ABL Custodian Services Pty Ltd v Kunz - [2016] SADC 145

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
ABL CUSTODIAN SERVICES PTY LTD AND ORS v KUNZ
[2016] SADC 145
Judgment of His Honour Judge Slattery
2 December 2016
CONTRACTS
EQUITY - GENERAL PRINCIPLES - EQUITABLE ASSIGNMENTS - WHAT AMOUNTS TO AN EQUITABLE ASSIGNMENT - PARTICULAR CASES - POWER OF ATTORNEY
ESTOPPEL - ESTOPPEL BY DEED OR CONVENTION
The plaintiff ABL Custodian Services Pty Ltd is one of a group of plaintiffs in this action and claims to be the assignee of a tranche of loans made by Great Southern Finance Pty Ltd (GSF) in the 2005/2006 financial year. Those loans were connected to investments in agricultural and forestry products promoted by the Great Southern Group as part of a managed investment scheme that, inter alia, gave certain taxation advantages to investors.
The plaintiffs claim and the defendant denies that in or about 22-28 June 2006 the defendant entered into a loan agreement with GSF to borrow a total of $197,200 for use by him in the investment of $195,000 in forestry products in the Great Southern Scheme claims. The plaintiff contends and the defendant denies that the terms of that loan were for interest only payments for three years and then interest and principal payments for a period of seven years. The applicable interest rate alleged by the plaintiffs is 11.5 percent per annum.
The plaintiffs claim that the terms of the loan were recorded in a Loan Agreement dated 1 July 2006 that was executed on behalf of the defendant by two officers of GSF under a power of attorney given by the defendant.
The plaintiffs claim that the power of attorney was granted under the hand of the defendant when he signed an application to GSF for a loan under which those officers were authorised to execute a Loan Agreement Form including the completion of blanks in the schedule of the Loan Agreement. The plaintiffs contend and the defendant denies that a copy of the Loan Agreement as executed under the power of attorney was sent to the defendant on or about 6 August 2006.
In or about June 2006 the defendant executed an authority for the direct debit from his bank account of amounts for interest on a loan of $195,000 at a rate of 11.5 percent per annum. Interest on that loan at that rate was deducted from the defendant’s bank account from 31 July 2006 to 30 April 2009 when the defendant terminated the authority on his bank account.
In July 2009 the defendant became involved as a group member in an action commenced under Part 4A of the Supreme Court Act 1986 (Victoria) commenced in the name of one Clarke. The defendant remained in those proceedings as a group member and did not opt out of them when the choice was given to him by order of Croft J in the Victorian Supreme Court. In that action the plaintiff parties sought to be relieved from their obligations to repay loans required to be paid under the terms of those loan agreements. In those group proceedings the plaintiff and group members actually or impliedly acknowledged the existence of loan agreements and sought to be relieved from the burdens under them.
Two days before the judgment in the Victorian proceedings was to be handed down by Croft J, the parties settled that action. The terms of the deed of settlement required the plaintiff in that action and so, the group members, to acknowledge the existence, efficacy and binding nature of their loan agreements. The defendants in that proceeding, which included all the plaintiffs in these proceedings, were required to forbear from bringing an action on those loan agreements for a period of 30 days and also to reinstate the bank accounts of the borrowers with a credit equivalent to the overdue interest rate charged by the bank interests under the loan agreements. Those defendant bank interests in the Victorian proceedings are the same entities that bring this action as plaintiffs. Croft J approved that settlement in December 2014. In delivering his judgment approving the settlement under the deed of settlement, Croft J also delivered his judgment in the principal proceedings in which the claim of the plaintiffs and the group members including the defendant in this action, wholly failed.
The bank account of the defendant was credited with the equivalent amount of the debit for overdue interest charged by the lender to that account. The plaintiffs then forbore for 30 days from commencing these proceedings.
In this action the defendant pleads not indebted on the basis that he did not sign any loan agreement, that he did not make any such loan agreement or enter into any agreement at common law for a loan and he is not indebted to the plaintiffs or any of them. The plaintiffs contend that an Anshun estoppel arises against the defendant which prevents him from raising such defences in these proceedings following the deed of settlement of the Victorian proceedings.
The defendant also denies that he ever received loan funds or made any investments as alleged in timber products. The defendant contends that any such loan was taken by a company associated with him called Total Hoarding Supplies Pty Ltd. The defendant contends that this company is the debtor under any such arrangement and that no agreement in any form was ever made by him with the plaintiffs or any of them or any assignor or assignee of them.
Whether there was a loan agreement between the defendant and the plaintiffs or any assignor of the plaintiffs in 2006 and if so, the parties to that loan agreement and its terms.
Whether the defendant became the investor in woodlots under the Great Southern Plantation Scheme using loan funds provided by GSF.
Whether the defendant was bound by a loan agreement dated 1 July 2006 executed on his behalf under a power of attorney.
Whether and to what extent the defendant observed the terms of such loan.
Whether an Anshun estoppel arises against the defendant because of any decision of Croft J in the Victorian proceedings which would preclude the defendant from pursuing his pleaded defences.
Whether any form of estoppel arises following the settlement of the Victorian proceedings under a deed of settlement and if so on what basis.
Whether the plaintiffs or any of them are entitled to judgment in this action and if so on what basis.
Whether on any basis the plaintiffs or any of them are entitled to claim for overdue interest and an indemnity for solicitors costs of recovery and if so on what basis.
Held:
1. In June 2006 GSF agreed to make available and did provide to the defendant loan funds of $195,000 plus expenses repayable as to interest over a three year period and at the rate of 11.5 percent per annum and then interest at the same rate and principal in the following seven years for the purpose of an investment by him in woodlots in the Great Southern Scheme.
2. At common law a loan for $195,000 plus $2,200 for expenses, $197,200 in total, was established and implemented between the defendant and the lender GSF before 30 June 2006 and the defendant was allocated woodlots as a grower in that scheme.
3. Interest was paid by the defendant upon that loan at the rate of 11.5 percent per annum from 31 July 2006 to 30 April 2009 under the direct debit authority given by the defendant upon his own bank account.
4. Soon after 6 August 2006, the defendant received from GSF a copy of a loan agreement executed by persons holding a power of attorney granted under the application for term finance signed by the defendant. The donees of the power of attorney were empowered to complete the blanks in the schedule to that loan agreement “consistent with the provision of this finance application”.
5. There was no agreement on an overdue interest rate consistent with any finance application, and so the loan agreement dated 1 July 2006 was not completed by the donees of the power in a manner consistent with the finance application.
6. In so purporting to exercise their authority, the donees of the power acted in breach of power and failed to fulfil their fiduciary duties owed to the defendant.
7. The judgment of Croft J in the Victorian proceedings that was attached to the judgment of Croft J approving the compromise does not, without more, create an Anshun estoppel against the defendant litigating his defence in these proceedings.
8. In the Victorian proceedings, the defence of the defendants in this action was not separately ventilated by the plaintiff Clarke on behalf of the defendant as a group member and so no aspect of any judgment upon the claim brought by Clarke creates any form of Anshun or issue estoppel against the defendant raising his defences in these proceedings.
9. In the settlement of the Victorian proceedings, the defendant bound himself to the deed of settlement made by Clarke with the defendant parties, which included the plaintiffs in these proceedings.
10. The deed of settlement of the Victorian proceedings acknowledged the existence and enforceability of the same loan agreement entered into by the defendant with GSF that he sought to avoid in those proceedings.
11. The loan agreement which the defendant personally sought to have set aside in the Victorian proceedings was the agreement of 1 July 2006 executed under the power of attorney.
12. As a result of the terms of the deed of settlement of the Victorian proceedings, the defendant formally acknowledged the existence and enforceability of that loan agreement and that he was liable thereunder.
13. Under the deed of settlement of the Victorian proceedings, the plaintiffs reinstated the bank account of the defendants with a credit equivalent to the amount of overdue interest debited to that account following the termination of payments of interest by the defendant on and after 30 April 2009. The plaintiffs also forbore from bringing any action against the defendant on this loan for a period of 30 days.
14. Notwithstanding that as at 1 July 2006 the defendant was not bound to pay the overdue interest amount, the acceptance by the defendant of the existence and enforceability of that loan agreement in its terms in the deed of settlement of the Victorian proceedings and the performance by the plaintiffs of their obligations to the defendant under that deed of settlement means that an estoppel by deed, or in pais, or an estoppel by convention arises against the defendant such that he is estopped from denying his liability under that loan agreement.
15. The plaintiff being the owner as assignee of the rights under that loan agreement is the plaintiff ABL Custodian Pty Ltd.
16. Judgment against the defendant in favour of ABL Custodian Pty Ltd in the following terms:
16.1 for the outstanding amount of the loan in the sum of $197,200;
16.2 interest at the rate of 14.5% per annum from a date calculated by reference to the deed of settlement of the Victorian proceedings in which a credit was posted to the defendant’s bank account of the sum of $41,578.14;
16.3 the defendant shall pay the costs of the plaintiff ABL Custodians Pty Ltd on an indemnity basis under the terms of the loan agreement.
Supreme Court Act 1985 (Victoria) Part 4A, s 33C(1), s 33H, s 33Q, s 33R, s 33V, s 33ZB, 33ZF; Evidence Act 1936 (SA) s 53 ; Corporations Act 2001 s 127; Everest and Strode's Law of Estoppel 3rd ed (1923); Dal Pont and Chalmers, in their text “Equity and Trusts in Australia”, Thompson Law Book Company, 4th ed. paragraph 10.10; Powers of Attorney and Agency Act 1984 (SA) s 5(1), referred to.
Peter Clarke as Trustee of the Clarke Family Trust and Ors (and other plaintiff’s names are contained in a schedule attached) v Great Southern Finance Pty Ltd (receiver and managers appointed) (in liquidation) and Ors. [2014] VSC 334; Timbercorp Finance Pty Ltd (in liq) v Collins; Timbercorp Finance Pty Ltd (in liq) v Tomes [2016] HCA 44; Girlock (Sales) Pty Ltd v Hurrell (1982) 149 CLR 155; BT Securities Limited v Lobel [2011] NSWSC 335; Gibbons v Pozzam [2007] SASC 99; Gibson v Manchester City Council [1978] 1 WLR 520; Armor Coatings (Marketing) Pty Ltd v General Credits (Finance) Pty Ltd (1976) 17 SASR 259; Port of Melbourne Authority v Anshun Pty Ltd (Anshun) (1981) 147 CLR 589; Wong v Silkfield Pty Ltd (1999) 199 CLR 255, discussed.
