Fingal Pastoral Pty Ltd v Page Seager Lawyers

[2019] TASSC 48

[2019]TASSC 48

COURT:  SUPREME COURT OF TASMANIA

CITATION:                Fingal Pastoral Pty Ltd v Page Seager Lawyers [2019] TASSC 48

PARTIES:  FINGAL PASTORAL PTY LTD
  v
  PAGE SEAGER LAWYERS (A FIRM)

FILE NO:  922/2014
DELIVERED ON:  19 December 2019
DELIVERED AT:  Launceston
HEARING DATES:  19 November 2018 – 6, 13 and 14 December 2018
JUDGMENT OF:  Pearce J

CATCHWORDS:

Professions and Trades – Lawyers – Duties and liabilities – Solicitor and client – Negligence – In relation to property transactions – Advice about forestry agreements – Claimed breach beyond retainer – Liability not established.

Doolan v Renkon Pty Ltd [2011] TASFC 4, 21 Tas R 156, distinguished.
Aust Dig Professions and Trades [1175]

Torts – Negligence – Essentials of action for negligence – Damage – Causation – Generally – Claimed breach not causative of loss.

Civil Liability Act 2002 (Tas), s 13.
Aust Dig Torts [60]

Trade and Commerce – Competition, fair trading and consumer protection legislation – Consumer protection – Misleading or deceptive conduct or false representations – Misleading or deceptive conduct generally – Misleading or deceptive: what constitutes – Representations as to future matters.

Fair Trading Act 1990 (Tas), ss 3, 11 and 14.
Aust Dig Trade and Commerce [1060]

Trade and Commerce – Competition, fair trading and consumer protection legislation – Enforcement and remedies – Actions for damages – Causation – Alleged contravention not causative of loss.

Fair Trading Act 1990 (Tas), s 37.
Aust Dig Trade and Commerce [1133]

REPRESENTATION:

Counsel:
             Plaintiff:  M G Roberts SC and K A Loxley
             Defendant:  S B McElwaine SC and K Cuthbertson
Solicitors:
             Plaintiff:  Shields Heritage
             Defendant:  Shaun McElwaine + Associates

Judgment Number:  [2019]TASSC 48
Number of paragraphs:  152

Serial No 48/2019

File No 922/2014

FINGAL PASTORAL PTY LTD (ACN 009 478 817)
v PAGE SEAGER LAWYERS (A FIRM) (ABN 37 078 672 294)

REASONS FOR JUDGMENT  PEARCE J

19 December 2019

1. The plaintiff, Fingal Pastoral Pty Ltd (FPPL), claims damages from the defendant, Page Seager, a firm of solicitors in Hobart, for breach of contract, negligence and misleading or deceptive conduct in the provision of legal advice. The advice in question concerns forestry rights agreements entered into by FPPL with Gunns Plantations Pty Ltd (Gunns Plantations) and Wesley Vale Engineering Pty Ltd (Wesley Vale Engineering) in 2009 to establish forestry plantations on FPPL's property at Mathinna Road, Fingal, called "Malahide".

Claim summary

1. In October 2008, David Shelley, one of the partners of Page Seager, was engaged by FPPL to provide advice about the proposed agreements. The agreements were executed by FPPL and are respectively dated 12 and 13 January 2009. The forestry rights granted by the agreements gave the companies the right to establish, maintain and harvest a eucalypt plantation on the land subject to the agreements for the term of 15 years from 1 January 2009 in return for payment of an annual fee of $400 per hectare adjustable annually for CPI. Ultimately, a total of 1682.4 hectares of FPPL's grazing land and 36.7 hectares of native forest was allocated for plantation, and trees were planted.

2. Almost four years later, on 25 September 2012 Gunns Plantations and Wesley Vale Engineering appointed voluntary administrators. On 5 March 2013 both companies went into liquidation. The forestry rights agreement with Wesley Vale Engineering was terminated by FPPL in July 2014. The agreement with Gunns Plantations was terminated in March 2016. During 2015 FPPL removed the young trees from 382.3 hectares of the plantation land and subsequently returned the land to pasture. FPPL resolved to retain the plantation trees on the balance 1,300.1 hectares, which will be grown to maturity before harvesting in 2025. It is FPPL's present intention to remove the stumps of the harvested trees and return the land to pasture for grazing.

3. FPPL claims that, were it not for the impugned advice, it would not have entered into the forestry rights agreements. It claims an entitlement to damages exceeding $6.5m which represents, in general terms, the difference, calculated at present value, between the position the company will be in after all of the trees are harvested and the property returned to grazing, and the position it would have been in had the agreements not been entered into.

4. For the reasons which follow, I am not satisfied that the causes of action pleaded by the plaintiff are made out. The action will be dismissed.

Malahide        

1. The current managing director of FPPL is Richard Talbot. Malahide has been held by interests associated with the Talbot family since it was settled on his distant ancestor, the Honourable William Talbot, in 1824. Ownership of the livestock, plant and equipment on Malahide was transferred to FPPL in 1954 by the then owner, Milo Talbot. In 1965, the land was also transferred. At that time, and now, FPPL had 1,000 issued shares, all of which are held by Agricultural Holdings (Jersey) Pty Ltd, a company incorporated in Jersey in the Channel Islands. The shares of FPPL are recorded on the register of the Australian Securities and Investments Commission as beneficially owned by Agricultural Holdings (Jersey) Pty Ltd. The memorandum and articles of association of FPPL are dated 22 June 1954. The Articles are in common form and regulate the shares and shareholding, membership, and the holding of and voting at and procedure for general meetings. The articles provide that the business of the company is to be managed by directors, and include provisions for the appointment, powers and duties and meetings of directors. By article 84, the directors may meet for the despatch of business and regulate their meetings as they see fit. At a meeting of directors, questions arising shall be decided by a majority of votes. By article 88, the directors "may delegate any of their powers to committees consisting of such member or members of their body as they think fit."

2. As to the shareholding company, Agricultural Holdings (Jersey) Pty Ltd, its return for 3 April 1998 discloses that it had 240,595 issued ordinary shares, 240,592 of which were owned by Damor Investments Limited and three by another shareholder, and 1,000 issued preference shares, all of which were owned jointly by Laurence Anthony Wheeler and Laurence John Monument. The annual return for Agricultural Holdings (Jersey) Pty Ltd for 1 January 2009 identified Damor Investments Limited as holding 240,592 ordinary shares and that the holder of the three issued ordinary shares was Cacique Investments Pty Ltd. By then, the preference shares were held equally by Damor Investments Pty Ltd and Cacique Investments Limited. According to the annual return for 1 January 2018 the shareholding remained the same. There is no evidence that any member of the Talbot family is or has ever been a director or shareholder of either Agricultural Holdings (Jersey) Pty Ltd or its parent companies Damor Investments Pty Ltd and Cacique Investments Limited, both of which have an address in Jersey. No evidence was adduced in this action from a shareholder or representative of a shareholding company.

3. It is the plaintiff's contention that, despite the corporate structure of FPPL and its parent companies, Malahide, the business and property, is nevertheless subject to an hereditary trust in favour of the member of the Talbot family "anointed" to benefit from it. It is put that Rose Talbot and then Richard Talbot were the "guiding minds" of FPPL. It is a contention which is important to this action. No trust document is in evidence and the existence and terms of the trust do not emerge clearly from the evidence. More will be said about that later in these reasons.

4. Milo Talbot died in 1973. He was succeeded by Rose Talbot, who, at the same time, also succeeded to the Malahide castle, the family's ancestral home in Ireland. The Irish castle was sold to pay Irish death duties whereupon, in 1976, Miss Talbot migrated to Australia and became a permanent resident at Malahide. Rose Talbot was born in 1915. She lived at Malahide from 1976 until her death aged about 94 in February 2009. From 1976 until not long before her death she was managing director of FPPL.

5. In accordance with the proposition advanced by the plaintiff about control of the company, in the late 1980s Rose Talbot began to consider a successor. She made tentative approaches to Richard Talbot who, at that time, was a member of the Royal Navy. He lived in England. He is a member of the Talbot family although not a close relative of Rose Talbot. In 1990, when he was about 24, he visited Malahide at Rose Talbot's invitation. At the end of 1991 the prospect of him "inheriting" her interest was raised with him. From the time he was first approached to take over Malahide, and in that expectation, Mr Talbot began to visit the property, when his naval commitments permitted, to familiarise himself with the business. He was married in 1996. He and his wife visited the property together for the first time in 1997. He attended a board meeting on 10 November 1997 and became progressively more involved in the management of the company. He was appointed as a director on 9 November 1998. Notwithstanding his role in the company, Mr Talbot remained in the Royal Navy until his retirement in June 2008, following which he moved to Tasmania.

6. At the time Mr Talbot joined the board of FPPL on 9 November 1998 the directors were Rose Talbot, Sir Geoffrey Foot, Henry von Bibra, JR Gunn, Barry Henry and James Walch. Mr von Bibra was a lawyer based in Melbourne. Barry Henry was an accountant, a partner of the firm KPMG based in Launceston. In addition to being on the board of FPPL Mr Henry advised Rose Talbot in her personal and estate affairs. Mr Walsh and Mr Gunn were persons with experience in agriculture. The company secretary was John Lord, also an accountant and a partner of KPMG in Launceston. KPMG were the company accountants. The farming business was not performing well. It had a high cost structure and the core farming operation of sheep and cattle grazing was supported by native timber harvesting and income from a share portfolio. The minutes of the meeting of 9 November 1998 record Mr Lord's report, as company secretary and accountant, that the business was making a loss and "that unless the farming business could be changed or commodity prices rise or expenses fall, the present farming enterprise would not in the future make a profit." The board resolved to undertake a "whole farm plan" and "land capability assessment." Planning and assessment was undertaken. A dam was constructed. Irrigated cropping was undertaken. Pine plantations were established. However, for at least the next few years things did not improve.

7. On 16 October 2003, in anticipation of a board meeting which Mr Talbot could not attend because he was not in Australia, Mr Lord sent an email to Mr Talbot prefaced with the following:

   "I have been thinking about where we are and offer the following comments. Were you here I'd have a discussion with you. I have had a brief discussion with Barry and believe he shares these sentiments. I appreciate I am, formally, the company's secretary but in reality Fingal Pastoral Pty Ltd is a private client and we are, in reality, advisers. This note is written in this context."

8. Mr Lord, in the email, then expressed his concern that the results for 2002 and 2003 "for a large scale operation without debt" were "not acceptable" and raised questions about why that may be so. By that time, the board consisted of Rose Talbot, Barry Henry, Henry von Bibra, James Walsh and Crosby Lyne. Mr Lyne was another person with experience in agriculture. Some differences of opinion existed between the directors about how the farm should be operated, in particular as to the balance between use of the land for grazing sheep and cattle and cropping. Mr Lord questioned whether the company should engage in cropping, as it had been, as opposed to grazing. Mr Talbot replied on the same day. He said, in part:

   "Thank you for your thoughts. They are very timely. Having read the papers over the past day, I think your analysis is pretty spot on. The 2003 results are very disappointing."

9. In his email of 16 October 2003, Mr Talbot continued by expressing his own thoughts about the performance of the company and the need for review and possible change. Over the ensuing years the process of review of the company's business continued. Early in 2004 Richard Talbot suggested the appointment of an agricultural consulting firm, Holmes and Sackett, to give advice concerning the farming business. At that time the farm employed a manager, John Hawkins, and an assistant manager, Ian Herbert. In 2005 Mr Herbert replaced Mr Hawkins as farm manager. The suggested appointment of a consultant encountered initial resistance from Rose Talbot. Rose Talbot, generally regarded as a person who was strong in her views, wished to avoid outside involvement in the management of the farm. However the minutes of a board meeting held on 24 May 2006 disclose that, by then, a report by a principal of Holmes and Sackett, Sandy McEachern, had been prepared and was discussed. Mr McEachern reviewed the performance of the farm business and made recommendations to the board aimed at improving profitability. In June and July 2006 three directors resigned, Mr von Bibra, Mr Walsh and Mr Lyne. On 1 August 2006 John Lord was appointed a director. The result of the change was that the board then consisted of Miss Talbot, Barry Henry, Richard Talbot and John Lord. Miss Talbot was very elderly and in failing health. In March 2007 she, aged 91, suffered a severe stroke. From then, at least for the most part, Richard Talbot or Mr Henry chaired meetings of the board. In September 2007 Mr Talbot resigned his commission with the Royal Navy effective from 6 June 2008.

