saw millers. The magnitude of this effect would depend on the effectiveness of an auction or tender type system in delivering the anticipated benefits. However, practical examples of this type of forest pricing do exist (such as performed by the United States' Forest Service)."

28 The second draft KPMG report also contained the following recommendation in relation to the reform of timber allocation and log pricing:[12]

"9.2.2.2 Reform timber allocation and log pricing

We recommend that the DNRE's administered allocation and pricing policy in relation to logs be changed to a more market-based determination of log prices. This may not necessarily require legislative amendment, given the generality of current provisions. Section 21 provides a power to sell timber by public auction or tender and Section 53 provides the power to sell by auction or tender the right to any leases of land in reserved forests (section 51) and any licences and permits in relation to forest produce in a reserved or protected forest (section 52). Reserve prices could be set by reference to the competitively neutral cost of supply and sale. A more market-based log pricing policy is consistent with current national policy on forest resource exploitation in the National Forests Policy Statement to which the Victorian Government is a signatory.

While in principle we advocate an increasing use of competitive tendering as the basis of resource allocation and price setting where practicable, we recognise there are complex issues in the design of a market-based system to be resolved. We recommend further work on the design of allocation and pricing mechanisms be undertaken and options for a market-based approach evaluated."

29 On the basis of this material, it is reasonable to suppose that those officers of the Department responsible for forest policy were aware that KPMG were recommending that an auction-based system for pricing and allocation of timber be implemented, and that the then current licensing system be substantially modified to comply with National Competition Policy, which it is clear that the defendant knew that the State was required to comply with. Nevertheless, it is also clear from the second draft of the KPMG report on the review of the Forests Act that "complex issues in the design of a market-based system [were yet] to be resolved".[13]

30 In a memorandum dated 15 June 1998, Mr Tony Bartlett (of the Forests Service within the defendant's Department) provided Mr Rod Grace (of the Competition Policy Unit, also within the same Department) with a draft Government response with respect to the NCP Review of the Forests Act. Mr Bartlett noted that the Government supported moving further towards market-based systems for sawlog allocation. The draft Government response which was attached to that memorandum referred to recommendation 9.2.2.2 of the KPMG NCP Review of the Forests Act which was to the effect that the Department, the defendant, should change its administered allocation and pricing policy in relation to logs to a more market-based determination of log prices. The plaintiff relied upon parts of the material contained in the draft Government response with respect to this recommendation in the KPMG Review. It is, in my view, important that the passages relied upon be placed in context. The relevant parts of the Government response were as follows (with the passages relied upon by the plaintiff set out in italics):

"Response

The Government accepts the principle that allocation and pricing of logs from State forest should utilise market-based mechanisms where practicable and that there should be increased use of these mechanisms over time.

Discussion

The review states that 'the change to a more market-based allocation and pricing policy may not necessarily require legislative amendment, given that the Act already contains provisions enabling the Director General to sell by auction or tender the right to any lease, licence or permit in relation to forest produce.' It suggests that 'reserve prices could be set by reference to the competitively neutral cost of supply and sale' and advocates 'the increased use of competitive tendering as the basis of resource allocation and price setting where practicable', but recommends 'further work on the design of allocation and pricing mechanisms be undertaken and options for a market-based approach be evaluated'.

The Victorian Government, as a signatory of the National Forest Policy Statement, accepts the following principles as the general basis for log pricing and allocation arrangements from State forest:

• prices will be market-based at least covering the full cost of efficient management, a fair return on capital and adequate return to the community;
• harvesting rights will reflect security of supply for wood users and be transferable generally;
• the allocation system will be flexible and involve competitive bidding arrangements for appropriate amounts of the resource.

Although these principles cannot be uniformly applied across all State forest log allocation and pricing arrangements, they are being applied at present where appropriate and it is expected that there will be greater use of these mechanisms in the future. Reserve prices are set for logs made available under auction and tender processes. It is anticipated that in the future, Forestry Victoria would set reserve prices based on a range of factors including the competitively-neutral cost of production.

The establishment of Forestry Victoria, with a clear charter for efficient commercial management of commercial forestry on State forest, will encourage the greater use of market-based mechanisms for log allocation and pricing. However, it is important that this Service Agency has the appropriate flexibility to determine its own pricing and allocation policies in line with government policies and the need to foster the development and expansion of efficient, competitive forest industries. It will be in the interests of Forestry Victoria to undertake further work on the design of allocation and pricing mechanisms."

In my opinion, the passages relied upon by the plaintiff do not, in context, take matters further than indicating an acceptance by the Government, as a long-term goal, that log pricing and allocation arrangements should become more market-based. Further, it appears that pricing and allocation policies were required to conform with Government policies which, as other policy development documents at this time show, were at least directed to and emphasised ecological sustainability and proper management of forestry resources as public resources as much as management and development for the benefit of forest industries. It also appears that even the establishment of Forestry Victoria with a charter for commercial management would not affect this position.

31 The evidence indicated a series of intra and inter-Departmental communications in relation to the process of transition from the then existing sawlog licence pricing and allocation policy to a more market-based policy. However, it is apparent that it was always within the general policy and responsibility of the Government to manage native forest resources sustainably. The latter is particularly clear from the facsimile transmission from Mr Michael James of the Economic Development Branch of the Department of Premier and Cabinet to Ms Norma Marshall and Mr Rod Grace of the Competition Policy Unit in the defendant's Department. The transitional aspects of the proposed revised Victorian Native Forests Policy were emphasised in a Memorandum from Mr Gerard O'Neill, Executive Director, Forest Services Division of the Department, the defendant, to the Secretary dated February 1999. Under the heading "Adjustment", the Memorandum posed the following questions:

"Is compensation appropriate?

Who should receive compensation, all licence holders or only those exiting the industry?

Who should fund compensation?"

Also attached to a later version of this document was a diagram with three headings: "Current Situation", "Transition" and "Preferred Structure". The diagram refers to the Government policy of developing auctions. The plaintiff submitted that Mr Pendrigh accepted in cross-examination that the proposal to develop an auction system is one of the type ultimately developed, and that he was aware of proposals of this nature at the time of this Memorandum, in February 1999. Mr Pendrigh also gave evidence that he would have seen a document for a presentation which was prepared on or about 26 May 1999 within the defendant, the Department. In a timeline contained in that document, the author contemplated that a transition phase would be in place until the full auction system was implemented in 2004, which the plaintiff submits is what occurred.

32 A more detailed memorandum along the same lines as the February 1999 memorandum from Mr O'Neill was prepared some months later. This was a memorandum from Mr Gary Stoneham and Mr Duncan Pendrigh to the Executive Director, Forest Services/Deputy Secretary Policy, dated 29 June 1999. The subject matter was "Native Timber Reform Timelines". The plaintiff placed considerable reliance upon this document as indicating, particularly, Mr Pendrigh's knowledge of the position with respect to sawlog allocation and licensing having regard to Mr Pendrigh being named as a co-author of this memorandum. In this respect, Mr Pendrigh's evidence was, in substance, that this memorandum was part of the continuing policy development process with respect to sawlog allocation and licensing and did not represent a concluded position. Further, Mr Pendrigh gave evidence that he disagreed with the process of implementation of the auction system at the time, but whether this was the case is not, in my view, particularly significant when regard is had to the nature of the proposals contained in the 29 June 1999 Memorandum. Additionally, I do not take it to be suggested either by Mr Pendrigh in his evidence or by the defendant that Mr Pendrigh was not aware of the ongoing policy debate within the defendant's Department and the Government as a whole in relation to the desirability of moving to a more market-based system for the allocation and licensing of sawlogs. What is clear from this 29 June 1999 Memorandum is that the implementation of any policy of this nature had not been finally settled. If and when any such policy was settled, the nature of any transitional arrangements would then need to be settled. Of most relevance in the present circumstances are the following parts of the summary of the proposal:

"5 Proposal summary

The following outlines of the proposal and timelines:

• Principles of an Auction System - The goal is to eventually replace all timber licences with a simultaneous sealed bid auction to replace current arrangements.
• Transition Phase

- Auction design - Auction system owned and operated by Forestry Victoria designed and implemented in 1999/2000.

- Timing of Introduction - Extend all licences until at least 2004 with no renewals after that date; use existing parcels and traded licences until licences cease in 2004.

- Industry Education - Forestry Victoria to develop an industry training and familiarisation program.

..."

33 The other significant policy document to which extensive reference was made during the course of the trial was to the State Government's "Our Forests, Our Future" policy statement. Mr Pendrigh gave evidence that the initiation of the "Our Forests, Our Future" policy was not caused by the National Competition Policy or responses to that Policy. Nevertheless, in a letter from The Hon John Thwaites MP, Minister for Environment, to The Hon John Brumby MP, Treasurer of Victoria, dated 27 February 2003, the following statement appeared in relation to developments in the National Competition Review of the Forests Act:

"In February 2002 the Government released a major forests statement Our Forests, Our Future. This statement outlines significant reform in the area of forest management and industry directions, many of which will go a long way to addressing the recommendations of the KPMG report."

It was also noted that the Government's response would detail these commitments and that the response was to be completed in March 2003. The "Our Forests, Our Future" policy statement opened with observations that:[14]

"The new figures reveal that if logging licences were renewed at current levels our reserves of suitable timber could be exhausted by as early as 2011 in some areas.

In response, the Government is taking swift action to save our hardwood timber industry and give it a long-term sustainable future. Sawlog harvesting in State forests will be cut by about a third (31%)."

The introductory or background material contained in the policy statement also made reference to the most significant reductions in sawlog harvesting in East Gippsland, Central Gippsland and the Midlands.

34 More particularly, the "Our Forests, Our Future" policy statement made specific reference to the establishment of "VicForests" and to a new licensing and pricing system, in the following terms:[15]

"VicForests - a New Commercial Entity

One of the main inhibitors to the restructure of the industry has been Government itself. Government is both the monopoly supplier of native forest timber and the environmental regulator. As a result of the inevitable conflicts of these dual roles, the management and protection of Victoria's forests have suffered.

In accordance with our commitment to National Competition Policy principles, we are required to take into account ecological sustainable development, social welfare and equity considerations, economic and regional development and the efficient allocation of resources, in forming policy.

The National Competition Policy Review of the Forests Act 1958 pointed to the need to reinforce the separation between NRE's commercial roles and its policy, monitoring and regulatory roles in forest management.

In addition, the data and the range of independent reviews commissioned by the Bracks Government make it very clear that current management arrangements are not suited to delivering the Government's objectives for ecologically sustainable forest management. Substantial changes are required.

The creation of a separate commercial forest service entity, VicForests, will transparently disentangle the commercial objectives from the regulatory functions of Government.

...

A New Licensing and Pricing System

Long term (15 years) timber licences were struck in the 1980s and 1990s with a view to providing a viable investment horizon for value adding and the establishment of new markets. While some will not expire until later this decade, many are due to expire this year and in 2003.

While sections of the industry are seeking new 15 year licences, it is vital that licensing strategies are consistent with the latest sustainable yield/resource data and reflect the amount of timber available.

The independent Expert Data Reference Group chaired by Professor Jerry Vanclay has provided unequivocal advice that based on the best information available at present, the Government is not well placed to make long term commitments to industry.

We will not risk over-committing resources or over-cutting of our forests again. Where activities are not sustainable, they will not continue.

While sustainable yield is now better estimated, the Government will need the flexibility to adjust supply commitments either upwards or downwards as further refinement of resource estimates occurs. This flexibility is essential to secure the long-term future of the timber industry.

We will therefore issue a combination of new short and long-term (up to 10 year) licences and logging volumes will be regulated by on going assessments of the health of our forests.

It is also clear that sawlog prices paid to Government have not been set on a transparently commercial basis. Recent independent advice to Government suggests that the most appropriate means of ensuring a fair return to the State for resources supplied to the industry is to establish market-based prices by selling timber competitively.

The Government will:

• fund an Our Forests, Our Future package of up to $80 million, including assistance for affected workers and a voluntary licence reduction program.
• grant new short-term licences to companies whose licences expire in 2002 and 2003, while new allocation arrangements are established.
• in consultation with the industry and affected communities, develop regionally appropriate transitions to the new sustainable yields.
• in future, allocate timber on a mix of short term and long term supply arrangements.
• in consultation with the timber industry, phase in market-based sawlog pricing and allocation.

35 There was significant attention given to the defendant's licence renewal policy, particularly in light of ongoing developments in Victoria's native forests policy.

36 The defendant submitted that even in the context of the ongoing developments in Victoria's native forests policy, the policy with respect to the renewal of long-term licences, as applicable at all relevant times, was as set out in a memorandum from Mr Richard Rawson, Executive Director, Forests Service, to the Minister for Conservation and Land Management, dated 4 February 1998. The plaintiff argued that this Memorandum should not be accepted as evidence of the Department's policy with respect to the renewal of timber licences because the Memorandum was not signed by the Secretary of the Department, the defendant, and nor was there evidence that the Secretary had approved the Memorandum. Mr Pendrigh gave evidence that the presence of the "Received 5 February 1998 Portfolio Coordination Unit" stamp indicated that the Memorandum had been received by that Unit and was on its way to the Minister's office, though it had not then been signed by the Minister. Further, Mr Pendrigh said that the notation "CF/10/0001" on the Portfolio Coordination Unit stamp indicated that the Memorandum had come to his office and had been filed subsequent to the Portfolio Coordination Unit having finished with it. It appeared from Mr Pendrigh's evidence that the process of submitting policy proposals for approval of the Minister did not necessarily involve any formal processing or signing by the Secretary of the Department, the defendant. On the basis of Mr Pendrigh's evidence and the apparent processing of Mr Rawson's Memorandum, I am satisfied that this Memorandum is to be taken as a statement of the approved policy of the defendant with respect to the renewal of long-term sawlog licences which was applicable at all relevant times in these proceedings.

37 The progress in the development and implementation of Victoria's native forests policies has been examined in some detail. In my opinion, it is clear that even at the stage of the publication of the "Our Forests, Our Future" policy statement in February 2002, it would have to be said that the detail of the Government's policy on the renewal of long-term sawlog licences was in a state of flux as the Government investigated the possible means of moving to a more market-priced and market-oriented policy with respect to the granting and renewal of sawlog licences. As indicated in a draft of the KPMG Review, it was anticipated that this process might be complex and, it seems, need to take place over a reasonably significant period of time.[16] In any event, Mr Pendrigh's evidence was that the 4 February 1998 memorandum did represent Government policy and was to be acted upon. There was no evidence to suggest that either the Secretary of the Department, the defendant, or the Minister, disagreed with the contents of this memorandum. Additionally, the position adopted by the plaintiff with respect to the content and timing of its dealings with the defendant in relation to the renewal of the licence is consistent with the timing of the licence renewal processes applicable to a "standard" licence as described in the memorandum.

38 The critical provisions of the 4 February 1998 memorandum were as follows:

1. 3. Most long-term licences have been issued for 15 years. While licences are not strictly renewable (the Forests Act requires that a new licence is issued), existing licences contain clauses that indicate renewal can be negotiated. Renewal of the 'standard' licence can be negotiated after 10 years. There are 52 'evergreen' licences, and renewal of these licences can be negotiated after 5 years.

The relevant clause in a 'standard' licence is:

After the tenth year of this licence, the annual allocation will be reviewed for the period following expiry of the licence. The Director-General and the licensee may negotiate an agreed licence fee for the renewal of this licence. If agreement is not reached before the beginning of the fourteenth year of this licence, rights to a renewal licence will be put to public tender during such fourteenth year. The licensee will be given opportunity to match competing tenders.

and the relevant clause in an 'evergreen' licence is:

After the fifth year of this licence, the licensee may seek the renewal of the licence on the basis of firm proposals for new investments. The Director-General will review the allocation to ensure that it is consistent with the current legislated sustainable yield rates and negotiate with the licensee an agreed licence fee for the renewal of this licence. In the absence of new investment proposals the Director-General and licensee may negotiate a mutually agreed licence fee after the tenth year of the licence. If agreement is not reached before the beginning of the fourteenth year of this licence, rights to a renewal licence will be put to public tender during such fourteenth year. The licensee will be given opportunity to match competing tenders.

1. 4. Most standard licences and many evergreen licences are now at the stage where renewal can be considered by the Department and the customer concerned.

1. 5. The proposed approach to licence renewals is to be based on the following objectives and principles:

• To provide longer term secure contracts to those companies which will make a dramatic change to the industry structure.
• To provide short term and relatively cheap licences to those who may wish to exit the industry, and to free up some resource which can be used to:
  • ➢ test market prices
  • ➢ provide management flexibility to cater for necessary supply adjustments.
• To provide at least a similar level of security as is presently available for the bulk of existing licensees, but to get away from 'renewal' of licences based on a judgement by NRE of what the licensee has done with the resource.
• To provide a consistent relationship between fees for different licences, so that different licensees are not disadvantaged by separate and unrelated adjustments to licence fees.
• To provide a flexible licence structure which allows the customer to move between various licence options.

• New licence fees are to be established once every five years commencing July 1998. The licence fees which are established remain fixed for the five year period concerned, rather than being linked to movements in royalty as they are now.

1. 7. An incentive is to be offered to those licensees who may wish to exist the industry, by effectively buying out licences, through a reduction in licence fees and royalty, over a period of about 5 years. Any wood which becomes available through this process would be re-sold on short term licences. This will allow us to test market prices, and it will also provide flexibility for any necessary future wood supply adjustments.

39 The representations relied upon by the plaintiff were contained in a letter dated 4 March 1998 from Mr Duncan Pendrigh, Acting Manager, Commercial Forestry, a section or division of the defendant's Department. This letter was written at the request of Mr Gary Addison, the Managing Director of the plaintiff, as a result of a meeting with Mr Pendrigh. Omitting the formal parts, the letter contained only two sentences, as follows:

"I refer to our meeting of yesterday where we discussed the renewal of Monier's licence number S000355.

I can guarantee, subject to agreement on price, that the holder of this licence will be offered a renewal licence for fifteen years with the same volume and log quality as shown on the current licence."

"(a) Subject to agreement on price, the holder of licence no. S0000355 under the Forests Act 1958 would be offered a renewal licence for 15 years with the same volume and log quality ('the first representation'); and

(b) The Department, the defendant, could guarantee that, subject to agreement on price, the holder of licence no. S000355 under the Forests Act 1958 would be offered a renewal licence for 15 years with the same volume and log quality ('the second representation')."

The plaintiff further pleaded that the first representation was made with respect to future matters and that the defendant did not have reasonable grounds for making that representation.

(a) the operation of s 52(6)(a) and (b) of the Forests Act;

(b) the fact that the subsequent changes to the licensing procedure brought about by the introduction of the Sustainable Forests (Timber) Act 2004 (Vic) were not, and could not have been, known to the defendant until early 2002;

(c) the assessment of forest resource in East Gippsland management area of February 1997;

(d) the defendant's alleged policy and intention to renew long-term sawlog licences with the same annual allocation or volume; and

(e) the fact that the defendant supported renewal of licences to licensees who entered into value adding activities.

42 Returning to the plaintiff's position, one of its principal arguments was that the defendant had no reasonable grounds for making the first representation. In this respect, the plaintiff relied upon the operation of ss 51A, 52, 82(1) and 87 of the TPA. The plaintiff relied upon the following parts of these provisions:

"51A(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.

For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have reasonable grounds for making the representations.

52(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

82(1) a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVA, IVB or V or section 5lAC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.

87(1) Subject to subsection (1AA) but without limiting the generality of section 80, where, in a proceeding instituted under this Part, or for an offence against section 44ZZRF or 44ZZRG or Part VC, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IV, IVA, IVB, V or VC, the Court may, whether or not it grants an injunction under section 80 or makes an order under section 82, 86C, 86D or 86E, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage."

43 The plaintiff submitted that ss 82(1) and 87 of the TPA provided its cause of action by reference to the norm of conduct provided for in s 52. Section 51A, an evidentiary and deeming provision, operates to caste the burden of proof upon a defendant who has made a representation about a future matter to prove that it had reasonable grounds for making that representation.[17] The position under s 52 without the operation of s 51A was stated by the Federal Court[18] in Global Sportsman Pty Ltd v Mirror Newspapers Ltd:[19]

"The non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor's intention lacked any, or any adequate, foundation. Similarly, that a prediction proves inaccurate does not of itself establish that the maker of the prediction did not believe that it would eventuate or that the belief lacked any, or any adequate, foundation.

... An expression of opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps that there is basis for the opinion. At least if those conditions are met, an expression of opinion, however erroneous, misrepresents nothing."

44 Section 51A of the TPA does not introduce a rule of law that a promise which is not performed or a prediction which is not fulfilled is thereby misleading or deceptive. Section 51A operates to require the conduct of the representor, if established, to be treated as misleading or deceptive in the absence of reasonable grounds for the making of that statement. In other words, the provisions of s 51A have an adjectival operation which casts the evidentiary burden upon the representor in the absence of reasonable grounds being established, and supports it with a powerful deeming provision.[20]

45 The plaintiff relied upon the knowledge of the defendant and its officers with respect to the development and implementation of Victoria's native forests policy between 1992 and 8 May 1998 when Mr Grace of the Competition Policy Unit of the Department sent an email to Mr Tony Bartlet, both also Departmental officers, and Mr Pendrigh with respect to the Government response to the KPMG Review of the Forests Act. In that email, he expressed the view that the Government response to the KPMG Report would not involve an overwhelming amount of work, given that there were "no surprises in the review report and you seem to be clear on the direction in which the Forests Services is heading".[21] The plaintiff's submission was that the work that was being undertaken by the defendant in relation to the NCP Review and the review of the Forests Act, which has already been examined in some detail,[22] indicated that the defendant was, at all relevant times, aware of significant impending changes in Victorian Government policy in relation to native forests. Consequently, it was said, an officer in Mr Pendrigh's position could not reasonably give any assurance to the plaintiff that the timber licence for the Orbost Mill would be renewed for 15 years with the same volume and log quality. Additionally, the plaintiff argued that the knowledge of Mr Pendrigh, as an individual officer, was not of itself decisive as the authorities established that relevant knowledge on the part of the defendant extended to include all the broader corporate knowledge within the operation of the defendant's Department.

46 In response, the defendant emphasised that sub-s 51A(2) of the TPA does not operate as a deeming position if evidence is adduced by a representor to the effect that the representor had reasonable grounds for making the representation.[23] It was submitted that where the representor adduces such evidence, it is then a matter for the Court to determine, on the balance of probabilities in the ordinary way, whether or not the representor had reasonable grounds for making the representation (with the onus resting on the plaintiff in the usual way).[24]

47 In particular, the defendant submitted that s 51A requires the representor to show:

(e) which support the representation made.[25]

48 In determining whether a person had reasonable grounds for expressing an opinion or making a prediction as to a future matter, it is necessary to judge the matter as at the date of representation.[26] This does not, however, preclude the examination of evidence of later events which may cast light upon the overall probabilities, which in certain circumstances may offer the most reliable guidance. Nevertheless, the test is one of reasonableness and "[i]t remains vital to guard against hindsight illusion".[27]

49 The defendant submitted that the following evidence provided proof of reasonable grounds, which existed at the time of the statements made by Mr Pendrigh contained in the letter dated 4 March 1998; which was relied upon by the plaintiff as containing both the first and the second pleaded representations. The defendant submitted that this evidence established that the contents of that letter, the alleged representations or statements, were objectively reasonable and that the evidence supported the representation that was made:

(a) Government policy at the time was for renewal of long-term licences with the same volume and grade of timber, with some allowance for market prices to be applied to set the licence fee for long-term licences. That policy was set out in the memorandum by the Executive Director, Mr Richard Rawson, dated 4 February 1998, which appears to have been approved by the Minister.[28] This was, as submitted by the defendant, in accordance with the Victorian Timber Industry Strategy of 1986.[29]

(b) It was submitted that the Court should find that Mr Pendrigh received and saw the Renewal Policy at the time, from the file markings on the document, as discussed previously.[30] In this respect it was noted that Mr Pendrigh's evidence was that:

"I know that I would not have written the March letter to Gary Addison unless I could be certain that the Minister would sign off on a 15 year licence because I knew the extent of my delegation and for the delegation to be exercised through - for the licence to be issued Governor-in-Council would have to approve it and Governor-in-Council would have to have the Minister sign off on the request ...".

(c) The Renewal Policy represented the conclusion of the defendant's review of the licence renewal policy, which had been conducted by Mr Pendrigh himself in 1997 and also in 1998. Mr Pendrigh's licence renewal paper, which formed the basis of the Renewal Policy, had a common theme which was "to continue to provide long term security to licencees [sic], so renewed licences to [sic] encourage continued value adding, but to also establish some shorter term licences to enable us to have a market price which could be applied to royalties across the licences".