Jones v Dunkel and Anor (1959) 101 CLR 298; Richard Evans & Co Ltd v Astley [1911] AC 674; Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1; Holloway v McFeeters (1956) 94 CLR 470; Luxton v Vines (1952) 85 CLR 352; Bendigo and Adelaide Bank Limited & Anor v Ling [2016] SADC 34; Tomlinson v Ramsey Food Processing Pty Ltd (2015) 89 ALJR 750; Ramsay v Pigram (1968) 118 CLR 271; Woodcrot-Brown v Timbercorp Securities Limited (2011) 253 FLR 240; Woodcrot-Brown v Timbercorp Securities Limited (in liq) (2013) 96 ACSR 307; Greer v Kettle [1937] 4 All ER 396; McCathie v McCathie [1971] NZLR 58; Dabbs v Seaman (1925) 36 CLR 538; Helmich and Taylor v Thorpe and Strathdee [1997] 3 NZLR 86; Discount and Finance Limited v Gehrig’s NSW Wines Limited (1940) 40 SR (NSW) 598; Re Bond (1992) 25 ATR 61; Offshore Oil NL v Southern Cross Exploration NL (1995) 3 NSWLR 337; Thomson v Palmer (1933) 49 CLR 507; Grundt v Great Boulder Pty Gold Mines Limited (1937) 59 CLR 641; Newbon v City Mutual Life Assurance Society Limited (1935) 52 CLR 723 ; Waltons Store (Interstate) Limited v Maher (1988) 164 CLR 387; Republic of India v India Steamship Co Limited (No. 2) [1998] AC 878; Conn-Stan Industries of Australia Pty Ltd v Norich Winterthur Insurance (Aust) Limited (1986) 160 CLR 226; Mirvac Homes Pty Ltd v Parramatta City Council (No. 3) (1999) 111 LGERA 233; Sweene v Howard [2007] NSWSC 852; Jacobs v Morris [1902] 1 Ch 816; Warman International Limited v Dwyer (1995) 182 CLR 544; Blackman v Thompson [1994] ANZ ConvR 279, considered.

ABL CUSTODIAN SERVICES PTY LTD AND ORS v KUNZ
[2016] SADC 145
Case summary and result

In this action the plaintiff ABL Custodian Services Pty Ltd (Custodian) seeks to recover a loan that it alleges was made in 2006 to the defendant by Great Southern Finance Pty Ltd (in liq), the benefit of which has now been assigned to Custodian. The defendant denies that in 2006 the plaintiffs or any assignor of the plaintiffs made any loan to him in the amount claimed or in any amount. There are several plaintiffs named in the proceedings as claims are put in the alternative. The focus here is upon a claim available to Custodian.
Although there are some internally contradictory positions taken by the defendant having regard to the state of the pleadings and the documents in evidence before the Court, in summary the defendant’s position is that any loan made by the plaintiff (or any prior assignor of the plaintiff) was made to a company associated with the defendant called Total Hoarding Supplies Pty Ltd (Total) and that any debt owed on any advance made by the plaintiffs or any prior assignor of the plaintiffs is owed by Total. Implicitly, the defendant admits that a loan was made (in the amount claimed by the plaintiff against the defendant) to Total in 2006 and that any liability for any amount outstanding on that loan belongs to Total. In so saying, the defendant denies that he is liable to repay any loan to the plaintiff, whether such liability arises at common law or under any form of written loan agreement. The defendant also denies that any liability arises to make any repayment of any loan as a result of the settlement of proceedings in Victoria. In those proceedings, the defendant was a member of a group of plaintiffs and he did not opt out of those proceedings. Those proceedings heard by Croft J, were settled, the settlement was approved and the plaintiff performed their obligations under the settlement.
The defence is a short document. It relevantly reads as follows:-
DEFENCE
Introduction
1.   The defendant is denying being indebted to the plaintiff in any form
2.   The deed of settlement of group proceedings approved by the Supreme Court of Victoria bears no relevance to the plaintiffs statement of claim
3.   There is no debt as cause of action to be relied on
Part 1: Background and uncontroversial matters
1.   The defendant denies ever signing a loan agreement with Bendigo Adelaide Bank Great Southern Finance Pty Ltd as claimed by the plaintiff
2.   The defendant denies ever signing a loan agreement with Great Southern Finance Pty Ltd as claimed by the plaintiff
3.   The plaintiff has so far failed to provide any documents supporting its claim
4.   The defendant denies any contractual relationship with the plaintiff or any of its subsidiaries
5.   The defendant alleges the plaintiff was not licensed to acquire any wholesale loan from Great Southern Finance
Part 3: Remedies and ancillary remedies
The remedies sought are:
1.   The plaintiffs claim be declared invalid
2.   The plaintiff to pay costs
3.   Such further or other orders as this Honourable Court deems fit
As a consequence, the defendant did not substantially contradict most of the evidentiary material put forward by the plaintiffs that a loan had been made. The defendant’s position was that the plaintiffs were not in a position to prove on the balance of probabilities that a loan was made by them or any or prior assignor to the defendant.
For the reasons which follow, I am unable to accept the defence as postulated by the defendant. I am satisfied that the defendant was the recipient of the loan made in 2006 and at common law, and, as a result of the settlement of the Victorian proceedings liability for the repayment of that loan rests with the defendant under a contract of loan. I am also satisfied that the defendant has breached his obligations to make repayment of that loan amount and is liable therefore.
The evidence
In this action 10 exhibits have been tendered before the Court. The first exhibit is the Tender Book. It consists of three volumes. All of the documents in the three volumes were tendered into evidence apart from Document 51. Four of the next five exhibits are affidavits tendered by the plaintiff in support of its claim. Exhibit P2 is the first affidavit of Mr Flamer-Smith sworn 11 May 2015; Exhibit P3 is the second affidavit of Mr Flamer-Smith sworn 3 July 2015; Exhibit P4 is the third affidavit of Mr Flamer-Smith sworn 20 July 2015 and Exhibit P5 is the affidavit of Nathanuel Stone sworn 20 July 2015. Exhibit P7 is an affidavit of Mr Bruno Romeo sworn 20 July 2015. All of these affidavits were read into evidence without objection. This was generally the approach of the defendant. His principal defence that on no version of the facts was he a debtor of any plaintiff. He contended that no basis in fact could be established to prove his alleged liability. He therefore did not seriously challenge many aspects of the plaintiffs’ case. I satisfied myself that this was a deliberate and informed choice of the defendant. I also satisfied myself that he understood the issues in the trial and he was making an informed choice about how he wished to defend this action.
It is not my intention to set out the detail of all of the affidavits and this is so for a number of reasons. Primarily, the defendant did not challenge the content or accuracy of the affidavits. The defendant’s substantive challenge was that there was no proof that an advance had been made to him or that he had any liability for any advance made. Where appropriate, I intend to deal with the evidence on a summary basis only because it is not necessary for me to describe all of the evidence in detail. It is sufficient to say that I have accepted the evidence of Mr Flamer-Smith, Mr Stone and Mr Romeo without reservation. The only substantive challenge made was to the credibility of Mr Romeo and I have taken that challenge into account on the question of the credit worthiness of his evidence. Later in these reasons I will make specific reference to some of the evidence given by these deponents upon topics and issues about which specific findings are required to be made.
The plaintiffs’ pleaded claim

The plaintiff pleads that Great Southern Finance Pty Ltd (GSF) agreed to lend to the defendant the sum of $197,200.00 (comprising a loan of $195,000 and expenses and fees of $2,200). This agreement was allegedly made on or about 1 July 2006. There is a slight inconsistency or perhaps discrepancy about this pleaded date because the plaintiffs’ case was that the investment was associated with the defendant obtaining a tax advantage. Ordinarily, such an investment would have been made prior to 30 June 2006. I consider that this issue was resolved on the evidence because it is apparent from the oral evidence and the documents that any lending occurred prior to 30 June 2006; this was to make the investment tax effective in the usual way. I am satisfied that this is what has occurred here. It follows that tax advantages were available to the investor/borrower for the financial year ending 30 June 2006.
The plaintiffs allege that the terms of the loan agreement and the parties to the loan agreement were formalised in a written loan application which was signed on behalf of the defendant. The plaintiffs allege that the loan was to be used to fund fees due from the defendant to Great Southern Managers Australia Limited (GSMAL) for the acquisition by the defendant of an interest in a managed investment scheme. The loan agreement was executed by two officers of GSF on behalf of the defendant under the powers provided to those officers under a power of attorney granted by the defendant. Questions for resolution here include the grant of such a power of attorney and if so, its effect.
The plaintiffs allege that GSF provided the funds under the loan agreement and those funds were paid to GSMAL consistent with (the requirements of the defendant for) the fulfilment of the arrangements to purchase woodlots. The plaintiffs plead that GSF assigned the benefit of the loan to the third plaintiff ABL Nominees Pty Ltd (ABLN) in its capacity as trustee of a trust and then ABLN later assigned the benefit of the same loan to Adelaide Bank Limited (ABL). Subsequently, ABL assigned the loan to the first plaintiff, ABL Custodian Services Pty Ltd (Custodian) and that party is the primary creditor of the defendant as debtor. Alternatively, the plaintiffs plead that in the event that ABL held any residuary rights in the loan (which actually or impliedly had not been assigned to Custodian) then those assets became the assets of the second plaintiff Bendigo and Adelaide Bank Limited following the merger of those two banks. Having regard to the findings that I have made that are set out hereunder, I have not been required to consider this alternative case and so it has not been necessary to mention that case any further.
The plaintiffs also plead that the defendant maintained regular monthly interest (on the interest only period of the loan: the first 34 months of a 10 year loan period) payments on the loan until 30 April 2009, whereas the defendant admits that monthly payments were made until that date but they were only made for and on behalf of Total. No payments had been made since May 2009 and the first plaintiff has demanded repayment of the loan which is now claimed to be entirely due and payable with interest and costs. No evidence was led by the defendant about any loan to Total. I satisfied myself that this was a deliberate decision on his part that was informed by what he contended was the effect of the documentary evidence.
In opening, the plaintiffs indicated that they relied upon the documentary trail of evidence within the exhibits above described as explained in the tendered affidavits and the oral evidence. The defendant challenges the reliability of such documents and maintains that the documentary record as relied upon by the plaintiffs does not substantiate the plaintiffs’ claim against him. The defendant has contended from the bar table that he signed a loan application form for a loan of $195,000 (plus $2,200) but only in his capacity as an officer of Total and that any investment loan was procured by the company Total and not the defendant personally. In that way, the defendant deliberately brought into sharp focus the loan documents and the documentary trail associated with them as part of his case.
The plaintiffs also point to a second matter as substantiating their claim against the defendant. The defendant was a party to proceedings in the Supreme Court of Victoria. He was included in a defined group of plaintiffs who were represented by the firm of solicitors MacPherson and Kelley (M&K) which acted on behalf of a number of groups of plaintiffs in the Victorian proceedings. Those proceedings challenged the loan agreements entered into by the plaintiffs (of that action) and the liability under one of those loan agreements (with the defendant) is the subject of the plaintiffs’ claim in this action. The defendant and Total were separately group members in one of those proceedings and both of them were represented by M&K. They were therefore both disclosed in the proceedings as group members who did not opt out of those proceedings.[1] The group proceedings were governed by Part 4A of the Supreme Court Act 1986 (Victoria) in the proceedings.
[1] Supreme Court Act 1986 (Victoria) s 33A - Group Proceedings
"group proceedings" means a proceeding commenced under this Part.