10. The financial performance of the farm remained problematic. The position deteriorated in late 2006 due to drought. At a board meeting held on 20 February 2007 a loss exceeding $1.5m was forecast by the farm manager. After the Holmes and Sackett review conducted in 2006, that firm, principally through Sandy McEachern, was engaged by FPPL to "provide the company with advice about the future direction of the farm."

Mr Talbot

1. Richard Talbot gave evidence of his background. When first approached in 1987 by Rose Talbot to be involved in Malahide he was a 20 year old serving officer in the Royal Navy. According to John Lord's evidence, Mr Talbot was "appointed as the youngest commander in the Royal Navy ever in the history of the navy. So a man of some considerable ability which I had observed for twenty probably something years." Between 1997 and 2002 he was employed in predominantly front line navy operations around the world. Between 2002 and 2004 he was employed by the navy in "procurement of future defence capability" and "shipbuilding projects with defence industries." He said that this gave him "experience in benchmarking cost of production, financial and performance management and working with management consultants in large organisations."

2. According to Mr Talbot, he was informed by Mr Henry and Mr Lord after the meeting of the board on 11 October 2007 that, in light of Miss Talbot's age and condition, they considered him to be "captain of the ship."

3. In October 2008 Mr Talbot commenced a Master of Business Administration in Advanced Farm Management at the Royal Agricultural College Cirencester in the UK, which he completed before leaving to live in Tasmania.

The lead-up to the forestry rights agreements

1. On 22 January 2008 John Lord sent an email to Mr Talbot. A copy was sent to Mr Henry. In the email Mr Lord expressed his "thoughts" about the difficulties to be faced by pastoral businesses in Tasmania over the ensuing years. Mr Lord suggested that a means of obtaining fixed income for farming properties, and for Malahide in particular, was to lease land to a forestry company for establishment of private forest. In part the email read:

   "As you know I've always been a fan of private forestry in Tasmania because I think it is such a good enterprise for Tasmanian land managers because of our climate and because we have significant industry infrastructure and skills in place here …

   There is currently another way for a pastoralist to benefit from forestry in Tasmania and this is by leasing (not selling) land to one of the forestry companies. Last time I looked they were paying $200-250 per hectare pa, indexed for inflation over the life of the crop – 15 to 25 years – depending on what type of tree is planted. These companies are able to offer tax effective investments to city investors and hence are able to pay rents in excess of real economic values ...

   Given the current and projected figures I believe we should look again at forestry, not doing it ourselves, but by leasing, to use the marginal country to better advantage. This could be factored into the high level consideration of the budgets for 2009."

2. In 2008 Malahide was affected by drought. A meeting of the board took place on 13 March 2008. Mr Henry, Mr Lord and Mr Talbot were present. Detailed minutes of the meeting were made by John Lord. The minutes record that the meeting received reports about the operation of the farming business from the farm manager, Mr Herbert, and from the farm consultant, Mr McEachern. By that time the directors had enlisted advice from Tim Rhodes, a person with local agricultural expertise. Mr Rhodes was present at the meeting. Mr Herbert reported that, with Mr McEachern's assistance, "huge changes" had been made to the way in which the farming business was run. Cropping was no longer conducted and the business had focussed on the livestock enterprises; grazing of sheep and cattle for wool, and beef, with a "sub-enterprise" of trading stock. Mr McEachern told the board that "substantial opportunities for the livestock enterprises were being realised but in the short term had been masked by drought." He forecast long term expected profitability to be in the range of $100 to $150 per hectare with potential for further improvement of up to $50 per hectare. Despite the reported improvements, the farm was not then trading profitably. The management accounts forecast a loss for the year ended 30 June 2008 of $388,286. The actual loss for that year was later reported as $562,275. Mr Talbot agreed in cross-examination that, at that time, he was concerned that the return on the capital value of the assets of FPPL was substantially below the benchmark figures that Mr McEachern had advised were achieved in comparable properties.

3. The minutes for the board meeting of 13 March 2008 also record that Mr Lord "advised of the opportunity presently existing of leasing already cleared land to forestry companies for the purpose of planting trees", and that Mr Lord "undertook to ascertain the likely current lease rental per hectare per year that would be paid and advise the manager of this." Mr Talbot made notes of his own of the board meeting which, he agreed, record discussion of committing 600-700 hectares to forestry, mention, probably by Mr Lord, of managed investment schemes, that eucalyptus nitens was grown in a 14 year rotation and that the cost of de-stumping to reconvert to pasture was, according to information given by Mr Rhodes, $1500 per hectare.

4. After the 13 March 2008 board meeting, Mr Talbot returned to the UK. From there, he made inquiries of Mr Lord and the farm manager, Mr Herbert, to inform himself about the forestry industry. Mr Talbot spoke by phone with John Lord on 25 June 2008. One of the subjects of the discussion was the forestry industry. I am satisfied that Mr Talbot was aware that Mr Lord was a person of experience in the industry and that the information he obtained from Mr Lord demonstrated that to be so. Mr Herbert reported to the board members by email dated 2 July 2008. By then Mr Herbert had engaged a forestry consultant, Martin Fitch, and had spent the morning with Mr Fitch at Malahide that day. As to the possibility that land at Malahide may be leased to a forestry company Mr Herbert reported:

   "I took the view that if the pasture or bush on the land was not producing at it's optimum then it should be considered. As already discussed forestry companies are very keen to convert pasture into plantations, our identified pasture areas would certainly be of interest to the 4 companies presently acquiring land … [Martin] is going to collate some data and preliminary maps for an initial meeting next week. From this I hope to be able to firm up the areas which we could offer the forestry companies to examine. I have told him we would need a full report including financial offers by the first week in September to enable due consideration before the board meeting."

1. On receiving the email Mr Talbot asked Mr Herbert to "ensure that the forestry analysis includes the potential cost of either converting the land back to pasture on completion of that lease or re-leasing the land for further forestry plantations." A report dated 4 August 2008 was prepared by another forestry consultant, Tony Stonjek. It was sent to Mr Talbot by Mr Herbert on 1 September 2008. The report identified areas totalling about 500 hectares of Malahide as suitable for lease for hardwood plantation at a return of $400 per hectare plus CPI on a yearly basis, with a usual timeframe for leasing of 15 years. Mr Talbot sought reports from Mr Herbert and Mr McEachern about whether other forms of farming operation may produce a similar return. On 1 September 2008 Mr Talbot sent an email to Mr McEachern asking that his benchmarking report for the farm business be prepared so as to enable "some form of relative judgment comparing the forestry options to our current operations." Mr McEachern replied by email dated 4 September 2008, the effect of which was that the farm had achieved an above average result when compared with other farms for the 07/08 year. However, by a further email sent by Mr McEachern to Mr Talbot on 6 September 2008 he summarised his reports about farm profitability and stated that although "there is evidence here that things are moving in the right direction", it remained the case that "all the farm enterprises are well short of $400 profit per hectare - which make forestry look like a very good alternative - assuming the risks are manageable (ie the lessee goes bankrupt, regulatory changes to managed investment schemes)."

2. On 3 September 2008 Mr Talbot sought advice from Mr Lord about the forestry proposal. Mr Talbot's email to Mr Lord included the following passages:

   "Given your experience of the industry, would you be able to produce a short capping note … with your recommendations for the board. My instinct, given the return and its ability to mitigate the risk in the livestock enterprise is to go for it (ideally for inclusion in this years' budget given the season) but would value your/the board's advice.

   I would also be grateful if you could advise on any key questions that I should put to Tony. My initial thoughts on the proposal are:

   ·The price for the lease seems high, mindful that Richard Hart's 2005 report noted a potential return from e.nitens pulpwood of $20 p/tn at 14 t/p/ha, ie $280 p/ha – a lease of $400 p/ha therefore seems high notwithstanding inflation – have I missed something or is there a reason? How does $400 p/ha lease income compare to what return we might expect if we were to do it in our own right (the key issue, being the expenses over the next 15 years compared to the income at the end? How do the lease/own right IRRs compare?).

   ·How do you feel $400 p/ha lease income compares to the market rate? Could we do better by going direct to Gunns or others for example? Where do you see the leasing income going if we wait another year (could it outstrip the CPI)? Should we lease 500 ha in a single year or stagger it at about 200 ha p/a?

   ·Should the lease be linked to the CPI or an alternative timber commodity index (to capture greater upside/albeit with downside risk)?

   ·How much risk is there if the lease goes bust/regulatory risk etc? what protection do we need?

   ·Can we capture any carbon credits associated with the lease? Is there potential here?

   ·Are there any issues associated with harvesting the native bush? What sort of harvest rate can we plan on given 1600 ha: 100 ha/pa for 16 years? What is the cost of addressing the die back areas in the bush? Is the royalty tax free still?

   ·What impact does the lease have on the land's subsequent use? Could it be re-leased at a similar price, or given the costs of converting it back to pasture (do we know these (Tim mentioned a figure of $1,500 p/a last year) could we be forced to take a much lower income from the land at the end of the lease?

   ·Can we still graze stock on the land after the risk of browsing has reduced?

   ·What do we need to ensure is included in any contract?

   ·My instinct is that this could enable us to combine both a forestry lease and bush royalties with the 225 ha of plantation forestry we already have established. This could give us a lease/royalty income from 2010-2025, noting that our first plantation block should then be ready for harvest in about 2025-6 (do you now what sort of income that would fetch at today's prices say 25 ha/p a at 250 t p/ha (non-pruned commercial saw logs/pulp material)? Finally, I note from the 2005 report that Richard recommended that we check the height of the Sheoak plantation last year to see whether it is worth pruning them for a clear wood regime – do you know whether this was done?/I haven't asked Ian yet – do you think it is too late to do it/still worth the costs?" [My emphasis.]

3. Mr Lord replied by email dated 7 September 2008. All of Mr Talbot's dot points were addressed. Mr Lord agreed that the "price is high" but suggested that it was "driven by the tax schemes the leasing companies are conducting". As to the question of risk "if the lessor goes bust" Mr Lord responded as follows:

   "Similarly, the offers would inform us as to our rights should the lessor go bust. We would be dealing with a large, possible public, company, so I expect there would always be someone there ie a restructured/taken over company if the current one got into trouble. Keep in mind the timber being grown will be in demand by the market as it is a high quality product.

   The only practical issue with leasing is that the land will have stumps in it at the end of the lease. If the best use of the land is to grow trees then this isn't a problem. A second rotation would be planted, either by a third party at the then current leasing rate or under a joint venture of some sort or potentially by the landowner."

4. Mr Talbot passed on Mr Lord's advice by email to Mr Herbert on 9 September 2008 with a request that Mr Herbert ask the three forestry companies to "tender for a 15 year lease for 500 ha, starting this year if possible …". Before sending the email Mr Talbot, who was in the UK at the time, spoke by phone with Mr Herbert. He requested Mr Herbert to ask a series of questions to be put to the forestry companies. Mr Talbot also asked for Mr Herbert's thoughts on "whether we should increase the total allocated area to 750 ha". By email of 12 September 2008, copied to Mr Talbot, Mr Herbert acted on Mr Talbot's instruction and asked Mr Stonjek to organise the tenders so that, if possible, they were received by 22 September 2008 for consideration by the board at the meeting proposed for that day. Also, consistently with Mr Talbot's instruction, Mr Herbert asked Mr Stonjek:

   "There have been some discussions about the future in regard to the leasing arrangements, what if the leasing companies become insolvent, what happens to the ownership and management of the trees, what guarantees are there about lease payments, what happens if the government changes their mind on MIS schemes. Carbon credits, who 'owns' them and how will they be effected [sic] by future changes to scheme management/ownership?"

