Plaintiff v Defendant [2019] VSC 519 | Case summary

Supreme Court of Victoria|2019-09-03|Before: KENNEDY J

CORPORATIONS - Managed Investment Schemes - Recovery of scheme loans - Where investors borrowed loan amount under loan agreements with the financier - Where financier agreed to lend loan amount by paying it to the responsible entity - Whether debt claims established on pleadings where defendant's counsel withdrew after openings - Whether detailed standard terms incorporated into agreements - Whether there was acceptance of the offers to borrow - Whether monies were advanced - Financier successful - Debt claims established - Ratification also established in the alternative where instalment payments made on first loan.

2 Following a mediation conducted on the second day of the trial (after openings had concluded), on 1 August 2019, Counsel for Mr Tomes announced that his instructions to appear were withdrawn and sought to be excused from further attending. Additionally, that the instructions of his solicitors, Somerset Ryckmans, were also withdrawn, save that they wished to remain on the Court file as solicitor of record for the purpose of service of any documents which may be required to be served on Mr Tomes.[1]

3 In response to inquiries from the bench, Counsel further advised that the defence filed was not withdrawn. Further, that Mr Tomes (who was not present) understood that the matter may proceed in his absence.[2]

4 No application for an adjournment was made. Rather, Counsel for Mr Tomes was excused from further attendance, with Timbercorp Finance indicating that it would pursue its claims on a recommenced date of 7 August 2019.

5 On recommencement of the trial on 7 August 2019, there was no appearance by/on behalf of Mr Tomes. I therefore determined that it was appropriate to proceed with the trial in circumstances where Mr Tomes understood that this may occur.[3]

6 Timbercorp Finance sought to establish its case by evidence, unopposed, in order to obtain judgment, with the issues between the parties remaining as pleaded.[4] It relied on two affidavits in doing so: one from the liquidator, Mr Mark Anthony Korda, of KordaMentha, sworn on 6 August 2019, and one of Mr Owain Rhys Stone, a partner in charge of the forensic team at KordaMentha, affirmed on 5 August 2019.

7 The primary issue was whether Timbercorp Finance was entitled to its claims in debt; alternatively, by way of ratification.

8 In the result, I have determined that Timbercorp Finance is entitled to judgment on its debt claims, together with an order for indemnity costs for the following Reasons.

9 The Timbercorp Group operated an agribusiness investment enterprise. Timbercorp Limited (TL) is the parent entity of the Timbercorp Group and was a publicly listed company on the Australian Securities Exchange.

10 The Timbercorp Group's primary business activity was the establishment, development, marketing and management of primary industry-based projects, the acquisition of land, water rights and infrastructure and the provision of finance to investors in projects. The Timbercorp Group invested more than $2 billion in agribusiness projects in respect of 18,500 investors since 1992.

11 Timbercorp Finance was established to provide finance to investors to participate in MIS.

12 As at April 2009, the Timbercorp Group operated 33 MIS. Timbercorp Securities Pty Ltd (TSL), a wholly owned subsidiary of TL, was the responsible entity for each of the MIS and held an Australian Financial Services Licence.

13 On 23 April 2009, administrators were appointed to TL, TSL as well as Timbercorp Finance. On 29 June 2009, the creditors of TL, TSL and Timbercorp Finance resolved to wind up the companies, and the administrators were appointed liquidators. Mr Korda was one of those liquidators.

14 Following the issue of a group proceeding by investors (which was unsuccessful both at trial[5] and on appeal[6]), Timbercorp Finance pursued a large number of recovery proceedings against defaulting borrowers, including the current proceeding. After further litigation, it was decided that the defendants were not estopped from relying upon defences that had not been raised in the group proceeding.[7]

15 In 2016, a trial of four 'test cases' was heard by Judd J which included the matter of Collins and White, which will be referred to below. The defences raised in the test proceedings were unsuccessful both at trial[8] and in respect of two matters that were ultimately prosecuted and adjudicated on appeal.[9]

16 Since February 2018, the Court has managed 295 ongoing recovery matters. During 2018, the Court determined that it was appropriate to list a group of matters for trial. In the result, this matter was listed together with 5 other matters, with trials to commence on a date fixed between 29 July 2019 and 16 August 2019.

17 In the result, only this matter has proceeded to judgment (with 4 matters resolved by consent). As at today, 125 ongoing proceedings remain to be resolved.

18 At the time of opening submissions, Counsel for Mr Tomes generally agreed that the following issues arose on the pleadings:[10]

(1) Whether the claims in debt were established, including:

(a) whether the 'Loan Explanation' and 'Loan Terms' are incorporated as terms of the 'Loan Agreement';[11]

(b) whether execution of the loans was valid insofar as reliance was placed on the relevant powers of attorney;[12]

(c) whether the plaintiff had advanced payment of the relevant loan amounts in circumstances where payment was made by journal entries.[13]

(2) Whether further defences effectively challenged the use of journal entries to make payment including:

(a) whether there was a breach of trust/ASIC Act regarding the way Loan 0025296 ('initial loan') was made;[14]

(b) whether the journal entries in relation to Loan 0028248 ('stage loan') were only 'notional';[15]

(c) whether the stage loan was frustrated due to insolvency of the Timbercorp Group, total failure of consideration and/or unjust enrichment;[16]

(d) whether there has been a breach of an implied term of the stage loan to pay by 'cash or in bankable form';[17]

(e) whether there has been misleading and deceptive conduct and/or unconscionable conduct in relation to the stage loan by reason of a breach of the plaintiff's duty of care to avoid economic loss in failing to warn the defendant that payments would be made by journal entries.[18]

(a) whether there has been a misrepresentation (made by Mr Spencer Broad) as alleged agent of the plaintiff;[19]

(b) whether the plaintiff was involved in a breach by TSL of its duties as responsible entity by failing to advise that the loans would be by journal entries;[20]

(4) Whether the plaintiff has established any alternative claims for relief, including ratification,[21] estoppel,[22] restitution,[23] or unconscionability.[24]

19 Issue 1 remained for consideration. However, a key issue relating to issue 1 was whether consideration needed to be given to the power of attorney issues in circumstances where Timbercorp Finance alleged that the offer to borrow was accepted by any one of three ways in each case: payment of the loan amount; issuing a letter of acceptance; and/or execution of a formal agreement under power of attorney. It followed that the pleaded power of attorney defences provided no answer if acceptance took place by way of one of the other two alternatives.

20 Insofar as issue 2(a) was concerned, it is not necessary for the Court to evaluate Mr Tomes' defence alleging breach of trust or contravention of s 601GA(3) of the Corporations Act 2001 (Cth) (the Act). In circumstances where Mr Tomes did not appear and adduce evidence of the scheme constitutions, this defence no longer arises.

21 The issue of whether the payments under the loans were only 'notional' will be considered below, in determining whether advancement was proven. The issues relating to frustration and an alleged breach of an implied term will also be considered in this context.