The defendant was named as a member of the group who opted into an action in the Supreme Court of Victoria no. SC12010022882 between Peter Clarke as Trustee of the Clarke Family Trust and Ors (and other plaintiff’s names are contained in a schedule attached) v Great Southern Finance Pty Ltd (receiver and managers appointed) (in liquidation) and Ors. This was a class action brought against 12 defendants and two third parties were joined to the action. The first defendant was Great Southern Finance Pty Ltd (in liq); the second defendant was Bendigo and Adelaide Bank Limited; the third defendant was ABL Custodian Services Pty Ltd; and the fourth defendant was ABL Nominees Pty Ltd in its capacity as trustee of the Lighthouse Trust No. 12. In giving consideration to whether there should be approval of a settlement between the parties under s 33V[2] of the Supreme Court Act 1986 (Victoria), Croft J considered the merits of the plaintiffs’ claim and concluded that the plaintiffs’ claims had no prospect of success. His Honour formed the view that the settlement should be approved on that basis. Those claims had been the subject of a long trial before Croft J over 90 sitting days and judgment was reserved on 24 October 2013. Judgment was listed for delivery on 25 July 2014 and on 23 July 2014 the Court was informed that the parties had reached a settlement. His Honour did not deliver reasons for judgment on 25 July 2014 because of this settlement but put that matter aside whilst assessing whether or not approval should be given of the settlement under s 33V[3] of the Supreme Court Act 1986 (Victoria). Croft J did later see it as necessary to publish his judgment[4] which was then annexed to his reasons published on 11 December 2014 approving the compromise. Croft J also published a synopsis of his judgment which set out a summary of the claims made by the plaintiffs and the group members, the causes of action pleaded and concluded that each of the plaintiff’s claims made in these proceedings completely and comprehensively fail on all pleadings and in respect of all claims made. It is necessary to recall that these claims were based upon attempts to set aside loan agreements that were alleged to be the basis of liabilities arising between the plaintiffs, group members and the defendants. The remedies sought relied upon a basal assumption of the existence of the agreements but that the rights of any lender under those agreements ought to be set aside. That is different from the approach shown in the defendant’s defence in this action.
[2] 33V Settlement and discontinuance
(1) A group proceeding may not be settled or discontinued without the approval of the Court.
(2) If the Court gives such approval, it may make such orders as it thinks fit with respect to the distribution of any money, including interest, paid under a settlement or paid into court.
[3] Ibid.
[4] [2014] VSC 334.
In turn that difference in approach must be assessed in the light of what occurred in the proceedings before Croft J. I consider that all of these matters will need to be assessed together.
The terms of the deed of settlement of the Victorian proceedings reached between the plaintiffs (and group members) and the 12 defendants included a term by which the plaintiffs and group members acknowledged the existence of loan deeds entered into by the parties and the group members and that such loan deeds were valid and binding upon them. The defendant and Total were group members in the proceedings. The plaintiffs in this action contend that, to the extent that any amounts remain unpaid under such loan arrangements, having regard to the formal concession made by the defendant in the deed of settlement of the Victorian proceedings, then the debtor under that arrangement remains liable to pay the amount owing to the owner of the debt, in this instance, the plaintiff Custodian. In light of very recent High Court authority on the operation of Part 4A of the Supreme Court Act 1986 (Victoria),[5] it will be necessary to closely consider this settlement and the effect, if any, which it has upon my decision in this matter. As has been seen, the defendant’s substantive defence is that there is no contractual relationship between the plaintiffs (or any assignor of the plaintiffs as assignee) and the defendant. In short the defendant says that this is not my loan. As became clear in the hearing before me, the contention made from the bar table by the defendant is that if a loan was made then it was made to Total.
[5] Timbercorp Finance Pty Ltd (in liq) v Collins; Timbercorp Finance Pty Ltd (in liq) v Tomes [2016] HCA 44.
Earlier in these reasons, I said that the defendant did not seriously put into contention the existence of a debt (owed, as he contended, by Total) or the assignment of those debts between various plaintiffs ending with the assignment to Custodian so that the asset in the form of the receivable belonged to Custodian. The defendant did not seriously contest the fact that insofar as any debt was owed on any advance made to Total, then such advance was owed to Custodian. Indirectly at least, the defendant conceded that if a finding was made that the debt was owed by him, then he owed that debt to Custodians.
The defendant’s further contention here is that the debt was owed by Total and not by him and therefore the claim against him should be dismissed. The essential question in the proceeding therefore is the identity of the debtor and not the identity of the creditor. On the question of assignments it is therefore not necessary for me to address in any particular detail the various assignments of the debts because those facts are not in contention. I have dealt with those matters later in these reasons and that treatment is based on the unchallenged evidence before the Court. The question for my consideration is the identity of the debtor and it is implicit in the defendant’s position that if I am satisfied that the defendant is the debtor of the subject loan, then the proper plaintiff is Custodian. I will proceed accordingly.
Set out below is a discussion about some of the evidentiary deficiencies of the documentary trail used to support the plaintiffs’ case. In my comments below I indicate that in a number of respects, the documentary records of the plaintiffs are deficient. Some of the document within the plaintiffs’ records are part documents only and are obviously incomplete. There are some missing documents.
The drawing of inferences
As will become plain below, a significant portion of my judgment deals with what inferences may be drawn from the proven facts. On a number of occasions I have drawn inferences of fact from the available evidence. It behoves me to set out the proper approach when assessing evidence and deciding whether or not that evidence supports one inference or the other. The approach that I use here is as described by the High Court in a number of well-known authorities. They are set out below.
In Girlock (Sales) Pty Ltd v Hurrell,[6] Stephen J said as follows:-
This is not a case of mere competing possibilities, no instance of “a choice among rival conjectures”, such as Dixon CJ spoke of in Jones v Dunkel and Anor.[7] Here there exists what Dixon CJ there referred to as “evidence supporting some positive inference… an inference which arises as an affirmative conclusion from the circumstances proved in evidence”. His Honour went on to cite a passage from the unreported decision of five members of this court in Bradshaw v McEwans Pty Ltd[8] which is rather more fully reproduced in the report of Holloway v McFeeters;[9] speaking of civil cases the passage reads:
“You need only circumstances raising a more probable inference in favour of what is alleged… where direct proof is not available it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference; they must do more than give rise to conflicting inferences of equal degree of probability so that the choice between them is mere matter of conjecture: see per Lord Robson, Richard Evans & Co Ltd v Astley.[10] All that is necessary is that according to the course of common experience the more probable inference from the circumstances that sufficiently appear by evidence or admission, left unexplained, should be that the injury arose from the defendant's negligence. By more probable is meant no more than that upon a balance of probabilities such an inference might reasonably be considered to have some greater degree of likelihood.”
[6] (1982) 149 CLR 155.
[7] (1959) 101 CLR 298 at 304.
[8] (1951) 217 ALR 1.
[9] (1956) 94 CLR 470 at 480-1.
[10] [1911] AC 674 at 687.
At page 305 of Jones v Dunkel,[11] Dixon CJ added these observations:-
But the law which this passage attempts to explain does not authorise a court to choose between guesses, where the possibilities are not unlimited, on the ground that one guess seems more likely than another or the others. The facts proved must form a reasonable basis for a definite conclusion affirmatively drawn of the truth of which the tribunal of fact may reasonably be satisfied.[12]
[11] (1959) 101 CLR 298.
[12] At page 161-162.
In Girlock Mason J said as follows:-[13]
There was no direct evidence which bore on the issue of causation. But there are settled principles which, though difficult in their application, allow inferences to be drawn from proven facts in certain circumstances. “Inferences from actual facts that are proved are just as much part of the evidence as those facts themselves.” (Holloway v McFeeters). What is required are circumstances which:-
… do more than give rise to conflicting inferences of equal degree of probability so that the choice between them is mere matter of conjecture… All that is necessary is that according to the course of common experience the more probable inference from the circumstances that sufficiently appear by evidence or admission, left unexplained, should be that the injury arose from the defendant's negligence. By more probable is meant no more than that upon a balance of probabilities such an inference might reasonably be considered to have some greater degree of likelihood.
See Bradshaw v McEwans Pty Ltd;[14] Holloway.[15] See also Jones v Dunkel;[16] Luxton v Vines.[17]
[13] At 168.
[14] (1951) 217 ALR 1 at 5.
[15] (1956) 94 CLR 470 at 476-477.
[16] (1959) 101 CLR 298 at 305.
[17] (1952) 85 CLR 352.
In the discussion below, I have made findings based upon the material facts proved, including through oral evidence and through the documentary trail as well as the inferences that, I consider, upon the balance of probabilities, reasonably have a greater degree of likelihood and so form a reasonable basis for a definite conclusion by me of which I can be satisfied. That is my approach in this matter. When I speak of inferences I find available, I have made that finding on the balance of probabilities and adopting the approach required by the High Court. Although many of these authorities concerned motor vehicle accidents, I do not think that this is any way detracts from the approach there set out.
The documentary trail
For its 2005 and 2006 projects (for investment in woodlots and grove lots using Great South Managers Australia Limited (GSMAL) as its manager of the assets), Great Southern Plantations Pty Ltd (GSP) issued a Product Disclosure Statement (PDS).[18] The plaintiffs concede that there is no evidence that this document was seen by the defendant however, I am satisfied that a clear inference arises on all of the evidence before me that the defendant received this document. At the very least he received this document for the purposes of the investment by Total (on his own case). It is also known that Total made at least two other investments in GSP using GSMAL and having obtained finance through GSF in the 2006 financial year. I will come to those matters later.
[18] Exhibit P1, volume 1, tab 1 (PDS).
At page 9 of the PDS, Exhibit P1, Vol 1, tab 1, page 7 of the document (the PDS) there is a reference to finance options. It informs the reader that finance is available to growers from GSF which is a wholly owned subsidiary of GSP. Short term interest free financing is available as well as long term principal and interest financing. A reference is then made to page 71 of the PDS. There set out are the loan conditions for the various forms of financing and these are further developed through pages 73, 74 and 75 of the Exhibit. At page 71 of the Exhibit is a first reference to a power of attorney. It relevantly reads as follows:-
Power of Attorney
By signing the application form on page 78 of this PDS, applicants are agreeing to appoint Great Southern Managers Australia Limited and each director and company secretary of Great Southern Managers Australia Limited jointly and severally to be attorney for the applicant, in the applicant’s name, on the applicant’s behalf and as the applicant’s act and deed on the terms specified below and to exercise the powers set out hereunder and only those powers.
1.   The applicant grants the Attorney the powers listed in paragraphs (a) – (o):
(a)    To enter into and execute on the applicant’s behalf a land management agreement which the applicant has offered to enter into which is accepted by the responsible entity;
(b)   To date the land management agreement and complete the blank spaces in schedule thereto;
(c)    …
(d)   …
(e)    …
(f)    To enter into and execute a land interest pursuant to the terms and conditions (as amended) of the Land Management Agreement);
(g)    …
(h)   ….
(i)     ….
(j)     …
(k)   …
(l)     …
(m) …
(n)   …
(o)   …
2.   …
3.   The applicant agrees at all times to keep the Attorney indemnified against all claims, demands, costs, expenses, damages and losses of any type arising as a result of the exercise of the Power of Attorney granted.
4.   The applicant undertakes to ratify all that the Attorney lawfully does or causes to be done under the Power of Attorney granted.
Mr Romeo gave evidence that in the usual course, a land management agreement was prepared by GSMAL and was executed. This was part of an internal process using the internal and electronic system of GSMAL and by the attachment of electronic signatures.