5. On 11 September 2008 Mr Talbot sent an email to Mr Lord with a copy to Mr Henry. The email contained attachments including a report written by Mr Talbot as "Chief Executive Officer" dated 12 September 2008, Mr Stonjek's report of 4 August 2008 and a number of financial analysis documents. The CEO report reviewed and commented on the financial performance of the farm for 2008 and the budgeted figures for 2009. It noted rainfall in the reporting period to have been significantly below average, the possibility of selling down livestock to avoid the consequences of drought, with consequent losses. The report continued:

   "In considering options to ameliorate the risk of such losses, my strategy is to look firstly at ways of increasing income by alternative means, secondly options to reduce cost, if necessary by scaling back the company's plans to increase mid-winter stocking rate to 60,000 dse and thirdly, to consider an increase in the parent company loan to help us maintain our planned growth and weather the downturn.

   The board will note the following items amongst the meeting papers: …

   Forestry

   oA forestry consultant Report detailing options firstly: to lease 500ha of currently low productivity grazing land on a 15 year lease, giving a potential $200,000 income p a, indexed to CPI; this should be achievable without impact to our planned stocking rate of 60,000 dse and secondly, to develop harvesting of the native timber. This is estimated to yield about 70/75T/ha at $14/T, giving a total yield of about 100,000 tonnes ($1.4M), which if harvested over 4 years would add about $350,000 income p a.

   oThe board are asked to consider this proposal, advise on any technical issues and agree that we proceed to get 3 tenders for the lease proposal and progress with harvesting the native bush, ideally, to enable any income to be received by March 2009.

   oGiven the potential return offered by the lease, I would welcome a debate at the meeting about the relative merit of increasing the amount of land leased to 750 ha. This is likely to impact on the scale of the livestock enterprise. I therefore recommend that following the board's discussion that the impact of such a strategy is analysed as part of the 2010 budget development, but in time to inform any contract for the initial 500 ha block."

6. In the report Mr Talbot also asked the board to consider Mr McEachern's benchmarking report, an agronomy report, a wool market analysis and the Holmes and Sackett review. Under the heading "Drought Plan", Mr Talbot continued:

   "Having considered the above factors and the potential areas for additional income/savings summarized in Table 3, the board are asked to discuss and agree that we initially focus on ameliorating the adverse impact to 2009 profit/cash flow by increasing income through forestry options. Thereafter, as the seasonal outlook develops, the board are asked to agree that I continue to develop and implement options with the management team to either reduce expenses further, if necessary reducing the end of year budgeted stocking rate and/or renegotiating the parent company loan, keeping the board informed of progress through the monthly management reports and the development of the 2010 budget."

7. Mr Stonjek responded to Mr Herbert's request on 16 September 2008. He proposed a commencement date of 1 January 2009 for the nominated area of about 500 hectares with annual payments of $400 per hectare indexed to CPI with a lease term of 15 years. He relevantly advised that "some of the questions you raised regarding grazing rights etc are answered in a letter I received from Gunns which I will forward to you". The letter from Mr Jim Wilson of Gunns is dated 16 September 2008. It contained a draft forestry right agreement and answers to a number of specific questions including the following:

   "What will happen if Gunns becomes insolvent? How will this effect lease payments, ownership of trees etc?

   I have attached the draft forestry right agreement proposed between Fingal Pastoral and Gunns Plantations. Clause 1.1 outlines termination events and consequences. Independent advice from Fingal Pastoral's solicitor would be recommended in interpretation."

8. According to Mr Talbot, the letter from Mr Stonjek was the first he had heard of Gunns Ltd. As a result he conducted searches on the internet of Gunns. He found and read the company's 2008 annual report and printed out at least part of it. He made notes of information he gleaned from the report about the activities and financial position of Gunns. On 16 September 2008 Mr Talbot met with two accountants from KPMG, Michael Hine and Brent Murphy, about a number of matters including the tax implications of the proposed forestry leases. Mr Talbot's evidence is that before that meeting he conducted some of his own enquiries about the "financial performance" and "potential creditworthiness" of Gunns. He asked Mr Hine about those matters. Mr Hine did not give evidence, but Mr Talbot made a note that Mr Hine advised him that the forestry industry "was suffering", that Gunns, Great Southern, Timbercorp and Forest Enterprises, all timber companies, had suffered a reduction in share price, and that he should have "good legal protection if they walk away [from any agreement]."

9. On 21 September 2008 Mr Talbot met with Mr Lord and discussed the activities and financial position of Gunns. His note of the meeting records that sometime between then and 24 September 2008 Mr Talbot met with Mr Stonjek. He made notes of the meeting.

10. Mr Talbot also met with representatives of Gunns to discuss the proposal in more detail. Mr Talbot was informed that Gunns would be open to a "staggered lease", initially 500 hectares and a further 750 hectares the following year. In the course of the discussion the area of the proposed initial lease was increased to 750 hectares, with the lease being conducted through two Gunns entities.

11. The board of FPPL met on 24 September 2008. Mr Talbot, Mr Henry and Mr Lord were all present, as was Mr Rhodes. The minutes of the meeting record the following:

"Lease of land for forestry purposes

The Directors discussed the recommendation from the Farm Management Group that an area of low productivity grazing country, primarily at the northern end of the property, be leased to Gunns for the purpose of growing trees. The Directors noted the advice given which was that the lease would be for a period of 15 years with a lease rental of $400 per plantable hectare, payable quarterly with these lease payments being increased each year by CPI.

The Directors noted the Farm Management Group's advice that it would not be possible to obtain a similar return from this land by conducting any sort of grazing enterprise.

The Directors resolved to approve the leasing of this amount of land to Gunns, subject to professional advice regarding the lease agreement and authorised Cdr Talbot to advise the Gunns' Plantation Manager of this. The Directors noted that the gross amount of land that may be required to be leased to achieve the above target would be approximately 800 hectares. Directors noted it was envisaged this lease would commence on 1 January 2009.

The Directors then discussed the option of potentially leasing additional land to Gunns. The Directors noted that the Farm Management Group had advised the leasing of a further block of 750 hectares would require the leasing of more productive land which would reduce the carrying capacity by more per hectare than the land agreed to be leased. Directors also noted that a second 750 hectares would involve planting of trees on the western side of the property in some areas adjacent to the Mathinna Road.

The Directors agreed that this matter of a possible second area to be leased to Gunns would be considered at a meeting of Directors to be held in January 2009 and Cdr Talbot was requested to seek an option from Gunns capable of being exercised on or before 28 January 2009." [Emphasis added.]

1. Subsequently, on 27 September 2008, Mr Talbot sent an email to the other board members which indicated that he had, since the board meeting three days earlier, spoken to a representative of Gunns, Ian Brandon. In the email Mr Talbot said that he had informed Mr Brandon of the decision of the board to proceed with the leasing of the 750 hectares, and that "we would consider leasing a possible further 750 hectares at the same $400 p/ha price in the new year, informing him of our decision by 28 February 09, to which he agreed. We agreed that Ian Herbert and Jim (Gunns) would speak to start working through the detail."

2. On 14 October 2008 Mr Herbert reported to the board, as well as Sandy McEachern, about farm matters, including about the adverse impact on pastoral operations of the continued lack of rain. Mr Herbert had reported a meeting with Mr Wilson of Gunns and "they are working towards having a contract to sign in the near future and are putting together the appropriate planning applications for Break O Day council." The report prompted Mr Talbot to request by email dated 15 October 2008 that Mr Herbert consider the impact of increasing the amount of land leased to Gunns for forestry from 750 hectares to 1500 hectares. His email addresses a number of matters he wished to discuss, including:

   "·   What would be the impact to the 2008/2009 LEOY cash flow and profit variance of $507,050 and $276,500 briefed to the board last month as a result of our decision to lease 723 ha for forestry with a revised 2009 52,000 DSE target? ...

   ·   What would be the impact to our proposed alternative option to increase the amount of land leased to forestry to 1500 ha and its inherent reduction to a target 41,000 DSE mid-winter stocking rate for July 2009, mindful that we still do not plan to make this decision until Jan/Feb next year?

   ·   An update on progress with the forestry, both with Gunns and Tony Stonjek."

3. In the meantime, between 30 October 2008 and 7 November 2008, the board of FPPL resolved to, if possible, increase the area available for plantation subject to the agreements, from 750 hectares to 1500 hectares. On 30 October 2008 Mr Talbot sent a further email to Mr Henry and Mr Lord. In it Mr Talbot asserted that the key issue concerning planning of the next stage of the company's response to the drought was "our decision whether to increase the amount of the country leased to Gunns above the approx. 723 ha we agreed at the last board meeting." He continued:

   "I am also mindful, given the current global financial crisis that Gunns might (although I have no indication) wish to reconsider their offer to accept a further lease at the same price early next year – you will of course be much better placed to judge this.

   Emma and I have discussed this and of course recognise both these challenges, although we are trying to balance the risk of continuing to delay the decision until the January board meeting, thereby giving us both the chance to view the potential additional sites together, set against whether it might be better in the circumstances to make the decision earlier."

4. On 5 November 2008 Mr Talbot spoke from England on the phone to Mr Henry. One of the subjects was the proposed additional 750 hectare forestry lease which was on the agenda for discussion at the board meeting scheduled to be held in January 2009. After that discussion, Mr Herbert was instructed to raise the matter with Gunns. Mr Herbert sent an email to Mr Wilson at Gunns, copied to Mr Talbot, Mr Rhodes, Mr Henry and Mr Lord, advising him of the board's wish to increase the area being made available for plantation from the initial 750 hectares to 1500 hectares. He reported to Mr Talbot, Mr Henry and Mr Lord by email dated 7 November 2008 that Mr Wilson had agreed. Mr Herbert had prepared a plan of Malahide which showed his suggestion for the areas which made up the 1500 hectares. Mr Talbot emailed Mr Henry, Mr Lord and Mr Rhodes on 9 November, referred to the proposed 1500 hectares and indicated that he intended to phone Mr Herbert on 19 November and "would wish to be in a position to confirm the proposed land area for forestry when I speak to him then to enable him to inform Gunns and progress the next stage of the work with them." Mr Henry sent an email to Mr Talbot on 11 November 2008 which said:

   "Richard,

   John and I have had an opportunity to discuss the proposal and confirm that we are both strongly in favour of the economics.

   The question of aesthetics must rest with you and Emma.

   It is important that communication with employees and the local community is well handled."

The other directors - Mr Lord and Mr Henry

1. Reference has already been made to the role of John Lord as accountant and advisor to, and company secretary and director of, FPPL. He graduated in law in about 1972. Although he completed an articled clerkship he did not practice as a lawyer and switched to accounting. He became a chartered accountant in 1976. In addition to being a partner of a large accounting firm, he had long general experience as a director and chairman of companies. Unlike at least one of his partners at KPMG he was not a registered company liquidator, but as a senior and experienced accountant he had considerable knowledge about, and experience in dealing with insolvency and liquidation. He presents as a person of considerable wisdom, intellect and judgment. He had developed a particular professional expertise in the forestry industry. He gave unchallenged evidence that he had, "for the better part of 40 years", worked in forestry government policy, administration, industry, processing and growing in Australia and New Zealand. In his words, he held strong views about "the economic, social and environmental benefits of trees." He agreed that, following his initial suggestion about the possible benefits of growing trees on Malahide, the prosecution of the proposal "on the ground" was the manager's role, but that Mr Talbot asked him for "higher level advice in principle or policy."

1. In 2008, Mr Lord had a detailed knowledge of the managed investment schemes being run by the forestry companies. He knew that they were "driven by tax", and that the profits to be made by the companies drove them to offer high rents for property on which trees could be grown. His knowledge of these matters formed the basis of his email response to Mr Talbot on 7 September 2008.

2. Mr Henry died some years ago. However he was, at the time of his involvement in the company, a highly experienced accountant and a trusted adviser.

Initial engagement of the defendant

1. The question of engaging a lawyer to act for FPPL was first raised by Mr Talbot in an email to Mr Henry and Mr Lord of 27 September 2008. Mr Talbot asked "which lawyer will be acting for us regarding the forestry/native timber contracts". He indicated that he "would be keen to see the draft contracts once they have been checked by the lawyers before they are signed." On 23 October 2008 Mr Talbot followed up his enquiry about a lawyer in an email to Mr Lord which included the following:

   "I am conscious from both Barry and Ian that they have been in contact with you regarding the forestry options we agreed to pursue at the last board meeting mindful of your experience in that area. I have attached a copy of the draft contact [sic] with Tony Stonjek that Ian sent me, which I understand that he may also have forwarded to you.

