Food and Beverage Australia Limited v P J Nash Pty Ltd - [2019] SASC 208

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
FOOD AND BEVERAGE AUSTRALIA LIMITED v P J NASH PTY LTD & ANOR
[2019] SASC 208
Judgment of The Honourable Justice Doyle
6 December 2019
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - RELATIONS BETWEEN PRINCIPAL AND THIRD PERSONS - RIGHTS AND LIABILITIES OF PRINCIPAL IN RESPECT OF CONTRACTS OF AGENT - IN GENERAL
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - REPUDIATION AND NON-PERFORMANCE - REPUDIATION - WHAT AMOUNTS TO REPUDIATION
The plaintiff, Food and Beverage Australia Limited (FABAL), was the responsible entity of a registered managed investment scheme known as the Tasmanian Cherries Project (the Project). The Project was promoted by Mr Nash (on behalf of PJ Nash Pty Ltd (PJN)), Mr Day (on behalf of FABAL) and Mr Holt (on behalf of Holt Norman & Co); FABAL was to be the responsible entity, PJN was to be responsible for the sale and marketing of the cherries throughout the life of the Project, and Holt Norman & Co’s role would be to sell the interests in the Project.
The Project was undertaken on land (the Land) owned by Aussie Cherries Limited (ACL). ACL also engaged in its own right in the business of the cultivation, harvesting, marketing and sale of cherries on the Land. It follows that both the Project and the separate business of ACL were conducted on the Land.
Various agreements governing the operation of the Project were entered between the various entities. One such agreement was the Cherry Marketing Agreement (CMA) entered into between FABAL, ACL and PJN and dated 20 December 2011. Among other things, the CMA required that PJN pay FABAL, on behalf of the Project and ACL, the net proceeds from the sale of the cherries.
These proceedings concern a dispute regarding the payment of the proceeds from the sale of cherries from the 2014/15 harvest. In December 2014, ACL directed that PJN pay it, rather than FABAL, the proceeds from the sale of the cherries from the 2014/15 harvest; PJN did not ultimately pay any of the proceeds to FABAL, rather, it acceded to ACL’s direction and paid the net proceeds of $1,125,581 to ACL instead.
It is FABAL’s case in these proceedings that the failure to pay it the net proceeds of the 2014/15 harvest involved a breach of the CMA by PJN. In its primary claim, FABAL seeks the net proceeds of $1,125,581 in debt or by way of damages for breach of contract. In the alternative, FABAL seeks to recover the portion of the net proceeds referrable to the Project cherries (as opposed to ACL’s cherries). On FABAL’s case, this was 13.9 per cent of the net proceeds, or $156,456.
PJN defends FABAL’s claims in debt and for damages at various levels.
In relation to the net proceeds from the sale of the Project cherries, PJN contends that only about 5 per cent and not 13.9 per cent of the net proceeds related to the Project cherries. PJN further contends that FABAL is not entitled to recover these proceeds by way of debt because it did not perform the work required of it in respect of the 2014/15 harvest; and in respect of FABAL’s claim for damages, it has not established that it suffered any loss by reason of the failure to pay it this sum.
In relation to the net proceeds from the sale of the ACL cherries, PJN contends that its failure to pay these proceeds to FABAL did not involve any breach of the CMA by it. It contends that ACL had terminated or withdrawn FABAL’s authority to receive payment of the proceeds from the ACL cherries (by purporting to terminate an Orchard Management Agreement (OMA) that was entered into between ACL and FABAL), with the result that PJN’s obligation to pay FABAL under the CMA was either frustrated or otherwise fell away. Alternatively, payment of the net proceeds to ACL was sufficient to discharge PJN’s obligations to FABAL under the CMA. PJN further contended that even if it remained obliged to pay FABAL, FABAL was not entitled to recover the unpaid proceeds by way of debt. Rather, it was confined to the recovery of damages for any loss it suffered. The only such loss asserted by FABAL was its inability to set off the sum it claimed it was owed by ACL. PJN denied FABAL was entitled to recover damages reflecting any sum owed by way of set off on the grounds that any such loss was either not caused by PJN’s breach or too remote.
Held (per Doyle J):
1.      PJN has not established a breach, let alone a repudiatory breach, of the OMA by FABAL.
2.      Alternatively even if the OMA had been validly terminated by ACL, it would not have disentitled FABAL from relying upon its rights to be paid the net proceeds of the sale of the harvested cherries under the CMA.
3.      ACL’s purported revocation of FABAL’s authority to require or receive payment of the proceeds of sale from PJN under the CMA was ineffective, as ACL was not entitled to unilaterally withdraw such authority.
4.      The CMA was not frustrated, as the OMA was not validly terminated and, in any event, the CMA was itself an independent and sufficient source of FABAL’s agency or authority to receive the net proceeds.
5.      PJN has failed to establish any repudiation of the CMA by FABAL. Further, and in any event, PJN did not accept any repudiation of the CMA and/or elected to affirm that agreement.
6.      The payment of the ACL cherry proceeds to ACL was sufficient to discharge PJN’s obligations in respect of the ACL cherry proceeds under the CMA. As a result, FABAL’s claim in debt or for damages for breach of contract fails in respect of the ACL cherry proceeds.
7.      ACL’s direction to PJN did not extend to the Project cherry proceeds, and in any event FABAL was not acting as agent for ACL in receiving the Project cherry proceeds under the CMA. Accordingly, the payment of the Project cherry proceeds to ACL was not a basis for discharging PJN’s contractual obligation under the CMA to pay that portion of the net proceeds to FABAL.
8.      FABAL was, and remains, entitled under the CMA to payment by PJN of the net proceeds from the sale of the Project cherries as a contractual debt. The proper percentage of the net proceeds recoverable is 13.9 per cent. Accordingly, FABAL is entitled to judgment against PJN in the amount of $156,456.
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; Byrnes v Kendle (2011) 243 CLR 253; Bailey v Angove’s Pty Ltd [2016] UKSC 47; Temple Legal Protection Ltd v QBE Insurance (Europe) Ltd [2009] EWCA Civ 453; Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337; Shevill v Builders Licensing Board (1982) 149 CLR 620; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623; Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141; CFI Rentals Pty Ltd v Roussos [2017] QCA 308; Mooney v Williams (1905) 3 CLR 1; Atkinson v Cotesworth (1825) 3 B & C 647; 107 ER 873; Pople v Evans [1969] 2 Ch 255; Young v Queensland Trustees Ltd (1956) 99 CLR 560; Commonwealth Bank of Australia v Butterell (1994) 35 NSWLR 64; Sansom Nominees Pty Ltd v Meade [2005] WASC 9; HL Diagnostics Pty Ltd v Psycadian Ltd [2005] WASC 234, considered.

