Equuscorp Pty Ltd (formerly Equuscorp Financial Services Pty Ltd) v Bassat

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 5084 of 1998

EQUUSCORP PTY LTD (FORMERLY EQUUS FINANCIAL SERVICES LTD) (ACN 006 012 3440)	Plaintiff
v
ROBERT SAMUEL BASSAT	Defendant

---

No. 4540 of 1998

EQUUSCORP PTY LTD (FORMERLY EQUUS FINANCIAL SERVICES LTD) (ACN 006 012 3440)	Plaintiff
V
ROBERT SAMUEL BASSAT	Defendant

---

No. 5223 of 1998

EQUUSCORP PTY LTD (FORMERLY EQUUS FINANCIAL SERVICES LTD) (ACN 006 012 3440)	Plaintiff
V
CUNNINGHAM’S WAREHOUSE SALES PTY LTD	Defendant

---

No. 4989 of 1998

EQUUSCORP PTY LTD (FORMERLY EQUUS FINANCIAL SERVICES LTD) (ACN 006 012 3440)	Plaintiff
V
CUNNINGHAM’S WAREHOUSE SALES PTY LTD	Defendant

---
No. 5189 of 1998

EQUUSCORP PTY LTD (FORMERLY EQUUS FINANCIAL SERVICES LTD) (ACN 006 012 3440)	Plaintiff
V
CUNNINGHAM’S WAREHOUSE SALES PTY LTD	Defendant

---

No. 8277 of 1997

EQUUSCORP PTY LTD (FORMERLY EQUUS FINANCIAL SERVICES LTD) (ACN 006 012 3440)	Plaintiff
V
CUNNINGHAM’S WAREHOUSE SALES PTY LTD	Defendant

---

No. 5154 of 1998

EQUUSCORP PTY LTD (FORMERLY EQUUS FINANCIAL SERVICES LTD) (ACN 006 012 3440)	Plaintiff
V
IAN ALEXANDER HAXTON	Defendant

---

No. 5261 of 1998

EQUUSCORP PTY LTD (FORMERLY EQUUS FINANCIAL SERVICES LTD) (ACN 006 012 3440)	Plaintiff
V
IAN ALEXANDER HAXTON	Defendant

---

JUDGE:	BYRNE J
WHERE HELD:	Melbourne
DATES OF HEARING:	12, 13, 14, 15, 16 and 19 November 2007
DATE OF JUDGMENT:	21 December 2007
CASE MAY BE CITED AS:	Equuscorp v Bassat
MEDIUM NEUTRAL CITATION:	[2007] VSC 553

Loan – provision that lender will have limited recourse to borrower for payment of principal and interest – whether immunity of recourse lost by late payments – whether waiver of late payment .

Release – whether borrower released from repayment obligation – construction of release - whether release executed by the lender.

Corporations - prescribed interest - whether offers to the public – agreements unenforceable - whether loan agreements made with investor to support investment are unenforceable.
Companies Code ss. 170, 174(2)

Restitution – whether investors received benefit of loan – “round robin” cheques from lender – whether restitution available where loan agreement unenforceable for illegality – significance of illegal agreement in determining liability to make restitution and amount of restitution.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr SSW Couper QC and Mr Gary Moffatt	Phillip Kotsanis
For the Defendants	Mr MR Pearce SC and Mr MJ Campbell	Eales & Mackenzie Melbourne

TABLE OF CONTENTS

Introduction

The 1986-7 Schemes
The 1987/88 Schemes
The 1988/9 Schemes

The Debt Claims

The Assignment
The Non-Recourse Defences
The Late Payments

Evidentiary Matters
The Disputed Payment Dates
The Effect of Late Payments
The June 1987 Loan Agreement
The January 1988 Loan Agreement
The June 1988 Loan Agreements
The 1989 Loan Agreements
Waiver of Late Payment
Release

The Prescribed Interest Defences

The June 1987 Schemes
The Limitations Defences

Conclusions

The Restitutionary Claims

The Assignment

Restitution

Benefit Received
Change of Position
Unjust Enrichment

Conclusions

HIS HONOUR:

Introduction

On 15 April 1986, the Commonwealth Government announced that its proposal to quarantine deductible expenses incurred in farm production would be abandoned. Expenses would continue to be allowable as a deduction in respect of all of the farmer’s income; not only the income derived from the farming activity. The consequence of this was that non-farmers were permitted to embark upon farming activities and to invest money in those activities, even when theses activities were not profitable in the year of investment. The benefit accruing to the investor was an immediate deduction against non-farm income and the prospect of future income and capital appreciation as the farm became productive.

Such an investment was the more attractive when the taxpayer was not obliged to put up his own money to obtain this deduction. A number of farm investment schemes with this characteristic were devised by enterprising promoters, among whom were Anthony James Johnson and members of the Johnson family.

According to the literature circulated to would-be investors in 1987, the Johnson organisation had acquired and begun to develop a farming and tourist complex at Blueberry Hill, some 570 kilometres north of Sydney. The property was owned by Corindi Blueberry Growers Pty Ltd (“CBG”) which was undertaking a development in conjunction with Johnson Farm Management Pty Ltd (“JFM”). At that time the directors of CBG and JFM[1] were Mr AJ Johnson and his brother Francis Edward Johnson.
[1]According to the company search the date of appointment of Mr FE Johnson as director of JFM was unknown. He ceased to hold that office on 24 June 1988.

In the financial years 1986/7, 1987/8 and 1988/9, the Johnsons sought to attract investors in the Blueberry Hill project by offering a series of schemes which included among their attractions the prospect that the amounts invested would be deductible for income tax purposes.

In broad terms, each of these schemes involve the investor paying money to CBG to purchase an interest in the project,[2] becoming a participant in the farming venture and assuming responsibility for maintaining and harvesting the crop. In reality, the investor would perform these tasks by engaging JFM to do them and paying to JFM an annual maintenance/harvesting charge for the management of the farm. The investor would pre-pay these charges upon entering the scheme. The produce from the farm which would be the property of the investor would then be sold to Kathleen Drive Stone Fruit Growers Syndicate No. 1 Pty Ltd trading as Johnson Farms (“the Buyer”) at an agreed guaranteed price for five years. The directors of the Buyer were also Mr FE Johnson and, probably, Mr AJ Johnson.[3] Thereafter the proceeds of the sale of the produce were to be shared between the investor and CBG and the investor, too, would retain the capital interest in the project.
[2]The interest in each year varied: in 1987 it was a joint venture (Bassat 5084, CWS 5189,). In January 1988 a leasehold (CWS 8277) and in 1988 and 1989 a licence (CWS 5233; Haxton 5261; Bassat 4540; Haxton 5154; and CWS 5989).
[3]According to the company search of the Buyer, Mr AJ Johnson was appointed as director on a date unknown and he ceased to hold that office on 1 September 1995.

A particular feature of these schemes and the feature which gives rise to this litigation, is that the Johnson Group also offered finance to investors on very attractive terms. In short, Rural Finance Pty Ltd, a company registered in 1983 whose directors in 1987 were Mr AJ Johnson and Mr FE Johnson, would lend to the investors for five years the amount of the maintenance/harvest charges to be pre-paid to JFM and the interest payable under the loan. The only outlay required of the borrower personally was two relatively small capital repayments. The loan also provided that the guaranteed proceeds of the harvest sales over the first five years would be applied to repay the balance of the loan, including the pre-paid interest. The expected result of this was that the investor, for this modest outlay, would receive a tax deduction to the full value of the loan and interest and the prospect of further farm income after five years and, ultimately, the capital value of the interest in the project.

It seems that the Blueberry Hill project encountered financial difficulties, for the company extracts show that on 10 January 1991 the plaintiff, Equuscorp Pty Ltd (“Equus”), registered charges over the assets of CBG, JFM, Rural Finance and the Buyer. On 29 August 1991, Equus appointed Phillip Arthur Hennessy of KPMG Peat Marwick in Brisbane and Michael Joseph Dwyer of McGrath Nicol + Partners in Adelaide receivers and managers of the assets of Rural Finance[4] and on 14 March 1993 Mr Hennessy and Alexander Robert McKay McIntosh of McGrath Nicol + Partners were appointed receivers and managers of the assets of JFM, CBG and the Buyer.[5] On 6 March 1996, Rural Finance was wound up pursuant to resolution of its creditors at a meeting convened under s. 439A of the Corporations Law.
[4]Agreed fact 11
[5]Agreed fact 13.

On 30 October 1997, Rural Finance assigned to Equus its loan contracts with the investors. The face value of these 638 loans as at 30/8/1997 was $52,584,005. The consideration given for the assignment was $500,000.

Equus then set about collecting these loans. In March 1998, it filed some 550 writs against certain investors. The pleadings in these cases raised a number of issues and eight of these proceedings have been selected for trial on the basis that the issues raised in them might assist the parties in the remaining proceedings to achieve a resolution of their disputes. I am to determine at this trial all issues in these selected proceedings with respect to the Equus claims against the investors[6] other than quantum.
[6]Not the counterclaims.

The Blueberry Hill schemes were entered into over four financial years. The selected proceedings and the schemes with which they were concerned are the following:

The 1986-7 Schemes

Proceeding No 5084 of 1998. The investor, Robert Samuel Bassat, on 3 June 1987, entered into a number of agreements whereby he became an investor in the scheme and, for the purpose, borrowed $110,000 from Rural Finance. He has repaid this loan to the extent of $20,000 by direct payments of capital[7] and $101,200 from the proceeds of the sale of farm produce in the financial years 1988, 1989,1990 and 1991.[8] Equus, as assignee of the loan, seeks to recover $31,235 as the balance due and payable together with interest. This proceeding and this loan are referred to as Bassat 5084.
[7]Statement of claim par 5, 6; defence par 5,6.
[8]Statement of claim pars 7, 8, 9, 10; defence par 7, 8, 9, 10.

Proceeding No 5189 of 1989. The investor, Cunningham’s Warehouse Sales Pty Ltd (“CWS”), on 29 June 1987, entered into a number of agreements whereby it became an investor in the scheme and, for the purpose, borrowed $220,000[9] from Rural Finance.[10] It has repaid this loan to the extent of $40,000 by direct payments of capital and $202,400 from the proceeds of the sale of farm produce in the financial years 1988, 1989, 1990 and 1991.[11] Equus, as assignee of the loan, seeks to recover $62,470 as the balance due and payable together with interest. This proceeding and this loan are referred to as CWS 5189.
[9]Agreed fact 4.
[10]Statement of claim pars 5, 6; defence pars 5, 6.
[11]Statement of claim pars 7, 8, 9, 10; defence par 7, 8, 9, 10.

The 1987/88 Schemes

Proceeding No 8277 of 1997. The investor, CWS, on 15 January 1988, entered into a number of agreements whereby it became an investor in the scheme and, for the purpose, borrowed $450,880[12] from Rural Finance. It has repaid this loan to the extent of $79,072 by direct payments of capital[13] and $177,200[14] from the proceeds of the sale of produce in the financial years 1989, 1990 and 1991. Equus, as assignee of the loan, seeks to recover $277,184 as the balance due and payable together with interest. This proceeding and this loan are referred to as CWS 8277.
[12]Agreed fact 4.
[13]Statement of claim 5, 6; defence 5, 6.
[14]Statement of claim 7, 8, 9; defence 7, 8, 9.

Proceeding 5223 of 1998. The Investor, CWS, on 28 June 1988, entered into a number of agreements whereby it became an investor in the scheme and, for the purpose, borrowed $445,060[15] from Rural Finance. It has repaid this loan to the extent of $84,000 by direct payments of capital[16] and $242,420 from the proceeds of the sale of produce in the financial years 1989, 1990 and 1991, and by direct payment of $52,920 interest on 28 June 1988.[17] Equus, as assignee of the loan seeks, to recover $184,480 as the balance due and payable together with interest. This proceeding and this loan are referred to as CWS 5223.
[15]Agreed fact 4.
[16]Statement of claim 5, 6; defence 5, 6.
[17]Statement of claim 8, 9, 10; defence 8, 9, 10.

Proceeding 5261 of 1998. The investor, Ian Alexander Haxton, on 29 June 1988, entered into a number of agreements whereby he became an investor in the scheme and, for the purpose, borrowed $89,012[18] from Rural Finance. He has repaid this loan to the extent of $16,800[19] by direct payments of capital, $10,584 by prepayment of interest and $48,484[20] from the proceeds of the sales of the farm produce in the financial years 1989, 1990 and 1991. Equus, as assignee of the loan, seeks to recover $36,896 as the balance due and payable together with interest. This proceeding and this loan are referred to as Haxton 5261.
[18]Agreed fact 4.
[19]Statement of claim 6, 7; defence 6, 7.
[20]Statement of claim pars 9, 10, 11.