   I would be keen to phone you to discuss your thoughts regarding the progress with both Tony and Gunns when you have a moment. My initial queries regarding Tony's draft contact rate to 'how exactly we interpret annual adjustments to the royalty payments linked to the CPI and market fluctuations', the impact of any fire within the bush and any OH&S risk. Also, do you know whether we have received advice from Michael Hine regarding the tax treatment of the royalty payments yet?

   I understand from Ian, that negotiations and planning with Gunns seem to be on track. Do you know yet which solicitors will be acting for us regarding the contract?"

2. After receiving Mr Talbot's email Mr Lord contacted a solicitor at Page Seager in Hobart, Ray Brown. On 23 October 2008 Mr Brown sent an email to another practitioner in that firm, David Shelley, who had been a partner since 2006. Mr Brown's email, which was copied to Mr Lord, records that he had been informed by Mr Lord that it concerned a "relatively straightforward timber plantation lease". On 24 October 2008 Mr Lord sent an email directly to Mr Shelley asking that he phone him. Mr Shelley did so and spoke to Mr Lord by phone on the same day. The conversation lasted about eight minutes. Mr Lord told Mr Shelley that he had arranged for him to receive a copy of the "proposed leases" from Gunns. According to Mr Lord, he asked Mr Shelley to "advise FPPL about everything relevant to the leases", or "all matters pertaining to the lease, anything appropriate." Mr Shelley's note of the conversation records that Mr Lord gave him some background about the Malahide property and the Talbot family. He was told that Richard Talbot, who was then in England, was "very particular" and that "he will effectively run it." Mr Lord also told Mr Shelley that an initial lease of 750 - 800 hectares was proposed to earn "additional income" and "may do another 750 next year". Mr Lord gave Mr Shelley contact details for Ian Herbert, the farm manager, and told Mr Shelley that Michael Hine of KPMG was providing advice to FPPL on taxation issues related to the proposed agreements.

3. Mr Lord told Mr Talbot by email on 26 October 2008 that Mr Shelley had been engaged, and invited Mr Talbot to contact him directly, which he did by email on 27 October 2008 in these terms:

   "Dear David,

   John Lord advised me that he has asked you to act for us (Fingal Pastoral Pty Ltd) regarding our proposed forestry lease with Gunns at our property 'Malahide' in the Fingal Valley. I understand that our Manager Ian Herbert is forwarding a copy of the draft lease prepared by Gunns.

   I wanted to establish email contact at this stage and say that I look forward to receiving your advice regarding the draft lease in due course."

4. By then Mr Shelley had received the draft agreements sent by Jim Wilson of Gunns Ltd. One draft agreement was with Gunns Plantations Limited and the other with Wesley Vale Engineering Pty Ltd. For some reason not fully explained by the evidence, the documents were not in the same terms. Mr Shelley noticed internal errors and inconsistencies and phoned Mr Wilson of Gunns Limited who asked that Mr Shelley submit any requested changes to him. On the same day Mr Shelley advised Mr Lord and Mr Talbot that he had received and reviewed the draft agreements. He sent an email to Mr Talbot indicating that there were "a significant number of internal inconsistencies in the documents which arise by them having been drafted 'in-house' rather than through Gunns' lawyers." His email indicated that he had discussed the matter with John Lord who was "content that I contact Gunns to have the documents amended accordingly". Mr Shelley wrote to Mr Wilson by letter dated 31 October 2008 requesting a number of largely mechanical and terminology changes and asked for amended drafts. He followed up his request on 4 November 2008. Eventually, Mr Wilson agreed to the amendments Mr Shelley earlier proposed and told Mr Shelley that he should have new agreements ready by the following week. Mr Shelley advised both Mr Lord and Mr Talbot of the delay, but the documents were not received until 1 December 2008.

The advice

1. The draft documents submitted to Mr Shelley were instruments creating a forestry right in the terms of associated deeds. By the instruments, FPPL, as owner of land forming part of Malahide, granted the right during the term of the agreement to establish, maintain and harvest a plantation of trees on the land in return for payment of annual fees. The recipient of the grant in one case is Wesley Vale Engineering and, in the other case, Gunns Plantations Pty Ltd. Both agreements provide for a 15 year term commencing 1 January 2009 and for payment of the annual fee of $400 per hectare indexed to CPI, payable quarterly. Both agreements describe, by reference to titles and location maps, the land to be subject to the grant, and specify a minimum plantation area, for Gunns Plantations, 1056 hectares, and for Wesley Vale Engineering 158 hectares.

2. All of the exchanges between Mr Shelley and Mr Talbot were, from start to finish, by email. They did not ever speak on the phone or in person. Mr Shelley's first advice is by letter addressed to Richard Talbot and John Lord dated 5 December 2008. The letter provides general advice about the terms of the agreements; that both provide for a grant of a forestry right by FPPL over parts of Malahide for 15 years from 1 January 2009 subject to a grant of a private timber reserve over the subject land and council approvals. The letter of advice concludes: "I look forward to receiving your instructions regarding the commercial aspects of the documentation and if you have any questions about the particular terms of the documentation please let me know."

3. On receipt of the advice Mr Talbot responded to Mr Shelley by email dated 11 December 2008. He said that he had "a few minor questions which I would be grateful for your clarification". There were questions concerning pasture establishment costs, the effect of the destruction of trees by fire, fencing, insurance, CPI indexation calculation, rates, termination following early harvesting, the obligation to mitigate damage in the event of breach, and exclusion of a dam from the leased area. One paragraph of Mr Talbot's request for further advice is in these terms:

   "I am unclear of the meaning of WVEPL clause 13.4 'Any entitlement the Owner may have for damages is to be assessed on the basis that the owner should have observed this obligation to mitigate his damages.' There does not appear to be any similar provision in the GUNNS PLANTATIONS document. I would not wish, in the unlikely event that WVEPL vacated the land without our consent, that should we for example, be left with the trees that could theoretically be utilised by us, that this would limit any damages that we might seek from WVEPL. I recognise that there is always a commercial risk of bad debt to some, albeit hopefully limited extent, but would hope that the agreement does not limit our options to redress unnecessarily. Please advise."

4. Clause 13.4 of the Wesley Vale Engineering agreement obliged FPPL to take reasonable steps to mitigate its loss and to "endeavour to utilise the plantation land" in the event that Wesley Vale Engineering vacated the land. Mr Shelley gave uncontentious advice about all the questions. He, amongst other things:

   ·     recommended amendments to the clause about fertilisation of pasture;

   ·     agreed to request amendments suggested by Mr Talbot to the provisions concerning the provision of stock proof fences and the obligation to repair roads and fences;

   ·     recommended amendments so that the insurance requirements in the agreements were equivalent;

   ·     agreed to request an amendment to the GPL agreement to include a clause concerning fencing and repair to roads which was included in the WVEPL draft;

   ·     agreed to request an amendment to the GPL agreement to include a clause concerning adjustment to rates which was included in the WVEPL draft;

   ·     agreed to request amendment of the GPL agreement to exclude a lake from a plan.

5. Mr Talbot made handwritten notes about each paragraph of the advice on a printed copy of the email. As to the mitigation of damages clause he wrote "noted content." At the foot of the email he wrote "impact of going bust, ownership of trees!" Mr Talbot responded to Mr Shelley's email on 14 December 2008. He did so by writing a covering email accompanied by a copy of Mr Shelley's email on which he wrote comments interposed after each of the various paragraphs. The covering email included the following:

   "Many thanks for your response. You will see that I have responded to your advice below following my telephone conversations with Ian Herbert over the weekend.

   I am now quite tight for time before I depart the UK for Australia on Tuesday morning (UK time). Ideally, my preference would be for you to have completed and agreed the necessary changes with GPL/WVEPL following my response to your advice below such that you can send me the amended agreements by the end of tomorrow (Monday 15^th December (you time)). This will enable me to review them during the day tomorrow (UK time) and if content, advise my fellow directors that I am content for them to be signed this week. Can you achieve this? If not, then I am due to arrive in Melbourne late pm on Wednesday 17 December and it may be possible, if you have sent Ian the amended agreements for him to forward then to me at my hotel in Melbourne on Thursday, that I can then phone John/Barry once content and if possible arrange for them to be signed before the end of the week. At the very latest, I am due to arrive in Tasmania next Sunday (21 December) and am due to see John and Barry at KPMG u Launceston at 11 am on Monday 22 December and provided we have managed to agree the final changes, with a final version of the agreements sent to Ian for my reading on Sunday night, we could sign then when I see John/Barry on 22 December. However, my preference would be to have the final versions of the agreements agreed before I depart the UK if possible."

6. Mr Talbot's accompanying comment email confirmed that Mr Shelley would seek the various amendments which had been the subject of the correspondence, and included an answer to Mr Shelley's advice about the mitigation of damages clause in the following terms:

   "Noted, content to follow your advice: please see to remove the clause if you can (but if you are unable to achieve this, then so be it), but on the basis of your advice, I see no need to request that we negate our common law obligation with WVEPL."

7. However, in the accompanying comment email, Mr Talbot asked one further question which is central to this action. It is in these terms:

   "As a final question, what is the position if either WVEPL and/or GPL (or their successors in the event of future M&A) go into liquidation? Clearly, if some future person or company were to buy that part of their business (presumably the MIS part) that owns/manages the plantation on FPPL's land then they would be required to honour our existing agreement with GPL/WVEPL and all its terms, lease payments etc – is this correct? However, in the unlikely event that there were to be no buyer for that element of the business in the event of GPL/WVEPL's liquidation and therefore that we were to lose our lease payments (effectively as a consequence of a bad debt), can we ensure that there is a clause that ownership of the right, title and interest in the trees and carbon rights (GPL clause 3, WVEPL clause 1) reverts to FPPL. Please advise if you think this is either unreasonable or unnecessary; I am merely seeking to ensure that we have some come back in the event of it becoming a bad debt in the future, however unlikely the risk."

8. Mr Shelley responded by email on 15 December 2008 in the following terms:

   "I have sent the attached email to Gunns' solicitors requesting the amendments by the end of today if possible. I will forward the documents as soon as they are available.

   In respect of your final question regarding liquidation, I confirm that if a third party were to buy the relevant part of the business of WVEPL/GPL, they would be bound by the terms of the existing Agreements (in the case of both Agreements, Gunns is entitled to assign its interest subject to your consent which may not be unreasonably refused).

   In the event that WVEPL/GPL were to be placed in liquidation, the Agreements as an asset of the company would no doubt be sold off by the company liquidator (with your reasonable consent). It is theoretically possible that the liquidator would disclaim the Agreements and the trees would therefore revert to your ownership, however in reality that would not occur as the asset is a valuable asset and the liquidator would invariably seek to sell the value of the Agreement. I therefore do not think it is necessary to amend the Agreement in this regard."

9. Mr Talbot replied on the same day that he was "content to follow your advice regarding the risk in the event of GPL/WVEPL liquidation." He asked that he be provided with a copy of the final agreements once they were available and suggested that they could be signed "provided GPL/WVEPL have no major issues with the points we have raised."

The agreements

1. Richard and Emma Talbot arrived in Tasmania on 21 December 2008. They met Mr Lord and Mr Henry at the KPMG offices on 22 December 2008 and signed the agreements on behalf of the company. A meeting of the directors of FPPL was conducted on 6 January 2009. The minutes record that the directors confirmed the use for the company seal on 22 December 2008 for executing the "two leases". The minutes record no other discussion of the subject.

2. The Gunns agreement was executed by that company and is dated 12 January 2009. An instrument creating the forestry right established by the agreement was later registered with the Land Titles Office, registered number C850616, which attached to land specified in a location map which was either all or part of 11 titles of which FPPL was the registered proprietor. It provided for a minimum plantation of 1056 hectares.

