Equuscorp Pty Ltd v Belperio

trus

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 7712 of 2000
No. 7713 of 2000

BETWEEN:

EQUUSCORP PTY LTD and SINTOFF PTY LTD (in liquidation) (receiver appointed)	Plaintiffs
v
MAURO BELPERIO AND ORS	Defendants

AND BETWEEN:

EQUUSCORP PTY LTD and SINTOFF PTY LTD (in liquidation) (receiver appointed)	Plaintiffs
v
GEORGE ANTONOPOULOS AND ORS	Defendants

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JUDGE:	HARGRAVE J
WHERE HELD:	Melbourne
DATES OF HEARING:	30, 31 August, 1, 6 - 9, 12 - 15 September 2005
DATE OF JUDGMENT:	6 February 2006
CASE MAY BE CITED AS:	Equuscorp Pty Ltd v Belperio
MEDIUM NEUTRAL CITATION:	[2006] VSC 14

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Landlord and Tenant - Contract – Uncertainty – whether description of land in lease agreements uncertain – land identified in lease by reference to attached diagram – whether diagram identified boundaries of the land with sufficient certainty – whether extrinsic materials which might make identification of the land possible admissible in evidence to identify the land.

Akot Pty Ltd v Rathmines Investments Pty Ltd [1984] 1 Qd R 302 considered.

Contract – Statutory Interpretation – statute prohibiting lease or agreement to lease of part of land for a period which, including any option to renew, exceeds five years – successive leases executed at the same time, each for a period of less than five years but with combined periods of in excess of five years – whether leases to be treated as one dealing constituting a lease or agreement to lease part of land for a period exceeding five years.

Local Government Act 1919 (NSW), ss. 4, 323(1), 327(2) and 327(3).

Estoppel – Estoppel In the Face of a Statute – estoppel by convention raised by plaintiff – whether estoppel could stand in the face of applicable statute.

Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993 applied.

Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 distinguished.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs in 7712 of 2000	Mr FGA Beaumont QC with Mr S Maiden	Phillip Kotsanis
For the Plaintiffs in 7713 of 2000	Mr N Mukhtar QC with Mr M Scott	Phillip Kotsanis
For the Fifthnamed Defendant, Mauro Belperio in 7712 of 2000 and the Eighthnamed Defendant, George Antonopoulos in 7713 of 2000	Mr DMB Derham QC with Mr J Tsalanidis	Mills Oakley

TABLE OF CONTENTS

Introduction.................................................................................................................................... 1

the Antonopoulos Proceeding................................................................................................... 4

The Belperio Proceeding................................................................................................................ 6

Facts..................................................................................................................................................... 7

The schemes............................................................................................................................ 7
The leases.............................................................................................................................. 13
Related contracts and trusts................................................................................................ 16
Financing the schemes and assignments of Sintoff’s rights................................................ 19
Mr Antonopoulos invests.................................................................................................... 21
Conduct of Mr Antonopoulos after investment.................................................................. 21
Mr Belperio invests.............................................................................................................. 22
Conduct of Mr Belperio after investment............................................................................ 27
One-off lease payment plan.................................................................................................. 28
Mr Belperio and the one-off lease payment plan.................................................................. 30
Seymour Softwoods fails to maintain the plantations........................................................ 32
Salvage schemes fail............................................................................................................. 35
Winding-up of the Trusts.................................................................................................... 36
Mr Antonopoulos and Mr Belperio deny obligations under leases..................................... 36
Equus re-leases the plantations............................................................................................ 37
Identification of land issues................................................................................................. 38

The Uncertainty Defence............................................................................................................ 39

The Antonopoulos land........................................................................................................ 39
The Belperio land................................................................................................................. 42
Are the leases uncertain?..................................................................................................... 43

The Uncertainty Estoppel........................................................................................................... 53

The Subdivision Defence.............................................................................................................. 56

The Subdivision Estoppel............................................................................................................. 65

Pleadings and relief sought.................................................................................................. 65
Is the subdivision estoppel precluded by the Act?............................................................... 68

One-off Lease Payment Plan Defence...................................................................................... 76

Was the one-off lease payment plan authorised by Sintoff?................................................ 77
If the one-off lease payment plan was authorised by Sintoff, is Equus bound by it?.......... 80

Summary of Conclusions............................................................................................................ 80

HIS HONOUR:

Introduction

In each of 1989, 1990, 1991, 1992 and 1993 Seymour Softwoods Ltd (“Seymour Softwoods”) promoted to the public a separate afforestation scheme (collectively “the schemes”) involving a right for investors to participate in the profits arising from pine tree plantations near Tumbarumba in New South Wales (“the plantations”). Each of the schemes offered significant “up-front” tax deductions for investors. Each of the schemes was offered to the public under a registered prospectus in compliance with the companies legislation applicable at the time. The legitimacy of the schemes under taxation law and company law is not in question.

In respect of each of the schemes, there was a separate trust established to administer the scheme. In each case, the trustee was National Mutual Trustees Ltd.

Each of the schemes involved, as an essential element, the investor leasing from the second plaintiff Sintoff Pty Ltd (“Sintoff”) a portion of the land on which the plantations were to be established. Sintoff was a related company of Seymour Softwoods and was, in substance, a co-promoter of the schemes. Sintoff and Seymour Softwoods had common directors and ownership and acted in concert to promote the schemes. None of the schemes would have been possible without the participation of Sintoff as owner of the plantations.

For reasons which will become apparent, there was more than one lease from Sintoff to each investor (“the leases”). The total duration of the leases was linked to the period required for the pine trees to reach maturity. The leases were to terminate on clearfelling of the pine trees on the land which was the subject of the leases.

In order to participate in a scheme, it was also necessary for an investor to enter into two contracts with Seymour Softwoods. First, a “Works and Services Contract”. Under this contract, the investor was required to pay $4,600 per hectare of leased land and, in return, Seymour Softwoods agreed to establish a pine tree plantation on the leased land. The minimum investment required a lease of at least two hectares. As the works and services to be performed under the Works and Services Contracts were to be performed within 13 months, the investor gained an initial “up-front” tax deduction of $4,600 per hectare which was leased.

Second, each investor was required to enter into a “Management Contract” with Seymour Softwoods. These contracts provided for the on-going maintenance and insurance of the land leased by the investor and the pine trees on that land until clearfelling of the pine trees when they reached maturity.

Initially, all went well under the schemes. The investors paid rent under their leases and fees under the other contracts, and claimed legitimate tax deductions as a result.

However, Seymour Softwoods became insolvent and was unable to comply with its obligations to maintain the leased land and the plantations. As a result, the prospect of the investors receiving a return on their investment became unlikely. Some of the plantings failed altogether. There were significant problems with noxious weeds and vermin on all of the plantations. Unless considerable further money was expended, it was likely that all of the plantations would fail as commercial enterprises.

Against this background, the trustee, in consultation with investors, attempted to salvage the schemes by giving the investors an opportunity to participate in a revised structure, under which a new manager would be appointed to bring the plantations up to an acceptable standard and maintain them until maturity and clearfelling. If this was done, there was a prospect of the investors realising a profit on their investment. However, in order to participate, the investors needed to invest further capital in the schemes. Although a majority of the investors were initially attracted to this course, and voted in favour of it, the required minimum proportion of investors failed to contribute the further funds which were required under the salvage schemes put forward, and they failed as a result.

Also against this background, there was a succession of assignments of the rights of Sintoff as lessor under the leases. For present purposes, it is sufficient to state that the first plaintiff Equuscorp Pty Ltd (“Equus”) is the ultimate assignee of Sintoff’s rights under the leases.

When attempts to salvage the schemes failed due to lack of financial support from the investors, Equus sought to enforce its rights as assignee of Sintoff’s rights under the leases. Equus demanded from the investors that they pay the arrears of rental due under the leases.

By this time, many of the investors had grouped together and were represented by one firm of solicitors. In correspondence, the solicitors for the investors denied that, in the circumstances which had occurred, the investors were liable to continue to pay rent under the leases. These assertions, together with the failure of the investors to pay rent despite demand, or to comply with other obligations under the leases, caused Equus to treat the investors as having repudiated the leases. The plantations were put up for tender in December 1997 and, in April 1998 all of the plantations were leased to the successful tenderer, Furies Capital Ltd.

Having re-leased the plantations, Equus commenced proceedings in this Court against the investors for unpaid rent at the time the leases were terminated in April 1998, for damages for loss of bargain and for interest due under the terms of the leases or pursuant to statute.

Five proceedings were issued in this Court. Each proceeding congregates its defendants according to the year of the annual prospectus under which they invested in a scheme. There are hundreds of investors who have been sued. For example, in Proceeding No 7713 of 2000 there are 244 defendants. However, as a result of pre-trial management by another judge, and agreement of the parties, only two of the five proceedings in the Court, relating to the 1989 prospectus and the 1990 prospectus, were tried before me. Further, the trial before me proceeded against only one defendant in each case.

In Proceeding No 7713 of 2000 the case tried was against the eighth defendant, George Antonopoulos (“the Antonopoulos proceeding”). There were separate pleadings between the plaintiffs and Mr Antonopoulos in the Antonopoulos proceeding.

In Proceeding No 7712 of 2000 the case was tried against the fifth defendant, Mauro Belperio (“the Belperio proceeding”). There were separate pleadings between the plaintiffs and Mr Belperio in the Belperio proceeding.

Although the cases against Mr Antonopoulos and Mr Belperio were selected to be tried separately, there is no order of the Court or agreement between the parties that the defendants other than Mr Antonopoulos and Mr Belperio are bound by the decisions reached in the cases against them. However, it is accepted that the decisions in the cases against Mr Antonopoulos and Mr Belperio have the capacity to have a significant bearing upon the cases against other defendants and, in particular, as to whether those cases should proceed to trial. In this sense, the Antonopoulos proceeding and the Belperio proceeding can be loosely described as test cases. However, as will appear, the scope for the result in the Belperio proceeding to influence the result in other cases may be more limited, given the particular facts of the Belperio proceeding.

the Antonopoulos Proceeding

Mr Antonopoulos invested in June 1990 under the prospectus then in force (“the 1990 prospectus”). The 1990 prospectus provided that an investor could participate in the scheme covered by that prospectus (“the 1990 scheme”) by investing in a long-term project of up to 25 years or for a short-term project of between eight and 12 years. Mr Antonopoulos chose to participate in a long-term project for up to 25 years in respect of two hectares of land (“the Antonopoulos land”). Accordingly, he executed seven separate lease agreements under which he agreed to lease the Antonopoulos land from Sintoff for a combined period of 25 years (the “Antonopoulos leases”).

The Antonopoulos leases were comprised of six leases of four years’ duration and one final lease of one year’s duration. This structure was adopted in an attempt to avoid the operation of the subdivision requirements of the Local Government Act 1919 (NSW) (“the Act”).

Section 4 of the Act provides a wide definition of “subdivision” and “subdivide” for the purposes of the Act, in the following terms:

“’Subdivision,’ ‘subdivide,’ and similar expressions mean and refer to dividing land into parts, whether the dividing is:
(a) by sale conveyance transfer or partition; or
(b)by any agreement dealing or instrument inter vivos (other than a lease for a period that, including any period for which the lease could be renewed by the exercise of an option, does not exceed 5 years) rendering different parts thereof immediately available for separate occupation or disposition...”[1] (Emphasis added.)

[1]The remaining parts of the definition are not relevant.

Section 4 of the Act also contains a definition of “Lease”, in the following terms:

“’Lease’ includes an original or derivative lease under-lease or agreement for the same, and extends to any case where there is the relation of landlord and tenant, whether there is or is not any instrument in writing.” (Emphasis added.)

It can thus be seen that, in very general terms, the lease or agreement for lease of a part of land in New South Wales, for a period exceeding five years, will constitute a subdivision for the purposes of the Act.

Section 323(1) of the Act provides that land in New South Wales must not be subdivided except in accordance with the provisions of the Act. Section 327(2) of the Act provides that land in New South Wales shall not be subdivided until (amongst other things):

(1)an application for the subdivision has been made to the relevant municipal council and approved by that council;[2] and
(2)a plan of subdivision has been registered in the office of the Registrar-General.[3]

[2]Section 327(2)(a).