22 In terms of issue 2(e), the allegations therein involved matters requiring proof or evidence (for example, that Mr Tomes was not warned, and that he acted in reliance on any failure to warn). In the absence of such evidence, these defences no longer arise.

23 Timbercorp Finance did not pursue its claims for estoppel, restitution or unconscionability, but relied only on ratification as an alternative to its debt claim.[25]

24 Insofar as the Counterclaim was concerned, the allegations therein involved matters of proof requiring evidence. In the absence of any evidence from Mr Tomes, the Counterclaim may be dismissed.[26]

25 It follows that, in terms of whether the debt claims are established, the key issues are:

(a) whether the offer was made on the basis of the detailed 'Loan Terms';

(b) an assessment of what act constituted acceptance; and

(c) whether journal entries sufficed for proving advancement.

26 The claim for debt arose in a context where the first debt concerned an 'initial loan' and the second debt concerned a 'stage loan.' According to Mr Stone, there were two broad kinds of finance packages offered by Timbercorp Finance: first, initial loans to finance an investor's liabilities to TSL for 'initial application fees'; second, stage loans to finance an investor's liabilities for maintenance and management costs, licence fees and/or rent which became payable on their investments.

27 The documents adduced to substantiate the two debts were produced after Mr Korda caused his staff to search the books and records of Timbercorp Finance and TSL.

28 According to the unchallenged evidence of Mr Korda, on or about 8 May 2008, Mr Tomes executed and submitted a document titled 'Timbercorp Finance 2008 Timbercorp Projects Finance Package Loan Application Form' ('Loan Application'). This was to finance part of his initial investment in relation to 74 Almondlots in the 2007 Almond Scheme and 77 Grovelots in the 2008 Olive Scheme.

29 On the first page of the Loan Application, under the heading 'Application Check' the Loan Application relevantly states:

Before completing and signing this application form, all parties should carefully read this application form and the Timbercorp Projects Loan Explanation and Loan Terms provided with this application form ("Explanation") and seek independent legal and financial advice.

Unless the context requires otherwise, or the relevant word is defined in this application form, words printed "like this" in this application form and some other key terms are defined in the Timbercorp Projects Loan Explanation and Loan Terms ("Loan Terms") document (see page 8 of the Explanation)...

All applications for finance are subject to approval by Timbercorp Finance.

30 Under a sub-heading entitled 'Section Details' the following is included:

This, together with the Direct Debit Form, is the only place that you are required to sign. The formal legal documents will be signed on your behalf by attorneys (whom you will have authorised to do so in Section 11 of the application form) once your application has been approved.

31 Mr Tomes is identified as the borrower in section 1 of the Loan Application.

32 Section 6 of the Loan Application headed 'Project and Loan Details' identified that Mr Tomes was investing in 74 Almondlots in the 2007 Almond Project Post 30 June Grower Scheme ('2007 Almond Scheme') and 77 Grovelots in the 2008 Olive Project ('2008 Olive Scheme'). The total amount of Mr Tomes' loan (allowing for a deposit) was $994,410.00 for a term specified of 10 years.

33 Section 7 specified the special conditions of the loan that have been 'discussed with and confirmed by Timbercorp Finance' which were '10 years @ 9.5% interest as approved by Andrew Peterson.'

34 Section 13 of the Loan Application titled 'What Completing and Signing this Form Achieves' provided that the completion and signing of this form achieved various things, including:

You apply to us for a Timbercorp Finance Loan
You and each guarantor (if any) appoint certain people to do specified things on your behalf and in your name, under the Power of Attorney in section 12 if your application is accepted

35 Section 12 contained the 'Power of Attorney' provisions. It provided that an attorney 'may**'** do various things, including 'execute an agreement comprising the provisions and details completed consistently with this application form, and do everything we need to deliver it to us.'

36 Section 14 contained 'Important Acknowledgments' and provided that by signing this document Mr Tomes 'acknowledges and confirms' that he 'read and understand[s]' each specified document, which included the Loan Explanation (including the Loan Terms).

37 Finally, the application contained a completed form of 'Direct Debit' which specified that payments ought be made from an account in the name of Malco Floorcoverings Pty Ltd (Malco) as requested by Mr Tomes. Mr Tomes was a director and shareholder of this company.

38 Mr Tomes admitted that he affixed his signature to this document which was dated 8 May 2008.[27]

39 In relation to the stage loan, according to Mr Korda, on 31 October 2008, Mr Tomes executed and submitted a document titled '2008 Timbercorp Projects Ongoing Finance Package Loan Application Form' to finance the payment of management costs, rent and other amounts owing to TSL in relation to the 74 Almondlots in the 2007 Almond Scheme and 77 Grovelots in the 2008 Olive Scheme.

40 The Loan Application for the stage loan relevantly contained substantially identical provisions save that section 6 of the Loan Application specified the total loan amount at $247,545.00, being the total payments due less the deposit. Further Mr Tomes had selected 'Loan Term Option A' which provided for interest at 9.5% with a loan term of 120 months.

41 Mr Tomes admitted that he affixed his signature to this document which was dated 31 October 2008.[28]

42 According to Mr Korda, Timbercorp Finance prepared a document titled 'Timbercorp Projects Finance Package Loan Explanation and Loan Terms' in respect of initial loans. It is comprised of documents titled Loan Explanation ('Loan Explanation'), a pro forma document containing provision of details of the loan to be inserted ('Loan Details') and a further document containing terms of the loan under the heading 'Provisions' ('Loan Terms').

This document explains the basis on which you can apply to borrow money to invest in Timbercorp Projects.

Unless the context requires otherwise, words printed in "italic" and some other key words in this document are defined at the end of the Loan Terms (see page 8).

44 Under the first heading of 'What level of finance is available' the document provided:

Timbercorp Finance Pty Ltd (ABN 88 054 581 190) is prepared to consider financing up to 90% of the GST inclusive amount that you want to invest in projects.

All applications for finance are subject to approval by Timbercorp Finance...

45 On page 2 of the Loan Explanation document under the topic 'What documents record the loan and the security' it stated that:

The loan terms at the back of this document will be incorporated into a Loan Agreement if we accept your application. The Loan Terms include the assignment and the guarantee and indemnity. In the application form you and each guarantor (if any) authorise us to:

complete the details, based on the information in, or provided with, the application form; and
sign the Loan _Agreemen_t as attorney for each of you.

The details and the Loan Terms will form the Loan Agreement which is signed by us a lender and as attorney for you and each guarantor (if any).

46 As outlined above, a pro forma Loan Details is also included with the Loan Explanation headed 'Loan Terms Pro Forma Do Not Complete.' This included entries for provision of key details concerning the loan i.e. names of the parties; the loan amount; the relevant project; the loan terms; interest rates (low and high); the instalments; and the date of loan agreement. The relevant entries are left blank save that a higher interest rate of 13.2% per annum is inserted.