Under the arrangement set out on page 55 of the PDS, the responsible entity is required to allocate individual identification numbers for all proposed woodlots (that may be purchased) and also to prepare a Land Management Agreement for the proposed woodlots. The responsible entity must determine the plantation in which the woodlots will be located as well as their physical location within the plantation and prepare a land interest agreement comprising either a lease or a forestry right agreement in which the woodlot is located. It was therefore the responsibility of the responsible entity to prepare the Land Management Agreement and to allocate the identification numbers for the woodlots covered by the Land Management Agreement. At page 56 of the Exhibit, the PDS records that if a Land Interest Agreement cannot be granted to an applicant within 9 months from the date of the applicant’s Land Management Agreement, then the responsible entity must notify the applicant within 7 days and the applicant has the right to withdraw from the project by lodging a withdrawal request.

There was no evidence that in this case, the defendant was notified of any right to withdraw or any election by the defendant to withdraw from the Land Management Agreement was made. The inference arises that, in the ordinary course, what has occurred here is that a Land Management Agreement has been prepared, there has been allocations of specific woodlots and there has been prepared a Land Interest Agreement. Although the plaintiffs do not have in their possession a copy of the actual Land Management Agreement entered with the defendant, there is evidence of the woodlots that were allocated to the defendant and there is no evidence that the defendant withdrew from the project (on the basis of a failure to allocate a land interest).
The product disclosure statement: the loan conditions and the application for term finance
I have earlier mentioned the loan conditions set out in the PDS at page 73 of Exhibit P1, page 71 of the document. Those conditions envisaged that if an investor chose to procure finance for the investment using the resources made available by GSF, then the investor would go on to complete the documentation within the booklet being an application for term finance and there would be an execution of the loan deed that was a part of the application for term finance (but in a blank form).
Exhibit P1, tab 5 at page 207 et seq is the application for term finance executed by the defendant. It relates to the purchase of 65 woodlots at $3,000 each for a total of $195,000. The personal details of the borrower/guarantor are the details of the defendant. The term finance options are then set out in the top right hand corner of the page; there are three possibilities. The first option is not relevant. The second option is for loan terms for investment woodlots only and the third is for loan terms for investment in grove lots or combined loans. The project and loan details completed by the defendant are for woodlots only; there is no completed application in respect of grove lots or for any combined loan. The lender for the loan for grove lots and combined loans was identified as ABL Nominees Pty Ltd. There is no evidence of any loan being provided by ABL Nominees Pty Ltd in respect of grove lots. The only relevant investment was in woodlots. The lender for loans for woodlots was GSF. The box crossed in respect of loan options was for grove lots and combined loans. The type of loan selected was for a three years interest only, then seven years principal and interest loan. I consider that it is apparent that this is a minor clerical error and that the true intention was to obtain an investment in 65 woodlots.
It appears plain enough that the intention is for an application for term finance for the purchase of 65 woodlots at $3,000 each. It also appears that finance is being sought on a basis of three years interest only and then seven years principal and interest repayments. It also appears obvious that the wrong box has been ticked in relation to the finance options. The appropriate box to have ticked was that relating to loans provided by GSF. If any confirmation was necessary, it is provided by the fact that 65 woodlots at $3,000 amounts to $195,000. This is the amount of the investment and the borrowing which is under consideration here. Sixty five woodlots at $8,000 amounts to $520,000. That is not the basis upon which any document was executed and is not the basis of any claim before me. I consider that an inference clearly arises that the person completing the document intended to apply for finance for 65 woodlots at $3,000 each from GSF on three years interest only and seven years principal and interest repayments. I am also satisfied that a simple clerical error has been made in the completion of the form and that the wrong box has been crossed by the applicant.
The applicable interest rate: a doubt resolved
The documents preparatory to the loan being provided do not prescribe the applicable interest rate. In the period of the first three years of the life of the loan to June 2009 only interest was charged and paid by the defendant from his personal bank account. This accords with what is shown on the face of the documents. The defendant had committed personally to the payment of interest and he did so for three years at the rate of 11.5% per annum and this rate is verified by a comparison of the total amount of the loan and amount paid as interest. This is calculable on an arithmetic progression. There was then a default in these repayments. In the usual course applicable interest rates for any loan are set out in a loan agreement that will include relevant terms of the loan for the sake of certainty between the parties. The form of applicable loan agreement was attached to the application for term finance. In this case the loan agreement in that form was executed under the power of attorney given by the defendant to the plaintiffs in the subscription agreement. The defendant challenges the efficacy of this agreement although he does not put in issue before me that he executed the application for term finance document that granted the form of power of attorney.
Matters for consideration
It is necessary therefore to consider the matter on two bases: first on a common law basis on the whole of the factual evidence including the fact of the existence of the power of attorney and second, having regard to the grant (or not) of the power of attorney by the defendant.
The application for term finance does not set out the interest rate applicable. There are references to interest repayments but not the interest rate. Exhibit P8 discloses that the investment application was completed and received at the same time as the application for term finance. It also does not nominate the interest rate applicable. The document at page 207 of P1 sets out the three key terms of the loan arrangement:
·    The amount of $195,00 for the loan;
·    The loan term of 10 years;
·    An interest only repayments obligation for three years and then interest plus principal repayments for the next seven years.
Implicitly at least, the applicant for term finance has acknowledged that it was necessary to pay interest on the loan amount and that the interest rate charged by the lender was the appropriate interest rate to be paid by the borrower. It is an offer to enter into a loan at the interest rate charged by Great Southern Finance; the evidence of Mr Romeo was that the standard interest rate at the time was 11.5%. This conclusion also arises as a matter of inference because the arrangement is to enter a loan with an interest only and then on interest and principal repayment obligation. This is what occurred in this case.
The document also identifies that the borrower/guarantor is the defendant. Page 208 of the exhibit is part of the same document and in item numbered three, it requires the nomination of the identity (to be completed) of the corporate/trust borrower. In the information there provided, reference is made to the company, Total. The next page of the application is the formal application for finance. It is executed by the defendant as the applicant. It is witnessed and dated 22 June 2006. That date is consistent with a tax benefit driven intention for the investment.
Also contained within the same suite of documents is Exhibit P8. It is page 2 of the facsimile sent from Dean Kavanaugh Financial Services to GSMAL on 22 June 2006 at 14.37 hours. It is to be read as page 2 of the document behind Tab 5 of Exhibit P1. The applicant for finance is identified as the defendant. I consider that if there was any doubt about the identity of the borrower, then this application for the purchase of woodlots (65 at $3,000 each, in total $195,000) resolves that issue. The investor in the woodlots is the defendant. That document, Exhibit P8, seeks finance of $195,000 under the terms of the finance option selected. There is an apparent error in the finance option details. But properly read it seeks an interest only payment arrangement for three years and then a principal and interest repayment arrangement for seven years. The person completing the document appears to have misunderstood the term; however, the important point is that this is an application by the defendant in his own name for finance for a borrowing of $195,000. I consider therefore that any doubt that arises on the terms of the documents otherwise is resolved by the content of Exhibit P8.
At common law: a loan
The plaintiffs contend, and I accept, that once the application for term finance for the investments was submitted to GSF and it was accepted (and put into effect), then a finding may be made at common law that a loan had been entered into upon the terms embodied within that form of application and there was a binding agreement. Once GSF accepted the application for term finance, an agreement was formed at that time. That is in fact what occurred. At the very least, there are details set out in the application for term finance which is signed by the defendant and witnessed and dated 22 June 2006. Those paragraphs relevantly read as follows:-
I,
Hereby apply for term finance as detailed in this finance application …
·   Confirm that all information provided in this finance application is true and correct and is not misleading;
·   Declare that any credit provided pursuant to the finance application is to be applied wholly for investment purposes;
·   Grant the power of attorney set out in Part VI;
·   Confirm the consents and acknowledgments given in this finance application;
·   Declare that I have read and understood the finance application including the risk disclosure statement and declaration and the loan deed;
·   Declare that I have had the opportunity to obtain independent legal, financial and taxation advice; and
·   Declare that I have considered the risk and costs involving in participating in an agricultural based activity and I am prepared to accept the risks involved and hereby accept liability for this loan as the borrower or guarantor (as the case may be) should this finance application be accepted.
This application for term finance formed part of a complete loan booklet.[19] It confirms the grant of the power of attorney and agreement by the defendant to enter a loan deed containing particular terms. The complete form of the application for term finance is to be found at P1 Volume 1 Tab 6. There are some amendments and additions on the first operative page (exhibit page 212) of that document. There is a second form of handwriting which completes the total investment amount, the loan amount and the total amount to be financed. It also changes the references from ABL Nominees as the provider of finance for grove lots to GSF providing finance for woodlots for a three year interest only and then a seven years principal and interest payment schedule. There is also a handwritten entry in the handwriting of a person not identified in the following terms:
Please charge rate of 10.5% and no app fees. Approved Neville Hill.
[19] P1 volume 1 tab 6.
There is no evidence before the court as to when this document was received by Great Southern. It is a document within the business records of Great Southern[20] and it is apparent that the loan was provided prior to 1 July 2006. However, I consider there is an obvious commercial explanation for the difference in handwriting in the amendments. The selection of the loan option of ABL Nominees for grove lots when it was first made on 22 June 2006 was incorrect; the intention was for woodlots financing with GSF. Therefore, the correction to the Great Southern Finance box on the front page of the application does not in any way change the nature of the transaction, the fact of the transaction nor the parties to the transaction. Second, the completion of the total investment amount, the loan amount and the total amount financed is obviously also an internal action by a person considering the document. The note in relation to the interest rate is a matter for explanation but it does not change the fact the application for term finance was made in the amount of $195,000.00 and that it was granted. There is no evidence given by the defendant in relation to any amended interest rate. The defendant elected not to give evidence in relation to these matters. I satisfied myself from my discussions with him that the defendant understood that in so choosing, there was no contravener of the evidence of the plaintiffs and that, as a result, inferencew could be drawn by me from that evidence. I was satisfied that in this background the defendant consciously chose not to give evidence. The interest rate that was charged on the loan was 11.5%. There is no evidence of any agreement to amend an interest rate.
[20] Viz s 53 Evidence Act 1936.
The other evidence is that the interest rate charged was 11.5% on a total loan of $197,200.00. The extra $2,200.00 was in respect of costs and charges. They were calculable by reference to the formula stated in the form of loan fees of 1%. What is known is that there was no amendment of the interest rate charged to 10.5% and there was no waiver of the 1% charge. The handwriting on the document therefore achieved a status of no higher than a clerical note of a conversation which was not implemented. If it were otherwise then it would be necessary for the defendant to lead evidence on the issue – none has been led and from my discussion with the defendant in court I am satisfied that this is a deliberate and informed decision on his part.
The defendant as an investor
I am also satisfied from the material before the court that the defendant is not, as it were, naïve to the process of courts and trials – as I have earlier mentioned he was a member of one of the plaintiff groups in an action heard by Croft J in the Supreme Court of Victoria in which orders were sought to set aside the investment and funding arrangements made by him with GSMAL and GSF. That action was resolved by a settlement the terms of which specifically acknowledged the existence and enforceability of those loan agreements. The defendant here was a party to that settlement. As I have explained in another decision,[21] Croft J found it necessary to make public his unpublished decision in the principal proceeding in order to properly explain his decision in the application for the approval of the compromise in the group proceedings. In those proceedings the defendant joined the group as an individual grower and investor and Total was similarly joined. Both bound themselves to the settlement and they were found by Croft J to be bound as they had not opted out of that proceeding. That being the case they both agreed to the terms of the deed of settlement and so the binding nature of the settlement. That deed of settlement included a term acknowledging the existence and enforceability of various loan agreements. This included the loan agreement pertaining to the defendant; the plaintiffs assert that such loan agreement is the subject of this action. It will be necessary to closely examine the effect of this settlement and its effect, if any, upon the defendant’s defence. I do so hereunder.