3. The Wesley Vale Engineering agreement was executed by that company and is dated 13 January 2009. An instrument creating the forestry right established by the agreement was later registered with the Land Titles Office, registered number C850899, which attaches to land specified in a location map which was either all or part of four titles of which FPPL was the registered proprietor. It provided for a minimum plantation of 158 hectares.

4. Both the agreements granted a forestry right over the subject land within the meaning of that term in the Forestry Rights Registration Act 1990. In that Act the term "forestry right" is defined in s 3:

   "forestry right, in relation to land, means any (or any combination) of the following interests in the land granted by its owner:

   (a)ownership of trees;

   (b)a carbon sequestration right;

   (c)a right to establish, maintain or harvest, or maintain and harvest, trees —

   together with —

   (d)any ancillary rights of access or of constructing or using tracks, culverts, bridges, buildings or other works or facilities in connection with the enjoyment of the interest, whether or not those ancillary rights are coupled with obligations; and

   (e)any provisions for charges, payments or royalties or for the division of trees or the proceeds of trees, whether or not those provisions are coupled with obligations."

5. According to that legislation, s 5, a forestry right shall, notwithstanding any rule of law or equity to the contrary, be deemed to be a profit à prendre, registrable under the Land Titles Act 1980. By s 6, unless a contrary intention is expressed in the forestry right to which that land is subject, or in any variation of that right, the right is binding on the assignees and personal representatives of the covenantor and on all successors in title of the covenantor to the land.

6. By May 2009 FPPL had removed its livestock from the plantation land and permitted the Gunns companies to take control. Some livestock was sold to allow for the area devoted to plantation. The establishment of plantations commenced in May and June 2009 and continued throughout the year. There was from the time of the first plantation until 2010, some agreed adjustment to the land allocated to the GPL agreement and the WVEPL agreement.

Breach of the forestry rights agreements

1. The sums due under the agreements with FPPL were paid to 1 July 2012. The amount due under the agreements for the period 1 July 2012 to 24 September 2012 but unpaid, was $51,887.86 excluding GST. On 25 September 2012 both Gunns Plantations and Wesley Vale Engineering appointed three named persons from the firm PPB Advisory as voluntary administrators. By a circular letter dated 26 September 2012 Mark Korda and Bryan Webster, members of the firm Korda Mentha, were appointed receivers and managers of the Gunns group of companies including Gunns Plantations and Wesley Vale Engineering. As at 1 October 2012 about $102,000 was outstanding to FPPL.

2. On appointment of the receivers and managers of the Gunns companies, care and maintenance of the plantation land ceased.

3. Both of the companies went into liquidation on 5 March 2013. On or about 4 July 2014, the plaintiff terminated the Forestry Rights Agreement with WVEPL. On or about 9 March 2016 the plaintiff terminated the Forestry Rights Agreement with GPL. On or about 29 April 2016, the plaintiff entered into a deed with GPL under which the plaintiff purchased any interest which GPL or the grower investors under the various managed investment schemes specified in that deed had in the trees on the plantation land subject to the Forestry Rights Agreement with GPL for $1.00.

What happened to the plantations after breach?

1. Between September 2012 and 2014 FPPL considered what should be done with the land which, by then, had been planted with trees. It sought advice from experts. The plantations were surveyed and assessed in the second half of 2013. They were found to be of variable quality, some likely to be commercially viable, some of marginal viability, and some failed with few or no trees. In June 2014 FPPL resolved to revert that part of the plantation land to the north of Malahide shown as area R on the plan, to pasture. It did so for two primary reasons. Firstly, that area of plantation was of poor quality. Secondly, the exercise was to be a trial so that the cost, process and effectiveness of the removal of the growing trees and return of the land to pasture could be assessed. The work was done but the cost was greater than anticipated. As a result, on 28 April 2015, the board of FPPL resolved that the remainder of the plantation would be left to mature and be harvested in 2025.

The retainer

1. The plaintiff's claim against the defendant is both in contract and in tort, and under the Fair Trading Act 1990, s 14. It is agreed that in October 2008 the plaintiff engaged the defendant to provide legal advice in relation to each of the draft agreements, and that advice was sought and given in the documents referred to in these reasons. It was an implied term of the retainer that the defendant would exercise reasonable skill and care in the provision of the legal services: Doolan v Renkon Pty Ltd [2011] TASFC 4, 21 Tas R 156 at [35], referring to Astley v Austrust Ltd [1999] HCA 6, 197 CLR 1 at 22. The defendant's duty to the plaintiff was to exercise the degree of care and skill to be expected of a member of the profession having expertise appropriate to the undertaking of the function specified in the retainer: Badenach v Calvert [2016] HCA 18, 257 CLR 440 per Gageler J at [57]; Heydon v NRMA Ltd [2000] NSWCA 347, 51 NSWLR 1 at [53]-[54]; Rogers v Whitaker (1992) 175 CLR 479, at 487.

2. In this case, the nature and extent of the retainer is in issue. The plaintiff contends that Mr Shelley was engaged to "provide it with advice regarding the possibility of entering into Forestry Rights Agreements proposed by GPL and WVEPL." There can be no doubt, and I so find, that Mr Shelley was retained to advise FPPL about the terms of the draft agreements. However the plaintiff contends that the terms of the retainer extended to advising FPPL about "the legal and commercial risks associated with the transactions required by … the Forestry Rights agreements should FPPL enter into one or more of them." As pleaded in its statement of claim, the plaintiff contends that Mr Talbot requested Mr Shelley to advise the plaintiff "in relation to the risks associated with either GPL or WVEPL, or both, going into liquidation". I am not satisfied that is so. As will be explained, my conclusion follows from the context and terms of the requests for advice. I find that, at the time of the impugned advice, the retainer was limited to the review of, and provision of advice to FPPL about the terms of the draft agreements. To the extent, if any, that Mr Talbot's intention at the time is relevant to determination of the terms of the retainer, I do not accept his evidence that he intended to seek general advice from Mr Shelley about the "legal and commercial risks" of the agreements in the manner contended by the plaintiff.

3. The starting point is to determine the precise function specified in the retainer. It requires consideration of the course of correspondence and communication between FPPL and Mr Shelley between October 2008 and execution of the agreements in January 2009. Mr Lord, when he first contacted Mr Shelley, asked Mr Shelley to look at the drafts which were to be sent to him, and to provide advice about "everything relevant to the leases", but had advised Mr Shelley through Mr Brown that they were "relatively straight forward timber plantation leases." Mr Talbot's initial email to Mr Shelley of 27 October 2008 requested "your advice regarding the draft lease in due course" without any mention of any request for advice about "legal or commercial risk." Having received the drafts and having noticed inconsistencies between the two documents, Mr Shelley's email concerned simple drafting matters. Between the end of October 2008 and 1 December 2008 nothing more was said by Mr Talbot or anyone else to broaden the scope of the retainer. Nevertheless, during that period the board resolved to increase the area proposed to be devoted to forestry from 750 hectares to 1500 hectares, a proposal agreed to by Gunns. It did so following Mr Talbot's indication in an email of 30 October 2008 to bring forward the decision to increase the leased area to avoid the chance that Gunns may reconsider the amount of its offer for financial reasons. On 9 November 2008 Mr Talbot expressed a wish to confirm the proposed land area, and on 11 November 2008 Mr Henry conveyed to Mr Talbot that he and Mr Lord were "both strongly in favour of the economics."

4. Mr Shelley's first letter of advice dated 5 December 2008 concerns the contents of the draft agreements. The letter contains no reference to the effect of the rights holder becoming insolvent. No such advice had been expressly requested. The plaintiff contends that it is to be inferred from Mr Shelley's closing comment which invites instructions about the "commercial aspects of the documentations" that advice about such matters formed part of his retainer. To my mind, the remark supports the contrary conclusion. The comment makes clear the division between the "particular terms of the documentation" about which Mr Shelley's advice was sought and the "commercial aspects of the documentation" about which he was awaiting instruction.

5. Mr Talbot responded six days later posing "a few minor questions" for clarification. The only question of any relevance to the plaintiff's contentions in this action concerns the mitigation of damages clause in the draft WVEPL agreement. Mr Talbot's question assumed FPPL running the "commercial risk of a bad debt", and being "left with trees if WVEPL vacated". The advice which is sought is whether the agreement limits "our options to redress unnecessarily." Except in another context, no criticism is made of Mr Shelley's advice about the nature, purpose and effect of the mitigation of damage clause.

6. The plaintiff contends that the opening words of the "final question" posed in Mr Talbot's email to Mr Shelley of 14 December 2008 constitute a general, stand alone, request for advice about the position of FPPL "if either WVEPL and/or GPL … go into liquidation." The submission should be rejected. It ignores the context of the previous correspondence to which I have just referred, and the context provided by the following words in the same email and the covering email sent at the same time. The following words and the covering email clarify and qualify the scope of the advice sought. The words "what is the position if either WVEPL and/or GPL (or their successors in the event of future M&A) go into liquidation" do not pose a separate request for general advice about commercial risk, but are introductory to the following questions. Read in the correct context, Mr Talbot's email poses two questions. The first is whether, in the event of liquidation and sale of the part of the business which manages the forestry plantation to a "future person or company", that person or company would be bound by the agreements. It concerns the situation in which, following a liquidation of WVEPL and/or GPL, there was a buyer for "that part of their business (presumably the MIS part) that owns and manages the plantation". The second question is whether, to cover the event that the business was not sold, there should be a clause in the agreements to ensure that ownership of the trees and carbon rights reverted to FPPL. No complaint is made, and no issue arises, in this action concerning Mr Shelley's advice about the first question; that is, that a third party buyer of the relevant part of the business would be bound.

7. The plaintiff contends that the terms of Mr Talbot's email amount to a retainer which extended to, inter alia, identifying, considering and advising about "all possible risks" associated with those companies becoming insolvent. Only one relevant risk is identified by the pleading and submissions, that is the risk that "there was at least a distinct prospect that FPPL might be left to grow out the plantation itself with the need to outlay the expenses of doing so, but without the benefit of the fees payable under the Forestry Rights Agreements, as well as having to take steps to remedy a situation in which a significant part of Malahide is not generating any income." That is not a fair or accurate characterisation of the request for advice. Mr Shelley, even as the circumstances evolved, was not retained to give general advice of the commercial risks of the proposed transactions. Mr Talbot's email, as the covering email amply demonstrates, was sent in the context of determining the final changes which were to be made to the terms of the draft agreements, all within a very tight time line. The time pressure for reply does not absolve Mr Shelley from his contractual obligation or duty, but points strongly against a contention that the retainer was broadened as the plaintiff contends at such a late stage. Moreover, the terms of the question assume the very position which the plaintiff now claims it was seeking advice about. It is contrary to common sense and reason that the plaintiff was seeking advice about the commercial risk of liquidation when the request for advice assumed the liquidation of the companies, that there was no buyer for the businesses which operated the planation, that the lease payments were lost and that there was thereby a "bad debt." The only debt which could have been the subject of that reference was outstanding "lease" payments. The terms of the email assume liquidation and "therefore that we were to lose our lease payments (effectively as a consequence of a bad debt)." Mr Shelley was not asked to advise about the risk that a buyer for the forestry rights agreements could not be found because the question assumed that factual scenario to exist. Mr Shelley's opinion was sought about whether it was "unreasonable or unnecessary" to ensure that there was a clause that ownership of the trees would revert to FPPL in that situation. That advice was only relevant if FPPL was, in fact, left with the trees following insolvency. Mr Shelley was not asked to assess and advise about the risk of liquidation or the inability to sell agreements. The question about a clause related to the ownership of trees was not to minimise those risks but was, rather, directed to whether it was unreasonable or unnecessary to request a clause aimed at securing ownership in the event those risks eventuated. As Mr Talbot's email stated, he was "merely seeking to ensure that we have some come back in the event of it becoming a bad debt in the future, however unlikely the risk." The part of Mr Talbot's email which the plaintiff relies on as constituting the retainer it contends for, was a last minute query about whether such a title reversion clause should be requested and insisted upon.