47 The Loan Terms contained detailed terms of the agreement and included relevant definitions in cl 11. Clause 1 read as follows:

1. What we lend and when

We agree to lend you the loan amount by paying it to Timbercorp Securities Limited AFSL 235653 (or as it directs) as payment of the balance of your application money for lots and the loan application fee as described in the application form. However, we only have to lend you the loan amount if:

(a) we have received all documents (including securities) and information we require, in a form satisfactory to us; and

(b) neither you nor a guarantor is in default under this agreement or a security.

48 Clause 2 contained details on how interest charges were calculated. It specified that 'interest charges for each day [were] calculated at the daily percentage rate on the balance owing on [the] loan account for the end of that day'. It also states that Timbercorp Finance may charge interest at the 'higher interest rate' on any amount which is not paid on time but would otherwise accept the 'lower interest rate.'

49 Clause 3 provided for the methodology for calculating instalment repayments, which are payable on the last business day of each month, with the first instalment due on the last business day of the month in which the loan term commences.

50 Clause 7 contained default provisions, and defined a default as including where the borrower did not pay on time all amounts due under the agreement. Further, that if there was a default, the total amount owing was payable on demand which entitled Timbercorp Finance to sue for that total amount owing.

51 Insofar as the stage loan is concerned, the evidence of Mr Korda was that the relevant Loan Explanation and Loan Terms document prepared in respect of stage loans had a different title (titled 'Timbercorp Finance Timbercorp 2008 Ongoing Finance Package Loan Explanation and Loan Terms').

52 These documents otherwise appear to be substantially identical in form to the Loan Explanation and Loan Terms document already cited. However, there is a slight difference in the words of equivalent cl 1 of the Loan Terms which referred to the 'payment of the 'balance of your invoice for your lots' rather than the 'balance of the application monies.'

53 Critically, then the Loan Application documentation (including the Loan Terms) contained all essential terms for a loan agreement, namely, the names of the parties; the loan amount; the loan term; relevant interest rates (higher and lower); and instalment calculation without the need for further input from Mr Tomes.

54 The unchallenged evidence of Mr Korda is that Timbercorp Finance 'accepted the Defendant's loan application in relation to Loan Agreement L0025296' (the initial loan). Further, that Timbercorp Finance confirmed its acceptance of Mr Tomes' Loan Application for his initial loan by way of letter signed by Mr Robert Hance, Chief Executive Officer, on behalf of Timbercorp Finance dated 20 May 2008 which also enclosed a document titled 'Loan Terms- Details.'

Thank you for your finance application lodged together with your application for lots in the 2008 Timbercorp Multichoice. We are pleased to confirm that your application for finance has been accepted.

Your loan is repayable by 120 monthly instalments of principal and interest over the term and at the rate set out in your loan terms (attached). Your loan instalments are due on the last business day of each month, commencing 31 July 2008 and your instalments will automatically be debited from your bank account.

If the following account details are incorrect, please complete in full the attached Direct Debit Form and fax or post to Timbercorp Finance. If details are correct, there is no need to take action (emphasis in italics added).

[The direct debit details given in the application are therein included which provides that the account to be debited is in the name of Malco.]

56 The letter also attached a Loan Details document in the same form as the pro forma form included with the Loan Explanation. It also included details of essential terms consistent with those contained in the Loan Application i.e. names of the lender (Timbercorp Finance); borrower (Mr Tomes); loan amount ($994,410.00); loan term (120 months); lower interest rate (9.5%); higher interest rate (13.2%); and instalments calculated and payable on the last business day of the month (consistent with cl 3 of the Loan Terms). The date of the agreement then coincides with the date of the letter being 20 May 2008.

57 According to Mr Korda, the Timbercorp Group file also contained a signing page together with the standard Loan Terms and Loan Details. However, his evidence was that the letter of acceptance enclosed the Loan Details document i.e. there was no evidence that the letter of acceptance also enclosed the executed form of the agreement. This is consistent with the terms of the letter which do not purport to attach an executed form of agreement.

58 The signing page describes the borrower, Mr Tomes, the loan number and stated that it is a 'signing page executed as an agreement.' It then contained two signatures which purported to be of Mr John Stuart Murray both of 20 May 2008. The first signature purports to appear on behalf of Timbercorp Finance. The second purported to be for the borrower under the description 'executed by the attorney detailed below, as attorney for the borrower in the borrower's personal capacity.' It then recorded the attorney's name as Mr Murray, whose title as at 2008 was Chief Financial Officer of the Timbercorp Group.

59 In relation to the stage loan, Mr Korda similarly states that Timbercorp Finance accepted Mr Tomes' Loan Application and confirmed its acceptance of Mr Tomes' Loan Application by way of a letter signed by Mr Sol Rabinowicz, Chief Executive Officer, on behalf of Timbercorp Finance dated 6 November 2008 which enclosed a document titled 'Loan Terms - Details.'

60 The letter of 6 November 2008 is also in substantially similar terms to the letter of 20 May 2008. The Loan Details document attached also contains the essential terms as reflected in the Loan Application when read together with the Loan Explanation and the Loan Terms. Further, although the Timbercorp file also contains a signing page together with the standard Loan Terms and Loan Details, Mr Korda's evidence again suggested that the letter of acceptance only enclosed the Loan Details (not the executed form of agreement).

61 Timbercorp Finance pleaded payment of the loan amount to TSL in relation to the initial loan by way of the following journal entries on 21 May 2008:[29]

(i) a debit entry of $2,910.390.00 (which included the L0025296 Loan Amount) on 21 May 2008 to an account in the general ledger of the Plaintiff named "Loan Control Account" and numbered 51-1221, by way of a journal voucher numbered 498803 entered into the Great Plains accounting software maintained by the Plaintiff and TSL;

(ii) a credit entry of $2,910,390.00 (which included the L0025296 Loan Amount) on 21 May 2008 to an account in the general ledger of the Plaintiff named "Loan- Timbercorp Securities Ltd" and numbered 51-1208, by way of the same journal voucher;

(iii) a debit entry of $2,910,390.00 (which included the L0025296 Loan Amount) on 21 May 2008 to an account in the general ledger of TSL named "Loan- Timbercorp Finance Pty Ltd" and numbered 12-1200, by way of the same journal voucher;

(iv) a credit entry of $2,910,390.00 (which included the L0025296 Loan Amount) on 21 May 2008 to an account in the general ledger of TSL named "Suspense New Loans Advance" and numbered 12-7234, by way of the same journal voucher.

62 A similar pleading of payment of the loan amount to TSL as payment for the balance of the stage loan also occurred by way of journal entries on 7 November 2008.[30]

63 Mr Stone verifies the above journal entries in relation to both the initial loan and the stage loan and further explains that the journal entries showed:

(a) a discharge of Mr Tomes' liability to TSL;

(b) a liability owed by Mr Tomes to Timbercorp Finance equal to the amount of his discharged liability to TSL; and

(c) a liability owed by Timbercorp Finance to TSL equal to the amount of Mr Tomes' discharged liability to TSL.

