Plaintiffs v Defendant

Section 52 focuses upon the effect of the defendant's conduct and representations which have the potential to mislead and deceive the plaintiffs.

735 The plaintiffs allege that, in entering into their respective policies, the defendant, in trade or commerce, represented that it intended to use historical pricing to fix the value of the units.[870] The plaintiffs allege that from at least 8 June 2000 the defendant did not intend to continue to use historic pricing and was under a duty to disclose that intention and breached its duty by not doing so.[871] They allege that the representation that the defendant would continue to use historic pricing and the failure to disclose its intentions constituted misleading and deceptive conduct in contravention of s.52 of the TPA.[872] They also allege that the representations were made negligently.[873]

736 The plaintiffs rely upon s.51A of the TPA, which provides that a representation made by a corporation with respect to any future matter, where the corporation does not have reasonable grounds for making the representation, shall be taken to be misleading and the corporation, unless it adduces evidence to the contrary, shall be deemed not to have had reasonable grounds for making the representation.[874]

737 The defendant submits that by reason of s.51AF of the TPA, s.52 had no application because the matters alleged involved the "supply of financial services".[875] In reply, the plaintiffs denied that the matters alleged involved the supply of "financial services" but, if they did, relied upon the provisions of ASICA and the CA which they submitted applied to misleading and deceptive conduct in relation to financial services.[876] It was not disputed that the law that has developed in relation to s.52 and related provisions of the TPA was applicable to s.12DA of the ASICA and s.1041H of the Corporations Act. The parties made substantial amendment to their pleadings in the first few days of the trial to cover these matters but in closing oral argument little attention was given to whether the claim of misleading and deceptive conduct rested upon the TPA, ASICA or the Corporations Act.

738 The defendant acknowledges that the plaintiffs' allegations as to negligent misstatement or a breach of s.52 of the TPA are founded upon essentially the same factual matters as those which form the basis for their claims as to oral policy terms and estoppel. It submits that the plaintiffs have failed to establish that the alleged representations were made or that they reasonably relied upon them.

739 The plaintiffs rely upon the principle that where a claim under the TPA involves silence or a failure to speak, it is not necessary to establish a duty of disclosure at common law or in equity.[877] The question is whether in all the circumstances "constituted by omissions, statements or silence, there has been conduct which is likely to be misleading or deceptive".[878]

Failure to speak

740 "Silence" which may be actionable may loosely fall into one of the following categories: where there is a duty to disclose; where something is said or done which, without more, communicates only a half truth; and where there is at least a reasonable expectation that silence will be broken in the circumstances.[879] For silence to be actionable it must be deliberate, that is to say the party must be aware that it is likely that the other party is labouring under a material misapprehension but determines to say nothing.[880] Neither in law or equity will mere silence avoid a contract where there is no legal obligation to divulge. But silence may constitute conduct which is misleading or deceptive in terms of s.52 though in law there was no duty to speak.[881]

741 Whether a party's departure from an assumption would be unconscionable calls for an examination of the conduct of the allegedly estopped party. One category of case which would make it so is where that party "knew that the other party laboured under the assumption and refrained from correcting him when it was his duty in conscience to do so."[882] The party's duty to speak rests upon its knowledge of the mistaken assumption made by the other and is informed by notions of unconscionability. A duty in conscience can arise to correct a false assumption.[883] Liability for misleading and deceptive conduct by silence under the TPA does not require a duty to speak but calls for an objective assessment of the relevant circumstances to determine whether conduct was misleading or deceptive. Whilst common law and equitable principles may be relevant in assessing whether a contravention of s.52 of the TPA has occurred, they are not determinative. Conduct that is misleading or deceptive may not always involve misrepresentation. The effect of any silence or inaction, and whether it is in contravention of s.52, must be deduced from an examination of the context in which such action or inaction occurred.[884] Silence may be the element which renders the conduct misleading or deceptive upon an objective analysis of all of the circumstances.[885]

742 Each of the plaintiffs say they had a reasonable expectation that the defendant would continue to administer the prosperity bonds in the same way in which it had with other Coneview investment club members over the previous year. They submit that the defendant's silence, and its holding out of Keller, Coneview and Taylor as its agents, made it entirely reasonable for them to have that expectation and to rely on what they were told by those persons. By its failure to speak when it had a duty to do so, they submit the defendant misled each of the plaintiffs into assuming that historical pricing would continue for the life of each policy. They submit that the defendant's deemed agents, Keller and Taylor, represented to them that the defendant was using historical pricing and that they would have the right to oblige the defendant to use it.

743 The plaintiffs submit that the defendant, by its silence, represented to each of the plaintiffs that they could make arbitrage profits by the use of the special terms utilising historical pricing. They submit that the representations were with respect to a future matter and that given Yesberg's knowledge by June 2000 - before any of the plaintiffs invested - the defendant did not have reasonable grounds for making that representation. They submit that no evidence was adduced showing that the defendant had any reasonable grounds for the making of such a representation as to a future matter. Yesberg, they submit, could not explain why he did not inform prospective investors of the deliberate steps which were put in train from June 2000 to bring about an end to this profitable method of arbitrage. They also rely upon the deeming provisions in s 51A(ii).

744 The plaintiffs further submit that the express and implied representations from the defendant's silence and the representations made by Keller and Taylor were all intended to and were likely to induce the plaintiffs to invest.[886] They submit it was reasonable to rely on what Keller said as he had negotiated the special terms with the defendant and managed the investments for the other Coneview investors. He had done nothing to cause the plaintiffs to distrust him. It was reasonable for the plaintiffs to rely on what Taylor said about the special terms as he was known to the plaintiffs and was a commercial solicitor with a major law firm.

745 To support their claim that there was an oral term, the plaintiffs relied principally upon the alleged representations of Keller and Taylor that it was a special term of the an agreement with defendant that it would continue using historical pricing. I have found, inter alia, that the plaintiffs did not regard what Keller and Taylor said as promissory, but it is also the plaintiffs case that Keller and Taylor told Tyne and Hawkins, more than once, that Keller had made clear to the defendant that he needed to know the unit price on the day that the notice to switch was given. I accept that Keller and Taylor made statements to that effect in their meetings with Tyne and Hawkins. I think it is likely that the defendant was so informed. This constituted part of the defendant's and the plaintiffs' knowledge at the time that the plaintiffs invested. No attempt was made to challenge the factual foundation for such an inference.

746 The plaintiffs rely upon the same representations and conduct to support their claim for negligent misstatement. They submit, as they did in relation to the three day option, that mere silence may not constitute a misrepresentation but it will do so where the silence distorts a positive representation or where a contract requires utmost good faith. They rely upon the fact that the defendant must have known that in the absence of a qualifying communication from it, investors would assume that the defendant would continue to use historical pricing to fix the value of units. Reliance by the plaintiffs was reasonably foreseeable. I have previously discussed, in dealing with the three day option, the duty of a party who has made a representation to communicate to the other party to whom the representation has been made, any alteration of relevant circumstances.

747 The plaintiffs advance the following argument. The duty to speak arose because the defendant had actual or constructive knowledge of what the plaintiffs had been told, both because Keller was its actual or deemed agent and because the only reasonable inference that could be drawn from all of the circumstances was that Keller was telling prospective Coneview investors, such as the plaintiffs, that arbitrage profits could be made as a consequence of the terms that he had negotiated with the defendant in conjunction with the defendant's use of historic pricing. Mr Yesberg had turned his mind to the probability that Keller was representing to potential Coneview investors that there was a right to make arbitrage profits from these special terms, but did not know precisely what representations he was making. The plaintiffs say that it is enough that the defendant knew that the plaintiffs entered into these contracts believing that they had a right to make arbitrage profits from these special terms, and at the time that the defendant did so it had the intention to cut off whatever avenues were available for them to do so.[887] As the objective interpretation of the wording was, at least arguably, as the plaintiffs contend, it was plain that the plaintiffs invested, negatively geared and payed management and protection fees in the expectation that they would get such benefits. For these reasons the defendant cannot be excused from the obligation to speak.[888]

748 The fact that the plaintiffs may have thought there was a three day option arbitrage or performed their own analysis of how the defendant was fixing the unit price (which confirmed that it was using historic pricing), does not mean that the plaintiffs did not rely upon the representations or conduct of the defendant or assume that the defendant would continue to utilise historic pricing to enable them to make arbitrage profits. They understood that it was not recorded as a special term in any of the documentation. The plaintiffs in their written reply say that "given the known risk of arbitrage with such pricing, it would never have appeared there anyway". It was not surprising that the plaintiffs would conduct their own enquiries before investing substantial amounts of money and incurring borrowing costs and management fees. The plaintiffs regarded the continued use of historic pricing by the defendant as a critical matter. Their own researches confirmed that the defendant used historic pricing. They were satisfied that the Coneview investment was being administered as Keller had told them it was. Historical pricing was being used. Initially they did not know whether the defendant appreciated how the historic pricing was being utilised in conjunction with the special terms.

Defendant's knowledge of assumptions made by plaintiffs as to historical pricing

749 It is necessary for the plaintiffs to establish that the defendant knew or ought to have known that they assumed that the defendant was committed to historical pricing. No duty could otherwise arise.

750 As to the defendant's knowledge and understanding of the effect of the terms, the plaintiffs rely upon the rule in Jones v Dunkel and say the inference should be drawn that none of the following people could have assisted the defendant's argument that it did not know the terms conferred a right to a three day arbitrage. They did not call the Product Actuary, Mr Burton, even though there was clear evidence that he had been consulted.[889] The evidence from Mr Lyon was that any actuary would have viewed the terms as an open invitation to material loss.[890] The plaintiffs invite an inference to be drawn from the defendant's failure to call its actuary, Mr Graham Slater, who was consulted by Mr Yesberg in about July. The plaintiffs argue that the actuarial experts whom the defendant consulted must have understood the effect of the no advice and June 1999 letters**,** the three day option and the use of historical pricing in conjunction with the terms. The plaintiffs also say that the defendant failed to call Mr Owen, who on the evidence was the person responsible for the defendant's volume driven approach as reflected in the CEO's report of October 16th. It failed to call Mr Shermon, the other director involved in the consultations to close down the prosperity bond.

751 The plaintiffs rely on Gaunt v Great Boulder Mines for the proposition that estoppel may be based on common assumptions encouraged by quite general conduct. The plaintiffs say Yesberg intended to do what he could to take this advantage away. The defendant knew of the likely impact of what it planned to do on the right to arbitrage. The plaintiffs say that is more than enough to give it the right to relief by way of the estoppels or claims based upon misrepresentations. The plaintiffs submit that I should not accept Yesberg's evidence, which they describe as obfuscatory, that he did not understand that cl 1.8 gave a right to arbitrage separate from historical pricing. He admitted that he had read the no advice letter,[891] which gives an obvious right to cancel. He knew that the Coneview investors had the right to and were making frequent switches between portfolios. He went to the Product Actuary and APRA.[892] They say Yesberg knew of Keller's representations regarding rights conveyed by the special terms and it was disingenuous of him to say he did not understand how the terms were being offered. The plaintiffs say the court should test Yesberg's denial that he knew how cl.1.8 might be utilised in the context that he knew that the unlimited right to switch together with the use of historical pricing gave investors an enormous economic opportunity.[893] They say that if the defendant knew that the special terms were being represented as giving the right to arbitrage, and it had a fair idea of what it was that was being said, even if it did not know every nuance, it knew enough by that alone. They submit that to these facts must be added the deemed knowledge acquired through Keller/Taylor and the failure of the defendant to call them, or any of its senior people, including the actuaries.

752 The conduct of Yesberg between March and September demonstrates that he was suspicious of the investment from March 2000 although he made no further enquiries about the reason for its popularity. By 8 June he was aware that the special terms were being used in conjunction with historical pricing to make arbitrage profits and he was seeking ways of stopping the "risk free rort". Between June and September further premiums were accepted from prospective Coneview investors including the plaintiffs.

753 Each plaintiff entered into the investment assuming they would make arbitrage returns comparable to those which had been made earlier by Taylor, Keller and Coneview investors. They assumed that the defendant would continue to use historic pricing. Those assumptions were induced by what Keller and Taylor told them as to the defendant's use of historic pricing, the knowledge that the defendant was aware that Keller would need to know the unit price at the time of a switch, the defendant's conduct in permitting the investment to be administered in that way, in permitting Keller to market the special terms knowing that it would be suggested that arbitrage profits could continue to be made in this way, and the defendant's deliberate concealment from investors between June and September of its proposed actions.