(d) Mr Pendrigh's evidence was that he expected the negotiations with the Victorian Association of Forest Industries ("VAFI") to conclude within 6 to 12 months and in accordance with the Renewal Policy. The Renewal Policy was presented to the industry body, VAFI, at the start of the licence renewal negotiations which were held in late May 1998. In relation to timing, Mr Pendrigh said in his oral evidence:

"Do you recall writing the letter, Mr Pendrigh?---I do.

What was your expectation at the time of writing the letter as to when the renewal licences would be offered?---I expected to be able to offer renewal licence during 1998/1999.

Do you mean by that a financial year?---That's right. So between 1 July 1998 and 30 June 1999.

Why did you hold that expectation?---Because I expected to be able to settle the negotiation with the industry about the terms of the new contracts, so a standard format contract within the calendar year."

(e) In that regard, Mr Pendrigh's expectation was borne out in the short-term, with negotiations commencing towards the end of May 1998. However, the negotiations became "drawn out" after significant differences arose as to terms and conditions, and persisted into late 2000; and

(f) The East Gippsland Regional Forest Agreement established an agreement between the Commonwealth and the State of Victoria which ended with a 20-year undertaking to manage the forests in a specific way and to map the areas that were either reserved or available for timber production.

50 In the course of his evidence, Mr Pendrigh said that he relied on the matters outlined above in making the statement in the 4 March 1998 letter. In particular, he said:

"Can you explain why you were in a position to make that statement in the second paragraph of that letter?---There was [sic] two principal reasons. First was that I believed that the Minister - if we went to issue a 15 year licence in the near future the Minister would sign that on the way to Governor-in-Council because the policy was established and the information on the policy was on the - contained in the memo of 4 February.

Do you mean the memorandum signed by Mr Rawson?---That's correct. Secondly, the forests in East Gippsland - for East Gippsland were subject to a regional forest agreement that had been signed in 1997 and without the RFA we couldn't be certain that we would be able to continue to supply the volumes necessarily at the levels we were at that time so we would have had to have waited for an RFA before writing such a letter, notwithstanding the policy."

51 The plaintiff submitted that the defendant was engaged in a competition policy review and that as part of that review, KPMG had recommended a change to the system of licences, including the abolition and non-renewal of existing licences and the sale of sawlogs by auction or by tender to the public. It was submitted by the defendant that the crux of the plaintiff's submission was that this recommendation created "uncertainty" regarding renewal of long-term licences. However, the defendant submitted that there was no relevant uncertainty which might go to establish that the making of the statements by Mr Pendrigh in the 4 March 1998 letter were made without reasonable grounds. The points relied upon by the defendant in this respect were as follows:

(a) Mr Pendrigh was aware of the review of the Forests Act and was "incidentally" involved. He was aware of what KPMG was recommending at the time he wrote the final draft of the licence renewal paper in mid-January, which formed the basis of the Renewal Policy.

(b) The recommendations of KPMG did not have to be accepted by the Secretary and could be accepted or rejected.

(c) The recommendations made by KPMG in April 1998 were not accepted by the Kennett Government in its formal response of May 1999, particularly in relation to allocation and pricing, and regarding KPMG's pricing analysis.

(d) This reflected the fact that the political situation in 1997 and 1998 was such that the Kennett Government "weren't keen on initiating those reforms at that time. I think they were going to wait for the next election before they moved". The reason "was of a political nature in that the Kennett Government was concerned about its reputation in regional Victoria and wanted to do the best it could to improve its standing in regional Victoria and upsetting a very important rural and regional industry or having reforms coming through at that time weren't seen to be politically wise".

(e) Mr Pendrigh was aware of the issues surrounding pricing of timber at the time of writing the March 1998 Letter. His evidence was that the DSE was "looking at setting a differential licence fee. So a licence that went for longer and could be renewed more frequently would attract a higher licence fee than one that was of a shorter duration or couldn't be renewed as often. That was the general plan" and the DSE had a "very clear market signal about the value of these licences in the marketplace because the licences were tradable and there had been about 80 trades or thereabouts at 1997 and 1998".

(f) The Renewal Policy was therefore not inconsistent with the overall recommendation in the KPMG Report, because it provided for the introduction of an approach that allowed the DSE to test market prices and set royalty rates in accordance with, or taking account of, those prices. Mr Pendrigh said:

"My response is that we felt that the policy set out in the Rawson memo of 4 February responded to the competition policy in a way that we felt would make us compliant from a range of perspectives. So if you look at the first sentence under 9.2.2.2 on 5434: 'We recommend that DNRE's administered allocation and pricing policy in relation to logs be changed to a more market based determination of log prices'; 'to a more market based' approach, not a fully market based approach. So that's what we were doing."

(g) Mr Pendrigh was aware that the DSE wanted to secure increased returns from sawlog licensing and that no price could be stated until negotiations with the industry were complete. This explained his choice of the words "subject to price" in the March 1998 letter.

(h) The "Our Forests, Our Future" policy was not the result of the National Competition Policy. The reforms that eventuated in the devolution of the commercial branch of the Forests Service Division were not the result of the KPMG Review. As has been mentioned, such reform was not supported by the Kennett Government at the time Mr Pendrigh wrote the March 1998 letter.

(j) To the extent that the KPMG Report recommended a market-based pricing system, this did not affect the status of the Renewal Policy or Mr Pendrigh's other grounds for making a representation as to a 15-year renewal (compared to royalties or fees levied for the same) because the March 1998 Letter expressly carved out "price" from any assurance.

52 Consequently, the defendant submitted that whatever options might have existed with respect to the review of the Forests Act or competition reform, the Renewal Policy was the Minister's policy at the date when Mr Pendrigh wrote the letter of 4 March 1998. Thus, the defendant submitted, Mr Pendrigh was reasonably entitled, indeed, expected, to rely on that policy and to implement it.

53 More generally, it was submitted that in the present context, each case turns on its own particular facts. Nevertheless, it was submitted that the City of Botany Bay Council v Jazabas Pty Limited[31] was an analogous and helpful decision of the New South Wales Court of Appeal. In that case, the plaintiff was interested in purchasing a site for development and sought assurance from the Council regarding development approval. The Council's Director of Planning and Environment, Ms Cuthbert, told the Plaintiff (in 1993) that she did not believe the company would have a problem in obtaining such approval. Later events revealed that there would have been problems with obtaining approval if the Council had given effect to the recommendation of the Department of Environment and Planning's "Risk Assessment Study" (RAS).[32] The plaintiff brought a claim for misleading and deceptive conduct, negligence, and estoppel. The observations of Mason P in respect of reasonable grounds (s 51A of the TPA) are apt (at [96], Beazley JA agreeing at [105]):

"It may well be the case that (as a matter of environmental law) the Council ought to have had a greater regard to the RAS, the risks it highlighted, and the recommended risk reduction zone at all times since 1985. But it was not legally bound to give effect to the Department's views expressed in the RAS, but not translated into prescriptive requirements. And it did not do so, as a matter of policy or practice, until late 1996. Mrs Cuthbert was asked to predict the likelihood of development approval issuing and she did so, carefully and correctly. The material she had at hand and upon which I infer she relied meant that such prediction was reasonably based."

54 His Honour noted, in respect of the various reasonable grounds submitted by the Council (at [88]):

"The Council also submits that there was in 1993 no policy of restricting development by reference to the RAS risks or the proposed RRZ [Risk Reduction Zone]. Fitzgerald JA has concluded that no such policy then existed. I agree with him. The reasons supporting that conclusion and the evidence showing that no such policy came into existence until late 1996 are also pertinent to the present issue."

55 In conclusion, it was submitted by the defendant that at the time Mr Pendrigh wrote the 4 March 1998 letter, the existing Renewal Policy within the Department was for long-term licences to be renewed. There was no contrary policy or decision within the defendant or the Victorian Government to countermand the Renewal Policy. The East Gippsland Regional Forest Agreement permitted the volumes allocated under those licences to be maintained on renewal. The changes that ultimately ensued, years later, as a result of the "Our Forests, Our Future" policy statement and the Sustainable Forests (Timber) Act 2004 (Vic), were unforeseen in 1998 and came about after a series of dramatic events, both for the Department and the State generally. Consequently, the defendant submitted that, taking into account all of the evidence that has been adduced, the Court ought to conclude that Mr Pendrigh had reasonable grounds for writing the March 1998 letter.

56 In my opinion, the defendant's submissions with respect to it having reasonable grounds for making the statements in the 4 March 1998 letter from Mr Pendrigh should be accepted for the reasons advanced, and on the basis of the evidence to which reference was made in those submissions. It is clear that Victoria's native forests policy was being reviewed at the relevant times and that the process was apparently triggered, in late 1992, as a result of the National Forest Policy Statement and, later, the National Competition Policy Statements and consequential reviews of legislation such as the Forests Act. This is, however, not an unusual position. In a modern democratic society, government policy is commonly in a state of development and change, and, indeed, many members of the community would regard governments and their departments as failing in their obligations to the community if this were not the case. The plaintiff is a corporate body which, as indicated previously, owns and operates timber mills in a number of locations and, as the evidence indicated, has been engaged in and has had officers who engaged in and conducted commercial operations and were involved in lobbying various governments in relation to forest policy over a significant period of time. In other words, it is the position that both parties must be taken to have been aware of the process of policy development by governments and the sort of policy development and consultative processes engaged in by entities such as the defendant. In this environment, government functions must continue to operate, but statements as to the current and future position with respect to licence and other arrangements will be required to be given and, in my view, are properly given on the basis of existing government policy. Save, of course, in circumstances where it is quite clear that that policy will change at a relevant time and the particular changes to be made to that policy are settled and clear. In my opinion, that is not the position in the present circumstances. Mr Pendrigh acted reasonably in writing the letter of 4 March 1998 in the form in which it was written, having regard to the then established government policy with respect to timber licensing and licence renewals.

57 As to the second representation, the plaintiff submitted, it will be recalled, that it refers to the "guarantee" said to be given in the 4 March 1998 letter, which was false for the same reasons as the first.[33] Further, the plaintiff submitted that the defendant was not in a position to "guarantee" renewal of the licence without also disclosing the process of policy review and development in relation to Victoria's native forests, to which reference has been made. The plaintiff submitted that a "guarantee" could not be given in circumstances where plans and policies were being considered and developed with a view to abolishing the licensing system. The plaintiff said that the failure to disclose the entire circumstances in which the "guarantee" was given meant that a contingency was hidden by the defendant's conduct which, ultimately, may or may not have come to pass. The plaintiff further submitted that this contingency did come to pass when, in 2005, after two short-term licences expired, a "clear-cut refusal" to renew the licence was given or, perhaps, on 28 May 2004, on which the first statement was made in clear, unequivocal terms that the licence would not be renewed. The plaintiff further submitted that both the first and the second representations were ongoing or continuing, and that the defendant did not plead that it had reasonable grounds for making the representations after 17 April 1998 (the date of the plaintiff's acquisition of the Orbost Mill).

58 The defendant submitted that, as put in its opening submissions and at trial, the case of the plaintiff was that "the defendant gave a guarantee that the licence to be purchased would be renewed, subject to agreement on price".[34] The defendant submitted that this was a departure from the "First Representation" as pleaded in the plaintiff's Further Amended Statement of Claim and the plain words of the 4 March 1998 letter. In the latter respect, the defendant made reference to the critical paragraph of that letter, emphasising the words which it submitted qualified any suggestion of something in the nature of an unequivocal or unconditional guarantee, in other words a guarantee in any real sense. That paragraph, with words emphasised by the defendant, was set out as follows:

"I can guarantee, subject to agreement on price, that the holder of this licence will be offered a renewal licence for 15 years with the same volume and log quality as shown in the current licence."

It was submitted by the defendant that the plaintiff did not plead any other positive contravening conduct on the part of the defendant other than the 4 March 1998 letter. In particular, it was emphasised that the plaintiff did not plead that it was given "verbal assurances ... that the Orbost licence would be renewed",[35] although much of the evidence of the plaintiff's witnesses was, the defendant said, directed to that proposition. Due to the reasons expressed below, I do not find that the 4 March 1998 letter of the defendant was misleading or deceptive. Consequently, there cannot be an ongoing or continuing breach, as the source of the representation was not misleading or deceptive, and thus, no initial breach, which was claimed to be the basis of a continuing breach, occurred.

59 Consequently, and in my view correctly, the defendant submitted that whether the conduct comprised in the 4 March 1998 letter is misleading or deceptive in the sense of being capable of inducing error, is a question of fact to be determined in the context of the relevant surrounding facts and circumstances.[36] The question is not simply whether the plaintiff was actually misled. The question of whether the defendant's conduct was misleading or deceptive for the purposes of the TPA or the FTA is an objective question for determination by the court.[37]

60 The defendant submitted that the words of the 4 March 1998 letter, on a plain reading, could only be understood by a person in the plaintiff's position as a promise of an "offer" of renewal which was itself "subject" to the parties reaching agreement on price. The defendant submitted that the words contained no representation that the price (or fees or royalties paid under the licence) would not change. Nor, the defendant submitted, did the 4 March 1998 letter or any other conduct of the defendant exclude the possibility or risk that the parties might disagree on price and therefore not reach any "agreement". The requirement for agreement was expressly stated as being a prerequisite for renewal. Consequently, the defendant submitted that there was no unqualified representation that the licence would be renewed.

61 It is clear from the authorities that, for the purposes of ss 52 and 82 of the TPA, "conduct" must be viewed "as a whole". Thus, in Butcher v Lachlan Elder Realty Pty Ltd,[38] Gleeson CJ, Hayne and Heydon JJ said:[39]

"... it is important that the agent's conduct be viewed as a whole. It is not right to characterise the problem as one of analysing the effect of its 'conduct' divorced from 'disclaimers' about that 'conduct' and divorced from other circumstances which might qualify its character. Everything relevant the agent did up to the time when the purchasers contracted to buy the Rednal land must be taken into account. ..."

Similarly, in his dissenting judgment in that case, McHugh J said that in determining whether conduct is misleading or deceptive, the court must examine the conduct objectively in its context.[40]

"The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation's conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct. Thus, where the alleged contravention of s 52 relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole. The court is not confined to examining the document in isolation. It must have regard to all the conduct of the corporation in relation to the document including the preparation and distribution of the document and any statement, action, silence or inaction in connection with the document."

62 The position was also affirmed more recently by the Victorian Court of Appeal in BMD Major Projects Pty Ltd v Victorian Urban Development Authority[41] where Buchanan, Nettle and Weinberg JJA said:[42]

"It is not to the point that particular statements can be characterised as unqualified and that other statements were not part of the contract. In order to determine whether conduct is misleading or deceptive, it is necessary to look at the entirety of a transaction and assess the particular conduct said to be misleading or deceptive in the context of everything else the representor said and did which is relevant to that conduct."

63 Consequently, the defendant submitted, the 4 March 1998 letter must be construed in light of the entire context of dealings and communications between the parties, including the preceding meetings and communications. The defendant submitted that when taken in this context, a person in the plaintiff's position would have understood that any assurance conveyed by the 4 March 1998 letter was not an unqualified "guarantee" and had a limited "life span" which would come to an end upon any announcement of a possible or actual change in Victorian Government policy.

64 It was also submitted by the defendant that the parties were aware that the long-term licences were to be negotiated and renewed in the following six to twelve months. In this respect, reference was made to a meeting held on 12 December 1997 between Mr Addison and Mr Squires, both then directors of the plaintiff, and Mr Pendrigh of the defendant's Department, at which they were told that the licence conditions provided for renewal after the tenth year and that the licensee could seek renewal for 15 years "from 1 July 1998". The plaintiff recorded or noted that this was the understanding in a letter from Mr Addison to Mr Pendrigh dated 15 December 1997.

65 Mr Addison's letter of 15 December 1997 to Mr Pendrigh is also indicative of the plaintiff's understanding of the broader Government policy, and Government policy development aspects of the timber licensing environment. The substantive parts of that letter were as follows:

"From our discussions we understand that the licence conditions provide for renewal after the tenth year and in this case the licensee can seek renewal of 15 years from 1/7/98. We also understand that the East Gippsland Regional Forest Agreement has been signed and there are no impediments on environmental grounds to the renewal of sawlog licences in East Gippsland at their current volumes.

As you are aware, we are genuine about the Orbost Sawmill and intend to enter into negotiations with Monier shortly. In anticipation of a successful outcome we would appreciate confirmation of the above licence being renewed to 2013 in order to support our bank finance proposal."

Mr Squires gave evidence that the 15 December 1997 letter accurately recorded the discussions that took place in the meeting on 12 December 1997 with Mr Squires, Mr Addison and Mr Pendrigh.

66 Mr Addison's letter of 15 December 1997 was responded to by Mr Peter Ford, Acting Manager Commercial Forestry of the defendant's Department, by letter dated 29 December 1997 addressed to Mr Addison. Omitting formal parts, this letter was as follows:

"Sawlog Licence S000355

Thank you for your facsimile of 15 December 1997 [which is a reference to the transmission of Mr Addison's 15 December 1997 letter by facsimile] to Duncan Pendrigh regarding discussions that you had concerning your company's possible purchase of the above licence. I note that you require confirmation regarding the future of the licence to assist you with your financing proposals. The following information is provided to assist you in this matter.

As indicated at the meeting, the Department would be prepared to renew the licence beyond 2003 subject to satisfactory negotiations regarding price and allocation as is specified in the licence conditions. The period for the renewal can be up to 15 years and will be part of the negotiation process. The level of allocation in the renewal period is dependent on the calculation of sustainable yield made following the current Statewide Forest Resources Inventory program and may involve some reduction. I am unable to give you any further indication at this time.

As you also discussed, the type of timber provided on the licence is determined following a value added assessment. A provisional annexure to the licence is produced following the assessment and Licensees have 90 days to object to that assessment and produce any evidence in support of their case. Following the recent assessment in East Gippsland FMA, the annexure to licence S000355 will no longer include any B+ material. However, should you purchase the licence, the Department would be prepared to consider including species above the provisional annexure provided you can put a proposal to the Department during the 90 day period mentioned above (the provisional annexures should be issued in the next 2 to 3 weeks)."

67 The plaintiff prepared a Proposal for Acquisition of Orbost Sawmill which was provided to the Commonwealth Bank of Australia for the purpose of obtaining finance for the purchase. Under the heading "Resource Supply", the Proposal stated the position as understood by the plaintiff, as follows:

"The CSR/Monier sawmill at Orbost has a Licence from the Department to take 31,345m3 of Grade D or better sawlog per annum with the Licence running until June 2003. Licences in the East Gippsland Forest Management Area were issued in July 1988 for fifteen years. Licence conditions provide for renewal after the tenth year, hence East Gippsland Licencees can seek renewal from July 1998.

The East Gippsland Region was the first in Australia to be subject to a Regional Forest Agreement (RFA) between the Commonwealth and State Governments. One of the principal objectives of the East Gippsland RFA which was signed in 1997 is to provide industry with the resource certainty necessary for continued investment. Given that the East Gippsland RFA has been signed there are no impediments to the renewal of sawlog licences in East Gippsland.

The Department of Natural Resources & Environment has indicated that it would be prepared to renew the Orbost sawmill Licence this year beyond 2003 subject to satisfactory negotiations regarding price and allocation as specified in the Licence conditions."

68 Consistently with the correspondence with the defendant in relation to the 12 December 1997 meeting and the proposal to the Commonwealth Bank of Australia, a paper presented to the plaintiff's Board stated that "Log licence from Victorian Government renewable 1998 for period 2003-2013". Additionally, Mr Addison's evidence was that he became aware at the 12 December 1997 meeting with Mr Pendrigh that the plaintiff was "entitled to negotiate a renewal of a licence almost immediately, commencing 1 July 1998".

69 In relation to the use of the word "guarantee" in the 4 March 1998 letter, the defendant submitted that the statements of Rares J in Ackers v Austcorp International Ltd[43] were of relevance. In that case, the fifth respondent (and others) made representations in promotional material to potential investors (including the applicants) about the future success of a resort development. One of the representations was that a net return of 7% per annum was "guaranteed" for at least 10 years. As to this, Rares J said:[44]

"I am satisfied that the brochure achieved, objectively and in the subjective minds of each of the applicants who gave evidence before me, the purpose of instilling in them the belief that the rent would be paid as a 'sure thing'. However, I am also satisfied that the applicants were worldly enough to realise that no-one would be able to give them a guarantee against the vicissitudes of the marketplace. No-one for example could have predicted the shocking events of 11 September 2001, or other economic events which might affect the Australian or international economies generally. It would be quite unreasonable for anyone to believe that a promoter of a resort hotel project in the Central Coast of New South Wales would be able to predict the outcome of the world economy over the succeeding 10 years and given assurance that nothing could happen which might so impact on the operations of the hotel that rent would not in any circumstances cease to be paid at the guaranteed rate. As Gibbs CJ said in Puxu[45] 149 CLR at 199 (see also Campomar[46] (2000) 202 CLR at 85 [102]-[103] per Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ):

'The heavy burdens which [s 52] create cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all the circumstances.'

So, the confidence which the brochure exuded could not reasonably have been understood as boundless or applicable in all circumstances." [emphasis added]

70 The defendant submitted that the present position was similar in that it could be said that a person in the position of the plaintiff, with experienced directors whose business was investing in timber-related businesses, would have understood that a "guarantee" could not be, and was not being, given by Mr Pendrigh. Rather, they would have understood that any representation was subject to limitations comprising the ordinary vicissitudes of government, such as changes in Victorian Government policy, legislation and, indeed, a change of government.

71 It was also submitted that, in any event, the evidence established that the parties were aware that an unqualified "guarantee" was not being given and could not be given. In this respect, reference was made to the 29 December 1997 letter from Mr Ford to Mr Addison, the substance of which is set out above,[47] with particular reference to the statement that "The level of allocation in the renewal period is dependent on the calculation of sustainable yield made following the current statewide forest resources inventory program and may involve some reduction". Further, reference was made to the licence provisions which stated: "The Secretary and the licensee acknowledge that available data on the forest resource, particularly relating to timber quality, is incomplete. Therefore licence tenure and total volume are subject to the provisions of Condition 23 thereof". The licence also stated: "This licence is subject to the attached Licence Conditions for licences granted pursuant to the Forests Act 1958 and as amended from time to time". It was noted that s 52(6)(b) of the Forests Act provided that the Secretary: "shall not by reason of having given information pursuant to [s 52(6)] be bound to grant a further licence". Additionally, the defendant submitted that the reference to the Forests Act in the licence made it clear on the face of the licence and accompanying correspondence that Governor-in-Council approval was required for licences for more than three years.

72 Finally, in this respect the defendant submitted that the evidence was that the plaintiff did not request or require a "guarantee". Mr Addison conceded that Mr Gilham, then a director of the plaintiff, did not want a guarantee but, rather, "more assurance". Mr Gilham said that he "asked Gary Addison to go back to the Government department in Victoria that handled this matter and negotiate a longer licence period to enable us to buy the mill". He disavowed paragraph six of his outline of evidence which referred to a request that Mr Addison obtain a "guarantee". Mr Gilham said in his oral evidence that he recalled that Mr Addison "certainly did tell me he had something positive back from the Department at some time prior to us going ahead with the purchase".

73 On the basis of the written and oral evidence and other matters to which reference has been made, I accept the submissions of the defendant that the plaintiff could not reasonably have understood that any assurance conveyed by the 4 March 1998 letter was either an unqualified assurance or guarantee, or anything that had a "lifespan" which would not come to an end as a result of an announcement of a possible or actual change in Victorian Government policy. On this basis, I find that the conduct of the defendant was not misleading or deceptive for the purposes of the provisions of the TPA or the FTA.

74 Having found that the conduct of the defendant is not misleading or deceptive for the purposes of the provisions of the TPA or the FTA, the question whether the plaintiff relied upon the defendant's conduct does not arise. Nevertheless, the issue was argued at some length and it may assist for me to consider the reliance issue and to express my opinion in the event that the issue becomes relevant.

75 The issue of reliance raises the question of causation. The plaintiff submitted that reliance need not be the sole cause of loss, and it rarely is, referring to Travel Compensation Fund v Robert Tambree.[48] In this respect, Gummow and Hayne JJ said:[49]

"Misrepresentation will rarely be the sole cause of loss. If, in reliance on information, a person acts, or fails to act, in a certain manner, the loss or damage may flow directly from the act or omission, and only indirectly from the making of the representation.[50] Where the reliance involves undertaking a risk, and information is provided for the purpose of inducing such reliance, then if misleading or deceptive conduct takes the form of participating in providing false information, and the very risk against which protection is sought materialises, it is consistent with the purpose of the statute to treat the loss as resulting from the misleading conduct."