The 1988/9 Schemes

Proceeding 4540 of 1998. The investor, Mr Bassat, on 31 March 1989, entered into a number of agreements whereby he became an investor in the scheme and, for the purpose, borrowed $133,518 from Rural Finance.[21] He has repaid this loan to the extent of $25,200 by direct payment of capital,[22] $15,876 by pre-payments of interest[23] and $56,679 from the proceeds of the sale of the farm produce in the financial years 1989, 1990 and 1991.[24] Equus, as assignee of the loan, seeks to recover $62,076 as the balance due and payable together with interest. This proceeding and this loan are referred to as Bassat 4540.
[21]Agreed fact 4.
[22]Statement of claim pars 5, 6; defence pars 5, 6.
[23]Statement of claim par 7; defence par 7.
[24]Statement of claim pars 8, 9; defence pars 8, 9.

Proceeding 5154 of 1998. The investor, Mr Haxton, on 31 May 1989, entered into a number of agreements whereby he became an investor in the scheme and, for the purpose, borrowed $44,506[25] from Rural Finance. He has repaid this loan to the extent of $8,400 by direct payments of capital[26], $5,292 by prepayment of interest[27] and as to $18,893[28] from the proceeds of the sales of the farm produce in the financial years 1990 and 1991 and by payment on 31 May 1989 of $5,292 interest. Equus, as assignee of the loan, seeks to recover $20,692 as to balance due and payable together with interest. This proceeding and this loan are referred to as Haxton 5154.
[25]Agreed facts 3 and 4.
[26]Statement of claim pars 5, 6; defence pars 5, 6.
[27]Statement of claim par 7; defence par 7.
[28]Statement of claim pars 8, 9; defence pars 8, 9.

Proceeding 4989 of 1998. The investor, CWS, on 28 June 1989, entered into a number of agreements whereby it became an investor in the scheme and, for the purpose, borrowed $667,590[29] from Rural Finance. It has repaid this loan to the extent of $126,000 by direct payments of principal, $79,380 by direct prepayment of interest[30] and as to $283,395[31] from the proceeds of the sale of the farm produce in the financial years 1990 and 1991. Equus, as assignee of the loan, seeks to recover $310,380 as the balance due and payable together with interest. This proceeding and this loan are referred to as CWS 4989.
[29]Agreed fact 5.
[30]Statement of claim par 7; defence par 7.
[31]Statement of claim par 8, 9; defence par 8, 9.

The Debt Claims

The primary claim of Equus against each of the investors is for the balance including interest due and payable under the loan agreement. The formal proofs for these claims are not in issue. The investors, however, raise a number of defences: the assignment to Equus is not effective; the loan agreements contain applicable non-recourse provisions including, in the case of loans CWS 5223 and CWS 4989, a specific document which is said to provide a release from the claim; the loan agreements are void or unenforceable for non-conformity with the prospectus requirements of the Companies Code for the marketing of prescribed interests; and, finally, limitations defences. A defence in each case based on the failure to stamp the agreements was not pressed.

The Assignment

The point taken here is that the assignment, in its terms, assigns to Equus loans between Rural Finance and others as are more particularly described in a schedule to both the asset sale agreement dated 6 May 1997 and the deed of assignment dated 30 October 1997. This schedule is said to be illegible so that Equus has failed to prove that the debts here in question were in fact assigned. The schedule appears to be a much reduced copy of a spreadsheet. It is correct to say that it is not possible to read the detail, including the names of the borrowers and the various figures in the columns. Produced in evidence and inserted in the Court Book at pages 12/99A to 12/99F is an enlarged version of the schedule. It is legible. I am able to identify the details of the loans the subject of the selected proceedings. I find no substance in the point.

The Non-Recourse Defences

It was contended on behalf of the investors that, under the terms of each of the loan agreements, their liability was to make the payments of principal as specified and that they had no further personal obligation. It will be recalled that the scheme contemplated that further payments under the loan agreements would be satisfied out of the proceeds of the sale of the farm produce.

It was accepted on behalf of Equus that the five loan agreements entered into prior to 1989 contained an express non-recourse provision and that this would defeat its claims if, in each case, it was applicable. It argued, however, that the provisions were not applicable because, in each case, their operation was conditional upon the investor’s compliance with his or its payment obligations under the loan agreement. In particular, it contended that one or both of the two specified payments of principal were in each case paid late and that, in all cases, payments to be made from the proceeds of the sale of the farm produce for the years after 30 June 1991 were not made at all.

The 1989 loans, which contain no express non-recourse clause, are those the subject of the Bassat 4540 proceeding (loan dated 31 March 1989), the Haxton 5154 proceeding (loan dated 31 May 1989) and the CWS 4989 proceeding (loan dated 28 June 1989). It was contended by the investors that, in these loan agreements too, I should find a non-recourse provision in like terms so that the dates of receipt of the payments of principal also became an issue.

The Late Payments

It is an agreed fact that the proceeds of the sale of the farm produce up to 30 June 1991 were paid to Rural Finance in accordance with the various loan agreements and that, thereafter, none of the investors received any proceeds and that no proceeds were applied in reduction of the loans.[32]
[32]Agreed facts 8, 9 and 10.

I turn now to the suggested late payments of principal. Each of the loan agreements makes provision for two repayments of principal by stipulated dates. Details of these are contained in the following table together with the date on which Equus contends the payment was in fact made. In the final column, I identify those payments which were accepted by Equus as timeous, those which were accepted by the investors as being late, and those whose payment date is in issue.[33]

[33]Agreed fact 6.

Loan

Amount

Date Due

Receipt (Equus)

Comment

Bassat 5084

10,000

30/9/87

28/9/87

In time

Bassat 5084

10,000

31/12/87

4/1/88

In issue

CWS 5189

20,000

30/9/87

1/10/87

In issue

CWS 5189

20,000

31/12/87

13/1/88

In issue

CWS 8277

40,000

15/4/88

6/6/88

In issue

CWS 8277

39,072

15/7/88

8/11/88

In issue

CWS 5223

42,000

28/9/88

22/11/88

Late

CWS 5223

42,000

28/12/88

15/12/88

In time

Haxton 5261

8,400

29/9/88

29/9/88

In time

Haxton 5261

8,400

29/12/88

3/1/89 ($8040)

23/1/89 ($360)

In issue

Late

Bassat 4540

12,600

30/6/89

30/6/89

In time

Bassat 4540

12,600

30/9/89

2/10/89

In issue

Haxton 5154

4,200

31/8/89

31/8/89

In time

Haxton 5154

4,200

30/11/89

1/12/89

In issue

CWS 4989

63,000

28/9/89

23/10/89

Late

CWS 4989

63,000

28/12/89

2/2/90

Late

Evidentiary Matters

In support of the disputed allegations of late payment, counsel for Equus relied upon documents recovered from the Rural Finance records. No witness of the fact of receipt of the payment was called by that party. On behalf of the investors, evidence was given by Mr Bassat, by Mr IA Haxton and his brother Charles David Haxton, a retired accountant formerly a partner at Coopers & Lybrand, Maitland, who was the accountant of Mr IA Haxton, and by John Ellis Cunningham.

Equus, as assignee, some 10 years after the loans were made, had no direct knowledge of the facts. Mr Hennessy, one of the receivers and managers of Rural Finance, gave evidence of the documents which came into his hands as receiver. The actual day-to-day management of the receivership was conducted, under Mr Hennessey’s supervision, by David Mark Anderson who was, in 1991, employed by KPMG as manager in charge of the reconstruction and insolvency division of the Gold Coast office. He spoke of taking and maintaining control of the records of Rural Finance which were then placed in storage at Labrador in Queensland. Mr Anderson said that the records of Rural Finance included various financial statements, ledgers and registers and that the registers included a spreadsheet called “Loan Recourse Register”. Mr Anderson said that in September 1988 representatives of Equus and its solicitors attended the Labrador storage facility. Mark Richardson Leaker was employed by Equus as its general manager between 1996 and 2000. He said he attended the Labrador storage facility in September 1998 with Mr Kotsanis, the solicitor for Equus. He recalled inspecting the documents and, in particular, the Rural Finance investors’ ledgers as at 30 June 1987, 30 June 1988 and 30 June 1989. These documents became Exhibits 2, 3 and 4 respectively.

The significance of this evidence was that the three exhibits included, in each case, a “Loans Recourse Register” for the year in question which included a record of the dates of payment of the specified repayments of principal.

The tender of these and other suggested accounting records of Rural Finance was objected to at the trial but I admitted them pursuant to the Corporations Act s. 1305.

Evidence was then led from Richard John Lynch, a retired chartered accountant, who had been employed by the Johnson Group from 1987 to late 1989 and was the secretary of Rural Finance from March 1988 to 29 June 1989. When Mr Lynch was shown Exhibits 2, 3 and 4, he said that they were, indeed, the records maintained by Rural Finance but that the loans recourse registers were not. He said that these were documents produced by the receivers office. I return then to the evidence of Mr Hennessy and Mr Anderson. Each of these witnesses is taken to have rejected the suggestion that the loan recourse registers were receivers documents.[34] Mr Anderson said, too, that none of the receiver’s documents were stored at Labrador.
[34]In each case, I was told that it was agreed that this is the evidence the witness should be taken to have given if the suggestion had been put to him.

I was encouraged by counsel for the investors to prefer the evidence of Mr Lynch notwithstanding the provisions of s. 1305 and the evidence to the contrary. I will not do so. It was apparent that Mr Lynch had some difficulty in recalling the events of two decades before. The documents moreover have the appearance of authenticity and the information they contained is, so far as is relevant, confirmed by other contemporaneous evidence. I will bring the entries in these loan recourse registers into account when I weigh all of the evidence on the issue of the payments date.

An associated matter which was debated before me was that I should not act upon the Rural Finance accounting records which were in evidence because they were criticised in the receivers’ reports dated 16 August 1991 and 23 November 1992. I need only say that, having considered what was said, I see no reason to conclude that the accounts generally are so unreliable that I should not have regard to them.

Next, on these evidentiary matters, there was debate before me about a number of letters which were addressed to investors drawing their attention to the fact that payments of principal had been made after the due date and that, as a consequence, the non-recourse provisions were no longer applicable to them. Insofar as these letters concern the investors in the selected proceedings, they were the following:

Loan

Letter

CWS 5189

9/10/87

Bassat 5084

11/1/88

CWS 8277

17/6/88

CWS 5223

28/11/88

In addition, there was tendered as Exhibit 17 a bundle of five similar letters sent to other investors in January and February 1989.

The significance of these letters was two-fold. First, the failure of the investor in question to challenge the assertion of late payment may be taken as an admission that the payment was late. Second, it was sought to be used on behalf of Equus to resist the defences based upon its waiver of the right to insist upon the loss of the non-recourse provision for late payment.

I declined to receive these letters as part of the Rural Finance books of account. In the circumstances, and notwithstanding that they found their way into the court book in evidence, I will receive them only if they are proved to have been sent. I am mindful of the evidence of Mr Lynch on this point, to the effect that these letters were prepared by him and another employee and that they were not sent. Notwithstanding the caution with which I approach his evidence and the uncertainties in this matter which he displayed under cross-examination, I will not receive these letters into evidence as having been received by the addressees, particularly where the supposed recipient denies receipt. Included in this finding is the letter of 11 January 1988 addressed to Mr Bassat. At one stage, the witness accepted that he believed that he received this letter but his evidence was confused and contradictory. On balance, I take him as denying receipt.

Another issue which may be considered at this stage is the contention, put on behalf of the investors, that I should apply with respect to certain payments a rule which was called “the postal acceptance rule”. As presented, this really amounted to a submission that I should find that, with respect to some of the loans, there was an acceptance by the parties that payment should be taken to have been made when the cheques were posted.[35] Reliance was placed upon a letter dated 26 November 1987 sent to Mr Bassat which reminded him of the pending date for the payment of his second instalment of principal in respect of the loan Bassat 5084. In it, Rural Finance suggested that, since the payment fell due on 31 December 1987, Mr Haxton might make the payment early, in which case he would receive a credit at 15% per annum or he might send before the Christmas holiday a cheque post-dated to 31 December 1987. The terms of this letter are not consistent with any arrangement in terms of the suggested postal acceptance rule.
[35]As in Tank Express A/S v Compagnie Financière Belge de Pétroles SA; The Petrofina [1949] AC 76.