754 The plaintiffs contend that if historic pricing was not a term of the contract the defendant had, by its conduct, led the plaintiff to suppose that the defendant would not seek to enforce its rights under the contract to move away from historic pricing.[894] The defendant played such a part in the adoption of the assumptions made by the plaintiff that it would be unjust and oppressive if the defendant were permitted to depart from it.

755 The defendant's knowledge of the plaintiffs' assumption was unambiguous. The defendant knew the new investors, including the plaintiffs, were investing because Keller had been exploiting the defendant's use of historic pricing to arbitrage and make good returns. It knew that Keller, on the plaintiffs' behalf, would continue to require the price on the day a notice to switch was given I am satisfied that the defendant and the plaintiffs knew of these matters prior to the time that the plaintiffs invested. By then these facts were apparent and known to all concerned.

756 The plaintiffs submitted in their reply that the defendant was content for the arbitrage to occur because of the increased funds under management and the flow on benefits that it brought. They submit that the defendant only decided to stop issuing new policies when it decided that the business was not as profitable as it had hoped. They submitted in reply that the Court should conclude, from the defendant's failure to call evidence of the alleged unprofitability of the business, that the business was not so disadvantageous to it as it now claimed. The plaintiffs submitted that the defendant gained not just from fee income but from its ranking as a fund manager. They pointed to evidence that the defendant's goal in 2000 was to increase the amount of funds under management and improve its perception in the marketplace by business analysts and stockbrokers.[895]

757 The plaintiffs point to the fact that the defendant took no active steps to stop the arbitrage of the Coneview investors for some three months after, by its own admission, it learned of how the Coneview investors were utilising the special terms. Its inaction, it was said, showed the defendant attached little importance to the arbitrage until it became apparent to it that the business had become marginal or unprofitable. In answer, the defendant in a schedule filed after closing submissions drew attention to the evidence of Yesberg that the annual fee income earned by the defendant on all of the Coneview policies was approximately $1.98M and that in the event that the plaintiffs' calculation of their entitlements was correct, the total cost to the defendant of the Coneview policies would be some $2.8B.[896] The plaintiffs submit that this evidence was irrelevant and unreliable. They submitted that were Yesberg's evidence credible, the defendant would have tendered documentary evidence to support it.

Conclusion

758 Amongst the factors which militate against the defendant being permitted to resile from the assumption that it would continue to use historic pricing are two matters upon which the plaintiffs placed considerable emphasis. First it was said that the defendant created the reasonable expectation that they would be able to arbitrage through the continued use of historic pricing. Second, the failure to inform the plaintiffs that it did not intend to continue using historic pricing was contrary to good practice when measured against what a reasonable insurer would have done. It was rightly contended that the defendant must bear the consequences of the combination of what it conveyed and failed to correct.[897] This was a case where the defendant was "lying by" and lulled the plaintiffs into the belief that it would not take any step to discontinue the use of historic pricing.[898]

759 The evidence left no room for doubt that the defendant was aware that the plaintiffs were proceeding upon the assumption that the defendant would continue to use historic pricing. The failure of the defendant to communicate to the plaintiffs that it did not intend to do so was in my view, unconscionable. I would conclude, even without the testimony of Yesberg and the admissions in his contemporaneous records, that the defendant knew and ought to have known that the plaintiffs were investing upon that assumption.[899] The defendant knew that the plaintiffs would be encouraged by its conduct to invest in the prosperity bonds on the basis that it would continue to use historic pricing. Keller was to be the manager of these new investments. It knew of his desire to have the unit price on the day of the switch. By the time the plaintiffs made their investments, the defendant knew or ought to have known that potential Coneview investors, who were introduced to the special terms by Keller, would be told that and would believe that the defendant would continue to use historical pricing and would be given the price on the day of the switch. It also knew or should have known that potential investors such as the plaintiffs were likely to be aware that it had continued to use historical pricing since Keller had commenced to manage the Coneview investors investments and would expect to be able to make the same returns. It knew that such investors, including the plaintiffs, would be aware that Keller had made frequent switches between the cash and the secure portfolios to make arbitrage profits as a consequence of the defendant's continued use of historic pricing.

760 The plaintiffs assumed, with good reason, based upon the information with which they had been provided by Keller and Taylor and the manner in which the defendant had conducted itself in administering the prosperity bonds, that the defendant would continue to use historic pricing. The defendant, knowing that the plaintiffs were intending to invest upon such an assumption, contrary to good conscience, refrained from informing the plaintiffs that it was not intending to do so. Such conduct gives rise to an equity sufficient to support an estoppel.

761 In my view the explanation for the defendant's conduct in accepting the plaintiffs' and other substantial investments was tolerably clear. Yesberg did not think that the special terms conferred upon the plaintiffs any enforceable right to make arbitrage profits. He did not believe that the defendant had any obligation to continue to use historical pricing. He was not aware that the plaintiffs and Keller considered that the special terms conferred a three day option to arbitrage. As Yesberg's evidence and the contemporaneous documents demonstrate, he considered that the defendant could take legitimate steps to bring the Coneview investors' capacity to arbitrage to an end. While obtaining the benefit of substantial further investment, the view which he held, and the defendant adopted, was that as Keller and the plaintiffs and other Coneview investors had not expressly required historical pricing to be a term of the prosperity bond and had not openly stated to the defendant that they assumed that the defendant would continue to use historical pricing to value units, the defendant was under no obligation to tell them that their assumption was wrong or that it would not continue to do so or that it was intending to move to a different method of valuation.

762 The defendant's conduct was unconscionable. Independently of any duty that it owed at law or any equity which may be raised in favour of the plaintiffs, it had an obligation under s.52 to disclose its intention to the plaintiffs and in failing to do so its conduct was false and misleading. The defendant knew and ought to have known that the plaintiffs were acting upon the assumption that the defendant would administer their contracts in the same manner as it had administered the other Coneview investors' policies, that it knew that they were investing upon the basis that it would continue to use historic pricing and that if it were not intending to do so it would inform them of its intentions. It had a duty in conscience to correct the false assumption upon which the plaintiffs were intending to invest and which gives rise to an estoppel. The plaintiffs' claim under s.52 of the TPA is also made out as the defendant's conduct was false and misleading.

DILUTION

763 I have found that there were no express or implied terms conferring upon the plaintiffs a right to historical pricing or the three day option. The plaintiffs have made out their estoppel claim as to the defendant's use of historic pricing and their claim under the TPA. If the special term was to be construed as the plaintiffs contend, it would be necessary to resolve questions as to dilution and segregation raised by the parties. These questions would also have to be addressed, but may not be answered in the same way, if the minimum equity flowing from an estoppel entitled the plaintiffs to the continuing benefit of historical pricing. As evidence was led by the parties in relation to these issues, some of it controversial, my assessment of that evidence should be recorded. The plaintiffs also submit that by virtue of cl 1.8, the plaintiffs still had the ability to arbitrage overnight even if the defendant were permitted to complete within the three day period and there was no historical pricing promise. This submission rests upon the notion that it would take the defendant more than one day to complete a switch so that the plaintiffs would still have the opportunity to give notice of their intention to switch and to cancel the switch before the defendant has completed it.[900] What benefits, if any, flowed if such a factual and legal conclusion is correct were questions deferred to the hearing on damages. For all of those reasons, and in deference to the parties' endeavours, I should deal with their substantial written and oral submissions on these issues.

764 Assuming the plaintiffs have a right to arbitrage, whatever its source, the plaintiffs say that the "no dilution" right is necessary because if they do not have it, their profits would not be as high as those earned up until October 2000 and would continually diminish as the value of the non-Coneview investors' policies was eroded. The difference in value of the unit price where dilution is permitted to take effect, is illustrated in the tables set out earlier in these reasons, which reflect the parties' competing views as to the effect of switching upon the unit price.

765 Dilution of the unit price will occur when further units are added to the portfolio without a corresponding addition of funds to maintain the unit price. As the Coneview investors comprised the overwhelming majority of both the cash and secure portfolios, the small amount that did not relate to Coneview policies would soon be entirely consumed, preventing the Coneview investors from continuing to make profits unless some "non dilution" right or "top up" right is to be implied. If the special terms permitted them to make arbitrage profits, the plaintiffs allege that the defendant breached the special terms by failing to contribute to the statutory fund and/or the Secure and Cash portfolios so as to avoid a dilution of the unit price consequent upon a switch.[901] The plaintiffs argue that to allow dilution is inconsistent with the objective intention of the special terms. The defendant contends that the special terms do not reveal an intention that the plaintiffs should be entitled to make large arbitrage gains in perpetuity by action to protect the Coneview investors' unit price from the effects of dilution. The defendant submits that dilution is no more than the natural result of calculating unit prices in the manner expressly provided for by the policy.

766 In the United States it has become increasingly widely known that mutual funds, which operate on a similar basis to an investment linked contract, often calculate their net asset values using stale prices which causes their daily returns to be predictable, enabling those who trade on that predictability to earn returns in excess of 20 per cent. Due to arbitrageurs trading at stale prices, the value of the units held by long term shareholders in those funds is diluted.[902] Such active trading has a meaningful economic impact on the returns of passive non-trading fund participants.[903] Fund Managers in the United States recognise the importance of limiting the number of exchanges that can be made within a fund especially if they suspect "market timing" activity.

767 The defendant claims that the prosperity bonds are administered as a "pooled arrangement" where the only inputs are premiums and the only outputs are withdrawals. In this "closed system", unit prices are "self correcting".[904] The defendant submits that the value of the assets is the result of a defined process and as the number of units on issue is a known fact, by a process of elimination the "self correcting" item is the unit price. The defendant says that as the plaintiffs' switching strategy results in an increase in the number of units held by them, without a commensurate increase in the value of the assets in the fund, the unit price must diminish accordingly. In the absence of segregation of Coneview and non-Coneview investors' funds, the diminution in the unit price would be experienced by Coneview and non-Coneview investors alike. It accepts that non-Coneview investors must be protected from such an outcome.

768 To diminish the unit price of non-Coneview investors would be contrary to undertakings given by the defendant to APRA and would, the plaintiffs submit, be contrary to the principle that a contract cannot impose a burden on a third party (the non-Coneview investors) and would mean that the defendant had deliberately acted in breach of its contracts with them. As any of these outcomes are unlawful, the plaintiffs submit that dilution necessarily requires segregation of the Coneview investors' units from non-Coneview investors' units.

769 The defendant denies that it is obliged to top-up the funds in a portfolio to avoid unit prices being diluted by the plaintiffs' arbitrage switching.[905] It submits that it is entitled to segregate the Coneview investors by isolating their group of policies from other investors. It alleges that it has segregated the plaintiffs' and other Coneview policies so that the diluting effect of the unit pricing provisions of the policies means that in the future, switching will not be as profitable for the plaintiffs as it appeared to be in the past.[906]

770 The plaintiffs contend that there can be no segregation as there is no term of the contract or statutory provision which authorises it and that segregation is prohibited by s.46 of the LIA. The plaintiffs also say that dilution or segregation would be contrary to ss.13 and 37 of the ICA. To rely on it would not be acting in the utmost good faith and would be contrary to ss.13 and 14 of the ICA as the defendant would be relying on an "unusual term" that was not disclosed to the plaintiffs in writing before they entered into the contracts with the defendant.

771 The plaintiffs also allege that the defendant has waived or abandoned any rights that the defendant alleges it has by reason of the conduct upon which the plaintiffs rely in support of their estoppel claim.[907] The plaintiffs further allege that the defendant's construction of the policy terms would be inconsistent with a range of objective background facts known to the defendant, including the fact that the defendant did not inform the plaintiffs about dilution or the notion of a finite fund.[908] The terms of the CIB and the standard prosperity bond cannot, the plaintiffs argue, be relied upon in support of the dilution argument. They argue that, as those terms are silent as to this circumstance, they cannot be used to circumscribe the rights of the plaintiffs as contained in the special terms. The special terms changed the use of switching from a strategic decision to be undertaken infrequently to one that provided a means of arbitraging. The dilution argument was raised by the defendant in the last quarter of 2000. The plaintiffs submit that no one viewing the matter independently could have reasonably thought that such a strategy, introduced to save the defendant from having to meet the costs of arbitraging gains, was justified.