FOOD AND BEVERAGE AUSTRALIA LIMITED v P J NASH PTY LTD & ANOR
[2019] SASC 208
Civil

DOYLE J: The plaintiff, Food and Beverage Australia Limited (FABAL), is the responsible entity of a registered managed investment scheme known as the Tasmanian Premium Cherries Project (the Project). The Project was established in early 2008 and involved the development of cherry orchards and the cultivation, harvesting, marketing and sale of cherries.
The Project was undertaken on land (the Land) in the Huon Valley in Tasmania owned by Aussie Cherries Limited (ACL). ACL is the second defendant in these proceedings, but the action against it is stayed as a result of it being placed into liquidation in April 2018. ACL also engaged in its own right in the business of the cultivation, harvesting, marketing and sale of cherries on the Land. It follows that both the Project and the separate business of ACL were conducted on the Land.
The first defendant, PJ Nash Pty Ltd (trading as Westmores) (PJN), is a company of which Philip Nash is the sole director. Mr Nash (through PJN) was one of the initial promoters of the Project, along with Christopher Day (through FABAL) and Peter Holt (through his accounting company, Holt Norman & Co). An agreement entered into between the promoters set out their respective roles in developing the Project. It contemplated that Holt Norman & Co’s role would be to sell the interests in the Project. FABAL was to be the responsible entity. And PJN was to be responsible for the sale and marketing of the cherries.
FABAL executed the Project’s Constitution in January 2008. The key provisions of this, and the other documents governing the operation of the Project and FABAL’s role in managing ACL’s own business on the Land, are outlined later in these reasons. However, the documentation included the Cherry Marketing Agreement (CMA) entered into between FABAL, ACL and PJN, dated 20 December 2011. The CMA formalised existing arrangements between the parties, including under an earlier unsigned Cherry Marketing Agreement.
Under the CMA, PJN was responsible for the marketing and sale of all cherries grown on the Land; that is, both the cherries that were grown as part of the Project and the cherries grown as part of ACL’s own business. The CMA also required that PJN pay FABAL, on behalf of the Project and ACL, the net proceeds from the sale of the cherries.
FABAL’s claim in these proceedings relates to the amount that it claims is payable to it by PJN under the CMA in relation to the marketing and sale of the cherries from the 2014/15 harvest (conducted during January 2015). The gross proceeds from the sale of those cherries was $1,315,696. After deduction of PJN’s commission, levy and GST, the net proceeds were $1,125,581.
By way of context to the present proceedings, by December 2014 ACL and FABAL had fallen into dispute. ACL purported to terminate or withdraw FABAL’s authority to manage its business on the Land under the Orchard Management Agreement (OMA). ACL also directed PJN to pay it, rather than FABAL, the proceeds from the sale of the cherries from the 2014/15 harvest.
Despite correspondence in January 2015 suggesting it would pay the cherry sale proceeds to FABAL, PJN did not ultimately pay any of the proceeds to FABAL. Rather, it acceded to ACL’s direction and paid the net proceeds of $1,125,581 to ACL instead.
It is FABAL’s case in these proceedings that the failure to pay it the net proceeds of the 2014/15 harvest involved a breach of the CMA by PJN. In its primary claim, FABAL seeks the net proceeds of $1,125,581 in debt or by way of damages for breach of contract. In the alternative, FABAL seeks to recover the portion of the net proceeds referrable to the Project cherries (as opposed to ACL’s cherries). On FABAL’s case, this was 13.9 per cent of the net proceeds, or $156,456.
In any assessment of its loss, FABAL seeks an amount reflecting monies it alleges it was owed by ACL, and hence which it contends it would have been entitled to set off against its payment to ACL of the portion of the net proceeds referrable to the ACL cherries. It is not proposed that I determine the quantum of any such set off that FABAL might have as against ACL. The parties have acquiesced in me merely determining whether FABAL is entitled to recover from PJN an amount reflecting any such set off against ACL. If so, then this may need to be the subject of a later separate hearing.
FABAL also pleaded a claim alleging conversion of the sale proceeds by PJN. However, it was ultimately conceded by FABAL that this claim would stand or fall with the contractual claim, and it was thus not pressed as an independent basis for the recovery of any relief against PJN.
PJN defends FABAL’s claims in debt and for damages at various levels. It contends that different issues arise in relation to the portion of the net sale proceeds relating to the Project cherries, and the portion of the net sale proceeds relating to the ACL cherries.
In relation to the net proceeds from the sale of the Project cherries, PJN ultimately conceded that it was obliged under the CMA to pay these proceeds to FABAL rather than ACL. However, it contends that only about 5 per cent and not 13.9 per cent of the net proceeds related to the Project cherries. PJN further contends that FABAL is not entitled to recover these proceeds by way of debt because it did not perform the work required of it in respect of the 2014/15 harvest; and that in respect of FABAL’s claim for damages, it has not established that it suffered any loss by reason of the failure to pay it this sum.