In respect of those loans where the second payment of principal fell due in December 1988[36] and December 1989,[37] letters were sent to the investor concerned in November offering a rebate for early payment but without the post-dated cheque suggestion. Again, the factual foundation for the suggested acceptance is not made out. I do not find that any of the parties accepted with respect to any of the payments that receipt should be taken to have occurred on posting.
[36]Haxton 5261 and CWS 5223.
[37]CWS 4989.

Nevertheless, in those cases where it is shown that a cheque was posted on a given date, I am prepared to take judicial notice of the time required in the ordinary course of post for its arrival at the address of destination. In short, I will treat the evidence of posting as carrying with it evidence of receipt some days later, such evidence to be weighed against any evidence of non-receipt by that date.

The Disputed Payment Dates

The second Bassat 5084 payment of $10,000 was due on 31 December 1987. Mr Bassat said that, at that time, he was employed by IBM in Melbourne. He received a letter from Rural Finance dated 26 November 1987 to which I have referred.[38] The letter requests that correspondence be sent to an address in Corindi, New South Wales. Mr Bassat said that on 24 December, which was a Thursday, he drew a cheque from his IBM Employees Credit Union account. I accept that he did this; a copy of the cheque was produced. He said that he sent the cheque by post on the same day addressed to Rural Finance at the Corindi address. The covering letter dated 24 December 1987 bears a handwritten note, apparently made by a Rural Finance employee, “cheque rec’d 4/1/88”. The initial beside this note appears to be “EW”. The person was not identified. I accept the evidence of Mr Bassat that, in the ordinary course of post, a letter posted in Melbourne would arrive at Corindi on or before 31 December. This allows three working days for receipt. The notation records receipt Monday 4 January 1988 and this is treated as the date of receipt in the Rural Finance records.
[38]See par [36] above.

The evidence of Mr Lynch showed that, about this time, Rural Finance was changing its office address. The address at Corindi was its business address up to October 1987 when it moved to Tweed Heads. About Christmas 1987 it moved again to Southport. Its letter to Mr Bassat of 26 November 1987 was on the old letterhead which directed correspondence to its Corindi address.

In all the circumstances, I find that Mr Bassat did in fact post the letter and the cheque on 24 December and I infer that it arrived at Corindi before 31 December. It is likely that it was then forwarded to Tweed Heads or Southport where it arrived on 4 January 1998. Equus bears the burden of proof on this issue. I am not satisfied that it has discharged this burden. Indeed, I find that Mr Bassat sent the cheque to Rural Finance and that it arrived at the given address by the due date. The fact that Rural Finance had moved offices without advising its borrower cannot provide a basis for invoking the penalty provisions of the loan agreement. The second payment in the Bassat 5084 loan was made by the due date.

The second Bassat 4540 payment of $12,600 was due on Saturday 30 September 1989. On the same date, Mr Bassat was required to make a payment under another Johnson Group project, the Red Claw project, of $3,617. On Tuesday 26 September he drew two cheques for a total of $16,217, one for $6,000 drawn on a person joint account and one for $10,217 drawn on his IBM Employees Credit Union Account. He said that he posted these cheques on that day to Rural Finance at Southport. This payment is shown in the books of Rural Finance as being received on Monday 2 October. In the ordinary course of mail a letter post in Burwood Victoria would arrive within three days. I accept the evidence of Mr Bassat that he posted the cheques on 26 September and I infer that they arrived on or before Friday 29 September. This payment, too, was made by the due date.

The second Haxton 5154 payment of $4,200 was said to be due on 30 November 1989. In fact, the loan agreement provides that it be made six months from the date of the loan, which is 31 May 1989. Mr CD Haxton said that this payment was made by cheque dated 25 November drawn on the account of Haxton Haulage. He was unable to say, however, when the cheque was posted. The copy cheque in evidence bears a note that it was received and banked on 1 December 1989. This payment is recorded in the books of Rural Finance as having been made on that date. In the circumstances, I will act upon the accounting records. The payment was not made by the due date.

Under the CWS 5189 loan agreement dated 29 June 1987, CWS was required to make two payments each of $20,000 on 30 September 1987 and 31 December 1987 respectively. According to the Rural Finance investors’ ledger the first payment was received on 1 October 1987 and banked on 2 October. The second payment is shown as having been banked on 13 January 1988. The only witness evidence of the date of receipt of this latter payment was that of Mr Lynch whose writing appears on a copy of the loan account statement for this loan. He interpreted his note, and with his memory refreshed, said that sometime in the new year 1988 he went to Adelaide. While he was there he received the CWS cheque on 13 January 1988. Accepting that his evidence on this matter relied heavily upon his contemporaneous note, I find that this payment was made after the due date. On the more sparse evidence as to the first payment, I find that on the balance of probabilities that this, too, was one day late.

Under the Haxton 5261 loan agreement, the investor was required to make two repayments of principal each of $8,400 on 29 September 1988 and 29 December 1998 respectively. With respect to the second payment, Mr Haxton said that, by mistake, he drew a cheque on the Haxton Haulage account for $8,040 only. The cheque is dated 23 December 1988. He said that his accountant would have posted it on that date or the following day. A handwritten note on the cheque shows that it was not received until 3 January 1989. The date of receipt which was therefore in issue, is of no consequence because it is common ground that the payment was insufficient. When this short payment was drawn to Mr Haxton’s attention on 19 January he immediately drew a cheque for the $360 required and this is marked as having been received and banked on 23 January 1989. I find that the second payment of principal was not made by the due date.

Pursuant to loan CWS 8277 dated 15 January 1988 the investor was required to make two repayments of principal, $40,000 on 15 April 1988 and $39,072 on 15 July 1988. According to the Rural Finance records these payments were made on 6 June 1988 and 8 November 1988 respectively. Mr Cunningham, in evidence, accepted that the first payment was not made by the due date. This was apparently because of some dispute with the Johnson Group regarding commission payable to his accountant Mr Tuckey for placing the investment. Mr Cunningham said, too, that the second payment was withheld until certain issues had been sorted out. The payment was eventually made after these issues were resolved in October or November. I find that neither of the payments was made by the due date.

Notwithstanding his concerns with the Johnson organisation, Mr Cunningham’s company made a further investment in June 1988 and entered into loan agreement CWS 5223 on 28 June 1988. This required that two repayments, each of $42,000, be made on 28 September and 28 December 1988 respectively. It was common ground that the second payment was made by the due date. The first payment was, however, not made until 22 November 1988. It was suggested that Rural Finance allowed further time for this payment and accepted late payment. Mr Cunningham’s evidence was that this payment was withheld, as was the case with the second payment due under loan CWS 8277 pending the resolution of certain issues between the Johnson Group and CWS. These issues were resolved in October or November and the payment was then made. I do not find any agreement to extend the time for payment.

I conclude this consideration of the factual issues as to late payments as appears in the final column to this table:

Loan

Amount

Date Due

Receipt Date

Finding

Bassat 5084

10,000

30/9/87

28/9/87

In time

Bassat 5084

10,000

31/12/87

By 31/12/87

In time

CWS 5189

20,000

30/9/87

1/10/87

Late

CWS 5189

20,000

31/12/87

13/1/88

Late

CWS 8277

40,000

15/4/88

6/6/88

Late

CWS 8277

39,072

15/7/88

8/11/88

Late

CWS 5223

42,000

28/9/88

22/11/88

Late

CWS 5223

42,000

28/12/88

15/12/88

In time

Haxton 5261

8,400

29/9/88

29/9/88

In time

Haxton 5261

8,400

29/12/88

3/1/89

23/1/89

Late

Bassat 4540

12,600

30/6/89

30/6/89

In time

Bassat 4540

12,600

30/9/89

by 30/9/87

In time

Haxton 5154

4,200

31/8/89

31/8/89

In time

Haxton 5154

4,200

30/11/89

1/12/89

Late

CWS 4989

63,000

28/9/89

23/10/89

Late

CWS 4989

63,000

28/12/89

2/2/90

Late

The Effect of Late Payments

I turn now to consider the effect of these late payments and the non-payment from the proceeds of the farm produce in the period after 30 June 1991 upon the non-recourse provisions of the loan agreements. It will be recalled that I have concluded that the loan agreements of 1989 do not contain a non-recourse provision[39] so that the issue of late-payment does not require consideration in this context. Of the remaining five loans there were three different forms of contract used in respect of loans made at different times.

The June 1987 Loan Agreement

[39]See par [23] above. Bassat 4540, CWS 4989; Haxton 5154,.

This is the form of agreement which underlies the Bassat 5084 and the CWS 5189 loans. The agreement requires the investor, as joint venturer, to repay the principal sum and interest, if any, subject to the terms of the agreement,[40] by the date of expiry of the loan, that is, by 31 March 1992.[41] Interest is agreed to be paid at 19% per annum payable annual in arrear on 31 March in each year[42] with an acceptable rate of 15% if the investor pays interest within seven days of the due date. Clause 3B deals with principal and interest repayments.
[40]Clause 2.
[41]Clause 3A(i).
[42]Clause 3A(ii).

B. PRINCIPAL AND INTEREST REPAYMENTS
(i)The Joint Venturer shall pay the Lender the sum of $10,000 on 30^th September 1987 and a further sum of $10,000 on 31^st December 1987 in reduction of the Principal Sum.[43]
[43]The sum for each repayment in the CWS 5189 loan was $20,000.
(ii)The balance of the Principal Sum and any interest owing under clause 3A(ii) and (iii) shall be repaid to the Lender by direct deduction from the proceeds (if any) of sale of the Joint Venturer’s Fruit pursuant to a Sale of Fruit Agreement or any other agreement which the Joint Venturer may enter into for the sale of the fruit the proceeds of sale of the Fruit being applied firstly in payment of any interest due and payable under Clauses 3A(ii) and (iii) hereof and the balance thereafter in reduction of the Principal Sum.
(iii)Subject expressly to the Joint Venturer entering into and duly performing his obligations under the Sale of Fruit Agreement and to the repayment by the Joint Venturer of each of the principal repayment sums referred to in B.(i) hereof by the due date for the repayment of each such sum (or such further time as the Lender shall at his sole discretion allow) the Lender shall have no right of recourse against the Joint Venturer and the Joint Venturer shall have no other personal liability for payment of balance of the Principal Sum or Interest owing under clauses 3a(ii) and (iii) or any other costs, charges or expenses whatsoever in respect of the balance of the Principal Sum other than out of the proceeds from sale of Fruit as provided in sub-clause 3B.(ii).
(iv)The Joint Venturer shall have the right on any day appointed herein for the payment of interest to repay to the Lender:
(a)the whole of the balance of the Principal Sum;
(b)$1000 or any multiple thereof in reduction of the Principal Sum.

Clauses 4 and 5 deal with defaults by the investor in making payments due under the agreement. Clause 4 deals with default in payments to be made from the proceeds of sale of the farm produce:
4. DEFAULT

The Lender in consideration of the execution of a guarantee by a third party in respect of the Loan warrants that on any default by the Joint Venturer to pay the amounts due under clause 3B(ii) PROVIDED THAT the Joint Venturer makes all payments in accordance with Clause 3B(i) and enters into the Sale of Fruit Agreement.
(a) it may call only on the guarantor to rectify such default and
(b)in any event it has recourse only to the asset specified in Clause 3C(i) and 3C(ii) hereof for rectification of the default and not otherwise.

Clause 5 is more general. It gives to Rural Finance the right, in the event of default in any payment, to call for an assignment from the investor of its rights to fruit.

The terms of the non-recourse provision are clear. The rights of the investor to immunity are conditional upon a number of events, including the payment by the due date of the two instalments of principal which are specified in cl. 3B(i). In the present case, the payments by Mr Bassat under Bassat 5084 were punctual, so that the right of non-recourse remains unaffected. Those under CWS 5189 were late, so that this precondition was not met.

Then there is the failure after 30 June 1991 to make payments to Rural Finance under cl. 3B(ii) out of the proceeds of the sale of the farm produce. This default was mentioned in general terms by counsel for Equus in final submissions. This payment is not a pre-condition of the non-recourse provision of cl. 3B(iii). It is alleged, but not admitted in each case, that no payments under cl. 3B(ii) were made after 31 March 1991.[44] The agreed fact is that no such payments were made after 30 June 1991. It would seem, therefore, that the non-payment in the last year of the loan might attract the operation of cl. 4. If it applies, the investor appears to be protected by this provision from a claim such as is brought here against him for the payment of principal and interest. But no argument was addressed to this point which was not pleaded in the defence. I say nothing further about it.

The January 1988 Loan Agreement

[44]Statement of claim, par 12, defence par 12.