[21] Bendigo and Adelaide Bank Limited & Anor v Ling [2016] SADC 34.
The plaintiffs’ contention also was that the agreement between the defendant and GSF to advance the funds did not depend upon the execution of a loan deed. At common law, there was a sufficient record within the documentation executed by the defendant to disclose his obligation to make repayments. In any event, the plaintiffs contend that the documentation is complete because the power of attorney clause within the executed documents is sufficient to enable the execution of the loan agreement under it. This is notwithstanding that the loan documentation booklet anticipates the execution of a loan deed. The plaintiffs’ second contention is that it is not strictly necessary to make a finding that a loan agreement had been formed between the parties, because even if no loan agreement is signed, the application document evidences an intention of the parties to enter into an agreement to be bound by the terms set out at page 219 and following of Exhibit P1 Volume 1 Tab 6. The key commercial terms were the amount of the loan, the interest rate, the interest only period, the period of repayment of interest and principal and the other more mechanical provisions.
A potential difficulty with these submissions of the plaintiffs is that the loan deed is a standalone document and it is anticipated that it would be executed by the parties. There is no loan deed personally executed by the defendant. This is important because the plaintiffs claim an acceleration of interest in its claim. That will need to be considered. The plaintiffs’ primary submission on the point is that the authorisation within the executed application for term finance and the product disclosure statement creates a power of attorney in favour of the plaintiffs, which in turn would allow the plaintiffs to execute documents on behalf of the defendant under the terms of that power of attorney. Part of that primary submission involves a consideration of whether the power of attorney document authorises the execution of the loan agreement in the name of the defendant and binding the defendant to the terms of that loan agreement, including, for example, an accelerated interest burden (called the overdue interest rate) upon default.
The application for term finance: the power of attorney clause
Having satisfied myself of the project and loan details (65 woodlots at $3,000 each) financed over a 10 year period, consisting of three years interest only and seven years principal and interest, it becomes necessary to review the operable clauses within the application for term finance. The first for consideration is clause 6: ‘Power of Attorney’. That clause reads as follows:
6.     Power of Attorney
(a)    By signing this finance application, the Borrower (… Appointor) agree to appoint:
(i)Where Great Southern Finance Pty Ltd (GSF) is the Lender under the proposed loan, GSF and each director, company secretary and attorney of GSF, jointly and severally
(ii)... to be attorney for the Appointor (Attorney) on the terms specified herein and to exercise the powers as follows:
(iii)to enter into and execute a loan deed in the form attached to this finance application (loan deed) on behalf of the Appointor. A loan deed will be in the same form as the loan deed attached to this finance application despite any formatting changes to the doc;
(iv)to date the loan deed and complete the blank spaces in the schedule thereto consistent with the provisions of this finance application;
(v)to make and initial any necessary alterations to the loan deed which are not prejudicial to the interests of the Appointor in the considered opinion of the Attorney;
(vi)to do anything in relation to the property secured under the loan deed which the owner of that property would be entitled to do;
(vii)to make, do and sign all acts, deeds and things as may be necessary to procure the stamping and registration of the loan deed with the power to instruct the Attorney’s solicitors to assist the Attorney in this regard; and
(viii)to enter into and execute on the Appointor’s behalf, any documents connected with, or related to, the loan deed;
(b)   The Appointor agrees at all times to keep the Attorney indemnified against all claims, demands, costs, expenses, damages and losses of any type arising as a result of the exercise of the power of attorney granted.
(c)    The Appointor authorises the Attorney to exercise the powers under the power of attorney even if the exercise of that power involves a conflict of interest.
(d)   The Appointor undertakes to ratify all that the Attorney lawfully does or causes to be done under the power of attorney granted.
(e)    The power of attorney granted by way of the Appointor’s signature on this finance application will remain in full force and effect until notice of the death of the Appointor or notice of the revocation of the power of attorney is received by the Attorney.
(f)    The Appointor declares that anything the Attorney does in exercising the powers under the power of attorney will be as binding as if the Appointor had done that act itself.
(g)    Any person dealing with the Attorney or a person purporting to be an Attorney under the power of attorney is entitled to rely on execution of any document by that person as conclusive evidence that:
(i)the person holds the office set out in the power of attorney;
(ii)     the power of attorney has come into effect;
(iii)    the power of attorney has not been revoked;
(iv)the right or power being exercised or being purported to be exercised is properly exercised and that the circumstances have arisen to authorise the exercise of that right and power; and
(v)they are not required to make any enquiries in respect of any of the above matters.
(h)     the power of attorney is executed as a deed.

The next page of the application for term finance[22] contains a term that the person making the application for term finance, in this case the defendant, grants the power of attorney set out in Part 6. His signature is then set out and that signature is witnessed.[23] The application is dated 22 June 2006.
[22] Exhibit P1, Tab 6, p218.
[23] The name of the witness is Marie Cost-Chretien.
After the execution page, there is set out in blank form the terms of the written loan deed – term finance.[24] This is the loan deed which is referred to within the application for term finance which creates the power of attorney, authorising the execution by any director, company secretary and attorney of GSF on behalf of the defendant as the applicant. This document shows the complete terms of the loan except that the schedule page is incomplete.
[24] Exhibit P1, Tab 6, pp219-227.
It is necessary to survey some of the terms of the loan deed. They are discussed below.
The plaintiff relies upon Clause 5.1(b) of the loan agreement. That clause reads as follows:
(b)The Borrower must pay interest on the Moneys Payable due and payable, but unpaid, at the rate set out in item 9(b) of the Schedule.
Clause 5.2 governs interest and that interest may be capitalised under clause 5.2(b). That clause reads as follows:
5.2     Accrual of Interest on overdue Moneys Payable
Interest payable under clause 5.1(b):
(a)    Accrues from day to day from and including the due date for payment up to the actual day of payment, before and as an additional and independent obligation, after a judgment or other thing into which the liability to pay the Moneys Payable becomes merged; and
(b)   May be capitalised by the Lender on the last day of the month in which the interest became due (or any other day determined by the Lender in its discretion).
Clause 7.1 governs the repayment of the loan term including all costs, including:
(c) all costs and expenses incurred by the lender in relation to the enforcement, protection or waiver of any rights under (the agreement) on a full indemnity basis.
The plaintiff relies upon this term (and together with the default) to claim a full indemnity for solicitors fees incurred in the recovery of the loan amount.
Clause 13 provides for acceleration events and a portion of the terms governing the acceleration events are set out in clause 14.1 which reads as follows:
14.1 Demand payment of Moneys Payable
If an Acceleration Event occurs, the Lender may demand immediate payment of the Moneys Payable.
The direct debit authorisation
At the time of completing the application for loan documents, the defendant also completed a direct debit request form[25]. The document is executed by the defendant in his own name. There is no indication that anyone apart from the defendant would be involved in making the repayments to the lender. The defendant’s contention is that this can be a matter of arrangement between the defendant and any corporate or other interest with which the defendant is involved. That may well be possible but the usual commercial arrangement would be for the defendant to make the funds available to the corporate or other entity and thus making the process a comparatively simple loan account issue between related or associated entities. This is not the arrangement that was made according to the defendant. I am unable to accept this contention of the defendant because it is generally inconsistent with all of the other evidence before the Court. It also lacks cogency and was unsupported by any financial reports of Total disclosing the receipt of those funds. I will later refer to those financial reports that are in evidence before the Court.
[25] Exhibit P1 Volume 1 Tab 7 page 229.
I also consider that a clear evidentiary inference arises from the execution by the defendant of the direct debit request form being that he is the borrower and is the person who is making the payments. There are a number of reasons: the direct debit request form fulfils a number of functions. It is a request and an authorisation. It requests GSF to arrange for any amount that “…Great Southern Finance may debit or charge you (Andre Kunz) to be debited through the bulk electronic clearing system from an account held at the financial institution identified in the form.” The financial institution is NAB Homeside. An address is supplied. The account detail is in the name of the defendant. Below those details including account numbers and BSB numbers is the following:
“Acknowledgment”
By signing this direct debit request (DDR) you acknowledge having read and understood the terms and conditions governing the debit agreements between you and Great Southern Finance as set out in this request and in your direct debit request service agreement.
If it were the case that another borrower was involved, the greater likelihood is that all of these arrangements would have been made with that borrower. It is quite unlikely that at this time an arrangement would be made to identify the borrower as a different entity to the investor. This is so for a number of reasons: the first is the obvious practical simplicity of that arrangement and the need for the investor to be the same person as the borrower for tax purposes. The scenario postulated by the defendant would leave considerable doubt about which taxpayer may be able to claim the tax benefit. In the usual case, these arrangements must be carefully managed so that there is no risk of losing the intended tax benefit of the investment. The second is that the documents make provision for a guarantor. The more likely scenario on the case put by the defendant is that if Total was the borrower he may have been asked to execute a guarantee of its liabilities. The third is that the documents contemplate the grant of the power of attorney by the individual borrower although that is not to say that the company Total could not execute such a power of attorney. The greater likelihood is that the grantor of the power of attorney is the person making the borrowing.
Properly construed as a whole, the documents in this instance contemplate the borrowing by the individual, the defendant. In the end, the application for finance is signed by the individual (the defendant) and absent any indication to the contrary, the loan funds were provided to the individual. The liability for that repayment (under contract) rests with him. This is the obligation that he fulfilled until May 2009.
The grower and allotment numbers
I consider that there are a number of other indicia in the papers, all of which point in only one direction. Within the documents there are internal records created by GSF that connects this investment to the defendant. These are the allotment numbers and the grower numbers. These were designated with a prefix “A” and “G”. These numbers are important at a number of levels, one of which is the Victorian proceedings. As will be later explained, the participants in the group proceedings were classified or identified by their grower number. In the case of the defendant, the settlement documents in the Victorian proceedings disclose his personal grower number and the grower number of Total. This shows a settlement with both legal entities that were claimants. The documents in consideration here show only the grower number for the defendant. In the case at bar, the “A” number is 55423 and the “G” number is 34792. These numbers relating to the investment made by the defendant in the woodlots are not referable to any other borrower or investor identified as or related to the defendant. They are referable to the activity of the defendant as an investor. This detail was included within the product disclosure statement and the inference arises that the defendant had the blank form of the direct debit statement in front of him when he received the product disclosure statement. The inclusions within the document and especially the serial number and the “A” number and the “G” numbers were embedded subsequently. The serial number of the document is 84980 and that number marries with the serial number on the application form. Therefore, the two documents travel together. The serial number 84980 was supplied by Great Southern Finance and identified the product disclosure statement received by the defendant.
The defendant was aware of the loan terms
This combination of factual circumstances satisfies me that GSF informed the defendant who knew of the terms of the loan arrangement, the interest rate provisions and the power of attorney provisions. I also consider that this suite of documents empowers the creditor (GSF or any assignee) to receive (and take) money from the bank account of the defendant on the basis that the defendant has a pre-existing obligation to pay money. It is not an authority in relation to, for example, a debt owed by a third party such as Total. I am satisfied from these records that the defendant personally bound himself to the obligations arising under the loan arrangements that he put into place to personally take woodlots offered by GSMAL. The funding obligations were owed by him to GSF as the lender under at least a common law obligation arising under contract.