76 In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No. 1),[51] Lockhart J (with whom Burchett and Foster JJ agreed in relation to the reliance issue) dealt with the issue of reliance in the following terms:[52]

"It is broadly true that an application in an action under s 52 cannot recover damages unless he establishes that he acted on or was influenced by the conduct contravening the section: Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd.[53] The issue of the applicant's reliance upon such conduct is however more complex than such a formulation indicates. The trial judge noted the similarity between conduct constituting deceit at common law and conduct contravening s 52, and referred to the principles which determine whether there has been inducement in actions for deceit. These principles were reviewed by Wilson J in Gould v Vaggelas.[54] His Honour there observed that the inference that the applicant relied upon a material representation calculated to induce him to enter a contract might be rebutted by showing that 'whether he knew the true facts or not he did not rely upon the representation'. His Honour noted that the representation made 'need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract.' In Neilsen v Hempston Holdings Pty Ltd,[55] a case which concerned an action for damages under s 52 where misleading statements had been made to the applicant as to the occupancy rate of a motel, Pincus J held that the causal chain allowing recovery of damages under s 52 of the Trade Practices Act was not broken even where the applicant had failed to take reasonable care of his own interests by undertaking a proper investigation of the figures presented. These decisions support the view that recovery under s 52 is founded by the applicant's actual reliance upon the misleading or deceptive conduct of the respondent although that conduct was not the only factor in the applicant's decision to enter a particular agreement, and although the applicant did not seek to verify the representations or did so inadequately and so failed to discover their falsity."

77 The defendant submitted that ss 82 or 87 of the TPA only apply where the plaintiff suffered, or was likely to suffer, loss or damage "by" the contravening conduct. Similarly, it was submitted, s 159 of the FTA only allows damages to be recovered for loss and damage occurring "because of" the relevant misleading and deceptive conduct. It was submitted that the term "by" has been held to invoke the "common law practical or common-sense concept of causation except insofar as that is expressly or impliedly modified or supplemented by the provisions of the Act".[56] This ordinarily involves a hypothetical inquiry assuming the non-existence of the contravening conduct, rather than one that assumes the truth of the misleading conduct.[57] Loss or damage is causally connected to a contravention if the conduct materially contributed to the loss or damage.[58]

78 On the basis of these authorities, it is, in my view, clear that, as Lockhart J said, there must be "actual reliance upon the misleading or deceptive conduct of the ... [defendant] although that conduct was not the only factor in the ... [plaintiff's] decision to enter a particular agreement, and although the ... [plaintiff] did not seek to verify the representations or did so inadequately and so failed to discover their falsity". On this basis, the plaintiff submitted that the evidence is clear that its directors relied upon the representations in acquiring the Orbost Mill. It was submitted that all three directors gave distinct accounts of their reliance on the 4 March 1998 letter in approving the acquisition of the Orbost Mill and that there was no good reason not to believe them. It was said that this was particularly so in the case of Mr Gilham, who was a director of Brickworks Ltd (the parent of the plaintiff company) which might have been liable to refund Mr Addison and Mr Squires' money if the plaintiff was to be successful in this proceeding.

79 In particular, the plaintiff submitted that it relied upon the representations to which reference has been made and, as a result, purchased the Orbost timber operations from Monier for approximately $2.9 million on 17 April 1998, took a transfer of licence no. S000484 (which had replaced licence no. S000355), and thereby assumed all the obligations and entitlements thereunder, and organised its business and invested and expended moneys on the basis that the holder of licence S000848 would be offered a renewal licence for 15 years with the same volume and log quality.

80 In support of its submissions with respect to reliance, the plaintiff then made reference to the history of its decision to consider the Orbost Mill as a potential acquisition, in mid-1997, and its subsequent dealings with officers of the defendant, in meetings and correspondence from mid-December 1997 until its purchase of the Orbost Mill on 17 April 1998. The purchase, it was said, followed the 4 March 1998 letter from Mr Pendrigh to the plaintiff, which was provided to its Board, and by the plaintiff to the Commonwealth Bank of Australia, which was financing the purchase. Particular reference was made to the meeting between Mr Addison, Mr Squires and Mr Pendrigh on 12 December 1997, to the letter of 15 December 1997 from Mr Addison to Mr Pendrigh and the letter of 29 December 1997 from Mr Peter Ford, Acting Manager Commercial Forestry of the defendant's Department, to Mr Addison.

81 Mr Addison gave evidence that he saw the 29 December 1997 letter from Mr Ford at the time and Mr Squires also gave evidence that it was likely that he saw the letter about the same time. Mr Squires gave evidence that he and Mr Addison worked actively together on the acquisition of the Orbost Mill at the time and travelled to Orbost to visit the mill. On 28 January 1998, Mr Squires sent a letter to CSR regarding the negotiation of the purchase of the Orbost Mill. Mr Addison gave evidence that the plaintiff and CSR had not reached any agreement at that time, and this was confirmed by Mr Squires, who gave evidence that negotiations with CSR were then continuing in relation to the purchase price and the proposed supply agreement.

82 Subsequently, on 3 March 1998, Mr Addison attended a meeting with Mr Pendrigh which, according to Mr Addison's evidence, involved a discussion principally related to the licence for the Orbost Mill. Neither Mr Squires nor any other person apart from Mr Addison was present at that meeting on behalf of the plaintiff. Mr Addison gave evidence that the plaintiff required more certainty in relation to the licence renewal provisions and that it was seeking an extension for 15 years after 2003. He said that he had been requested by the plaintiff's Board and the Commonwealth Bank of Australia to seek this assurance. Mr Gilham also gave evidence that he told Mr Addison to obtain an assurance for a longer licence. Mr Addison said that Mr Pendrigh assured him that Auswest would be granted a 15 year renewal, which he reported to the plaintiff's Board. Mr Addison's evidence was that the Board required that assurance to be in writing and that he, Mr Addison, telephoned Mr Pendrigh and requested the assurance in writing, to which Mr Pendrigh responded that he would send something in writing. The plaintiff submitted that Mr Addison's evidence was not contradicted by Mr Pendrigh in examination-in-chief. The written response from Mr Pendrigh which had been requested by the plaintiff was provided in the form of the 4 March 1998 letter from Mr Pendrigh to Mr Addison, to which reference has been made. Mr Addison's evidence was that he provided a copy of the 4 March 1998 letter to the plaintiff's Board and to the Commonwealth Bank of Australia. He said that, subsequently, the Board approved the acquisition and the bank approved the financing and the acquisition of the Orbost Mill on the basis of the 4 March 1998 letter. Consequently, on 17 April 1998, Auswest purchased the Orbost Mill from Monier for $2.9 million.

83 Mr Addison gave evidence that the plaintiff would not have acquired the Orbost Mill had the defendant not provided the 4 March 1998 letter. This was because, he said, a five year licence would not be sufficient to warrant personal guarantees; the plaintiff was not in the business of looking for a short-term opportunity; and Mr Addison would not have been prepared to give guarantees and secure finance for a five year period because too much risk would have been involved with a five year licence period.

84 Mr Squires' evidence was similar to that of Mr Addison with respect to the guarantee, the licence period, and the acquisition of the Orbost Mill. In relation to licence renewal, his evidence was that some certainty surrounding the renewability of the licence which, in 1998, was due to run out in five years, was absolutely essential. He also said that he thought the 4 March 1998 letter was a very valuable letter as it enabled Auswest to proceed to the acquisition process. In relation to the contents of that letter, he said that he thought the phrase "subject to negotiation on price" meant that closer to the renewal date there would be negotiation whereby the actual price would be subject to the price then prevailing in the marketplace in the East Gippsland area. Finally, his evidence was that the existence of the "guarantee" as to the renewability of the licence was a vital building block, without which the acquisition of the Orbost Mill would not have proceeded.

85 Mr Gilham also gave evidence about the guarantee, licence period, and acquisition of the Orbost Mill. Mr Gilham said that he was happy to go along with the acquisition of the Orbost Mill at the outset, but, having been informed that the licence was only for about five years and, considering the purchase price, he thought that the supply contract or the supply licence period was too short. He said that he asked Mr Addison to go back to the Government department in Victoria handling the matter and negotiate a longer licence period to enable the plaintiff to buy the mill. Mr Gilham insisted in his evidence that the 15 year extension of the licence was a prerequisite for the plaintiff's purchase of the Orbost Mill and that when Mr Addison "obtained a 15 year extension to the licence", Mr Gilham was happy to proceed with the purchase of the mill and the purchase proceeded. Mr Gilham said that he relied on the 4 March 1998 letter, and not the 29 December 1997 letter from Mr Peter Ford. Mr Gilham also said that if the plaintiff had not received the 4 March 1998 letter and he was told that the licensing system may be abolished and replaced, it would have been most unlikely for the acquisition of the Orbost Mill to have proceeded. Further, he said that, if he had been told prior to the purchase of the Orbost Mill that the Government department responsible for timber licensing was undertaking or proposing to undertake a comprehensive review of policies and procedures with respect to the renewal of log licences, the plaintiff would not have proceeded with the purchase of the Orbost Mill. Finally, he said that had he been told that the "guarantee" in the letter of 4 March 1998 may not have been honoured, then the plaintiff would not have proceeded with the acquisition of the Orbost Mill.

86 The defendant submitted that although the plaintiff's witnesses on reliance, Messrs Addison, Squires and Gilham, may not have set out to positively mislead the Court in relation to their evidence, the events occurred many years ago and Mr Addison, in particular, was inclined to tailor his evidence to accord with the plaintiff's case. It was submitted that this should be compared to the evidence of Mr Pendrigh, who frankly conceded that he could not remember anything about his meetings with Mr Addison and Mr Squires (on 12 December 1997) and with Mr Addison (on 3 March 1998).

87 The defendant submitted that Mr Addison gave the overall impression that he had been involved in the conduct of the proceeding for such a long time that he had come to believe some of his assertions, even though they were contradicted by contemporaneous documents. The defendant submitted that Mr Addison should not be treated as a wholly reliable witness for the following reasons:[59]

"(a) In-chief, Mr Addison was asked if someone had said to him before he was to sign the purchase agreement in 1998 what he would have said to such a person as to the worth of the business. Mr Addison replied that "I would have said the business was nowhere near worth $2.9 million". This evidence was quite inconsistent with the contemporaneous documents. The Bank Proposal prepared for the CBA noted that the agreed purchase price was "substantially below a recent independent valuation of $3.9 million" and described the price as "favourable_"_. Mr Addison did not give satisfactory evidence when he was cross-examined on those statements. At first he denied that the purchase price of $2.9 million was a favourable price. When presented with the terms of the Bank Proposal, his evidence was evasive.

(b) In relation to the events of early 1998, Mr Addison adhered to unlikely versions of events eg the Bank Proposal was prepared for both the board of directors of Auswest and the CBA; by a "coincidence" both the board and the CBA sought at the same time the further assurance eventually contained in the March 1998 Letter; his denial that the board was prepared to proceed with the purchase on the basis of Mr Ford's letter of 29 December 1997 rather than the March 1998 Letter; his evidence that he was told "twice" by the board to seek assurances from the DSE etc.[60]

(c) Mr Addison gave unsatisfactory evidence that he believed that the "guarantee" contained in the March 1998 letter would be honoured by the DSE even after the release of OFOF policy in February 2002. Mr Addison claimed that he thought that the "guarantee" was "iron clad" in February 2002 notwithstanding the release of the OFOF policy. He further asserted that the letter from the DSE dated 4 July 2002 in response to his letter dated 21 March 2002 did not "necessarily" address "the issue of our guarantee of renewal and that it was primarily talking about the one year extensions". Yet under cross-examination, Mr Addison conceded that the earlier issue of a one year licence on 5 April 2002 was inconsistent with Auswest being offered a 15 year licence commencing on 1 July 2003. At times Mr Addison conceded that it was clear from the DSE's letter dated 4 July 2002 that the DSE would not be issuing the licence as "guaranteed" and yet elsewhere he gave evidence that the letter "didn't specifically address the issues I had raised in my letter to Ms Munro about our guarantee". Notwithstanding the invitation in the last paragraph of the DSE's letter, Mr Addison could not explain why he did not speak to Mr Rutherford. Generally, Mr Addison refused to accept the obvious implications of the March/July correspondence. At one point Mr Addison conceded that it was "becoming unlikely around mid-2003" that the licence would be renewed and yet he thought that in 2005 "there was still a possibility of the licence being extended". Even at the time of giving evidence, Mr Addison thought there was a possibility that the 15 year licence might be granted. These assertions are not credible.

(d) Mr Addison (as well as Mr Squires) has a personal interest in the success of this proceeding because they are entitled to be paid $1 million or part thereof under the clawback provisions in the acquisition agreement whereby Brickworks acquired Auswest."

I accept the defendant's submissions in this respect for the reasons set out in its submissions. In relation to the evidence of Messrs Squires and Gilham, I am of the opinion that their evidence must be treated with caution having regard to the fact that the events in question did occur many years ago, and that much of their evidence relied upon assurances from Mr Addison rather than direct contact with officers of the defendant's Department. This evidence also relied upon their views with respect to the licence conditions and correspondence as a result of the dealings between the plaintiff and the defendant which, in my view, is more likely to be current interpretation with the benefit of hindsight, rather than any real recollection of their contemporaneous reactions or position with respect to the relevant correspondence or the licence conditions. In this respect, it is apposite to refer to the comments of Lewison J in Food Co UK LLP (T/a Muffinbreak) v Henry Boot Developments Limited:[61]

"4. Although some of the representations on which the tenants rely were made in writing, in all cases they allege that these representations were confirmed, expanded, or supplemented by oral representations. These oral representations were made in conversations and at meetings of which there is scant record. In approaching the evidence I have tended to place weight on contemporaneous documents and documents which came into existence before the problems emerged. In assessing the recollections of witnesses, it is also important to avoid the benefit of hindsight. I must try to assess what people did, said and thought at the time. In that connection I have borne in mind the words of Lord Pearce in his dissenting speech in Onassis v Vergottis [1968] 2 Lloyd's Rep. 403, 431:

'Credibility involves wider problems than mere "demeanour" which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person, telling something less than the truth on this issue, or, though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so, has his memory correctly retained them? Also, has his recollection been subsequently altered by unconscious bias or wishful thinking or by overmuch discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection ins preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness, and motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process and in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part."

88 In relation to the evidence of Messrs Addison, Squires and Gilham, I should make the general observation that the plaintiff's claimed reliance upon the, so-called, "guarantee" said to be contained in the 4 March 1998 letter has an air of unreality about it when one considers both the terseness of that letter and the lack of any assurance that a vital ingredient in any ongoing licence, namely price, was subject to future negotiation and agreement. Additionally, the fact that the plaintiff and its directors had been involved in timber milling operations prior to investigation of the Orbost Mill purchase proposal, and must have been familiar with the ongoing development of State and Commonwealth Government policy with respect to forestry management, timber licensing and timber supply makes it improbable, in my view, that the plaintiff regarded the 4 March 1998 letter and any other assurances from officers of the Department as anything other than generally helpful and something that might be relied upon in future negotiations with the Department in relation to timber licensing and timber pricing for the Orbost Mill. Any suggestion that this letter and other dealings with the defendant or the defendant's Department produced any settled entitlement that could be relied upon in the future is, in my view, an assertion that is not credible in all the circumstances, particularly having regard to the nature and magnitude of the investment that was being made. In my view, this position is supported by the matters relied upon by the defendant in evidence in support of its submissions that the plaintiff did not rely on the 4 March 1998 letter in purchasing the Orbost Mill. The same applies with respect to the defendant's submissions that the plaintiff did not rely on this letter after acquisition of the Orbost Mill.

89 The defendant also submitted that the plaintiff had decided to acquire the Orbost Mill for the purchase price of $2.9 million prior to receiving the 4 March 1998 letter. In this respect, it submitted that the plaintiff saw benefits in the acquisition because it would further entrench its relationship with CSR as it had already purchased another sawmill from Monier/CSR in 1996, located at Busselton in Western Australia. The plaintiff's "Proposal for Acquisition of Orbost Sawmill" stated that the Busselton mill had operated successfully for almost two years and, further, that, with respect to the Orbost Mill,[62] "The future is also assisted by the stability which flows from a Supply Agreement for Orbost to supply some 58% of its output to CSR/Monier at agreed market prices for a four year period". Further, the Proposal continued:[63]

"The acquisition is also, moreover, a most important advance in the development of the Auswest business in that it builds critical mass and provides significant operational and management synergies for the combined operation. In particular, the opportunity to supply Adelaide with battens from Busselton to replace those currently supplied from Orbost does two things

(i) it builds capacity utilisation, reduces unit costs and increases profitability of Busselton (in Y/E March 1999 our profit increase is estimated at $138,000); and

(ii) improves Orbost's profitability by facilitating the transfer of the raw material otherwise cut into Adelaide batten into higher valuated product."

Consistently with this position, the heads of agreement proposed by the plaintiff to CSR in the letter dated 28 January 1998 from Mr Squires to Mr Mark Hollingsworth of CSR said that:

"Supply agreement

...

Auswest would intend building a reliable long-term client relationship with Monier. We have a proven track record at Busselton and well understand the critical nature of batten supply particularly at times of high demand."

Mr Squires also said in his evidence, consistently with the position indicated above, that "we were keen to acquire the business and we saw this the next step following Busselton Sawmill acquisition in the development of our company, Auswest". On this basis, I accept the submission of the defendant that the evidence does indicate that the plaintiff was already making decisions in respect of the acquisition and operation of the Orbost Mill prior to the 4 March 1998 letter which indicate that this letter was not critical in the plaintiff's decision-making process.

90 Precisely when the plaintiff's Board decided to acquire the Orbost Mill, and whether the Commonwealth Bank of Australia or Mr Gilham requested the 4 March 1998 letter, are contentious issues that go to the issue of reliance. The defendant submitted that the evidence supported the following conclusions in this respect:

(a) Mr Addison and Mr Squires met with Mr Pendrigh on 12 December 1997 to discuss the renewal of the licence;[64]

(b) On 15 December 1997 at a meeting between them, Mr Gilham requested that Mr Addison obtain "assurances" in writing from the defendant, influenced by the consideration that this would assist with obtaining bank finance;[65]

(c) Also on 15 December 1997, Mr Addison sought such confirmation;[66]

(d) In response, the defendant provided the letter dated 29 December 1997 from Mr Peter Ford, Acting Manager Commercial Forestry to Mr Addison;

(e) This assurance was sufficient for the plaintiff to approve the acquisition of the Orbost Mill;

(f) The Bank Proposal was then submitted to the Commonwealth Bank of Australia;[67]

(g) Some time later, the Commonwealth Bank of Australia sought more specific assurances from the Department in order to bolster the credit application which led to a further meeting between Mr Addison and Mr Pendrigh and the preparation by Mr Pendrigh of the 4 March 1998 letter.

91 The defendant provided detailed submissions in relation to the evidence which it said supported these conclusions.[68] In my opinion, the evidence to which reference was made by the defendant in its detailed submissions in this respect does support the conclusions it advanced in relation to the question when the plaintiff's Board decided to acquire the Orbost Mill. It is, nevertheless, helpful to make reference to some aspects of that evidence.

92 A paper was presented to the plaintiff's Board in support of the proposal to acquire the Orbost Mill. It is not clear when this paper was presented to the Board, but having regard to the fact that no reference was made to the 4 March 1998 letter from the defendant's Department or to anything in the nature of a "guarantee" which the plaintiff said this letter constituted, it is more than likely the Board received this paper prior to receipt of the 4 March 1998 letter. In relation to the log licence, the proposal merely states: "Log licence from Victorian Government renewable 1998 for period 2003-2013". Also, it is noted that there is no reference to the price of timber available under the log licence. Additionally, the Board Paper makes no reference to forecast earnings projections beyond the period 1998-2001 (therefore excluding any projections over the post-2003 period). Additionally, the bank proposal[69] only contains forecasts with respect to the Orbost Mill performance up to and including the year ending March 2001. One might have thought that the time of presentation of the Board Paper and the Board's decision to acquire the Orbost Mill could have been resolved easily by reference to the Board minutes. Unfortunately, the only minute recording the Board's consideration of the acquisition of the Orbost Mill is one dated 29 November 1997, which is of no assistance.

93 The proposal submitted to the Commonwealth Bank of Australia[70] made no reference to the 4 March 1998 letter or to any "guarantee". The proposal stated simply that the timber licence was renewable "this year" for a further 15 years.[71] Reference was made to statements from the 29 December 1997 letter from Mr Peter Ford, Acting Manager Commercial Forestry to Mr Addison[72] (though without attribution) in the paragraph: "The Department of Natural Resources and Environment has indicated that it would be prepared to renew the Orbost Sawmill Licence this year beyond 2003 subject to satisfactory negotiations regarding price and allocation as specified in the Licence conditions".[73] No reference was made in the Bank Proposal to the plaintiff seeking further assurances as to the renewal of the licence apart from those just quoted. Further, in cross-examination, Mr Addison agreed that the application to the Commonwealth Bank of Australia was prepared by the plaintiff prior to receiving the letter of 4 March 1998 from Mr Pendrigh.

94 Mr Addison's evidence was that he was asked by the Board to undertake a number of tasks to support the acquisition of the Orbost Mill and to seek "further clarification" regarding the timber licence. It appears from this evidence that Mr Gilham was primarily the person who "raised the problem". Further, in his evidence, Mr Addison sought to tie Mr Gilham's request for "further clarification" to the 4 March 1998 letter and suggested that when he told the Board of his discussions with Mr Pendrigh on 3 March 1998, he was instructed "to go back and seek a further assurance in writing that the licence would be extended for a further 15 years". He said that he "took this letter back to my Board and I also presented it to the CBA in regard to our finance application". It was submitted by the defendant that Mr Addison's evidence in this respect is unlikely, as it involves an assertion the Board made two requests in relation to licence renewals. The first request led to the meeting between Mr Addison and Mr Pendrigh on 3 March 1998, and the second led to the March 1998 Letter. In contrast, it was submitted, Mr Gilham's evidence was that he only recollected a single request for a written assurance from the defendant. It was submitted that it was more likely that Mr Gilham requested an "assurance" at this meeting with Mr Addison on 15 December 1997, and that this resulted in the letter of 29 December 1997 from Mr Peter Ford, Acting Manager Commercial Forestry, to Mr Addison being written. In cross-examination, Mr Gilham said that he could not remember telling Mr Addison that he would not agree to the purchase without a "guarantee" of long-term licence renewal. Rather, his evidence was that Mr Addison told him that he had received "verbal assurances from DSE that the Orbost licence would be renewed" and that he, Mr Gilham, wanted that in writing. This accords with Mr Addison's evidence that Mr Gilham pressed for "more assurance", rather than a "guarantee". Mr Squires' evidence was that he could not recall such a request.

95 I accept the defendant's submissions that it is an unlikely coincidence that Mr Gilham and the Commonwealth Bank of Australia would independently and simultaneously, in March 1998, request more specific written assurances by way of "guarantee" in the absence of contemporaneous evidence to that effect. Mr Addison, in his evidence, conceded that this was something of a coincidence, but said that "both Mr Gilham and the Bank saw that as being a weakness in the proposal". On the basis of the evidence and documents already considered, I accept that it is much more likely that Mr Gilham made this request on 15 December 1997 and that the Commonwealth Bank of Australia made its own request much later, in early March 1998. Additionally, Mr Addison's evidence was that he did not, himself, require the assurance provided in the 4 March 1998 letter. In cross-examination he said:[74]

"You were personally happy when you put forward this proposition for it to go ahead without the assurances that later came in the March letter written by Mr Pendrigh?---I was of a view that the licence had five years to run and was renewable for 15 years and yes, I was prepared to at that point in time accept that position."

Further, Mr Addison was content for the proposal to be put to the Commonwealth Bank of Australia without the assurances in the 4 March 1998 letter. In cross-examination he said:[75]

"You were happy, weren't you, for the proposal to be put up to the bank simply on the basis of the assurances in the letter from Mr Ford of 29 December 1997?---Yes, and from the discussions that I had had previously with Mr Pendrigh."

Mr Squires rarely attended monthly directors' meetings at that time and it is, in my view, likely that he relied upon what he was told by Mr Addison and did not turn his mind to the matter. There is no evidence that he saw the 4 March 1998 letter himself.

96 I also accept the defendant's submissions that contemporaneous documents tend to suggest that even the request for the letter of 29 December 1997 from Mr Peter Ford, Acting Manager Commercial Forestry, to Mr Addison was driven by concerns about obtaining bank finance. In a facsimile transmission from Mr Addison to Mr Pendrigh dated 15 December 1997 forwarding the letter of 15 December 1997 from Mr Addison to Mr Pendrigh, the third paragraph stated:

"As you are aware, we are genuine about the Orbost Sawmill and intend to enter into negotiations with Monier shortly. In anticipation of a successful outcome we would appreciate confirmation of the above licence being renewed to 2013 in order to support our bank finance proposal."

Consistently with the manner in which the issue was raised on behalf of the plaintiff, the response from Mr Ford in the 29 December 1997 letter states, in the second sentence: "I note that you require confirmation regarding the future of the licence to assist you with your financing proposals". The next sentence states: "The following information is provided to assist you in this matter".