This is the form of agreement which underlies CWS 8277. As with the other loan agreements, the investor agrees to pay the principal sum of $450,880 when the term of the loan expires on 15 January 1994. The interest provision requires payment at 17% quarterly in arrear with an acceptable rate of 13% if interest is paid within seven days after the due date.[45] Clause 4 provides for a further discount of interest below 13% in certain circumstances. The two specified repayments of principal are $40,000 by 15 April 1988 and $39,072 by 15 July 1988.[46] Then follow a number of sub-clauses of cl. 3B:
[45]Clause 3A(ii), (iii).
[46]Clause 3B(i), CB8/109Q.

(ii)The balance of the Principal Sum and any interest owing under clause 3A(ii) and (iii) shall be repaid to the Lender by direct deduction from the income received by the Borrower from the Farm whether from the sale of Fruit or otherwise such income being applied firstly in payment of any interest due and payable under Clauses 3A(ii) and (iii) hereof and the balance thereafter in reduction of the Principal Sum.
(iii)Subject expressly to the repayment by the Borrower of each of the principal repayment sums referred to in B(i) hereof by the due date for the repayment of each such sum (or such further time as the Lender shall at its sole discretion allow) and subject further to the Borrower exercising his right to prepay interest for a period of not less than eighteen (18) months the Lender shall have no right of recourse against the Borrower and the Borrower shall have no other personal liability for payment of the balance of the Principal Sum or Interest owing under clauses 3A(ii) and (iii) or any other costs, charges or expenses whatsoever in respect of the balance of the Principal Sum other than out of the income from the Farm as provided in subclause (ii) hereof.
(iv)The Borrower shall have the right on any day appointed herein for the payment of interest to repay to the Lender:
(a)the whole of the balance of the Principal Sum;
(b)$1000 or any multiple thereof in reduction of the Principal Sum.

As with the earlier loan agreements, the right of non-recourse is expressed to be conditional upon payment of the two specified payments of principal by the due dates. In case of this loan, this was not done. The provision permits Rural Finance to extend the time for payment but it was not alleged or proved that any extension was granted. Accordingly, the pre-condition to the protection given by cl. 3B(iii) was not satisfied.

The right of non-recourse is also said to be conditional upon the investor exercising the right to pre-pay interest. The loan agreement does not, in terms, confer such a right. In its defence, CWS asserts that in January 1988 it elected to pre-pay interest and did in fact pay $72,128.[47] This is denied in paragraph 3(aa) of the reply. There was no evidence as to this payment. Counsel for Equus said, however, that, if this amount was paid it would not satisfy the requirement that 18 months’ interest be pre-paid. However it be calculated, $72,128 would not be sufficient. But nothing turns upon this as Equus does not in its reply rely on this as a reason for the non-applicability of the non-recourse provision[48] and, in any event, the pre-conditions as to repayment of principal were not satisfied.
[47]Defence par 14.
[48]Reply par 3(e).

Equus in its reply further asserts a number of other bases for the non-applicability of the non-recourse agreement in this loan. I shall consider now only that which depends upon a construction of the loan agreement. Other bases which depend upon breaches of the loan agreement were not developed. It was contended by Equus that the obligation to repay the principal sum on the expiry of the loan is unaffected by the non-recourse provision which is concerned only with the payments to be made prior to that date from the farm produce pursuant to cl. 3B(ii). Counsel, in final submissions, did not make anything of this. Nor do I. The obligation of the investor to repay the principal is expressed to be “in accordance with the terms of this Agreement.”[49] The non-recourse provision of cl. 3B(iii) is in very general terms. Its generality is confirmed by the default clause.[50] If it applies, it overrides the obligation to repay principal upon the expiry of the loan.
[49]Clause 2.
[50]Clause 5.

Then there is cl. 5, the default clause. This would include a default in making a specified repayment of principal and also a default in not making payments out of the proceeds of the sale of the farm produce pursuant to cl. 3B(ii). Clause 5 is in these terms:

5. DEFAULT
The Lender acknowledges that it has recourse only to the assets specified in Clause 3C(i) and 3C(ii) hereof for rectification of any the default by the Borrower and not otherwise, but subject to due performance by the Borrower of the terms of this Agreement PROVIDED HOWEVER that the Borrower at all times during the period hereof retains the Contractor to maintain the Farm.

It is an agreed fact that no payments under cl. 3B(ii) were made after 30 June 1991. In the pleadings it is alleged, but not admitted, that these payments were not made after 15 January 1991. The pleadings make no mention of cl. 5, nor was there any argument addressed as to its meaning or import. It is a difficult provision. In the circumstances I will say nothing further about it.
The June 1988 Loan Agreements

These are loans CWS 5223 and Haxton 5261 which were made on 26 June and 29 June 1988 respectively. The agreements[51] are, so far as is relevant, in identical terms. As with the other loan agreements the investor agrees to repay the balance of the principal sum, if any, and other moneys outstanding within five years, that is, by the end of June 1993. This obligation, however, is expressed to be subject to the provisions of the agreement. Interest is fixed at 17% per annum payable in arrear with an acceptable rate of 15% when the payment is made within seven days after the due date. There is, too, a provision for further discounting of interest in certain circumstances.[52]
[51]CWS 5223, Haxton 5261.
[52]Clause 6.

Two repayments of principal are required to be made three months and six months respectively after the date of the loan agreement.[53] Then followed provisions for payment of the balance of the principal sum and interest out of the proceeds of the sale of farm produce and a provision for early repayment of principal. The provisions, which are similar to the equivalent provisions in the January 1988 loan are in the following terms:
[53]Clause 3C(i).

3C. PRINCIPAL AND INTEREST PAYMENTS
(i)The Borrower shall repay to the Lender the respective sums specified in (i) and (ii) in Part B of Schedule 2 three (3) months from the date hereof and six (6) months from the date hereof respectively in reduction of the Principal Sum.
(ii)The balance of the Principal Sum and any interest owing under Clauses 3B(i) and (ii) shall be repaid to the Lender by direct deduction from the income received by the Borrower from the Farm such income being applied firstly in payment of any interest due and payable under Clauses 3B(i) and (ii) hereof and the balance thereafter in reduction of the Principal Sum.
(iii)The Borrower shall have the right on any day appointed herein for the payment of interest or at periods of 3, 6 and 9 months in each year to repay to the Lender:
(a)the whole of the balance of the Principal Sum.
(b)$1000 or any multiple thereof in reduction of the Principal Sum.

(iv)The Borrower by his execution hereof hereby authorises the Buyer to pay to the Lender until all monies payable hereunder have been paid, the proceeds of farm income.

Upon any payment of any such sum or sums interest thereon shall immediately abate notwithstanding Clause 3B(i) hereof.

The non-recourse provision is contained in cl. 4(iii):
(iii)Notwithstanding anything hereinbefore or hereinafter contained and subject expressly to:
(a)the repayment by the Borrower of each of the principal repayments referred to in Clause 3C(i) by the due date for the repayment of each such sum; and
(b)the payment of interest by the due date for each such payment, (or such further time as the Lender in each such case at its sole discretion allows); and
(c)the due performance by the Borrower of the conditions imposed on him by Clause 5 hereof, then the Lender shall have no right of recourse against the Borrower and the Borrower shall have no other personal liability for payment of the balance of the Principal Sum or Interest owing under Clauses 3B(i) and (ii) or any other costs, charges or expenses whatsoever in respect of the balance of the Principal Sum other than out of the income from the Farm as provided in Subclause 3C(ii) hereof.

The reference to cl. 5 is a reference to the provision in the agreement by which the investor agrees to comply with the provisions of the farm agreement. This is the agreement whereby the investor, as farmer, agrees with CBG, as landowner, to farm the land, to tend the blueberry plantation and to harvest the fruit.

There is no requirement in cl. 4(iii)(b) for the prepayment of interest generally: only “the payment of interest by the due date for each such payment”. This must refer to the interest payable on the two repayments of principal under cl. 3C(i); not the interest which is payable out of the sale of farm produce pursuant to cl. 3C(ii).

Since it was not suggested that Rural Finance allowed an extension of the time for compliance with cl. 4(iii), it follows from my finding that one repayment of interest in each case was not made by the due date, that the pre-conditions for the operation of the non-recourse provision in loans CWS 5223 and Haxton 5261 have not been satisfied.

The non-payment after June 1991 of interest and principal from the proceeds of sale of the farm produce could, therefore, not cause the loss of the non-recourse provision pursuant to cl. 4(iii).

The 1989 Loan Agreements

In respect of each of the Bassett 4540, the Haxton 5154 and the CWS 4989 loans, it was contended on behalf of the investor that, upon a proper construction of the loan agreement, their obligation to make repayments of principal and payments of interest was limited to payments from the proceeds of the sale of the farm produce.

The agreements in each of the three loans are in identical terms. It will be recalled that this agreement was entered into at the same time as a number of other agreements: a farm agreement between CBG and the investor whereby CBG granted to the investor a licence for 12 years in respect of a specified area of land upon certain terms; a management agreement between the investor and JFM whereby JFM was to conduct the farming operation; and a sale of fruit agreement between the investor and the Buyer whereby the Buyer agreed to buy the produce at guaranteed prices.

Under the loan agreement, Rural Finance agreed to lend the principal sum to the investor[54] and the investor acknowledged receipt of the principal and agreed to repay it in accordance with the terms of the agreement.[55] In particular, the investor agreed to pay the balance of principal and other moneys outstanding (if any) within five years of the date of the agreement. Interest was fixed at 17% with an acceptable rate of 15% if paid within seven days of the due date for payment.[56] There is, in cl. 6, a provision for further discounting the rate of interest in certain circumstances. Clause 3C deals with the payment of principal and interest.
[54]Clause 1.
[55]Clause 2.
[56]Clause 3B.

3C. PRINCIPAL AND INTEREST PAYMENTS
(i)The Borrower shall repay to the Lender the respective sums specified in (i) and (ii) in Part B of Schedule 2 three (3) months from the date hereof and six (6) months from the date hereof respectively in reduction of the Principal Sum.
(ii)The balance of the Principal Sum and any interest owing under Clause 3B(i) and (ii) shall be repaid to the Lender by direct deduction from the net proceeds received by the Borrower from the Farm such net proceeds being applied firstly in payment of any interest due and payable under Clauses 3B(i) and (ii) hereof and the balance thereafter in reduction of the Principal Sum.
(iii)The Borrower shall have the right on any day appointed herein for the payment of interest or at periods of 3, 6 and 9 months in each year to repay to the Lender:
(a)the whole of the balance of the Principal Sum.
(b)$1000 or any multiple thereof in reduction of the Principal Sum.

(iv)The Borrower by his execution hereof hereby authorises the Buyer to pay to the Lender until all monies payable hereunder have been paid, the net proceeds.

Upon any payment of any such sum or sums interest thereon shall immediately abate notwithstanding Clause 3B(i) hereof.

On behalf of the investors, it was contended that their personal liability to repay principal and interest was limited to the payments referred to in cl. 3C(i). What was put was that cl. 3C(ii) should be read and construed as if the word “only” were inserted after the words “repaid to the Lender” and before the words “by direct deduction”. This, it was said, was implicit from the scheme of the loan agreement which provided in terms that the investor should pay only the two specified instalments of principal under cl. 3C(i). The obligation to make further payments created under cl. 3C(ii) is expressed in the passive voice so that the investor is not identified as the person assuming this obligation and, that these payments “shall be repaid to the Lender by direct deduction from” the proceeds of the sale of the farm produce.

I am not persuaded that this is the correct interpretation of the loan agreement. The document, in fairly conventional terms, makes provision in cll. 2, 3B(i), and 4(i) for payments of principal and interest to be made by the investor as borrower. It is, in truth, the investor who is making payment under cl. 3C(ii), because the proceeds of the sale of the produce from the farm for the first five years are the investor’s own funds.[57] By cl. 3C(iv), the investor authorises the Buyer to make payment of these proceeds to Rural Finance. This is confirmed by the default provisions in cl. 7(ii) which treat the non-payment from the farm proceeds pursuant to cl. 3C(ii) as a default by the investor which renders the balance of the principal and interest immediately payable.
[57]Sale of fruit agreement cl. 2, 5.2.

I have examined, too, the other agreements executed in respect of this project at the same time as the loan agreement. I find nothing which causes me to depart from my conclusion that, in these three 1989 agreements, there is no non-recourse provision. Accordingly, subject to any other of the defences raised, the balance unpaid is due and payable at the expiration of the five year loan period unless it be sooner due and payable by the operation of cl. 7.