772 The plaintiffs plead that it would be unconscionable for the defendant to contend that their policies did not contain an implied "top up" term by reason of the fact that the plaintiffs assumed that the term was contained in their policies, the assumption being induced by the defendant whose conduct in relation to switches and cancellations is consistent only with the existence of the "top up" term. The plaintiffs rely upon their reasonable expectation induced by what the defendant and its agents did and did not say. The defendant had not reserved the right to dilute or segregate so that the defendant is to be estopped from so contending. Alternatively, if the defendant were permitted to dilute and segregate, they say the special terms would be rendered illusory, contrary to the plaintiffs' reasonable expectations induced by the defendant, so that its conduct was misleading and deceptive giving rise to relief under s 87 of the TPA and sounding in damages.

773 The plaintiffs allege that on the proper construction of cls 3.2(a), 4.20(i) and (ii) and the other terms of each policy, they are entitled to have their benefits determined without a limitation by reason of the value of assets in the Statutory Fund No. 5 or the value of the assets of the cash or secure portfolios or as a consequence of any dilution of the unit prices of their units in those portfolios because of the increased number of units to which the plaintiffs are entitled by reason of switching between the portfolios in accordance with the special terms.[909]

774 The defendant argues that the words of cl 3.2(a) are clear, that the unit price will rise and fall in a manner which reflects the value of the assets in the portfolio from time to time, and that by virtue of cl 4.20 the unit price is to be determined by dividing the value of the assets in the portfolio by the number of units on issue. Clause 3.2(b) provides that the portfolio net value will be determined at least once every calendar month but could be determined daily or more frequently than daily. Clause 3.5 deals with portfolio cash flows and provides, inter alia, that transfers into portfolios are added to the appropriate portfolios and corresponding new units are created in those portfolios using the appropriate unit prices. Transfers to other portfolios reduce the number of units in the appropriate portfolios and corresponding amounts are deducted from those portfolios using the appropriate unit prices. Thus the defendant submits that such transfers affect the quantum of assets in the relevant asset pool so that where an arbitrage based switch is effected, this must have an affect on the unit prices.

775 Because switching at back-dated prices (that is the price on the date that the notice to switch was given) will result in the unit prices being different after the switch, from the price they would have been if the switch had never taken place, the defendant submits that dilution is no more or less than the result of applying the terms of the policy which relate to the calculation of the unit price. It is the plaintiffs who seek the intervention of the Court in relation to dilution and seek the implication of a term that the defendant is bound to "top up" the relevant pools of assets to prevent dilution. It submits that the plaintiffs' argument as to the process by which dilution might be avoided is a complex one and there could be no confidence that each of the parties are addressing precisely the same thing when they use the term "dilution". It submits that the plaintiffs' claim that by segregating and diluting, it is in breach of the terms of the policy is plainly unsustainable.

776 The plaintiffs submit that their construction of the terms of the policy is to be preferred because the defendant's construction of cl 4.20(1) is inconsistent with cl 3.2(a) which does not contemplate that any other factor, bar changes in market values of the investments, reflects in the unit price. The plaintiffs rely on the fact that cl 3.2(a) does not say that switches can affect the unit price or that a change in the number of units on issue reflects in the unit price. They rely on the relationship between changes in market values and changes in unit price as described by the use of the word "reflects". They say the use of this word implies a precise correlation between changes in asset value and changes in unit price. The plaintiffs submit that their construction argument endorses that correlation whilst the defendant's argument does not.

777 The defendant submits that there is no inconsistency between its construction of cl 4.20(i) and cl 3.2(a). It submits that dilution occurs precisely because the market value of the investments that are in the portfolio after the switch are insufficient to support a higher unit price.

778 The plaintiffs argue that if the Court required the defendant to contribute to the statutory fund each time a plaintiffs' switch was completed so as to maintain the unit price before and after the transaction, the funds contributed would be invested and would become "investments then underlying the portfolio" as contemplated by cl 4.13. Clause 3.5 does not limit the life company from contributing to a portfolio to maintain the unit price. It permits certain cash flows and supplementary protection units to be added to the portfolio. The cl 4.20(i) valuation could still be undertaken each month but the investments underlying the portfolio would include those purchased with funds contributed by the defendant and not policyholders. The resulting "hard price" would not be diluted and so cl 3.2(a) would be complied with. This would also satisfy the requirements of paragraph 4.5.2 of the Actuarial Standard PS 200.[910]

779 The plaintiffs referred to the evidence of various witnesses who they submitted recognised that the plaintiffs' construction, which obliged the defendant to contribute to the fund, enabled the clauses in the policy and good actuarial practice to be given effect in their individual terms and in harmony together.[911]

780 The plaintiffs' argument that the policy requires the defendant to contribute to avoid dilution rested on these further contentions. The portfolio value (cl 4.13) is simply the aggregate value of all investments underlying the portfolio. They submit that if the defendant was required to meet its obligation to the plaintiffs by contributing to the fund, it is clear that the obligation to contribute cash would itself constitute an asset of the fund. That asset should be taken into account when undertaking the "hard pricing" contemplated by cl 4.20(i). Clause 4.20(i) provides a mechanism for deriving a "hard price" by realigning the unit prices to actual market values. It provides the base point for the calculation of a new series of unit prices.[912] The "hard price" does not become the "unit price" declared under cl 3.2(e). The plaintiffs submit that cl 4.20(i) is no more than a machinery provision which does not confer any substantive rights. Unit transactions are never actually undertaken at the cl 4.20(i) derived "hard price".[913] The defendant's attempt to read cl 4.20(i) as conferring the right to dilute unit prices is contrary to cl 3.2(a) and relies upon an 'unusual term' which is prohibited by s.37 of the LIA. No clause restricts the class of assets valued in the "hard pricing" exercise to those assets purchased with policyholders' premiums. There is no reason to read such a restriction into the clause yet the defendant's construction is dependant upon such a reading. If such a restriction is not imported into the wording, the argument against the defendant contributing to the fund to prevent dilution can no longer be sustained. The defendant was more than a mere operator of the asset pool concerned with allocating investment risk and returns amongst participants in accordance with defined rules. The defendant held the units in the statutory fund so it could support a unit price by cancelling its own units or contributing to the fund.[914] The defendant had obligations which might require it to contribute to the fund. If policyholders took up the protection option and the defendant was required to meet it, the practice was for the defendant to contribute money to the pool in order to support the unit price. There is no difference in principle between the situation where the defendant must contribute to the pool of assets to meet its obligations to a protected policyholder and where it must do so to meet its obligations under the special terms. In both cases the terms agreed by the defendant will unfairly impact on policyholders unless the defendant contributes to the pool. This analogy is fatal to the defendant's dilution argument and relies upon the testimony of Mr Lyon.[915]

781 The defendant acknowledges that it could support a particular unit price by cancelling its own units or contributing to the fund but I see no basis for the conclusion that it is obliged to do so. It would be necessary to imply terms in order to create such an obligation. The defendant submits the analogy with a policyholder who has taken up the protection option is fundamentally flawed. The protection option places a clear obligation on the defendant to contribute in certain circumstances. The special terms do not, in the absence of any implication of a term such as the plaintiffs seek. The defendant submits that Mr Lyon's opinion rests upon his faulty and irrelevant interpretation of cl 1.8 as providing the right to arbitrage and requiring an interpretation of the standard terms that does not override that purpose.

782 Both parties referred at length to the evidence of Mr O'Brien and his opinion as to the right of the defendant to permit dilution.[916] There was something for both parties in his extensive cross-examination. He was asked to make various assumptions before his opinion was sought. Like other evidence of "expert" witnesses, I found his cross examination helpful in understanding the nature of the issues and the competing views that were open. Ultimately it remained a matter for the court to determine what constituted "good practice" and whether dilution was permitted.

783 Mr O'Brien drew upon the analogy of a unit trust in describing the pooled asset arrangement as a "closed system". The plaintiffs submit that analogy was fundamentally flawed as the policyholders, unlike unit holders in a unit trust, do not have a proprietary interest in the assets of a statutory fund. Clauses 3.1 and 3.2(a) of the policy and s 34 of the LIA make clear, the plaintiffs submit, that the policyholders do not hold any interest in the assets of the statutory fund. The defendant submits that Mr O'Brien's opinion, being on a matter of law which the court must decide, was irrelevant. It submitted the "closed system" analysis does not depend upon an analogy to a unit trust but rests upon the fact that policyholders' benefits are determined by the amounts that policyholders have contributed to the asset pool.[917]

784 Both parties recognised that industry practice would necessarily be of limited value given the unique nature of the special terms.[918] As prosperity bonds were a life insurance product containing a large investment component, the plaintiffs refer to good insurance practice where relevant and submit that it includes giving effect to policyholders' reasonable expectations. Mr Lyon testified that the defendant was obliged, as a matter of good practice, to recognise reasonable expectations which it had created in the plaintiffs by what was said and what was not said.[919] Based upon good practice and the objectives of the LIA, the plaintiffs submit that the defendant could only dilute the plaintiffs' entitlements or segregate or move to forward pricing if that was clearly spelt out in the contractual documents. The plaintiffs rely upon "good practice" and the recognition of reasonable expectations to resolve ambiguities in the contract and to imply terms to complete the contract whilst aware that they cannot contradict its terms. Testifying as to good industry practice, Mr O'Brien expressed the opinion that if the plaintiffs were merely exercising their contractual right to arbitrage, the defendant could not dilute their entitlements.[920]

785 The plaintiffs rely upon the proposition that the insurer cannot discriminate against a group of policyholders. They submit that as a matter of good practice, the defendant cannot ignore the rights and expectations of or discriminate against the Coneview investors. Thus, they argue, to avoid an adverse economic impact on other policyholders, the defendant (and therefore its shareholders) had to meet the costs of the plaintiffs successful arbitraging.

786 Save for the limited manner in which Mr Lyon's testimony as to industry practice may have been utilised in aid of construction, his opinion and those of other witnesses as to the interpretation of the special terms were recognised by the parties to be irrelevant as they concerned questions of law in relation to the construction of the unique special terms.[921]

787 Mr Lyon's evidence that there should be no dilution of the unit price because this would detrimentally affect the plaintiffs' entitlements, rested upon his construction of the special terms as conferring upon the plaintiffs the entitlement to what Mr Lyon described as "back dated switches" (the effect of the three day option as he interpreted the special terms). This led to his conclusion that the back dating cost should result in an injection of shareholder funds by the defendant.[922] It was Mr Lyon's testimony that the plaintiffs' entitlement to the back dated switch should not be diluted by the mechanics of the unit pricing system. In his opinion the defendant had an obligation under the contract to contribute to the policyholder's pool as the plaintiffs' entitlement to the back dated switch would otherwise be diluted by the mechanics of the defendant's unit pricing system.[923] It was Mr Lyon's evidence that there were situations in which the terms of a policy specifically or by necessary implication required the insurer to make contributions to the asset pool. Those situations arose were where there was a specific contractual obligation to do so or where there had been an operator error.[924]

788 The defendant submits that the processing of back dated switches in accordance with cl 1.8 does not involve operator error and on the plaintiffs' construction it is what the contract requires. The defendant submits that on the plaintiffs' construction, the special terms produce a distortion of the unit prices, and the plaintiffs cannot have no complain when those distortions occur.

789 The defendant relied upon Mr Lyon's testimony that if back dating did not affect those policyholders without special terms and was carried out in a manner consistent with the terms of the policies being switched, there was no problem.[925] The defendant says that the substance of his evidence was that the pool of assets valued to determine a "hard" unit price consisted only of the premiums paid by investors plus earnings from the investments made with money less what that had been paid to policyholders as benefits and included nothing else, assuming no contractual obligation existed on the share holders to contribute.[926]

790 Mr Lyon did not say that the defendant could only dilute or segregate if such a term was expressed in the policy. The defendant submits that the substance of his testimony was that segregation was entirely appropriate and should be carried through to whatever level of the fund was necessary to ensure that the activities of one group of investors did not affect another with different policy terms.[927]

791 Good actuarial practice as set out in paragraph 5.4.2 of PS 200, the plaintiffs argue, requires the maintenance of the unit price before and after a switch. They rely upon the testimony of Mr O'Brien who said that, as a matter of good practice, the unit price should be the same before and after a switch.[928] Hence the plaintiffs argue that if the defendant were required to meet its contractual obligations to the plaintiffs by making a corresponding contribution to the fund upon the completion of each switch, the unit price before and after each switch would be maintained, but if the dilution argument were accepted, the unit price after "hard pricing" would diminish significantly. Paragraph 5.4.2. of PS 200 is said by the defendant to have no application in the present circumstances. It submits that paragraph only applies to reports made under s.116 of the LIA, prior to policies containing particular terms being issued.