97 The bank proposal[76] was, on the evidence of Mr Addison, prepared for the Commonwealth Bank of Australia. However, Mr Addison also claimed that the Bank Proposal was prepared for the Board as well as the Commonwealth Bank of Australia. As submitted by the defendant, this is inconsistent with the terms of the Bank Proposal, which states that "This proposal has been prepared to support a request for funding for the acquisition by Auswest Timbers Pty Ltd of the CSR/Monier Hardwood Sawmill at Orbost in East Gippsland, Victoria".[77] Additionally, the information contained in the Bank Proposal is provided in the kind of detail which would be expected in a submission to a bank for a credit application, whereas the Board Paper to which reference has already been made is the kind of document which might be expected to be considered by the board of directors of a small private company. Additionally, Mr Gilham gave evidence that he had a specific recollection of the Board Paper, but had no recollection of the Bank Proposal. This is, as the defendant submitted, consistent with Mr Gilham's role as a director who had nothing to do with the finance application. Indeed, Mr Gilham could not recall Mr Addison or Mr Squires telling him that the Commonwealth Bank of Australia had requested a firmer reassurance about licence renewal. Nor could Mr Gilham recall Mr Addison showing him a letter from the defendant which tended to support the conclusion that Mr Gilham was satisfied with the oral description by Mr Addison of the letter of 29 December 1997 from Mr Peter Ford, Acting Manager Commercial Forestry, to Mr Addison and that he had nothing to do with the events leading to the preparation of the 4 March 1998 letter. Mr Gilham had no involvement in negotiating or obtaining external finance to facilitate the purchase of the Orbost Mill. It was Mr Addison who was instrumental in obtaining finance. Mr Addison's evidence was that prior to the Bank Proposal being sent to the Commonwealth Bank of Australia, the Board of the plaintiff had considered whether or not to proceed with the acquisition. Later, in the course of cross-examination, Mr Addison appeared to contradict himself when he said that the Board had not necessarily resolved to go ahead with the transaction. In any event, Mr Addison's evidence in cross-examination was that prior to the Bank Proposal being sent to the Commonwealth Bank of Australia, the purchase price for the Orbost Mill had been agreed with CSR.

98 Documents from Mr Addison to the Commonwealth Bank of Australia, which were contemporaneous with the 4 March 1998 letter from the defendant, indicate, in my view, that Mr Addison was actively dealing with the Commonwealth Bank of Australia at the very time that the 4 March 1998 letter was sought and obtained. A facsimile transmission from Mr Addison to Mr Robert McLeod of the Commonwealth Bank of Australia dated 3 March 1998 mentions that Mr Addison will be "in Melbourne/Orbost from between March 2nd and 6th ... if you require further information on the above or our submission". This timing accords with the date of the further meeting between Mr Addison and Mr Pendrigh on 3 March 1998 which resulted in the 4 March 1998 letter from the defendant.

99 It was also submitted by the defendant that the timing of the plaintiff's concluding the terms of its purchase and the purchase price of the Orbost Mill with CSR also suggests that a decision to proceed with the purchase was made before the 4 March 1998 letter was received. In particular, reference was made to the following:

(a) Auswest's proposed Heads of Agreement was sent to CSR on or around 28 January 1998, more than a month before the March 1998 letter;[78]

(b) The Heads of Agreement letter sent on 28 January 1998 evinced an intention to conclude the acquisition shortly;[79]

(c) The 28 January 1998 letter also attached a "Proposed Supply Agreement" which was for a "contract period [of] four years". Mr Addison's evidence-in-chief was that he would not have signed the supply agreement with CSR without the 4 March 1998 letter. This is inconsistent with Auswest's proposal of a supply agreement well before the 4 March 1998 letter was in existence;

(d) There was no evidence of any other documentation passing between the plaintiff and CSR which ultimately proposed terms after the Heads of Agreement.

On this basis, the defendant submitted that the plaintiff had resolved to acquire the Orbost Mill by early 1998 and did not require any further assurance of renewability of the licence beyond the limited assurances given by the defendant in December 1997. It was submitted that the 4 March 1998 letter was requested in early March solely in response to a request from the Commonwealth Bank of Australia.

100 It was also submitted that no evidence was provided as to whether the Commonwealth Bank of Australia relied upon the 4 March 1998 letter. Further, it was submitted that even if the Commonwealth Bank of Australia did rely on this letter, it would not necessarily create a causal link between the defendant's conduct and any loss or damage which the plaintiff may have sustained after purchasing the Orbost Mill. There was evidence to suggest that the plaintiff was considering vendor financing[80] and it may be inferred, in my view, that it would have sought funds elsewhere for the purchase if the Commonwealth Bank of Australia had not approved the loan. In this respect, the defendant made reference to Haynes v Top Slice Deli Pty Ltd[81] where the applicants entered into agreements with the second respondent to conduct a delicatessen and obtained finance approval on the basis of cash flow figures provided by the respondents. They alleged losses resulting from misrepresentations about the likely profitability of the business. As to this, Einfeld J said:[82]

"In this case the third party reliance was that of a bank, resulting in its approval of a loan application. Armed with that approval, the applicants entered a set of agreements upon which they had already determined. Even if the bank's approval of the loan was an antecedent condition of entry into the agreements, and I have expressed my reservations on the evidence on this point, there was not an effective or true nexus between the approval and the entry. To adopt the language of Justice Lockhart, any resulting loss from the failure of the business is both a remote and indirect, not the 'natural and direct', result of the relevant conduct. It therefore falls outside s 82 and the applicants' case against the accountants fails There will be judgment accordingly."

101 Similarly, it was submitted by the defendant that if the truth of the matter was that the Commonwealth Bank of Australia relied upon the 4 March 1998 letter, rather than the plaintiff, then any losses suffered by the plaintiff would be remote from the 4 March 1998 letter, and in no view could they be seen as caused "by that conduct" in terms of the reliance and causation issues now under consideration. In my view, this is the correct position on the basis of the evidence to which reference has been made and the statement of Einfeld J.

102 The plaintiff also claimed that it continued to rely upon the representations after acquisition of the Orbost Mill and, further, that there was a "failure to correct" on the part of the defendant in response to the plaintiff's request for clarification in relation to its licence renewal. The plaintiff admitted that between 23 January 2002 and 30 June 2005 it corresponded with officers of the defendant's Department on a number of occasions in relation to the renewal of its timber licence. It said that at no time before 30 June 2005 did any officer of the Department "explicitly tell Auswest that the licence would not be renewed and that the guarantee made by Mr Pendrigh would not be honoured".

103 By letter dated 23 January 2002, Mr Allan Light, on behalf of the plaintiff, wrote to Mr Peter Rutherford, General Manager of Forestry Victoria, in relation to the Orbost Mill licence in the following terms:

"The Licensor has, under the Licence, an obligation to renew our Licence.

We wish to make it clear that we require the Licensor to properly discharge its obligations to us under the Licence. In that regard we insist that we are afforded all the rights conferred on us in the Licence. We are ready willing and able to discharge all our obligations under the Licence. As far as we are concerned the Licensor has, under the Licence, and by its statements and actions, envinced to us the intention of renewing our Licence.

Please note we have made commercial and financial decisions on that basis and on the basis of the representations made by, or on behalf of the Licensor, from time to time."

Mr Addison gave evidence that he was aware of Mr Light's letter at the time, but that he was not told prior to late 2003 that the letter of "guarantee" of 4 March 1998 would not be honoured.

104 Mr Addison gave evidence that he saw the "Our Forests, Our Future" policy statement at the time it was released on 21 February 2002, but that he did not understand from reading it that the "guarantee" contained in the 4 March 1998 letter would not be honoured. Mr Addison gave evidence that he received the "Our Forests, Our Future" policy statement as an enclosure to a letter dated 21 February 2002 addressed to him from Ms Chloe Munro, the then Secretary of the DNRE, the predecessor in office in the shoes, so to speak, of the defendant. Mr Addison took this letter, it was said, as a pro forma letter sent to a number of participants in the forestry industry in Victoria. He gave evidence that he did not believe that this letter was a response to Mr Light's letter of 23 January 2002. Mr Addison said in his evidence that, in his view, the 21 February 2002 letter from Ms Munro was not very specific in the way it was going to go about taking timber to the market and, consequently, he continued to expect that the "guarantee" contained in the 4 March 1998 letter would be honoured. Whether one might have regarded Ms Munro's letter as a pro forma letter or not, it is, in my view, relevantly specific in relation to critical matters, as the following parts of that letter indicate:

"The timber resource review conducted by the Department last year (examined by the Expert Data Reference Group) identified new timber supply volumes. This analysis is based on current harvesting practices and industry preferred sawlog species and grades. It indicates that a reduction in supply volumes is required from 828,500m3 per year to approximately 567,500m3 per year across the State as a whole.

The timber under your licence is supplied from the East Gippsland Forest Management Area which requires a 43% reduction in supply volumes from 250,000 m3 to 143,000 m3.

In addition to your current licence, you will be offered a new one year licence for the supply period 1 July 2003 to 30 June 2004. This new licence will be forwarded to you in the next six weeks.

To ensure that supply levels remain consistent with sustainable yields, the State Government has announced a voluntary licence reduction program. Notwithstanding the new licence you will still be entitled to participate in the Program.

Under the Program:

• Licence holders interested in participating can submit an offer, in which they indicate the price at which they are willing to surrender a specified volume.
• Government will accept offers to surrender licence volumes, subject to achieving the necessary reduction across all grades, and other strategic objectives.
• The buy-back will be targeted at areas where the need to reduce timber is greatest but, will not necessarily be confined to these FMAs.
• It will be based on a realistic assessment of the value of sawlog licences.

The details of the program are yet to be finalised. In the attached statement - Our Forests Our Future you will note that the Government is establishing an Industry Transition Taskforce, with representation from industry and government to advise on the buy-back program and other important matters. In due course you will be advised of the details of the buy-back program.

A further part of the new strategies for forestry is changes to the way timber is allocated in the future. A market based approach for pricing and allocation will be introduced. In future all licence holders will be eligible to bid for timber under new arrangements, which are to be developed in consultation with industry during 2002."

105 By letter dated 21 March 2002, Mr Addison wrote to Ms Munro, omitting formal parts, in the following terms:

"We are in receipt of your letter dated 21st February 2002 regarding changes to resource availability and an offer of a new one year log licence.

For your information, Auswest Timbers acquired its Orbost operation in April, 1998. Prior to acquisition, our assessment of the business was largely based on the availability of resource. At the time we sought and were give (sic) assurances during several meetings with your departmental staff that resource was secure. In addition Auswest was provided with a written guarantee that our licence would be renewed for a further 15 years with the same volume and log quality as shown on the current licence.

We are now most concerned that your assurances of licence renewal may not be met, therefore we seek urgent clarification of your position in this matter.

Auswest's considerable investment in the Victorian Hardwood Industry was based on a long term view and we are unwilling to participate in Government licence buy back programs, nor do we accept that our operational efficiencies should suffer because of either a reduced log resource or quality of log.

In the first instance we would be pleased to discuss a one year extension of our existing licence providing this does not jeopardize our position regarding the guarantee of a 15 year renewal.

Furthermore if it is the intention of the Department not to renew our existing licence as guaranteed we urgently seek to enter into negotiations regarding the suitable compensation for the loss of such a benefit. We wish to reiterate that our investment in the Victorian native forest industry including the considerable amount of time, effort and capital placed towards the Terra Timbers value adding consortium was based principally on suitable resource availability and security.

We would be pleased to receive your advice in regard to the above issues as a matter of urgency."

106 By letter dated 5 April 2002, Mr Peter Rutherford, General Manager Forestry Victoria, wrote to Mr Addison advising that a new licence, S000565, had then been issued to the plaintiff for the period 1 July 2003 to 30 June 2004. It is noted that this reflected the position as set out in the third paragraph of the quoted portion of the letter of 22 February 2002 from Ms Munro, as set out above. On 4 July 2002, Ms Munro wrote to Mr Addison with the subject heading "Licence Renewal". The plaintiff submitted that although the letter referred to Mr Addison's letter of 21 March 2002, it did not answer his queries but, rather, invited the plaintiff to consider participation in the Voluntary Licence Reduction Program ("VLRP"). In my opinion, this is not an accurate summary of the import of that letter, as the following three initial paragraphs of that letter indicate:

"Thank you for your letter of 21 March 2002 concerning renewal of licence S000484. This reply is to advise you of changed circumstances in relation to your licence S000484.

You are aware that the Premier has released a statement entitled 'Our Forests Our Future' which deals with the reassessment of the available yield of sawlogs from forests in Victoria. One of the consequences of this review is that, under the provisions of the Forests Act 1958, new licences for the cutting and removal of timber will be granted on different terms.

On 5 April 2002 you were sent a new licence number S000565 that will operate from 1 July 2003 to 30 June 2004. This licence is to allow the continuation of your operations through the transition period until the new licensing arrangements that will be generated from the Our Forests Our Future statement are in place."

107 By letter dated 17 April 2003, Mr Light, the Sawmill Manager of the plaintiff at the Orbost Mill, wrote to Mr Rutherford, General Manager Forestry Victoria. The relevant parts of the letter read:

"As you are aware, Auswest's 15 year licence runs out on 31 July 2003, from then until July 2004, we have been issued with a one year licence, pending negotiations for a future long term licence.

...

Under previous licence terms and conditions and under certain circumstances at the discretion of the Secretary, a carryover or extension up to 130% can be granted.

Therefore under exceptional circumstances which I have raised in this letter I hope you can act in favour of our request and grant an extra volume for the 2003-04 season.

This would also help us to purchase more salvage wood from the fire raged area and maintain supply to Terra Timbers and the viability of both operations."

In spite of this letter, Mr Addison gave evidence that he then continued to believe that the "guarantee" contained in the letter of 4 March 1998 was still in force. Despite this, on 24 June 2003, Mr Addison wrote to Professor Lyndsay Neilson, the then Secretary of the Department:

"... urgently seeking to establish when negotiations for our new sawlog licence, which is due to commence on 1 July 2004, will begin.

We would like to commence negotiations regarding the issuing of our new sawlog licence at the earliest opportunity. The longer this process is drawn out the more uncertainty created within our business, further investments within our operations are delayed and it creates serious problems/concerns for the Terra Timber consortium."

There was apparently no further correspondence on the subject until the letter on 1 December 2003 from Mr Ian Long and Mr Squires to Mr Rutherford, General Manager Forestry Victoria, requesting that the extension of the plaintiff's licence be "fast tracked". They again wrote to Mr Rutherford, on 22 December 2003, requesting that the plaintiff's licence be finalised. Mr Rutherford replied by letter dated 8 January 2004 stating that:

"It is not possible to provide you with the certainty you desire on this issue. The VicForest Board as a matter of priority will consider the future all saw log licences that expire on 30 June 2004, however it is unclear whether a decision will be made on this issue...

In the meantime, it is important that you manage the uncertainty that this outcome provides."

Mr Addison gave evidence that he saw Mr Rutherford's letter at that time, but that he continued to rely on the "guarantee" contained in the 4 March 1998 letter.

108 By letter dated 20 May 2004, Professor Neilson, as Secretary, wrote to Mr Addison in relation to the development of legislation following the release of the "Our Forests, Our Future" policy statement in 2002. The critical parts of that letter are as follows:

"The Government has now developed legislation to support the operation of VicForests. That legislation, the Sustainable Forests (Timber) Bill, has been tabled in Parliament and is due to be debated in early June. The Bill contains a number of clauses in respect of sawlog licences, primarily the transfer of existing licences from the DSE Secretary to VicForests. I write to inform you of the changes proposed by the legislation.

The legislation sets up a framework that will allocate a 15 year rolling supply of timber to VicForests and gives VicForests the power to supply this timber to industry. Using the Regional Forests Agreements, forest management plans and other forest planning tools as the basis, the Minister for Environment will allocate timber in State forests to VicForests to supply existing sawlog licences. The allocation order will be reviewed every five years to add another five years of timber. From this rolling 15-year resource, VicForests will develop five year timber resource plans that will identify specific coupes to be harvested.

The Bill makes VicForests responsible for commercial timber harvesting operations and transfer to it the management of the existing sawlog and residual licences. The licences in the east of the State will be transferred first, with those in the west of the state transferred when DSE and VicForests finalise operational arrangements for this area. As was clearly stated in the Second Reading Speech, VicForests will meet the commitments of existing licences until expiry and there will be no change to the amount of timber provided under those licences. Initially, from the licensees point of view the only change in respect of existing licences is that they will be managed by VicForests, rather than Forestry Victoria in DSE. Operations will continue to be conducted under the existing Code of Forest Practice.

So that VicForests may move to a new sales system, licences will not be renewed or reissued on expiry by DSE or VicForests. However, companies with licences expiring this year have had new one year licences issued to allow a transition period. Licence commitments will be met, and after those licences expire industry players will have the opportunity to participate in the new system developed by VicForests.

If you wish to examine the Bill or read the second reading speech these documents can be down loaded from the Victorian Parliamentary website (www.parliament.vic.gov.au). I have included a fact sheet for your information."

Mr Addison's evidence was that even at this time he had the view that there was a possibility that the licence would be renewed. Some further correspondence followed this letter and culminated in the letter of 30 June 2005 from Dr Matthew Crapp, Director of Sales of VicForests, to Mr Addison which contained as an opening paragraph: "Pursuant to the Sustainable Forests (Timber) Act 2004 (Vic), the State of Victoria will not renew expiring timber licences".

109 Mr Addison gave evidence in chief and in cross-examination that he continued to rely on the letter of 4 March 1998 in 2002 and 2003. The plaintiff submitted that this was not surprising as the Government had given no direct response to his request for answers. The plaintiff submitted that, instead, transitional arrangements were to be put in place and further negotiations were to continue. The plaintiff submitted that Mr Addison was waiting to see what transitional arrangements would be offered and then continue with negotiations: "A lot of things were still up in the air. People were still talking about negotiating licences and conditions of licences with VAFI [Victorian Association of Forest Industries] and so on and in my view I didn't believe that a one year extension at that particular time or the following year necessarily confused the issue in relation to our guarantee."[83] Furthermore, Mr Addison said that the plaintiff was in a "different position than the rest of the industry in that we were the only ones I knew of that had a guarantee of an extension of 15 years".[84] Further, Mr Addison said that he did not wish to "take up an adversarial role in regards to securing our long-term licence".[85] After all, he said, the Department, the defendant, was the sole supplier of the resource and, consequently, such an approach was reasonable.[86] It was submitted that Mr Addison continued to hold the view that the licence would be granted until May 2004 on receipt of the letter of that date from Professor Neilson, when it became "highly unlikely".

110 It was also submitted by the plaintiff that surrounding circumstances suggested that the "guarantee" contained in the 4 March 1998 letter could have and may well have been honoured, as a matter of discretion. By way of example, it was submitted that the Aus Timber licence was extended prior to 2004 as "VicForests were doing deals with various people around the place and in the case of Aus Timber were able not only to have the volume that they would have normally had under their licence, but they also had a significant undercut volume associated with this licence that carried - that increased the actual volume of timber available to them by about 250,000m3".[87] It was said that VicForests actually approved that increase out to 2014. Consequently, it was said that when VicForests was dealing with other suppliers, it would not be unreasonable to assume that they would honour the "guarantee". It should be observed, of course, that these submissions seek to equate a "guarantee" which might be honoured as a matter of discretion with something in the nature of an obligation, or at least something "connoting an assurance".[88] This is an entirely different position from that applying with respect to a guarantee as an enforceable obligation of a guarantor, or even something "connoting an assurance".

111 The defendant submitted that there was an air of unreality about Mr Addison's assertion that the plaintiff continued to believe its 15 year licence would be renewed on the strength of the 4 March 1998 letter in the face of the subsequent events in 2002 and 2003. In support of this submission the defendant made detailed reference to the documentary and oral evidence. In my opinion, the matters relied upon in this respect by the defendant do establish this general proposition, and I would reaffirm my view, on the basis of the evidence and matters to which reference has already been made, that there was an air of unreality in relation to the proposition advanced by the plaintiff that the letter of 4 March 1998 could be treated as a "guarantee" upon which the plaintiff would make significant investment decisions having regard to its context in terms of the plaintiff's correspondence with the defendant and the defendant's Department and the general state of policy development with respect to the management of forests and concern about the sustainability of timber production generally. In any event, it is helpful to refer to some aspects of the matters raised by the defendant in the present context.

112 The defendant submitted that from at least 1998 the plaintiff was aware, as a result of information received from VAFI, of the progress of negotiations with the defendant and the defendant's Department regarding the renewal of licences, including the plaintiff's licence. The defendant submitted that the plaintiff was aware, from at least October 2000, as a result of information received from VAFI, that there were concerns about the sustainable yield estimates and the impact this may have on licence renewals and allocations. Mr Addison recalled in his evidence that "Mr Steele and I discussed the issue of sustainable yield probably about this time and that there was concern that the Department in their evaluation initially for the RFA had made some mistakes in regard to the sustainable yield".[89] Further, from at least 2001, the plaintiff was aware that the Government was reviewing the sustainability yields and the licensing system generally, and had established a number of review groups for that purpose.[90] Mr Addison conceded that at the time he had read a media release to this effect. Further, the plaintiff was aware that the review chaired by Professor Vanclay had concluded in its 31 October 2001 report that due to the uncertainties in the yield estimates for a number of Forest Management Areas ("FMAs") the Department was not well placed to make long-term commitments to the timber industry.[91] Mr Addison conceded in his evidence that this was a "worrying comment",[92] and gave evidence that he would have read the report before the release of the "Our Forests, Our Future" policy statement.

113 It was submitted that if Mr Addison met with Mr Rutherford in 2001 and discussed the issue of renewal of the plaintiff's timber licence with him, he did not refer Mr Rutherford to the 4 March 1998 letter and, further, his evidence was that Mr Rutherford "was cautious about 15 years".[93] Additionally, the evidence showed that Auswest had received legal advice from as early as 12 June 1998 and again in 2004, which was to the effect that the defendant was not legally obliged to renew the timber licences. Further, in 2001, the plaintiff received legal advice obtained by VAFI that VAFI's members should commence taking steps, including the issue of self-serving letters, and to insist that the Department, on the basis of its "representations and promises", renewed the licences. The plaintiff sent such a letter to the Department, using the template provided by VAFI's lawyers. Further, in February 2002, the plaintiff became aware, on the release of the "Our Forests, Our Future" policy statement, that the Department would not renew any licence for 15 years or for the same allocation. Rather, it would only grant a combination of new short and long-term (up to ten year) licences with volumes to be regulated by ongoing assessments of the State's forests. Mr Addison read the "Our Forests, Our Future" policy statement closely, and also other media releases. In February 2002, the plaintiff also became aware that the East Gippsland Forests Management Area, from which the timber under the plaintiff's licence was supplied, required a 43% reduction in supply volumes.[94] It is also probable that Mr Addison saw the VAFI minutes of 19 February 2002, which contained the observation "P. Rutherford advised 15 year licences (sic) 'not on'". Mr Addison did not telephone Mr Rutherford to explore whether or not the plaintiff might be specially exempted from this position.

114 The plaintiff's licence provided for a renewal to be negotiated after the fifth year of the licence (1 July 1998) and before the beginning of the ninth year of the licence (1 July 2002). By early 2002, the negotiations between VAFI and the Department as to the terms of the renewal of licences had terminated because they had been entirely superseded by the "Our Forests, Our Future" policy statement. The defendant submitted that it must have been apparent to the plaintiff, as 1 July 2002 approached, that a further 15 year licence would not be issued. Reference has been made to the 21 March 2002 letter from Mr Addison to Ms Munro, and Mr Addison's evidence that, notwithstanding that correspondence, he expected the "guarantee" contained in the 4 March 1998 letter to be honoured. The Department issued a media release on 8 April 2002 announcing that 49 short-term licences had been granted to the holders of 15 year licences which were then about to expire. The media release added that "The two year licences replace the usual five to 15 year licences which would usually be granted". Mr Addison's evidence was that he had read this media release about the time it was released. Reference has also been made to the 4 July 2002 letter from Ms Munro to Mr Addison in which, among other things, the plaintiff was informed that its licence circumstances had "changed" and that it would be sent a new one year licence "to allow the continuation of [its] operations through the transition period until the new licensing arrangements that will be generated under the [Our Forests, Our Future policy statement] are in place". Mr Addison offered no explanation as to why he did not follow up with Mr Rutherford notwithstanding the invitation in this letter from the Department. Mr Addison conceded that the issue of a one year licence after 30 June 2003 jarred his confidence, as it was inconsistent with the plaintiff being offered a 15 year licence commencing on 1 July 2003. The plaintiff's licence expired on 30 June 2003 and it was not granted a renewed or re-issued 15 year licence, but rather, a new one year transitional licence from 1 July 2003. On no occasion after March 2002 did the plaintiff inform the defendant that it was relying on the 4 March 1998 letter or seek an assurance that the "guarantee" in that letter would be honoured. Further, at no time did the plaintiff assert to the Department that it was exempt from the new system of timber licensing and allocation because of the 4 March 1998 letter or otherwise. The plaintiff did not itself refer to the 4 March 1998 letter or to any "guarantee" in any correspondence sent by it to the Department, other than in the letter dated 21 March 2002. Further, it did not refer to any "guarantee" in written correspondence before the letter of 21 March 2002. Mr Addison's evidence was also that the plaintiff was reluctant to raise the issue of the renewal of the licence with the Department in view of the Department's control of the timber resource, but was hopeful of negotiating redress or another licence. There is no evidence that the plaintiff approached the Department to do so.