In the absence of any contradictory evidence, I consider that an inference also arises that all payments made by the defendant to the plaintiff came from the bank account identified on the direct debit request forms. No contrary proposition was put to me and I consider none could be put in light of the business records received into evidence under s 53 of the Evidence Act.
The loan deed executed under the power of attorney
Exhibit P1 Volume 1 Tab 10 is the loan deed located within the file of Great Southern Finance. At page 241 of the exhibit, the details of the loan are set out including the applicable interest rate of 11.5%, the default interest rate of 14.5% and the loan establishment fees of $2,200.00. This is consistent with other internal documents of Great Southern Finance which discloses a total loan amount of $197,200.00. The document is dated 1 July 2006. That is a peculiar date bearing in mind that the apparent intention of the transaction was to obtain the maximum benefit of a tax deduction as at 30 June 2006. That may be of no significance if the transaction which is evidenced by the deed, took place prior to 30 June 2006.
It appears from as early as 22 June 2006 that arrangements were being made for the procuration of the loan. For present purposes, the operative page of the exhibit is page 241 which sets out the schedule of details concerning the loan including the name of the borrower (the defendant in this case), the project, the amount of funds ($197,200.00), the interest start date (1 July 2006), the first repayment date (31 July 2006), and the last repayment date (30 June 2016), the interest rate (11.5%) and overdue rate (14.5%), the loan establishment fee ($2,200.00) and the execution clause. The document is signed, sealed and delivered by the defendant by his duly appointed attorney Great Southern Finance Pty Ltd in accordance with s 127 of the Corporations Act 2001 (Cth). There is a signature of a director and a secretary. The signature of the director is John Carlton Young and the signature of the secretary is of Cameron Arthur Rhodes. I am satisfied from the unchallenged evidence before me that Young and Rhodes were respectively a director and secretary of Great Southern Finance at that time. The document is then executed on behalf of the defendant by the same persons under the power of attorney. It is common ground that electronic signatures have been used and I accept the correctness of the execution of the document on that basis. That said, I will need to closely examine whether and if so to what extent this deed binds the defendant absent any other facts or circumstances.
I earlier mentioned the dates of the investment and the connection to possible tax advantages. I am satisfied from the evidence before me that the plaintiffs have on a number of occasions requested from the defendant provision of his taxation return for the 2006 and following taxation years. I am also satisfied that these documents are directly relevant and that the defendant has failed or refused to make the documents available notwithstanding the requests of the plaintiffs. The plaintiffs contend that an inference arises that the documents would not support the contentions of the defendant from the bar table and in his defence that the loan agreement was made with a company and not with him personally. The plaintiffs argued that an inference arises that disclosure of the documents would show that the defendant has sought and obtained the benefit of tax advantages resulting from the 2005/2006 financial year at least until the 2008/2009 taxation year. I am not prepared to draw that inference as contended for by the plaintiffs. It must be recalled that proof by inference is otherwise called indirect or presumptive evidence. I am asked to draw a particular inference from other facts that are proved. The evidence before me is that the defendant has been requested to provide in disclosure and has refused to disclose his taxation returns in connection with any claim he may have made for a deduction for the investment and the cost of interest. The tax returns are directly relevant documents. I will treat the refusal of the defendant to make disclosure as part of the background circumstances of this case.
Mr Romeo gave evidence that the execution of the loan agreement by the director and secretary under the power of attorney and then for Great Southern Finance was the standard practice in 2006. The documentation was discovered on the file of Great Southern Finance and I am satisfied from the evidence before me that these documents were held within the file of that entity as part of its business records. They and all of the other business records are admissible into evidence before me under s 53 of the Evidence Act 1929 (SA).
The loan deed[26] is dated 1 July 2006. As I have said, the evidence indicates that the funding under the loan agreement was provided earlier than this date. It is not necessary to precisely identify that date because it is only necessary that I be satisfied that the transaction of purchase of the woodlots occurred prior to 30 June 2006 in order for the tax benefit to be obtained by the defendant as the tax payer. I am so satisfied on all the evidence before me that although it may appear to be slightly unorthodox that the date of the loan agreement is the first day of the new tax year, the loan has been provided earlier than that date in order to enable the purchase of the woodlots. These events (the loan and the purchase) generally occur simultaneously but that is not mandatory because the event giving rise to the tax deduction is the actual investment. This can occur without the execution of the loan agreement but when loan funds are provided. There is no suggestion in the evidence that this is not the case. No case one way or the other was canvassed before me and it is therefore unnecessary to do more than consider the loan agreement bearing date of 1 July 2006.
[26] Exhibit P1, vol 1, tab 10, pp 232-241.
The loan deed is in the form provided to the defendant in the application for term finance signed by the defendant except that the schedule to the agreement[27] is completed. The interest rate paid by the defendant on the loan was 11.5% (up to 30 April 2009 when there was default). The full amount of the borrowing on which interest was paid was $195,000.
[27] Exhibit P1, vol 1, tab 10, p 241.
At the time of the execution by him of the application for term finance,[28] the defendant was provided with a copy of the loan deed in blank form. A reading of that document discloses that the details of the loan arrangement were to be completed. That must logically be the case because until acceptance, no final details may be stated. I consider that no real challenge could be made by the defendant to the execution by the director and secretary of GSF under s 127 and s 129 of the Corporations Act 2001 (Cth). I find that the documents have been properly executed by GSF.
[28] Exhibit P1, vol 1, tab 6.
The binding nature of the loan agreement of 1 July 2006
The question which then arises is whether the loan agreement executed under the power of attorney given by the defendant is binding upon him. I consider that there are a number of features that require further comment. I leave aside the question of the basic interest rate. Sufficient has been shown in evidence to satisfy me that the defendant agreed to this rate of 11.5% per annum.
The position on other matters is different. There is no evidence before me that the default rate of 14.5% was specifically raised with the defendant and agreed by him. There is no evidence before me about any separate agreement of the defendant to pay lender’s solicitors indemnity costs on default. This obligation was contained within the terms of the loan deed attached to the application for term finance.
There are different issues at play here. The default rate was part of the schedule that was incomplete at the time that the defendant signed the PDS and application for term finance. The solicitor’s indemnity provision was in that document for anyone to read. Even so, is it to be said that the power of attorney would authorise any form of loan agreement? This would be a strange result as the holder of the power, an agent of the defendant and a person/entity upon whom a fiduciary duties are imposed, is in a position to bind the defendant to onerous provisions in a loan agreement. I will later consider these matters but first I will consider the authorities referred to by the plaintiffs.
BT Securities Limited v Lobel[29] was a decision of Harrison J in the Supreme Court of New South Wales on an application for summary judgment. BT had provided financial accommodation to Lobel under the terms of an absolute investment facility. BT sued upon the loan and Lobel defended the action alleging the loan application form was not a deed and denying he had executed a power of attorney in favour of the person who exercised the power when executing the loan agreement thereby giving BT the power to execute the agreement. Lobel denied all liability.
[29] [2011] NSWSC 335.
The decision of Harrison J is important in this context because it emphasises the point of distinction that I have earlier made in this judgment about the nature of the power of attorney granted to GSF.
In BT, the loan facility agreement said the following:-
This facility will be executed by BT as your Attorney under the Power of Attorney that you grant in its favour. Once BT signs this facility, it is binding on you, BT and… The date BT signs is the commencement date of the facility.
The application form for the loan was completed by Lobel and it contained a power of attorney granted to BT and each authorised officer of BT separately as Lobel’s attorney and that power could not be revoked without BT’s consent. Its term authorised the attorney to do “everything needed (including completing blanks) to execute and deliver the documents listed in item 1 of the schedule”. In item 1 of the schedule there is a reference to the BT absolute investment loan facility agreement.
Lobel received the loan and the facility agreement was signed by an officer of BT (a Ms Munnelly) under a power of attorney granted to her by BT of 30 July 2004. Mr Lobel’s first argument was that if the power of attorney granted to BT by him was not under seal then the execution of the facility agreement as a deed was invalid or inoperative. This argument failed. That argument was also rejected in a decision of the Supreme Court of South Australia in Gibbons v Pozzam.[30] Mr Lobel’s second argument was Ms Munnelly had no authority to execute the agreement on his behalf and therefore the facility agreement did not bind him (notwithstanding that he had received the money). The Court found the Munnelly had authority to execute the document on behalf of BT under the power of attorney given to her by BT. As a result Mr Lobel had no defence to the claim of BT.
[30] [2007] SASC 99 at [53]-[55] (per Duggan J).

All of these matters were disclosed in the loan deed dated 1 July 2006 and sent to the defendant in August 2006. I consider that they are all matters that may be identified as being within the provision of “…this finance application…”
The defendant terminated the direct debit authority in May 2009 and so, an overdue interest rate may apply. By that time, the scheme had failed and the question of class actions were being considered. Even so there is no evidence before the Court to suggest that from the time of the execution of the application for term finance until that time, the defendant agreed to pay a particular default rate of interest as an overdue rate. I am satisfied that by no later than August 2006, the defendant had in his possession a document recording these facts. But that does not address the fact that the blanks filled into the loan agreement must be consistent with the finance application. I am unable to identify anywhere within that application any formal record of what blanks were to be filled in on the loan deed or for example the rate applicable as the overdue interest rate.
The position reached is that at a minimum, the defendant knew of the existence of both of those rates from no later than August 2006 when he received the executed loan agreement. However, this raises two further issues. The first is that the base interest rate of 11.5% applied was known from 31 July 2006 which was the first payment drawn under the direct debit authority. I consider that at least impliedly, and most likely actually, the defendant knew of this rate and the charge made was not inconsistent with the finance applications. I have earlier mentioned the reference of writing on the document about the possibility of an interest rate of 10.5% and no application fees. This is written on the document as a note for the file. Any discussion about that rate is obviously connected to a concession to the defendant about the level of the interest rate payable by him on the finance. Consequently, I consider that a clear inference arises that it was a compromise on the rate of 11.5% sought by the defendant. The record is set out on the documents executed by the defendant but what is recorded on the documents appears not to have been implemented. Be that as it may, the defendant was sufficiently aware that he was to pay interest at the rate of 11.5% per annum on the borrowing for three years to have sought this compromise. After that time, he was to pay principal and interest amounts and there is no suggestion that under those arrangements, the interest rate would vary. That is, if there was a possible compromise interest rate of 10.5%, as being the applicable interest rate. If there was no compromised interest rate of 10.5% per annum, then the applicable interest rate was 11.5%. That was the interest rate that was applied to the borrowing made by the defendant and which is reflected in the payments made by the defendant between July 2006 and 30 April 2009.
The power of attorney and the overdue rate
The position is different for the overdue rates. There is no evidence of agreement on that rate and nothing within the finance application documentation informs the amount of that rate. This in turn raises whether under a power of attorney provision, the insertion of that rate into a “blank” is authorised or is consistent with the exercise of the fiduciary obligations imposed upon the holder of that power.
In dealing with these questions, I have assumed that because the formalities that would be required under, for example, s 5(1) of the Powers of Attorney and Agency Act 1984 (SA) have not been complied with in this situation, the relevant applicable law is that of Western Australia where no such formalities are prescribed in statute.