792 The plaintiffs argue that the terms of the policy should be construed so as to be consistent with the special terms and the objective of arbitraging. The benefit of the special terms would be lost entirely if the dilution argument succeeded.[929] On the defendant's construction of cl 4.20(1) it would not apply to the present contract, where arbitrage would result in increased unit entitlements without any corresponding increase in fund asset values. Similarly, the plaintiffs argue that their construction is consistent with the reasonable expectation of the parties while the defendant's is not. It is submitted that none of the plaintiffs would have invested had they been informed that their increase in units, which resulted from the exercise of their rights, automatically resulted in a corresponding dilution in the value of their units. To so administer the bonds would, it was submitted, be contrary to the reasonable expectations of the policyholder and good life company practice.[930]

Implied terms as to dilution

793 The plaintiffs allege that it was an implied term of the policy that the defendant would "maintain sufficient units on issue in the Secure portfolio and the Cash portfolio to enable the plaintiffs ... to conduct switches and cancellations ... profitably."[931] This term is said to be necessary to give business efficacy to the policies express terms and to ensure that the plaintiffs receive the benefit of their contracts.

794 The plaintiffs submitted that the defendant's shareholders would benefit at the expense of the Coneview investors if there is no obligation to prevent dilution. They say there is no corresponding diminution in shareholders' funds or assets, because the shareholders do not contribute. They point to the fact that the defendant received $180 million in premiums, collected up-front fees and would then by dilution prevent the plaintiffs getting the benefit of their arbitraging. The plaintiffs say that cannot be right as a matter of contract law and is immoral.

795 Alternatively, the plaintiffs allege that if dilution would otherwise occur, then it was an implied term of each plaintiff's policy that the defendant would make a contribution of funds sufficient to avoid any such dilution (the "top up" term).[932] The "top up" term is said to be necessary to give business efficacy to the special terms of the plaintiffs' policies which facilitate arbitraging by the plaintiffs, otherwise unit prices would fall. Such a result would mean that the defendant would be preferring its interests to those of policyholders contrary to ss.32 and 48 of the LIA and cl 4.5 of Professional Standard 200 because other policyholders would potentially bear the burden of the defendant's contracts with the plaintiffs.

796 The "top up" term is also necessary, the plaintiffs allege, because otherwise the plaintiffs might increase their number of units whilst the corresponding decrease in the unit prices resulting from dilution would make that increase worthless. They submit that the "top up" term ought to be implied because of cl 3.2(a) and cl 4.20 of their policies.[933]

797 The plaintiffs submit that the proper construction of cl 3.2(a) precludes the possibility that switching activity will impact upon unit prices and confirms unambiguously that unit prices only change with changes in the market value of the underlying investments.[934]

798 The plaintiffs seek to rely upon the opinion of a number of senior employees of the defendant as to the defendant's obligations.[935] I have explained why much opinion evidence found its way into the trial without specific objection. The relevance of most opinion evidence was not the subject of argument. Admissibility to one side, the defendant submits that the expressions of opinion as to the defendant's obligations related to the gains that the Coneview investors had made from switching that had already been carried out. The opinions did not relate to the interpretation of the special terms or the defendant's obligations into the future.

799 The defendant argues that to imply an obligation to "top up" and maintain sufficient units in the portfolio involves an unwarranted extension of the principle in Butt v McDonald[936] "that each party agrees, by implication, to do all such things as are necessary on his part to enable the other party to have the benefit of the contract."[937]

800 The defendant submits that the duty to cooperate[938] does not require the defendant to do any more than preserve the benefit of the contract. It submits that if the unit prices are diluted, the profitability of switches will be less than if the defendant is obliged to maintain unit prices at an artificial level but the policies will not be worthless. Thus, it submits that the term is not necessary to preserve the benefit of the contract. Secondly, it submits that the duty to cooperate must be assessed by reference to what is reasonable in the circumstances. The requirement of reasonableness permits a party to act so as to avoid commercial detriment to itself.[939]

801 The alleged implied terms are said by the defendant to be inconsistent with the express terms of the policies which provide for gains or losses to be made in consequence of changes in the value of the assets underlying the investors' policies. It is fundamentally inconsistent with the nature of the policies for them to provide for benefits that are artificially high by reason of contributions to the fund by the insurer. Finally, it submits that the term "dilution in unit prices" is not capable of clear expression and the quantification of the required "contribution" is unspecified. These facts tell against the implication of a term.

802 Counsel for the defendant submitted in oral argument that even if the plaintiffs had made out their construction of cl 1.8, they contracted ex-hypothesi, for the three day option right. The plaintiffs thought that a certain result followed but they did not contract for that right. Other terms of the contract expressly provide for how the unit price was to be determined. The defendant submitted that the plaintiffs effectively seek a term that says that the unit price should be calculated so as to give them the right to make 20% profit, rather than the terms specified in the contract. Neither cl 1.8 or any other provision conferred upon the plaintiffs the right to make 20% per annum compounding profits for the rest of their lives. It was submitted that it was impermissible for the plaintiffs to obtain implied terms for the purpose of producing a particular result for which they had not expressly contracted.[940] No particular return from the application of the special terms was ever stipulated. The provisions as to unit pricing within the policy did not mean that the plaintiffs would get no return if they could use the special terms as they contended. The defendant submitted that the return they could obtain would depend on how they used their right and how many other policyholders were in the same portfolio. Counsel referred to examples 1A and 1B of the defendant's example[941] and the testimony of Mrs Hoare which showed that, assuming there were other non-Coneview policyholders in the portfolio, the plaintiffs would make arbitrage - type returns higher than those made by a policyholder who just invested in one portfolio, but the returns would not be as high as those the plaintiffs are seeking.[942] The plaintiffs did not obtain a term which provided that the unit price they would receive would be for a switch where there were other unit holders already in that portfolio. They obtained no term which specified the gain to which they were entitled.[943]

803 The plaintiffs say that there is nothing in the "purpose of an investment linked contract" argument. They say the benefit of the contract was not to make unlimited switches which had the result that the net value of the plaintiffs' entitlements remained unchanged or only rose marginally. None of the plaintiffs would have invested if that were so. They submit that it is pure conjecture that topping up would impose an extraordinary burden on the defendant as no evidence was called in support of that contention.

804 The damages claimed by the plaintiffs provide some indication of the amount by which the defendant would be required to "top up" the portfolios over the life of the policy. I have referred to the competing arguments of the parties as to the evidence given by Yesberg as to the fee income earned by the defendant and the estimate of the cost of the Coneview policies to the defendant. Whatever direct or indirect benefits the defendant would derive from the Coneview investors, it would be required to contribute a very substantial sum to maintain the value of the units.

805 The implied term requiring no dilution is said by the plaintiffs to satisfy all the tests in BP Refinery. Without it, the gains by the plaintiffs would be limited to the assets in the pool. They say the special terms would be rendered illusory because they would derive no greater return than an ordinary investor. The plaintiffs say the contract is relevantly unworkable without the special term, the implication of which is reasonable and equitable. They submit that there is no inconsistency between the implied and express terms of the policies. They submit the defendant erroneously confuses the reference in cl 3.2(a) to "unit prices" with "gains". The latter do not depend only on fluctuations in the value of the underlying investments.

Conclusion

806 Assuming that cl 1.8 on its proper construction creates a three day option or the defendant was obliged to continue using historical pricing or both, dilution would not render the special terms illusory because it makes the plaintiffs' policies less economically attractive by reason of the fact that they have borrowed most of their premiums. Benefits remain in the special terms though they are substantially lower than the plaintiffs anticipated.

807 The contract is silent as to the nature of the return that is to be derived from the prosperity bond with special terms. No identifiable contractual entitlement will be lost if dilution takes place. It would not therefore be contrary to "good practice".

808 The provisions of the policy, in particular, cls 3.2(a) and 4.20 do not give rise to some inconsistency if dilution is permitted. If the correct construction of the special terms permits the plaintiffs to arbitrage, there is no inconsistency with that right for the defendant to utilise the pricing mechanism contained in cl 4.20, which would produce dilution because an increased number of units would be used to arrive at the unit price. Neither clause, in my view, precludes dilution of the unit price if cl 1.8, whether alone or in conjunction with the use of historic pricing, enables the making of an arbitrage profit. Such a construction would not be inconsistent with the arbitrage opportunity created. The fact that the special term creates an opportunity to arbitrage does not require the unit pricing mechanism to be interpreted or applied in a different manner. The class of assets to which cl 4.20 can apply is not restricted to those purchased with investor's premiums but that does not give rise to an obligation by the defendant to contribute to the pool to maintain unit prices.

809 As to the alleged implied terms I do not regard it as reasonable to require the defendant to "top up" the portfolios, as this would impose an extraordinary burden on it, not for the purpose of preserving the benefit of the contracts, but to give the plaintiffs the return they hoped for. There is difficulty in identifying with any degree of certainty the terms which upon which the parties would have settled.[944] The language of the term proposed is uncertain. It is not a term that is so obvious that it "goes without saying".

810 Applying the tests identified in BP Refinery, the policy works without such alleged terms. The special terms regarding historic pricing and the three day option would be workable notwithstanding dilution and segregation; they are merely less profitable than the plaintiffs hoped. It would be neither reasonable nor equitable that the defendant would be required to make regular contributions to the assets in the portfolios in order to maintain a particular level of unit price.

Section 14 - Insurance Contract Act - Reliance on unusual term - Section 13 - duty to act in utmost good faith

811 Part II of the Insurance Contracts Act 1984 (ICA) is entitled "The duty of the utmost good faith". Section 13 provides:

[1] Introduction to plaintiffs' written submissions, para 1.

[2] FAD para 10F, 10G - the plaintiffs say such implied terms are inconsistent with the right to arbitrage and their reasonable expectations.

[3] The defence in its final form was 64 pages and the reply 34 pages.

[4] Hadid v Redpath [2001] NSWCA 416; Cobham v Frett [2000] UKPC 49; [2001] 1 WLR 1775; R v Maxwell [1999] NSWSC 1085; Moylan v NutraSweet Co [2000] NSWCA 337.

[5] For example, some of the arguments as to the proper construction of parts of the standard terms.

[6] See for example T3135, 3446.

[7] The following facts are largely undisputed. Where the evidence was controversial I have referred to it as the evidence given by the witness.

[8] CB 185-186 and 3577-3578.

[9] CB 211-212.

[10] T 1365.

[11] T 2201.

[12] CB 194.

[13] Witness statement of Brian Beazley; CB 194.

[14] Witness statement of Greg Andrews.

[15] T 2202-3.

[16] T 2208 and 2212.

[17] Exhibit LL at 636, T 1435-6.

[18] CB 191-193.

[19] CB 200-202.

[20] Ibid.

[21] CB 204.

[22] CB 208-210.

[23] CB 1634.

[24] CB 213-214.

[25] T 2243 and 2245-2249.

[26] CB 215.

[27] CB 216 and 3045-3046.

[28] CB 213-214.

[29] CB 217-218.

[30] T 1489.

[31] CB 2993-2994 and 3048-3049.

[32] CB 219-220.

[33] CB 219.

[34] CB 3068-3087.

[35] T 173.

[36] See Exhibit H.

[37] T 557 and 595-596.

[38] CB 248.

[39] Ibid.

[40] CB 249.

[41] Exhibit F at [10-11] and T 561 and 595-596. Exhibit O at [12, 14, 15, and 20] and T 803-805, 823, 833-834 and 893.

[42] Exhibit I.

[43] T 593, 597, 602, 693, 740, 748, 1432, 1485, 1486 and 3389.

[44] T 806-807; 593-594, 597, 599 and 740.

[45] T 1411 and 1495-1497.

[46] CB 257.

[47] T 1764-1765.

[48] T 1763-1764.

[49] T 1345-1346 and 1534-1535.

[50] CB 292-311.

[51] CB at 280-282.

[52] CB 3573-3575.

[53] Witness statement of Brian Beazley.

[54] CB 289-310.

[55] CB 3195-3196.

[56] CB 320-321.

[57] CB 3194.

[58] CB 340.

[59] Exhibit J.

[60] CB 452.

[61] CB 453.

[62] CB 454.

[63] CB 455.

[64] CB 457.

[65] CB 458.

[66] Exhibit QQ(xiii).

[67] T 1656-1659.

[68] CB 350.

[69] T 2270.

[70] Exhibit UU - Version 1, draft of Business Review Specification.