64 At the end of each month, the aggregate net position of the Timbercorp Finance/TSL loan was also cleared to nil by way of journal entries so that at the end of each month, there was no loan between Timbercorp Finance and TSL.

65 In terms of the initial loan, Mr Stone's evidence was also that TL transferred 'money' to the Trust Company of Australia Limited (Trust Co) trust account operated on behalf of TSL with respect to each MIS. An intercompany loan was recorded in TSL and TL's general ledgers as owing by TSL to TL for the amount of that transfer.

66 He further adduced evidence of a facsimile transmission of 27 May 2008 which read:

We advise that Timbercorp Finance Pty Ltd has instructed ANZ Bank to telegraphically transfer $2,543,447.76 into your almond application account - account no. 083-091 528760374, being finance for investors as set out in the attached schedule.

67 Thus on 27 May 2008, the sum of $2,543,447.76 (which included the balance of Mr Tomes' loan account) was credited to the Trust Co bank account for the 2007 Almond Scheme and the same sum was debited from TL's operating account.

68 Also, on 27 May 2008, TSL instructed Trust Co to electronically transfer $3,096,000.00 back to TL which sum represented the total of each growers' deposit together with their loan amount and included Mr Tomes' total loan amount for the 2007 Almond Scheme. Thus, the sum of $3,096,000.00 was subsequently debited from Trust Co's almond scheme trust account and credited to TL's bank account.

69 Similar transactions occurred in relation to the 2008 Olive Scheme on 28 May 2008 insofar as the initial loan was concerned.

70 There were no such transfers of funds in relation to the stage loan.

71 Consistent with evidence of Mr Korda, Mr Tomes admits that between 31 July 2008 and 29 May 2009 he made instalment payments of $12,867.44 per month pursuant to the initial loan.[31] In fact, Mr Tomes made 11 instalment repayments for his initial loan in the amount stipulated in the Loan Details document. I infer that these were made from Malco's bank account as specified in the Loan Application and letter of acceptance.

72 Mr Tomes also admits that he paid $3,203.18 per month between 28 November 2008 and 27 February 2009 with respect to the stage loan.[32] In fact, Mr Tomes made 7 instalment repayments for his stage loan in the amount as stipulated up to May 2009, which also appear to have been made from Malco's bank account.

73 Consistent with the evidence of Mr Korda, on 1 July 2009 Mr Tomes admits that he did not pay the instalment then due pursuant to the initial loan.[33]

74 Similarly, consistent with the evidence of Mr Korda, on 1 July 2009 Mr Tomes admits that he did not pay the instalment then due in respect of the stage loan.[34]

75 According to Mr Korda, on 8 February 2010 Timbercorp Finance's solicitors sent a letter of demand with respect to the initial loan seeking the outstanding balance. On or about 2 May 2014, Timbercorp Finance wrote to Mr Tomes confirming that he remained in default of his payment obligations pursuant to the initial loan. This letter also advised Mr Tomes of the total amount owing and that Timbercorp Finance intended to sue.[35] These demands are admitted by Mr Tomes[36] who also admits that he has failed to comply with the 8 February 2010 demand.[37]

76 Similar letters were also sent in relation to the stage loan on 8 February 2010 and 2 May 2014, which are admitted by Mr Tomes,[38] who also admits non-compliance with the 8 February 2010 demand.[39]

77 Mr Korda's unchallenged evidence was that the amounts owing in respect of each of these loans, taking into account interest as at 31 July 2019, is $3,214,839.61 for the initial loan, and $818,218.80 for the stage loan, giving a total of $4,033,058.41.

78 This figure takes into account the suspension of interest during the relevant time Mr Tomes was a participant in the borrower assist program.

80 Therefore there is unchallenged evidence adduced to support each of the elements of offer; acceptance; advancement; default; demand; and quantum for both the initial loan and stage loan.

81 It follows that the plaintiff is, prima facie, entitled to judgment in debt subject to the three main defences raised concerning incorporation of the Loan Terms; whether acceptance is established; and whether payment was really made.

82 Timbercorp Finance submits that by signing and completing both Loan Applications, Mr Tomes acknowledged, confirmed and agreed that he had read the Loan Explanation and Loan Terms. Thus, Mr Tomes manifested his intention to enter into the initial and stage loans and offered to borrow the loan amounts on the Loan Terms comprised in the Loan Application and Loan Explanation documents.

83 Mr Tomes denied that the Loan Explanation and Loan Terms formed any part or term of the application for credit, and specifically denied that the Loan Explanation and Loan Terms were provided to him at the time he signed the Loan Application form.[40]

84 In written opening submissions, Counsel for Mr Tomes also alleged that Timbercorp Finance did not provide Mr Tomes with a copy of the Loan Explanation and Loan Details document nor tell him that the terms were incorporated in the application. Further, he alleged that, as Timbercorp Finance did not take any steps to bring these documents to Mr Tomes' attention, they did not form part of either Loan Application.[41]

85 In the decision of Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd[42] the High Court enforced a clause in a signed document which protected a carrier against negligence even though the customer was not aware of its existence and did not read the standard conditions (on the back of an 'application for credit' form) containing that clause.

86 The majority (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ) stated:[43]

The general rule, which applies in the present case, is that where there is no suggested vitiating element, and no claim for equitable or statutory relief, a person who signs a document which is known by that person to contain contractual terms, and to affect legal relations, is bound by those terms, and it is immaterial that the person has not read the document.

87 The majority also rejected that there was any general obligation to prove that a party relying on a signed contract was obliged to show that it had done what was reasonably sufficient to give notice of the terms.[44] A qualification to this was as follows:[45]

There may be cases where the circumstances in which a document is presented for signature, or the presence in it of unusual terms, could involve a misrepresentation. No such problem exists in the present case. There could also be circumstances in which one party would not reasonably understand another party's signature to a document as a manifestation of intent to enter into legal relations, or of assent to its terms. Again, this is not this case. It was reasonable of Finemores to treat Mr Gardiner-Garden's signature as a manifestation of assent to the conditions he had been invited to read before signing.

88 Despite the suggestion in opening that evidence would be given by Mr Tomes that he did not receive the Loan Explanation and Loan Terms,[46] Mr Tomes has chosen not to appear and give evidence. In particular, he has chosen not to give evidence to show that the Loan Explanation and Loan Terms were not provided to him. Nor that he was not put on notice of such terms.

89 In these circumstances, the unchallenged evidence before the Court was that the Loan Explanation and Loan Details, were in fact 'provided with' the Loan Application (as appears on the first page of the Loan Application form signed by Mr Tomes). Further, that Mr Tomes 'read and understood' the Loan Explanation (including the Loan Terms) (as Mr Tomes acknowledged in cl 14 of the Loan Application form).

90 On the basis of this evidence, I am satisfied that Mr Tomes was provided with the Loan Explanation and Loan Terms prior to execution.

91 It was not suggested why, within the principles in Toll, above, there was any obligation to do more to bring those terms to the attention of Mr Tomes. In any event, I am satisfied that he was sufficiently put on notice of the terms given he himself stated that he had 'read and understood' those terms.