In relation to the net proceeds from the ACL cherries, PJN contends that its failure to pay these proceeds to FABAL did not involve any breach of the CMA by it. It contends that ACL had terminated or withdrawn FABAL’s authority to receive payment of the proceeds from the ACL cherries, with the result that PJN’s obligation to pay FABAL under the CMA was either frustrated or otherwise fell away. Alternatively, payment of the net proceeds to ACL was sufficient to discharge PJN’s obligations to FABAL under the CMA. PJN further contends that even if it remained obliged to pay FABAL, FABAL was not entitled to recover the unpaid proceeds by way of debt. Rather, it is confined to the recovery of damages for any loss it suffered. The only such loss asserted by FABAL was its inability to set off the sum it claimed it was owed by ACL. PJN denied FABAL was entitled to recover damages reflecting any sum owed by way of set off on the grounds that any such loss was either not caused by PJN’s breach or too remote.
Against this background, and after some observations about the trial of these proceedings, I propose to commence by summarising the background to the Project and some of the key provisions of the documentation governing the Project, and FABAL’s role in managing ACL’s own business on the Land. I will then outline the operation of the scheme through to the 2014/15 harvest, and the disputes between the parties as to the conduct of that harvest and the proceeds of its sale. I will then address FABAL’s claims in respect of the net sale proceeds from both the Project cherries and ACL’s cherries.
The trial
The trial of these proceedings took place over four days.
The plaintiff called two witnesses. The first was Christopher Dundon, who was FABAL’s Chief Operations Officer from 2008 until about September 2011, and then its Chief Governance Officer and Chief Horticultural Officer from about September 2011 onwards. He is also the company secretary of FABAL and the FABAL group of companies. The second witness called by FABAL was John Lambert, who was the Chief Financial Officer of FABAL and the FABAL group of companies from about 1995 until his retirement on 16 November 2018.
The second defendant, PJN, called its director Philip Nash as its only witness.
Each of the witnesses gave their evidence in chief primarily by affidavit but were then cross-examined at length.
I found each of the witnesses to be honest and generally reliable in the evidence they gave. While some issues as to the witnesses’ credit and reliability were pursued in cross-examination, I have not ultimately found it necessary to resolve most of these issues. To the extent it has been necessary for me to address them, I have done so as they arise in my reasons.
The parties also relied upon several volumes of documentary exhibits, which included not only the contractual documents governing the Project and ACL’s business on the Land, but also numerous communications between the parties.
The factual background
The following are the findings of fact I have made, based upon the evidence at trial. Most of what follows was not the subject of any significant contest. To the extent that there were some controversial issues of fact, I have addressed these as they arise later in these reasons.
Mr Nash and the Westmores Business
Prior to his involvement with the Project, Mr Nash had significant experience in the fresh produce industry. His parents worked in the industry, and after leaving school he also commenced working in the industry. He worked in various roles, including as a salesman for FW Westmore & Son Pty Ltd (Westmores) (a fruit and vegetable wholesale business based in Victoria).
In around 2004 or 2005, Mr Nash approached the owners of Westmores to discuss buying the business from them. Whilst familiar with the business and its day to day operations, Mr Nash was not familiar with the legal or financial aspects of purchasing or setting up a business. He thus sought out, and received, significant assistance in these respects from his friend, Peter Holt. Mr Holt was a financial planner and director of the accounting firm Holt Norman & Co.
In 2005, Mr Nash purchased Westmores. He did so by setting up PJN, of which he became, and remains, the sole director. He retained Westmores as the trading name of the business so as to ensure that he obtained the benefit of the goodwill associated with that name. PJN also retained the Westmores employees and business structure, and its contracts with its growers and clients. And it employed Robin Westmore, who had worked in the Westmores business for almost a decade, as its general manager.
Westmores sourced its produce from around Australia, specialising in seasonal fruit and vegetables. It predominately sold its produce to Coles, Woolworths and Aldi stores throughout Victoria, although it occasionally also sold to interstate stores.
The prospect of a managed investment scheme for Tasmanian cherries
One of the suppliers from whom Westmores sourced produce was the Driessen family. They sold apples and cherries grown on their farm in the Huon Valley in Tasmania. Through the Westmores business, both Mr Westmore and Mr Nash knew the Driessen family, and had visited their farm on several occasions.
Through discussions with Mr Holt, Mr Nash had become interested in managed investment schemes. He invested in several, and by around 2006 or 2007 had become interested in developing one himself. To this end, he asked Mr Westmore to discuss with the Driessen family the prospect of purchasing their farm, but with them continuing to have a role in managing the farm. He also asked Mr Holt to ascertain the level of interest that his clients might have in investing in a managed investment scheme involving Tasmanian cherries. There appeared to be interest from both the Driessen family and potential investors.
It was in this context that Mr Nash and Mr Holt came across FABAL as a potential responsible entity for the proposed scheme. FABAL had experience operating managed investment schemes involving small vineyards. Whilst FABAL did not have experience with fresh fruit or vegetable produce, Mr Nash and Mr Holt considered that this lack of experience could be overcome through a combination of his own knowledge and experience, Westmores’ contacts and the assistance of the Driessen family.
The FABAL group of companies
FABAL is a member of the FABAL group of companies, which has as its parent company, The FABAL Group Pty Ltd. The other companies within the FABAL group include FABAL Operations Pty Ltd and Total Beverage Australia Pty Ltd.