[71] T 2271.

[72] Exhibit TT.

[73] Ibid.

[74] T 1721.

[75] T 568.

[76] T 571-572; 575-578; 662-664 (Tyne) and 956-962 (Tom Oates).

[77] T 657-671 (Tyne) and 808-809 and 834-835 (Hawkins).

[78] T 2271.

[79] Exhibit UU; T 1775-1777.

[80] T 1718-1719.

[81] CB 3609.

[82] T 1770.

[83] CB 431-448.

[84] Exhibit L.

[85] CB 932-946.

[86] CB 947.

[87] T 700 and 750.

[88] CB 948.

[89] CB 485.

[90] T 730-731.

[91] CB 361-369; T 957.

[92] CB 494-497; T 1391-1395 and 1717-1723.

[93] CB 494-497.

[94] CB 495.

[95] CB 495-496.

[96] CB 497.

[97] CB 494-497.

[98] CB 496; T 1507-1508 and 1829.

[99] CB 357-358.

[100] CB 452-483.

[101] CB 344-358.

[102] CB 3309-3310. See also witness statement of Beazley at [54] and Yesberg at [21].

[103] CB 512-518.

[104] T 809-818.

[105] T 778.

[106] T 814-817.

[107] CB 521.

[108] See Exhibit R at [32].

[109] CB 583.

[110] CB 583.

[111] Ibid.

[112] T 1779 and 1842.

[113] T 1739; 1842; 1845; and 1774-1775.

[114] T 1517.

[115] CB 587.

[116] Ibid.

[117] CB 588.

[118] CB 644-645.

[119] CB 645.

[120] Exhibit SS and T 1854-1856 and 1978.

[121] CB 652.

[122] T 582-583.

[123] Chief Investment Officer and National Marketing Manager (the defendant).

[124] General Manager for Marketing Retail products (the defendant).

[125] CB 3765.

[126] CB 812-828.

[127] T 585.

[128] Exhibit F; CB 912-931.

[129] T 758.

[130] CB 2978-2980 and 3743-3745. See also witness statements of Spanu at [25] and Wenzel at [4].

[131] T 2047.

[132] T 2014-2015 and 2047-2066.

[133] CB 2177.

[134] CB 1077-1081.

[135] CB 1060-1063.

[136] CB 1076-1082.

[137] CB 1083; 3628-3633.

[138] CB 1113-1114.

[139] T 2088.

[140] CB 1162-1163.

[141] CB 1162.

[142] CB 1162-1163.

[143] CB 1162.

[144] CB 1164-1165.

[145] T 734.

[146] CB 1166.

[147] Ibid.

[148] CB 1172.

[149] Exhibit V.

[150] CB 1227.

[151] T 3251.

[152] CB 3370-3371.

[153] CB 3362.

[154] CB 1473-1475.

[155] Ibid.

[156] CB 3634-3638.

[157] CB 1217-1221.

[158] CB 1362.

[159] CB 1377-1378.

[160] CB 1378.

[161] CB 1377.

[162] T 1842.

[163] CB 1363.

[164] CB 1363.

[165] CB 1364.

[166] CB 1377.

[167] CB 1379.

[168] CB 1379.

[169] CB 1379.

[170] CB 1382.

[171] CB 1384.

[172] CB 1402.

[173] Exhibit CCC.

[174] Exhibit CCC.

[175] Exhibit CCC.

[176] CB 1401.

[177] CB 1410-1411. See also witness statement of Yesberg at [60] and T 738-739 (Tyne) and T 937-940 (Hawkins).

[178] CB 1410.

[179] CB 1410.

[180] Ibid.

[181] Ibid.

[182] CB 1411.

[183] Ibid.

[184] CB 3415-3422.

[185] CB 312-313.

[186] CB 312-314.

[187] CB 1422.

[188] CB 1427-1433.

[189] CB 1430.

[190] CB 1471.

[191] CB 2485.

[192] CB 1477-1480.

[193] CB 2935.

[194] CB 2128.

[195] CB 2129.

[196] CB 3656-3657.

[197] CB 1487.

[198] CB 2130.

[199] CB 2131.

[200] CB 1492.

[201] CB 2132.

[202] CB 2133.

[203] CB 1496.

[204] CB 1499-1500.

[205] Ibid.

[206] CB 2134.

[207] CB 2396.

[208] CB 3481.

[209] CB 2937.

[210] CB 1497.

[211] CB 1509.

[212] CB 3491-3494.

[213] CB 1520-1527.

[214] CB 1532.

[215] CB 1534-1535.

[216] CB 1634-1635.

[217] CB 1654.

[218] Ibid.

[219] CB 1660.

[220] Exhibit JJJ.

[221] Exhibit M.

[222] Ibid.

[223] CB 1684.

[224] CB 1683.

[225] CB 1711-1733.

[226] Exhibit X.

[227] CB 3560-3561 and 3681-3682.

[228] T 2631 and 2647.

[229] Exhibit N at 3.

[230] Para 10(a) of the further amended statement of claim (FASOC) filed pursuant to leave granted 19 December 2003.

[231] FASOC 10(b).

[232] FASOC 10(c).

[233] FASOC 10(d) and see also the rectification pleading at paragraphs 11(a) to 11(e).

[234] FASOC 19(e).

[235] Para 10A(a), Third Further Amended Defence (TFAD) filed pursuant to leave granted 19 December 2003.

[236] TFAD para 10A(b).

[237] TFAD 10A(c).

[238] TFAD 10A(d).

[239] TFAD 10C, 10D.

[240] Stern v McArthur [1988] HCA 51; (1988) 165 CLR 489 at 514 per Brennan J; Campbell Discount Co Ltd v Bridge [1962] AC 600 at 626 per Lord Radcliffe; Gleeson CJ, "Innovations in Contract: an Australian Analysis" in The Frontiers of Liability Vol 2 (1994) P Birks (Ed), 113 at 114.

[241] [1948] HCA 20; (1948) 76 CLR 646 at 649.

[242] [1997] 1 Ch 173.

[243] This method of pricing is referred to in this judgment as "historical pricing".

[244] [1997] 1 Ch 173 at 181.

[245] [2000] 2 All ER 265.

[246] At 281-282.

[247] Lewison_, The Interpretation of Contracts,_ at [1.06] - [1.07] (2nd Ed); Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290 at 299; Di Dio Nominees Pty Ltd v Brian Mark Real Estate Pty Ltd [1992] VicRp 99; [1992] 2 VR 732 at 740-1.

[248] Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201; Hide & Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 at 313-4; Minchillo v Ford Motor Company of Australia [1995] VicRp 78; [1995] 2 VR 594 at 609.

[249] Chitty on Contracts (28th Ed), Vol 1_,_ at [12-075]; Big River Timbers Pty Ltd v Stewart (1999) BPR 16,605 at [16].

[250] Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99 at 109 per Gibbs J; TCN Channel 9 v Hayden Enterprises (1989) 16 NSWLR 130 at 146 per Hope JA (with whom Meagher JA agreed); Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland (1976) 50 ALJR 769, 11 ALR 305; Stillwell Trucks Pty Ltd v Nectar Brook Investments Pty Ltd [1993] FCA 646; (1993) 115 ALR 294, 10 ACSR 615; Spunwill Pty Ltd v BAB Pty Ltd (1994) 36 NSWLR 290 at 299 per Santow J; Hide and Skin Trading, supra at 313-314; Biscayne Partners Pty Ltd v Valance Corp Pty Ltd [2003] NSWSC 874 at [72] per Einstein J.

[251] Hardy Wine Company Ltd v Janevruss Pty Ltd [2006] VSCA 28 at [11] per Callaway JA.

[252] Hide & Skin Trading, supra at 313-314; Miramar Maritime Corporation v Holborn Oil Trading Ltd [1984] AC 676 at 682 per Lord Diplock (with whom Lords Scarman, Roskill, Brandon of Oakbrook and Brightman agreed); Wickman Machine Tool Sales Ltd v Schuler AG [1973] UKHL 2; [1974] AC 235 at 251 per Lord Reed; Kilkerrin Investments Pty Ltd v Yiu Ying Mei Pty Ltd (2001) Q Conv R 54-551 at [27]-[28] per Muir J.

[253] [2001] HCA 70; (2001) 185 ALR 152 at 155.

[254] [1997] UKHL 28; [1998] 1 WLR 896 at 912; [1997] UKHL 28; [1998] 1 All ER 98 at 114.

[255] CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232 at [9] per Nettle JA, with whom Batt and Vincent JJA agreed; Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd; [1990] VicRp 74; [1990] VR 834 at 840; Dovuro Pty Ltd v Wilkins [2000] FCA 1902; (2000) 105 FCR 476 at 491.

[256] McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 at 589; Seddon and Elinghaus, Cheshire and Fifoot's Law of Contract (8th ed, 2002) (hereafter 'Cheshire and Fifoot') at 402.

[257] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40] per curiam.

[258] Dong v Monkiro Pty Ltd [2005] NSWSC 749 at [88] per Hall J.

[259] All State Explorations v LV Beaconsfield Gold N/L [1999] NSWSC 832 at [42] per Santow J.

[260] Alex Kay Pty Ltd v GN Acceptance Corporation [1963] VicRp 66; [1963] VR 458 at 463 per Sholl J; Suncorp Metway Insurance Ltd v Landridge Pty Ltd [2005] VSCA 223; (2005) 12 VR 290 at 293 per Buchanan JA.

[261] Ibid at 296 (footnotes omitted).

[262] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 352 per Mason J; DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423 at 429 per Stephen, Mason and Jacobs JJ; ANZ Banking Group Ltd v Compagnie D'Assurances Maritimes Aeriennes Et Terrestres [1996] VicRp 40; [1996] 1 VR 561 at 565 - 566 per Hayne J.

[263] FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] VicRp 76; (1993) 2 VR 343; Ryan v Textile Clothing and Footwear Union of Australia [1996] VicRp 67; (1996) 2 VR 235 at 237-8 and 261-2 per Hayne JA;; Collins Hill Group Pty Ltd v Trollope Silverwood and Beck Pty Ltd [2002] VSCA 205 at [44] per Ormiston JA, with whom Batt JA agreed; Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153; CH Magill v National Australia Bank Ltd [2001] NSWCA 221; Seven Network (Operations) Ltd v TCN Channel 9 Pty Ltd [2005] FCAFC 144; [2005] 146 FCR 183 at [83] per Finkelstein J. See also Howtrac Rentals Pty Ltd v Thiess Contractors (NZ) Ltd [2000] VSC 415 at [207]; A_rthurson v State of Victoria_ [2001] VSC 244; Sports Vision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 at 116 per Bryson J.

[264] Seven Network v TCN 9 [2005] FCAFC 144; [2005] 146 FCR 183 at [83] per Finkelstein J.

[265] (1976) 1 WLR 989.

[266] At 997.

[267] [2002] HCA 5; (2002) 186 ALR 289.

[268] At [108]. See also the Right Honourable Lord Nicholls of Birkenhead, "My Kingdom for a Horse: The meaning of words", 121 Law Quarterly Review , October 2005, where his Lordship refers to "the ploy of counsel placing evidence of pre-contract negotiations before the trial judge on a rectification claim in the hope of consciously or sub-consciously affecting the judge's thinking on questions of construction."

[269] Howtrac Rentals Pty Ltd v Thiess Contractors NZ Ltd [2000] VSC 415 at [179]- [181] per Gillard J; Codelfa, supra per Mason J at 353.

[270] T 1083.

[271] (1971) 1 WLR 1381.

[272] Supra at 315-6.

[273] Codelfa per Mason J at 352; Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 186 ALR 289 at [10] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ.

[274] Reardon Smith Line Ltd v Hansen-Tangem [1976] WLR 989 per Lord Wilberforce at 995-6, Codelfa per Mason J at 352-3.

[275] White v Australian and New Zealand Theatres Ltd [1943] HCA 6; (1943) 67 CLR 266; Boranga v Flintoff (1997) 19 WAR 1 at 6; Spunwill Pty Ltd v Bab Pty Ltd (1994) 36 NSWLR 290 at 304-312; Codelfa at 307-8; Hide and Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310 per Priestley JA at 328.

[276] Mason A and Gageler SJ "The Contract" in Finn P.D (Ed), Essays on Contract (Sydney: LBC 1987) 1 at 11; and Sutton, Insurance Law in Australia (3rd Ed) LBC 1999 at 766.