There are some well settled principles that apply to powers of attorney. It is to be understood that powers of attorney are one form of agency which give rise to fiduciary duties. It is to be recalled that not all forms of agency give rise to fiduciary duties and, in some forms of agency, not all fiduciary duties are applicable. Powers of attorney sit in a different category of case and it is well recognised that the fiduciary duties applicable to such powers of attorney are the duty to avoid a conflict of interest and the no profit duty. I will develop those matters below.
When construing a power of attorney, the general rule is that the terms of the power are to be strictly construed. That is, the power given to the donee by the donor must be strictly construed. This also means that regard may only be had to the authority in the instrument of authority.[102] Any ambiguity in respect of general powers can only be resolved by reference to the recitals of the document of appointment.[103] In this case, there are no such recitals and so regard may only be had to the specific powers set out in the power of attorney itself.
[102] Sweene v Howard [2007] NSWSC 852 at [54] per Windeyer J.
[103] Jacobs v Morris [1902] 1 Ch 816.
It is in that background that the fiduciary duties of the donee of the power are to be canvassed. They are generally the same as for a trustee. The agent must not without the informed consent of the principal/donor of the power, as the person to whom the fiduciary duties are owed, be in a positon of conflict between duties owed as a fiduciary and his interest or duty to a third party or between duty as a fiduciary to two or more persons in the same transaction or matter. This is commonly called the no conflict rule.
The second is that the fiduciary may not profit from that position except with the informed consent of the object of the duty. This is commonly called the no profit rule. Of particular interest in this case, is the no conflict rule. The donees of the power were officers of the lender. The lender has obtained for its benefit a overdue interest rate of 14.5% on a borrowing on which interest was paid at 11.5%. Therefore, the lender through the execution of the power of attorney by the donees, the officers of the lender, have profited at the expense of the borrower to the extent of the difference between 11.5% and 14.5%. This is in circumstances where there is no evidence of any specific instruction or power being given to the donee or that specific authority has been given by the donor for the execution of such a clause.
Looked at in their broadest perspective, these duties take on a particular importance when considering the conduct of the donees of a power of attorney. Such powers are to be strictly construed and here only specific (and not general) powers are under consideration. I do not think that the rule of strict construction in any way broadens the strictness of the fiduciary duties owed. The better view is that those duties operate within the strict rules of construing the power.[104]
[104] See generally Warman International Limited v Dwyer (1995) 182 CLR 544 at 557-558.
The donees of the power therefore stands in the shoes of the fiduciary agent. In that position, the donees must exercise any power in the interest of the donor but within the specifically construed powers of the appointment. The Court has always strictly applied the no conflict and no profit rules.[105] Policy reasons about the level of inflexibility of these rules will be understood because they have been settled for so long and do not permit of exception.
[105] See Blackman v Thompson [1994] ANZ ConvR 279 at 280-281.
When construed strictly, the power of attorney provides authority to the named donees to “complete the blank spaces… consistent with the provision of this finance application.” The evidence before the Court is that the loan deed was attached to the term finance application. It was available to be read. It contained a schedule page which was in blank. Therefore, to that extent, there is no evidence before the Court to suggest that the finance application under consideration and the loan deed comprised anything more than the document called the application for term finance, when considering at least the overdue interest rates. It is to the application for term finance that a Court would look for guidance as to the overdue rate of interest to be charged under the loan deed. It would be to the same place that the donees of the power of attorney would look when completing the schedule of the agreement. In that way, even though the loan deed – term finance was annexed to the application for term finance, that does not assist the plaintiff in the absence of any other information. This is because there is no schedule shown on that document and clause 5 – “interest” does not prescribe any interest rates. The annotation in the very document discloses sufficient for clause 5.1 rate to be asserted as 11.5%. And, earlier in my reasons, I have made a finding that the finance application agreed rate of interest was 11.5%. Different to that, there is no mention in any finance application of any rate of 14.5% as the overdue interest rate (see loan deed clause 5.2).
I consider that there was no or no sufficient authority in the donees of the power of attorney to complete the overdue rate of interest applicable under clause 5.2 of the loan deed at the figure of 14.5%. As a consequence, I find that, to the extent of that entry, the loan deed is not enforceable against the defendant. I consider that it would be an affront to the principles of equity to suggest that a form of severance at common law is applicable here but I am also of the view that the failure of that entry under the power of attorney does not mean that the balance of the loan contract is not preserved. I consider that because the contract of loan was signed by the donees in excess of that power to the extent that the overdue interest rate is relied upon, the loan deed is not enforceable against the defendant but only to that extent. Even if I was wrong about that view, there is no consequence because of my earlier finding that a contract of loan exists between the lender and the defendant at common law under which the applicable interest rate is 11.5%.
That expressed view does not change because the defendant received the copy of the loan agreement which he was free to read and if necessary query. This is because these circumstances cannot, as it were, mean that the donees were retrospectively authorised to execute the loan agreement dated 1 July 2006. That is possible in circumstances where evidence could be led of the knowledge of the defendant about that interest rate in the same fashion as I am satisfied from the evidence of the defendant’s agreement to the interest rate of 11.5%. However, that evidence is not before the Court.
The plaintiffs relied upon the evidence given by Mr Romeo that a loan deed was always sent to the borrower. There was some challenge in the evidence to the credibility of the version of events given by Mr Romeo in his evidence. I am unable to accept that challenge and I am satisfied on all of the evidence that the loan given to the defendant was arranged prior to the end of the relevant financial year in order to allow the defendant to obtain the desired taxation advantages. I also accept that this loan to the defendant was implemented by 30 June 2006, that it was packaged for securitisation to Adelaide Bank and that the loan sale and servicing deed required GSF to warrant the documentation was correct and part of that documentation was the loan deed. I have already found that according to the Navizon data which is before me, the loan deed was sent to the defendant on 8 August 2006 and I do not accept the assertion by the defendant in the defence and from the bar table that he did not receive the loan deed. I am satisfied and I find that the loan deed was sent to the defendant and it recorded that GSF held the defendant to a loan agreement with an interest rate of 11.5%. That was the arrangement which was implemented in any event. It is the arrangement which binds the obligation of the defendant to make repayment to the plaintiff of that loan.
Despite the findings that I have made about the power of attorney it still remains necessary for this Court to assess the position having regard to the deed of settlement of the Victorian proceedings. There are two essential features. The first is that the terms require the defendant to acknowledge the (existence and) efficacy of the loan deed dated 1 July 2006. That was the loan agreement that the defendant sought to challenge and the claims in respect of which Croft J found were unsustainable but only on the basis of the causes of action pleaded in the group proceeding. In that respect, I am required to keep the recent decision of the High Court in Timbercorp clearly in mind as to what does and does not affect the position of the plaintiff having regard to that decision of Croft J. Consistent with the approach of the High Court in Timbercorp, the judgment of Croft J attached to the approval of the compromise judgment, does not, without more, preclude the defendant under an Anshun estoppel, from alleging that there was no deed of loan or that it was not his loan.
The decision in Timbercorp however does not inform the discussion when a contract of resolution under a settlement deed of claims has been made, executed and brought to fulfilment. In this case, in the dispute between the plaintiffs and the defendant, this has happened in two very important ways. First, the contract of settlement under the deed of settlement has been achieved and then the Court has delivered a judgment under which it has approved the terms of the compromise. The compromise was made subject to the consent of the Court. Ultimately, the approval judgment was disclosed by Croft J. It was in the context of giving that approval judgment, that his Honour attached the judgment at first instance which, when read, disclosed that on the pleaded cases of the group plaintiffs, there was no prospects of success and therefore the compromise should be approved.
In reaching the compromise, the defendant acknowledge his liability under the loan agreement. Therefore, the defendant forbore from making any assertion at that time of any other defence which he might wish to pursue in relation to that deed. It follows that the intention of the lender parties, the bank interests and the borrowers was to deal contractually with all rights in the settlement. This is what was achieved and this is apparent from the documentation of settlement so that all parties’ rights were dealt with together. Then, in accordance with the terms of the deed of settlement, the banks forbore for a period of 30 days from issuing any proceedings to collect the debts owing under the loan agreements. Secondly, the banks credited the bank account of the defendant, thereby reducing the debit for overdue interest that had been charged to that account at the rate of 14.5%. These actions of the bank fulfilled their obligations under the terms of the settlement deed, which is a separate contract and in consideration for which, the defendant has acknowledged his obligations for overdue interest, solicitors indemnity costs and all other borrower’s obligations under the loan deed dated 1 July 2006. Therefore, the whole of the parties’ rights and obligations are now reflected in that deed. The terms of that deed have been carried into effect, and the banks have changed their positon by observing their obligations under the deed as it applies to this defendant.
The overarching effect of the deed of settlement
I therefore consider that as a result of this separate settlement by deed having been formed, executed, approved and carried into effect, the defendant has now bound himself to the obligations in the loan deed which informs the terms of that settlement. The defendant is estopped from asserting any entitlement to avoid his obligation under the loan agreement of 1 July 2006 because that is the agreement he bound himself to observe under the deed of settlement. I make this finding despite the other finding made by me about the efficacy of the power or attorney and the limit on the ability of the donee of the power to bind the defendant. Other circumstances have overtaken these matters.
I am satisfied that but for that settlement, the plaintiffs were not in a position to demand payment from the defendant of the overdue interest rate because the execution of the loan deed by the donees of the power was outside of the strict nature of the authority given to the donees in that respect. Although, I would not set aside the loan deed on that basis I would still find that the plaintiffs were not entitled to pursue the defendant for that overdue interest amount. The settlement deed has created an estoppel that protects the position of the plaintiffs, not the defendant.
Even if I was wrong about all of that, I would still find that in 2006, the defendant took a loan from GSF in the amount of $197,500 which attracted an interest rate of $11.50 per centum per annum and that such loan was an interest only loan for three years and then an interest and principal loan for the next 7 years. The term of the loan therefore was 10 years. I find that the payments of interests made by the defendant from 31 July 2006 to 30 April 2009 discharged, in part, the defendant’s liability under the loan agreement but that, subsequently the defendant is in breach of that loan agreement and has not repaid that loan. I am satisfied that, (again if I am wrong about the foregoing) the defendant would be susceptible to a claim by the plaintiff for the full balance of the loan plus interest at the rate of 11.5%.
The identification of the proper plaintiff
Tendered in evidence before me were three affidavits from Mr Steven Flamer-Smith and one of Mr Nathanuel Stone. The affidavit of Mr Stone explains the background to what is described as program lending and the purchase of the tranche of loans including the loan made to the defendant. It is necessary to explain the background of those matters and the documents relating to the assignment of the loan.
Mr Stone explains in his affidavit that the plaintiffs ABL Custodian Services Pty Ltd (Custodian), Bendigo and Adelaide Bank Limited (BABL) and ABL Nominees Pty Ltd (ABLN) are and were all members of the Bendigo and Adelaide Group of companies. In 2006 and 2007, Custodian and ABLN constituted part of the Adelaide Bank Group of companies. Later there was a merger of Adelaide Bank Limited with Bendigo Bank Limited forming Bendigo and Adelaide Bank.
Mr Stone explained that there was a number of types of lending. These included what might be considered to be traditional retail lending in the usual way. Another form of lending was program lending which involved the bank acquiring a portfolio of loans. It was therefore referred to in the bank as “portfolio lending”. When there is a program lending arrangement, a bank will purchase a tranche of loans from another commercial lender. That way, the bank will take any future profitability in those loans in consideration of the payment made by the bank to the commercial lender for the acquisition of that portfolio of loans. In banking arrangements, this is a very commonplace transaction.