As at 2007, Christopher Day was the Chief Executive Officer of FABAL. Mr Lambert was the Chief Financial Officer, and Mr Dundon was the Chief Operations Officer and Company Secretary. The Chairman of FABAL was Ian Edgley, and its other directors included Mr Day and Grahame Tonkin.
FABAL has been the responsible entity for 11 managed investment schemes (including the Project), and for six unregistered managed investment scheme trusts.
Commencement of the Project
During 2006 and 2007, Mr Nash and Mr Holt discussed with Mr Day and Mr Dundon the possibility of FABAL taking on the role as the responsible entity for a managed investment scheme involving cherries grown on the Driessen family farm in Tasmania. These discussions led to Mr Nash (on behalf of PJN), Mr Day (on behalf of FABAL) and Mr Holt (on behalf of Holt Norman & Co), as the three promoters of the Project, entering into a Managed Investment Scheme Development Agreement (the MIS Agreement) dated 9 October 2007.
The MIS Agreement set out their respective roles in developing the Project. It also provided an overview of the matters the promoters had agreed in terms of how the Project would operate, and how the costs and profits would be shared. The MIS Agreement made reference to a ‘Land Owning Company’, which ultimately became ACL.
ACL was a company that Mr Holt and his business partner, William Norman, had established under a different name in 2000. It was established initially as a private company. It was converted to an unlisted public company in April 2008, for the purposes of raising capital to fund the acquisition of the Driessen family land and capital improvements in the Tasmanian Huon Valley (defined earlier in these reasons as ‘the Land’). Both Mr Holt and Mr Norman were directors of ACL from the outset. Mr Nash became a director in September 2007. Mr Day became a director in February 2008, and Mr Tonkin (another director of FABAL) became a director in September 2008. They were later joined as directors by Craig Baker and Peter Stafford. Following the removal of Mr Day and Mr Tonkin as directors of ACL in June 2014 (in the circumstances described later in these reasons), the remaining directors of ACL were Mr Nash, Mr Baker and Mr Stafford.
The MIS Agreement envisaged that ACL would purchase the Driessen family farm for the purposes of the Project. ACL did so in 2008 for a price of approximately $3.5 million. It was also envisaged that ACL would then offer licenses to investors in the Project, referred to as Growers.
The MIS Agreement provided for PJN to take on responsibility for the marketing and sale of the Project cherries.
Pursuant to the MIS Agreement, FABAL assumed responsibility for drafting the Project documentation, including the Project Constitution, the Product Disclosure Statement (PDS) and other contractual documents. It also assumed responsibility for lodging the application and documentation necessary to obtain a Product Ruling from the ATO.
The Project Constitution
The Project Constitution was executed by FABAL, as the responsible entity, on 23 January 2008. It was later amended through a Supplementary Deed, but none of the amendments are of any consequence to the matters in issue in these proceedings.
The Constitution recited FABAL’s intention, as the responsible entity, to establish the Project as a registered managed investment scheme. It recited that investors in the Project will participate by acquiring Interests through a PDS to be issued by FABAL, with investors becoming Growers upon acquiring Interests in the Project and being bound by the Constitution. Both the Responsible Entity (FABAL) and the Land Owning Company (ACL) were to provide facilities and services to Growers, as prescribed in the draft agreements included as Schedules to the Constitution.
By way of overview, the Constitution was expressed to be binding on all Growers and FABAL (clause 2). It provided a process for applications by Growers for an Interest in the Project (clause 3), and for the receipt of application monies from Growers (clause 4). FABAL was required to keep a register of Growers (clause 5). Each Grower was vested with an Interest in the Project, the produce attributable to their specific area of Land (referred to as their Allotment), and a proportion of the application funds held by FABAL (clause 6).
The Scheme Property[1] was held by FABAL on trust for the Growers, but with provision for FABAL to appoint a Custodian to hold the Scheme Property (clause 7). The powers of FABAL to deal with the Scheme Property were set out in clauses 8 and 13.
[1] Defined in Schedule 1 to mean any funds, investments, assets, contributions of money or monies worth to the Project including money that forms part of the Scheme Property under the provisions of the Corporations Act 2001 (Cth) or Australian Securities and Investments Commission Act 2001 (Cth) and monies held in the Proceeds Fund.
Under clause 15, the Project was to commence upon its registration with ASIC, and to terminate upon the earlier of either (i) 30 June 2023 (which date was able to be extended by up two years if the Growers have not received a minimum income return of 9 per cent), (ii) the expiry of the last of the Interests, (iii) the Project being wound up, or (iv) the expiry of the last Grower Allotment due to the termination of all Management Agreements and Licence Agreements.
Clauses 20 and 21 provided for the entry into Licence and Management Agreements between the Growers and FABAL/ACL, in the form attached to the Constitution as Schedules 3 and 4. FABAL was required to act in accordance with those agreements, but they were to be read as being subject in all respects to the terms of the Constitution.
The consequences of a default by a Grower under the Licence or Management Agreements were addressed in clause 22. In particular, clause 22.3 provided that FABAL “may, in its absolute discretion, terminate the Interest of a Defaulting Grower although any such termination must be in accordance with this Constitution.” And, under clause 22.4, FABAL “may only exercise its discretion to not terminate the Interest of a Defaulting Grower if it is reasonably satisfied that the interests of the … Project and the remaining Growers as a whole will not be prejudiced as a result.”
Under clause 22.5, the defaults empowering FABAL to terminate a Defaulting Grower’s interest included failure to make any payment required by the Constitution, Licence Agreement or Management Agreement, or any other breach of the same that resulted in a default by the Grower. Under clauses 22.6 and 22.7, FABAL was required to provide the Grower with notice of any default and seven days to remedy that default.
Under clause 22.8, where a Defaulting Grower’s interest was terminated, the Defaulting Grower remained liable for any amounts outstanding or incurred pursuant to the Constitution, Licence Agreement or Management Agreement until FABAL sold or purchased that Interest. And under clause 22.9, any income to which the Defaulting Grower would have been entitled if not in default was to be offset against the Defaulting Grower’s liabilities.
Clause 23 provided a process for the sale by FABAL of any terminated Interest of a Defaulting Grower. And in the event that any such Interest could not be sold within three months, clause 24 provided a process for that Interest to be transferred to FABAL and for the allocation of any income attributable to that Interest (referred to as the ‘purchase’ of that Interest by FABAL).
The topic of fees was addressed in clause 26. It provided for FABAL to be paid the fees in the amount and on the dates set out in Schedule 3 (the Management Agreement), and as disclosed in the PDS. And it provided for the Land Owning Company (ACL) to be paid fees in the amount and on the dates set out in Schedule 4 (the Licence Agreement). Clause 27 provided for FABAL to also be paid the amounts contemplated in the Management Agreement for horticulture costs and unexpected costs or expenses (up to the prescribed limit of the cash call).