[3]Section 327(2)(c).

The first defence raised by Mr Antonopoulos is that the Antonopoulos leases, when considered together, constitute an agreement for a lease or leases of a part of land for a period exceeding five years. Accordingly, it being conceded that no application has been made for subdivision of the relevant land, no council approval has been obtained and that no plan of subdivision has been registered, the Antonopoulos leases were entered into in contravention of ss. 323(1) and 327(2) of the Act, with the result that they are illegal, void and unenforceable against him (“the subdivision defence”).

In reply to the subdivision defence, Equus denies that the Antonopoulos leases constitute a subdivision for the purposes of the Act. In the alternative, it is contended on behalf of Equus that, if the Antonopoulos leases do constitute a subdivision for the purposes of the Act, then:

(1)Section 327(3) of the Act expressly provides that the Antonopoulos leases are not illegal or void. Section 327(3) provides:
“(3)Nothing in this section shall be deemed to render any agreement to sell, let or otherwise dispose of any land illegal or void by reason merely that it is entered into before an application in respect of the subdivision has been approved by the council, but the agreement shall be deemed to be made subject to such approval being obtained.”

(2)If, notwithstanding the provisions of s. 327(3) of the Act, the Antonopoulos leases are unenforceable by Equus, Mr Antonopoulos is estopped from departing from a common assumption that the Antonopoulos leases did not require a subdivision under the Act, with the effect that Mr Antonopoulos is estopped from denying his liability to pay the amounts claimed by Equus in the proceeding (“the subdivision estoppel”).

The second defence raised by Mr Antonopoulos is based on alleged uncertainty of the Antonopoulos leases (“the uncertainty defence”). Mr Antonopoulos alleges that the Antonopoulos leases do not identify the Antonopoulos land with sufficient certainty to enable it to be readily located. Accordingly, the Antonopoulos leases are void for uncertainty.

In reply to the uncertainty defence, Equus contends that the land which is the subject of the Antonopoulos leases is capable of identification and that there is no uncertainty. Alternatively, if the Antonopoulos land is not sufficiently identified and the Antonopoulos leases are uncertain, it is contended on behalf of Equus that Mr Antonopoulos is estopped from denying that the Antonopoulos leases do not sufficiently identify the Antonopoulos land (“the uncertainty estoppel”).

The Belperio Proceeding

Mr Belperio invested in June 1989 under the prospectus then in force (“the 1989 prospectus”). The 1989 prospectus provided that an investor could participate in the scheme covered by that prospectus (“the 1989 scheme”) by investing in a long-term project of up to 25 years.

The 1989 prospectus did not provide for an option to invest in a short-term project of between eight and 12 years, as was the case with the 1990 prospectus. Mr Belperio alleges that, notwithstanding the terms of the 1989 prospectus, he was given to understand that there was an option to invest in 1989 in a short-term project and that he took up this option and invested for a period of eight years only. This is denied by Equus. Equus contends in response that:

(1)by participating in the 1989 scheme subject to the 1989 prospectus, Mr Belperio thereby agreed to enter into a long-term project for up to 25 years and to execute seven separate leases for a combined period of 25 years; and
(2)the liability of Mr Belperio for unpaid rent, damages and interest should be calculated on the basis that he is bound by leases for a 25 year period.

There is no dispute that only two leases signed by Mr Belperio, each of four years duration, have been located and are in evidence (“the Belperio leases”). Under the Belperio leases, Mr Belperio agreed to lease two hectares of land (“the Belperio land”).

Putting to one side the issue as to whether Mr Belperio is bound by the Belperio leases for period of eight years, or by leases or agreements for lease for a combined period of 25 years, Mr Belperio also relies upon the same defences that are raised by Mr Antonopoulos. In reply, Equus relies upon the same estoppels that it raises against Mr Antonopoulos. Accordingly, the subdivision defence, the subdivision estoppel, the uncertainty defence and the uncertainty estoppel are, with necessary modifications, in issue in the Belperio proceeding.

There is another factual difference between the Belperio proceeding and the Antonopoulos proceeding. Mr Belperio alleges that, whatever the duration of the Belperio leases, he has paid all of the rental due under those leases. This defence is based upon an allegation by Mr Belperio that he received a written offer from Sintoff to pay the sum of $650 per hectare leased by him in full satisfaction of all of his obligations to pay rent under the Belperio leases (the “one-off lease payment plan defence”). In reply, Equus denies that the officer of Sintoff who made the offer was authorised to do so. Further, Equus contends that, even if authorised, it is not bound by the one-off lease payment plan because it was an arrangement entered into between Sintoff as mortgagor, and Mr Belperio as lessee, without the consent of Equus as mortgagee.

Facts
(1) The schemes

The schemes in issue in the proceedings involved the promotion, establishment, conduct and clearfelling of the plantations. The 1989 scheme, in which Mr Belperio invested, related to a plantation known as the “Ardsley” plantation (“the Ardsley plantation”). The 1990 scheme, in which Mr Antonopoulos invested, involved a plantation known as the “Birmaroo” plantation (“the Birmaroo plantation”).

As I have said in the introduction, the schemes were promoted by Seymour Softwoods and Sintoff. Sintoff owned the land on which the plantations were to be established, and thereafter maintained, by Seymour Softwoods.

In order for the schemes to be attractive to investors, it was necessary to structure them in a way which would attract tax deductions, in particular a significant up-front tax deduction in the year of investment. In order to qualify as a primary producer and obtain the tax deductions, an investor had to be in the business of afforestation. A mere investment would not be enough.[4] Structuring the schemes in this way meant that investors were undertaking all of the attendant risks of the business of afforestation. For example:

“... the trees might be inexpertly planted or unwisely tended; the land or climate might prove unsuitable for them; fire might destroy them; and, even if everything else should go well, the timber might have to be sold on a depressed market...”[5]

[4]Milne v Federal Commissioner of Taxation (1975) 133 CLR 526.

[5]Clowes v Federal Commissioner of Taxation (1954) 91 CLR 209 at 221-2, per Kitto J.

At the time each of the schemes was promoted, there was in existence a ruling of the Commissioner of Taxation relating to the circumstances in which the Commissioner would be satisfied that a person claiming a tax deduction in respect of an afforestation scheme was carrying on the business of afforestation. In Ruling IT 360, the Commissioner stated:

“In the final analysis the question of whether a person is carrying on a business of afforestation will depend on the answers to the questions:
(i)does he have an interest in an identifiable area of land?
(ii)are the afforestation operations carried on on the land comparable to ordinary forestry albeit on a small scale?
(iii)is the project commercially viable?
(iv)are the operations being carried out in a businesslike manner?
(v)has the person a sufficient degree of control over the operations carried out on his land?” [6]

[6]Australian Tax Office, Ruling IT 360: Afforestation Companies – Payments made pursuant to service contracts: Whether deductible to payer (issued 26 April 1979, released 2 September 1983), [6].

The schemes were structured in a way to comply with the requirements of Ruling IT 360. First, the leases were chosen as the method of ensuring that the investors had an interest in an identifiable area of land. Secondly, in order to meet the other requirements of the ruling, the Works and Services Contracts and the Management Contracts were entered into by investors with Seymour Softwoods.

As I have said, the schemes were each the subject of a registered prospectus. The 1989 prospectus and the 1990 prospectus were in the same terms, except for a few relevant exceptions which I will mention. Unless indicated to the contrary, any reference in this judgment to a provision of the prospectus is a reference to a provision contained in each of the 1989 prospectus and the 1990 prospectus.

The prospectus contains an invitation to the public to participate in the forest industry by investing in a pine plantation managed by Seymour Softwoods. In the prospectus, investors are described as “growers”. This description was no doubt attached to investors because of the need for the investors, in order to attract the desired tax deductions, to satisfy the Commissioner of Taxation that they were in the business of afforestation. In the remainder of this judgment, the terms “investor” and “grower” are used interchangeably.

The prospectus describes the investment in the following terms:

“The Investment
This Prospectus invites the public (“growers”) to participate in the forest industry by investing in a pine plantation managed by Seymour Softwoods Ltd. Growers participate by:
1.entering into a number of similar consecutive lease agreements[7] (‘Lease’ or ‘Leases’) with Sintoff Pty Ltd for an identifiable allotment of land (‘the land’) (minimum of two (2) hectares)... It should be noted that the granting of Leases by Sintoff Pty Ltd to growers may constitute a subdivision of the plantation in accordance with the provisions of the Local Government Act 1919 New South Wales (‘the LGA’). The relevant local shire councils are of the view that formal subdivision of the land is unnecessary. However, in order to take advantage of exclusion provisions contained in the LGA (and minimise the risk of adverse applications of the LGA), growers will enter into seven (7) separate consecutive leases each being under five (5) years’ duration;...
2.Entering into contracts with Seymour Softwoods Ltd for works and services in relation to the establishment of a pine plantation and initial insurance (‘the Works and Services Contract’) and a management contract in relation to the on-going maintenance and insurance of a pine plantation (‘the Management Contract’).

[7]The word “agreements” has inadvertently been excluded from the 1990 prospectus.

The prospectus describes the rental payments payable under the leases in the following terms:

“Lease Rental
The lease rental is One Hundred and Fifty Dollars ($150) per hectare for the first year (initial stamp duty included), thereafter the lease rental is adjusted annually, generally in line with the increase in the Consumer Price Index Weighted Average of Eight (8) Capital City All Groups Number, or eight per centum (8%) whichever is the greater.”

The amount payable under the Works and Services Contract is described in the prospectus in the following terms:

“The Works and Services Contract
The Contract Price for the Works and Services Contract is an amount of Four Thousand Six Hundred Dollars ($4,600) per hectare.”

The amount payable under the Management Contract is described in the prospectus in the following terms:

“The cost of managing the plantation (other than insurances) after the completion of the works under the Works and Services Contract is met out of the sale proceeds of the thinnings and clearfelling of the pinus radiata. Insurance for the year after the first thirteen (13) month period (covered by the Works and Services Contract) is estimated at ten dollars ($10) per hectare.”

Each of the 1989 prospectus and the 1990 prospectus described the term of the investment as a long-term investment. The 1989 prospectus stated:

“Long-Term Investment
The term of the investment is for a minimum of twenty-five (25) years. The investment should not be seen as short-term.”

In this regard, the 1990 prospectus states:
“Long-Term Investment
The term of the investment is for a period of twenty-five (25) years or until clearfelling of the pinus radiata. The investment should not be seen as short-term. Seymour Softwoods can however arrange to have clearfelling effected to enable growers to take advantage of products requiring younger trees. Growers wishing to avail themselves of early clearfelling should complete the Application Form accordingly. This will facilitate Seymour Softwoods Ltd in the efficient planning of the plantations.”

The fact that it is only in the 1990 prospectus that there is an option for a shorter term investment is relevant to the claim made by Mr Belperio that he only invested in the 1989 scheme for a period of eight years. In this regard, the application form for the 1989 prospectus contains no option to invest for a shorter term. In contrast, the application form for the 1990 prospectus introduces such an option, in the following terms:

“3. Marketing of the Plantation
I/we whose full name(s) and address appear above hereby advise that I/we prefer that our pine plantation (managed by Seymour Softwoods Ltd in accordance with the Management Contract referred to in the Prospectus) be developed and marketed as:-
*A Short Term Project (eight (8) to twelve (12) years).
*A Long Term Project (up to twenty-five (25) years).
(*Delete whichever is inapplicable)”

The prospectus describes the risk factors applicable to all investors, in the following terms:

“Risk Factors
At all times the pine trees the subject of the Works and Services Contract and the Management Contract shall remain the property of the growers and furthermore any and all income derived from the sale of such trees shall subject to the provisions of the Trust Deed accrue to the benefit of each grower. No compensation will be paid by Seymour Softwoods Ltd or Sintoff Pty Ltd to the growers in case the Lease determines before the pine trees, the subject of the Works and Services Contract in the Management Contract, have fully matured and there is no guarantee that the plantation will be fully matured by that time.
Growers should be aware that any agricultural investments carry certain risks. In particular, Growers should take note that the following risks are associated with investing in the pine plantations:
[The risks are set out, although not in the same terms in each of the 1989 prospectus and the 1990 prospectus.]
Further, there is a risk by virtue of the LGA that as the plantations have not been subdivided the Leases may be invalid. This risk has been minimised by having consecutive Leases totalling twenty-five (25) years in duration and the relevant shire council not requiring a formal subdivision.”