Waiver of Late Payment

Faced with the prospect that the non-recourse provisions of the loan agreements entered into prior to 1989 were lost by reason of late payments of principal, the investors presented a case that this had been waived by the various acts of Rural Finance which were referable to the continuance of the non-recourse provisions.

It is necessary to unravel a number of aspects of this contention which tended to confuse the issue generally. First, the non-recourse entitlement in each case was expressed to be subject to a number of pre-conditions, of which the repayment of principal was only one. The failure to comply with the obligation to make these repayments may have been a default but it was not default which caused the loss of the non-recourse provision. Accordingly, there is in the present context, no election to be made by Rural Finance as to whether to treat the late payment as a default or as to whether to treat the late payment as triggering the acceleration of the obligation to pay the balance. There is, in truth, no election at all; if the payment is late the non-recourse provision no longer applies.

The investor is then liable to pay the balance of principal and interest, if any, at the end of the loan period and to make payments from the proceeds of the sale of the farm produce as is provided under the loan agreement. The investor may also be liable to make these payments forthwith if the acceleration provisions of the default clause apply. This is an independent consequence of a late payment of principal, assuming that this is a default which triggers the acceleration clause.

It follows from this that the statements of Rural Finance made after a late payment of principal, to the effect that the investor is obliged to comply with its obligation to make repayments of principal and to pay from the proceeds of the sale of farm produce, are not at all inconsistent with the loss of the non-recourse provision. Even if election had a role to play in this, such statements or conduct could not be taken as an indication of the election or waiver of the right of Rural Finance to pursue the investor personally if the other contractual procedures for payment of principal and interest were not complied with; the statement or conduct is not directed to that consequence.

I should mention, too, that such statements or conduct were not relied on for other purposes, such as, constituting a variation to the loan agreement, an estoppel or misleading and deceptive conduct.

This said, there is little point in traversing in detail the various acts of Rural Finance which were relied upon as constituting waiver or election. I will, nevertheless, deal with them briefly in turn. Before I do this, I make one general observation about those acts of Rural Finance relied upon which were, in effect, that it failed, following the late payment, to exercise its rights under the loan agreement to accelerate the payment of principal and interest if this were available, to pursue the investor for payment or to enforce its security rights. It will be recalled that, in all cases, the delinquent investor made the required repayments of principal and that, in most cases, this was done soon after the due date. In the circumstances, there was no reason to pursue the investor for that payment and no reason not to let the agreement run its normal course. If the payments from the proceeds of the sale of the farm produce were made as expected, there would be no need for Rural Finance to enforce its rights and thereby antagonise a future repeat investor.

The following were the acts of Rural Finance which were relied upon as constituting waiver or election:

(a)Failure to give notice to the investor that the protection of the non-recourse provisions was lost. Counsel for Equus contended that notice was given and for the purpose relied on the letters to which I have referred.[58] I do not find that these letters were in fact sent. I would not construe the silence of Rural Finance on this matter as amounting to an election or waiver.
(b)Failure to enforce the security. In each case the investor gave security but the provisions in the various agreements were not identical. I do not see a failure on the part of Rural Finance to enforce its security rights as amounting to any indication that the non-recourse provision was still effective.
(c)Acceptance of payments from the sale of farm produce. Again, this says nothing about the attitude of Rural Finance to its right of recourse. The fact that Rural Finance accepted payment from the sales of produce says nothing about its attitude to pursue the investor personally in the event of default.
(d)Acceptance of lower interest rate. Reliance was placed in some cases upon the fact that Rural Finance continued, after the late payment, to charge interest at the acceptable rate rather than at the higher rate. It will be recalled that this lower rate is payable when the interest is paid within seven days of the due date. The interest clauses of the loan agreements say nothing about late payment of principal. Even so, the acceptance of a lower rate of interest says nothing about the attitude of Rural Finance to the personal liability of the investor.
(e)Letters to investors. Next, my attention was directed to a number of letters apparently sent to all investors in which mention is made of the fact that the investor was not personally liable. Notable among this correspondence was a letter dated 19 June 1992 sent to all investors which commences “Dear Blueberry Lease Farmer”. It is signed by Mr AJ Johnson and is written on behalf of CBG, JFM, the Buyer and the directors of Rural Finance. It is not sent on behalf of Rural Finance itself, over whose assets receivers and managers had by then been appointed. In these circumstances, any assertion contained in this letter cannot amount to a waiver or election by Rural Finance.

[58]See par [33] above.

I conclude that there is no substance in the contentions based upon the conduct of Rural Finance which were said to amount to waiver or the like.

Release

In respect of two loans it is put by CWS that it was released by Rural Finance.

Loan CWS 5223 was entered into in June 1988. Under the loan agreement, CWS was required to make two repayments of principal, each of $42,000, the second of which was due on 28 December 1988. The first payment, due on 28 September, had not been paid on 16 November 1988, due to disputes between CWS and the Johnson Group, when Rural Finance wrote to CWS a letter reminding it that “your second (and final) loan repayment… falls due in December, 1988”. The letter then offers an interest rebate in the event of early payment of the December payment. In response to this, CWS made the December payment 13 days early and received a refund of $246.82. On the date of this reminder letter, the investor’s right of non-recourse had been lost due to the non-payment of the first principal repayment. The investor, therefore, had lost its immunity from personal liability for the repayment of all of the principal and interest as and when they fell due. It was argued that the mention in this letter of the repayment being a final loan repayment meant that the letter should be construed as an offer to release the investor from the obligation to make any other loan repayments, if the December instalment was paid early. The consequence of this and of the early payment, it was said, is that CWS accepted this offer and was released from any further obligation under the loan agreement. This would include its obligation to make payments from the proceeds of sale of farm produce and presumably entitle the release of the security which it had given.

I am entirely unpersuaded that the letter and what followed will bear this remarkable interpretation. While it is true that mention is made of the December payment as being the final loan repayment, this is not to be found in any contractual context such as exists in the second paragraph of the letter.

The second loan which is said to have been released is CWS 4989 which was made by agreement dated 28 June 1989. The loan agreement contains no non-recourse provision. When Mr Cunningham and his accountant, Mr Tuckey, saw this, upon receipt of the documentation for execution, they requested Mr Lynch for a written assurance that the liability of CWS was limited to the payments to be made upon entry into the scheme and the two capital repayments of $63,000 each. Mr Tuckey, who negotiated this, was not called as a witness but his letter of 30 June 1989 to CWS was put in evidence. In this letter he speaks of having completed the documentation and returned it to the Johnson Group together with the necessary cheques. He says, too, that a document, which he calls an indemnity, had not yet been received. It would seem, however, that this was some kind of indemnity in case there were difficulties with the taxation office.

In mid-August, CWS received a document entitled “Guarantee” which was said to constitute the release. It is dated 29 June 1989 and appears to have been executed with the common seals of JFM and Rural Finance. It is also expressed to have been signed sealed and delivered by Mr AJ Johnson. It was common ground that, notwithstanding its date, it was executed some time in August 1989. In a letter to JFM of 15 August 1989, Mr Tuckey speaks of having received the document “last Thursday” which was 10 August in that year.

Before I turn to the terms of this document, two points were taken by Equus as to its validity. First, it was put that it was not the document of Rural Finance and, second, that there was no good consideration given for any release contained in it.

As to the execution of the document, the seal of Rural Finance is in the document said to have been affixed by authority of a resolution of the board of directors in the presence of two persons whose signatures there appear. There is no evidence before me that such a resolution of the board was not made; there was no evidence of the relevant provisions of the memorandum and articles of association of Rural Finance. The first signature beside the seal is that of Mr AJ Johnson, the other appears to be that of Mr FE Johnson. Mr AJ Johnson ceased to be a director of Rural Finance on 29 June 1989. He became a director again on 3 October 1994. Notwithstanding this, I accept the evidence of Mr FE Johnson and of Mr Lynch that Mr AJ Johnson was the moving spirit behind the Johnson group of companies and that all of their significant decisions were his decisions. The company return also shows that there were in August 1989 two directors of Rural Finance: Mr FE Johnson and Gregory Morris Johnson. Mr AJ Johnson was not in 1989 a secretary of that company. It was suggested, therefore, that he was not an authorised witness to the affixation of the seal.

I turn now to the apparent signature of Mr FE Johnson. When he gave evidence he was shown a number of documents bearing his signature. None of these signatures resembled that on the guarantee. When this was put to him he said that he could not be sure that the signature by the seal of Rural Finance was his signature. I find that this is not his signature.

Counsel for CWS then relied upon s. 68A of the Companies Code[59] contending that it was not open to Equus to challenge the assumptions which their clients were entitled to make under s. 68A(3). These assumptions, if available, would defeat the point taken on behalf of Equus since the document appears to have been attested by two persons who may be assumed to be directors.[60] Counsel for Equus, however, argued against the availability of these assumptions on the basis that s. 68A(1) operated only to prevent the company from challenging these assumptions.[61] In this case, the challenge was not made by the company, Rural Finance, but by Equus.
[59]The point was argued by both parties on the basis that this was the appropriate provision rather than part 2B.2 of the Corporations Act2001.
[60]See s. 68A(3)(e).
[61]Australian Capital Television Pty Ltd v Minister for Transport and Communication for the Commonwealth (1989) 7 ACLC 525 at 534, per Gummow J (Fed Ct).

Counsel for CWS responded to this by making three submissions. First, that Equus is claiming as an assignee of Rural Finance. Accordingly, it is bound by the equities which bind the assignor, so that, where s. 68A speaks of the rights of persons dealing with the company and constraints upon the rights of the company to disavow documents and dealings apparently made by it, the statute should be taken as including the privies of that company.

Section 68A(1) of the Companies Code is in these terms:

Persons having dealings with companies, &c.
68A. (1) A person having dealings with a company is, subject to sub-section (4), entitled to make, in relation to those dealings, the assumptions referred to in sub-section (3) and, in any proceedings in relation to those dealings, any assertion by the company that the matters that the person is so entitled to assume were not correct shall be disregarded.

In the Australian Capital Television case, Gummow J approached the subsection as having two limbs, one concerned with persons having dealings with the company and, second, with proceedings in relation to those dealings. The giving of the guarantee in this case is clearly a dealing by CWS with Rural Finance and proceeding CWS 4989 is a proceeding in relation to that dealing. The attack on the correctness of the assumption is made by Equus which, for present purposes, stands in the shoes of Rural Finance. I raised with counsel whether the question, as an evidentiary one, should be determined, as at the date of trial, under the provisions of the Corporations Act 2001. No party embraced this suggestion, presumably on the basis that, what is here in question, are the rights and obligations of CWS and Rural Finance under the impugned document. Accepting this to be the case, it would follow that these rights and obligations of Rural Finance which are sought to be enforced by or against Equus were those assigned to Equus and are those which Equus seeks to enforce as its assignee. In these circumstances, I construe s. 68A(1) so that the expression “assertion by the company” includes an assertion by a party to the proceeding which makes the assertion as assignee of the company. There being no contention that CWS is otherwise precluded from relying upon the statutory assumptions, I conclude that the guarantee was duly executed.

The second contention in response was that any suggested irregularity in the guarantee would be overcome by the application of the indoor management rule. The third was that the execution of the document by Rural Finance was valid since Mr AJ Johnson was a director or, on the evidence, a person acting in the position of a director and, therefore, within the statutory definition of director.[62] Mr AJ Johnson’s signature, even without the common seal, is sufficient authentication.[63] It is not necessary that I express any final view as to these alternative submissions, having regard to the conclusions which I have reached on the primary submission.
[62]Section 5(1).
[63]Section 80(7).

The second point taken on behalf of Equus against the validity of the guarantee is a want of consideration. What was put was that the expressed consideration moving from the promisee was the investor’s entering into of the scheme, its acquisition of the blueberry trees and its application for the loan. All of these events had occurred in June 1989, over a month before the guarantee was executed. The response of counsel for CWS was, first, that this document is executed as a deed so that no consideration is required and, second, that it should be taken as recording an agreement made no later than the time of entry into the scheme and the purchase of the trees.

As to the first response of CWS, the guarantee is expressed to have been given by Mr AJ Johnson personally and by JFM and Rural Finance. In the place where Mr AJ Johnson signed, the execution clause reads “signed sealed and delivered by Anthony J Johnson in the presence of: ……..”. Then, there appears his signature but without an attesting witness. The effect of this is that the instrument operates and takes effect as a deed.[64] This is sufficient indication that the document was executed by all parties as a deed. As such, consideration is not required. The second of the Equus points fails.
[64]Property Law Act1958 s. 73A.