8. The plaintiff correctly contends that Mr Shelley did not seek to clarify or qualify the terms of advice which was sought. In my view, the terms of the retainer were already sufficiently clear and qualified. As was pointed out by Gageler J in Calvert v Badenach at [57], performance of Mr Shelley's duty may also have required him not only to undertake the precise function specified in the retainer but to provide the client with advice on appurtenant legal risks. The possible existence of a duty of care in tort extending beyond the terms of the retainer, a "penumbral duty of care", was discussed in Doolan v Renkon Pty Ltd at [36]-[39]. It was not necessary for the court in that case to decide on whether such duty may exist. Here, the plaintiff does not rely on the existence of any penumbral duty because it contends that the retainer was already sufficiently broad. For the reasons I have already expressed, the circumstances of this case do not justify a conclusion that Mr Shelley assumed a duty, independent of the retainer, to give advice about legal and commercial risk in the broad terms the plaintiff contends.

9. In Doolan v Renkon Pty Ltd, at [36]-[39], the Full Court considered whether the scope of a solicitor's duty of care may depend, to some extent, on the nature of the client. The plaintiff contends that Mr Talbot was, to Mr Shelley's knowledge, an "inexperienced client", by reason of which a broader view of the scope of the retainer should be taken. In this case, even a broad or liberal construction of the terms of the retainer does not extend it in the manner contended by the plaintiff. The circumstances of this case may be distinguished from those which led the Full Court in Doolan v Renkon to state that the solicitor assumed duty to deal thoroughly with a vague and imprecise request for advice about a lease of a hotel/motel from a client with minimal experience in relation to commercial leases. In that case, although the request for advice was vague, the client made clear that she wanted to know whether there was any way that she could avoid having to comply with licensing notices which had been issued in respect to the leased premises. The Court found that the request gave rise to a duty to consider and give advice about a clause in the lease which may have given rise to the ability to surrender the lease, and thus avoid the obligation to comply with the notices. When no such advice was given, the duty was breached.

10. The situation in this case is quite different both as to the nature of the request for advice and the nature of the client. The characterisation of the "client" in this case as inexperienced or in special need of general advice should be rejected, whether the proposition is viewed objectively or subjectively, and whether the "client" being considered is Mr Talbot or the company. It was obvious from Mr Talbot's correspondence with board members and others members, the company documents, Mr Talbot's correspondence with Mr Shelley, and from my observations of him when giving evidence, that he is an intelligent and competent man. He is well able to formulate and express his views and concerns with clarity and detail, and commonly did so. The same appears from the evidence of his participation in the management of the farming business over many years. He had long experience in very senior positions in the navy. He was completing, or had just completed, a Master of Business Administration in advanced farm management at an agricultural college. Mr Lord told Mr Shelley that Mr Talbot would "think about everything and ask him questions and expect responses." Mr Lord told Mr Shelley that although the board had "delegated" the matter to Mr Talbot, that the other directors were "happy with the concept and with the other party", that it was "the right thing to be done" and it was "simply a matter of putting it in place legally."

11. Viewed objectively, it is at once to be remembered that Mr Talbot was not the defendant's client, although he was a representative of the client. I do not accept that he was the "guiding mind" of the company as that term is commonly used, although final approval of the draft agreements was delegated to him. The evidence establishes that, for many years, the business of the company was operated in a formal way. Board members were selected for their expertise and experience. Board meetings were conducted. Resolutions were passed and minuted. As Mr Lord explained, the views of Miss Talbot, and then Richard Talbot, were highly influential in that process. Although there is little evidence of the terms of the hereditary trust to which I have referred, it was Mr Talbot and his family who were going to bear the financial impact, and that "final decision making rested with me". I accept Mr Lord's evidence that the board would have not taken any step against Mr Talbot's wishes. However, that proposition is to be distinguished from the contention that the views of the other directors were entirely subjugated to Mr Talbot's views. Mr Henry and Mr Lord had conveyed that they were "both strongly in favour of the economics" of the proposed agreements. Nor do I accept that the ignorance about the "legal and commercial risks" claimed by Mr Talbot, if it existed, should be attributed to the company, just because the final terms of the agreements had been delegated to him. Given Mr Lord's experience and expertise, there could hardly have been anyone in Tasmania better placed than him to appreciate and assess the commercial benefits and risks of the proposed venture, including the risk to FPPL of and following "third party insolvency." The company had resolved in September 2008 to approve the leasing of land to Gunns, subject only to "professional advice regarding the lease agreement."

12. In his witness statement, admitted to evidence, Mr Shelley stated:

    "It was my understanding that Richard Talbot in the question he posed to me was seeking my advice on the consequences of liquidation of either GPL or Wesley Vale Engineering."

13. The plaintiff contends that Mr Shelley, by this evidence, makes a "frank concession" that he was asked to give unqualified advice about the "risk to FPPL in the event of counterparty insolvency." That submission mischaracterises that part of Mr Shelley's evidence and takes that paragraph in isolation from all of the evidence. It ignores the immediately following paragraph in the same witness statement in these terms: "I did not understand that I was being asked to provide advice to Richard Talbot about the commercial risks which might be faced by the plaintiff in the event of insolvency." It is for me to assess the credibility and reliability of Mr Shelley's evidence, but he did not make the "frank concession" which the plaintiff contends.

Mr Talbot's evidence

1. I turn to consider Mr Talbot's evidence, including his intention when seeking advice, to the extent that it is relevant to determination of the terms of Mr Shelley's retainer. This aspect of Mr Talbot's evidence will be relevant also to the question of breach and causation to which I will return.

2. At trial, Mr Talbot agreed that the company had resolved to approve the leasing of the land to Gunns "subject to professional advice regarding the lease agreement." His evidence was that he intended to seek Mr Shelley's advice "in relation to any issues that I discerned from the documents." More will be said in these reasons about Mr Talbot's evidence on specific issues. However, beyond the general statements just referred to, I have considerable reservations about the reliability of his evidence in critical respects. As I have previously commented, he is an obviously intelligent and competent man. His evidence on some collateral matters was accurate and precise. Mr Talbot demonstrated the ability to give accurate evidence about matters of considerable detail. However his evidence about what he intended to ask Mr Shelley and what he said he took from Mr Shelley's advice strains credulity. For the most part, I find that is because of the not unnatural tendency, with present knowledge of subsequent events, to seek to support the plaintiff's case by characterising his request for advice from Mr Shelley in 2008, and his response to the advice, as something that it was not. I found his evidence, particularly when critical issues were canvassed, to be rambling and non-responsive. When cross-examined he was argumentative and, at times, evasive. Senior counsel for the plaintiff submits that such perceptions of his evidence flow from the aggressive nature of the cross-examination. Although I think that sometimes contributed, I observed the same tendencies when Mr Talbot answered during examination-in-chief. He repeatedly attempted to argue the plaintiff's case rather than give responsive answers to questions about facts. He overstated evidence and displayed an unwillingness to make concessions which he perceived were adverse to the plaintiff's case, even when correctness of the proposition was obvious. Counsel for the defendant made some criticisms of the credibility of some parts of Mr Talbot's evidence which are not justified. For example, Mr Talbot was strongly criticised for his evidence about the reason he put in place a borrowing facility from Agricultural Holdings (Jersey) Pty Ltd, the shareholding company, for restocking with trade cattle in the event that the proposed forestry agreements did not proceed. It was suggested that he lied about the evidence, but I reject that characterisation of his evidence. Mr Talbot's account of the financial position of the company at the time, and the nature of and reason for the facility, was borne out by other evidence and was proved to be correct. If anything, however, his ability to give coherent and accurate evidence on that subject matter emphasises the unsatisfactory nature of other aspects of his evidence. When it came to his evidence about what he intended to ask Mr Shelley, I reject his evidence in certain important respects. When cross-examined about whether, at the time, he appreciated that a person may lose money if a debtor becomes bankrupt, he disclaimed any "knowledge of the law" about the proposition and claimed that bankruptcy was "rather complex". When asked to explain what he thought a "bad debt" was he gave a protracted answer about it being "prudent" to write down the debt in the accounts until "you go through a legal process." In my view, Mr Talbot well understood what he was being asked and why. The questions went directly to the terms of the questions he asked Mr Shelley in the critical final email. His answers, in my view, disclose an attempt to avoid a frank and direct answer with an appreciation that such an answer may weaken the plaintiff's case.

1. As is stated in counsel for the plaintiff's written closing submissions, the "foundation" of the plaintiff's claim in misleading and deceptive conduct is the asserted representations made by Mr Shelley about the value of the agreements and the chance of disclaimer. The plaintiff pleads that Mr Shelley's advice was "false and inaccurate" and thus misleading and deceptive:

   ·     "in that" in liquidation, both GPL and WVEPL surrendered the Forestry Rights Agreements, and the liquidator did not sell the agreements;

   ·     Mr Shelley "could not predict" the matters related to the future value of the agreements, the possibility of sale of the agreements and the chance the liquidator would sell or retain the agreements as particularised in the statement of claim, par 22(d) to (i).

2. The terms and context of the statements made by Mr Shelley in his advice are to be borne firmly in mind. His statements that the agreements would "no doubt be sold off", that "in reality, disclaimer of the agreements would not occur as the asset is a valuable asset", and that "the liquidator would invariably seek to sell the value of the agreement" were advanced as reasons for why a clause about ownership of trees was not, in his opinion, necessary. The pleading at par 14 of the statement of claim recognises this to be so. Viewed objectively and in context, the statements were not representations about the extent of the risk that the plaintiff would be left without income from the agreements in the event of insolvency of one of the forestry companies, and were not misleading or deceptive, or likely to mislead and deceive in that context.

3. Were the statements, viewed objectively, nevertheless misleading or deceptive or likely to mislead or deceive? The plaintiff relies on the evidentiary provisions in the Fair Trading Act, s 3, which provide:

   "(7)  For the purposes of this Act, where a person makes a representation with respect to any future matter, including the doing of, or the refusing to do, any act, and that person does not have reasonable grounds for making the representation, the representation is taken to be misleading.

   (8)   For the purposes of the application of subsection (7) to a proceeding concerning a representation made by a person with respect to any future matter, that person is, unless he or she adduces evidence to the contrary, taken not to have had reasonable grounds for making the representation.

   (9)   Subsection (7) does not limit the meaning of a reference in this Act to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead."

4. The first issue to be addressed is how the terms of s 3 sit with s 11 of the Act which provides:

   "11      Representations

   (1)   For the purposes of this Act, where a person makes an inaccurate representation with respect to any future matter (including the doing of, or the refusing to do, any act) the representation shall be taken to be misleading unless the person has reasonable grounds for making the representation.

   (2)   For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a person with respect to any future matter, the person shall, unless the person adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.

   (3)   Subsection (1) shall be deemed not to limit the meaning of a reference in this Act to a misleading representation, a representation that is misleading in a material particular, or conduct that is misleading or is likely or liable to mislead."

5. It will be observed that the provisions are almost identical except that s 11(1) applies only to representations which are "inaccurate". In contrast, s 3 has application to representations with respect to a future matter, not just inaccurate representations. The Act itself provides no guidance as to how the provisions are to operate together. The relevant parts of s 3 were included as an amendment to the Act in 2003, whereas s 11 was in the Act in its original form. The defendant contends that s 11 is to be applied, not s 3, because s 3 is expressed to apply only if the contrary intention appears, and s 11 must prevail as the provision expressly dealing with representations said to be "inaccurate". I would not so confine the operation of s 3. In any event, I see no reason to conclude that the evidentiary operation of the provisions makes any substantial difference. It is as was assumed by Blow CJ without analysis in Kronenberg v Bridge [2014] TASFC 10 at [53]:

   "Section 11(2), like s 51A(2) of the Trade Practices Act, imposed an evidential burden, not an onus of proof: McGrath v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2; (2008) 165 FCR 230; North East Equity Pty Ltd v Proud Nominees Pty Ltd [2010] FCAFC 60; (2010) 269 ALR 262."

6. Both s 3 and s 11, like s 51A(2) of the Trade Practices Act impose an evidential burden on the defendant to adduce evidence on the issue of whether there were reasonable grounds for making the representation, but no persuasive onus falls upon the defendant to prove that it had reasonable grounds: North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1, 285 ALR 217 at [28]. Once the defendant adduces evidence of reasonable grounds, the plaintiff must satisfy the dispositive burden of showing that the defendant did not have reasonable grounds for making a representation: North East Equity at [30].