In the “Feature Summary” of the prospectus, it is stated that the grower is to enter into:

“... seven (7) consecutive similar leases for the land being for a minimum period of twenty-five (25) years...”

However, the minimum 25 year period is subject to one exception in the 1989 prospectus and two exceptions in the 1990 prospectus.

The 1989 prospectus provides that the minimum period of the leases is to be 25 years:

“... unless, in accordance with good afforestation practices, the land is clearfelled before that time in which case the lease will determine.”

In the 1990 prospectus, the exception to the minimum 25 year period of the leases is expressed in the following way:

“... unless the land is clearfelled before that time in accordance with good afforestation practices or as determined by the grower in which case the Lease will determine.” (Emphasis added.)

Once again, this distinction between the 1989 prospectus and the 1990 prospectus would appear to be the result of changes introduced to accommodate the option for a shorter term investment in the 1990 prospectus. This also explains the difference between the statements in the 1989 prospectus and the 1990 prospectus concerning income to be earned by growers from thinnings and clearfelling. In this regard, the 1989 prospectus states:

“Income may be expected to be received by growers in the third, eighth, thirteenth, twentieth and twenty-fifth year.”

In the 1990 prospectus, it is stated:

“Income may be expected to be received by growers from the thinnings and clearfelling of the pinus radiata. Income may be expected to be received by growers in the third, eighth, thirteenth, and twenty-fifth year. Growers may seek to have their plantation clearfelled as early as eight (8) years in which case income may be received by them.” (Emphasis added.)

In both the 1989 prospectus and the 1990 prospectus, it is provided that the income from thinning and clearfelling shall be used, in the first instance, to pay for the maintenance of the plantations, insurances and trustees’ fees and then paid to the grower.

The prospectus contains a forecast of income from thinning and clearfelling, in the following terms:

“Returns Per Hectare

1988 (1989)
$ Future
$

Thinning years 3 100 100

Thinning years 7-8 350 600

Thinning years 12-13 2,010 5,711

Thinning years 19-20 1,980 9,228

Clearfell years 25 12,160 83,277

Total Returns 98,916”

I note that neither the 1989 prospectus nor the 1990 prospectus contains an income projection for clearfelling at a time earlier than 25 years. Accordingly, it is not possible to ascertain, from the prospectus, whether the shorter term investment option available under the 1990 prospectus, and which Mr Belperio says he took up in respect of the 1989 scheme, will provide a return on the initial investment of $4,600 per hectare.

The prospectus contains a specialist forestry consultant’s report. That report notes:

“There is some variation of growth potential across sites on these properties, but this will not disadvantage individual investors due to the pooling of returns from the plantations.”

This is a reference to the terms of the trust deed to which I will later refer.

The terms of the leases, the Works and Services Contracts and the Management Contracts are all set out in full in the prospectus.

Before leaving the general description of the schemes, it is important to note that the schemes were structured by the promoters, Seymour Softwoods and Sintoff. Each of Seymour Softwoods and Sintoff had express knowledge of the risk that the leases may be invalid by reason of the subdivision requirements of the Act. These risks were expressly referred to in the prospectuses. Seymour Softwoods and Sintoff must be taken to have entered into the transaction documents with growers subject to that risk. In particular, Sintoff must be taken to have entered into the leases with the knowledge of that risk. Further, any investor in a scheme who read the prospectus or had it explained by an accountant or financial advisor would also be aware of the risk. However, the prospectus sought to downplay the risk by stating that steps had been taken “in order to take advantage of exclusion provisions contained in” the Act, and noting that the relevant shire council did not require a formal subdivision.

(2) The leases

In each case, seven leases are provided for, as described above. With one exception, the terms of the leases are in substantially the same form in the 1989 prospectus and the 1990 prospectus. Each of the first six leases is for a period of four years. Each of the seventh leases is for a period of one year. In each case, the land which is the subject of the lease is described as:

“All that land delineated and coloured green on the plan to be annexed hereto but nevertheless being an area of... hectares and being part of the plantation.”

I have emphasised “the plantation” because that is a defined term in the form of the leases contained in the 1990 prospectus. In the 1989 prospectus, the plantation is described in the description of the land, and is not separately defined. In my view, nothing turns on this.

Each of the leases adopts standard form landlord and tenant language. Sintoff is described as “the lessor” and the investor is described as “the grower”. The grower is to pay rent and the lessor is to give the grower quiet enjoyment of the land which is the subject of the lease. As may be expected, many of the rights and obligations of the parties to the leases are expressly referable to “the land” as defined in the leases. For example:

(1)the grower must not do or permit anything to be done on the land or bring to or keep on the land anything which may invalidate any insurance relating to the land – cl. 1(c);
(2)the grower must comply with any notices, directions or orders affecting the land – cl. 1(d);
(3)the grower must destroy and keep down all rabbits, other vermin, thistles and other noxious weeds on the land – cl. 1(f);
(4)the grower must use and manage the land in a proper and businesslike and reputable manner and not allow the land to be used for any purpose which contravenes any applicable planning scheme or permit – cl. 1(g);
(5)the grower must keep any and all fences on the land in good and substantial repair – cl. 1(h);
(6)at the expiration or sooner determination of the lease, the grower must deliver up the land to the lessor in a condition which is consistent with the due performance of the covenants of the grower contained in the lease – cl. 1(j);
(7)if the grower decides to plant the land with trees and to use and maintain the land for the purposes of afforestation, the grower has complete freedom of choice as to the conduct of that business and is not obliged to engage any, or any particular, contractor to carry out the desired works and services – cl. 3(a)(i);
(8)the grower has the sole right to determine when the land shall be planted and when the produce of the land may be realised and marketed – cl. 3(a)(ii);
(9)the lease determines when the land is clear felled in accordance with good afforestation practices or, in the case of the form of lease contained in the 1990 prospectus[8], as determined by the grower – cl. 3(a)(iii);
(10)the grower is obliged to give the owners and occupiers of any adjoining parcel of land to the land all such rights of way and access over the land as are reasonably necessary for the proper use and enjoyment of that adjoining parcel of land – cl. 3(b);
(11)the grower indemnifies the lessor against a number of possible heads of liability arising from conduct upon or referable to the land – cl. 4;
(12)the grower is entitled to erect improvements on the land, subject to certain exceptions requiring the written consent of the lessor – cl. 7;
(13)the grower is prohibited from bringing onto the land, or permitting to remain thereon, any rabbits, horses, or livestock – cl. 9;
(14)if the grower does not pay rent in accordance with the terms of the lease, if the grower is otherwise in breach of the terms and conditions of the lease or if certain specified events occur, the lessor is entitled to re-enter into and upon the land and to repossess and enjoy it and, if the lessor so elects, the lease shall thereupon be determined – cl. 10(a);

(15)if the lessor elects to determine the lease, the lessor is granted an option to purchase the “grower’s trees”, which trees are defined in cl. 10(a) as “the trees then growing on the land” – cl. 10(b);
(16)in the event of a breach of the lease on the part of the grower, the lessor is entitled to enter the land and do such acts and things as the lessor considers necessary or desirable to remedy or attempt to remedy the breach – cl. 10(d);
(17)the produce of the land and any profits derived from the sale thereof remain the property of the grower at all times – cl. 10(i);

[8]But not in the form of lease contained in the 1989 prospectus.

Indeed, the plaintiffs have sought in the proceedings before me, to enforce some of these obligations which are expressly referable to “the land”. In the Antonopoulos proceeding, it is alleged that Mr Antonopoulos breached the first and second of the Antonopoulos leases by:

(1)failing at his expense or at all to destroy and keep down all rabbits, other vermin, thistles and other noxious weeds on the Antonopoulos land;
(2)failing to use and manage the Antonopoulos land in a proper businesslike and reputable manner; and
(3)failing to keep fences on the Antonopoulos land in good and substantial repair.

These breaches are alleged to constitute conduct by Mr Antonopoulos constituting a repudiation of the first and second Antonopoulos leases or one of them.

Similar allegations are made against Mr Belperio in respect of the Belperio leases and his failure to comply with the same obligations with respect to the Belperio land.

There is one clause in the 1990 form of lease which is not contained in the 1989 form of lease. Clause 10(m) of the 1990 lease provides:

“(m)if the Lessor and the Grower have entered into a lease or a series of leases (‘the prior lease’) on similar terms and conditions as set out herein for periods of leased terms that end prior to the commencement date and the Lessor in accordance with the Prior Lease determines the Prior Lease then this Lease shall at the time of the determination of the Prior Lease automatically determine and be at an end...”

Finally, in respect of the leases, it should be noted that they are governed by the law of New South Wales.

(3) Related contracts and trusts

The form of the Works and Services Contract for the 1989 scheme and the 1990 scheme is set out in the 1989 prospectus and the 1990 prospectus. Neither party drew my attention to any material difference between the forms of Works and Services Contract prescribed by the two prospectuses. I will proceed on the basis that there is none. Under the Works and Services Contract:

(1)The grower engages Seymour Softwoods to carry out certain works and services specified in the first schedule upon the land leased by the grower from Sintoff. In general terms, the works and services specified in the first schedule comprise the work of establishing and maintaining a pine tree plantation on the land leased by the grower.
(2)The grower agrees to pay the sum of $4,600 per hectare leased by the grower, which sum is payable upon execution of the Works and Services Contract.
(3)In order to ensure that the whole of the contract price of $4,600 per hectare is tax deductible in the year in which the payment is made, Seymour Softwoods agrees to complete the specified works and services no later than 13 months after the date of execution of the contract.
(4)The Works and Services Contract is subject to the laws and jurisdiction of the State of Victoria.

The form of the Management Contract for the 1989 scheme and the 1990 scheme is also set out in the prospectuses. Once again, neither party drew my attention to any material difference between the forms of Management Contract prescribed. I will proceed on the basis that there is none. Under the Management Contract:

(1)The grower engages Seymour Softwoods to carry out certain works and services specified in the first schedule upon the land leased by the grower from Sintoff. In general terms, the works and services specified in the first schedule comprise the work of maintaining the pine tree plantation on the land leased by the grower and reporting to the grower on a regular basis[9] in respect of the plantation.
(2)Further, Seymour Softwoods agrees to effect insurances over the land leased by the grower and the grower agrees to pay for that insurance in the proportion to which the grower’s land bears to the total number of hectares of the plantation.
(3)Seymour Softwoods is to be paid a management fee from the sale of thinnings and clearfelling of the pine trees.
(4)The Management Contract is subject to the laws and jurisdiction of the State of Victoria.

[9]At least yearly.

As I have said, there was a separate trust established to administer each of the schemes (“the Trusts”). In each case, the trustee was National Mutual Trustees Ltd (“the Trustee”). The parties did not draw my attention to any material difference between the Trust Deeds governing the Trusts. I will proceed on the basis that there is no material difference.