Clause 28 was entitled ‘Recovery of Liabilities’ and provided that FABAL was entitled to deduct amounts owing to it pursuant to the Constitution from proceeds to which the Grower was entitled. The clause went on to state that FABAL was only entitled to the amounts due to it under the Constitution, Licence Agreement or Management Agreement where it had performed its role and met its obligations under those agreements with respect to those fees or expenses. But to the extent that FABAL had not performed its role or met its obligations, it only ceased to be entitled to that part of the payment that related to the lack of performance. Further, to the extent there was any dispute with respect to the payment of fees and expenses to FABAL, FABAL was entitled to be paid the full amount until the dispute was resolved.
Clauses 29, 30 and 31 provided a process for handling complaints by, and resolving disputes with, Growers.
Clause 32 required and authorised payment by FABAL, out of Scheme Property, of such payments as were required by the proper performance of the Project.
Clauses 33 and 34 dealt with the collection and distribution of income respectively. They provided as follows:
33. Collection of Income
33.1 The Responsible Entity must collect, receive, and get in all income due and payable to the Tassie Cherries Project.
33.2 The Responsible Entity must arrange the picking, grading, packing and cold storage of all of the cherries from each Allotment.
33.3 The Responsible Entity must arrange the marketing and sale of all of the cherries from all Allotments without having regard to the quantity or quality of produce gathered in from any particular Allotment.
33.4 The Responsible Entity must cause to be established a bank account for the purpose of holding all income attributable to Grower Allotments (the “Proceeds Fund”).
33.5 The Responsible Entity must pay into the Proceeds Fund:
33.5.1 the proceeds of the sale of cherries attributable to each Allotment after payment of any costs and expenses in relation to the picking, grading, packing, cold storage, marketing and sale of those cherries;
33.5.2the proceeds of any income protection insurance policy to the benefit of which Growers are expressly entitled …; and
33.5.3any other income that relates to an Allotment or Interests in the Tassie Cherries Project.
34.Distribution from the Proceeds Funds
34.1 A Grower is entitled to that percentage of the money in the Proceeds Fund which reflects that portion which the Allotment bears to the total number of Grower Allotments for the Production Period less:
34.1.1all fees payable pursuant to the Management Agreement;
34.1.2all fees payable pursuant to the Licence Agreement;
34.1.3any other amounts which the Responsible Entity reasonably considers will be required to meet anticipated Horticulture Costs, subject at all times to clause 27.1.3 of this Constitution; and
34.1.4any other amounts payable by the Grower pursuant to this Constitution or any other liabilities that attach to the Grower’s Interest.
34.2 The Growers authorise the Responsible Entity to deduct the amounts listed in clause 34.1 of this Constitution and pay those amounts to the persons entitled to them. The Responsible Entity may pay those amounts as soon as is practicable after receiving monies into the Proceeds Fund.
34.3 Where there are insufficient monies in the Proceeds Fund to make all the required payments, they must be paid in the order in which they are listed in clause 34.1 of this Constitution.
34.4 Any monies remaining in the Proceeds Fund after the payments required in clause 34.1 of this Constitution are paid must be paid by the Responsible Entity to the relevant Grower within five (5) calendar months of the 30^th of June in each year.
34.5 A Grower whose Allotment does not cause a deposit to be made to the Proceeds Funds for a Production Period is not entitled to any part of the Proceeds Fund in respect of the Production Period.
34.6 The Responsible Entity may from time to time, as it considers necessary, make interim distributions to Growers. The timing of such distributions, if any, shall be at the Responsible Entity’s unfettered discretion.
34.7 The proceeds of the sale of produce or other income from an Allotment that is not held by a Grower shall not be paid into the Proceeds Fund.
34.8 For the sake of clarity, despite anything else in this clause which would give a Grower an entitlement to the amounts in the Proceeds Fund, if an Allotment is partially or totally destroyed, or if the contribution made by that Allotment to the Proceeds Fund is otherwise reduced or inadequate compared to other Allotments for any other reason than that Grower’s entitlement to the amounts in the Proceeds Fund shall be reduced to reflect the reduced level of contribution of that Allotment.
The balance of the Constitution consisted of relatively formal matters which are not relevant for present purposes.
The product disclosure statement
FABAL issued the product disclosure statement (PDS) on 29 February 2008, and supplementary PDSs extending the time for acceptance of applications on 30 May 2008 and 26 March 2009.
The PDS announced itself as an “invitation to invest in a $12.32 million project involving the development of a premium cherry orchard in the Huon Valley of Tasmania to produce quality cherries under experienced management.”
The PDS identified FABAL as the responsible entity, referring to its significant agribusiness experience and expertise, particularly in managing vineyards and other similar managed investment schemes. It disclosed that Driessen Management (said to be closely associated with the former owners of Land, and to have 25 years experience in large scale orchards and other horticulture projects in Tasmania) would be responsible for the technical and operational management of the Project. The Land Owning Company was said to have contracted for the term of the Project to grade, pack and store the cherries in accordance with the Cherry Packing Agreement summarised in section 10 of the PDS. The PDS also stated that Westmores (a leading Australian wholesale fruit merchant with over 50 years experience) had been contracted as the marketing and sales agent for the cherries from the Project.
The PDS provided that the application fees were $26,504 (inclusive of GST) per Interest. It also provided that each Interest in the Project entitled a Grower to a 0.10 hectare (or 1,000 square metres) Allotment upon which the Grower would be licenced by the Land Owning Company to grow cherries throughout the Term of the Project. The PDS provided that each Grower will farm approximately 100 cherry trees on their 0.10 hectare Allotment. However, it also provided that all of the Allotments were to be managed as a single orchard so that all Growers could benefit from economies of scale.
The PDS stated that in the initial development, up to 465 Allotments would be made available, resulting in the Project raising $12,324,360 when fully subscribed. The land to be utilised by the Project was described as three parcels in the Castle Forbes Bay and Lucaston areas of Huon Valley of Tasmania, two of which already had commercial cherry orchards on them.
The PDS stated that the Project was to incorporate approximately 15 per cent mature and semi-mature trees, and approximately 85 per cent new plantings. A cherry crop from the mature and semi-mature trees was expected to be picked in January and February 2009. The first commercial cherry crop from the new plantings was expected to be harvested in year five of the Project, with full production expected in year eight. The anticipated term of the Project was 16 years, and thus unless extended was expected to expire on 30 June 2023.
The PDS provided that all applicants would be required to enter into Management and Licence Agreements.
I mentioned the application fee of $26,504 (inclusive of GST). The PDS provided that each Grower must pay ‘Grower Fees’ of at least this amount for each Interest. The payments, in instalments, were to cover fees for initial management services, irrigation and planting services, ongoing management services and licence fees and rent. The payment schedules for the instalments were as follows:

Overview of Grower Fees Years 1-4

Project Year

Financial Year Ending

Initial Management Services Fee

$

Ongoing Management Services Fees

$

Irrigation, Licence Fees & Planting Fee

$

Rent

$

Total

$

Payment Date

1

30 June 2008

6,964

-

2,228

312

9,504

31 May 2008

2

30 June 2009

-

2,707

1,356

2,019

6,082

31 Aug 2008

3

30 June 2010

-

2,971

-

2,216

5,187

31 July 2009

4

30 June 2011

-

2,780

-

2,951

5,731

31 July 2010

Total

6,964

8,458

3,584

7,498

26,504

Overview of Grower Fees Years 5-16

Project Year

Financial Year Ending

Ongoing Management Service Fees

$

Horticulture Costs (estimate only)

$

Rent

$

Total

$

5

30 June 2012

507

2,657

3,676

6,839

6

30 June 2013

569

3,269

3,679

7,518

7

30 June 2014

599

3,551

3,743

7,893

8

30 June 2015

627

3,815

3,784

8,226

9

30 June 2016

643

3,911

3,834

8,388

10

30 June 2017

659

4,007

3,862

8,528

11

30 June 2018

675

4,107

3,907

8,689

12

30 June 2019

692

4,210

3,919

8,821

13

30 June 2020

709

4,315

3,973

8,998

14

30 June 2021

727

4,424

4,007

9,158

15

30 June 2022

745

4,534

4,054

9,333

16

30 June 2023

764

4,646

4,100

9,510

The PDS mentioned that the Management Agreement allowed FABAL, if necessary, to make further cash calls upon Growers to meet Project costs, but that these could not exceed $5,301 (inclusive of GST) per Interest in each year.
The PDS also provided that ongoing costs and expenses would be paid for out of the Grower’s cherry proceeds prior to the payment of any distributions, adding that provided revenue from cherry proceeds exceeded ongoing costs and expenses, no further fees should be payable by Growers.
The PDS explained that after the first four years, the ongoing Management Services Fees and Horticulture Costs were expected to be paid out of cherry sale proceeds prior to distribution to Growers. However, Growers were to be liable for the fees payable to FABAL if the proceeds were insufficient for this purpose. (The ‘Rent’ (being payments for land and water licence fees, and plant and equipment rental fees) was said to be payable by Growers to the Land Owning Company rather than FABAL.)
The PDS included sections outlining the cherry industry, and the nature and risks of the Project. It included a report from an independent horticulturalist (Ken Gaudion), and an overview of the Product Ruling from the ATO.
The PDS concluded with a summary of each of the contracts material to the Project. These included the Constitution, the Licence and Management Agreements to be entered into between each Grower and FABAL (and the Land Owning Company in the case of the Licence Agreement), the Grading, Packing & Storage Agreement between FABAL and the Land Owning Company, and the Cherry Marketing Agreement between FABAL and PJN.
I have already summarised the relevant provisions of the Constitution. The relevant aspects of the other agreements are summarised later in these reasons. The PDS also referred to the Terms Loan Agreement. The PDS explained that FABAL would provide all Growers with the opportunity to enter into an agreement with Total Beverage Australia Pty Ltd (a related entity of FABAL) for it to pay the costs of and incidental to the Grower’s Interest, with the loan repayable at a date specified and interest payable in accordance with the terms set out in the individual loan agreements.
The planting and allocation of cherry trees