115 On the basis of the oral and written evidence to which reference has been made, I accept the submissions of the defendant that it cannot be suggested that the defendant, or the defendant's Department, deliberately remained "silent" or "failed to communicate" relevant changes with respect to timber licensing affecting the plaintiff's position.[95] Further, I accept that, to the extent that Mr Addison "believed" that there was a "possibility" that the plaintiff could "negotiate" for carry-over of the guarantee, such belief was not founded on the 4 March 1998 letter. Indeed, as the defendant submitted, Mr Addison's desire to "negotiate" supports the inference that neither he nor the plaintiff were relying on the 4 March 1998 letter by that time, but, rather, intended to negotiate redress by political or legal means using the 4 March 1998 letter as a negotiating tool. In any event, Mr Addison gave evidence in cross-examination that he thought that the entitlement to a 15 year renewal was based not on the 4 March 1998 letter, but on the licence conditions. In this respect he said:[96]

"When you thought of your entitlement to the 15 year extension you were thinking of the letter from Mr Pendrigh of March 1998 as the source of your entitlement?---No. I thought we had an entitlement to have that licence renewed under normal conditions for 15 years.

Under the terms of your licence itself or what?---Well, under the granting of the licence. I was always of a view that we had an opportunity for a 15 year extension to that licence."

116 Additionally, the plaintiff was a member of VAFI, at least from the time it acquired the Orbost Mill, and was sent minutes of various VAFI meetings, on the evidence of Mr Addison. VAFI kept its members informed of developments in relation to its negotiations with the Department for renewal of long-term licences and, particularly, notified the plaintiff of the progress of those negotiations and raised concerns regarding renewal from as early as June 1998. The defendant made reference to specific oral evidence of Mr Addison, together with various documents in support of this position, which I accept on the basis of that material.[97] It is not necessary, for present purposes, having regard to my findings on this issue, to go into further detail in this respect.

117 In light of the above, I accept the defendant's submission that, commencing around late 2000, and certainly by February 2002, the plaintiff knew the "truth", namely that there would be no offer of a renewal of the licence for 15 years on the same terms and conditions as the previous licence and, further, that such an offer could not be guaranteed. In these circumstances, losses subsequent in time are too remote and cannot be causally linked to the 4 March 1998 letter. There are also some further issues in relation to causation which arise in relation to the plaintiff's decision to continue with the business and to forego reliance upon the VLRP. I propose to deal with this aspect of the matter briefly, again having regard to the view I have formed and indicated above in relation to representation and reliance issues.

118 It was common ground that the defendant offered the plaintiff and other timber producers in a similar position the opportunity to participate in the VLRP. The plaintiff was aware that it was permitted to apply to participate in the VLRP from 30 August 2002 to 31 July 2003, as the oral evidence of Mr Addison and Mr Squires confirmed. The "Our Forests, Our Future" policy statement indicated that a VLRP would be established. This aspect of the "Our Forests, Our Future" policy statement was also referred to in the letter of 4 July 2002 from Ms Munro, the then Secretary of the Department of Natural Resources and Environment, to Mr Addison. She also added: "This will allow licence holders who no longer wish to remain in the industry to sell back their licences. The program is available to all licence holders and more details about the program and other aspects of the Statement [referring to the "Our Forests, Our Future" policy statement] will be provided, as they become available". The plaintiff, in its closing submissions, also made reference to the Application Guidelines with respect to the VLRP dated 30 August 2002.[98]

119 There is no doubt that the plaintiff was aware of the availability of the VLRP and the period during which it was open for the plaintiff to participate in that program. The plaintiff submitted that the program was open to it during the period in which its questions to the defendant which were being put, it said, in the correspondence between 23 January 2002 and 30 June 2005 were not being answered. Mr Addison said in his cross-examination that he thought that the VLRP would result in a voluntary reduction in the amount of timber taken which would exceed the level required to meet the new sustainable yield targets. He believed that a sufficient number of other timber companies would accept the VLRP package so as to allow the plaintiff to receive sufficient log supplies in the future. He also said that he saw no reason why the Department, having regard to the reduction in volume of timber taken, would not be in a position to provide the plaintiff with a 15 year extension to its licence because there was sufficient volume of timber entitlements being voluntarily handed back to the defendant. It appeared that this view was based on a survey that had been conducted during the period of availability of the VLRP by the VAFI, which had been made available to the plaintiff. Further, Mr Addison, in the course of his cross-examination, agreed that a calculation had been prepared indicating the worth of the licence buy-back under the VLRP to the plaintiff, and this produced a figure of $2.41 million. He said this was the figure for the licence "but there were other areas in which there was additional value to come back into the business if you had decided to take up the option of voluntary licence buy-back such as redundancies and value-adding equipment values and those sorts of things".[99] Mr Addison had been more expansive, but seemingly in the same vein, in his examination-in-chief when he was asked why the plaintiff did not take up the offer under the VLRP. He said:[100]

"Why didn't you take that offer up?---Well, there were a number of things that were considered at the time. There was the issue that we had entered into a long term supply arrangement with Monier. We had, further on from the Orbost acquisition, purchased the ACT sawmill so that was one issue. So we had arranged our business with more of a longer term view that committed it to supplying and continuing to supply Monier across four or five different states - or four states for their business. I felt that had we taken, let's say, the opportunity to take up the voluntary licence buyback we would have exposed the rest of our business to some failure because of our unlikelihood of being able to supply to the supply guarantee that we had given Monier. There was at a time a number of industry players indicating that they would be exiting the industry and I felt that there was sufficient resource to satisfy the remaining players, including ourselves, of enough resource to carry on with business. There was our commitment to Terra Timbers and the other members of Terra Timbers that I regarded as important and wasn't willing to walk away from at any sort of whim, and there was also a social aspect as well and that was in regards to the people that we employed in our business. So there were a whole range of things that I considered and our board considered to be important in relation to coming to a conclusion of the voluntary licence buyback scheme.

You said you were taking a long term view?---Yes.

What were the factors that led you to believe you could take a long term view to your business?---Well, we had the guarantee, obviously, as well and that had encouraged us to organise our business further on from just the Orbost acquisition. So with that in mind we continued on with acquisitions in the ACT and we continued on with other aspects of our business in relation to Western Australia and so forth too."

120 The evidence of Mr Squires was consistent with that of Mr Addison. Mr Squires knew of the "Our Forests, Our Future" policy statement at about the time of its release, and knew of the VLRP offer and that it was open for the period from 30 August 2002 until 31 July 2003. Mr Squires also indicated that there were other factors involved in the decision of the plaintiff not to accept an offer under the VLRP. He said:[101]

"My thoughts related to the fact that we only recently entered the industry in East Gippsland in Victoria and it was an important part of the Auswest company. We had a legal agreement with Monier to supply it with roof tile battens and I believed at the time that there was a very good future for us within the industry, particularly given that the number of players was going to be reduced as a result of this Voluntary Licence Reduction Program. I thought it would be a very good thing for Auswest to remain in the industry, given the implications of the buyback. In other words, I felt that we, I guess, were young enough and wanted to have a future in the industry and this program would enhance the prospects of us being successful with it in the future."

Mr Squires did, however, also say in his examination-in-chief in response to the question "If the DSE had stated to you in that period, the period I described to you, June 2002 to August 2003, in unqualified terms that the plaintiff would not be offered a renewal licence in accordance with the guarantee what would Auswest have done?", that "I can only tell you that my view as a director would have been that it would have been absolutely clear: to take the money and run".[102]

121 The plaintiff submitted that I should find that if it had been informed by the defendant that the defendant planned to exercise its discretion to refuse to renew the licence between August 2002 and July 2003, it is highly likely that the plaintiff would have participated in the VLRP. Further, it was submitted that the plaintiff still expected (or at least hoped) that the defendant would honour its "commitment", as claimed by the plaintiff with reference to the "guarantee" provided in the 4 March 1998 letter. It was further submitted that the question was whether the plaintiff's conduct was "unreasonable, even in circumstances in which the conduct takes place after the misled person has become aware of the misrepresentations".[103] It was said that in Warwick Entertainment Centre Ltd v Alpine Holdings[104] the respondent's conduct in signing leases after they learnt of the falsity of the representations was not unreasonable. It was submitted that they were, in that case, left in a considerable dilemma as they had spent money on establishing the business, and made a substantial attempt to make a success of it where the future was "still largely an unknown quantity".[105] It was submitted that in the present case, the plaintiff's decision not to take the VLRP offer and to continue to trade was a reasonable one in view of all the circumstances. It was submitted that the plaintiff was still negotiating for the defendant to honour the "guarantee" and that the defendant had not said, expressly, that it would not honour the "guarantee". The plaintiff submitted that it had expended considerable sums in purchasing a business, building it up and investing in Terra Timbers[106] (with the encouragement of the defendant). The plaintiff submitted that with employees dependent upon the continued success of the business, and the expectation that the Victorian Government would honour the "guarantee", it was reasonable for it to stay in business at the Orbost Mill. Furthermore, the plaintiff submitted that the Department was stating that there may be sufficient resources to renew licences if others took up the VLRP. The true position, the plaintiff said, would not be known until the VLRP closed. In the meantime, the plaintiff was entitled, so it said, to see how the voluntary reductions went and assume there would be sufficient resources left.

122 Additionally, the plaintiff submitted that the defendant did not respond adequately to its requests. The plaintiff said that it appeared that Mr Featherston, a consultant for the Department, was vetting all correspondence to limit legal liability and that, in the absence of Mr Featherston being called as a witness, it should be inferred that the Department chose to deal with the plaintiff by not responding to its request specifically, leaving the defendant in a dilemma as to what would happen in the future about the specific "guarantee".

123 The defendant submitted that by electing to forego the VLRP offer, the plaintiff made a decision to continue operating the Orbost Mill for reasons which were entirely divorced from the 4 March 1998 letter or any offer of renewal. It was submitted that this decision marked the outer limit of the period for which the plaintiff could be entitled to look to the defendant for any loss and damage which it claimed to have been sustained. Put another way, the defendant submitted, this decision was the real, essential and effective cause of acts or omissions (including loss or damage) experienced by the plaintiff thereafter. The defendant submitted that there can be no causal link between the 4 March 1998 letter and any losses incurred after (at least) July 2003.

124 It was submitted that the decision to forego the VLRP was a decision taken deliberately by Mr Addison on behalf of the plaintiff for a number of reasons, including the fact that the plaintiff had entered into a long-term supply arrangement with Monier across a number of States; the plaintiff was committed to Terra Timbers and other members of that consortium;[107] the plaintiff did not want to expose the business to any loss; and the plaintiff expected that a sufficient number of other timber companies would accept the VLRP so as to allow the plaintiff to receive sufficient log supplies going forward. It was submitted that it was telling that these reasons were advanced by both Mr Addison and Mr Squires when questioned in chief without either of them making reference to the 4 March 1998 letter or issues of renewal generally in those reasons.

125 In this respect, the defendant made specific reference to Mr Addison's evidence-in-chief in answer to the question why the plaintiff had not taken up the VLRP offer, which is set out above.[108] Reference was also made to further evidence which Mr Addison gave in chief in response to a question as to what he would have done if the defendant had stated in unqualified terms that the plaintiff would not be offered a renewal of the licence. Mr Addison said:[109]

"Mr Addison, I want to ask you a hypothetical question. I want to ask you about the period in 2002 and 2003?---Yes.

If the department had stated to you in that period in unqualified terms that the plaintiff would not be offered a renewal licence in accordance with the guarantee, what would Auswest have done?---I am not sure on that in that regard. I don't think there was any doubt that we would have taken action to - perhaps legal action to ensure that we were compensated in one form or another but my state of mind at that particular time was really that I couldn't understand why the department couldn't give us a licence. So I was always, I guess, led on the path that commonsense would prevail and that we would be extended the licence as we had expected it to be. No, I am not quite sure whether I can specifically answer that question." [emphasis added]

It is noted, as the defendant submitted, that Mr Addison made no reference to the VLRP.

126 The defendant also referred to Mr Squires' first answer in relation to the VLRP, which is set out above.[110] The answer concluded with the sentence (emphasised in the defendant's submissions): "In other words, I felt that we, I guess, we're young enough and wanted to have a future in the industry and this program would enhance the prospects of us being successful with it in the future". As the defendant noted in its submissions, Mr Squires' later evidence was that had the Department stated to him in the period between June 2002 and August 2003 in unqualified terms that the plaintiff would not be offered a renewal licence in accordance with the "guarantee", he would have been clear in his view that the plaintiff ought to "take the money and run". In my opinion, the latter answer ought not be accorded any weight for the reasons advanced by the defendant in its submissions. In particular, because at the relevant time, Mr Squires was not involved in the day-to-day operations of the Orbost Mill, which were Mr Addison's exclusive responsibility. Additionally, Mr Squires' answer was preceded by a series of questions and objections which, in my view, easily led him to the answer he eventually gave. Mr Squires did not recall discussing the correspondence passing between the plaintiff and the defendant in March to July 2002 with Mr Addison. No Board meetings were held to consider potential participation in the VLRP. Mr Squires could not recall any discussions with Mr Addison about any security afforded by the 4 March 1998 letter around this time and all Mr Squires could recall were discussions with Mr Addison to the effect that Mr Addison could not get any sense out of the defendant in terms of honouring the "guarantee".

127 Similarly, as the defendant submitted, Mr Gilham said that he had little involvement in the affairs of the Orbost Mill, as Mr Addison took on that responsibility from the time it was purchased. Further, he was distracted by the Brickworks Limited takeover of Bristile Ltd.[111] Mr Gilham was asked generally about the decision by Brickworks to continue with the Orbost Mill, as follows:[112]

"Mr Gilham, if the Orbost mill was travelling less successfully between 2006 and 2009 why did Brickworks continue to conduct the business at the Orbost mill in those circumstances?---I think that management believe that it could be a profitable business and that it should continue."

128 Consequently, it follows, in my view, that Mr Addison's evidence is decisive on the question whether the plaintiff would have applied for payment on surrender of its licence under the VLRP, and his evidence does not assist the plaintiff in relation to that issue. Consequently, there is no causal link between the 4 March 1998 letter and any trading (or other "losses") sustained after the plaintiff's deliberate decision to "stay in the business". By that time, the plaintiff was well aware that the licence would not be renewed and had already decided not to take up the opportunity to exit the industry, which was presented as an option by the VLRP. It was not, in my view, reasonable for the plaintiff to reject the opportunity provided by the VLRP and still hope to hold the defendant liable for statements made in the 4 March 1998 letter.

129 Issues with respect to the AusTimber licence acquisition do not appear to take matters further in any direction. The plaintiff had been operating for the 2003/2004 year and the 2004/2005 year on one year licences, but had secured ongoing supply as a result of obtaining a five year transitional licence, and also by participating in a sealed licence bid and two online licence auctions in 2005 and 2006, respectively. These arrangements provided it with supply approximately equivalent to its entitlement under the original licence (31,145m3). After the acquisition of the AusTimber licence, the plaintiff had a significantly higher level of supply than under the old licence. In cross-examination, Mr Addison said:[113]

"It was my view at the time that we were better off seeking that licence because we were unsure of what might transpire in auction systems carrying forward over the ensuing few years. In other words, we didn't have a real good understanding of what VicForests were proposing to put to auction, what sort of volumes they were and whether they would be enough to maintain the business, I guess. Both of those discussions were [to] stay in business at the time." [emphasis added]

130 On this basis, I am of the view that the defendant is correct in its submission that the situation here is not analogous to cases in which a plaintiff has been found on the evidence to have been "locked in" to the business, such that any losses sustained thereafter may arguably be causally linked to the original contravening conduct.[114] There is no evidence that the plaintiff could not have "closed its doors" in the sense of it being practically impossible or unreasonable for it to liquidate or sell the business. Rather, the evidence was that the plaintiff and Brickworks Limited made a conscious decision to continue with the business because they believed it would be profitable. As events turned out, that appears to have come to pass.

131 As the authorities indicate, it is not the law that in every case where a party is held to have been engaged in misleading conduct that party becomes the insurer of the other's success and liable to indemnify it against the consequences of a purchase.[115] Not all losses after an acquisition are "caused" by the contravention in a legal sense. If losses result from the plaintiff's own continuation of the business after discovering the truth, the plaintiff is not entitled to recover the losses from the defendant.[116] This is especially so where the plaintiff had the option of selling or otherwise exiting the business for a profit, but elects not to take up that option.

132 In Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd,[117] Gummow J said:[118]

"The conduct relied on by the applicant need not be the only cause of the loss or damage of which complaint is made. However, in my view, that does not necessarily mean that a party is to be fixed with liability under s 82 for loss or damage suffered by his conduct where the chain of causation has been broken or dislocated, or where the real, essential, substantial, direct, appreciable or effective cause lies elsewhere, particularly in a cause or causes arising from the acts or omissions of the applicant himself." [emphasis added]

133 In Henjo Investments Pty Limited v Collins Marrickville Pty Limited,[119] the defendant's misrepresentations caused the plaintiff to purchase "The New York Deli" in Double Bay. A loss was sustained on the purchase price. The plaintiff submitted that the trial judge should have awarded relief for its full trading losses up to the time of the actual closure of the New York Deli in 1988. The trial judge allowed part of the trading losses incurred up to 30 June 1986, by which time his Honour thought that the plaintiff should have realised its position and closed the restaurant. The Full Court upheld this decision, stating:[120]

"Collins Marrickville knew within 6 weeks of purchase that the representations were false. Yet it chose to carry on with the restaurant. Not all the losses incurred thereafter could be attributed to the representations. I would not allow any greater sum than that assessed by his Honour. I see no fault in the way his Honour approached the matter."

134 More recent statements to the same effect are found in Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd (No 2).[121] In that case, the respondent relied on the appellants' misrepresentations in acquiring a service station. The trial judge held that each of the appellants was liable for: contravening the TPA or the Fair Trading Act 1987 (WA), negligence, and in respect of some of the representations only, in deceit. The trial judge also found that the respondent was aware of the true position in relation to the service station within a few months of settlement, yet awarded damages up until the date of the trial. No evidence was led at trial to establish any reason why the respondent could not have liquidated its investment in the service station and reinvested its funds at any point prior to the trial. The Court of Appeal of Western Australia allowed an appeal from the decision and was critical of the trial judge's award. Martin CJ said:[122]

"there is an air of unreality relating to the overall conclusion at which the trial judge arrived. He had found that by reason of the appellants' breach of duty, the respondent had been induced to pay, on 1 May 2003, $665,000 (plus stamp duty) for property which had a value of $414,750. With knowledge of the true position, the respondent retained and relet the property, and still held it as an investment at the time of trial. The trial judge awarded damages in the total amount of $967,202.50 plus interest of $138,824.83. So, as a result of being induced to pay about $250,000 more than the property was worth, the respondent, who retains the property, has been awarded about $1.1 million in damages and interest. Analysis at that level of abstraction strongly suggests error in the process of assessment." [emphasis added]

135 Murphy v Overton Investments Pty Ltd[123] does not require the application of a different principle from that stated above. In that case, the High Court acknowledged that damages for the contingent (and then actual) loss sustained by the appellants should only be awarded into the future for a reasonable time. The Court remitted the assessment of damages and remarked:[124]

"If it were found that it was, or would at some later time become, unreasonable for the appellants not to sell their interest in the lease, the point at which they could be expected to sell the lease would mark the outer limit to the period for which they would be exposed to the obligation to pay more outgoings than they were led to anticipate."

136 For the reasons indicated, I am of the view that there was no reliance on the part of the plaintiff on any of the claimed representations by the defendant, assuming for the purposes of considering this issue that those representations were misleading or deceptive. For the reasons indicated previously, I am of the view that that was not the position.[125] Further, I am of the view that the plaintiff's decision to continue with the business conducted at the Orbost Mill and to forego accepting any offer under the VLRP severed any causal link between and loss and damage it claims to have suffered and the alleged representation, to the extent indicated in the preceding reasons.

137 The defendant submitted that it is, and was at all relevant times, part of the Crown in right of the State of Victoria and, consequently, not bound by Parts V and VI of the TPA. Section 2B of the TPA provides that the Act binds the Crown in right of the State of Victoria, "so far as the Crown carries on a business, either directly or by an authority of the State ..." only in respect of Part IV, Part XIB and the other provisions of the Act so far as they relate to these provisions. The effect of this section is that neither the provisions of s 52 nor the related adjectival provisions of s 51A of the TPA apply to the defendant if it is found to be part of the Crown in right of the State of Victoria. In other words, it would, in these circumstances, be entitled to immunity from any cause of action under s 52 of the Act and, it follows, the remedial provisions contained in ss 82 and 87 and any other related provisions which operate in the event of the provisions of s 52 being breached would be inapplicable.

138 It is common ground that the question whether the defendant is part of the Crown in right of the State of Victoria for the purposes of s 2B of the TPA is a matter of statutory construction, and that the degree of Ministerial control over the activities of a State statutory body is an important indicium of whether a State statutory body is to be treated as part of the Crown in right of the State.[126] The plaintiff submitted also that the Court should consider whether or not the property and funds of the defendant are held independently of government.[127]

139 The plaintiff submitted that the test for Crown immunity was stated by Kitto J in Inglis v Commonwealth Trading Bank of Australia, as follows:[128]

"The decisive question is not whether the activities and functions with which the respondent is endowed are traditionally governmental in character, though their possession of a traditional or generally accepted governmental character may well help in the ascertainment of the legislative intention. The question is rather what intention appears from the provisions relating to the respondent in the relevant statute: is it, on the one hand, an intention that the Commonwealth shall operate in a particular field through a corporation created for the purpose; or is it, on the other hand, an intention to put into the field a corporation to perform its functions independently of the Commonwealth, that is to say otherwise than as a Commonwealth instrument, so that the concept of a Commonwealth activity cannot realistically be applied to that which the corporation does?"

140 Of particular interest in the context of the present proceedings, it is a decision of Lowe J in this Court in Marks v Forests Commission.[129] The question of Crown immunity arose in that case in relation to the application of Crown immunity in tort for negligence of employees in the course of their employment. It was found that this immunity was applicable, as the Forests Commission was, in substance, a body incorporated by statute to administer a department of government and, as such, was an instrumentality of the Crown. Though the case was decided in 1936, the principles applied by Lowe J were consistent with more modern authority.[130] Apart from providing an example of the application of these principles in a more analogous context, the judgment of Lowe J also addresses the approach to be applied by the courts in the absence of relevant legislative provisions. For the reasons which follow, I am of the opinion that the current Victorian legislation does indicate that the defendant is part of the Crown in right of the State of Victoria for present purposes. Nevertheless, the following passage from the judgment of Lowe J does contain some helpful observations in relation to the interpretation of legislative provisions and in relation to the long-recognised function of the Crown as the custodian, to use a general term, of forests. Thus, Lowe J said:[131]

"In the absence of legislation on the question of the liability of the entity in question, the modern test would seem to run somewhat as follows: Is the body in question an organ for the exercise of part of the general executive authority of the Government, or is it a mere substitute for an individual, to carry out what may be done by private enterprise? If the body possesses varying characteristics, some pointing to one conclusion and others to another, the answer would seem to turn upon the dominant characteristics of the body.

My first task is indicated, I think, by Blackburn J in the opinion referred to, where he says:[132] 'It is pointed out by Lord Campbell in The Southampton and Itchin Bridge Company v The Southampton Local Board of Health,[133] that in every case the liability of a body created by statute must be determined upon a true interpretation of the statute under which it is created', and for the purposes of interpretation I must, of course, bear in mind the subject-matter dealt with and the history of the legislation. It is not without importance, in determining whether the Commission is an agency of the Crown for the purpose of the rule in question, to observe, as Day J pointed out, in excluding the Trinity House Corporation from the rule, in Gilbert v Trinity House Corporation,[134] that 'All the great officers of State are, if I may say so, emanations from the Crown. They are delegations by the Crown of its own authority to particular individuals', and that in Viscount Canterbury v The Attorney-General[135] the Commissioners of Woods and Forests were protected by the rule, so that they were immune from liability for the negligence of a servant in their department. In the opinion of Professor Harrison Moore, the Commissioners of Woods and Forests 'are instruments of the King because they are the means of carrying out powers or exercising rights assigned to the King in the government of the country' ('Liability for Acts of Public Servants,' Law Quarterly Review, Vol 23, at p 16)."