Under the terms of the Trusts:

(1)The Trustee agrees to be the representative of the growers and custodian of the trust fund – cl. 1.
(2)All monies received by Seymour Softwoods from growers in payment of the contract price under the Works and Services Contracts are to be paid to the Trustee – cl. 2(a).
(3)All monies received by Seymour Softwoods from the clearfelling of pine trees on the land which is the subject of the relevant scheme are to be paid to the Trustee.
(4)The Trustee is to pay out of the trust fund the costs and expenses of establishing and maintaining the relevant plantation applicable to the scheme and, after payment of such costs and expenses, must pay the balance of to the growers in accordance with their proportionate interests in such part of the plantation that has been thinned or clearfelled – cl. 4(a).
(5)Seymour Softwoods covenants to use its best endeavours to ensure that the plantations are established and maintained in a proper and efficient manner – cl. 8.
(6)The Trustee covenants to exercise all due diligence and vigilance in watching the rights and interests of the growers in its capacity as representative of the growers and custodian of the trust fund – cl. 7(c).
(7)The Trustee may dismiss Seymour Softwoods if it fails to carry out or satisfy any duty imposed on it in accordance with the Trust Deed, the Works and Services Contract or the Management Contract to the reasonable satisfaction of the Trustee – cl. 9(a)(ii).
(8)Upon dismissal of Seymour Softwoods pursuant to cl. 9(a)(i), the Trustee is entitled to appoint another person to be the contractor under the Trust in place of Seymour Softwoods. However, if the vacancy is not filled within 60 days, the Trustee is obliged to terminate the Trust forthwith – cl. 9(a)(i)(ii).
(9)The Trustee may summon a meeting of growers for any purpose that it thinks fit. At such a meeting, the growers entitled to vote may pass a resolution which is binding on all growers – cll. 14(a), (t) and (u).

The proportionate sharing of the net proceeds of thinning and clearfelling of the pine trees under the terms of the Trusts has the practical effect that, whilst the scheme continues to operate, the actual revenue earned by a grower from the pine trees planted on his, her or its land is not relevant. The net profits of the plantation as a whole are pooled and distributed rateably amongst growers participating in each scheme (“the pooling provisions”). Accordingly, whilst the scheme is operating as intended, there is no commercial need for a grower to be concerned about the precise location of his, her or its land. The profitability of the investment will depend upon the profitability of the plantation as a whole. On the other hand, if the scheme does not progress as expected and the Trust terminates, and the grower is left to manage or otherwise deal with the land and the pine trees planted thereon, identification of the grower’s land will become important.

(4)Financing the schemes and assignments of Sintoff’s rights

There were two financiers of the schemes. First, RMBL Investments Pty Ltd (“RMBL”) provided finance to Seymour Softwoods and Sintoff, and took a first mortgage over the plantations to secure their indebtedness to it. RMBL is and was at all relevant times a company owned and controlled by the partners of a legal firm in Victoria, Macpherson & Kelly. Secondly, in respect of each scheme, there was a “Finance Provisions Agreement” entered into between Equus and Seymour Softwoods. Under the Finance Provisions Agreements, Equus agreed to provide finance to investors in the schemes to enable them to invest, provided that they could meet the standard lending criteria of Equus.

Under the terms of the Finance Provisions Agreements, Seymour Softwoods agreed that it would deposit with Equus an amount equal to 5 per cent (later 7.5 per cent) of the principal of each loan made by Equus to an investor in the schemes. Equus agreed to hold these amounts in a “Reserve Fund”. Further, if at any time the amount standing to the credit of the Reserve Fund fell below the specified per centage, Seymour Softwoods agreed to pay Equus, within seven days of demand, the amount required to ensure that the Reserve Fund comprised the agreed per centage of the total of outstanding loans to investors.

The obligations of Seymour Softwoods to Equus under the Finance Provisions Agreements were guaranteed by Sintoff and by other corporations and persons related to Seymour Softwoods.

By a deed of fixed charge dated 13 October 1992, Sintoff charged to Equus all of its property, including the plantations and its rights as lessor under the leases, in order to secure its obligations as guarantor of Seymour Softwoods under the 1991 Finance Provisions Agreement. This charge was registered (“the Equus charge”).

Further, in order to secure its obligations to Equus as guarantor of Seymour Softwoods, Sintoff mortgaged the plantations to Equus (“the Equus mortgage”). Equus lodged a caveat over the plantations to protect its interest as second mortgagee behind RMBL.

Sintoff granted the Equus charge and the Equus mortgage in October 1992, at a time when Seymour Softwoods was in default under its obligations to maintain the Reserve Fund at the required levels. Demand had been issued by Equus to Seymour Softwoods requiring it to restore the Reserve Fund to the required levels, and this demand had not been met. It was this default which subsequently led to Equus appointing a receiver of all of the property of Sintoff.

By October 1993, Sintoff had defaulted under its first mortgage obligations to RMBL. RMBL entered into possession of the plantations and commenced collecting the rental due under the leases.

In June 1995, Equus appointed Mr Geoffrey Kelly of the firm of Clarke + Company as the receiver of all of the property of Sintoff (“the Receiver”). The Receiver acted at all times pursuant to the directions of Equus.

In 1996, Equus paid to RMBL all of the monies secured by its first mortgage over the plantations. Pursuant to an order made by the Supreme Court of New South Wales in December 1996, RMBL was ordered to deliver to Equus transfers of its first mortgages over the plantations, a withdrawal of its caveat over certain of the plantations, a deed of assignment of rental whereby RMBL assigned all of its rights under the leases to Equus and all of the records of RMBL and Sintoff which were in the possession of RMBL relating to the plantations and the leases.

As I have said in the introduction to this judgment, there has been a succession of assignments of the rights and obligations of Sintoff as lessor under the leases, resulting in Equus being the legal assignee of the rights and obligations of Sintoff under the leases. This chain of assignments can be briefly described:

(1)On 17 January 1992, Sintoff assigned all of its right, title and interest in the leases to RMBL. Through inadvertence, the lot number attributed to the Antonopoulos lease was in error. This error was rectified by a subsequent deed between RMBL and Sintoff. Nothing turns on the error.
(2)On 18 December 1996, RMBL assigned its rights under the leases to Equus.
(3)On 10 July 1997, Equus assigned its rights under the leases to the Receiver in his capacity as receiver of Sintoff.
(4)On 12 October 2000, the Receiver assigned his rights under the leases to Equus.

Notice of the assignments was given to Mr Antonopoulos, Mr Belperio and all of the other investors. I find that there has been a legal assignment to Equus of all of the right, title and interest of Sintoff under the leases, including the Belperio lease and the Antonopoulos lease. In any event, in order to meet any possible technical defence concerning the efficacy of the assignments, Sintoff has been joined as second plaintiff to the proceeding.

(5) Mr Antonopoulos invests

There is no dispute about the form of the investment by Mr Antonopoulos in the 1990 scheme. He chose to invest in a long-term investment for up to 25 years. He signed the Antonopoulos leases, a Works and Services Contract and a Management Contract. He borrowed money from Equus to enable him to fund his investment in the 1990 scheme.

(6) Conduct of Mr Antonopoulos after investment

Under the terms of the Antonopoulos leases, Mr Antonopoulos was obliged to pay rent annually in advance by 30 June each year. Mr Antonopoulos continued to pay rent annually in advance until he made his final payment on 27 June 1996 in respect of the financial year ending 30 June 1997.[10] Mr Antonopoulos continued to make these payments notwithstanding, as appears hereafter, the failure of Seymour Softwoods to maintain the Birmaroo plantation, the dismissal of Seymour Softwoods as plantation contractor, the failure of the salvage scheme proposed by the Trustee and the winding up of the Trusts, all of which occurred by 20 October 1995.
[10]During this period, Mr Antonopoulos also paid his contribution towards insurance, pursuant to his obligations under the Management Contract signed by him.

Further, on 20 July 1995, Mr Antonopoulos repaid Equus all of the outstanding monies due under his loan agreement with Equus.

As will hereafter appear, it was not until September 1996 that, through his solicitors, Mr Antonopoulos denied any obligation to pay rent.

Finally, in respect of the conduct of Mr Antonopoulos after his investment, it is necessary to record that Mr Antonopoulos claimed tax deductions in respect of all of the payments made by him in respect of his investment in the 1990 scheme.

(7) Mr Belperio invests

As I have said, there is an issue as to the term of the investment by Mr Belperio. The issue for determination is whether Mr Belperio must be taken to have agreed to lease the Belperio land for a period of 25 years, constituted by six leases of four years’ duration and one lease of one year’s duration, or whether Mr Belperio is only bound by the Belperio leases, comprised of two leases which are each of four years’ duration.

In addition to the Belperio leases, Mr Belperio signed a Works and Services Contract and a Management Contract. He paid the full amount due under the Works and Services Contract, a sum of $4,600 per hectare leased by him.

Mr Belperio invested in the 1989 scheme after discussing it, together with other possible investment opportunities, with his accountant Mr Moskowitz in June 1989. Both Mr Belperio and Mr Moskowitz gave oral evidence.

Mr Belperio was a most unsatisfactory witness. Mr Beaumont QC, who appeared with Mr Maiden on behalf of the plaintiffs in the Belperio proceeding, submitted that Mr Belperio was a combative, evasive and disingenuous witness who cannot be believed. I accept that this description is apt in respect of much of the evidence given by Mr Belperio. However, on the critical issue of whether Mr Belperio invested for a period of eight years only, there are contemporaneous documents to support Mr Belperio’s version of events and, in addition, the evidence of Mr Moskowitz also supports Mr Belperio on this critical issue.

As to Mr Moskowitz, although I am satisfied that he was genuinely attempting to tell the truth, much of his evidence in cross-examination was constituted by his acceptance of propositions put to him as to what is likely to have occurred, given his position as an accountant with a professional responsibility to his clients. In my view, this evidence should be treated with caution. Much of it is reconstruction based on what Mr Moskowitz perceived was in accordance with his professional duties at the time. This perception was engendered and encouraged by the form and tone of the questions put in cross-examination.

Further and in any event, in considering what is likely to have occurred in 1989, and in respect of the one-off lease payment plan in 1993, it is in my view safer to resolve any factual disputes and inconsistencies by reference to the contemporaneous documents wherever possible. The lapse of time makes reliance upon oral recollection of events unreliable.

Mr Belperio met with Mr Moskowitz in June 1989. A number of investment alternatives were discussed. Following discussion with Mr Moskowitz, upon whom Mr Belperio relied, he decided to proceed with an investment in the 1989 scheme over other investment alternatives. It is clear that Mr Belperio cannot recall all that was said at this meeting. The extent of his recollection is set out in the following exchange:

“What did he [Mr Moskowitz] tell you about the forestry scheme? --- Eight year duration, you get two hectares and you can take out a loan and of course he pushed the tax benefits.”

In his witness statement which he adopted in oral evidence, Mr Belperio stated:

“He [Mr Moskowitz] explained the investment scheme to me. He said that the investment could be taken out for a short term (about 8 - 10 years) or a longer term of 25 years. I opted to invest for a period of eight years... Moskowitz explained to me that after the expiration of the lease the pine trees would be harvested for the purpose of telegraph and/or vineyard poles or alternatively, I had a further option of not harvesting the trees and remaining in the investment for the full length being the maximum 25 years. He did not explain to me how this option could be exercised if I decided to remain in the scheme for 25 years. After discussing this scheme with him, I thought that the scheme was feasible, not only for the purposes of claiming deductions, but more importantly that there would be a growing need for timber and the scheme may prove to be profitable, and decided to invest in it.
To the best of my recollection, when I was at Moskowitz’ office discussing the scheme, Moskowitz may have had a copy of a prospectus but I do not recall reading it. I do not recall ever being given the prospectus for the 1989/90 year. I do not recall whether I was shown that prospectus, although I may have been.”

Mr Belperio said in his witness statement, and confirmed in his oral evidence, that he received a copy of a brochure issued by Seymour Softwoods titled “Trees and Money” from Mr Moskowitz prior to discussing investment alternatives with Mr Moskowitz. In his witness statement and in oral evidence, Mr Moskowitz gave evidence of a similar recollection. In his witness statement, he said:

“In particular, I recall passing on to Mauro Belperio and others a document titled ‘Trees and Money’ which gave them an opportunity to get into the scheme for a period of 8 - 10 years. Belperio, and a number of other clients were particularly attracted to the scheme for the short term.”

In his witness statement, Mr Moskowitz also stated that he recalled that the short-term option under the 1989 scheme “involved utilising investors’ funds to grow pine trees which would be harvested to produce vineyard poles and Christmas trees”.

Mr Belperio acknowledged in evidence that he did not read or rely upon the “Trees and Money” brochure. Rather, he said that the receipt of this document in the mail, presumably with other documents for other schemes, coupled with a telephone call from Moskowitz’ office, caused him to make an appointment to see Mr Moskowitz to discuss investment alternatives in June 1989.