[277] Sutton, Insurance Law in Australia at 755

[278] British Traders Insurance Co Ltd v James [1968] NZLR 1157 at 1162 per North P; AF & G Robinson v Evans Bros Pty Ltd [1969] VicRp 110; [1969] VR 885 at 895 per Starke J.

[279] Farmers Co-Op Ltd v National Benefit Assurance Co Ltd (1922) Lloyd's Rep 530 at 533 per Atkin LJ.

[280] Robertson and Thomson v French [1803] EngR 639; (1803) 102 ER 779 at 781; Halford v Price [1960] HCA 38; (1960) 105 CLR 23 at 29 per Dickson CJ; Australian Casualty Co Ltd v Federico [1986] HCA 32; (1986) 160 CLR 513 at 520-1 per Gibbs CJ.

[281] Johnson v American Home Assurance Co [1998] HCA 14; (1998) 192 CLR 266 at 274-275 [19] per Kirby J; McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579 at 600 - 603; Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; (2004) 78 ALJR 907 at 922-3; Willkie v Gordian Runoff Ltd [2005] HCA 17; (2005) 221 CLR 522; Rich v CGU Insurance Ltd [2005] HCA 16; (2005) 214 ALR 370.

[282] Supra at 602 (footnotes omitted).

[283] [2005] HCA 17; (2005) 221 CLR 522 at [51].

[284] [2005] HCA 16; (2005) 214 ALR 370.

[285] At [25] (footnotes omitted). See also Wallace-Smith v Thiess Infraco (Swanston) Pty Ltd [2005] FCAFC 49; (2005) 218 ALR 1 at [61].

[286] Botany Fork & Crane Hire Pty Ltd v New Zealand Insurance Co Ltd (1993) 44 FCR 27; Burke v State Bank of New South Wales (1994) 37 NSWLR 53 at 72; Cheshire & Fifoot at 407.

[287] Hammer Waste Pty Ltd v QBE American Tile Mutual Ltd [2002] NSWSC 1006.

[288] Cheshire & Fifoot at 278.

[289] T 3041.

[290] T 3039-40.

[291] Cross on Evidence (Aust Ed) at [29105].

[292] Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 at [87] per Heydon JA.

[293] Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp (A firm) [1997] 1 Ch 384 at 402.

[294] R v GK [2001] NSWCCA 413; (2001) 53 NSWLR 317 at 326-7; Adler v ASIC [2003] NSWCA 131; (2003) 46 ACSR 504 at [622]; Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No. 6) (1996) 137 ALR 138 at 142 per Lindgren J; ASIC v Vines [2003] NSWSC 1095.

[295] Ancher Mortlock Murray & Woolley Pty Ltd v Hooker Homes Pty Ltd [1971] 2 NSWLR 278 at 286 where Street J adopted such an approach to expert testimony in a suit for breach of copyright; Australian Competition and Consumer Commission v Lux Pty Ltd [2003] FCA 89 at [16] per Nicholson J; Brand v Digi-Tech (Aust) Ltd [2002] NSWSC 996.

[296] TFAD para 16C(a)-(d).

[297] Section L6 plaintiffs' written submissions, T 3038.

[298] O'Brien 2361-4; McMennamin 2653, Lyon 2772.

[299] T 2702, T 2710-1.

[300] AXA Group CEO Report, CB 1419.

[301] Exhibit 000 para 5.18.

[302] [2000] UKHL 39; (2000) 3 WLR 529, [2002] 1 AC 48.

[303] [2000] UKHL 39; (2000) 3 WLR 529 at 539.

[304] At 541.

[305] At 542.

[306] Fuji Finance Inc v Aetna Life Insurance Co Ltd (1996) 4 All ER 608; Maye v Colonial Mutual Life Assurance Society Limited [1924] HCA 26; (1924) 35 CLR 14; Cornish v The Accident Insurance Company (1889) 23 QBD 453; Joel v Law Union and Crown Insurance Company [1908] 2 KB 863; Blow v Guardian Assurance (1922) 22 SR (NSW) 154; Royal Insurance v Coleman (1906) NZLR 526.

[307] 35F. 3d at 382, 386 (9th Cir 1994); Gaunt v John Hancock Mutual Life Insurance Co 160F. 2d at 599; Keaton, "Insurance Law Rights at Variance with Policy Provisions" (1970) 83 Harvard Law Review 961-967.

[308] Ibid s.72.

[309] It was submitted the document was not admissible under Division 6 of Part 3 of the Evidence Act - in particular s.77.

[310] T 3386, T 3501.

[311] AS s 8.1.

[312] T 2959.

[313] T 3359.

[314] T 3062, T 3359.

[315] T 2958, T 3351.

[316] [1993] 2 Lloyd's Reps 194 at 196.

[317] [2004] FCA 1251 at [18].

[318] [1994] VicRp 53; [1994] 2 VR 32.

[319] At 67.

[320] Evans Deakin Pty Ltd v Sebel Furniture Ltd [2003] FCA 171 at [492] per Allsop J.

[321] T 3525-6.

[322] T 3355.

[323] T 3525-6.

[324] Cf para 10A, 16D plaintiffs' reply.

[325] Exhibit 000 Annexure 4 p 2.

[326] Exhibit 000 Annexure 5 IFSA Standard Number 8 p10.

[327] Exhibit CCC - Group CEO Report CB 1419-22; Griffin T 2479, O'Brien T 2358.

[328] Exhibit XXX paras 11 and 17; Exhibit FF para 24.

[329] Exhibit UUU T 532.

[330] AXA Enhancement Process Concept Document CB 315-319.

[331] CB 185.

[332] CB 211, 191, 194, 196, 208.

[333] CB 208-9.

[334] T 3148-9.

[335] T 213-4.

[336] T 3154.

[337] T 3148-9.

[338] See Exhibit QQ(v).

[339] Plaintiffs' written submission section N para 5.

[340] Ibid.

[341] T 2950, T 3515.

[342] Para 10A TFAD.

[343] Para 10A(c) TFAD.

[344] Para A.1 plaintiffs' submissions.

[345] TFAD para 10A.

[346] CB 485 - Memorandum 25 February 2000.

[347] CB 357 - email 17 March 2000.

[348] CB 260 - 1 September 1999.

[349] See for example Delta Vale Properties Ltd v Mills (1990) 2 All ER 176; Hankey v Clavering [1942] 2 KB 326; Allam & Co v Europa Poster Services [1968] 1 All ER 826.

[350] Para A1, written submissions, and T 2974.

[351] T 2974-5.

[352] T 2261; T 2280. Alternatively, the plaintiffs rely upon this evidence in support of their claim for rectification.

[353] [1900] AC 182.

[354] The nature of their evidence is considered more fully in dealing with the plaintiffs' claim for rectification by the removal of the impugned words.

[355] T 3084-5, 3399-3400.

[356] Page 19-23.

[357] O'Brien at 2355, cf at 2357-8.

[358] Beazley thought that this was at the time that the Coneview investors units were recalculated and wrongly thought in his testimony that that was in May or June 2000: T 1541, T 1551.

[359] T 2233-4, T 2261.

[360] T 2239.

[361] T 2238.

[362] T 2281.

[363] CB 294, 295, 296 and 300.

[364] T 3392.

[365] Exhibit FF para 42-46, CB 289, CB 322-339, CB 3194.

[366] T 2268.

[367] CB 370-399.

[368] Memorandum from Tyne to Hawkins dated 25 February CB 484.

[369] CB 3746.

[370] CB 458.

[371] T 3054.

[372] It says that figure is arrived at by taking the figure that the plaintiffs claim they are entitled to and multiplying it proportionately by the total number of Coneview policies.

[373] Fund Managers in the United States recognise the importance of limiting the number of exchanges that can be made within a fund especially if they suspect market timing activity.

[374] T 3059.

[375] T 3059-60.

[376] T 3430-1.

[377] T 3067.

[378] T 3072.

[379] T 3414.

[380] T 2982-3.

[381] T 2985, T 3109, T 3342.

[382] T 3108.

[383] T 2983-4.

[384] CB 1510-1.

[385] T 3523.

[386] T 3088.

[387] T 2975.

[388] FASOC para 11.

[389] FASOC para 12.

[390] FAD para 16J, 16K, 16L.

[391] T 3054, T 3062.

[392] CB 3746.

[393] T 3310-1.

[394] CB pp 2293-2302 - from 31 May 2001 to 7 June 2001 there were nine separate notices of intention to switch and cancellations of switches.

[395] FAD para 10E.

[396] CB 349; Andrews 2214; Hoare T 2552; Vanderfeen T 2579.

[397] FAD para 10C.

[398] T 3307.

[399] Clause 3.3(b).

[400] June 1999 letter, para 4; no advice letter para 4; undertaking letter para 4. The defendant's case is that these letters are not part of the investor's policies and are of no contractual force.

[401] See FASOC paras 10(6), 10(c), 10(e).

[402] TFAD para 10 D (b).

[403] Majeau Carrying Co Pty Ltd v Coastal Rutile [1973] HCA 22; (1973) 129 CLR 48 at 61.

[404] Lion T2445.

[405] FASOC para 11(e) and (f).

[406] Hawkins v Clayton (1988) 164 CLR 539 at 569-573; Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 345-6; Byrne & Frew v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 448-453; Etna v Arif [1999] VSCA 99; [1999] 2 VR 353 at [48]; Arthurson v State of Victoria [2001] VSC 244 per Gillard J at [257]- [310].

[407] Breen v Williams (1996) 186 CLR 71 at 103 per Gaudron and McHugh JJ.

[408] (1977) 180 CLR 266 at 283; See also Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 347; Khoury v Government Insurance Office of New South Wales [1984] HCA 55; (1984) 165 CLR 622 at 636; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 605-606.

[409] Davis and Seddon at 7.4.22.

[410] Codelfa Constructions supra at 346, 355, 374.

[411] Para A10.

[412] The plaintiffs' final submissions para 10.

[413] This was not said to be a representation that amounted to a term.

[414] FASOC para 12.

[415] FASOC para 11, para 12.

[416] Para 12.

[417] DJ Hill & Co Pty Ltd v Walter Wright Pty Ltd [1971] VicRp 92; [1971] VR 749 at 754.

[418] T 3462-3.

[419] Codelfa Constructions supra at 346 per Mason J.

[420] Ikin v The Danish Club "Dannebrog" Inc [2001] VSCA 123 at [17] per Brooking, Batt and Buchanan JJA.

[421] Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 605-6.

[422] See Re Ronim Pty Ltd [1998] QCA 444; [1999] 2 Qd R 172 at 180; Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 at 257-8.

[423] Cheshire & Fifoot at [10.58], [10.61].

[424] Exhibit SS para 12, Exhibit XX para 22.

[425] See Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 442-3 per McHugh and Gummow JJ; Secured Income Real Estate (Australia) Pty Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 605 per Mason J; Dallhold Investments v Gold Resources Australia (1991) 31 FCR 587 at 597 per Gummow J; Peters American Delicacy Co Limited v Champion (1928_)_ [1928] HCA 27; 41 CLR 316 at 324; National Mutual Life Association of Australasia Ltd v Chris Poulson Insurance Agencies Pty Ltd (No. 5) (Unreported, TASSC, Slicer J, 8 April 1998).

[426] Secured Income, supra at 605 per Mason J.

[427] Byrne v Australian Airlines Ltd, supra at 442.

[428] State Bank of New South Wales Ltd v Currabubula Holdings Pty Ltd [2001] NSWCA 47; (2001) 51 NSWLR 399.

[429] Particulars (a) - (k) TFAD para 10B.

[430] Plaintiffs' written submission, section G para 13.

[431] Although it does not bear upon the question of construction, this was the understanding of Tyne as reflected in his contemporaneous records and his testimony, Oates T and the defendant's representatives.

[432] Big River Timbers Pty Ltd v Stewart (1999) 9 BPR 16,605 at 16,606; GEC Marconi Systems Pty Limited v BHP Information Technology Pty Limited [2003] FCA 688; (2003) 201 ALR 55.

[433] The plaintiffs' claim for rectification is addressed later in these reasons.

[434] Para 10(a) - (e) FASOC.

[435] Para 10, 10(aa), 13A-L, 7(b) - (f) of the TFAD.

[436] Plaintiffs' written submissions, section A, Introduction para 2(c).

[437] Para 10 FASOC.

[438] Davies, Seddon & Masel (eds), Laws of Australia: Contract (Lawbook, 2002) at [7.4.17], [7.4.21], Gardiner v Grigg (1938) 38 SR (NSW) 524.

[439] Para 6 FASOC, para 10 FASOC.