Program lending is not a function of the retail lending side of the bank. Notwithstanding, the bank must be satisfied of the quality of the loans made by the vendor of the loans which are to be purchased. The vendor of the loans would not in the ordinary course have made a loan to a single borrower but to have made a series of loans to a series of borrowers over time. In that circumstance, checks must be made by the purchasing bank of the loans to be purchased in tranches of loans under a portfolio lending arrangement. Mr Stone informed the Court that in the ordinary course the verification of those loans was usually done on the basis of the performance of the loan rather than by a strict examination of the documentation for each and every loan. That is, in the ordinary course, the purchasing bank would make its decision on the purchase of a particular loan based upon its performance. A delinquent loan is unlikely to be purchased as part of a tranche of loans. Mr Stone was a member of the purchasing bank and part of his role was to perform checks on the loans included in the tranches of loans offered by the vendor bank (in this instance GSF). It is the GSF loan program with the plaintiffs to which I now turn.

Historically Adelaide Bank purchased tranches of loans from the provider of these loans made to persons who invested in managed investment schemes promoted and managed by GSMAL. GSF was such a financier. From as early as 2004, a series of documents were settled as between Adelaide Bank Limited and GSF and GSMAL which regulated the portfolio lending purchases made by Adelaide Bank Limited from GSF from time to time. They were called “Loan Sales and Servicing Deeds”. The usual reference to them was “LSSD”. The LSSDs were amended from time to time. Copies of the amending deeds are contained in the affidavits of Mr Flamer-Smith. The fourth deed of amendment by way of rectification is the seventh exhibit to the first affidavit of Mr Flamer-Smith. This document amended the deed entitled “third deed of amendment” dated 9^th of June 2006 which is the eighth exhibit to the first affidavit of Mr Flamer-Smith.
There was some variation in the manner in which these loans were offered by GSF to the bank. All of the loans had to meet particular criteria including lending performance. Some of the loans were called purchased loans. These are loans under which GSF was the lender and the loan was then offered to the bank. It would ordinarily be assigned to the bank either contemporaneously or at some later time. Otherwise there were originated loans which were dealt with on the basis that the bank (and this includes ABLN) was the lender. All of these loans were offered to the bank in tranches under either a sale notice or an origination notice. The sale notice referred to purchased loans and the origination notice referred to originated loans. Consistent with good banking practice, the bank could accept or reject the loans in either form. The bank received information about the loans within what is described as a settlement report and this report was required under the terms of the LSSD. In the ordinary course, the bank had to make its own commercial decision about whether a tranche of loans or any particular loan within the tranche of loans would be accepted under a sale notice or an origination notice.
It is not relevant to my considerations how the bank may have formed views about the quality of one loan or the other. The process of checking these loans is described by Mr Stone in his affidavit at paragraphs 23-30 inclusive. It is sufficient to say that there was an exchange of work sheets relating to the tranches of loan, there was a review of criteria called the “eligibility criteria” as described in the LSSD and then the tranche of loans was analysed. Particular formulae were applied to the tranches to determine collectability of the loans and whether the loans were properly categorised. There were occasions when the loans had to be reclassified and then reassessed. Ultimately a settlement report was prepared by GSF and then sent to the bank setting out all of the details of the various borrowers. This was then verified within the bank and depending upon the commercial decision made by the bank about the tranche of loans or any loans within the tranche, a decision was made as to whether or not the bank would settle upon the purchase of the purchased loans or the adoption of the originated loans. The originated loans were entered into the records of GSF on the basis that the bank was the lender however the bank did not take those loans until it had accepted the origination notice.
If the bank decided to purchase the tranche of loans then a payment was made to the vendor of the loans, GSF, and this was recorded through a software system called “Quantum”. The physical payment occurred through the “Swift System” and payment was made through the EFT funding clearance system on an interbank basis.
Once the loans became the property of the bank in the form of receivables, it was quite often the case that the relevant bank entity assigned the benefit of the loan to other bank entities by way of internal assignment arrangements. Sometimes this happened contemporaneously with the settlement of the purchase of the tranche and at other times it occurred subsequently. These internal assignments were usually conducted through what was described as an internal sale notice. Under such a notice, ABLN in its capacity as the trustee of the Lighthouse Trust No. 11 or Lighthouse Trust No. 12 offered to assign to ABL the whole of its rights, title and interest in the loan. This notification occurred through the internal sale notice and the production of a settlement report. The internal sale notice showed the purchase price for the assignment of the loan. This was one method of internal assignment. Another arrangement was that loans held by Adelaide Bank or ABLN in its capacity as trustee were further assigned to Custodians as trustee of the ABL Portfolio Trust 2007-1. This occurred in 2007.
One assignment occurred under a sale agreement dated 7^th of March 2007. This document is the fifteenth exhibit to the first affidavit of Mr Flamer-Smith. The parties to that agreement were Custodians, Adelaide Bank Limited, ABLN and AB Management Pty Ltd. The operative document in that arrangement was the sale notice and it identified that the assignor offered to assign to the nominated assignee designated loans and loan rights. These were identified in an annexure to the sale notice.
Once these transactions were undertaken, the internal accounting system of the bank called “Quantum” prepared a journal entry which was then posted to the bank’s general ledger system. That general ledger system reflected the transaction, namely the debit of the money paid and the credit of the value of the loan. Thus the value of the asset was taken to the general ledger. At the time there were a number of different types of general ledger systems. In 2006 the general ledger system was called “Masterpiece”. By July 2006 the bank also used an accounting system called “Finance 1”. The general ledger entry produced using the Quantum system was then posted to Finance 1. This always occurred on the day on which the transaction took place and according to the general ledger, that is the day upon which it was posted to the general ledger. Sometimes manual journals were prepared that were posted to the general ledgers of the Lighthouse Trust No. 11 or No. 12.
The loan of the defendant was included within tranche 18 being the specific number given to the tranche of loans purchased by ABLN. The process of purchase was that on 14 November 2006, a sale notice was sent by GSF to ABLN. The notice carried the same date. It is exhibit 9 to the first affidavit of Mr Flamer-Smith. This was the sale notice for the tranche 18 purchased loans. The settlement report for tranche 18 is disclosed in exhibit 10 to the first affidavit of Mr Flamer-Smith and this settlement report accompanied the notice. It refers to the defendant by loan number NN00012725. The grower number is G34792. I have earlier identified that grower number given to the defendant.
Following consideration of the tranche, the relevant program management group within the bank entered the details of the tranche into the Quantum recording system and made payment to GSF. Details of those matters are contained within the fourteenth exhibit to the first affidavit of Mr Flamer-Smith. The transactions were numbered 74968 and 74969. Those exhibits set out the screen shots for the relevant deals all of which are dated the 14^th of November 2006. The Quantum system recorded the payments in relation to these deals and again those payments were all made and recorded on 14 November 2006. The settlement area of the bank was responsible to effect payment to GSF via the Swift payment system.
Exhibit 14 to the first affidavit of Mr Flamer-Smith at page 189 discloses a screen shot from the Quantum system recording the Swift payment confirmation for both transactions numbered 74968 and 74969. These payments were made and approved on 14 November 2006 and were confirmed by letter from Simon Hiller of Adelaide Bank Limited and ABLN addressed to Simon Martin, Great Southern Plantations Limited. A copy of that letter is the thirteenth exhibit to the first affidavit of Mr Flamer-Smith. Lighthouse Trust No. 12 was the repository of that tranche of loans in tranche 18.
There was then an internal assignment of tranche 18 (which included the loan of the defendant Mr Kunz). The assignment was made to Adelaide Bank Limited from Lighthouse Trust No. 12. A side letter from ABLN to Adelaide Bank Limited dated 14 June 2006 accompanied this internal assignment. That letter is the eleventh exhibit to the first affidavit of Mr Flamer-Smith. ABLN assigned its rights under the loan agreement to Adelaide Bank Limited under a sale notice dated 14 November 2006. That is to be found in exhibit 12 of the first affidavit of Mr Flamer-Smith. The sale notice covered only some of the loans. The balance of the loans remain with ABLN in its capacity as trustee of Lighthouse Trust No. 12.
The internal accounting system Quantum then generated a journal which was posted to the bank’s general ledger system, Finance 1. Those documents reflecting the posting to the general ledger are to be found behind tab 2 to the affidavit of Mr Stone. The general ledger reflects the dealings for both deals 74969 and 74868. In both deals, Adelaide Bank Limited invested in the purchase of the loans from GSF either in its own right or as sole note holder in Lighthouse Trust No. 12.
Subsequently, a portion of the loans in tranche 18 were assigned from Adelaide Bank Limited to Custodians as trustee for the ABL Portfolio Funding Trust 2007-1. This occurred on or about 14 March 2007. The process used was a sale notice delivered to Custodian by Adelaide Bank Limited. The sale notice is the sixteenth exhibit to the first affidavit of Mr Flamer-Smith. The sale notice refers to an Annexure A which is a spreadsheet showing the total of the value of the loans assigned. This included a loan to the defendant. That document is to be found in the sixteenth exhibit to the first affidavit of Mr Flamer-Smith. Payment was made for the assignment of these loans. That payment is reflected in the general ledger showing a transfer to Custodian under the sale notice and the payment to Adelaide Bank Limited. The documents relating to these entries into the general ledger are set out behind divider three to the affidavit of Mr Stone.
The effect of the accounting entries is that on 14 March 2007 overall loans of a value of $80,871,852.56 were assigned to Custodian by Adelaide Bank Limited under the sale notice delivered by Custodian. The defendant’s loan was comprised within the loans assigned under that sale notice. It follows that the plaintiff ABL Custodian Services Pty Ltd is the correct plaintiff for the purposes of making any claim under the loan from the defendant.
I have earlier mentioned and set out paragraph 5 of the defendant’s defence. No positive case in evidence was led by the defendant on the issues raised in this paragraph. This was the case with the whole of the defendant’s defence. At trial, I took the opportunity on several occasions to discuss with the defendant his position on the plaintiffs’ claims. I satisfied myself that he had a thorough grasp of the Court process, his obligations if he chose to put a positive case in evidence, the consequence if he did not and then the result. The defendant competently cross examined Mr Romeo and I surmised that he was familiar with Court processes, at least to some extent. I formed the view from what he told me that his decision not to call any evidence was deliberate and informed. As this judgment indicates, it has been necessary to survey a very broad range of facts as well as legal and equitable principles. This has been necessary due to the way in which the defendant conducted his case.
I am satisfied that paragraph 5 of the defence requires no further consideration. It is sufficient to say that it cannot be made out on the facts before me or as a matter of law.
For the foregoing reasons I find that the defendant is bound by the loan agreement of 1 July 2006 and therefore the defendant is required to make the following payments to ABL Custodian Pty Ltd under that agreement:-
1.   Outstanding principal;
2.   Interest at the rate of 14.5% per annum from a date calculated by reference to the deed of settlement of the Victorian proceedings in which a credit was posted to the defendant’s bank account of the sum of $41,578.14;
3.   The costs of the plaintiff on an indemnity basis.
I will hear the parties as to any further or consequential orders.