If the “Trees and Money” brochure was in fact in existence in June 1989, and was used to market the 1989 scheme, this gives considerable support to Mr Belperio’s claim that he only invested in the 1989 scheme for a period of eight years. However, the case of Equus was that I should infer that the “Trees and Money” document was used in connection with the marketing of the 1990 scheme, not the 1989 scheme.

The “Trees and Money” brochure contains an invitation to send for a prospectus (coupled with a photograph of the 1989 prospectus) and is directed at a short-term investment only. The brochure concludes in the following terms:

“Returns – Estimated return of $12,000 per hectare for an outlay of $4,600 in eight – ten years.
Finance – Available at 16%.
Insurance – Covered for all risks.
Tax Deductible.”

A document titled “Only 8 Years!” was issued by Seymour Softwoods in connection with the 1990 scheme. As I have said, there is no dispute that there was a short-term investment option contained in the 1990 prospectus. However, the relevance of the “Only 8 Years!” document is that it refers to the short-term option having been available in the previous year. The “Only 8 Years!” document states in this regard:

“There is a market in the short term guaranteed to double your money, give you 100% deduction, and is fully insured against loss. Only five hundred hectares is being made available again this year, as was in 1989/90, for the early sale project and the same each year will continue to ensure supply.” (Emphasis added.)

Although the “Only 8 Years!” document is clearly a marketing document, it is in my view unambiguous in its reference to there having been a short-term investment option in the 1989 scheme, limited to 500 hectares or 250 investors (a minimum investment of two hectares being required). This is consistent with the “Trees and Money” brochure being distributed in relation to the 1989 scheme. It is also consistent with the oral evidence of both Mr Belperio and Mr Moskowitz.

On the other hand, each of the “Trees and Money” brochure, the “Only 8 Years!” document and the oral evidence of Mr Belperio and Mr Moskowitz in this regard is inconsistent with the terms of the 1989 prospectus. The 1989 prospectus provided only for a 25 year investment. There was no short-term option referred to in the 1989 prospectus itself or in the application form which was attached.

There are other documents which support the case of Mr Belperio on this issue:

(1)Only two leases, the Belperio leases, can be located. Although the succession of assignments has meant that physical possession of the leases has passed from Sintoff to RMBL, from RMBL to Equus, from Equus to Sintoff and then from Sintoff to Equus, giving rise to the possibility that further leases signed by Mr Belperio may have been in existence but have been mislaid, this fact is significant.
(2)In an attachment to the 1989 income tax return of Mr Belperio, which was prepared by Mr Moskowitz, there is a description of Mr Belperio’s investment in the 1989 scheme. Paragraph 5 of that attachment states:
“5.The Lease is for a period of eight years, as is the Works and Services Contract to ensure that the operations will be carried on to profitable conclusion.”

Mr Moskowitz is, in my view, unlikely to have prepared a tax return containing this statement if it did not accord with his belief at the time. This bolsters the credibility of his evidence and that of Mr Belperio in this regard. In my view, the obvious error as to the duration of the Works and Services Contract, which may be a mistaken reference to the Management Contract, does not affect the weight of this evidence as to the duration of Mr Belperio’s investment.
(3)In connection with a possible salvage scheme in 1995, Mr Belperio agreed to enter into five further lease agreements with RMBL. A “Further Leases Agreement” was prepared on behalf of RMBL between it and Mr Belperio. Mr Belperio signed it on 8 August 1995. At the time, RMBL was the first assignee of the rights of Sintoff under the leases. The recitals to the Further Leases Agreement state:
“A.The Lessor [a reference to RMBL]... is Mortgagee in possession of the land... which land is the subject of a series of Leases with the Grower [a reference to Mr Belperio] (the First Lease and the Second Lease), the combined terms of which Leases expire on June 30, 1997.”

In the face of the contemporaneous documents, it was contended on behalf of Equus that, nevertheless, I should find that Mr Belperio was untruthful when he said that he only invested for eight years and that Mr Moskowitz was mistaken in his evidence to that effect, having confused the 1989 scheme with the 1990 scheme. In this regard a number of submissions were put. I will not deal with all of them. In the main, they all come back to the form of the 1989 prospectus, which did not contain any reference to a short-term investment, the lack of any detailed financial projections in the 1989 prospectus or elsewhere as to the return which could be expected on a short-term investment in the 1989 scheme, attacks on the credit of Mr Belperio generally and reference to subsequent conduct of Mr Belperio which indicates a belief that he was still a “grower” after the expiration of the eight year term of the Belperio leases.

Although there is force in some of these submissions, and I am satisfied that Mr Belperio was an untruthful witness in many respects, I find that Seymour Softwoods did offer a short-term investment option in connection with the 1989 scheme. In my view, the evidence of both Mr Belperio and Mr Moskowitz that the “Trees and Money” brochure was issued by Seymour Softwoods in connection with the 1989 scheme, the reference in the “Only 8 Years!” document to there having been a limited short-term option available under the 1989 scheme and, in particular, the content of the statement in the 1989 tax return of Mr Belperio which was prepared by Mr Moskowitz, are decisive on this issue.

There is a further factual issue relating to the initial investment by Mr Belperio. When the Belperio leases were presented to him for signature, he made handwritten alterations to the rental escalation clauses. These alterations were initialled by Mr Belperio and Mr Moskowitz. It appears that, after this occurred, the executed Belperio leases were returned to Seymour Softwoods and were executed by Sintoff. The evidence does not permit a finding as to whether the alterations were brought to the attention of Seymour Softwoods or Sintoff at the time they were returned for execution. However, no case of unilateral mistake was sought to be made out. In these circumstances, the submission by Mr Moskowitz, on behalf of Mr Belperio, of the Belperio leases with handwritten alterations must be seen as an offer, or counter-offer made by Mr Belperio to Sintoff. That offer or counter-offer was accepted by Sintoff executing the Belperio leases containing the handwritten alterations.

Finally, in respect of Mr Belperio’s investment, it should be noted that he borrowed money from Equus in order to fund his participation in the 1989 scheme and that he claimed tax deductions for all payments made by him under the 1989 scheme.

(8) Conduct of Mr Belperio after investment

After he invested, Mr Belperio made payments of rental to Sintoff in or about June 1990, June 1991 and June 1992. Some amended invoices were issued, which had the effect of reducing the rental escalations. Nothing turns on this.

Notwithstanding that on 17 January 1992, Sintoff had assigned its rights under the leases to RMBL, Sintoff continued to issue invoices to Mr Belperio in 1992 and 1993. The amended invoice for rent due by 30 June 1993, in respect of the period ended 30 June 1994, is dated 12 May 1993. It was sent to Mr Belperio on 14 May 1993, under cover of a letter from Sintoff to growers offering a “one-off lease payment plan”.

(9) One-off lease payment plan

The letter from Sintoff offering growers the opportunity to participate in the one-off lease payment plan is on Sintoff letterhead. It purports to be issued by Stephen Gilmour, General Manager of Sintoff. It has been signed on his behalf by another Sintoff employee.

The offer to growers to participate in the one-off lease payment plan is set out below:

“14 May 1993
Dear Grower,
Please find enclosed your lease accounts for the financial year 1992-93. If you accept this offer and acknowledgment of the debt you will be entitled to a full tax deduction. Remember, this must be paid prior to 30 June 1993 to qualify for the full tax deduction.
Sintoff Pty. Ltd., the owners of the land you lease to grow the plantation, have offered for the first time a ‘One-Off Lease Payments Plan’. This should not be confused with a ‘pay the lease in advance plan which of course would not be fully tax deductible this year.
A ‘One-Off Lease Payments Plan’ means there will be no further lease payments required for the life of the plantation, until clear felling.
At present lease payments vary, depending on the contract life, from $150.00/Ha - $194.00/Ha, per annum. If we ignore the C.P.I. index and inflation, and multiply $150.00 by eight years, you would pay a minimum of $1200.00/Ha.
The ‘one-off lease payment plan’ has a payout figure of $650.00/Ha, including this years lease payment – fully deductible this year so in effect if you are paying 48 cents tax in the dollar, it is really costing approximately $312.00.
The full amount of $650.00/Ha includes this years lease cost, so assuming you owe $150.00 and you accept this offer – for an additional cost of $500.00/Ha now, you stand to save at lease [sic] $550.00 in lease payment over the life of the plantation, plus you [sic] tax break.
You will agree this is not only a substantial cost saving of many hundreds of dollars, but is a welcome tax deduction this financial year.
Should you agree to go ahead and finalise the lease under this plan, your rights as a tennant [sic] will not alter. The only change will be your annual commitment will be zero.
By completing the attached finance application form, and forwarding it with your cheque for $54.17/Ha payable to Berrema Finance being the first months payment, leaving a further 11 monthly payments to conclude the agreement. Your $650.00/Ha is now 100% fully tax deductible.
If you have any questions, please telephone (03) 894 2667, but certainly act now. There is no obligation to agree to this ‘One-Off Lease Payments Plan’. However it should be seen as an easy way to vary your commitment substantially, regarding your cash flow, a larger than usual tax deduction and a saving of hundreds of dollars over the next few years.
* Take a tax break
* Save yourself $$$
* This is a limited offer
* Demand will outstrip available finance
* Act now!!

Please complete the attached finance application form for your interest free loan, enclose your first months payment (payable to Berrema Finance), along with completed periodical payments authority to –

Berrema Finance Pty Ltd
PO Box 52
Nunawading Vic 3131

Yours faithfully
Sintoff Pty Ltd
[per (signature of employee)]
Stephen B Gilmour
General Manager
------------------
Finance Application
‘One-Off Lease Payments Plan’
Loan Amount required $........... ($650.00/Ha).
To be repayed in 12 equal monthly instalments of $54.17/Ha.

(First months payment $................. enclosed.)
I understand that no interest or fees will be charged and no security will be required to obtain this automatic loan to pay the lease.
The amount of the loan will be fully tax deductable this financial year.
Growers Name ...............................................
(Please Print)
Signed ..............................................................
Date ..................................................................
Return completed documents to –
Berrema Finance Pty Ltd
PO Box 52
Nunawading 3131”

Having regard to the assignment to RMBL of the rental due under the leases, the offer of the one-off lease payment plan by Sintoff was clearly improper. At the time of the offer, there were four directors of Sintoff – Carl Smith, Alan Lawry, Stephen Gilmour and his wife Colleen Gilmour. Mr Lawry gave evidence that he and Carl Smith expressly disapproved of Mr Gilmour’s plan to offer the one-off lease payment plan. Mr Lawry said that he was so against the offer that he resigned as a director of Sintoff, so as to dissociate himself from the offer. Whether or not this conduct was in accordance with Mr Lawry’s duties as a director of Sintoff is not in issue in this proceeding.

A question arises as to whether it was only possible to accept the one-off lease payment plan offer by borrowing the money from Berrema Finance, or whether the offer could be accepted by payment in full of the $650 per hectare. In my view, giving the offer a commercially sensible interpretation, it is clear that Sintoff was offering to accept $650 per hectare in full satisfaction of all of a grower’s obligations to pay rent and, in addition, was informing growers of an option to fund such a one-off payment by interest free finance from Berrema Finance.

Further questions arise as to the authority of Mr Gilmour to make the offer and as to whether, in the absence of such authority, Mr Belperio was nevertheless entitled to assume in his dealings with Sintoff that Mr Gilmour had such authority. In my view, it is obvious that Mr Gilmour had no actual authority to make the offer. This is established by the evidence of Mr Lawry combined with the fact that Sintoff had, at the time, no capacity to vary the terms of any of the leases. It had assigned all of its rights to receive rental to RMBL and, in addition, had expressly agreed with RMBL that it would not vary any of the leases, including Mr Belperio’s lease, without RMBL’s prior written consent.[11] I will consider whether Mr Belperio was entitled to assume that Mr Gilmour had authority later in these reasons.
[11]Clause 3.2 of deed of assignment of rental dated 17 January 1992 between Sintoff and RMBL.