[440] TFAD para 10(f).

[441] Exhibit F para 8, Exhibit O para 11.

[442] This issue is examined under the plaintiffs' claim for rectification.

[443] T 1440.

[444] T 1489.

[445] T 2376.

[446] FAI Traders Insurance Company Ltd v Savoy Plaza Pty Ltd [1993] VicRp 76; [1993] 2 VR 343 at 351; Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 at 119-120.

[447] CB 201-2. It is not pleaded as a contractual document.

[448] Exhibit FF para 22.

[449] Allied Pastoral Holdings Pty Ltd v FCT [1983] 1 NSWLR 1; Bulstrode v Trimble [1970] VicRp 104; [1970] VR 840 at 846; R v McDowell [1997] 1 VR 473 at 482; White Industries (Qld) Pty Ltd v Flower and Hart [1998] FCA 806; (1998) 156 ALR 169 at 216-9; Flower and Hart (a firm) v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 87 FCR 134 at 147.

[450] FASOC para 7(b).

[451] TFAD para 7. Mr Tyne gave evidence of these conversations at T 560-570 - Evidence in Chief, Mr Hawkins T 804-810 Evidence in Chief.

[452] T 802.

[453] Exhibit H.

[454] T 564.

[455] T 805.

[456] Exhibit I.

[457] CB 287.

[458] T 3389.

[459] The plaintiffs' written reply, para 36.

[460] FASOC, para 10

[461] The policy; the June 1999 letter**,** the no advice letter.

[462] Tyne 569, 657-8.

[463] CB 485.

[464] T 894-5, 903, 906.

[465] Plaintiffs' reply, para 68.

[466] FASOC para 11A.

[467] TFAD 11B.

[468] Maralinga Pty Ltd v Major Enterprises Pty Ltd [1973] HCA 23; (1973) 128 CLR 336; Pukallus v Cameron [1982] HCA 63; (1982) 180 CLR 447.

[469] Ibid.

[470] Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd [2001] VSCA 2; [2001] 3 VR 526 at [39] per Phillips JA.

[471] Club Cape Schanck supra per Tadgell JA at 530; per Phillips JA at 540; Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 340 per Scheller JA, at 345 per McLelland AJA; Mander Pty Ltd v Clements [2005] WASCA 67; (2005) 30 WAR 46; Oates Properties Pty Ltd & Ors v Commissioner of State Revenue [2003] NSWSC 596; Hudson Investment Group Limited v Australian Hardboards Limited & Ors [2005] NSWSC 716.

[472] Bacchus Marsh Concentrated Milk Co Ltd v Joseph Nathan & Co. Ltd [1919] HCA 18; (1919) 26 CLR 410 at 451; Issa v Berisha [1981] 1 NSWLR 261 at 264 per Powell J.

[473] Leibler v Air New Zealand (No. 2) [1999] 1 VR 1.

[474] Commissioner of Stamp Duties (New South Wales) v Carlenka Pty Ltd (1995) 41 NSWLR 329; Oates Properties Pty Ltd & Ors v Commissioner of State Revenue [2003] NSWSC 596 at [16]- [37]; Meagher, Gummow and Lehane Equity: Doctrines and Remedies (4th Ed, 2002) at [26-060]-[26-070].

[475] 5th Edition (1997), p 610 (referred to with approval in Club Cape Schanck Resort, supra at 530 per Tadgell JA, at 540 per Phillips JA).

[476] Pukallus v Cameron supra at 452 per Wilson J.

[477] Slee v Warke [1949] HCA 57; (1949) 86 CLR 271 at 281 per Rich, Dixon and Williams JJ; Pukallus v Cameron at 452 per Wilson J, 456 per Brennan J; Warburton v National Westminster Finance Australia Ltd (1988) 15 NSWLR 238 at 249 per Hope JA; Victoria Gardens Developments Pty Ltd v Commissioner of State Revenue (1999) ATC 4683 at [168] per Gillard J.

[478] Pukallus v Cameron per Wilson J at 452 and Brennan J at 456; Maralinga, supra per Mason J at 350.

[479] Pukallus v Cameron at 452 per Wilson J; Victoria Gardens Developments Pty Ltd v Commissioner of State Revenue (1999) 99 ATC 4683 at [162] per Gillard J_: Foyster v Green_ [2000] NSWSC 189 at [15] per Windeyer J; New South Wales Medical Defence Union v Transport Industries Insurance Co (1986) 6 NSWLR 740 at 753 per Clarke J; Joscelyne v Nissen [1970] 2 QB 86 at 98 per Russell LJ.

[480] Farmers Mutual Insurance Ltd v QBE Insurance International Ltd [1993] 3 NZLR 305 at 314 per Barker J.

[481] Crane v Hegeman-Harris Co Inc (1939) 1 All ER 662 at 669 per Simonds J; Slee v Warke [1949] HCA 57; (1949) 86 CLR 271 at 281; Pukallus v Cameron Supra at 452; Club Cape Schanck Resort Co Limited supra at 531.

[482] [2000] NSWSC 189.

[483] Ibid at [15].

[484] Muriti v Prendergast [2005] NSWSC 281 at [130]- [135] per White J.

[485] Plaintiffs' written submission para 24.

[486] CB 1477-8.

[487] Arthurson & Ors v State of Victoria [2001] VSC 244 at [286] per Gillard J.

[488] See FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] VicRp 76; [1993] 2 VR 343 at 350 per Brooking J; Ryan v Textile Clothing and Footwear Union Australia & Ors [1996] VicRp 67; [1996] 2 VR 235 at 237-8, 261-2.

[489] [1982] 1 NSWLR 105.

[490] Supra at 109.

[491] [2005] NSWSC 281.

[492] Crane v Hegeman-Harris Co Inc (1939) 4 All ER 68; Caird v Moss (1886) 33 Ch D 22; Nulty Securities Ltd v Carpenter (Unreported, NSWSC, McLelland CJ 10 December 1996); Market Terminal at [166]-[169].

[493] Tirango Nominees Pty Ltd v Dairy Vale Foods Ltd [1999] FCA 1299 at [14] and [103].

[494] FASOC 11G.

[495] See Francis v South Sydney District Rugby League Football Club Ltd [2002] FCA 1306 at [151].

[496] Tucker v Bennett (1887) 38 Ch D 1 at 9; Australian Gypsum Ltd v Hume Steel Ltd [1930] HCA 38; (1930) 45 CLR 54.

[497] Paragraph (f) page 6.

[498] T 2978.

[499] CB 376 para (f).

[500] Beazley Exhibit FF para 30-33.

[501] Exhibit FF para 31.

[502] CB 294-5.

[503] CB 289-310.

[504] Beazley Exhibit FF para 43.

[505] CB 322.

[506] CB 3194.

[507] CB 320-1, Beazley Exhibit FF para 45-6.

[508] Beazley Exhibit FF para 34.

[509] Exhibit FF para 54, CB 494-7, 583, 3195-6, 3309.

[510] CB 3195-6.

[511] Beazley statement filed and amended 27 November 2003 Exhibit FF para 43, para 45; CB 3194-3196.

[512] T 3392-3.

[513] Plaintiffs' written submission para 25; plaintiffs' reply para 66; T 3457.

[514] CB 196.

[515] T 1551; Sydney Transcript LL 653-4.

[516] T1527, T 1535-8.

[517] See defendant's written submission para 100.

[518] Crane v Hegeman-Harris Co Inc (1939) 1 All ER 662 at 664-5 per Simonds J; Australian Gypsum Ltd v Hume Steel Ltd [1930] HCA 38; (1930) 45 CLR 54 at 66-7; GPI Leisure Corporation Ltd v Herdsman Investments Pty Ltd (1990) 9 BPR 17461 at 464 per Young J.

[519] Leibler v Air New Zealand Limited (No. 2) [1991] VicRp 1; [1991] 1 VR 1 at [38], [49], [73].

[520] (Unreported, NSWSC, Giles J, 2 April 1997) at 14.

[521] (1991) 22 NSWLR 389 at 418-9 per Handley JA.

[522] FASOC para 11(c).

[523] Defendant's written submission para 110 footnote 193. In a schedule of inaccuracies to the defendant's written submissions the plaintiffs take issue with the assertion contained in para 110.

[524] Plaintiffs' reply para 66 - the transcript references cited do not appear to support this proposition.

[525] CB 3746-7, 3658.

[526] FASOC 10(b, (d) and (e).

[527] FASOC para 13B, para 13G - no submissions were addressed to the conceptual difficulty arising from the pleading that the implied terms were the subject of agreement between the agent and the plaintiffs.

[528] FASOC para 11(e) and (f).

[529] Plaintiffs' written submission, A(d).

[530] TFAD para 13S(a)-(c).

[531] TFAD para 13A(a)-(d).

[532] TFAD para 13A(f).

[533] TFAD para 13B.

[534] TFAD para 13A(g), (h), para 7(b)-(g).

[535] TFAD para 13I, para 13K.

[536] TFAD para 13K.

[537] SFAD para 13A(f).

[538] SFAD para 13K.

[539] SFAD para 13A-13L.

[540] SFAD para 13D.

[541] CB 496.

[542] See Schedule of Errors in plaintiffs' oral closing submissions, pp 3-4.

[543] FASOC para 13A.

[544] [1892] 2 QB 534.

[545] GE Dal Pont Law of Agency (2001) at [4.4]; Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 132 per Clarke and Cripps JJA.

[546] Beazley Exhibit FF para[65]-[67]; Yesberg Exhibit SS para [84]-[86], Andrews Exhibit XX para [43-5].

[547] Branwhite v Worcester Works Finance Ltd [1969] 1 AC 552 at 587 per Lord Wilberforce; FMB Reynolds, Bowstead on Agency (15th Ed., 1985) p 42.

[548] Cousens v Grayridge Pty Ltd [2000] VSCA 96 at [4]- [7] per Charles and Chernov JJA and the cases therein discussed.

[549] Cousens v Gray Ridge at [6].

[550] [1970] 1 QB 311 at 323-4.

[551] FASOC para 13A - particulars (a) and (b).

[552] FASOC para 13A - particular (c).

[553] FASOC para 13A - particular (d).

[554] TFAD para 13A(e).

[555] [1993] VicRp 86; [1993] 2 VR 469 at 486-7 per Marks J (with whom Fullagar and Ormiston JJ agreed).

[556] Ibid at 485-6.

[557] FASOC para 13A(e), (f), (g); TFAD para 13A - (e), (f), 13D.

[558] FASOC para 13A - particular (h), para 12.

[559] FASOC para 13B.

[560] FASOC para 7(b).

[561] FASOC para 13D, 13E, 13F.

[562] T 3418-26

[563] [1998] 3 VR 133.

[564] FMB Reynolds Bowstead & Reynolds on Agency (17th Ed. 2001) at [8-013]; Dal Pont, Law of Agency, (2001) at [20.22].

[565] Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 503 per Diplock LJ; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising Co Pty Ltd [1975] HCA 49; (1975) 133 CLR 72 at 78; EFM Pty Ltd v N.Z. Steel (Australia) Pty Ltd [1998] VSC 194 at [84].

[566] [1985] 2 Lloyd's Rep 36 at 41.

[567] Bowstead on Agency (15th Ed) at 284.

[568] EFM Pty Ltd, supra at [86].

[569] Crabtree-Vickers [1975] HCA 49; (1975) 133 CLR 72 at 78.

[570] Combulk Pty Ltd v TNT Management Pty Ltd [1992] FCA 342; (1992) 37 FCR 45 at 53ff, and the cases therein referred to; Powercor Australia Ltd v Pacific Power [1999] VSC 110 at [1234].

[571] Lysaght Brothers & Co Ltd v Falk (1905) 2 CLR 421; Combulk Pty Ltd v TNT Management Pty Ltd [1993] FCA 89; (1993) 41 FCR 59 at 66-67.

[572] Lysaght Brothers & Co Ltd v Falk, supra per Griffith CJ at 430-1; O'Connor J at 439; Bowstead on Agency at 303; Combulk Pty Ltd, supra at 66-67.

[573] Hoare v McCarthy [1916] HCA 65; (1916) 22 CLR 296 at 303 per Griffith CJ, 305 per Isaacs J; Geissler v Accro Motors Pty Ltd (1955) 73 WN (NSW) 31 at 33 per Roper CJ in Eq Herron & Clancy JJ.

[574] FASOC para 13D, 13E, 13FF, 13F and 13G.