FABAL arranged for new cherry trees to be planted across the Castle Forbes Bay and Lucaston properties in May 2008. The orchards were divided into blocks, with each block having a number of rows with at least two varieties of cherry trees for cross-pollination purposes. Subsequently some new cherry trees were also planted upon a property referred to as the New Lucaston property.
As mentioned, it was envisaged that each Interest in the Project would relate to an Allotment of 0.10 hectares, and would carry 100 cherry trees (comprising 15 established trees and 85 new trees). In order to spread the agricultural risk (associated with the potential adverse events and the differing varieties of trees) it was determined by Mr Dundon, Mr Day and representatives of the Driessen family that the trees making up each Grower’s interest would not be continuous, but rather spread across the orchards.[2]
[2] Mr Dundon also suggested in his evidence that Mr Westmore was involved in this decision, but nothing turns on whether this was so.
By 31 May 2008, which was the final day for applications by investors to become Growers, the Project was not fully subscribed. There were 41 investors who between them had subscribed for a total of 406 of the 465 available Interests. It followed that investor subscriptions covered 40,600 trees, but that there would be 5,900 trees which were not the subject of an Interest and hence did not form part of the Project. Two further investors subsequently subscribed for Interests under the supplementary PDSs, taking the total subscribed interest to 408.
ACL, as the Land Owning Company, was not a Grower in the Project. However, it was decided that it would be responsible for the trees which did not form part of the Project. It was not envisaged that ACL would farm those trees itself. Rather, ACL and FABAL entered into the Orchard Management Agreement (OMA) (summarised later in these reasons), which gave FABAL responsibility for the management of ACL’s trees on the Land.
At the commencement of the Project, and within each block, all Project trees were contiguous. The balance of the trees in each block were owned by ACL. However, from as early as 2008, Interests began to be cancelled for various reasons, and to revert to ACL. Initially ACL purchased the interests of the defaulting Growers and hence itself became a Grower. However, it seems that in June 2013 those interests were cancelled, and ACL ceased to be a Grower. Ownership of the relevant trees reverted to ACL and thereafter formed part of its own business on the Land rather than part of the Project. It seems that the same approach was taken in relation to trees the subject of other Grower interests terminated after June 2013. As a result, what was described as a “chequerboard effect” developed across the various blocks in terms of the Project and ACL trees.
With the assistance of the Driessens, FABAL prepared and maintained an allocation map so as to enable identification of each Grower’s cherry trees. There was a dispute in the evidence as to whether Mr Nash was aware of the allocation map, but I have not found it necessary to resolve this dispute. There was no allocation map for the cherry trees on the New Lucaston property as all of these trees were owned by ACL.
The contractual documentation
In addition to the Constitution and PDS, which I have already summarised, the parties also entered into various other agreements to facilitate both the Project and the management of ACL’s trees. The relevant terms of these agreements are summarised below, however it is useful to commence by identifying the various agreements.
In relation to the Project trees, each of the Growers entered into a Licence Agreement (with FABAL and ACL) and Management Agreement (with FABAL), in the form envisaged by the Constitution. The Licence Agreement entitled ACL to fees from Growers for the services it provided under that agreement, and the Management Agreement entitled FABAL to fees from Growers for the services it rendered under that agreement.
In relation to the management of ACL’s trees, I have already mentioned the Orchard Management Agreement (OMA) entered into between ACL and FABAL. This agreement was formally executed on 29 July 2010, and provided for the appointment by ACL of FABAL to manage ACL’s trees (which were not part of the Project).
ACL and FABAL also entered into a Services Agreement. Under this agreement, FABAL provided administrative services to ACL, such as processing ACL staff wages, rendering invoices on behalf of ACL, and receipting monies on behalf of ACL. While FABAL commenced to provide these services from as early as April 2008, a written agreement was not executed until 2010.
There was also a Grading, Packing & Storage Agreement between ACL and FABAL. While only an unexecuted version of this agreement was in evidence, there was no dispute that an agreement to this effect was in place throughout the relevant period. It provided for ACL to grade, pack and store the Project cherries (as well as the ACL cherries) prior to the cherries being provided to PJN for it to market and sell. In return, ACL was to receive a fee of $2.00 per kilogram in 2009, increased annually by CPI thereafter.
Each of FABAL, ACL and PJN entered into the Cherry Marketing Agreement (CMA), pursuant to which PJN took on responsibility for marketing and selling the cherries from both the Project trees and ACL’s trees. The version of this agreement in evidence was not executed until 20 December 2011. An earlier version of the agreement had been circulated as early as 2007, and the parties had conducted themselves in accordance with its terms, albeit without ever executing that earlier version of the agreement.
I turn now to summarise the general effect, and relevant provisions, of each of the Licence Agreements, the Management Agreements, the OMA and CMA.
The Licence Agreements
Each Grower entered into a Licence Agreement with FABAL and ACL (as the Land Owning Company) in identical terms, being the terms contemplated by, and attached to, the Constitution.
Under clause 3 of the Agreement, ACL granted the Grower a licence, for the term of the Project, to use and occupy their Allotment of 0.10 hectares for the purposes of carrying out their business under the Project. The particular Allotment of the individual Grower was not further described, save that the Schedule to the Licence Agreement included reference to the number of new and established trees (being 85 per cent and 15 per cent respectively of the total number of trees).