(10) Mr Belperio and the one-off lease payment plan

Mr Belperio received the offer to participate in the one-off lease payment plan together with his amended invoice for rental due by 30 June 1993 in respect of the year ended 30 June 1994. He decided to accept it. There is no issue that he paid out of his own monies, rather than borrowing from Berrema Finance as contemplated in the offer, the sum of $650 per hectare leased by him under the Belperio leases, a total of $1,300.

Mr Belperio’s evidence about his acceptance of and payment pursuant to the one-off lease payment plan was contained in his witness statement, as follows:

“I decided to accept the One-Off Lease Payment Plan. I filled out an application to Berrema Finance Pty Ltd (‘Berrema’) which had arrived with the letter of offer from Sintoff, on 29 June 1993, and dated it that day. The next day, 30 June 1993 I attended the offices of Berrema, which was located at the same address as Sintoff (1 Walkers Road, Nunawading, Victoria), and I asked the person in attendance whether I could accept the offer by paying the whole amount of $1,300 without having first to borrow it from Berrema. I was told I could do this, and I paid the sum of $1,300 by cheque. I was given a receipt for this payment. I was asked to hand over the finance application form as this was required for Sintoff’s records. This I did, although I did not understand why it was necessary, as I had paid the full amount rather than borrowing it from Berrema.”

I accept this evidence. It follows that Mr Belperio accepted the offer purportedly made on behalf of Sintoff by Mr Gilmour. As I have said, this offer was made by Mr Gilmour without any actual authority, and I will consider later in these reasons whether Mr Belperio was entitled to assume authority on the part of Mr Gilmour.

Later in his witness statement, Mr Belperio referred to a letter written by him on 29 October 1997 to the Receiver, in response to a letter dated 23 October 1997 from the Receiver to Mr Belperio. In that letter, the Receiver had stated that Sintoff did not accept that the one-off lease payment plan was valid because:

“Mr Stephen Gilmour, the person purported to have made the offer to accept this pre-payment of leases, did not have the actual or ostensible authority of Sintoff to make the offer and this was known to Growers.”

In this letter, the Receiver made demand for further payments of rental from Mr Belperio, on the basis that he was bound to pay rental for the year ending 30 June 1998.

Against this background, Mr Belperio says that he recalled further aspects of his conversation with the receptionist when he made his payment pursuant to the one-off lease payment plan. In his letter, he stated:

“As stated in my original letter I am a grower who pre-paid my (very large) two hectare lease and did so as I did not wish to have a future liability in the lease payments. This I did in good faith, as I believed the offer to be fair and true at the time.
I certainly object to the claim that I as a grower was aware that Stephen Gilmour did not have the authority to make the offer. This, at least in my case, I can say is absolutely incorrect. It was also explained to me that Stephen Gilmour was at the time a director of the company and thus able to make the offer.”

In his witness statement, Mr Belperio says that this exchange of correspondence caused him to remember further aspects of his conversation with the receptionist when he made his payment of $1,300, as follows:

“It was explained to me by the receptionist that Mr Stephen Gilmour was a director of Sintoff and was accordingly able to make the offer. When I attended the offices of Berrima Finance to pay the sum of $1,300.00 I commented generally to the receptionist that this was a good offer that had been made by Stephen Gilmour to the growers. She stated in response or words to the effect, that ‘this is his company and he can make the offer.’”

I do not accept this evidence of Mr Belperio. It is consistent with much of Mr Belperio’s evidence, in which he obviously reconstructed, or told untruths, in order to bolster his case. The manner in which Mr Belperio gave evidence concerning this conversation was highly unsatisfactory. He said “I think” this and that. When asked to recall the conversation, he replied “Well, I can’t. It’s impossible for me to recite a conversation made in 1993.” When asked “How did the conversation go?” he replied “Look, I can't recall.”

If I am wrong, and the conversation between Mr Belperio and the receptionist was as described by Mr Belperio, the only explanation for the issue of the authority of Mr Gilmour being raised with the receptionist is that Mr Belperio thought that the offer was “too good to be true”. That would be consistent with Mr Belperio believing he was under a 25 year lease obligation. However, as I have found, Mr Belperio was under an eight year lease obligation only, and this must have been apparent to him at the time. Based on an eight year lease obligation, the one-off lease payment plan was only marginally beneficial to Mr Belperio. In this circumstance, there was no reason for him to have a discussion with the receptionist about the authority of Mr Gilmour to make the offer, or as to whether or not the offer was “a good offer”.

(1)The leases to Mr Antonopoulos and Mr Belperio were an integral part of the schemes in which they participated.
(2)The prospectus for each of the schemes in which Mr Antonopoulos and Mr Belperio invested stated that there was a risk that the leases may constitute a subdivision under the Act and, if they did, that the leases may be invalid. In order to minimise this risk, participation in the scheme would be by way of separate consecutive leases each being under five years duration.
(3)Each of Mr Antonopoulos and Mr Belperio signed the necessary documents to become a participant in the scheme in which he participated and thereby became a “grower”.
(4)As it was obliged to do under the Works and Services Contract entered into by each of Mr Antonopoulos and Mr Belperio, Seymour Softwoods, with the consent of its related company Sintoff, cleared the land and changed it from grazing land to land suitable for a pine tree plantation.
(5)Pursuant to the leases entered into by them, each of Mr Antonopoulos and Mr Belperio was given quiet and exclusive possession of the land leased by him and permitted to commence afforestation upon that land under the scheme in which he participated.
(6)Each of Mr Antonopoulos and Mr Belperio paid rent under the leases signed by him.
(7)Each of Mr Antonopoulos and Mr Belperio claimed tax deductions in connection with his participation in the scheme in which he invested.
(8)In these circumstances, there was an obvious intention as between Sintoff and each of Mr Antonopoulos and Mr Belperio to have a relationship of lessor and lessee so as to enable Mr Antonopoulos and Mr Belperio to participate in the scheme in which he invested.

The plaintiffs allege that each of Mr Antonopoulos and Mr Belperio has, by alleging that the leases to him are unenforceable, unconscientiously resiled from the assumption. Again, the facts relied upon are not in dispute. In summary, it is alleged on behalf of the plaintiffs that it is unconscientious for each of Mr Antonopoulos and Mr Belperio to resile from the assumption because:

(1)Sintoff gave him quiet possession of the land leased by him, thus enabling him to conduct afforestation operations on that land in accordance with the scheme in which he invested.
(2)He enjoyed the advantages of the scheme in which he invested when it suited him and only stopped paying rent when Seymour Softwoods was dismissed as manager and attempts to salvage the scheme in which he invested failed.
(3)Whilst he was paying rent, he treated the leases to him as valid and claimed tax deductions as a result.
(4)Having regard to his afforestation activities on the land leased by him, it is not possible to restore him and Sintoff to their respective positions before the leases were entered into.
(5)Sintoff entered into financial arrangements in connection with the scheme in which he invested, including guaranteeing the obligations of Seymour Softwoods and providing security over the land to support that guarantee.

In response to the allegations of the plaintiffs that they are entitled to rely upon the subdivision estoppel, each of Mr Antonopoulos and Mr Belperio has pleaded that such an estoppel cannot stand in the face of the provisions of the Act which render the leases executed by him unenforceable by reason of the operation of the Act.

(2) Is the subdivision estoppel precluded by the Act?

The parties agreed that the governing statement of general principle is that contained in the judgment of the Privy Council in Kok Hoong v Leong Cheong Kweng Mines Ltd.[44] The judgment of the Privy Council was delivered by Viscount Radcliffe. The case involved a claim for arrears of rent under an agreement to let machinery on hire. The defendant contended that the agreement for hire was really a money lending transaction or a bill of sale, which was void and unenforceable under the applicable money lending legislation. The appellant pleaded an estoppel which came to be determined as a preliminary point of law.
[44][1964] AC 993.

Viscount Radcliffe described the issue for determination in the following terms:[45]

“The respondent has invoked in support of its defence a principle which appears in our law in many forms, that a party cannot set up an estoppel in the face of a statute. Thus a corporation upon which there is imposed a statutory duty to carry out certain acts in the interest of the public cannot preclude itself by estoppel in pais from performing its duty and asserting legal rights accordingly... Similarly, there is, in most cases, no estoppel against a defendant who wishes to set up the statutory invalidity of some contract or transaction upon which he is being sued, despite the fact that by conduct or other means he would otherwise be bound by estoppel.
...
It does not appear to their Lordships that the principle invoked is confined to transactions that have been made the subject of legislation or that, where legislation is in question, the bare prescription that a transaction is to be void or unenforceable is sufficient by itself to justify the principle’s application. Thus, on the one hand, the common law may itself prohibit the enforcement of certain contracts... On the other hand, there are statutes which, though declaring transactions to be unenforceable or void, are nevertheless not essentially prohibitory and so do not preclude estoppels. One example of these is the Statute of Frauds (see Humphries v Humphries, in which it was no doubt considered that following Leroux v Brown, the statute ought to be treated as regulating procedure, not as striking at essential validity...” (Citations omitted.)

[45][1964] AC 993 at 1015-6.

It can thus be seen that not all statutes which declare a transaction to be unenforceable or void will operate so as to preclude the establishment of an estoppel against a party seeking to rely upon the statutory invalidity. The question is one of statutory construction. Based on the statement of Viscount Radcliffe quoted above, it would appear that the question of statutory construction is whether the invalidating provision is “essentially prohibitory” or not. However, the test is not so straightforward. Viscount Radcliffe continued:[46]

“It has been said that the question whether an estoppel is to be allowed or not depends on whether the enactment or rule of law relied upon is imposed in the public interest or on grounds of ‘general public policy’ (see In re A Bankruptcy Notice, per Atkin LJ). But a principle as widely stated as this might prove to be rather an elusive guide, since there is no statute, at least public general statute, for which this claim might not be made. In their Lordships’ opinion a more direct test to apply in any case such as the present, where the laws of moneylending or monetary security are involved, is to ask whether the law that confronts the estoppel can be seen to represent a social policy to which the court must give effect in the interests of the public generally or some section of the public, despite any rules of evidence as between themselves that the parties may have created by their conduct or otherwise. Thus the laws of gaming or usury (Carter v James) override an estoppel: so do the provisions of the Rent Restriction Acts with regard to orders for possession of controlled tenancies (Welch v Nagy).
General social policy does from time to time require the denial of legal validity to certain transactions by certain persons. This may be for their own protection, as in the case of infant or other category of persons enjoying what is to some extent a protected status, or for the protection of others who may come to be engaged in dealings with them, as, for instance, the creditors of a bankrupt. In all such cases there is no room for application of another general and familiar principle of the law that a man may, if he wishes, disclaim a statutory provision enacted for his benefit, for what is for a man’s benefit and what is for his protection are not synonymous terms. Nor is it open to the court to give its sanction to departures from any law that reflects such a policy, even though the party concerned has himself behaved in such a way as would otherwise tie his hands. See In re Stapleford Colliery Co., per Bacon VC” (Citations omitted.) (Emphasis added.)

[46][1964] AC 993 at 1016-7.

Viscount Radcliffe applied the emphasised statement of principle to the facts before him in the following way:[47]

“These principles, as their Lordships understand them, would point very directly to the conclusion that there can be no estoppel in face of the Moneylenders Ordinance, since the provisions on which the respondent seeks to rely render him a ‘protected person’ for this purpose, nor any estoppel in the face of the Bills of Sale Ordinance, the provisions of which, whatever other purposes they may serve, are at least intended for the protection of other creditors who may have dealings with the borrower”. (Emphasis added.)

[47][1964] AC 993 at 1017.

In my opinion, the provisions of the Act which render the leases unenforceable do represent a social policy to which the Court must give effect in the interests of the public generally or some section of the public. At the very least, the provisions of Division 2 of Part 12 of the Act are, in my view, intended for the protection of a section of the public constituted by others interested in or affected by an unauthorised subdivision.