92 The case of Ange[47] (cited by Mr Tomes) also does not assist him since, in that case, the Court of Appeal found that there was no obligation to bring conditions to the attention of Mrs Ange where the evidence established that she was already aware of the nature of the terms.

93 In the current case, then, I consider that the Loan Terms and Loan Explanation were incorporated in the offer by reference i.e. that a reasonable person would have concluded that Mr Tomes intended to contract in accordance with the terms as set out in the Loan Explanation and Loan Terms in circumstances where he signed a document (being the Loan Application) which stated that those terms had been provided with the Loan Application form and where he expressly acknowledged reading them.

94 In such circumstances I am satisfied that, objectively considered, Mr Tomes is taken to have intended to make an offer to borrow on the terms as provided in the Loan Explanation and Loan Terms documents.

95 Timbercorp Finance pleaded that acceptance occurred by 3 ways in respect of each of the loans:[48]

(a) by sending the letters dated 20 May 2008 and 6 November 2008 which enclosed the Loan Details in each case;

(b) by payment of the loan amount to TSL; and/or

(c) by the plaintiff's execution of agreements comprising the Loan Details and Loan Terms on its own behalf and as agent or attorney for the defendant.

96 A significant portion of the defence to this allegation was devoted to alleged defects in the purported use of the power of attorney provisions ([7(d)]-[7(dd)]).[49] There are also some (unsubstantiated) generalised complaints about the matters pleaded and repetition of paragraphs (at [7(a)] -[7(c)]). The material part of the pleading then reads (in relation to the initial loan):

As to paragraph 7 he:

...

(e) denies that any alleged offer to borrow (the existence of which he denies) could have been or was accepted by the Plaintiff;

(f) by reason of the matters alleged above, denies that any loan agreement was entered into or executed by him or on behalf;

(g) says further, that the "L0025296 Letter of Acceptance" sent to him did not enclose any document "signed on behalf of the Defendant" or the "L0025296 Loan Explanation and Loan Terms";

(h) says in the alternative, if he did make an offer to borrow which was accepted by the Plaintiff (which is expressly denied) the purported loan agreement (the existence of which is denied) was not completed consistently or did not contain terms consistent with the "provisions" and "details" in the "application form", as required by clause 3(a) of the purported power of attorney contained in the "2008 Timbercorp Projects Finance Package Loan Application Form" (the validity of which is denied);

(i) otherwise denies the allegations therein.

Particulars to sub-para 9(h)

The "2008 Timbercorp Projects Finance Package Loan Application Form" did not specify the "higher interest rate" inserted in the purported "L0025296 Loan Details".

97 Substantially identical matters were pleaded in relation to the stage loan.[50]

98 Insofar as the matters raised above deal with the non-receipt of the Loan Explanation and Loan Terms, this matter has been dealt with already. Insofar as there was a suggestion that there was inconsistency with the Loan Application, the only matter particularised was the failure to specify the 'higher interest rate.' However, although the Loan Application did not specify the higher interest rate, the figure of 13.2% was inserted in the pro forma Loan Details document, included with the Loan Explanation and Loan Terms document (and incorporated with the offer).

99 Insofar as the other pleaded defences are concerned, it is significant that Mr Tomes admits that the relevant letter in each case was 'sent to the defendant' (at [7(g)] and [22(g)]). It is also significant that none of the other matters pleaded provide any direct response to the allegation that the letter itself amounts to acceptance.

100 In written opening submissions, Counsel submitted that the role of each letter 'is no more than to provide Mr Tomes with the document which details the terms and conditions on which the loan has been made, being the documents headed Loan Terms- Details and Provisions.'[51] In oral opening submissions, Counsel for Mr Tomes submitted that the role of the letter was to forward the contract document on which Timbercorp Finance relied.[52]

101 However, Counsel's submissions appeared to be misconceived since the unchallenged evidence of Mr Korda was that the letters of acceptance only enclosed the Loan Details document (and not the executed form of the contract). In any event, the letters clearly go further than providing any documentation given they explicitly purport to confirm that the relevant applications had been 'accepted.'

102 Returning to the evidence, I am satisfied that there has been valid acceptance of the two offers to borrow by Timbercorp Finance by reason of the two letters.

103 First, the language in the letters is unequivocal and clear and states explicitly that Mr Tomes' application for finance has been 'accepted.' The letters then proceeded to utilise language which was only consistent with assent to a loan agreement having been reached importing existing obligations e.g. referring to an existing 'loan' and highlighting that this loan 'is repayable' and that instalments 'are due' on the last business day of the month.

104 Second, Mr Tomes has admitted communication of this correspondence as identified above i.e. communication of the acceptance is conceded.

105 Third, I am satisfied that the Loan Details document attached contains, and is consistent with, the essential terms contained in the offer (i.e. it deals with parties; loan amount; loan term; interest rates; and instalment calculation). The statement that the application for finance has been accepted also evinces an intention to accept all the terms contained in the offer (which incorporate the standard detailed Loan Terms as set out above).

106 There was no defence pleaded that the letter could not constitute an acceptance by reason that the parties had stipulated that there would be a formal agreement. Nor was the matter raised in written or oral openings by Mr Tomes. If this had occurred, Timbercorp Finance may also have wished to plead waiver and/or rely on other pleaded claims (e.g. estoppel). The matter was, however, generally referred to in Timbercorp Finance's submissions such that I will briefly record my views for the sake of completeness. Such consideration is provided solely on the basis of the evidence in this case and without the benefit of a contradictor.

107 Although there was reference to a formal agreement, the language of the offer explicitly contemplated that acceptance could take place by other acts prior to the execution of any formal written agreement. Thus, it suggested that the 'formal' legal documents were signed 'once' the application was 'approved' or 'if' the application was [already] 'accepted' (at pages 1 and 7 of the Loan Application). Further, that the formal document would be created 'if we accept your application' (at page 2 of the Loan Explanation). The language of the purported power of attorney is also permissive in nature given the attorney 'may' do certain things (at page 7 of the Loan Application form). The structure of the transaction further meant that there was nothing remaining to be agreed or done. Thus, even if a formal loan document was later prepared, by reason of cl 12.3(a) of the Loan Application, Timbercorp Finance could not execute a document which contained any material additions or differences to the 'provisions' (already contained in the Loan Terms) and 'details' based on information already set out in the application form.[53]

108 The mere fact that the parties stipulated that there should be a formal agreement did not therefore mean that they were continuing only in negotiation. The key question instead is whether there was mutual assent with no power to vary terms.[54] The matters I have identified evidence that mutual assent. In such circumstances, the execution of a written agreement by Timbercorp Finance under power of attorney would be a mere formality.