141 The defendant submitted that the Crown has (and had) direct and indirect control over the defendant's activities pursuant to statute. Sub-section 7(1) of the Conservation, Forests and Lands Act 1987 (Vic) (the "CFLA") provided at all relevant times, until amended in 1998 where the title of the body corporate called the Director-General of Conservation, Forests and Lands was replaced with the title "the Secretary", that: "In the carrying out of the powers, functions and duties conferred or imposed on the Director-General [now the Secretary] by or under this or any other Act, the Director-General [now the Secretary] is subject to the direction and control of the Minister". Additionally, as a department head, the person who occupies the office of the Secretary, or formerly the Director-General, is appointed by the Premier on behalf of the Crown and is responsible to the Minister for the conduct and management of the Department and may be removed from office by the Crown, through the agency of the Governor-in-Council.[136]

142 The defendant also made reference to the direct control which the Crown maintained and maintains over the funding of the defendant's activities, the Secretary or the Director-General, pursuant to statute. Money for the payment by the defendant of "the costs of the administration, maintenance, protection and management of all Crown lands under the jurisdiction and control of the Director-General [now the Secretary] and all other matters and things under the jurisdiction and control of the Director-General [now the Secretary] out of such money as is from year to year provided for that purpose by Parliament".[137] Further, all revenue received by the defendant must be paid into the Consolidated Fund under s 9 of the Financial Management Act 1994 (Vic), which provides as follows:

"9. The Consolidated Fund

(1) There shall be established and kept an account to be known as the Consolidated Fund.

(2) There shall be credited to the Consolidated Fund-

(a) all money forming part of the Consolidated Revenue under the Constitution Act 1975;

(b) all money-

(i) raised by or on behalf of or received by the State; or

(ii) which by or under an Act is payable to a person holding an office or place in the public service-

and which is not, by or under an Act, required or authorised to be paid to the Trust Fund, or an account in the Trust Fund, or to any other fund.

(3) If the purpose for which money must be applied is defined by the Commonwealth, the Minister may accept the money and credit it to a suitable account in the Trust Fund and, without any other authority than this Act, authorise the disbursement of the money for that purpose."

Additionally, in terms of financial control, s 24 of the CFLA requires the defendant to prepare a budget in the form approved by the Treasurer and give reasons for the items contained in it.[138] The Treasurer may then approve the budget or may make alterations to it as the Treasurer sees fit.[139]

143 The plaintiff submitted that there were also a number of statutory provisions which were indicative of a degree of control of the defendant, by the Crown and its Ministers, less than that required to characterise the defendant as part of the Crown in right of the State of Victoria. First, it was submitted that attention should be directed to s 6 of the CFLA, which constituted the Director-General [now the Secretary] as a body corporate. Sub-sections 6(1) and (2) (incorporating amendments as at 1 July 1998) provided:

"6. Secretary to be body corporate

(1) The person who is for the time being the Department Head (within the meaning of the Public Sector Management and Employment Act 1998) of the Department and the successors in office of that person are a body corporate under the name 'Secretary to the Department of Sustainability and Environment'.

(2) The Director-General-

(a) has perpetual succession; and

(b) is to have an official seal; and

(c) may sue and be sued in its corporate name; and

(d) is, subject to this Act, capable of taking, purchasing, acquiring, leasing, holding, exchanging, selling and disposing of real and personal property for the purpose of performing its functions or exercising its powers under a relevant law.

..."

It was submitted by the plaintiff that it is relevant that the body corporate constituted under these provisions may sue and be sued. Further, it was submitted that the provisions of paragraph 6(2)(d) of that Act invite inquiry as to whether these activities or functions of the defendant, which are said to be distinctly commercial or non-governmental in nature, are intended to be carried out with the requisite degree of independence from Ministerial control.

144 Further, the plaintiff submitted that ss 18, 19, 20, 22 and 23 of the CFLA indicated a significant degree of independence on the part of the defendant in the management of moneys and the entering into of contracts. The plaintiff submitted that the effect of these provisions was as follows:[140]

"The Secretary may enter into an unlimited number of contracts for the prescribed amount of $50,000 or less for a period of three years or less with any persons or corporations without any requirement for ministerial approval; (ss 18 and 19)

The Secretary must pay the costs of the administration, maintenance, protection and management of all Crown lands under the jurisdiction and control of the Secretary and all other matters and things under the jurisdiction and control of the Secretary out of such money as is from year to year provided for that purpose by Parliament without ministerial approval; (s 20); and

The Secretary administers accounts or funds without requiring ministerial approval for these acts of administration:

(i) the Conservations, Forests and Lands Stores Suspense Account; and (s 22)

(ii) the Conservation, Forests and Lands Plant and Machinery Fund (s 23)"

145 In my opinion, the plaintiff's submissions with respect to the provisions of the CFLA upon which it relies[141] are not supported by the provisions themselves. In my view, the incorporation of the Director-General, and now the Secretary, under s 6 is in the nature of a machinery provision designed to facilitate the holding and transfer of property and the process of contracting, rather than a provision which goes to the substance of the nature of the defendant's office and its relationship with the Crown. In my view, this is made clear by the provisions of s 7 of that Act, to which reference has already been made. Sections 18 and 19 of the Act provide a degree of flexibility in relation to the making of contracts with some specific requirements that major contracts (as "defined" or provided for under the provisions of s 19) require the specific approval of the Minister. Again, in my view, these provisions are facilitative and do not detract from the provisions of s 7 of the Act which make it clear that the carrying out of the power, functions and duties conferred on or imposed upon the defendant are "subject to the direction and control of the Minister". Finally, the provisions of ss 22 and 23 do not, in my opinion, assist the plaintiff's case as sub-s (1) of both ss 22 and 23 provide expressly that the account or fund established under these provisions, respectively, are to be "established and kept in the Treasury". In my view, these provisions are a very clear assertion of executive and ministerial control of the defendant, particularly when read with the provisions of s 7, as indicated previously.

146 In support of its arguments, the plaintiff submitted that in assessing the degree of Ministerial control, regard should be had to the observations of Stephen J in Superannuation Fund Investment Trust v Commissioner of Stamps (SA):[142]

"The importance of the presence or absence of control by the executive government in ascertaining whether or not a statutory corporation possesses a particular immunity or privilege of the Crown is a consequence of the very nature of that inquiry, concerned as it is with the nexus between the corporation and the executive. If a corporation is no more than the passive instrument of the Crown, subject in a high degree to control by the executive, it is appropriate enough that its acts be viewed as those of its master and that it be itself treated as the alter ego of the Crown, enjoying accordingly those immunities and privileges with which the Crown is clothed. If, on the contrary, a statutory corporation is essentially autonomous, its acts being in no sense the outcome of directions by the executive but truly its own, there will be little reason to clothe it with any of those immunities or privileges. In saying this I do not intend to suggest the need for any examination of the actual extent to which particular actions are or are not the result of the exercise of control by the executive: it is the existence of the statutory ability to control, or its absence, that is to be looked at.

No doubt in practice a statutory corporation will seldom be either a mere passive instrument or wholly autonomous. If the former its creation would scarcely be worthwhile, departmental officers could serve the purpose just as well. If the latter it would savour of Frankenstein's monster, hence the usual retention of some control, even if it be no more than some power of appointment and removal of the members of its governing body, perhaps the existence of an obligation to make periodic reports to Parliament, or, particularly if public funds are in question, the imposition of audit and financial reporting procedures."

147 The plaintiff also relied upon the observations of Gibbs CJ in Townsville Hospitals Board v Townsville City Council:[143]

"Although the Board is subject to quite stringent controls in relation to proposed building work, the Board retains an independent discretion to decide whether to engage in such work. The Board cannot be compelled to engage in the building work and whether it does so lies within its own discretion. However, if it does decide to engage in the work and needs to borrow or raise money or make financial arrangements, it is subject to the controls provided by s 24. There is nothing to indicate that the purpose of those controls is to achieve any of the objects of the Building Act. The Minister, in deciding whether or not to approve of plans and specifications submitted by the Board, is not obliged to consider whether the Standard Building By-laws have been observed. The Minister in question is the Minister for Health or other Minister for the time being administering the Hospitals Act. No doubt the Minister might be expected to consider whether the building shown in the plans and specifications was a sound financial proposition. It may be assumed that he might also consider whether the building proposed was suitable for hospital purposes. It is unnecessary to decide whether the Minister might consider whether the plans and specifications complied with the Standard Building By-laws, for there is nothing in s 24 that obliges him to do so.

...

The fact that a number of Ministerial approvals must be obtained if the Board needs to borrow or raise money or make financial arrangements for the purposes of a proposed work does not indicate that the Board in carrying out the work is acting for the Crown. The Board cannot be directed to do the work, and if it does borrow or raise money for the purpose, the Board and not the Crown is liable in case of default."

148 In my opinion, neither the observations of Stephen J in the Superannuation Fund Investment Trust case nor those of Gibbs CJ in the Townsville Hospitals Board case advance the plaintiff's arguments having regard to the statutory provisions to which consideration has been given. Additionally, I note that Stephen J appears to suggest that it is unnecessary to examine the actual facts and circumstances of the operation of an entity such as the defendant to assess whether or not particular actions are or are not the result of exercise of control by the Executive. In so doing, Stephen J reaffirmed that it is "the existence of the statutory ability to control, or its absence, that is to be looked at". The reference by Gibbs CJ appears to be dealing with a statutory entity of a different nature, as the Chief Justice makes clear in his judgment that the Board cannot be compelled to engage in relevant work by the Minister. The Board may borrow or raise money if it does decide to carry out relevant work, but it, and not the Crown, would be liable in the event of default. It was said that the fact that Ministerial approvals must be obtained in certain circumstances where the Board needs to borrow or raise money or make financial arrangements does not affect the position. Here, the defendant is clearly rendered subject to Ministerial control by s 7 of the CFLA and, for the reasons indicated, does not conduct or maintain independent financial arrangements; at all times being subject to the requirement of appropriations from the consolidated fund, payments of revenue into the consolidated fund, and the keeping of the account and fund established by ss 22 and 23, respectively, "in the Treasury".

149 The plaintiff also submitted that the terms and effects of the legislation establishing and regulating the activities of the defendant reveal a number of functions which, it was said, could not realistically be regarded as governmental in nature. An example given was that under sub-s 21(1) of the Forests Act (as it then was) the Secretary has "special powers" to:

(a) permit the taking or converting of any timber or other forest produce in any State forest at not less than such minimum rates or amounts as are prescribed by or under this Act;

(b) take and sell any timber or forest produce in any State forest;

(c) convert any such timber into logs sawn timber or merchantable articles and sell the same;

(d) convert any such forest produce into merchantable articles and sell the same;

(e) construct purchase or rent and operate sawmills and other mills and kilns and depots for seasoning timber and purchase or rent machinery and plant for the purposes of this section; and

(f) purchase cattle and depasture them on State forests and sell such cattle.

150 Additionally, the plaintiff submitted that under s 20 of the Forests Act, the Secretary has "other powers and duties" to provide for planning works and plant for the utilisation of forest produce for the market and for the conversion, manufacture and sale of forest produce and by-products thereof and also the promotion of the sale of trees and timber. It was submitted that these activities are distinctly commercial in nature and could not attract Crown immunity of themselves. It was also submitted that these powers are, on their face, exercised by the defendant without any degree of Ministerial control, apart from the limitations on the amount and duration of the contracts provided for in ss 18 and 19 of the CFLA. Reference was also made to the judgment of Stephen J in Superannuation Fund Investment Trust v Commissioner of Stamps (SA).[144] In part of the passage referred to, Stephen J said:[145]

"Again, whether a corporation possesses one or more functions, the intention of the legislation may be that only some of the Crown's immunities and privileges should attach to it. Whatever complexities may arise in such cases, the course of statutory interpretation will but reflect the complex nature of the legislative intent to which effect is being sought to be given. In such cases indicia may at first sight appear to point in different directions, the apparent conflict only resolving itself by reference to the circumstances relevant to the case in hand and how they bear upon the particular function in question or the particular immunity or privilege to which claim is made."

As indicated previously, I am of the view that Stephen J was indicating that no investigation of the actual extent of particular actions was required[146] and that these "special powers" and "other powers and duties" must be read subject to the provisions of the CFLA to which reference has been made; and in this respect, particularly to the provisions of s 7 of that Act. Additionally, in my view, the provisions of ss 5 and 18 of the Forests Act (as at 30 April 1998) make it clear that the function of the defendant may have commercial aspects, but is directed to the protection, control and management of State forests. These provisions were as follows:

"5. Business of the Director-General

(1) The Director-General shall subject to this Act have the exclusive control and management of-

(a) all matters of forest policy;

(b) the granting issuing and enforcing of all leases licences permits or authorities under this Act or any corresponding previous enactment;

(c) the collection and recovery of all rents fees royalties charges and revenue under this Act whether in respect of leases licences permits or authorities granted before or after the commencement of this Act; and

(d) the administration generally of this Act.

18. General powers of Director-General

Subject to this Act the Director-General shall protect State forests and shall have the control and management of-

(a) State forests and plantations nurseries forest schools and industrial undertakings carried on under this Act and the forest produce of other Crown lands as provided in this Act; and

(b) the establishment maintenance improvement and renewal of forests plantations and tree-nurseries and the distribution of trees therefrom and all tree-planting-

(i) on Crown lands not vested in any corporation or trustees or not under the control or management of any council or committee of management; or

(ii) on public roads (other than main roads and State highways within the meaning of the Transport Act 1983)-

when such tree-planting is subsidised by grants from the Consolidated Fund or the Forestry Fund or by gifts of trees from the Government or the Director-General."

Furthermore, it should be emphasised that these provisions are expressly subject to s 7 of the CFLA, which renders the carrying out of the powers, functions and duties under these provisions subject to the direction and control of the Minister. In my opinion, the provisions of s 52 of the Forests Act which empower the defendant to grant licences and permits with respect to forests simply follow from these more general empowering provisions, as do some of the particular provisions of s 52, namely paragraphs 52(6)(a) and (b) to which reference was made by the plaintiff in its submissions. Again, exercise of these powers, functions and duties are subject to s 7 of the CFLA.

151 Finally, for the sake of completeness I note submissions made by the defendant in relation to Mr Pendrigh's evidence as to the extent of control exercised by the Crown over the operations of the Forests Service Division of the defendant.[147] The reference in the defendant's submissions to the control of the Forests Service Division and the control of the issue of licences is, in my view, consistent with the view I have reached with respect to the operation of the various statutory provisions, as indicated above. The exercise of Ministerial control is also evident in the various Ministerial press releases and the "Our Forests, Our Future" policy statement to which reference has already been made. In my view, none of the documents of this kind or the correspondence to which reference has been made indicates anything other than a high degree of Ministerial and Executive control of the defendant. Nevertheless, as appears from the authorities, particularly the statements of Stephen J in Superannuation Fund Investment Trust v Commissioner of Stamps (SA),[148] the question is to be resolved as a matter of statutory interpretation, rather than an assessment of the actual conduct of and degree of control by the Minister and the Executive over the defendant.

152 The characterisation of the defendant as part of the Crown in right of the State of Victoria does not resolve the application of the FTA, as s 5 of that Act makes it clear that the Crown is bound by its provisions. Consequently, the critical issue with respect to the possible application of the provisions of the FTA relied upon by the plaintiff, namely that the representations alleged to be made by the defendant were in contravention of sub-s 9(1) of the FTA, depend upon those representations having been made by the defendant "in trade or commerce" (assuming that they were otherwise found to be misleading or deceptive, directly or with the aid of the "future matters" provisions). Reliance was also placed by the plaintiff on s 4 of the FTA, which deals with representations as to future matters and reflects s 51A of the TPA to which reference has already been made. The s 4 provisions do not detract from the requirement of a finding of conduct "in trade or commerce" for the application of sub-s 9(1) of the FTA.

153 The defendant submitted that the 4 March 1998 letter did not constitute conduct "in trade or commerce" within the meaning of these words as stated by the High Court in Concrete Constructions (NSW) Pty Ltd v Nelson[149] in the context of s 52 of the TPA. The majority in that case, Mason CJ, Deane, Dawson and Gaudron JJ, said that the phrase has a "restrictive operation"[150] and expressed a preference for a construction that refers:[151]

"... only to conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character. So construed, to borrow and adapt words used by Dixon J in a different context in Bank of NSW v The Commonwealth, the words 'in trade or commerce' refer to 'the central conception' of trade or commerce and not to the 'immense field of activities' in which corporations may engage in the course of, or for the purposes of, carrying on some overall trading or commercial business.

Indeed, in the context of Pt V of the Act with its heading 'Consumer Protection', it is plain that s 52 was not intended to extend to all conduct, regardless of its nature, in which a corporation might engage in the course of, or for the purpose of, its overall trading or commercial business. Put differently, the section was not intended to impose, by a side-wind, an overlay of Commonwealth law upon every field of legislative control into which a corporation might stray for the purposes of, or in connection with, carrying on its trading or commercial activities. What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character..."

"The question is not whether the conduct engaged in was in connexion with trade or commerce or in relation to trade or commerce. It must have been in trade or commerce."

The majority, therefore, rejected a construction of s 52 which would encompass all the conduct in the course of a myriad of activities which are undertaken in the course of, or incidental to, the carrying on of an overall trading or commercial business.

154 The plaintiff accepted that the High Court had found in Concrete Constructions that the operation of s 52 should be restricted to conduct which is itself an aspect or element of activities or transactions which, by their nature, bear a trading or commercial character.[153] Further, the plaintiff submitted that the High Court made clear that dealings with prospective customers are specifically included within the operation of s 52.[154] On this basis, it was submitted that the conduct about which the plaintiff complained is the 4 March 1998 letter and the representations therein. Further, the plaintiff submitted that the representations must be understood in the context in which they were made. It said that the plaintiff had discussed with the defendant the licence which attached to the Orbost Mill, which it was then contemplating acquiring. At the time at which those discussions took place, the defendant was, the plaintiff submitted, in a trading or commercial relationship with the vendor of the business (Monier), which included the licence. It was said by the plaintiff that so much is clear by the evidence that goes to the commercial activities of the defendant , which included selling wood to the licensee, negotiating the price of that wood and, if required, paying for and on-charging the processing of that wood for a licensee. It was also noted by the plaintiff that the defendant refers itself, in its annual report, to "licensees" as "customers". It was submitted that the language used by the defendant in the annual report of the Department accurately describes the trading or commercial relationship between the defendant and such licensees.

155 The plaintiff submitted that the 4 March 1998 letter was sent as part of the defendant's commercial activities and, consequently, the conduct was in trade or commerce for the following reasons:

(a) The letter was sent to a prospective licensee, or "customer", in circumstances where the plaintiff was negotiating the purchase of the Orbost Mill;

(b) the letter refers to future negotiations for agreement on price - and such negotiations are distinctly commercial and in trade or commerce by nature;

(c) the letter was sent to a prospective purchaser/customer of a business from an existing customer (Monier) who, at the time, was purchasing goods from the defendant - the trading and commercial relationship of the defendant with Monier, the vendor of the business, was intended to be continued with the plaintiff as purchaser of that business (that is, the Orbost Mill);

(d) thus the letter was part of the defendant's commercial activities which was ongoing with the vendor, Monier (purchaser of the goods from the defendant) and to be ongoing with the plaintiff (as future purchaser of the goods from the defendant). The customer, the plaintiff, was looking forward to developing an association with the defendant in the future, a commercial association;

(e) in a conversation on 3 March 1998, prior to the provision of the letter to the plaintiff, the defendant, the supplier of the goods, assured the purchaser of the business, the plaintiff, to which the defendant supplied the goods, that supply was guaranteed; and

(f) the analysis of the commercial activities of the defendant is relevant to whether the provision of the letter itself was in trade or commerce. The defendant itself recognised not simply that it conducted itself in a business-like manner, but that the licensing of commercial forestry and, in particular, the issuing of licences and negotiation of licence fees and royalty rates under those licences was a distinctly commercial activity (see "Our Forests, Our Future", which refers to the commercial activities of the defendant being "disentangled" from the regulatory activities).

156 It follows that it is necessary to identify with some precision the particular conduct in issue in order to determine whether or not that conduct can be characterised as having occurred "in trade or commerce".[155] It is clear that the mere "potential" for trade or commerce is not sufficient, in the sense of conduct preceding the activity or transaction which bears a trading or commercial character.[156] In the present case it was submitted by the defendant that the relevant conduct here was the writing of the 4 March 1998 letter to a potential licensee, namely the plaintiff, which contained a statement as to a possible future offer of a renewal of a licence not held by the licensee. The defendant submitted that this conduct was not conduct which, of its nature, bears a "trading or commercial character". At most, the defendant said, the letter was in anticipation of activities that had the potential to be "in trade or commerce", but which were yet to eventuate.[157]

157 The point is illustrated by a number of authorities. In Robin Pty Ltd v Canberra International Airport Pty Ltd,[158] the respondents made statements concerning the effect of aircraft noise upon residents of a proposed subdivision if rezoning of that land was permitted. Gyles J held[159] that the statements were not "in trade or commerce" because the conduct was not directed to the trade or commerce associated with the airport at all, but rather the potential subdivision of the applicant's land. It was noted[160] that "The objective of the relevant conduct of the respondents is to prevent rezoning. It is only upon rezoning that the potential for trade or commerce may be realised".

158 Similarly, in State of New South Wales v RT & YE Falls Investments Pty Ltd,[161] the NSW Department of Agriculture adopted a policy to eradicate Bovine Johne's Disease, the primary method of which was the slaughter of each herd found to contain infected animals, with compensation to be paid to owners. A veterinarian employed by the Department told Mr Falls that he "believe[d] that support for the proposal is very strong at Head Office and that [it] is highly unlikely not to be approved." The Department changed its policy after the respondent claimed to have relied upon the statement to its detriment. The New South Wales Court of Appeal held that the representations were not made in trade or commerce in response to a claim by the respondent for damages under the New South Wales Fair Trading Act on the basis of misleading conduct; though it was accepted, in general terms, that a government agency may be carrying on business activities.[162] It was also observed that the commercial activities in question must be sufficiently systematic and regular and sufficiently similar to commercial activities that private persons might engage in to be characterised as a business.[163] On this basis, the plaintiff submitted that the commercial activities of the defendant were systematic, regular and similar to activities that private persons might engage in. At that time, the plaintiff said, the defendant sold wood, processed wood, paid for it to be processed, on-sold that wood at a profit and negotiated prices for the purchase of wood.[164]

159 Perhaps one of the more dramatic illustrations of the approach in the authorities was the decision of the Federal Court in Unilan Holdings Pty Ltd v Kerin.[165] In that case, Mr Kerin, the then Minister for Primary Industry and Energy, said, in the course of a speech made to the International Wool Textile Organisation, that he gave "a cast-iron guarantee ... that the Australian government will not contemplate, under any circumstances, any further downward movement in the floor price" of wool. Eight months later, the Australian government suspended the national wool marketing scheme, including the reserve price, resulting in a slump in the price of wool. Hill J held that the Minister's speech was not made in trade or commerce, notwithstanding that it was made to an audience comprised of those whose business was the wool trade and for the purpose of seeking to promote the interests of the Australian Wool Corporation and the wool industry generally. Hill J said:[166]

"... It is obvious that the statutory body could engage in trade or commerce. The Treasury might mint coins to be marketed for collection; the sale of those coins would be conduct in trade or commerce. If the Treasurer, acting on behalf of his department were to make a misleading statement in the course of promoting the sale of the coins, he could be representing the Treasury in its dealings with potential customers. But this is remote from the present. The conduct complained of here is the speech of the Minister dealing with government policy which impinges directly on the international trade in wool. It is not conduct itself which itself has a trading or commercial character ..."

Hill J concluded[167] that the speech was "not an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character", and it was not made so merely because the speech concerned matters of trade or commerce. In relation to this case, the plaintiff submitted that the present circumstances are to be distinguished because the defendant had made statements to a purchaser of the business to which the defendant then supplied goods for value as part of a significant part of its operations, namely, commercial forestry.

160 The High Court in Houghton v Arms[168] said that the same construction is to be accorded to the terms as used in the FTA as applied under the corresponding provisions of the TPA.