The social policy underlying the prohibition upon a subdivision, otherwise than in accordance with the Act, is apparent from a number of the provisions contained in Division 2. For example:

(1)No such subdivision is permissible until the relevant town or shire clerk has certified that the subdivision complies with a number of other Acts of the New South Wales Parliament.[48]
[48]Section 327(2).
(2)No subdivision is permitted until the relevant council has approved it, subject to such conditions as the council may impose.[49]
[49]Section 327(3), s. 331.
(3)The council must disapprove an application for a subdivision if the carrying out of the subdivision would result in a contravention of the Environmental Planning and Assessment Act 1979 (NSW).[50]
[50]Section 331(7).
(4)In respect of any application for approval of a subdivision, the relevant council must take into consideration a number of specified matters.[51] These matters include:
[51]Section 331(1A).
“(a) the size and shape of each separate parcel;
(b) the length of road frontage of each separate parcel;
(c)the situation and planning of the separate parcels in relation to public convenience, present and prospective;
(d)the existing and proposed means of access to each separate parcel;

(e) whether the district is or probably will be a residential district;
(f)the drainage of the land, the drains proposed to be constructed and the drainage reserves and drainage easements to be provided;
(g)whether the land has been declared unsuitable for building upon under the provisions of the Public Health Act 1902;
(h)whether the land is subject to flooding or tidal inundation;
(i)whether the land is or probably will be subject to subsidence or slip;
(j)the amount of land to be provided as a public reserve out of the land to be subdivided; and
(k)whether any trees on the land should be preserved.”

Authorities subsequent to Kok Hoong have consistently approved of the statements of principle by Viscount Radcliffe and applied them. These authorities include Barilla v James[52], The Owners – Strata Plan No 51487 v Broadsand Pty Ltd[53], Considine v Citicorp Australia Ltd[54], Beckford Nominees Pty Ltd v Shell Co of Australia Ltd[55], Keen v Holland[56] and Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd.[57]
[52](1964) 81 WN (Pt 1457 at 464, a decision of the Full Court of the Supreme Court of New South Wales, by majority – Walsh and Wallace JJ, Asprey J dissenting).
[53][2002] NSWSC 770 at [19]-[22], [36].
[54][1981] 1 NSWLR 657 at 662.
[55](1987) 73 ALR 373 at 378-9.
[56][1984] 1 WLR 251 at 261.
[57][2003] NSWCA 305 at [51].

It was submitted on behalf of the plaintiffs that, notwithstanding the continued applicability of the principles stated by Viscount Radcliffe in Kok Hoong, there was indistinguishable authority in the Court of Appeal in New South Wales which established that an estoppel could be made out in the face of a contravention of ss. 323(1) and 327(2) of the Act. Reliance was placed upon the decision of Powell J in Starr v Barbaro[58] which was affirmed by the Court of Appeal in Silovi Pty Ltd v Barbaro.[59] It was submitted that the effect of these decisions is that, provided the Court can give effect to the estoppel by framing its orders so that there is no breach of the Act, an estoppel can stand in the face of a breach of ss. 323(1) and 327(2) of the Act.
[58](1986) NSW ConvR 55-315.
[59](1988) 13 NSWLR 466.

The case involved the lease of a portion of land in New South Wales for a period of 10 years, in circumstances where no application was made for approval or registration of a plan of subdivision. Mr and Mrs Barbaro (the lessors) were the owners of the land in question. Mr Starr and Mrs Dixon (the lessees) occupied land immediately adjoining the land owned by the lessors. Silovi Pty Ltd (Silovi) occupied land adjoining the land occupied by the lessees. Both the lessees and Silovi conducted a plant nursery business on the land occupied by them.

An agreement was reached between the lessors and the lessees to lease a portion of the land for a period of 10 years. The express purpose of the lease was to enable the lessees to cultivate a slow growing crop of palm trees on the portion of the land to be leased.

A lease agreement was executed, providing for a lease for a 10 year period from 1 September 1982. The lessees took occupation of the portion of the land which was leased to them and incurred considerable expenditure clearing it, installing an irrigation system and planting the palm trees.

Silovi was aware of the lease and of the fact that the lessees had expended a considerable amount in reliance upon the lease.

When the lease was lodged for registration in 1983, the Registrar-General informed the solicitor for the lessors that the lease constituted a subdivision within the meaning of the Act and that it was therefore necessary that a plan of subdivision, bearing council approval, be lodged for registration. In response, the solicitor for the lessors informed the lessees of the position and said that the lessors did not wish to lodge a plan of subdivision for approval or registration.

In 1984, the lessors sold the land to Silovi, subject to the lease. After exchange of contracts, Silovi stated that it did not intend to be bound by the lease. The lessees thereupon commenced proceedings seeking to protect their rights under the lease. They sought a series of declarations, including a declaration that the lease was valid and enforceable and a declaration that their interest under the lease took priority over any interest of Silovi as purchaser of the land. Later, the lessees sought an alternative declaration, to the effect that the lessors and Silovi were estopped from denying that the lessees were entitled to occupy the portion of the land which had been leased to them.

After the commencement of proceedings, but before trial, the lessors sought to obtain approval and registration of the necessary subdivision. That application was unsuccessful and was the subject of an appeal to the Land Environment Court of New South Wales at the time of the hearing before Powell J.

Powell J decided that it would be unconscionable for the lessors to deny to the lessees the expectation which had been created by the execution of the lease and, on the face of which, the lessees had expended considerable sums of money. Accordingly, he granted relief based upon equitable or proprietary estoppel. However, Powell J recognised that he could not, by reason of the provisions of the Act, declare that the lease was valid or order the execution of a fresh lease, on the same terms as the lease, for the balance of the period of the lease. This was because the unexpired term of the lease exceeded five years. Accordingly, Powell J fashioned a remedy which did not contravene the prohibitions in the Act against unregistered subdivisions. The result was a declaration that the lessees were entitled to a licence to enter upon the leased land upon the same terms as the unenforceable lease.

Silovi appealed to the Court of Appeal. The appeal was dismissed. Priestley JA (with whom Hope and McHugh JJA agreed) specifically referred to the issue which I must decide, in the following terms:[60]

“Silovi’s primary argument was that the Local Government Act provisions precluded the coming into existence of any equity such as that found by Powell J; consequently his orders could not be made in face of the statute.
Two questions arise from this submission: does the law, in light of the words of the Local Government Act, s 327AA, prevent an equity of the kind asserted by the plaintiffs from coming into existence between them and the owners; and, if the equity can properly be found to exist, can the Court make an order of the kind made by Powell J?”

[60]Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 473.

Priestly JA then considered whether the Act rendered the lease illegal or void. Priestly JA concluded that the Act did not render the lease illegal or void, only that it was deemed to be subject to council approval.[61] This is consistent with my reasoning in this case.
[61]Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 473-4.

Having concluded that the Act did not render the lease illegal or void, but only subject to council approval, Priestley JA continued:[62]

“Once that step is taken there seems to me no difficulty caused by the second question arising under the submission. If the equities in the case otherwise justify orders of the kind made by Powell J, there can be no objection based on s 327 or s 327AA to orders substantially permitting the satisfaction of the plaintiffs’ equity, if those orders are so framed that there is no breach of the sections. This view is exemplified by an illustration used in argument in this Court which seems to me to be correct, namely that the owners could have had share farmers on part of their land, without any contravention of the Local Government Act sections. Many contractual arrangements can be envisaged clearly falling short of any breach of the sections which would enable persons to carry out on land operations such as those intended by the parties in the present case. An example of the law giving effect to an idea of this kind appears in the Privy Council decision in Maharaj v Chand [1986] AC 898. Powell J’s orders in the present case do not in my opinion permit a situation in breach of s 327, as Silovi argued. The effect of the orders is not to render the relevant parts of the land immediately available for separate occupation (which because of the definition of ‘subdivision’ already referred to might well be contrary to the section) but to ensure to the plaintiffs access to the land and their Cocos palms which does not preclude the owners from occupation of the land, and is not inconsistent with the usual idea of licences, that is, permitting the use of land by the licensee simultaneously with the continuing occupation of the owner.” (Emphasis added.)

[62]Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 at 474.

In my opinion, the decision in Silovi is distinguishable from the present case. In the first place, the orders made in Silovi did not give effect to the lease in issue. The orders permitted the plaintiffs to have access to the land, for the purposes of tending and harvesting the palm plantation, simultaneously with the continuing occupation of the land by Silovi as owner of the land. This was inconsistent with a lease under which the plaintiffs would have enjoyed a right to separate occupation of the land, exclusive of any right of Silovi to occupy it.

Secondly, in Silovi it was the lessees who were seeking to enforce their rights as lessees and to continue in occupation of the land at issue. The lessees had, upon the faith of the lease, entered into possession of the land and spent considerable sums upon it in planting a slow-growing crop of palm trees, which they hoped to harvest upon maturity for financial gain. A belated application by the lessors for approval and registration of a plan of subdivision was refused. In these circumstances, the orders made by Powell J were to give effect to a different kind of equity than the estoppel relied upon by Equus in this case. Silovi involved the granting of relief to a lessee based upon proprietary estoppel.

By contrast, the estoppel relied upon by Equus in this case is an estoppel by convention, based on an alleged common assumption by the parties to treat the leases as enforceable notwithstanding the effect of the Act. There is no issue in this case as to the existence of a proprietary estoppel. Mr Antonopoulos and Mr Belperio are not seeking to continue in occupation of the land. Indeed, the leases to which they are parties have been terminated by Sintoff and the land has been re-leased to a third party. This conduct on the part of Sintoff occurred prior to it availing itself of the opportunity to seek to have a plan of subdivision approved and registered so as to render the leases enforceable.

Further, there is no consideration in Silovi of the principles concerning estoppel in the face of a statute as stated by Viscount Radcliffe in Kok Hoong. Not only are these principles not referred to by Priestley JA in his judgment, but the report shows that Kok Hoong and other relevant authorities concerning estoppel in the face of a statute were not cited in argument or submissions to the Court of Appeal. In this regard, I note that a differently constituted Court of Appeal in New South Wales has recently approved the principles stated by Viscount Radcliffe in Kok Hoong and noted that Kok Hoong and other relevant authorities applying those principles were not cited to the Court of Appeal in Silovi. In Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd[63], Young CJ in Equity referred with approval to the principles stated by Viscount Radcliffe in Kok Hoong,[64] and continued:[65]
[63][2003] NSWCA 305.
[64][2003] NSWCA 305 at [51].
[65][2003] NSWCA 305 at [52]-[56].

“However, in Silovi Pty Ltd v Barbaro, this Court held that the then provisions of the Local Government Act 1919 dealing with illegal subdivisions did not prevent equitable estoppels coming into operation. The report shows that the cases on no estoppel in the face of a statute were not cited to the Court nor were they referred to in any of the judgments.
With respect, it is not completely clear whether Silovi’s Case was decided on the basis that an estoppel lies in the face of a statute where the orders sought do not on their face breach the statute, or whether the estoppel raised was not one made ‘in the face’ of a statute. It would not, however, seem to be of any great relevance in the instant case.
The English Court of Appeal in Shah v Shah approved a statement of Beldam LJ in Yaxley v Gotts that:
‘the general principle that a party cannot rely on an estoppel in the face of a statute depends upon the nature of the enactment, the purpose of the provision and the social policy behind it.’

It would seem to me almost unarguable that the legislature has made it as plain as plain can be that there is not to be recovery of the remuneration in the instant case and that no estoppel in the face of the statute will lie.
Although in Silovi the estoppel was an equitable estoppel, it does not seem to me that this was a distinguishing factor and that there can be neither a legal nor an equitable estoppel in the face of a statute if that runs counter to the social policy of the statute.” (Citations omitted.)

I agree with the analysis of Young CJ as to the uncertainty surrounding the basis of the decision in Silovi. It is unclear whether the principles stated in Kok Hoong were considered by the Court of Appeal in Silovi. However, in my view, it is clear that the equitable remedy fashioned by the Court in Silovi is not open in this case. The estoppel relied upon by Equus in this case is an estoppel by convention based on a common assumption to treat the leases as enforceable notwithstanding the requirements under the Act to subdivide the land. Such an estoppel is, in my view, inconsistent with the social policy underlying the provisions of the Act under consideration.