109 If it was necessary to determine, I would therefore accept Timbercorp Finance's submission that the case readily falls within the first category of Masters v Cameron[55] i.e. one in which the parties have reached finality in arranging all the terms of their bargain and intend to be bound immediately, but at the same time propose to have the terms restated in a fuller form. In such a case, a contract binding the parties to perform the agreed terms comes into effect whether the contemplated formal document comes into existence or not.

110 In any event, for the reasons expressed above, and absent any cogent defence, I am satisfied that there has been acceptance by letter. It follows that it is unnecessary to consider the other two alternative modes of acceptance.

111 In terms of payment, an issue would arise as to whether this was adequately communicated given it was effected by journal entry. However, it is unnecessary to consider this further given the finding above.

112 Insofar as the executed agreement was concerned, even if all the defences about the power of attorney are made out, I am satisfied that a binding agreement came into effect independently of any such formal document. It is also unnecessary to consider a further submission by Timbercorp Finance that Mr Tomes had ratified the execution of the loan agreement (if the execution was otherwise unauthorised). The matter does not appear to arise in any event, on the way ratification is presently pleaded.

113 It is also undesirable for me to say anything further about the defences raised about the executed agreement which involve wide ranging challenges to the use of the power of attorney provisions in the Loan Application.

114 First, and foremost, there was no 'contradictor' in final submissions which would properly enable the Court to give appropriate consideration to the issues involved.

115 Next, as accepted by Senior Counsel for Timbercorp Finance, the Court was not required to make any findings of fact in determining the power of attorney issues as the matters were strictly confined to law.[56]

116 Further, the defences relating to power of attorney were wide ranging. Indeed, in openings, Counsel for Mr Tomes suggested that only one or two really had 'legs'.[57] He was invited to reconsider which defences were to be pursued in the light of this approach but withdrew before advising of any such reconsideration. In such circumstances, it is undesirable for the Court to engage in any lengthy consideration of alternative defences which may lack proper foundation.

117 Finally, the relevant letters appear clear in this particular case, with no cogent defence pleaded to the contrary.

118 I am therefore satisfied that the letters sufficiently evidence communication of acceptance of the offer in each case such that binding loan agreements came into effect.

119 In Collins and White, the relevant journal entries relied upon were recorded on 14 June 2008 as follows:[58]

(a) in Timbercorp Finance's general ledger in the Great Plains software:

(i) a debit entry to Timbercorp Finance account named 'Loan Control Account' in the sum of $4,473,412.00;

(ii) a credit entry in a Timbercorp Finance account named 'Loan- TSL' account in the sum of $4,473,412.00;

(b) in TSL's general ledger in the Great Plains software:

(i) a debit entry to TSL account named 'Loan- Timbercorp Finance' in the sum of $4,473,412.00;

(ii) a credit entry in a TSL account named 'Suspense - New Loans Advanced' account in the sum of $4,473,412.00.

120 Thus, it can be seen that Timbercorp Finance's claims against Mr Tomes (regarding payment) relied on journal entries recorded in the same way as those relied upon in the Collins and White test cases.

121 As described by the Court of Appeal, at the trial before Judd J:[59]

The trial judge rejected each of the defences and entered judgment in favour of Timbercorp Finance. In particular, the trial judge held that, in making journal entries in its accounts whereby it purported to debit its accounts and credit those of Timbercorp Securities, Timbercorp Finance had made payment to Timbercorp Securities on behalf of the applicants pursuant to the loan agreement between Timbercorp Finance and the applicants. In the event, the applicants were liable for the unpaid balance of each loan as alleged, together with interest. The applications now seek leave to appear from that judgment (emphasis in italics added).

122 Judd J also found that Timbercorp Finance and TSL had agreed that Timbercorp Finance could effect payment to TSL by way of journal entry on the following bases:[60]

(a) the Timbercorp Group carried on business as a group of wholly owned subsidiaries under TL;

(b) there were common directorships and officeholders;

(c) the Group prepared and filed consolidated accounts;

(d) the Group maintained only one central operating account into which all funds were paid and out of which all expenses were paid;

(e) the Group maintained ledgers for the operating entities, TSL and Timbercorp Finance, which contained journal entries recording transactions, in dollar amounts, without underlying cash transfers;

(f) the accounts of the Group were regularly audited and published. The defendants point to no qualification or criticism by an auditor or a regulator of the way in which the Group maintained its accounts.

123 Before the Court of Appeal, various arguments were put that the trial judge had erred in finding that the 14 June 2008 journal entry amounted to payment by Timbercorp Finance to TSL for the balance of Mr White's application money under the loan agreement.

124 The arguments included that Timbercorp Finance had not established the debt unless the amount had the character of 'application moneys' which payment was made to TSL 'in its capacity as responsible entity.' It was also argued that, even if payment under cl 1 of the Loan Terms could be made by journal entry, there was no evidence of an agreement between Timbercorp Finance and TSL that allowed Timbercorp Finance to effect such payment by way of journal entry.[61]

125 The Court of Appeal held that cl 1 of the Loan Terms does not convey that the amount to be lent must be pressed with a certain character at the time when it is paid (as application money) or that it is to be paid to TSL strictly in its capacity as responsible entity.[62]

126 Having regard to, inter alia, the decision of the High Court in Equuscorp Pty Ltd v Glengallen Pty Ltd[63] the Court also found that, provided there was an agreement between TSL and Timbercorp Finance, payment may be made by book entry.[64]

127 In upholding the trial judge's decision, the Court of Appeal noted the decision of Judd J in finding an inferred agreement and highlighted that what was critical was that the two companies were wholly owned subsidiaries of TL; they had the same directors; and that the group only had one operating account. The Court of Appeal also placed emphasis on the director's declarations in the financial accounts as well as the fact that the financial accounts were the subject of an independent audit. The Court concluded 'absent some special feature, an agreement that intercompany transactions may be evidenced by journal entry must be inferred in this case. Any contrary conclusion defies commercial sense.'[65]

128 Ultimately the Court of Appeal found that the trial judge made no error in finding that the 14 June 2008 journal entry constituted 'payment' within the meaning of cl 1 of the loan agreement.[66]

129 However, in the course of considering whether an agreement ought to be inferred, the judgment included the following statements at [155] (which were relied upon by Mr Tomes in this case):

Similarly, in the present case, the principal question is whether Timbercorp Finance complied with cl 1 of the Loan Agreement. That was the relevant agreement between Timbercorp Finance and Mr White. Mr White was entitled to be lent the 'loan amount' by Timbercorp Finance 'paying it to Timbercorp Securities' ... as payment of the balance of [his] application money.' In deciding whether an agreement between Timbercorp Finance and Timbercorp Securities that payment of the application money could be made by journal entry should be inferred, the obligations of Timbercorp Finance to Mr White would not be irrelevant. If the journal entries were simply notional, there might not have been performance under cl 1 of the Loan Agreement; that circumstances would tell against inferring the necessary agreement. But the journal entries were not simply notional. They were accompanied by payment by Timbercorp Finance to the custodian (by Timbercorp Ltd on behalf of Timbercorp Finance). As set out above, in Equuscorp, the High Court spoke of debts that 'were created and satisfied at all points in the chain' and that, 'of most particular relevance to the present matters, in accordance with its obligations under the written loan agreements, Rural Finance had applied the money it lent in payment of, the application moneys due from the respondents for the units being bought (citations omitted) (bold emphasis added).