The alternative submission in response depends upon the document speaking from a date earlier than that of its actual execution and, indeed, earlier than the date which it bears. I would not be prepared to accept this submission if it were necessary that I deal with this point. Mr Cunningham said that he was concerned about the omission of a non-recourse provision in the documents which he received for execution. He said he left the matter to Mr Tuckey who was not called to give evidence. Mr Tuckey’s letter of 30 June 1989 makes no mention of any finalised agreement as to limited recourse. The evidence offered on behalf of CWS does not lead me to the conclusion that the guarantee records an agreement reached in June.

Accepting, then, as I do, that the guarantee is technically valid, what then is its effect? It is in these terms:

GUARANTEE
TO:     Cunningham Warehouse Sales Pty Ltd
OF:     1005/9 Lower North East Road, Highbury, S.A. 5089
In consideration of Cunningham Warehouse Sales Pty Ltd entering into the acquisition of 10,500 blueberry trees in the Blueberry Hill Development, with JOHNSON FARM MANAGEMENT PTY. LIMITED and applying for a loan from RURAL FINANCE PTY. LIMITED for $667,590.00, we the undersigned hereby guarantee and indemnify Cunningham Warehouse Sales Pty Ltd as follows:-
1.That the only payments to be made by Cunningham Warehouse Sales Pty Ltd, will be as follows:
Prepaid Interest  -         Due 28 June 89 of $79,380
Nursery Costs  -         Due 28 June 89 of $ 4,200
Farm Rental  -         Due 28 June 89 of $       1
Principal Repayment           -         Due 28 Sept 89 of $63,000
Principal Repayment           -         Due 28 Dec 89 of $63,000.
2.That no further payment will be made by Cunningham Warehouse Sales Pty Ltd beyond the above to JOHNSON FARM MANAGEMENT PTY. LIMITED, RURAL FINANCE PTY. LIMITED, or any other party
3.Against any claims or demands by JOHNSON FARM MANAGEMENT PTY. LIMITED or RURAL FINANCE PTY. LIMITED or any other party in respect of the Blueberry Hill Development or the said loan agreement in excess of the abovementioned amount.

Although the document is expressed using legalistic terminology, its legal effect is not altogether clear. In particular, the component parts of the operative expression “guarantee and indemnify” do not appear to bear their usual legal meanings. Doing the best I can to give a commercial meaning to this commercial document, it seems to me that the verb “guarantee” is used in its non-legal sense of “seriously promise” and that this attaches to the paragraphs numbered 1 and 2 which follow. The verb “indemnify” does not sit easily with either of those two paragraphs, but it would have meaning if it were attached to the third. It could then be taken to be a promise by Mr AJ Johnson and each of JFM and Rural Finance to hold CWS harmless in the event that one or other of those companies or another party associated with the scheme makes a claim upon CWS in respect of the Blueberry Hill development or the loan agreement for further payment. This may, in certain circumstances, be a very far-reaching indemnity, but for present purposes, it means that Mr AJ Johnson and JFM will indemnify CWS against the present claim in proceeding CWS 4989. This is, of course, not an indemnity which is sought to be enforced against JFM or Mr AJ Johnson.

Concluding as I do that the promise of Rural Finance contained in paragraph 1 and 2 of the document is effective, it follows that Rural Finance would be precluded from bringing a proceeding such as this against CWS in breach of that promise. I am comforted in reaching this conclusion by the observations in passing made to the same effect by McPherson JA in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd.[65] Equus as assignee from Rural Finance, is in no better position.
[65][2006] QCA 194 at [10], [12].

The claim of Equus against CWS in proceeding CWS 4989 must, therefore, fail at this point.

The Prescribed Interest Defences

It was accepted on behalf of Equus that the interests in the Blueberry Hill project which were the subject of the agreements entered into by each of the investors in the selected cases were prescribed interests within the meaning of s. 5(1) of the Companies Code. Accordingly, the issue to the public of an offer to purchase such an interest is prohibited by s. 170 of the Code unless accompanied by a prospectus lodged with the NCSC. It was common ground that in none of the selected cases, except Haxton 5261 and CWS 5223, was there any prospectus. In the case of CWS 5223, it was put on behalf of CWS that the prospectus which was used did not meet the requirements of the Code. And so, it was said, the agreements were unenforceable on the ground of illegality and that this infirmity attached also to the loan agreements.

The issues in this part of the case, were as to whether the interests were offered to the public and, if so, whether the loan agreements fell with the agreements under which the investors purchased the prescribed interests.

The point taken about the prospectus in CWS 5223 was that the interest offered and purchased by CWS in June 1988 differed from that described in the prospectus in the following respects: there was no trustee appointed as required by the prospectus and the manager under the prospectus was Forestell Securities (Australia) Ltd and not JFM. Little was said about these two discrepancies at trial. An examination of the prospectus and the agreements themselves actually entered into demonstrates that the alleged discrepancies do exist. Subject, then, to the question as to offer to the public, the breach of s. 170 with respect to CWS 5223 was not challenged and I find that it has been made out on behalf of CWS.

The remaining issue as to breach is whether, in each case, other than Haxton 5261, the interest was offered to the public. Counsel for Equus conceded that the interests in proceeding Bassat 5084 and CWS 5189 were in fact offered to the public so that, in respect of those transactions a breach of s. 170 was made out.

Focus then shifted to the remaining five investments.[66] In each case, the evidence showed that the promoters of the scheme in 1988 and 1989 circularised previous investors and their financial advisers with material encouraging them to invest or to cause their clients to invest in the scheme. Mr Lynch, who did much of this promoting after he joined the Johnson organisation in October 1987, described how he did this. He said that he also sent material to his own network of financial advisers in the hope that they would recommend the investment to their clients. It was apparent from his evidence that there was no attempt to limit the class of persons to whom material was distributed or the class of persons who might be acceptable as investors. No applicant was ever rejected. In each of the years 1988 and 1989 the number of persons to whom material was sent increased to some hundreds of persons and they were in nearly all States and Territories. It is fair to say that the promoters were prepared to deal not only with those who enjoyed a special relationship with them; they would deal with any person who was or might become interested in making an investment and who had the resources to do so. I find that in each of the years 1988 and 1989 the interests which the present investors purchased were offered to the public within the meaning of s. 5(4) of the Companies Code and that these investors made their investments as members of the public.
[66]CWS 8277; CWS 5223; Bassat 4540; Haxton 5154; and CWS 4989.

I conclude, therefore, that, in the case of each of the investments presently before the Court, each of them, other than Haxton 5261, breached s. 170. It was accepted by counsel for Equus that such a conclusion would carry with it the consequence that the agreements for the acquisition of those interests were illegal and unenforceable against the investors. They conceded, further, that the investors might, at their option, terminate or rescind these agreements. Finally, it was accepted that, in their defences filed in 1999, each of the investors did in fact terminate the agreement.

Let me say at this point that I do not wish to be taken as subscribing to this view as to termination. The cases in this area of law speak of unenforceability. It is not pleaded in the 1999 defences that this right to terminate existed in the investors or that it had been exercised or was thereby being exercised. What is said in some, but not all, of the 1999 defences is that the loan agreement was unenforceable at the investors option. It may be that the concession by counsel for Equus was intended to be understood as relating to unenforceability. In any event, this plea was not made in the 1999 defence in CWS 5223 or Haxton 5261, the two proceedings concerning the June 1988 loans. In the case of CWS 5223, the plea was introduced in paragraph 28Q by an amendment made on 14 November 2007.

The remaining issue in this case is whether the illegality and its consequent impact upon the agreement made by the investors for the acquisition of the prescribed interests affect also the loan agreements. It is well established that, in this statute or others which have equivalent prohibitions, a contract entered into as a direct consequence of the prohibited activity is tainted and will not be enforced. This has led the courts to conclude that, in schemes such as the present, the unenforceability attaches not only to the agreements which make up the scheme, but also those which provide the finance for it, at least where the finance providers are implicated in the scheme. This is because the finance agreement was entered into as a direct consequence of the illegal act[67] and because the financial transaction was an essential part of the scheme so that it cannot be seen sensibly to stand without the scheme.[68]
[67]Hurst v Vestcorp (1988) 12 NSWLR 394 at 412, per Kirby P and at 443, per McHugh JA.
[68]See, too, O’Brien v Melbank Corporation Ltd (1991) 7 ACSR 19 at 32, per Fullagar J, at 48, per McGarvie J and at 67, per O’Bryan J; Australia Breeders Cooperative Society Ltd v Jones (1997) 150 ALR 488 at 535 ff, per Wilcox and Lindgren JJ.

There can be no doubt that, with the exception of Haxton 5261, each of the investments in these cases was entered into as a direct consequence of a breach of s. 170. Nor is there any room for doubt that each of the loan agreements was entered into as part of the investment schemes. It would follow from this that the loan agreements were also unenforceable against the investors unless they can be seen as severable from the transaction.

The relationship between Rural Finance and Mr AJ Johnson, Mr FE Johnson, CBG, JFM and the Buyer is such that Rural Finance cannot present itself as an innocent third party unconnected with the schemes.

In O’Brien v Melbank Corporation Ltd,[69] McGarvie J undertook an analysis of the agreements which made up the scheme to determine whether severance of part might be possible so that this part remained enforceable notwithstanding that the balance of the scheme was not. His Honour[70] identified three steps in this process: is the part technically severable; is, as a matter of construction, an intention to be imputed to the parties that the operation of the part should be conditional upon the efficacy of the tainted scheme or that the part was to continue to have effect notwithstanding the failure of the tainted scheme; and, third, is the nature of the illegality such that, even so, the whole scheme, including that part, should be treated as unenforceable. I will consider these matters as they concern each of the schemes.

The June 1987 Schemes

[69](1991) 7 ACSR 19.

[70](1991) 7 ACSR 19 at 53.

The investors in Bassat 5084 and CWS 5189 entered into five agreements as well as the loan agreement. The information sent to Mr Bassat on 20 May 1987 and to Mr Cunningham toward the end of that tax year was contained in a number of circulars including a document which resembled a prospectus and was entitled “Blueberry Hill – A Fresh Approach to Rural Property Investment”. This document sets out the commercial and taxation advantages of investing in the scheme and, on page 13, suggests that the deductible once only pre-payment of the management fee to cover “the cost and expense of maintaining, fertilizing, mulching, spraying and irrigating plants and the harvesting, packaging and distributing of the fruit” might be funded in any of three ways: from the investor’s own funds; from funds borrowed by the investor upon the security of the guaranteed sale price agreement with the Buyer; or from finance arranged for the investor by the Johnson group.

Each of Mr Bassat and CWS elected to take finance from the promoter and for that purpose borrowed from Rural Finance $110,000 and $220,000 respectively and this sum was paid by them endorsing in favour of JFM the Rural Finance cheque for the principal drawn in favour of the investor. This was for the pre-payment of the management fee.

Two things should be noted at this stage. Under cl. 3 of the maintenance agreement the investor agreed to pay to JFM a monthly management fee which varied from year to year but which totalled aggregate $193,500 for Mr Basset and $387,000 for CWS. If the investor elected to pre-pay all or some of this fee a discount was allowed under cl. 10. While there were evident commercial and taxation attractions in making the pre-payment, it was not necessary that the pre-payment be made or that the amount of the pre-payment be financed by the promoters or by Rural Finance.

Nevertheless, the investors, having decided to pre-pay the management fee and to borrow it from Rural Finance entered into the loan agreement. This document contains many references to the other agreements and is clearly tailored to meet the requirements of the scheme.

More important, however, is the degree to which the illegal agreements are bound to the loan agreement. The joint venture agreement made between CBG and the investor defines the loan agreement but does not appear to mention it otherwise. It also contains in cl. 19 a severance provision if any covenant or obligation contained in it is unenforceable. The sale of fruit agreement made between the investor and the Buyer contains in cl. 6 a direction that the price for the fruit be paid to the investor or to its nominee in accordance with the direction for payment. The direction at the foot of the document is in favour of Rural Finance. The maintenance agreement made between JFM and CBG and the investor provides in cl. 9 for termination of the agreement for default by the investor in making a payment due and extending beyond a period of 90 days. Both this agreement in cl. 20 and in the last of the agreements, the pooling agreement, in cl. 18, there is a severance provision like that in the joint venture agreement. It follows from this analysis that, looking at the matter from the perspective of the illegal transactions, the loan agreement is not an integral part of the transaction.