7. To my mind, the statements made by Mr Shelley were expressions of opinion. A statement of that character cannot be shown to be proved to be "inaccurate" just because it was later proved to be wrong. The character of the representations is to be judged at the date of making them, and not with the benefit of hindsight. The assertion that, as events occurred years later, that the Forestry Rights Agreements were surrendered and not sold, does not make the representations at the time they were made misleading or deceptive, or, in my view, inaccurate. At best, it may provide some indication of whether the representations, at the time they were made, were made on reasonable grounds. As Mason P observed in City of Botany Bay Council v Jazabas Pty Ltd [2001] NSWCA 94, [2002] ANZ Conv R 300:

   "In determining whether a person had reasonable grounds for expressing an opinion or making a prediction as to a future matter, it is necessary to judge the matter as at the date of the representation (see Lyndel Nominees Pty Ltd v Mobil Oil Australia Ltd (1997) 37 IPR 599, Sykes v Reserve Bank of Australia (1998) 88 FCR 511 at 513). This does not preclude examining evidence of later events which may throw light upon the overall probabilities (cf Cummings at 565). The overall probabilities and circumstances may offer the most reliable guidance (ibid at 566). However, it remains vital to guard against hindsight illusion."

8. Such statements of principle reinforce my view that the accuracy or otherwise of a representation as to a future matter is to be determined at the time it was made. As to whether a statement is inaccurate or misleading I conclude that the same considerations apply, whether s 11 or s 3 is to be applied. The Full Court of the Federal Court in Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82, stated at 88:

   "A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or by implication) that the maker of the statement had a particular state of mind when the statement was made and, commonly at least, that there was basis for that state of mind. If the meaning contained in or conveyed by the statement is false in that or in any other respect, the making of the statement will have contravened s 52(1) of the Act.

   [T]he incorrectness of an opinion (assuming that can be established) does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any, or any adequate, foundation.

   The applicants argued that, nevertheless, the statement of an incorrect opinion is misleading or deceptive or likely to mislead or deceive merely because it misinforms or is likely to misinform. An expression of opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps there is basis for the opinion. At least if those conditions are met, an expression of opinion, however erroneous, misrepresents nothing."

9. However, in Sykes v Reserve Bank of Australia (1998) 88 FCR 511, Heerey J summarised the law to be applied to representations concerning future matters at 513 as follows:

   "If there was a representation as to a future matter, s 51A requires the representor to show:

   •   some facts or circumstances

   •   existing at the time of the representation

   •   on which the representor in fact relied

   •   which are objectively reasonable and

   •   which support the representation made."

10. It is for the representor to identify the facts or circumstances actually relied upon to support any assertion that they were objectively reasonable and whether they support the representation made.

11. Mr Shelley gave evidence about the grounds for his advice in his witness statements and in cross-examination. Apart from his initial contact with Mr Lord, all of the instructions he was given were from Mr Talbot in writing. Mr Shelley knew little about the plaintiff's property except that Mr Lord told him that the farm comprised "20,000 acres" and that 750-800 hectares of less productive land, with possibly a further 750 hectares the following year, were intended for forestry. Mr Shelley was given no information about the plaintiff's farming operation or business. As to the agreements, he knew only what the terms of them disclosed. He had not acted for forestry companies but had acted for some farming clients in relation to proposed forestry plantation agreements. He understood, at that time, that the Gunns group was "the foremost public company in Tasmania … with very substantial business interests", and he had no knowledge that any company in the group was "at risk of insolvency".

12. Mr Shelley's evidence is that he understood, at the time, that the liquidator of a company has a statutory duty to collect and realise the assets of the company to the benefit of the creditors, that the agreements gave ownership of the trees to the forestry company and the trees were physical assets and would have value, and that a liquidator would discharge the duty to the creditors to "deal with the assets of the companies, including the rights to the trees, by realising their value for the benefit of creditors". Mr Shelley considered, as Gunns Ltd in December 2008 was a substantial, and publicly listed forestry company, that its plantation assets were of value, and the value would increase as the plantations matured.

13. I accept that the representations made by Mr Shelley concerning the value of the agreements and the likelihood they may be sold by a liquidator relate to future matters. On one view, the statements about the value of the agreements are with respect to a current matter, but the better view is that they concern also whether the agreements will have future value in the event of liquidation. The representations that the "agreements as an asset of the company would no doubt be sold off by the company liquidator" and that the "liquidator would invariably seek to sell the value of the agreement" relate to future matters. They involve a prediction about something which may or may not happen in the future.

14. I think that there were reasonable grounds for Mr Shelley to represent that the liquidator would "invariably seek to sell the value" of the agreements. The representation states nothing more than that the liquidator would try to sell them. At the time that statement was made, there were reasonable grounds for making it. The representations about value and the prospect of sale in liquidation are representations of a different nature. Nothing Mr Shelley took into account when he made the representations in his email of 15 December 2008 were wrong. I accept that the Gunns companies were a very substantial corporate enterprise. I accept that the trees would have had value, increasing as the plantation matured. However, his representation was made on the assumption that Gunns Ltd was in liquidation. The financial viability of the company was not, in those circumstances, grounds for a prediction expressed in confident terms that the agreements would have value or were likely to be sold. In those circumstances, his representations that the agreements would "no doubt be sold off" by a liquidator, and that the agreements were "valuable assets" must be taken to be misleading.

Causation

1. It is not strictly necessary, in light of the findings I have made about whether Mr Shelley breached his retainer or duty to the plaintiff, to address the issue of causation in that respect. However I will nevertheless address the issue of causation. Although causation is a logically distinct question to the issues of duty and breach, there are practical overlaps in the resolution of the factual issues. It is necessary for me to determine whether the plaintiff suffered loss and damage by the contravention of the Fair Trading Act I have found established.

2. The plaintiff's claim is put on a "no transaction" basis, that is, it claims that as a result of what Mr Shelley said, or failed to say, that it entered into the agreements when it would not otherwise have done so. To succeed in its action it must establish that proposition on the balance of probabilities. Causation in the contractual and tortious claim is to be assessed by reference to the Civil Liability Act, s 13. It is a prerequisite to a decision that a breach of duty caused particular harm that the breach was a necessary element of the occurrence of harm: s 13(1)(a). If it is relevant to deciding factual causation to decide what the person who suffered harm would have done if the person who was in breach of the duty had not been so in breach, the "the matter is to be decided subjectively in the light of all relevant circumstances", s 13(3)(a), but any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest, s 13(3)(b).

3. The plaintiff bears the onus of proving all facts relevant to the issue of causation: s 14.

4. By the Fair Trading Act, s 37, damages are recoverable by a person who suffers loss or damage "by conduct of another person that was done in contravention of a provision of this Act." There must be a causal connection between the identified contravening conduct and the loss and damage: Campbell v Backoffice Investments Pty Ltd (above). Whether the connection is established is a question of fact to be determined by reference to common sense and experience and one into which policy considerations and value judgments necessarily enter: March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; Henville v Walker [2001] HCA 52, 206 CLR 459.

5. Notwithstanding the terms of the Civil Liability Act, s 13(3)(b), which do not apply in any event to the Fair Trading Act claim, I made a ruling at trial permitting the admission of evidence from Mr Talbot, as an individual rather than the company, about what he would have done had he been given the advice he claims that he should have been. It is first to be noted that when he came to give evidence, he did not, in my assessment, clearly enunciate what advice he claims he should have been given. In his examination-in-chief attempts were made for him to do so. He was asked to identify the "concerns" in his mind when communicating with Mr Shelley. He answered:

   "… I did not understand that the other party to this deal would somehow not pay me regardless of whatever happened to them, whoever might succeed them, and that we did not receive the rental income that I believe I was due and I wished to be assured that there was nothing in the context of Tasmanian law governing this agreement that meant that I would be left without receipt of that rental income. That was the clear decision. It was a binary decision for me. If this is not what I thought then I am not signing the agreement."

6. Later in his evidence he was asked about his response to Mr Shelley's email of 15 December 2008 which stated: "Many thanks for your response, I am content to follow your advice regarding the risk in the event of liquidation." In evidence he claimed that "liquidation" was the central issue and all the other issues were minor – "the central question was thin binary issue of the protection." I took his evidence to mean protection against loss of income under the agreements in the event of insolvency. Mr Talbot gave no evidence that his or the plaintiff's decision to enter into the agreement was related in any way to Mr Shelley's advice about the necessity or otherwise for a clause dealing with ownership of trees in the event of insolvency.

7. I treat the evidence about what Mr Talbot would have done had Mr Shelley acted otherwise with caution for the reasons explained by the High Court in Chappel v Hart (1998) 195 CLR 232 at 246, 272-3; Rosenberg v Percival [2001] HCA 18, 205 CLR 434 at [26], [87]-[89], [158] and [221]; Vairy v Wyong Shire Council [2005] HCA 62, 223 CLR 422 at [226]. For reasons substantially expressed earlier, I do not accept Mr Talbot's evidence in critical respects. The evidence of the surrounding circumstances and other objective facts, when viewed as a whole, are a more reliable guide, and lead me firmly to conclusions contrary to those asserted by Mr Talbot. I accept the submission of counsel for the defendant, that Mr Talbot's evidence relevant to the critical questions was contradictory, artificial and implausible. In general terms I found his evidence, both in examination-in-chief, and cross-examination, to be heavily influenced by a retrospective reconstruction of what influenced, or did not influence, the decision to proceed with the agreements.

8. This issue is to be considered in light of my finding that Mr Shelley was not retained, and had no duty, to give general advice about the risk associated with the liquation of the companies. It was not part of his retainer or duty to identify and advise about "all possible risks". I reject Mr Talbot's assertions, often put in argumentative terms, that he was looking for such advice or that he treated Mr Shelley's comments as such advice. His answer, set out above, when asked about what his concerns were when Mr Shelley's advice was sought, betrays the reconstruction. As best I can understand it, the substance of what Mr Talbot contended by his answer is that he wanted to be, to use his words, "assured that there was nothing in the context of Tasmanian law governing this agreement that meant that I would be left without receipt of that rental income. That was the clear decision." The answer suggests that Mr Talbot wanted the agreements to secure the right to the rental income regardless of what happened to the other contracting party, that he ought to have been advised if that were not so, and he would not have entered into the agreements otherwise. That this was his intended meaning seems to be confirmed by his answer in cross-examination that his state of mind at the time was "I want the lease income. I don't care how unlikely it is." I am satisfied that the intended effect of Mr Talbot's evidence is that he wanted to be assured that the income stream from the agreements was guaranteed, and expected to be told if that were not the case. The mere statement of those propositions, when considered in all the circumstances leading up to, and the terms of, his request for advice, conveys their improbability. I reject his evidence. It is entirely inconsistent with the context and terms of his request for advice and bears little if any relationship to the advice he received. However the question is posed, I do not accept that Mr Shelley's advice was a necessary element of the plaintiff's loss, or that loss was caused "by" it. I do not accept the contention that the plaintiff company would not have entered into the agreements if Mr Shelley had not included in his advice the comments he made about the value and prospect of sale of the agreements in the event of insolvency. The question might be framed in terms of what would have occurred if Mr Talbot had been told that Mr Shelley could not reliably predict whether the agreements had value in the event of insolvency or could not be sold. Mr Talbot said nothing about what would or would not have occurred if Mr Shelley had informed him that he could not predict, one way or another, the agreements would be disclaimed or have value in liquidation. It was not a question addressed by the plaintiff. However, I am not persuaded that the plaintiff would not have entered into the agreements if Mr Shelley had given advice to Mr Talbot to that effect. Mr Talbot did not ask for such advice. His request for advice was directed to ownership of the trees. His request for advice assumed liquidation, assumed that there would be no buyer for the agreements, and assumed loss of the lease payments. For him to contend that he acted on Mr Shelley's advice on the basis that it gave him the assurance about the security of the rental income he was looking for is, I find, highly implausible. The content and context of all of the lead-up correspondence is contrary to his assertion that "the risk of liquidation" in the sense of the potential for loss of the lease payments, was, by the time of his critical email to Mr Shelley, the "critical issue" he wanted Mr Shelley to address. His post-advice comment did not, I find, bear the broad meaning which the plaintiff now seeks to attribute to it. In short, I am not satisfied on the balance of probabilities that anything Mr Shelley said or did not say in his email of 15 December 2008, apart from his advice about successors being bound by the agreements, and the necessity or otherwise for a clause about ownership of trees, was a necessary element of the plaintiff's decision to enter into the agreements. Nor am I satisfied, to use the words of the Fair Trading Act in accordance with their proper meaning, that loss suffered by the plaintiff was "by conduct" of Mr Shelley in contravention of the Act. It was not what Mr Shelley said or did not say in any other respect which influenced or induced the plaintiff company to enter into the agreements. I find that Mr Talbot was not misled or deceived by Mr Shelley's conduct in any material way.