161 I am of the opinion that the representations, based on the defendant's 4 March 1998 letter, which the plaintiff claimed that the defendant made to it in breach of sub-s 52(1) of the TPA and sub-s 9(1) of the FTA, did not constitute conduct "in trade or commerce" for the purposes of those provisions. They concerned "trade and commerce" in the sense that both the vendor of the Orbost Mill, Monier, and the plaintiff, as intending purchaser of the Orbost Mill, were both engaged in trade and commerce as timber millers and suppliers. The granting or withholding of a timber licence clearly impinged upon and may have had significant effects in relation to the commercial activities of the vendor or the purchaser, the latter more particularly after its purchase of the Orbost Mill. Nevertheless, on the basis of the reasoning of the authorities referred to above, particularly in Uniland Holdings, I am of the opinion that the representations as alleged by the plaintiff are properly to be regarded as concerning "trade and commerce", rather than being made "in" trade and commerce vis-à-vis the defendant. In relation to the plaintiff's submissions that the defendant should be characterised as being in a commercial relationship, in "trade and commerce", with Monier (the vendor of the Orbost Mill) and the plaintiff (as purchaser of the Orbost Mill), before and after the settlement of that purchase, respectively, I am of the opinion that the issue is to be determined on the basis of the approach of the High Court to the ambit of s 52 of the TPA (and the corresponding provisions of s 9 of the FTA) in Concrete Constructions (NSW) Pty Ltd v Nelson.[169] In my opinion, the statement of the majority in that case, as set out above, indicates that it is necessary to look at the nature of the particular activities or transactions in which the alleged representations were said to have been made. For the reasons indicated in relation to the question whether or not the defendant is to be characterised as a "Trading Corporation", I find that it is, in summary, primarily a governmental and regulatory agency. Activities which might otherwise be characterised as trading or commercial are not properly so characterised merely because, in the conduct of its regulatory functions, the defendant carries those functions out in a "business-like" way.[170] Additionally, the alleged representations were made in the letter of 4 March 1998, which was prior to the purchase of the Orbost Mill by the plaintiff from Monier (which occurred on 17 April 1998). Consequently, it is not correct to say that at the time that letter was written and provided to the plaintiff, that it was engaged in trading or commercial activities with the defendant, namely the supply of timber for the Orbost Mill, a factor which was emphasised by the plaintiff in its submission.

162 Finally, a related issue going to the possible application of s 52 of the TPA, is whether the defendant is properly characterised as a "trading corporation" as defined in s 4 of the TPA (by reference to paragraph 51(xx) of the Commonwealth of Australia Constitution), thus rendering it a "corporation" as defined by s 4 of the TPA for the purposes of applying s 52. Having regard to the position I have reached on the other issues considered, whether the defendant is a "trading corporation" does not, in my view, affect the result in these proceedings. Nevertheless, it may assist if I express some views on the issue.

163 The defendant submitted that it is not a "trading corporation" for the purposes of s 52 of the TPA. The relevant principles were summarised by Toohey J in Hughes v Western Australian Cricket Association.[171] The test is whether trading is a "substantial or significant part" of the corporation's activities.[172] This is a matter of fact and degree[173] and requires a consideration of the overall activities of the defendant.[174] Where trading is merely a peripheral part of the corporation's activities, this will not suffice to lend a corporation the character of a "trading corporation".[175] In the context of the expression "trading corporation", the use of the participle "trading" necessarily involves reference to function: either to the activities which the corporation is intended to undertake, or those which it does in fact undertake.[176] Nevertheless, it has been held that the activities of a corporation, rather than the purpose of its incorporation, will designate its relevant character.[177] The critical question is the nature of the corporation's activities at the relevant time.[178] Finally, the authorities indicate that the making of a profit is not an essential aspect of "trading", but it is usually concomitant.[179]

164 The plaintiff submitted that the statutory accounts of the defendant "can be powerful admissions in a case such as the present".[180] It submitted that they were of the "utmost solemnity".[181] The plaintiff further submitted that the Annual Report of the Department supports the view that the defendant carried on substantial commercial activities at the relevant time and was, consequently, to be regarded as a "trading corporation". The plaintiff then made reference to the Annual Report of the Department of Natural Resources and Environment, of which the predecessor of the defendant was then Department Head for the financial year 1997-1998. The plaintiff submitted that this Annual Report contained many references to the commercial functions of the Department, as follows:

(a) the Secretary in his Statement, said that "the Department's espoused values are the basis of the way we deal with customers and deliver high quality products and services. This was demonstrated nowhere more clearly throughout 1997-1998 than in Gippsland where the need to serve customers and improve services during the drought made it necessary to step back from other activities."[182]

(b) the Department's "Mission" was described as follows: "The staff of the Department of Natural Resources and Environment are committed to efficiently delivering high quality products and services to our customers. Our purpose is to generate wealth through sustainable development of primary industries and natural resources and protect our natural and cultural heritage."[183]

(c) the Department's "Values" were described as follows: "Our philosophy of customer service is underpinned by a set of values which reflect our attitude to our customers, our services, our people and our business. These are values that we must work and live by. The staff of the department:

• Believe that success matters
• Are committed to excellence and continuous improvement
• Strive to understand our customers and meet their needs".[184]

(d) a division entitled, "Corporate Management" provided support to DNRE businesses through financial management, corporate and budget planning, information technology and human resources.[185]

(i) "user charges and fees" and "other revenue" of approximately $227 million under "operating revenue".[186]

(ii) accumulated surplus of $1.281 million.[187]

(iii) net cash flow from investing activities of $23 million.[188]

(c) the notes to the financial reports record that:

(iv) Forest Management - Output Group 402 was responsible for sustainable management of State forests for a range of productive, conservation and recreation uses.[189]

(v) all transactions and balances between the Output Groups have been eliminated.[190]

(vi) user charges and fees controlled by the Department are recognised as revenues and are accounted for on an accrual basis.[191]

(vii) productive trees in commercial native forests are recognised by the Department as self generating and regenerating assets which are valued at their net market value at 30 June each year.[192]

(d) the Output Group Schedule of Revenue and Expenses shows user charges and fees attributable to Output Group 402 (Forest Management) of approximately $18 million and other revenue of approximately $15,616. Expenses of Output Group 402 are recorded as $34,913 and depreciation and amortization of $3,953.[193]

(e) assets of the Department are recorded as approximately $652 million including $157,815 of regenerating assets comprising productive trees in commercial native forests and other resources.[194]

(f) trade debtors are recorded as approximately $14 million.[195]

165 In the same vein, the plaintiff also submitted that in the "Our Forests, Our Future" policy statement, the Victorian Government stated that in establishing VicForests as a separate commercial service entity, VicForests would "transparently disentangle the commercial objectives from the regulatory functions of government". It was submitted that VicForests manages the commercial forestry functions or activities of the defendant and it is those activities which are relevant to the current dispute. In this respect, reference was also made by the plaintiff in its submissions to various parts of the oral evidence of Mr Pendrigh to the effect that while the defendant had a policy and regulatory role, it also performed various commercial functions, and generated profit and loss statements designed to "get a handle on how this business was operating".[196] Reference was also made to Mr Pendrigh's evidence that not all payments received by the Department went to consolidated revenue, that the Department charged customers for hiring contractors to convert trees to sawlogs and transport them to sawmills, and that the Department put all expenditure against revenue from sawmillers in a trust fund which was not returned to the Government. Apart from this evidence not being very specific, it appears to me that it is more than likely explicable under statutory provisions such as, for example, ss 22 and 23 of the CFLA.

166 The defendant, on the other hand, submitted that its activities extended beyond the licensing activities of the commercial forestry branch. The breadth of those activities, none of which it was submitted appeared to involve any aspect of "trading", were "displayed" in the Annual Report for the financial year 1997-1998, and the numerous statutes administered by the defendant. The latter included the Catchment and Land Protection Act 1994 (Vic), Coastal Management Act 1995 (Vic), Flora and Fauna Guarantee Act 1988 (Vic), Land Act 1958 (Vic), National Parks Act 1975 (Vic), Parks Victoria Act 1998 (Vic), Royal Botanic Gardens Act 1991 (Vic), Victorian Plantations Corporation Act 1993 (Vic), Water Act 1989 (Vic) and the Wildlife Act 1975 (Vic). Mr Pendrigh also gave evidence of other divisions within the defendant's Department, which he said were "quite a large number" and included Primary Industries, Minerals and Petroleum, and Catchment and Agricultural Services. Further, even within the Forests Service Division, the regulatory and policy-making activities of the defendant were of significance. This accords with the defendant's functions under the Forests Act, which provided that the defendant had exclusive control and management of all matters of forest policy.[197] Additionally, Mr Pendrigh gave evidence as follows:

"Forest management branch, what did that do?---That was effectively a regulatory function, the forest policy function, and responsible for forest management planning. So at that time - since 1990 the department had undertaken to produce strategic forest management plans in each of its 14 forest management areas and the branch was in the process of producing those plans. East Gippsland's came out in 1995, which is the relevant area here, the ecological sustainable forest management principles for society's interests in forests, aimed to balance commercial production with other values for forests, including maintaining its biodiversity and health."

Mr Pendrigh also gave evidence about the functions of the Fire Management Branch and the Centre for Tree Technology. His evidence was that the Commercial Forestry Branch comprised only 20 employees, a very small proportion of the number of people otherwise employed by the Department.

167 Consequently, the significance of the licensing activities of the Commercial Forestry Branch of the defendant must be assessed in this broader context, including the other regulatory and policy-making activities of the defendant. I accept that even if the activities of the Commercial Forestry Branch are properly described as "trading activities", these do not form a "significant or substantial part" of the defendant's activities. The Annual Report for the 1997-1998 financial year to which reference has been made was presented to the Minister and tabled in Parliament pursuant to ss 53 and 53A of the Financial Management Act 1994 (Vic). It follows that reports of this nature form an important part of the transparency and accountability of the defendant to the Government and, ultimately, the people of Victoria through the Victorian Parliament. Additionally, the Auditor-General of Victoria reviews financial statements of this nature to determine whether the State's public bodies are achieving their objectives effectively and are doing so economically and efficiently and in compliance with all relevant Acts.[198]

168 The defendant submitted that the annual reports of the defendant are not decisive of the nature of the activities of the defendant and, consequently, whether the defendant is to be regarded as a "trading corporation". Reference was made to Mr Pendrigh's evidence in cross-examination that the Commercial Forestry Branch produced "fictional profit and loss" statements which "had no bearing on the way appropriations and revenues were dealt with".[199] The defendant also submitted that statements within the annual reports emphasising the functioning of the defendant in a "businesslike" manner are also not decisive. Conducting an activity in a businesslike way does not, in itself, mean that the activity is "trading" in the requisite sense. Indeed, the defendant submitted that it would be surprising if the defendant would not conduct its activities in a businesslike manner.[200] In this respect, reference was made to the comments of Buddin J in Knevitt v Commonwealth of Australia.[201] In that case, it was concluded that the Electronic Weapons Systems Division of the Defence Material Organisation in the Commonwealth Defence Department was not "carrying on a business" for the purpose of section 2A of the TPA. Buddin J said:[202]

"In today's world it would not be acceptable for any public instrumentality to conduct its activities in a fashion that was other than 'business-like' regardless of whether or not it was a 'separate business unit'."

169 The defendant also noted that it had been doubted that the concept of "trading" extends to the provision of service under a statutory obligation to fix a fee the liability of which appears to be statutory. Thus, in Quickenden v Commissioner O'Connor of the Australian Industrial Relations Commission,[203] Black CJ and French J said that it was "questionable" whether the provision of educational services by a University within a statutory framework amounted to "trading" (in the context of considering whether the University of Western Australia was a "trading corporation" for the purposes of the Workplace Relations Act 1996 (Cth)). Their Honours stated:[204]

"The [Higher Education Funding Act 1988 (Cth)] creates a liability for each student to the University in respect of each course of study undertaken in a semester. The amount is not fixed by the University but rather by the Minister under published guidelines. The concept of "trading" is a broad one. It is doubtful, however, that it extends to the provision of services under a statutory obligation to fix a fee determined by law and the liability for which, on the part of the student, appears to be statutory."

170 The defendant also submitted that the charging of a licence fee or royalties for the removal of timber from State forests pursuant to the Forests Act, in force at the relevant time, is not to be seen as "trading". Reference was made to the following provisions of that Act at that time:

(a) Section 5(1)(c) provided that the Secretary has exclusive control and management of the collection and recovery of royalties and charges under the Act in respect of licences.

(b) Section 21(1) provided that, subject to the Act, the Secretary may permit the taking of timber or other forest produce at not less than such minimum rates or amounts as were prescribed by or under the Act (section 21(1)(a)).

(c) Section 99(2) provided for the Governor-in-Council to make regulations not inconsistent with the provisions of the Act for the purpose of prescribing the rate or amount of rentals, royalties, fees, dues and charges payable in respect of any licence.

(d) Section 51(2) provided, inter alia, that the Secretary could grant a licence for the removal of timber subject to the payment of any fees, royalties or charges that the Secretary may determine.

171 On the basis of these submissions of the defendant, which I accept, when the activities of the defendant are considered as a whole, any "trading" activities do not "form a sufficiently significant proportion of its overall activities to merit its description as a trading corporation". Alternatively, an evaluation of the extent of any "trading activities" against the totality of the defendant's activities demonstrates that the former are not so significant to give the defendant "the character of a trading corporation". The role of the defendant insofar as it concerns commercial activity is primarily to regulate that activity rather than to engage in it. It follows, on this basis the provisions of s 52 do not apply to the defendant, whether or not their operation would otherwise have been attracted.

Defences under the Forests Act

172 Prior to its repeal by the Sustainable Forests (Timber) Act 2004 (Vic), paragraphs 52(6)(a) and (b) of the Forests Act provided that:

"52. Licences and permits with respect to forests

...

(6) (a) The Director-General [the Secretary] may in writing inform any person who holds a licence or permit under this section to cut and remove trees and timber for saw-milling purposes of the period (not exceeding twenty-one years) for which the Director-General [the Secretary] will grant him further licences or permits for the same purpose.

(b) The Director-General [the Secretary] shall not by reason of having given information pursuant to this sub-section be bound to grant a further licence or permit to cut and remove any particular volume or quantity of trees or timber."

173 The Sustainable Forests (Timber) Act 2004 (Vic) was assented to on 16 June 2004. That Act repealed s 52(6) of the Forests Act and extinguished any rights, entitlement or purported rights in existence before that repeal, and precluded proceedings being taken in respect of any loss, damage or injury arising out of that extinguishment.[205] Section 27 of the Act meant that the plaintiff's licence expired at the end of its term (as existing immediately before the commencement of that section). It further meant that the plaintiff was not entitled to have such licence renewed or reissued, whether any entitlement, right or purported right to do so may have arisen in respect of that licence under section 52(6) or in any other manner.[206]

174 The relevant provisions of the 2004 Act are as follows:

"Section 27, Sustainable Forests (Timber) Act 2004 (Vic):

On and from the commencement of section 25,[207] a transferred licence (east)[208] expires at the end of its term (as existing immediately before the commencement of that section) and, despite anything to the contrary in that licence or section 52(6) of the Forests Act 1958 as in force immediately before its repeal -

(a) VicForests is not empowered to renew or reissue any transferred licence (east) or grant any further licences or permits in relation to that licence; and

(b) any entitlement, right or purported right in existence before that commencement in respect of the granting of any further licence or permit under section 52(6) of the Forests Act 1958 as in force immediately before its repeal ceases to exist; and

(c) the holder of a transferred licence (east) is not entitled to have that licence renewed or reissued, whether any entitlement, right or purported right to do so in respect of that licence arose under section 52(6), a term or condition of that licence or in any other manner; and

_(d) no proceedings may be taken - _

_(i) in respect of any loss, damage or injury from or arising out of - _

(A) the loss of any entitlement, right or purported right referred to in paragraph (b) or (c); or

(B) the enactment of this Division; or

(ii) to seek a renewal, reissue of a transferred licence (east) or the grant of any further licences or permits in relation to that licence, whether arising out of an entitlement or a right or purported right to do so under section 52(6), a term or condition of that licence or in any other manner; and

_(e) no compensation is payable in respect of any loss, damage or injury from or arising out of - _

(i) the loss of any entitlement, right or purported right referred to in paragraph (b) or (c); or

(ii) the enactment of this Division.

Section 34, Sustainable Forests (Timber) Act 2004 (Vic):

Nothing effected or to be effected by this Part or done or suffered under this Part -

(a) is to be regarded as placing any person in breach of contract or confidence or as otherwise making any person guilty of a civil wrong; or

(b) is to be regarded as placing any person in breach of, or as constituting a default under, any Act or other law or obligation or any provision in any agreement, arrangement or understanding including, but not limited to, any provision or obligation prohibiting, restricting or regulating the assignment, transfer, sale or disposal of any property or the disclosure of any information; or

(c) is to be regarded as fulfilling any condition that allows a person to exercise a power, right or remedy in respect of or to terminate any agreement or obligation ...

Section 52AA, Forests Act 1958 (Vic):

On the repeal of section 52(6) by section 107 of the Sustainable Forests (Timber) Act 2004 _ - _

(a) despite anything to the contrary in section 14 of the Interpretation of Legislation Act 1984, any entitlement, right or purported right in existence immediately before that repeal in respect of the granting of any further licence or permit for a licence or permit of a kind referred to in section 52(6) as in force immediately before its repeal ceases to exist; and

(b) the holder of a licence or permit of a kind referred to in section 52(6) is not entitled to have that licence or permit renewed or reissued, whether any entitlement, right or purported right to do so arose under section 52(6), a term or condition of the licence or permit or in any other manner; and

(c) _no proceedings may be taken - _

_(i) in respect of any loss, damage or injury resulting from or arising out of - _

(A) the loss of any entitlement, right or purported right referred to in paragraph (a) or (b); or

(B) the enactment of this section; or

(ii) to seek a renewal, reissue or grant of a licence or permit, whether arising under any entitlement, right or purported right to do so under section 52(6), a term or condition of the licence or permit or in any other manner; and

(d) _no compensation is payable in respect of any loss, damage or injury resulting from or arising out of - _

(i) the loss of any entitlement, right or purported right referred to in paragraph (a) or (b); or

(ii) the enactment of this section.

[emphasis added]."

175 I accept that ss 27 and 52AA of the Sustainable Forests (Timber) Act 2004 (Vic) are "cascading" in effect. In my opinion, a plain reading of the relevant parts of those provisions may, as the defendant submitted, be summarised as follows:

(a) Each transferred licence (east) expired at the end of its term as that term existed immediately before 1 August 2004 (section 27);

(b) the holder of such a licence was not entitled to have that licence renewed or reissued, whether such entitlement, right or purported right arose under section 52(6) or a term or condition of the licence "or in any other manner" (licence bar) (s 27(c)/s 52AA(b));

(c) the licence-holder is not permitted to bring proceedings in respect of any loss, damage or injury from or arising out of the loss of any entitlement, right or purported right referred to in the licence bar (proceedings bar) (s 27(d)(i)(A)/s 52AA(c)); and

(d) no compensation is payable in respect of any loss, damage or injury from or arising out of the loss of any entitlement, right or purported right referred to in the proceedings bar (compensation bar) (s 27(e)(i)/s 52AA(d)).

176 In relation to sub-s 52(6), the defendant submitted that it was relevant that on 2 December 1997, Monier wrote to the defendant's Department stating "We are having discussions with Messrs Geoff Squires and Gary Addison about the future of our Orbost sawmill and sawlog licence [sic]" and authorised the defendant to "release information" to Mr Squires and Mr Addison. Mr Addison's evidence was that he saw that letter at the time. Mr Pendrigh's evidence was that if a third party approached the Department with an inquiry about a licence, formal release was always sought from the licensee to provide information to that third party. He said that the letter of 2 December 1997 was the kind of letter to which he was referring in this respect.

177 Consequently, the defendant submitted that the 4 March 1998 letter should be treated as an exercise of the power conferred by sub-s 52(6) of the Forests Act before its repeal by the Sustainable Forests (Timber) Act 2004 (Vic). In any event, the defendant submitted, even if sub-s 52(6) did not apply, the words of s 27(c) (and s 52AA(b)) of the Sustainable Forests (Timber) Act 2004 (Vic) are broad enough to include any entitlement, right or purported right, whether such right "arose under s 52(6) ... or in any other manner".

178 The defendant submitted that these matters should be applied to the factual circumstances of this matter, as follows:

(a) The plaintiff's licence S000484 expired at the end of its term on 30 June 2003;

(b) The plaintiff was not entitled to have the licence renewed or reissued, including where that entitlement, right or purported right arose under the March 1998 Letter (that is, "under section 52(6) ... or in any other manner");

(c) The plaintiff is not permitted to take proceedings in respect of any loss, damage or injury from or arising out of the "licence bar" (as described in the preceding paragraph); and

(d) No compensation is payable to the plaintiff in respect of any loss, damage or injury from or arising out of the proceedings bar (as described in the aforementioned paragraph).

179 The defendant noted that there appear to be no cases in which the relevant provisions have been judicially considered. However, the defendant submitted that the Second Reading Speech of the Sustainable Forests (Timber) Bill sheds light on the manner in which the provision was intended to operate and assists in discerning Parliament's intention. That intention was, the defendant submitted, to ensure that no proceedings or claims could be brought in respect of the failure to renew a licence granted under the previous system:[209]

"The Government supports a sustainable timber harvesting industry, and VicForests will continue to meet the terms of existing licence commitments to current licence-holders for the remainder of their current licence periods. In line with its functions, VicForests will then progressively move to new commercial arrangements of its own making. Beyond meeting these existing commitments the government does not wish VicForests to be hampered with questions about any ongoing obligation to further extend licences. Any ongoing question about the renewal or reissue of licences under the current provisions of the Forests Act will jeopardise this key element of the reforms. The government is firm about the introduction of a new system for the pricing and sale of timber resources. The government wishes the licensing system to end in a clear and orderly manner, and it wishes to provide VicForests with a clean slate for its new system." [emphasis added]

180 Finally, it was submitted that the words "in respect of" and "arising out of" in each of the relevant sub-paragraphs of s 27 (and s 52AA) of the Sustainable Forests (Timber) Act 2004 (Vic) are sufficiently wide enough to encompass, either expressly or by necessary implication, claims for relief which are brought under the machinery of the FTA. The defendant submitted that such an interpretation is necessary to address the mischief which Parliament intended to address.[210] The defendant further submitted that any other reading would allow the provisions to be usually circumvented by claims (such as by the plaintiff), which effectively seek compensation for non-renewal of a licence.

181 The plaintiff submitted that insofar as s 56 of the Forests Act, prior to its repeal, purported to permit the making of the representations or to bar the plaintiff from seeking relief by reason of the making of the representations, these provisions were not applicable because, at the relevant time, the plaintiff was not a person who holds a licence or permit "within the meaning of s 56".

182 In my opinion, this is an artificially narrow interpretation of the operation of the provisions of sub-s 56(6). At the very least, its provisions should extend to apply to representations made to a person such as the plaintiff, who was, in a real and commercial sense, to be regarded as an agent of Monier, the licence holder, or a successor in title to the licence holder. As was clear from the terms of the 2 December 1997 letter and the evidence of Mr Addison and Mr Pendrigh, this position was known to all parties, the plaintiff and the defendant, at the relevant time. The plaintiff's interpretation of the provisions of sub-s 56(6) would, in my view, substantially constrain the operation of these provisions in what is likely to be the very situation in which information with respect to the grant of further licences or permits might have been expected to be requested from the defendant (or its predecessor). In any event, it appears at least as likely that potential licensees should seek these assurances from the defendant and, as the apparent purpose of these provisions is to protect the defendant in the provision of such information, such a limitation would appear to be contrary to the purpose of those provisions and lead to an anomalous result.[211]

183 As the defendant submitted,[212] , a purposive interpretation should be adopted.[213] The Second Reading Speech of the Sustainable Forests (Timber) Bill, given on 13 May 2004, by Mr Cameron, Minister for Agriculture, said that s 52AA of the Forests Act (inserted via clause 108 of the Bill), "operates in a similar way" to clauses 27 and 30 of the Bill and:

"takes away any entitlement, right or purported right of a holder of a licence or permit referred to in section 52(6) to have their licence or permit renewed or reissued.

The proposed section further provides that no proceedings may be taken in respect of any loss, damage or injury from or arising out of the loss of such an entitlement, right or purported right or as a result of the enactment of that section, and that no compensation is payable in respect of any loss, damage or injury from or arising out of the loss of any such entitlement, right or purported right, or as a result of the enactment of the section."