I turn now to consider the matter from the point of view of the investors. First and foremost, s. 174(2) preserves the right of the investor to enforce the illegal agreements. This right remained in existence until 1989 in most cases, if the Equus concession is taken at its face value. Insofar as it is a right against Rural Finance, the question may arise as to its position and as to the right of the investors to terminate it following its winding up on 6 March 1996. This was not raised in argument and I say nothing about it. The position remains, then, that the investors might, theoretically, have continued to enforce their rights under the joint venture agreement to continue to farm the land and harvest the crop, their rights under the maintenance agreement to insist that JFM continue to manage the farm and their rights under the sale of fruit agreement to insist that the Buyer purchase the produce at the agreed price and pay the proceeds to them or at their direction. On the other hand, the rights of CBG to recover its agreed share of the proceeds and those of JFM to be paid for its work are not enforceable against the investors, otherwise, perhaps, than by the operation of a restitutionary remedy. These rights of the investors had, for the most part, been paid for upon their entering the scheme and the pre-paying of the management fee. And funds to make these payments were provided by Rural Finance.

I return, then, to consider in respect of the 1987 loans, the three questions posed by McGarvie J.[71] The loan agreement is technically severable. The second question, however, is fatal to the severance contention. It is clear enough that the promoters would not have offered the loan to the investor without it being part of the scheme. The fact that money passed to the investor as part of the round robin of cheques indicates this, as do the repayment terms which favour the investor. Likewise, there is nothing to suggest that the investors would have approached Rural Finance for a loan otherwise than as part of the scheme. It follows from this that it could not be inferred that a fair and reasonable person in the positions of the investor and Rural Finance, respectively, would intend that the loan might stand when the rest of the scheme fell away. It follows from this that each of the June 1987 loan agreements is unenforceable on the ground of illegality.
[71]See paragraph [105] above.

Given this conclusion, there was little point in undertaking a like analysis of the remaining schemes and the role played by the loan agreement in each of them. They must all, except Haxton 5261, meet the same fate as those agreements made in June 1987. This means that the contractual claims based upon them must fail.

The Limitations Defences

In five of the cases, the investor relies upon a limitations defence. These are the two loans made in June 1988, CWS 5223 whose expiry date was 28 June 1993, Haxton 5261 whose expiry date was 28 June 1993 and in the three 1989 loans, Bassat 4540 whose expiry date was 31 March 1994, Haxton 5154 whose expiry date was 31 May 1994 and CWS 4989 whose expiry date was 28 June 1994. Each of these proceedings other than Bassat 4540 was commenced on 27 March 1998, and the remaining case was commenced on 25 February 1998. The defence then depended upon the cause of action arising prior to 25 February 1992 or 27 March 1992. In each case the loan fell due for repayment five years after the date of the loan so that the cause of action arose in 1993 or 1994, within the six year limitation period. The point taken on behalf of the investors was that, in each of these loans, the late payment of one or both of the specified repayments of capital was a default which triggered the acceleration clause so that the principal and interest became immediately due and payable in 1988 or 1989 on the date of the default. The relevant conclusions which I have reached with respect to each of these five loans are as follows:

CWS 5223                 The payment of principal due on 29 September 1988 was late.
Haxton 5261             The payment of principal due on 29 December 1988 was late.
Bass 4540                  No payment of principal was late.
Haxton 5154             The payment due on 30 November 1989 was late.
CWS 4989The payments due on 28 September 1989 and 28 December 1989 were both late.

In each case no payment of principal and interest from the proceeds of sale was made after 30 June 1991.

The acceleration provisions of the default clause in each of these loan agreements is in similar terms:

(a)the repayment by the Borrower of each of the principal repayments referred to in Clause 3C(i) by the due date for the repayment of each such sum; and
(b)the payment of interest by the due date for each such payment, (or such further time as the Lender in each such case as its sole discretion allows); and
(c)the due performance by the Borrower of the conditions imposed on him by Clause 5 hereof, then the Lender shall have no right of recourse against the Borrower and the Borrower shall have no other personal liability for payment of the balance of the Principal Sum or Interest owing under Clauses 3B(i) and (ii) or any other costs, charges or expenses whatsoever in respect of the balance of the Principal Sum other than out of the income from the Farm as provided in Subclause 3C(ii) hereof.[72]

[72]CWS 5223, Haxton 5261, Haxton 5154, CWS 4989, Bassat 4540.

Counsel for Equus, in one of those tactical twists which characterise this case, argued that I should conclude that the investors had not committed a default which activated this clause. They pointed out that the default there described was “a default as to the payment of interest or the Principal Sum or any part thereof”. The comparable expression in the June 1988 loan agreements is similar: “default hereunder as to payment of interest or the Principal Sum or any part thereof”. But no party made anything of this minor verbal difference. In the June 1988 agreements which contain a non-recourse provision the relevant pre-condition includes a requirement that the payment be “by the due date”. The absence of such a requirement in cl. 7 encouraged counsel to contend that no relevant default had occurred by the late payment of principal because the payment in each case was eventually made. There was, therefore, no default in payment. Alternatively, it was put that the default in the terms of cl. 7 could occur only if there was a non-payment beyond a reasonable time. I am unable to accede to either of these submissions. The insertion of the word “immediately” indicates that there are no days of grace. It is a fair reading of the words “default as to payment” that they mean a failure to pay in circumstances which amount to a breach of the clause which requires the payment to be made. I find in the case of the late of payments under loans CWS 5223, Haxton 5261, Haxton 5154 and CWS 4989, that there was a default at the end of the due date for payment within the meaning of cl. 7.

A number of other points were then advanced on behalf of Equus.

(a)The loan agreement was a specialty so that the limitation period was 15 years. The loan agreements do not bear the hallmarks of a deed.
(b)Rural Finance waived the default by its receipt of principal and interest payments after the default. Again, this presupposes that there is here a role for election or waiver. Clause 7 in each case provides that the balance is immediately due and payable. There is nothing for Rural Finance to do to cause this to happen and nothing, other than a collateral agreement or an estoppel and the like, which it could do to prevent it from happening. In any event, even if the balance was due and payable, it is not inconsistent with this state of affairs for Rural Finance to accept payments of principal from the debtor or payments from JFM on its behalf.
(c)The investor, by seeking income tax advantages from the scheme by recording in its financial records a debt to Rural Finance with respect to the loan and by taking no steps to rescind the loan agreement has affirmed and ratified the loan agreement so that time does not run. I am at a loss to understand much of this. No evidence was led to establish the factual assertions and no argument was presented in support of the conclusion. The point is without substance.

I conclude, therefore, that the limitation defence has been made out with respect to claims CWS 5223, Haxton 5261, Haxton 5154, and CWS 4989.

Conclusions

Other defences were pleaded on behalf of the investors but little if anything was said about them. Having regard to the conclusions I have reached, I shall not say anything further.

The result of this is that each of the debt claims has failed. In summary, this is for the following reasons.

·Bassat 5084 investor is protected by the non-recourse agreement and, in any event, the loan agreement is unenforceable for illegality.
·CWS 5189 the loan agreement is unenforceable for illegality.
·CWS 8277 the loan agreement is unenforceable for illegality.
·CWS 5223 the loan agreement is unenforceable for illegality and is statute barred.
·Haxton 5261 the loan is statute barred.
·Bassat 4540 the loan agreement is unenforceable for illegality.
·Haxton 5154 the loan agreement is unenforceable for illegality and the claim is statute barred.
·CWS 4989 the loan agreement is unenforceable for illegality, it has been released by the guarantee dated 29 June 1988 and the claim is statute barred.

The Restitutionary Claims
The Assignment

The first question is whether the Rural Finance cause of action in restitution was assigned to Equus. The assignment relied upon by Equus was made pursuant to an agreement dated 16 May 1987 entered into between Rural Finance as vendor and Equus as purchaser whereby Rural Finance agreed to sell the investor loans described in the schedule, for $500,000. The assignment itself was contained in a Deed of Assignment dated 30 October 1987. The operative parts of this deed are short and important.

1.Pursuant to clause 5.2(a) of the Asset Sale Agreement, Rural, as legal and beneficial owner, hereby sells, assigns, transfers and sets over the debts, its interests under the loan contracts, its interests under the guarantees and its interests under the securities, free from all encumbrances to Equus and all interest due and becoming due on the debts for Equus to hold absolutely (“the assignment”).
2.The assignment is an absolute assignment intended to take effect immediately as a legal assignment of, inter alia,
(a)the legal right to such debts, interests under the guarantors and its interests under the securities and all interest due and becoming due on the debts.
(b)all legal and other remedies for these matters in the preceding sub-paragraph (a).
(c)the power to give good discharge for those matters referred to in sub-paragraph (a) without the concurrence of Rural.

“Debts“ is defined in the first recital to the deed of assignment:
AThe persons or corporations identified as borrowers in the schedule are indebted to Rural under certain investor loans regarding the Blueberry Project at Corindi, New South Wales, more particularly described in Annexure “A” to the Asset Sale Agreement referred to herein (“loan contracts”) in the amounts set out in the schedule (“debts”).

The point taken on behalf of the investors is that there are in issue in this proceeding the obligations of the investors as borrowers under the loan agreements and their obligations which arise at common law to make restitution to the lender and that the last-mentioned obligations are independent of and survive the unenforceability of the loan agreements.

The debts are referred to in the recital as being an indebtedness under certain identified investor loans which include the eight loans the subject of these proceedings. The suggested obligation to make restitution is not a debt as defined.

Under cl. 1, what is assigned are Rural Finance’s “debts, its interests under the loan contracts…” These do not include its rights to restitution.

Clause 2, which is in aid of cl. 1, speaks in part (a) of the assignment of the legal right of Rural Finance “to such debts” and, in part (b), of its assignment of “all legal and other remedies for these matters in the preceding sub-paragraph (a)”.

In response, counsel for Equus submitted that cl. 2(b) should be understood as including in the assignment any causes of action attendant upon the debts or arising out of them. They submitted that I should approach this commercial document in a commercial way: the assignment is expressed in broad terms with the evident intention of giving to Equus the right to recover, by whatever remedy was available, the loan debts. The claim in restitution is predicated on the rights of Rural Finance under the loan agreement. Put another way, there would be little purpose in the receivers and managers of Rural Finance selling off the contractual rights and reserving to Rural Finance the common law rights which are so closely associated with those contractual rights.

I agree. I am satisfied that Rural Finance expressed in the deed of assignment its intention to pass to Equus all of its rights and remedies under and in connection with the loan agreements and that these include any right to restitution which may arise from the payment of the loans to the investors.

Restitution

In each case, Equus pleads in the alternative a claim against the investor for money had and received. Notwithstanding counsel’s protest, I accepted this as a submission basis for a restitutionary claim.[73] The claim is predicated upon the receipt by the investor of the benefit of the sum advanced by Rural Finance and the corresponding disbenefit suffered by the lender in making the advance. It is said that it would offend equitable notions of good conscience[74] for the investors to retain this benefit without making restitution to the lender. As Deane J pointed out in Pavey & Matthews Pty Ltd v Paul[75] where a restitutionary claim is made by a lender the restitution will normally involve an obligation in the borrower to repay the principal lent. And this is what Equus seeks after making due allowance for repayments of principal.
[73]See Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 255, per Deane J.
[74]Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673.
[75](1987) 162 CLR 221 at 255 at 257.

Counsel for the investors challenged the underlying factual assumptions in this analysis. Their clients derived no benefit from the loans and there was no disbenefit suffered by Rural Finance, for there was in fact no money advanced. It is true that Rural Finance drew a cheque for the advance on its bank account and delivered it to the investor. The investor, however, was directed not to bank it but to endorse it in favour of JFM in performance of the investor’s obligation to prepay management fees. JFM then banked the cheque in the Rural Finance bank account. There were, it seems, no funds in the Rural Finance bank account to support the cheque; it was a round robin transaction. This point cannot survive the High Court decision in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd.[76] There, in the circumstances of a very similar scheme, the High Court concluded that the agreements should be given their legal effect. Notwithstanding the tax-minimisation objectives of the parties and the commercial impact of the transactions, the legal effect of the transaction between the lender and the investor was that of a loan, so that a claim for money lent was available to the lender.
[76](2005) 218 CLR 471.

Benefit Received

Counsel for the investors then said that, realistically, their client received no benefit because the loan money was destined, as all parties knew, for JFM. When the investor in each case endorsed the cheque in favour of JFM, it changed its position or acted to its detriment with the consequence that it should not be liable to make restitution.

Reliance was placed upon the decision in Australian and New Zealand Banking Group Ltd v Westpac Banking Corporation.[77] This case, as its name suggests, arose from a transaction between two banks. A cheque was drawn by the ANZ Bank in favour of a customer of Westpac. The amount of the cheque was, by a bank error, very much more than it ought to have been. It was received by Westpac, as collecting bank, and credited to the customer’s account which was then overdrawn. Most of the funds were then disbursed from the account. A little later, when the mistake was discovered, the customer was unable to refund the surplus. Westpac argued that it received the proceeds of the cheque as agent for its customer and that, in good faith, it had acted to its detriment by disbursing the funds. The decision in the ANZ Bank case shows that these are two independent principles.
[77](1988) 164 CLR 662.