If the facts were different, and it was Mr Antonopoulos or Mr Belperio seeking to invoke a proprietary estoppel to defeat reliance by Sintoff on the subdivision requirements of the Act, it may be that proprietary estoppel would be available, as in Silovi. In this regard, I note the decision of the England Court of Appeal in Yaxley v Gotts[66]. In that case, the Court was of the view that, although estoppel by convention was not available, different considerations may arise when considering other equitable remedies such as proprietary estoppel or constructive trust.[67] This reasoning is consistent with the approach adopted in Silovi. However, it is unnecessary for me to consider this matter further. This is not such a case.
[66][2000] Ch 162.
[67][2000] Ch 162 at 174-6 per Robert Walker LJ; 182 per Clarke LJ.

Accordingly, I find that the subdivision estoppel, even if established on the facts of the case and the applicable authorities, cannot have the effect of preventing Mr Antonopoulos and Mr Belperio from contending that the leases signed by them are unenforceable by reason of the provisions of s. 327(3) of the Act.

It is accordingly, not necessary for me to consider whether the subdivision estoppel has been made out on the undisputed facts referred to above.

One-off Lease Payment Plan Defence

Having regard to my findings that the leases are void for uncertainty and, if not void, unenforceable by reason of failure to comply with the subdivision requirements of the Act, it is unnecessary for me to consider the one-off lease payment plan defence raised by Mr Belperio. However, as the matter was fully argued and as the Belperio proceeding can be loosely described as a test case on this issue, I will consider it briefly.

I have found that Mr Belperio accepted the one-off lease payment plan offer. The question remains as to whether the one-off lease payment plan offer, and Mr Belperio’s acceptance of it, is binding upon Equus as assignee of the rights of Sintoff under the leases.

As I have said in the introduction to this judgment, in reply to the one-off lease payment plan defence, Equus:

(1)denies that Mr Gilmour was authorised by Sintoff to offer the one-off lease payment plan to growers;
(2)contends that, even if Mr Gilmour was authorised, it is not bound by the one-off lease payment plan because it was an arrangement entered into between Sintoff as mortgagor and Mr Belperio as lessee without the consent of Equus as mortgagee.

(1) Was the one-off lease payment plan authorised by Sintoff?

I have already found that Mr Gilmour did not have actual authority to make the one-off lease payment plan offer on behalf of Sintoff. It was not pleaded or submitted on behalf of Mr Belperio that Mr Gilmour had ostensible authority to make the offer.[68]
[68]This was doubtless because the only representation as to the authority of Mr Gilmour to make the offer was made by him, or by the unknown person who signed the letter constituting the offer on his behalf. There was no evidence that anyone with authority of Sintoff held Mr Gilmour out as having authority to make the offer. See Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72.

In response to the allegation by Equus that Gilmour was not authorised to make the offer on behalf of Sintoff, it was alleged on behalf of Mr Belperio that he was entitled to rely upon the assumptions under s. 164 of the Corporations Law or the assumptions under ss. 128 and 129 of the Corporations Act 2001 (Cth). In submissions, reliance was placed upon s. 164 of the Corporations Law. That was the correct approach. Where a person had dealings with a company before 1 July 1998, the relevant law to apply is s. 164 of the Corporations Law.[69]
[69]Ford’s Principles of Corporations Law, para [13.280] at 13,125.

The assumptions which a person dealing with a company prior to 1 July 1998 were permitted to make were assumptions in addition to the general law. However, on behalf of Mr Belperio, reliance was placed solely upon the provisions of s. 164 of the Corporations Law in the event that I found, as I have, that Mr Gilmour did not have actual authority to make the one-off lease payment plan offer.

Section 164 of the Corporations Law provided:

“(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.
...
(3)The assumptions that a person is, by virtue of sub-section (1)... entitled to make in relation to dealings with a Company are:
(a)...
(b)that a person who appears from returns lodged... to be a director of the Company has been duly appointed and has authority to exercise the powers and perform the duties customarily exercised or performed by a director... of a company carrying on a business of the kind carried on by the company;
(c)that a person who is held out by the Company to be an officer or agent of the Company has been duly appointed and has authority to exercise the powers and perform the duties customarily exercised or performed by an officer of the kind concerned;

(4)Despite sub-section (1) a person is not entitled to make an assumption referred to in sub-section (3) in relation to dealings with a Company if:
(a)the person has actual knowledge that the matter that but for this sub-section, the person would be entitled to assume is not correct; or
(b)the person’s connection or relationship with the Company is such that the person ought to know that the matter that, but for this sub-section, the person would be entitled to assume is not correct...” (Emphasis added.)

There is no dispute that Mr Gilmour was a director of Sintoff at the time he made the one-off lease payment plan offer. As to Mr Belperio’s knowledge that Mr Gilmour was a director, it was submitted that I should accept Mr Belperio’s evidence that he was informed of this during the conversation with the receptionist when he paid the $1,300. As I have said, I reject this evidence. However, as will appear, this does not matter.[70] As to the position of Mr Gilmour as general manager of Sintoff, this was asserted in the letter making the one-off lease payment plan offer. I infer that Mr Gilmour authorised the letter, even though he did not sign it, and that he made the representation that he was general manager of Sintoff.[71]
[70]As to whether it is necessary for the person having dealings with the company to believe that the relevant person was a director, or for there to have been some holding out of that person as a director, see the discussion in Ford’s Principles of Corporation Law, para [13.380] at 13,148.
[71]As to the question whether the holding out referred to in sub-section 164(3)(c) of the Corporations Law can be by the officer or agent concerned, see Ford’s Principles of Corporations Law, para [13.410] at 13,150.

However, even if Mr Belperio knew that Mr Gilmour was a director, and Mr Gilmour was held out by Sintoff as its general manager, I am of the view that this does not assist Mr Belperio in overcoming Mr Gilmour’s lack of actual authority. The mere fact that a person is a director of a company does not establish authority on the part of the director to commit the company to contracts.[72] Nor, in my opinion, does the mere fact that a person occupies the position of general manager of a company necessarily establish that the person has authority to commit the company to contracts.
[72]Northside Developments Pty Ltd v Registrar-General (1990) 170 CLR 146 at 205 per Dawson J; Brick and Pipe Industries Ltd v Occidental Life Nominees Pty Ltd [1992] 2 VR 279 at 361.

In my view, in order for Mr Belperio to rely upon the assumptions contained in paragraphs 164(3)(b) and (c) of the Corporations Law, it is not sufficient to establish that Mr Gilmour was a director, or a director and general manager, of Sintoff at the time he authorised the making of the one-off lease payment plan offer. In order to attract the statutory assumption, it is necessary to prove that the making of such an offer was either:

“(1)one of ‘the duties customarily exercised or performed by a director... of a company carrying on a business of the kind carried on by the company’; or
(2)one of the ‘duties customarily exercised or performed by an officer of the kind concerned’.”

There was no evidence as to the duties customarily exercised or performed by a director of a company such as Sintoff. Nor was there any evidence as to the duties customarily exercised or performed by a general manager of a company. In the absence of such evidence, I would not be prepared to find that the mere fact that a person holds the position of director and general manager is, of itself, sufficient to establish that the person customarily exercises or performs the duty of varying contracts entered into by the company to a substantial extent, as proposed by the one-off lease payment plan offer.

I find that Mr Belperio has not made out a case to rely upon the assumptions contained in s. 164(3)(b) and (c) of the Corporations Law. Accordingly, as I have found that Mr Gilmour did not have actual authority to make the one-off lease payment plan offer, no contract came into existence as a result of the payment by Mr Belperio of $1,300 pursuant to that offer. The payment made by Mr Belperio is to be treated as a payment made in respect of his rental obligation under the Belperio leases.[73]
[73]As to the monies paid by both Mr Antonopoulos and Mr Belperio under the leases, these were the subject of counterclaim for restitution. However, in the course of final submissions, these claims were abandoned.

(2)If the one-off lease payment plan was authorised by Sintoff, is Equus bound by it?

It is accordingly unnecessary for me to consider a number of further issues which were the subject of submissions concerning the one-off lease payment plan. In particular, it is not necessary for me to consider whether, if the making of the one-off lease payment plan offer resulted in a variation to the Belperio lease as between Mr Belperio and Sintoff, Equus was bound by any such variation. Nor is it necessary for me to consider whether RMBL ratified any such variation and, if so, whether that ratification is binding upon Equus.

Summary of Conclusions

In summary, I have found that the Antonopoulos leases and the Belperio leases are unenforceable on two grounds. First, they are void for uncertainty because neither the Antonopoulos land nor the Belperio land was described in those leases with sufficient certainty. Secondly, the leases are unenforceable because they constitute a subdivision entered into in contravention of ss. 323(1) and 327(2) of the Act. As to the contentions on the part of the plaintiffs that Mr Antonopoulos and Mr Belperio are estopped from relying upon the uncertainty defence or the subdivision defence, I have found that neither estoppel operates to prevent the defences being relied upon. The uncertainty estoppel has not be established. Even if the subdivision estoppel could be established, that estoppel could not stand in the face of the subdivision provisions of the Act.

Accordingly, the plaintiffs’ claims must fail. I will hear the parties as to the form of orders and as to costs.

ANNEXURE 1
SCHEDULE 2 (FOR THE 1ST LEASE)

"BIRMAROO", PADDY^'S RIVER, TUMBARUMBA being Lot 1 in Deposited Plan 706304 at Birmaroo in the Shire of Tumbarumba Parish of Beaumont County of Selwyn contained in Certificate of Title Identifier 1/706304 comprising 40.48ha. Lot 2, in Deposited Plan 706304 at Birmaroo in the Shire of Tumbarumba Parish of Beaumont County of Selwyn contained in Certificate of Title Identifier 2/706304
comprising 40.47ha. Lot 3 in Deposited
Plan 706304 at Birmaroo in the Shire of Tumbarumba Parish of Beaumont County of Selwyn contained in Certificate of Title Identifier 3/706304 comprising 43.76ha. Lot 4 in Deposited Plan 706304 at Birmaroo in the Shire of Tumbarumba Parish of Beaumont County of Selwyn contained in Certificate of Title Identifier 4/706304
comprising 46.58ha. Lot 5 in Deposited
Plan 706304 at Birmaroo in the Shire of Tumbarumba Parish of Beaumont County of Selwyn contained in Certificate of Title Identifier 5/706304 comprising 41.57ha. Lot 6 in Deposited Plan 706304 at Birmaroo in the Shire of Tumbarumba Parish of Beaumont County of Selwyn contained in Certificate of Title Identifier 6/706304
comprising 40.47ha. Lot 13 in Deposited
Plan 711114 at Birmaroo in the Shire of Tumbarumba Parish of Beaumont County of Selwyn contained in Certificate of Title Identifier 13/711114 comprising 64.52ha. Lot 14 in Deposited Plan 711114 at Birmaroo in the Shire of Tumbarumba Parish of Beaumont County of Selwyn contained in Certificate of Title Identifier 14/711114
comprising 40.5ha. Lot 15 in Deposited
Plan 711114 at Birmaroo in the Shire of Tumbarumba Parish of Beaumont County of Selwyn contained in Certificate of Title Identifier 15/711114 comprising 40.43ha. Lot 16 in Deposited Plan 711114 at Birmaroo in the Shire of Tumbarumba Parish of Beaumont County of Selwyn contained in Certificate of Title Identifier 16/711114
comprising 40.32ha. Lot 17 in Deposited
Plan 711114 at Birmaroo in the Shire of Tumbarumba Parish of Beaumont County of Selwyn contained. in the Certificate of
Title Identifier 17/711114 comprising 333ha. Portion 14 Parish of Beaumont County of Selwyn comprising 585.225ha.

1988 (1989) $	Future $
Thinning years 3	100	100
Thinning years 7-8	350	600
Thinning years 12-13	2,010	5,711
Thinning years 19-20	1,980	9,228
Clearfell years 25	12,160	83,277
Total Returns	98,916”

[2006] VSC 14

3 February 2006