130 The decision of Equuscorp cited above, concerned investors in units in a limited liability partnership that developed and operated an aquaculture farm. On 30 June 1989, a series of transactions took place at the lender's bank whereby the lender's bank account was debited, and a representative of the investors' account was credited. Cheques were then drawn by the representative and paid to the credit of the general partner who drew cheques for management fees and other outgoings in favour of the managers of the scheme. It was proposed that the manager would then deposit the funds they had received with the lender into interest bearing deposits.

131 The respondents had successfully argued before the trial judge that the series of transactions that took place on 30 June 1989 did not involve 'real money' and were a 'round-robin' that amounted to a sham. The Queensland Court of Appeal dismissed an appeal.

132 However, Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ held that the series of transactions were not a sham as understood by its legal meaning.[67] Their Honours held that 'debts were created and satisfied at all points in the chain' and that 'of most particular relevance to the present matters, in accordance with its obligations under the written loan agreements, Rural Finance had applied the money it lent in payment of the application moneys due from the respondents for the units being bought.'[68] Their Honours also noted that the expression 'real money', as contended by the respondents, focused on the economic effect rather than the legal effect of the transactions.[69]

133 In his defence, Mr Tomes did not admit the journal entries and records.[70] He also denied that there was an agreement between TSL and Timbercorp Finance that payment could be made by journal entries.[71] In respect of the stage loan he further says that if there was such an agreement that the journal entries were 'notional only' and there was not performance under cl 1 of the Loan Terms.[72]

134 At [23] of his written opening submissions, Counsel for Mr Tomes further submitted that:

the Plaintiff's evidence in relation to the Stage Loan is that no transfer of funds occurred in the case of Stage Loans. The consequence of that position is that the journal entries relevant to the Stage Loan were simply notional and there was no performance under Clause 2 of the Loan Agreement.

135 The reference to payment being 'notional' appeared to be directed to the passage from Collins and White at [155] cited above. Thus, it appeared to be suggested by Mr Tomes that the absence of a funds transfer in the case of a stage loan meant that the agreement between Timbercorp Finance and TSL ought not be inferred.

136 However, in oral opening submissions, Counsel submitted that the journal entries for the initial loan were also 'notional'.[73] In order to substantiate this suggestion and distinguish the present case from Collins and White, reference was made to the evidence of Mr Stone that for the initial loan, payment was made by TL transferring money to Trust Co 'on behalf of TSL' (at [14(c)]. This was to be distinguished from the reference to payment being made 'on behalf of Timbercorp Finance' as referred to in the above passage in Collins and White and meant the present case was distinguishable.

137 I am, first, satisfied, that the journal entries summarised above, occurred, based on the unchallenged evidence of Mr Stone. They also generally establish that payment was made based on the same reasoning used in Collins and White, subject to whether an inferred agreement is available in the case of each loan.

138 In terms of the initial loan, the evidence is virtually identical to that considered by the Court of Appeal and there is nothing pleaded to distinguish the case of Mr Tomes.

139 Further, even if a generous approach is taken such that consideration is given to the opening submission, there is no relevant distinction. Thus, the evidence in this case is that, although the instruction in the facsimile was given on behalf of Timbercorp Finance, the funds were placed into a trust account held on behalf of TSL, as Mr Stone's evidence describes. This also appears to have been the evidence before the Court of Appeal.[74] The Court of Appeal's statement at [155] therefore appears to be directed to the former sense (i.e. appears to be making reference to the instruction given in the relevant facsimile transmission) notwithstanding that, as in the Court of Appeal, the trust account was held on behalf of TSL, consistent with the evidence in this case.[75] No point of distinction thereby arises.

140 In relation to the suggestion that the inferred agreement would not be established in relation to the stage loan, the critical matters summarised by Judd J are again present in this proceeding, namely that:

Timbercorp Finance and TSL were wholly owned subsidiaries of TL, and together with a number of other companies, constituted the Timbercorp Group;[76]
Timbercorp Finance, TSL and TL entities all shared the same directors;[77]
The Timbercorp Group only had one operating bank account in the name of TL;[78]
TL prepared and filed consolidated accounts (including Timbercorp Finance and TSL);[79]
The Timbercorp Group maintained ledgers for the operating entities, TSL and Timbercorp Finance which contained journal entries recording transactions without underlying cash transfers. Thus, given TL was the only entity with an operating bank account there was not at any time any actual 'money' payment by Timbercorp Finance to TSL. Instead, journal entries were used, for example, in recording payment by Timbercorp Finance to TSL discharging a grower's liability to TSL; and in clearing the Timbercorp Finance/ TSL loan balance at the end of the month.[80]

141 In terms of the financial accounts of each of TL, Timbercorp Finance and TSL there were directors' declarations that they gave a true and fair view of the company's financial position. Specifically, the directors declared that in accordance with s 295(5) of the Act, various financial statements (and notes thereto) of each of the companies (a) complied with accounting standards; (b) gave a true and fair view of the financial position and performance of the company and the consolidated entity; and (c) were, in the opinion of the directors, in accordance with the Act (in addition to a declaration that the companies were solvent).[81] Further, the financial accounts were also the subject of an independent auditor's report pursuant to Div 3 Pt 2M.3 of the Act where he opined that they were in accordance with the legislation and accounting standards and gave a true and fair view of the company and consolidated entity's financial position.[82] In notes to the financial accounts of TL it stated, 'the ultimate parent entity in the wholly owned group is TL ...Transactions within the wholly owned Group are based on normal terms and conditions.'[83]

142 More specifically, the audited scheme accounts for both the 2007 Almond Scheme[84] and the 2008 Olive Scheme[85] record receipt of payment from growers and generally treated Timbercorp Finance's payments to TSL as legally effective.

143 Finally, TL and its subsidiaries were taxed as a consolidated group.[86]

144 I am satisfied that an agreement ought to be inferred in the case of the stage loan (as well as the initial loan) notwithstanding the absence of a transfer of funds.

145 First, the factors above present both in this case and Collins and White are overwhelmingly in favour of such an agreement with any contrary conclusion similarly being contrary to 'commercial sense.'

146 Second, it would be unlikely that Timbercorp Finance and TSL had reached agreement that journal entries sufficed for one type of loan (an initial loan) but not for others in circumstances where the use of journal entry was widespread, as outlined above.

147 Third, as the Court of Appeal highlights, the contractual intent giving rise to the inferred agreement between Timbercorp Finance and TSL, insofar as the initial loan was concerned, had already crystallised by the time the transfer of funds took place (which happened subsequent to the journal entries).[87]

148 Finally, insofar as [155] is concerned, it can be seen that the Court was readily able to dismiss the 'notional' description in the case of an initial loan given the accompanying payment. However, there is nothing in that paragraph which suggests that this factor (accompanying transfer) would be determinative.