1. Mr Talbot knew that the plaintiff, by entering into the agreements, was taking a commercial risk arising from threats to the financial position of the Gunns companies. He, and the other board members, had balanced the attractive potential returns to be achieved from forestry against the return which could otherwise be achieved from the land which was to be allocated away from grazing. Over time, without resort to Mr Shelley's advice, a decision was made to increase the area to be so allocated, driven by the prospect that the Gunns companies may not remain willing to offer the terms then available. I accept that Mr Talbot was to consider whether the risks were "manageable", but he did not look to Mr Shelley for that advice, except to the extent that he asked about a clause to ensure the "come back" of ownership of the trees in the event of a "bad debt". I reject Mr Talbot's assertion now made that the terms of Mr Shelley's response were critical to the decision to sign the agreements, either for Mr Talbot at the time, or for the company.

2. There are many aspects of Mr Talbot's evidence which cause me to doubt the correctness of his evidence. It is not necessary to state them all. Some have already been mentioned. In the course of his evidence, Mr Talbot asserted no knowledge of what happens if a company "goes bust", even though he used that term in the course of his correspondence. He asserted that his concern was the security of the lease income, but was evasive when questioned about the meaning of the term "bad debt" which he had used. The extent of his claimed ignorance of the effect of liquidation did not ring true. His evidence that he thought that there may be some form of government subsidy to guarantee lease payments defies credulity.

3. The terms of Mr Talbot's email make clear that the risk, in the event of liquidation, of disclaimer and bad debt was appreciated and understood. Mr Shelley was not asked about the "extent" of the risk. Nothing Mr Shelley said or did not say about a matter which was apparently so "critical" was raised with other board members. The plaintiff submits that Mr Lord's evidence about risk is irrelevant to causation because the decision of whether or not to proceed had been entirely delegated to Mr Talbot. I do not accept the submission. Consistently with my findings about the terms of the retainer, although I accept that the company would not have entered into the agreements against Mr Talbot's wishes, it is quite a different proposition to assert that the decision of the company to enter into the agreements would not have occurred if Mr Shelley had not said what he did or indicated an inability to predict the contemplated future events. Mr Lord, whose evidence I accept, was aware of the risks of insolvency and liquidation, had assessed them, and was comfortable with the risks because of his belief in the long term value of the plantation. With all Mr Lord's extensive knowledge and experience in forestry and commerce, he thought that the risk of insolvency was not significant in the decision-making of the company and that he "had every confidence that the market would be there for those trees and that someone would take over the rights to those trees." As far as can be determined, Mr Henry was of the same view, and had expressed that he was "strongly in favour of the economics." Mr Lord gave evidence that he recognised that it was quite possible that in the event that the Gunns group went into liquidation that a liquidator would disclaim the Forestry Rights Agreements and the trees would revert to ownership of the Fingal Pastoral. The overwhelming thrust of Mr Lord's evidence is that, at the time, he did not regard the risk of that happening as significant but that, in any event, it was a risk he, as a director of the company, was prepared to run.

4. In cross-examination of Mr Talbot, the following exchange occurred:

   "MR MCELWAINE SC:     In fact, your instinct told you, as at 3 September 2008, that the forestry plantation would be good because you could secure an income greater than the return that you could otherwise derive from grazing, that's correct, isn't it?

   MR TALBOT:  Subject to the risks being manageable, which is why I put so much effort into trying to find out about it."

5. However, Mr Talbot did not seek any advice about risk when he first responded to Mr Shelley's initial advice. The question he was asked was in the nature of an afterthought to the further advice. And when he did make the request it did not specifically refer to the type of risk he now complains he was incorrectly advised about.

6. I am not satisfied that causation is established in contract, tort or under the Fair Trading Act.

Damages

1. In light of my findings it is not strictly necessary for me to assess damages. However there are some limited factual findings which I should make in the event that I have fallen into error in any of the determinations I have made. The plaintiff's claim is calculated on the basis that the plaintiff would not have entered into the Forestry Rights Agreements but for the advice. Had the agreements not been entered into the plaintiff would have continued to use the land for grazing, apart from the area of 36.7 hectares which was managed as native forest. The plaintiff ceased operations on the total land area of 1718.6 hectares by the end of the 2009 financial year and the trees were planted. The plaintiff's livestock herd was reduced somewhat as a result.

2. Following liquidation of the forestry companies, the plaintiff reinstated 382.3 hectares of the plantation area to grazing. It did so by, in 2015, clearing the plantation, a year later establishing and harvesting a break crop, and in the following year re-establishing pasture and replacing fences. The plaintiff, by delaying removal of that part of the plantation, and subsequently deciding not to remove the rest of the plantation at that stage, did not fail to mitigate its loss. A claim that the plaintiff failed to mitigate was not pressed by counsel for the defendant in the closing address. I find that those decisions taken by the plaintiff were reasonable. It took some time, and many exchanges with the liquidators, before the plaintiff could reasonably proceed with removal of trees. I find that the costs incurred for removal of trees and re-establishment of pasture were reasonably incurred.

3. I accept the plaintiff's contention that it is almost certain to return the plantation land to grazing land after harvesting the remaining trees, predicted to occur in 2025 and 2026. After the trees grow to maturity they will be harvested and the land cleared. After establishment and harvesting of break crops for about a year, the pasture is to be re-established. There will be some restocking.

4. The expert evidence fell into four main categories. The first concerned evidence about agronomy and concerned the management of the farming business at Malahide before the plantation was established, the process of re-establishing pasture on part of the plantation area in 2014 which came to be known as "Area R", and the proposed return of the balance of the plantation area to pasture in 2025. The second area of evidence concerned the method and cost of restocking the land after return to pasture after the plantation is harvested. The third area of evidence was forestry and concerned the cost of clearing the plantation from Area R in 2014, the likely yield from harvesting trees from the balance area in 2025, and the process and cost of removal of stumps prior to reinstatement of the land to pasture following harvest. The final area of expert evidence takes into account the factors to which I have referred and, at a high level of abstraction, concerned the accounting methodology for calculating the loss and damage suffered by the plaintiff.

5. As the trial proceeded, most of the controversy about the assessment of damages evaporated. Most relevant facts were agreed either as a result of joint expert conferences prior to trial or in the course of concurrent expert evidence during the trial.

6. A discounted cash flow (DCF) model for calculation of the loss has been used. The model applies a present value to the difference between the historic and future cash flow of the plaintiff's business had the agreements not been entered into and the land had continued to be used for grazing, and the position as it is, namely that the land will be converted back to pasture after the remaining plantation is harvested. Subject to the following matters, I accept the evidence of Martin Rees, the expert accountant engaged by the plaintiff, who produced a comprehensive report and gave evidence at the trial. I accept Mr Rees' opinions about the model and result of application of the model. As counsel for the plaintiff correctly pointed out in closing submissions, there are only differences in opinion on a handful of the inputs to the model. Assuming the model is applied, and it is not necessary for me to determine whether it is correct to do so; resolution of unresolved differences in the input criteria is all that is required. Once the differences are resolved, calculation of the loss is a relatively simple matter, for those responsible for such things, of inputting the amended criteria into the calculation of the model. Assuming application of the model, there is no dispute about its application. It is a matter of mathematics.

7. The areas of difference are these:

   (a)       the discount rate to be applied;

   (b)       pasture establishment costs;

   (c)       fencing costs;

   (d)       credit for use of the plantation land for grazing.

8. Discount rates. Under the DCF approach, forecast cash flows are discounted back to a valuation date, generating a net present value for the cash flow stream of each scenario. Mr Rees calculates the discount rate by reference to the weighted average cost of capital, comprising both equity and debt. He has applied a differential discount rate for forestry cash flows on the one hand, and other cash flows, grazing, land clearing and pasture establishment, on the other. In Mr Rees' opinion, the higher discount rate for forestry is justified by the comparatively higher risk of forestry operations arising from fluctuations of and unpredictability of market demand, exchange rates, and volume, and the lack of knowledge of the plaintiff in running forestry operations.

9. The defendant's expert, Dr Fisher, adopted what he described as an economist's approach which, with respect, I would not adopt. On the other hand, other experts, Mr de Fegely and Mr Meynink, expressed different views about the extent of the forestry associated risks. Both described an outlook for forestry of ongoing demand for timber exceeding supply, and other ways of controlling market risks. I was impressed by the evidence of the defendant's expert accountant, Mr Harvey Gibson. He differed from Mr Rees in few respects, but expressed his opinion that a lesser discount rate for forestry was appropriate. I have concluded that a somewhat higher discount rate for forestry is justified, but it should be at the moderated rate suggested by Mr Gibson, 9.1%. I accept Mr Rees' evidence that the discount rate for other enterprises should be the 7.58% he specifies.

10. Pasture establishment costs. The evidence of the pasture establishment costs was largely agreed. There was some confusion about which figure was used in the final revised calculations tendered at trial. The difference to the result is minor. I see no need to make a finding about it. It can be determined elsewhere if not agreed by the parties.

11. Fencing costs. One aspect of the plaintiff's calculated loss in the DCF model is "Plantation fenceline area and replacement budget". It includes allowance for actual costs incurred for fencing in 2016 and 2017. It also includes costs to be incurred in 2026 and 2027 for the replacement of internal fences. There is no dispute about the cost of fencing. The issue is whether the remaining fences all need to be replaced, and if new fences are built, the plaintiff will end up with better fences than it otherwise would have. The plaintiff's farm manager, Edward Beacham, gave evidence about the fences. He agreed that some of the fences which were damaged or destroyed in the course of the forestry planting activities were nearing the end of their useful life. It was standard stock fencing which, he said, would normally last 15 to 20 years. The amount claimed by the plaintiff for future fencing presumes replacement of some existing fences. No reduction is made for the possibility that repair of some fences, rather than replacement, may be possible. There is no evidence of the difference in cost, or how much of the fencing may be able to be repaired. It also seems clear that there will be some betterment. Doing the best I can, and adopting a broad approach, I would discount the claim for fencing to allow for both factors by 40%.

12. Utilisation of plantation land for grazing. This difference in approach concerns whether there should be a reduction in the claim for the benefit to the plaintiff of grazing on the plantation land. The opinion of the plaintiff's expert farm consultant, Mr McEachern, was that he had already allowed for the benefit in his calculation of the plaintiff's earnings before interest, lease and tax costs. Mr Gibson, the defendant's expert, thought that the method used by Mr McEachern did not fully offset the benefit when calculating the "as is" case, which carries the costs associated with the plantation. There was a general view that calculation of any such benefit is complex, although Mr Armstrong, for the defendant, thought an estimate is possible. My impression is that the difference it will make to the overall claim is small, and the assessment of any benefit carries sufficient doubt that there should be no reduction in the claim to account for it.

13. Betterment generally. One further submission made on behalf of the defendant remains to be addressed. It is that there should be a reduction in the claim for betterment to the pasture upon re-establishment of the grazing land. In other words, that the plaintiff will end up with better pasture on the re-established grazing land than would have been the case had the agreements not been entered into. I am not persuaded that there should be any allowance made for betterment in this respect. I accept the opinion of Mr McEachern, based on his general expertise and actual experience of Malahide, that the re-established pasture will not have any material increase in carrying capacity than those which otherwise would have existed.

Orders

1. For the reasons I have expressed the plaintiff's action must be dismissed. There will be judgment for the defendant.