The Government's intention was also made abundantly clear, and supports a wider interpretation of the provisions, in that part of Mr Cameron's Second Reading Speech, to which reference has already been made.[214]

184 The plaintiff referred in its submissions to a pleading by the defendant that paragraphs 52(6)(a) and (b) formed a basis for the defendant having "reasonable grounds" for making a representation with respect to a future matter. It was submitted by the plaintiff that the operation of ss 52(6) could not in any way serve as the basis of any defence to the plaintiff's claims under the provisions of the TPA by reason of the operation of s 109 of the Commonwealth of Australia Constitution Act, which provides that "when a law of a State is inconsistent with the law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid". It was submitted that the High Court has interpreted the operation of s 109 as follows:

"[W]hen a State Law, if valid, would alter, impair or detract from the operation of the law of the Commonwealth Parliament, then to that extent it is invalid".[215]

185 In my opinion, the plaintiff's position with respect to the operation of the relevant provisions of the Forests Act and also the provisions of the Sustainable Forests (Timber) Act 2004 (Vic) vis-à-vis the TPA is clearly correct. Consequently, any liability which the defendant might otherwise have had under the provisions of the TPA is not affected by the provisions of this State legislation. The position is, as indicated previously, otherwise with respect to the operation of the State FTA. Nonetheless, the Forests Act provisions prevail as specific rather than general legislative provisions. That is, to the extent that it might be said that the FTA provisions, as subsequent legislation, affect the operation of previously enacted provisions of the Forests Act, I am of the view that the FTA provisions are provisions of a general nature, and ought not to be interpreted to affect the specific provisions of the Forests Act.[216] In any event, if any repeal occurred, it would not retrospectively affect any rights of parties or the position subsisting 'between parties', as a result of the operation of any earlier provisions of the Forests Act.[217]

186 The defendant claimed that the plaintiff's action was time-barred by virtue of sub-s 82(2) of the TPA, sub-s 159(3) of the FTA and also under sub-s 5(1) of the Limitation of Actions Act 1958 (Vic). The plaintiff, on the other hand, argued that none of these limitation periods had expired as to prevent its bringing this proceeding. In particular, the plaintiff submitted that the cause of action does not accrue under s 82 of the TPA until the event occasioned by loss or damage occurs. More particularly, the plaintiff submitted that the damage which it claims to have suffered arose as a result of a hidden contingency which may or may not ever have occurred after 1998, depending upon whether the defendant exercised a discretion to renew the licence or not. The plaintiff submitted that it was when events took a course of non-renewal of the licence that the damage was suffered. The defendant, on the other hand, says that the loss and damage claimed occurred immediately upon the purchase of the Orbost Mill sawmill business.

187 Having regard to the view I have taken in relation to the issues considered, it is not now necessary to pursue and resolve these limitation of actions arguments.

188 For the preceding reasons, the plaintiff has failed to establish that the representations which it claims were made to it by the defendant constituted a breach of the provisions of either s 52 of the TPA or s 9 of the FTA. In relation to both pieces of legislation, the representations did not, in my view, amount to misleading or deceptive conduct and they were not, in any event, made in "trade or commerce". In relation to the TPA, the defendant is not subject to the provisions of s 52 or any of the related provisions because it is part of the Crown in right of the State of Victoria and, in any event, is not a "trading corporation" as defined in that Act. In relation to the FTA, its provisions do not apply because, even in the event that the representations had been found to amount to misleading or deceptive conduct under the provisions of s 9, they were not made in "trade or commerce". Finally, I have found that the defences available to the defendant under the provisions of the Forests Act apply to protect it from any liability for or in respect of the representations alleged to have been made by it to the plaintiff, with the result that at least under Victorian statute law, it can have no liability. Nevertheless, I have found that as a result of the operation of s 109 of the Commonwealth of Australia Constitution Act, the relevant provisions of the Forests Act would not operate to the exclusion of provisions of the Commonwealth TPA in the event that those provisions were otherwise applicable.

189 Accordingly, I will order that there be judgment for the defendant. I will hear the parties in relation to the form of final orders, and reserve the question of costs.

[1] The Statement was entitled "National Forest Policy Statement - A new focus for Australia's forests (second edition)", 1992.

[4] The report was the result of a review commissioned by the then Prime Minister, and chaired by Professor Frederick Hilmer: "National Competition Policy" (25 August 1993).

[6] KPMG Review of the Forests Act 1958 (19 December 1997), p 1.

[7] KPMG Review of the Forests Act 1958 (19 December 1997), p 2.

[8] KPMG Review of the Forests Act 1958 (19 December 1997), pp 2 and 3.

[9] "KPMG Review of the Forests Act - draft report" (22 December 1997), pp 50-1.

[10] "KPMG Review of the Forests Act - draft report" (22 December 1997), pp 62-3.

[11] "KPMG NCP Review of the Forests Act - draft report" (6 February 1998), pp 71-2.

[12] "KPMG NCP Review of the Forests Act - draft report" (6 February 1998), p 87.

[13] "KPMG NCP Review of the Forests Act - draft report" (6 February 1998), p 87.

[14] "Our Forests, Our Future" Policy Statement (February 2002), p 2.

[15] "Our Forests, Our Future" Policy Statement (February 2002), pp 3 and 4.

[16] See "KPMG NCP Review of the Forest Act - draft report" (6 February 1998), pp 5417-8.

[17] Ting v Blanche [1993] FCA 524; (1993) 118 ALR 543 at 552, per Hill J.

[18] Bowen CJ, Lockhart and Fitzgerald JJ.

[19] [1984] FCA 180; (1984) 2 FCR 82 at 88.

[20] Fubilan Catering Services Limited v Compass Group (Australia) Pty Ltd [2007] FCA 1205 at [546]- [547].

[22] See above, beginning at paragraph 19.

[23] Referring also to s 4 of the Fair Trading Act 1999 (Vic) which, it was submitted, is to the same effect.

[24] See Fubilan Catering Services Limited v Compass Group (Australia) Pty Limited [2007] FCA 1205 at [545] (per French J). The Full Federal Court dismissed an appeal from French J's decision: Fubilan Catering Services Ltd (Incorporated in PNG) v Compass Group (Australia) Pty Ltd [2008] FCAFC 53.

[25] Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513.

[26] City of Botany Bay Council v Jazabas Pty Limited [2001] NSWCA 94 at [83] per Mason P citing Lyndel Nominees Pty Ltd v Mobil Oil Australia Ltd (1997) 37 IPR 599, Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513.

[27] City of Botany Bay Council v Jazabas Pty Limited [2001] NSWCA 94 at [83] per Mason P.

[29] Report titled "Victoria Timber Industry Strategy" (August 1986).

[31] [2001] NSWCA 94; [2001] ATPR 46-210.

[32] The RAS recommended that the Council establish and maintain a Risk Reduction Zone (RRZ). Risks based on propinquity to industrial sites like the ICI complex that had been identified in the Study were generally disregarded by the Council until after July 1996. Nor was the recommended RRZ established or applied until after then. Consistent with this attitude, the Council granted development approval for the site in June 1996. It treated other sites within the area of the proposed RRZ in similar fashion, until July 1996.

[33] The plaintiff made clear in closing submissions that it treated the word "guarantee" as used in this context as bearing its general, non-technical, meaning as "connoting an assurance": see Transcript, p 789, referring to the Macquarie Dictionary.

[35] See MFI-11, Witness Summary of David Gilham at [8].

[36] Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 at 604-605 (Gleeson CJ, Hayne and Heydon JJ).

[37] Brown v The Jam Factory Pty Ltd [1981] FCA 35; (1981) 53 FLR 340 at 349 (Fox J); Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] FCA 180; (1984) 2 FCR 82 at 87.

[38] [2004] HCA 60; (2004) 218 CLR 592.

[39] [2004] HCA 60; (2004) 218 CLR 592 at 605, [39].

[40] [2004] HCA 60; (2004) 218 CLR 592 at 625, [109].

[41] [2009] VSCA 221.

[42] [2009] VSCA 221 at [204].

[43] [2009] FCA 432.

[44] [2009] FCA 432 at [183] and [184].

[45] Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191.

[46] Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12; (2000) 202 CLR 45.

[48] [2005] HCA 69; (2005) 224 CLR 627.

[49] [2005] HCA 69; (2005) 224 CLR 627 at 640, [32].

[50] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 at 356-357; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at 469 [14].

[51] [1988] FCA 40; (1988) 39 FCR 546.

[52] [1988] FCA 40; (1988) 39 FCR 546 at 558-9.

[53] [1981] FCA 15; (1981) 36 ALR 23 per Northrop J at 48.

[54] [1984] HCA 68; (1985) 157 CLR 215 at 236.

[55] (1986) 65 ALR 302 at 313.

1. [56] Wardley v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514 at 525 (per Mason CJ, Dawson, Gaudron and McHugh JJ); Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at 480 (per Gaudron J), 489 (per McHugh J, Gummow J agreeing).
2. [57] Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at [126]; Street v Luna Park Sydney Pty Limited [2009] NSWSC 1; (2009) 223 FLR 245 at [278].
3. [58] HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at 469 (per Gleeson CJ), 480 (per Gaudron J), 493-4 (per McHugh J), 508-9 (per Hayne J).

[59] Defendant's closing submissions, paragraph 64.

[60] These matters are considered in more detail below.

[61] [2010] EWHC 358 (Ch).

[62] Auswest Timbers Pty Ltd - Proposal for Acquisition of Orbost Sawmill, p 1.

[63] Auswest Timbers Pty Ltd - Proposal for Acquisition of Orbost Sawmill, p 2.

[64] See letter from Mr Addison to Mr Pendrigh dated 15 December 1997.

[65] Notes of meeting on 15 December 1997 (CB S-49).

[66] See letter from Mr Addison to Mr Pendrigh dated 15 December 1997.

[67] See Auswest Timbers Pty Ltd - Proposal for Acquisition of Orbost Sawmill.

[68] See Defendant's Closing Submissions, paragraph 68.

[69] Auswest Timbers Pty Ltd - Proposal for Acquisition of Orbost Sawmill, p 1.

[70] Auswest Timbers Pty Ltd - Proposal for Acquisition of Orbost Sawmill.

[71] Auswest Timbers Pty Ltd - Proposal for Acquisition of Orbost Sawmill, p 1.

[73] Auswest Timbers Pty Ltd - Proposal for Acquisition of Orbost Sawmill, p 6. This passage in the Proposal is, substantially, a repetition of the first sentence of the second paragraph of the 29 December 1997 letter.

[76] Auswest Timbers Pty Ltd - Proposal for Acquisition of Orbost Sawmill.

[77] Auswest Timbers Pty Ltd - Proposal for Acquisition of Orbost Sawmill, p 1.

[78] Contained in a letter dated 28 January 1998 from Mr Squires to Mr Mark Hollingsworth of CSR.

[79] The 28 January 1998 letter from Mr Squires to Mr Hollingsworth contained passages such as "We are keen to progress the matter" and "Gary and I remain anxious to bring the negotiation process to an end ... and look forward to reaching satisfactory conclusion on Friday".

[80] See facsimile transmission from Mr Addison to Mr Squires dated 25 November 1997 and the attachment.

[81] (1995) ATPR (Digest) 53,149 (46-147)

[82] (1995) ATPR (Digest) 53,149 (46-147) at [53,512].

[88] See above paragraph 57, footnote 33.

[90] See Media Release from the Minister for Environment and Conservation dated 9 March 2001 entitled "Minister Announced New Timber Licensing Review Body".

[91] See Evaluation of Data and Methods for Estimating the Sustainable Yield of Sawlogs in Victoria - Report of the Expert Data Reference Group by Professor Jerome K. Vanclay and Dr Brian J. Turner (31 October 2001).

[94] See Media Release from the Office of the Premier dated 21 February 2002 entitled "Government Acts to Protect Forests and Workers".

1. [95] Winterton Constructions Pty Ltd v Hambros Australia Limited [1992] FCA 582; (1992) 39 FCR 97; Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31 at 32; Australian Development Corporation Pty Ltd v White (2001) 189 ALR 266 at pp 281-2, [83]- [87]).

[97] See defendant's closing submissions, paragraph 79.

[98] The relevant document is entitled "Our Forests Our Future - Industry Transition Program - Voluntary Licence Reduction Program - Application Guidelines (30 August 2002; Rule of Finance Corporation)".

[101] Transcript p 299.2 to 299.17; and see p 299.18 to 299.25.

[103] See Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd [2005] WASCA 174; (2005) 224 ALR 134 at 150-1, [72] citing I & L Securities Pty Ltd v HTW Valuers Brisbane Pty Ltd [2002] HCA 41; (2002) 210 CLR 109; and Mr Figgins v Centrepoint Freehills Pty Ltd [1981] FCA 15; (1981) 36 ALR 23 at 60.

[104] [2005] WASCA 174; (2005) 224 ALR 134.

[105] See also Brothers v Park [2004] NSWCA 241; (2004) 12 BPR 22,501.

[106] Though the Terra Timbers issues were not pursued by the plaintiff at trial.

[107] Though the Terra Timbers issues were not pursued by the plaintiff at trial.

[108] See above, paragraph 119, footnote 100, being the material quoted from Transcript pp 190-191.

[110] See paragraph 120, footnote 101; and see Transcript p 299.

[114] See Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1996] UKHL 3; [1997] AC 254.

[115] Netaf Pty Ltd v Bikane Pty Ltd [1990] FCA 35; (1990) 26 FCR 305 at 308 (Sheppard and Pincus JJ).

[116] Henjo Investments Pty Limited v Collins Marrickville Pty Limited [1989] FCA 246; (1989) 40 FCR 76.

[117] [1987] FCA 332; (1987) 78 ALR 193.

[118] [1987] FCA 332; (1987) 78 ALR 193 at 243.

[119] [1989] FCA 246; (1989) 40 FCR 76.

[120] [1989] FCA 246; (1989) 40 FCR 76 at [25].

[121] [2009] WASCA 183; (2009) 261 ALR 179.

[122] [2009] WASCA 183; (2009) 261 ALR 179 at [45] (Buss and Newnes JJA agreeing).

[123] [2004] HCA 3; (2004) 216 CLR 388.

[124] [2004] HCA 3; (2004) 216 CLR 388 at [70].

1. [126] Inglis v Commonwealth Trading Bank of Australia [1969] HCA 44; (1969) 119 CLR 334 at 337 per Kitto J; Superannuation Fund Investment Trust v Commissioner of Stamps (SA) [1979] HCA 34; (1979) 145 CLR 330, 348-349; NT Power Generation Pty Ltd v Power & Water Authority [2002] FCAFC 302; (2002) 122 FCR 399 at [126]. Note: the High Court did not consider this question directly on appeal, as it proceeded on the basis that the Power & Water Authority was an emanation of the Northern Territory Government (see NT Power Generation Pty Ltd v Power & Water Authority (2004) 219 CLR 90 at 98, [4]); and see Hogg and Monahan, Liability of the Crown (3rd ed, Carswell, 2000).

[127] E v Australian Red Cross Society [1991] FCA 20; (1991) 27 FCR 310 at 346, per Wilcox J.

[128] [1969] HCA 44; (1969) 119 CLR 334 at 338; referring also to NT Power Generation Pty Ltd v Power & Water Authority [2002] FCAFC 302; (2002) 122 FCR 399 at 418-9, [80] per Branson J.

[129] [1936] VicLawRp 58; [1936] VLR 344.

[130] But see The Commonwealth of Australia v Bogle [1953] HCA 10; (1952) 89 CLR 229 at 267, where Fullagar J (Kitto J in agreement), referring to Marks v Forest Commission [1936] VicLawRp 58; [1936] VLR 344, stated "with the greatest respect to the learned judge who decided it, I cannot think that that case was rightly decided." However, this criticism appears directed to the conclusions of Lowe J with respect to the construction of various provisions of the Forests Act 1928 (Vic), in the context of the question of liability of the Forests Commission in tort, rather than the more general comments made by Lowe J in relation to the role of the Crown with respect to forest management. These comments were, of course, made in the context of the provisions of the Forests Act 1928 (Vic) as then applicable, provisions which were treated as being 'decisive' of the question 'whether the Forests Commission was to be treated as an emanation' of the Crown.

[131] [1936] VicLawRp 58; [1936] VLR 344 at 349-50.

[132] [1866] LR 1 HL 93, at p 117.

[133] [1858] 8 E & B 801, at p 812.

[134] [1886] 17 QBD 795, at p 801.

[136] See ss 12, 13 and 33 of the Public Sector Management and Employment Act 1998 (Vic) and also ss 12, 13 and 34 of the Public Administration Act 2004 (Vic).

[137] See s 20 of the Conservation, Forests and Lands Act 1987 (Vic); and now as amended by Act No. 76 of 1998, which inserted a reference to the Secretary in place of the reference to the Director-General; and see s 28 of the Financial Management Act 1994 (Vic).

[138] See sub-s 24(2) of the Conservation, Forests and Lands Act 1987 (Vic).

[139] See sub-s 24(4) of the Conservation, Forests and Lands Act 1987 (Vic).

[140] Plaintiff's closing submissions, paragraph 233.

[141] That is, ss 6, 7, 18, 19, 20, 22 and 23 of the Conservation, Forests and Lands Act 1987 (Vic).

[142] [1979] HCA 34; (1979) 145 CLR 330 at 348.

[143] [1982] HCA 48; (1982) 149 CLR 282 at 291-2.

[144] [1979] HCA 34; (1979) 145 CLR 330 at 349-50.

[145] [1979] HCA 34; (1979) 145 CLR 330 at 350.

[146] See [1979] HCA 34; (1979) 145 CLR 330 at 348.

[147] See defendant's closing submissions, paragraph 4(d) and 5.

[148] [1979] HCA 34; (1979) 145 CLR 330 at 348 and also at 349-50.

[149] [1990] HCA 17; (1990) 169 CLR 594.

[150] [1990] HCA 17; (1990) 169 CLR 594 at 602, [7].

[151] [1990] HCA 17; (1990) 169 CLR 594 at 603-4.

[152] [1990] HCA 17; (1990) 169 CLR 594 at 614.

[153] Referring to [1990] HCA 17; (1990) 169 CLR 594 at 603.

[154] Referring to [1990] HCA 17; (1990) 169 CLR 594 at 604 (Mason CJ, Deane, Dawson and Gaudron JJ) and at 613 (Toohey J).

[155] State of New South Wales v RT & YE Falls Investments Pty Ltd [2003] NSWCA 54; (2003) 57 NSWLR 1 at 5 (Spigelman CJ).

1. [156] Structured Property Pty Ltd v Tirli-Bennett [2010] VSC 129 at [47] citing Robin Pty Ltd v Canberra International Airport Pty Ltd (1999) 179 ALR 449 at [49].

[157] But cf. Concrete Constructions (NSW) Pty Ltd v Nelson [1979] HCA 34; (1979) 145 CLR 330 at 604 (Mason CJ, Deane, Dawson and Gaudron JJ) and at 613 (Toohey J); and see above, paragraphs 153 and 154.

[158] (1999) 179 ALR 449.

[159] (1999) 179 ALR 449 at [49].

[160] (1999) 179 ALR 449 at [49]

[161] [2003] NSWCA 54; (2003) 57 NSWLR 1.

[162] [2003] NSWCA 54; (2003) 57 NSWLR 1 at 132 (Hodgson JA).

[163] [2003] NSWCA 54; (2003) 57 NSWLR 1 at 133 (Hodgson JA).

[164] Referring to the evidence-in-chief of Mr Pendrigh: see Transcript, p 526.

[165] [1992] FCA 179; (1992) 35 FCR 272.

[166] [1992] FCA 179; (1992) 35 FCR 272 at 278.

[167] [1992] FCA 179; (1992) 35 FCR 272 at 277.

[168] [2006] HCA 59; (2006) 225 CLR 553 at 565 (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ).

[169] [1990] HCA 17; (1990) 169 CLR 594.

[170] See below, "Trading Corporation", beginning at paragraph 162.

[171] [1986] FCA 357; (1986) 19 FCR 10 at 20; and, more recently, see Steytler P in Aboriginal Legal Service of Western Australia (Inc) v Lawrence (No. 2) [2008] WASCA 254; (2008) 178 IR 168 at 190, [68].

1. [172] R v Federal Court of Australia; Ex parte Western Australian National Football League [1979] HCA 6; (1979) 143 CLR 190 (Adamson's case) at 208 (Barwick CJ), 233 (Mason J), 237 (Jacobs J agreeing) and 239 (Murphy J); Hughes v Western Australian Cricket Association Inc [1986] FCA 357; (1986) 19 FCR 10 at 20.
2. [173] Quickenden v Commissioner O'Connor of the Australian Industrial Relations Commission [2001] FCA 303; (2001) 109 FCR 243 at 262, [52] (per Black CJ and French J); R v Federal Court of Australia; Ex parte Western Australian National Football League [1979] HCA 6; (1979) 143 CLR 190 at 234 (Mason J).

[174] See R v Federal Court of Australia; Ex parte Western Australian National Football League (Inc) [1979] HCA 6; (1979) 143 CLR 190; Mid Density Developments Pty Ltd v Rockdale Municipal Council [1992] FCA 634; (1992) 39 FCR 579 at 584.

1. [175] R v Federal Court of Australia; Ex parte Western Australian National Football League (Inc) [1979] HCA 6; (1979) 143 CLR 190 at 208, 234, 239.

[176] R v Trade Practices Tribunal; Ex parte St George County Council [1974] HCA 7; (1974) 130 CLR 533 at 568 (Stephen J).

[177] R v Federal Court of Australia; Ex parte Western Australian National Football League [1979] HCA 6; (1979) 143 CLR 190 at 208 per Barwick CJ.

[178] E v Australian Red Cross Society [1991] FCA 20; (1991) 27 FCR 310 at 344ff per Wilcox J.

1. [179] Re Ku-ring-gai Co-operative Building Society (No 12) Ltd [1978] FCA 50; (1978) 22 ALR 621 at 645; R v Federal Court of Australia; Ex parte Western Australian National Football League (Inc) [1979] HCA 6; (1979) 143 CLR 190 at 219.

[180] Plaintiff's closing submissions, paragraph 218.

[181] Referring to NT Power Generation v Power & Water Authority (2004) 219 CLR 90 at 111, [55].

[182] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1085.

[183] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1087.

[184] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1087.

[185] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1196.

[186] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1213.

[187] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1213.

[188] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1214.

[189] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1215.

[190] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1218.

[191] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1220.

[192] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1222.

[193] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1226.

[194] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1228.

[195] Department of Natural Resources and Environment Annual Report 1997-1998, Court Book p 1230.

[196] See plaintiff's closing submissions, paragraph 222.

[197] See s 5.

[198] See Audit Act 1994 (Vic), s 1.

[200] And see Environment East Gippsland Inc v VicForests [2010] VSC 335 (Osborn J; 1 August 2010):

"26. It can be seen that the order emphasises the intention that VicForests operates commercially by reference to the commercial basis of its particular purpose, the requirement that it operate as efficiently as possible consistent with prudent commercial practice, and the further requirement that it must be commercially focussed. As against these matters however it must operate in a framework consistent with Victorian government policy and priorities generally.

28. VicForests was established after the release in 2002 of the State policy entitled 'Our Forests Our Future'. That policy referred to the fact that the National Competition Policy Review of the Forests Act 1958, pointed to the need to reinforce the separation between the role of governmental commercial functions and its policy and regulatory roles in forest management.

29. The policy stated the intention to transparently disentangle the commercial objectives from the regulatory functions of government by the creation of a separate commercial forest service entity."

[201] [2009] NSWSC 1341.

[202] [2009] NSWSC 1341, at [56].

[203] [2001] FCA 303; (2001) 109 FCR 243.

[204] [2001] FCA 303; (2001) 109 FCR 243 at [56].

1. [205] Section 107 (which repealed section 52(6) of the Forests Act) and section 108 (which inserted section 52AA into the Forests Act), both came into operation the day after the Act received the Royal Assent (that is, on 17 June 2004) pursuant to section 2(1).

[206] Sections 27 and 34 came into operation on 1 August 2004: Government Gazette 29 July 2004 page 2120.

[207] Section 25 came into operation on 1 August 2004: Government Gazette 29 July 2004 page 2120.

[208] Auswest's licence was declared a transferred licence (east) on 1 August 2004: Special Government Gazette No. S179, 1 August 2004.

1. [209] Hansard, Legislative Assembly, 13 May 2004, 1330 at 1332 (Minister for Agriculture on behalf of the Minister for Environment).

[210] CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408.

[211] Pearce and Geddes, Statutory Interpretation of Australia (6th ed, Lexis Nexis, 2006), 27-29, [2.5]; and see also 58-61, [2.34].

[212] See paragraph i. of the defendant's supplementary closing submissions, dated 22 June 2010.

[213] Kelly v The Queen [2004] HCA 12; (2004) 218 CLR 216 at [97]- [98]; Bropho v Western Australian [1990] HCA 24; (1990) 171 CLR 1 at 20; and see s 35(a) Interpretation of Legislation Act 1984 (Vic).

[215] Victoria v the Commonwealth [1937] HCA 82; (1937) 58 CLR 618 at 630, per Dixon J; see more recently, APLA v Legal Services Commissioner (NSW) [2005] HCA 44; (2005) 224 CLR 322 at 354- 355 per Gleeson CJ and Heydon J, at 425-426 per Kirby J, at 486-489 per Callinan J.

[216] See Goodwin v Phillips [1908] HCA 55; (1908) 7 CLR 1 at 14 (O'Connor J); and see Pearce and Geddes, above n 211, 257-8 [7.18].

[217] See Interpretation of Legislation Act 1984 (Vic) ss 14 to 16; and see Pearce and Geddes, above n 211, 200-202 [6.7] and [6.8].