Where the recipient of the erroneous payment receives it as an agent for a disclosed principal, it cannot be said that the recipient has received the benefit; it is a mere conduit pipe.[78] Accordingly, the recipient is not obliged to make restitution,[79] but this is not the present case for agency was not suggested.
[78]164 CLR at 673-4.
[79]164 CLR at 682-4.

Where, however, the recipient, as a principal, receives money which is destined for another and passes it to the other, the conclusion, as a matter of law, may well be the same. The justices in the ANZ Bank case speak of the recipient being “an intermediary (e.g., as agent for a designated principal)”[80] and that the recipient passes the money to “the person for whom he received it”.[81] In terms of legal analysis, there are a variety of situations in which a principal receives money for another. These will range from the creation of a trust for the other to the situation where it is paid to the recipient with a direction or mere request that it be passed to the other. It may be that it was understood by the payee and the recipient and the other that this is what would happen or that their understanding was that the payment would be made only if that is what would happen.
[80]164 CLR at 673.
[81]164 CLR at 674.

Although the discussion of these matters in the ANZ Bank case was in the context of a payment made under a mistake of fact, there is no reason to think that their Honours’ observations do not apply equally to a payment made under an unenforceable loan. The point of interest is whether the recipient, who is known not to have been the intended ultimate destination of the funds, should be treated as having received the benefit of the payment and, if that benefit be unjust, should be obliged to make restitution.

In the present case, it was understood and intended by Rural Finance, JFM and the investors, at the time of the investment, that the cheques would be endorsed in favour of JFM and this is what was done in each case. I treat that as the equivalent of Rural Finance making a payment of money to the investor, which money was, in turn, paid to JFM. Under the terms of the various agreements the investors were not bound to do this. There is no contractual restraint upon the use to which the investors might put the loan funds. In these circumstances, it would follow from the observations of the High Court in Glengallan’s case that the legal position of the investor is that the funds were not received by the investor as an intermediary. Such benefit as the receipt of those funds conferred was conferred on the investor.

Change of Position

Then, it is said that the prima facie liability of the investor to make restitution for the loan moneys received should be displaced because the moneys were disbursed in good faith in reliance upon the validity of the scheme and the enforceability of its component agreements.[82] This disbursement is an act by the investor to his or her detriment.[83] While such a formulation of the change of position principle may be apposite in the case where the defendant is the innocent recipient of funds mistakenly paid, it sits uneasily in the facts of this case. First, there is no mistake of law or fact underlying the payment of the loan money to the investors. The sum was received as all involved intended it to have been received. The transaction agreements, including the loan agreement and the farming and other agreements, were always enforceable by the investor. It is difficult to see how the investor in these cases acted to his or its detriment by applying the money, as all intended, in pursuance of a transaction which was seen as beneficial and, since it was unenforceable by the other contracting parties, was, in fact, potentially of greater benefit. This defence has not been made out.
[82]See Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673.
[83]David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 173 CLR 353 at 385.

Unjust Enrichment

The restitutionary claim is based on an enrichment which is characterised as unjust, that is, its retention would offend equitable notions of good conscience. It was put on behalf of the investors that a lender whose loan was part of an illegal transaction could not be heard to pray in aid of its claims allegations of injustice when its own illegal conduct lay behind the claims.

In Henderson v Amadio Pty Ltd,[84] Heerey J addressed the question whether restitution could be relied upon to enforce rights which would otherwise be unenforceable by reason of non-compliance with the prescribed interest provisions, the equivalent of s. 170 of the Companies Code. He concluded that restitution remedies were not available to defeat the intent of s. 174.[85]
[84](1995) 140 ALR 391.
[85]140 ALR at 566.

His Honour acknowledged that the question must be addressed in terms of the intent of the legislation, and in particular, s. 174:

174. (1) A person shall not -
(a)contravene or fail to comply with a provision of section 169, 170 or 171; or
(b)fail to comply with a covenant contained or deemed to be contained in any deed that is or at any time has been an approved deed.
Penalty:$20,000 or imprisonment for 5 years, or both.
(2) A person is not relieved from any liability to any holder of a prescribed interest by reason of any contravention or failure to comply with a provision of this Division.

He considered, first, that the legislation should be approached in much the same way as the money lenders’ legislation. Second, he identified the particular vice addressed in s. 170 as being the denial to an investor of the right to have detailed information in a prospectus which permitted the investor to make an informed investment decision. Third, his Honour observed that the financier, as Rural Finance in the present case, was not a mere lender but was part of the group of companies controlled by the promoters of the scheme. Finally, his Honour observed that Parliament treated breaches of the prescribed interests provisions as being very serious. So serious does Parliament regard the law that a breach albeit not fraudulent and not causing monetary loss might result in imprisonment. His Honour concluded from this that it is just that persons who have suffered loss as a result of breach of these laws should not be put in a position where the beneficiary of the breach achieves the same result as if the law had not existed.

This view has not always prevailed. In Hurst v Vestcorp Ltd,[86] McHugh J saw it is inappropriate that the borrowers under an illegal loan agreement, in a case such as the present, would reap an unmerited benefit if they were not required to refund the principal. In O'Brien v Melbank Corporation Ltd,[87] McGarvie J was of opinion, in a case like the present, that the lender had an arguable case for restitution, and the matter was remitted for determination of that issue. These statements of opinion, notwithstanding the eminence of their source, may be considered as obiter for no final decision in either case turned upon them. But in Australian Breeders Co-operative Society Ltd v Jones,[88] the Full Court of the Federal Court decided that illegality provisions analogous to s. 170 of the Code did not mean that a claim for restitution against investors in an illegal prescribed interests scheme was not available to the lender of funds for that purpose. Although the matter was not developed in great detail, it is clear that the Full Court concluded that there was nothing in the statute to preclude such a claim in restitution.
[86](1988) 12 NSWLR 394 at 445-6.
[87](1991) 7 ACSR 19 at 58.
[88](1997) 150 ALR 488 at 541- 2.

As a judge at first instance dealing with a common law claim against the background of a national legislative scheme, I believe that I should follow the Full Federal Court decision.

I remain faced, however, with a claim which depends upon notions of conscience which arise from the circumstances of the receipt of a loan by the investors. Moreover, the primary focus of attention is upon the circumstances at the moment of the enrichment.[89] These circumstances include the terms of the unenforceable contract of loan. In the ANZ Bank case,[90] the High Court said that a claim for restitution by a person who made a mistaken payment might be met with the response that the payment was made for good consideration. And in Pavey’s case,[91] Deane J acknowledged that an unenforceable contract may still have a role to play in the determination of whether the benefit was conferred gratuitously or what was the fair and reasonable value of the benefit.[92]
[89]David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 173 CLR 353 at 385.
[90](1988) 164 CLR 662 at 673
[91](1987) 162 CLR 221 at 257.
[92]162 CLR at 263.

In the present case the lender seeks restitution for the benefit of the loan accepted by the investors. Whether the retention of that benefit by the investors is unjust cannot be determined without regard to the terms of the unenforceable contract. If, for example, Rural Finance lent money on terms that the principal was not repayable, it could not be said that the borrowers' failure to repay was unjust. And so, notions of fairness and good conscience in the investors must have regard to circumstances such as those attending their receipt of the sum advanced. But, if it is necessary to have regard to this, does this mean that the terms of the contract, which are not enforceable against them, may be brought to account in the restitution claim against the investors? I think it must.

It follows, in my opinion, that the restitution claim against Mr Bassat in claim Bassat 5084 must fail because he enjoys the protection of the non-recourse provisions of that loan agreement.

In the case of the other four loan agreements entered into prior to 1989, there were also non-recourse provisions, but these failed for non-fulfilment of the condition. It is probably fair to say that the investors entered into each of these loan agreements on the basis that their liability to pay interest and principal was limited to two repayments of principal. As has been seen, the contractual provisions which conferred this immunity were qualified. Is the conscience of these investors as to repayment of the principal bound by the generality of the scheme or by the details of the contract which is, after all, unenforceable against them? I fear that these questions will often arise in the case where a party to an unenforceable contract seeks to invoke restitutionary remedies to recover, outside the contract, the benefits which the contract would otherwise have conferred.

The solution which, as a matter of principle, I will adopt in this case is that a lender under an unenforceable contract, by paying the principal sum to or at the direction of the borrower, conferred a benefit upon the borrower at the lender’s expense and that this principal, or so much as remains unpaid, is recoverable in restitution unless the borrower is able to point to a term of the loan agreement at a which, if enforceable, would have the consequence that its failure to repay the principal is not unjust.

This exposes a further point of difficulty which was not much explored at trial. At the moment of the receipt of the loan funds, the investors were not liable to repay all of the principal. This liability arose only upon the non-fulfilment of the conditions as to payment of the two instalments of principal. It cannot, therefore be said that the receipt of the fund bound the conscience of the recipients. Later, the investors who failed make the payments in due time thereupon became liable. Can it then be said that the just receipt then became an unjust one? If not, when did it become unjust or when did it become unjust for the investors to retain this benefit.

This leads to a further difficulty. When did the cause of action in restitution arise? At the trial this was not in issue, the parties accepting that by the filing of the defences the loan agreements were brought to an end.[93] These difficulties, nevertheless, expose the essentially contractual nature of the claims presently under consideration.
[93]See par [100] above.

With some hesitation, my conclusion is that the receipt of the loan funds by those investors who, at the time of receipt, had no obligation to repay them raises no equity in them to make restitution. If by reason of subsequent events an obligation in contract to repay the loan arose, then, the obligation must be seen as contractual unless the circumstances then existing give rise to another right. Taking the agreed termination as an example, it may be that upon termination as the parties agreed an equity arises in the parties to restore the unpaid loan to rural finance. But this is not the way the cases here were pleaded or argued.

The consequence of this is that Equus has a good claim in restitution against each of the investors in respect of each of the 1989 loans, that is loans Bassat 4540, Haxton 5154 and CWS 4989. The CWS 4989 fails by reason of the release. Limitations Act defences were not pleaded to the restitution claims and were not the subject of argument; I shall say nothing further about this.

The value of the benefit accepted and the consequent quantum of restitution to be made was also the subject of argument. On behalf of the investors it was said that this was the value of the tax benefit which they obtained form the investment in the schemes. This cannot be correct. In one sense the benefit they derived from the loan money was this as well as the opportunity to invest in the scheme with its prospect of income from the farming activities and the capital value of their investment in a commercial venture. But these were matters which were of no relevant concern to the Rural Finance. The enrichment to which they must respond is the loan money, for the amount of this is the benefit which they received at the expense of the lender. The value of this should be calculated along the lines set out by the Full Federal Court in Australian Breeders Co-operative Society Ltd v Jones.[94] This is likely to be the unpaid capital sum borrowed plus simple interest at the commercial rate from time to time.
[94](1997) 150 ALR 488 at 542.

Conclusions

I will hear counsel further as to the orders, if any, which should be made to give effect to these conclusions and as to costs.

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*Loan*	*Amount*	*Date Due*	*Receipt (Equus)*	*Comment*
Bassat 5084	10,000	30/9/87	28/9/87	In time
Bassat 5084	10,000	31/12/87	4/1/88	In issue
CWS 5189	20,000	30/9/87	1/10/87	In issue
CWS 5189	20,000	31/12/87	13/1/88	In issue
CWS 8277	40,000	15/4/88	6/6/88	In issue
CWS 8277	39,072	15/7/88	8/11/88	In issue
CWS 5223	42,000	28/9/88	22/11/88	Late
CWS 5223	42,000	28/12/88	15/12/88	In time
Haxton 5261	8,400	29/9/88	29/9/88	In time
Haxton 5261	8,400	29/12/88	3/1/89 ($8040) 23/1/89 ($360)	In issue Late
Bassat 4540	12,600	30/6/89	30/6/89	In time
Bassat 4540	12,600	30/9/89	2/10/89	In issue
Haxton 5154	4,200	31/8/89	31/8/89	In time
Haxton 5154	4,200	30/11/89	1/12/89	In issue
CWS 4989	63,000	28/9/89	23/10/89	Late
CWS 4989	63,000	28/12/89	2/2/90	Late

*Loan*	*Letter*
CWS 5189	9/10/87
Bassat 5084	11/1/88
CWS 8277	17/6/88
CWS 5223	28/11/88

[2007] VSC 553

21 December 2007