[575] Steutel v Kimple Pty Ltd [2005] VSCA 312 at [39] per Nettle JA

[576] Tyne - Exhibit F para 18, 56(g); Hawkins - Exhibit O para 30(d)(iii); P Oates - Exhibit R para 24.

[577] Freeman and Lockyear v Buckhurst Park Properties (Magnal) Ltd (1964) 2 QB 480 at 503 per Diplock LJ; EFM Pty Ltd v New Zealand Steel (Australia) Pty Ltd [1998] VSC 194 at [83] per Chernov J.

[578] [1988] NZCA 113; [1989] 1 NZLR 257 at 274 per Tipping J; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd [1975] HCA 49; (1975) 133 CLR 72 at 80 per Gibbs, Mason and Jacobs JJ and Powercor Australia Ltd v Pacific Power [1999] VSC 110 at [1230] per Gillard J.

[579] The defendant's written submission - para 10 footnotes 34-41.

[580] Freeman and Lockyear v Buckhurst Park Properties, supra at 505 per Diplock LJ; Cousens v Grayridge Pty Ltd [2000] VSCA 96 para [45] per Batt JA; Geissler v Accro Motors Supra at 32 per Roper CJ; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Co Pty Ltd [1975] VicRp 59; [1975] VR 607 at 615 per Lush J - approved by the High Court [1975] HCA 49; (1975) 133 CLR 72 at 78 per Gibbs, Mason and Jacobs JJ.

[581] FASOC para 13AA.

[582] A comparison of the paragraphs of Tyne and Hawkins' statements and their testimony at T 558, 562 and 803-5 leaves the evidence in an unsatisfactory state.

[583] CB 344 - 350, T 992.

[584] Egyptian International Foreign Trade Co v Soplex Wholesale Supplies Ltd [1985] 2 Lloyd's Rep 36 at 41 per Browne-Wilkinson LJ; Prospect Industries v Anscor Pty Ltd [2003] QSC 296 at [73] per Philippides J.

[585] Lysaght Bros v Falk Supra; Powercor Supra; Alliance Acceptance Co Ltd v Oakley (1988) 48 SASR 337 at 348 per Johnston J; Alliance and Leicester v Hamptons; Edgestop Ltd [1993] 1 WLR 1462 at 1480 per Mummery J.

[586] GE Dal Pont, Law of Agency (2002) at [20.35].

[587] Equiticorp Finance Ltd v Bank of New Zealand (1993) 32 NSWLR 50 at 132 per Clarke and Cripps JJA.

[588] The plaintiffs rely on a memorandum of Yesberg of 18 October 2000 recording Mr Hawkins' view of the importance of the representations and his decision to invest: CB 1410.

[589] CB 484-6; T 679-680.

[590] T 670, 679-81.

[591] T 757.

[592] T 1391; CB 464 - Investor Management Agreement clause 10.3 which refers to a confidentiality obligation upon investors.

[593] As to the ambit of the confidentiality regime see the defendant's written submission para 16(iv).

[594] T 896-8, T 944.

[595] T 956, CB 3615-21.

[596] Exhibit R para 42, T 1033.

[597] Exhibit F para 18.

[598] Defendant's submission part 1 para 20.

[599] FASOC Para 13FF.

[600] SFAR T 42, T 46.

[601] Section E para 2.

[602] The defendant's written reply para 33.

[603] Para 8AA.

[604] TFAD para 13A.

[605] Section 3 and item 245 of Schedule 1 to the FSR Act.

[606] Corporations Act ss.1431(1)(b), 1432(1); Exhibit XXX being the Australian Financial Services Licence granted under s.913B of the Corporations Act.

[607] (1986) 44 SASR 413.

[608] Hucks v Slann (1980) 24 SASR 535 at 541-2 per Cox J.

[609] [1971] HCA 29; (1971) 125 CLR 228 at 246 per Gibbs J (with whom Menzies, Windeyer and Walsh JJ agreed).

[610] Esber v Commonwealth [1992] HCA 20; (1992) 174 CLR 430 at 445; Pearce & Geddes - Statutory Interpretation in Australia (5th Ed, 2001) at [6.9].

[611] T 518. See Manufacturers Mutual Insurance Ltd v John H Boardman Insurance Brokers Pty Ltd [1994] HCA 16; (1994) 179 CLR 650 at 662.

[612] Taylor v Smith [1926] HCA 16; (1926) 38 CLR 48 at 59 per Higgins J, at 60 per Rich J; Hamilton Panel Works v Thomas [1963] NZLR 771 at 774 per Woodhouse J; Sinclair v Hudson (1995) 9 BPR 16,269 at 262-3 per Windeyer J; Marsh v Joseph [1897] 1 Ch 213 at 246-247; Brockway v Pando [2000] WASCA 192; (2000) 22 WAR 405 at 433.

[613] Lithgoe v Vernon [1860] EngR 373; (1860) 5 H&N 180; Gunn v Roberts (1874) LR 9 CP 331 at 335 per Brett J; Marsh v Joseph at 246-7 per Russell LCJ; Brockway v Pando ibid.

[614] FASOC para 13C.

[615] FASOC para 13A.

[616] FASCOC para 13A(a).

[617] FASOC para 13A(b).

[618] FASOC para 13A(e).

[619] FASOC para 13A(h).

[620] Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd [1990] HCA 11; (1990) 169 CLR 279 at 286-7 per Mason CJ and Gaudron J, 288 per Brennan J, at 293 per Dawson J; Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658 at 664 per Murphy, Wilson, Brennan, Deane and Dawson JJ; Water Board v Moustakas [1988] HCA 12; (1988) 180 CLR 491.

[621] TFAD para 13H(a), para 7(b) - (g).

[622] TFAD para 13H(b), (c).

[623] Beazley Exhibit FF para 65, Yesberg Exhibit SS para 84, Andrews Exhibit XX para 43.

[624] This appears to be the conduct referred to in the FASOC para 12.

[625] Exhibit QQ(xvi) and (ix).

[626] Exhibit QQ (xvii).

[627] Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634 at 658.

[628] El Ajou v Dollar Land Holdings Ltd [1993] 3 All ER 717.

[629] Re Chisum Services Pty Ltd (1982) 7 ACLR 641 at 650 per Wootten J.

[630] Fraser Henleins Pty Ltd v Cody [1945] HCA 49; (1945) 70 CLR 100.

[631] TFAD para 13H(e), (f).

[632] CB 219-220, 3743-3745; Spanu - T 1557.

[633] CB 2874-5, 2924, 1423.

[634] Petersen v Moloney [1951] HCA 57; (1951) 84 CLR 91 at 101 per Dixon, Fullagar and Kitto JJ; McLachlan-Troup v Peters [1983] VicRp 5; [1983] 1 VR 53 at 59 per Beach J; New Era Installations Pty Ltd v Don Mathieson & Staff Glass Pty Ltd [1999] FCA 475; (1999) 31 ACSR 53 at 65 per Katz J; BHP Trading Asia Ltd v Oceaname Shipping Ltd (1996) 67 FCR 211 at 222 per Hill J.

[635] See Defendant's final submissions as to some of the alternative bases upon which the conduct may be explained. Part 1 para 25.

[636] TFAD para 13H(g).

[637] FASOC paras 11F - 11L.

[638] FASOC para 11N.

[639] Second Further Amended Reply (SFAR) paras 6 - 6I.

[640] SFAR para 6J.

[641] SFAR para 11.

[642] SFAR para 12.

[643] [1981] FCA 117; (1981) 36 ALR 567.

[644] Cheshire and Fifoot at 964.

[645] [1993] HCA 27; (1992-3) 182 CLR 26.

[646] FASOC para 12.

[647] The defendant referred to Cheshire and Fifoot at [4.32].

[648] SFAR paras 6, 11.

[649] The Commonwealth v Verwayen (1990) 170 CLR 394 at 421; Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634; Immer (No. 145) supra.

[650] FASOC para 12.

[651] Immer (No 145), supra.

[652] SFAR para 6(h), 6I.

[653] Grundt v Great Boulder Pty Goldmines Ltd [1937] HCA 58; (1937) 59 CLR 641 at 674.

[654] SFAR para 6.

[655] SFAR para 6(f), (g).

[656] SFAR para 6D.

[657] SFAR para 6(e), (f), (g).

[658] See Gray v National Crime Authority [2003] NSWSC 111 at [154] per Austin J, who refers to estoppel by encouragement and acquiescence.

[659] Verwayen, supra at 413.

[660] Grundt v Great Boulder Pty Goldmines Ltd [1937] HCA 58; (1937) 59 CLR 641; Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507 at 547 per Dixon J; Waltons Stores, supra.

[661] [1933] HCA 61; (1933) 49 CLR 507 at 547

[662] ibid at 547

[663] Con-stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226 at 244 per Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ_._

[664] Con-Stan Industries; Santos & ors v Delhi Petroleum Pty Ltd [2002] SASC 272

[665] Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 435 per Deane J; Caboche v Ramsay (1994) 119 ALR 215 at 238 per Gummow J; Santos v Delhi Petroleum supra at [489]; Riseda Nominees Pty Ltd v St Vincent's Hospital [1998] 2 VR 70 at 77per Callaway JA with whom Brooking and Kenny JA agreed; Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 at 399.

[666] Ibid at 425.

[667] Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 at 121-5 per Gleeson CJ, McHugh, Gummow and Callinan JJ.

[668] [1999] VSCA 109; [1999] 3 VR 712

[669] SFAR para 6.

[670] (1877) 2 App Cas 439 at 448

[671] supra, at 449.

[672] FASOC para 12.

[673] Plaintiffs' written submissions A.1, A.2(f).

[674] T.2865

[675] CB 1419-22.

[676] Griffin T.2477-2480.

[677] T 2950-2951.

[678] [1998] 3 VR 133 at 145

[679] David Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 583 per Brennan, Deane, Gaudron and McHugh JJ.

[680] TPA, s.84; ASICA, s.12GH.

[681] Waltons Stores supra, per Brennan J at 427.

[682] [1986] HCA 68; (1986) 162 CLR 340 at 355.

[683] Jones v Dumbrell [1981] VicRp 21; [1981] VR 199; Hughes Aircraft Systems International v Air Services Australia [1997] FCA 558; (1997) 146 ALR 1.

[684] Jones v Dumbrell, supra, per Smith J at 203.

[685] CB 484.

[686] T 667,669

[687] See the Schedule of Errors in the plaintiffs' reply submissions, para 69 p.43.

[688] Taylor was responsible for drafting somedocuments concerned with Truemont.

[689] Plaintiffs' written reply in the "Schedule of Errors in the Plaintiffs' Reply Submissions" - para 69 p.26 are not relevant to the evidence of Beazley and Andrews as to the view they held.

[690] Plaintiffs written reply, para 70.

[691] Exhibit TTT.

[692] Exhibit SSS.

[693] Plaintiffs' written reply, para 69.

[694] T 669

[695] SFAR para 72.

[696] Tom Oates - para 24(e).

[697] T.1198, 1224.

[698] Plaintiffs' written submission, para 15.

[699] FASOC para 12(iii).

[700] Johan Steyn, "Contract Law: Fulfilling the Reasonable Expectations of Honest Men" (1997) 113 Law Quarterly Review 433 at 434.

[701] October 2005 Vol 121 LQR at 580.

[702] The making of risk free arbitrage profits in this type of investment setting have for some time been strongly disapproved in the United States where it has consistently been recognised as an immoral form of commercial activity.

[703] Waltons, supra, at 397 per Mason CJ and Wilson J, 462 per Gaudron J; Australian Securities Commission v Marlborough Goldmines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 506-7 per Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ; Murphy v Overton Investments Pty Ltd [2001] FCA 500; (2001) 112 FCR 182 paras [63], [68]. per Branson J.

[704] Tyne T.650, 667, Hawkins T.847, 904.

[705] JC Houghton & Co v Nothard, Lowe and Wills [1928] AC 1 at 14-15 per Viscount Dunedin with whom Lord Atkinson agreed, 18-19 per Viscount Sumner, at 33 per Lord Carson.

[706] FASOC para 7, SFAR para 6(c).

[707] FASOC para 13A, para 13B.

[708] SFAR para 6(e), (f), (h), para 7(b), (c).

[709] Spanu T 1557-8; Schedule of errors in plaintiffs' reply submissions, Section B, para 35, p 19, para 53, p 24.

[710] Defendant's written submission para 69, p.26.

[711] The circumstances in which the implied term may operate are considered more fully later in this judgment.

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Judgment (459 paragraphs)

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Cases Cited (152)