149 I therefore find that I can infer an agreement between Timbercorp Finance and TSL that payment by Timbercorp Finance could be effected by journal entry. Using the language of Equuscorp, debts were thereby 'created and satisfied' by reason of those entries i.e. first, there was a discharge of Mr Tomes' liability to TSL replaced by Mr Tomes' liability to Timbercorp Finance. There was also the creation of a liability between Timbercorp Finance and TSL equal to the amount of Mr Tomes' liability. The creation of these series of obligations had a real legal effect and were not merely 'notional' (i.e. being merely an 'idea' or 'not real').[88] The journal entries thereby fulfilled the obligations contained in cl 1 of the Loan Terms.

150 This applies equally to both the initial loan as well as the stage loan.

151 Thus overall, I am satisfied that there has been payment of Mr Tomes' liability under cl 1 of the Loan Terms.

152 Mr Tomes relied on the following further defences. In openings, it was accepted that these only operated in relation to the stage loan:[89]

given the insolvency of TSL and the plaintiff, if the plaintiff paid the amounts to TSL 'the purpose for the payment of those amounts was frustrated';[90]
the loans were frustrated 'by reason of a total failure of consideration';[91]
if the plaintiff is entitled to recover, it will have been 'unjustly enriched' by reason of the fact that it did not advance cash 'in bankable form to TSL as the Loan Agreement required' and as a result the annual expenses of the Projects [2007 Almond Scheme and 2008 Olive Scheme] were unable to be paid;[92] and
there was breach of an implied term that the plaintiff would pay the loan monies to TSL 'in cash, or bankable form'.[93]

153 Given I am satisfied that payment was made in accordance with the loan agreements, there can be no frustration/total failure of consideration. Section 14 of the Loan Application also expressly acknowledged Mr Tomes' obligation to pay all interest on, and to repay, the loan amount regardless of the success or failure of any investment in the projects or the rate of return of income or capital from that investment.

154 There was no evidence adduced that annual expenses were unable to be paid. In any event, there cannot be unjust enrichment where Timbercorp Finance discharged Mr Tomes' liability to TSL in accordance with the loan agreements.

155 Moreover, there cannot be an implied term that Timbercorp Finance would pay the loan amount in 'cash or bankable form' which would operate in direct conflict with the construction of the express term in cl 1 of the Loan Terms as enunciated above.[94]

156 Given that none of the pleaded defences are sustainable it follows that the plaintiff is entitled to judgment on its debt claim in respect of both loans.

157 Timbercorp Finance pleaded that if the loan agreements were not legally enforceable, Mr Tomes ratified Timbercorp Finance's satisfaction of his liability to TSL for the fees payable by Mr Tomes to TSL under both the initial and stage loan.[95] It relied on various actions by Mr Tomes including the payment of instalments and the claiming of tax deductions.

158 Mr Tomes denied that he ratified the payments to Timbercorp Finance. He also denied that he had knowledge that payment of the loan amounts was by book entries and says that it was not accompanied by payment of cash in bankable form in accordance with cl 1 of the Loan Terms.[96]

159 It is unnecessary to consider this issue given my findings above. However, I will provide a brief summary of my views as follows.

160 At first instance, Judd J determined that ratification was established in circumstances where Timbercorp Finance had relied on ratification on the basis of tortious acts of an agent. This would ordinarily require three essential elements:[97] the agent must have acted not for himself, but on behalf of the principal; the ratifier must have had sufficient knowledge of the act; the principal's act must be of the appropriate kind (i.e. sufficiently clear).

161 The Court of Appeal doubted the applicability of the analysis based on tortious acts of an agent and found that Judd J did not approach the case by determining whether the applicants were bound by acts done by Timbercorp Finance as their agent. Rather, his finding was that, even if Timbercorp Finance had departed from the agreement in the manner in which it paid TSL, the applicants had nonetheless ratified that departure and affirmed the agreement by accepting the loans in discharge of their obligations to TSL and making payments and claiming tax deductions.[98]

162 The Court of Appeal went on to reject the suggestion that Mr White needed to have knowledge as to the mode of payment. Instead, the relevant knowledge was that he had acquired an interest in the schemes (which gave rise to a tax deduction).[99]

163 The Court ultimately determined that, by his conduct, Mr White ratified any irregularity in the manner in which the loan amount was paid.

164 In the present case, I am unable to be satisfied that Mr Tomes claimed tax deductions. Thus, although Timbercorp Finance had sought production of Mr Tomes' tax returns and notices of assessment by way of notice to produce filed on 25 July 2019, these documents have not been provided, and were not adduced as evidence in this proceeding.

165 What was in evidence, however, was that Mr Tomes caused 11 payments of the instalments due under the initial loan to be made between July 2008 and May 2009, and 7 instalment payments under the stage loan to be made to Timbercorp Finance between November 2008 and May 2009.

166 In the absence of any evidence providing some contrary explanation, I would be satisfied that Mr Tomes affirmed the initial loan by accepting that a payment had been made in discharge of his obligation to TSL and thereafter making instalment payments in respect of that loan.

167 Insofar as the defence of 'lack of knowledge' is concerned, the crucial question, pursuant to Collins and White, was whether he knew he had acquired an interest in the schemes. In that case, the Court found that the requisite knowledge arose upon receipt of a 'Confirmation Notice/Tax invoice' which confirmed acceptance of Mr White's application for lots in the relevant schemes.

168 In the present case, there does not appear to be such a Confirmation Notice. However, on 22 July 2008 Mr Tomes was provided with a Tax Summary which set out the income he earned and the 'total fees' he had paid as set out in 'Total Expenses' in the 2007/2008 financial year as a 'participant' in Timbercorp Projects. It also states that Timbercorp had assumed that the relevant expenses had been 'paid in full.' I would therefore find, absent evidence from Mr Tomes, that he knew that he had acquired an interest in the scheme by at least 22 July 2008 with the result that, in making instalment payments after this time, he has ratified any irregularity in the manner in which the initial loan amount was paid.

169 I would not be of the same view in relation to the stage loan. Contrary to a submission of Timbercorp Finance, the knowledge in this case would not just be that he was a member of the scheme, but that his ongoing obligations in relation to the scheme had been satisfied. In this respect, although there was a Tax Summary for the 2008/2009 financial year, it is dated 15 August 2009 which is subsequent to the date he finished making instalment payments (in May 2009). I am also unable to be satisfied that the letter of acceptance of his application for finance itself suffices (as also relied upon by Timbercorp Finance). As at the time of the letter (6 November 2008), the payment by journal entry had not even been effected (until 7 November 2008). In such circumstances he could not, without further advice, have knowledge that his ongoing obligations to TSL were satisfied by Timbercorp Finance.

Plaintiff v Defendant

At a glance

Court

Decision date

Before

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Judgment (276 paragraphs)

Parties

Cases Cited (9)