Under clause 4, ACL also granted the Grower a licence to use (either directly or through FABAL) the plant and equipment owned by ACL that was suitable for use in the business.
In consideration for the licences granted under clauses 3 and 4, the Grower agreed to pay the land and water licence fee, and the plant and equipment rental, set out in Schedule 2. The Schedule provided for these fees to be paid in the amounts set out in the ‘rent’ column of the figures I have extracted from the PDS earlier in these reasons.
Under clause 5, the Grower authorised FABAL to deduct any amounts payable to ACL under the Licence Agreement from income due to be distributed to the Grower by FABAL (such deduction to be made by FABAL at ACL’s discretion, exercisable by ACL after at least one calendar month’s notice to the Grower).
The Grower’s and ACL’s respective duties in relation to the Allotments were detailed in clauses 7 and 8.
Clause 9 addressed the issue of title and interest. In particular, clause 9.1 provided that the Grower’s title to, and Interest in, the trees of their Allotment was limited to such title and Interest as was required for them to grow and maintain the trees, and to harvest and sell cherries from those trees. And under clause 9.2, the Grower had full title to any cherries grown on the trees.
Clause 10 dealt with the default by a Grower in respect of any payment or other obligation under the Licence Agreement. It provided for ACL to give the Grower a written notice to remedy their default within seven days, following which ACL may terminate the Licence Agreement. The result of this was the loss of the Grower’s right under the Project, but with a continuing liability for payment of amounts due under the Licence Agreement and exposure to FABAL taking steps to terminate the Management Agreement with the Grower and to sell their Interest under the Constitution.
Clause 13 provided for the parties to be excused from their obligations to the extent they were prevented from performing them by reason of an uncontrolled event.
And Clause 15 provided that the Licence Agreement was to be subject in all regards to the provision of the Constitution.
The Management Agreements
Each Grower also entered into a Management Agreement with FABAL, again in identical terms and as contemplated by, and attached to, the Constitution.[3] As recorded in the recitals to the Management Agreement, it set out an agreement between the Grower and FABAL by which FABAL was to manage the Grower’s business on their Allotment.
[3] Reference was made at trial to two Growers later in time entering into Management Agreements in slightly differing terms, but nothing was said to turn on this.
To this end, clause 2 provided for the appointment of FABAL by the Grower as an independent contractor to manage the Grower’s business on their Allotment,[4] in accordance with the Management Agreement and the Constitution.
[4] The Allotment was described in the same limited terms as in the Licence Agreement.
FABAL’s obligations in terms of carrying out irrigation and planting, and both initial and ongoing management services, in connection with the Grower’s Allotment, were set out in clauses 4 to 7. Further, under clause 8, FABAL agreed to take the steps reasonably necessary to harvest, grade, pack, market and sell the cherries, as detailed in that clause.
Clause 11 authorised FABAL to accumulate and pool the cherries attributable to a Grower’s Allotment with the cherries from the other Allotments.
Clause 12 provided for FABAL to be paid the initial management services fee, irrigation and planting fees and ongoing management services fees as set out in Schedules 2, 3 and 4 of the Management Agreement (as summarised and reflected in the figures extracted from the PDS earlier in these reasons).
Under clause 14, FABAL was also entitled to be reimbursed by the Grower for all of the costs and expenses of and incidental to the performance of its duties under clauses 7 and 8, referred to as the Horticulture Costs. Estimates of these costs were set out in Schedule 4 and are again reflected in the figures extracted from the PDS earlier in these reasons.
And under clause 15, FABAL was entitled to request that Growers make a payment to contribute to any unexpected expenses in relation to an Allotment, up to the call amount in Schedule 4. That Schedule provided that the call amount was not to exceed $5,300 in any year.
The Orchard Management Agreement
The Orchard Management Agreement (OMA) was executed by FABAL and ACL on 29 July 2010.
As recorded in the recitals to this agreement, it related only to ACL’s Business (as defined) on the Land, and hence not to the Project cherries.
Under clause 3, ACL appointed FABAL (referred to in the OMA as the Manager) as an independent contractor to manage ACL’s Business on the Land for the Term on the conditions contained in the OMA. Under clause 4, the Term was from the commencement date (26 May 2008) until the agreement was terminated pursuant to clause 18. (Clause 18 contained standard rights of termination in the event of some insolvency-type events or the default of one or other of the parties.)
FABAL’s obligations as Manager were set out in clauses 5, 6, 7, 8 and 9. Clause 5 imposed some general obligations as to the standard of skill and care required by FABAL in performing services under the OMA. FABAL’s obligations in relation to irrigation and planting services were set out in clause 6, initial management services in clause 7, ongoing management services in clause 8 and the harvesting, marketing and sale of cherries in clause 9.
FABAL’s remuneration and fees were addressed in clause 11. Under clause 11.1, and in consideration for its performance of the obligations in clauses 6, 7, 8 and 9, FABAL was entitled to the management fees set out in Schedule 2 of the OMA. That Schedule provided for management fees of $1,890 per hectare of Orchard[5] for the period ended 30 June 2009, $1,938 per hectare of Orchard for the next year, and indexed annually thereafter at the rate of 3 per cent or CPI (which ever was higher). Under clause 11.3 the management fees were payable in response to monthly invoices to be provided to ACL. Clause 11.4 entitled ACL to deduct from amounts otherwise payable to FABAL any debts owed by FABAL to it. Clause 11.5 gave FABAL a right to interest in respect of late payments. And clause 11.6 entitled FABAL, in addition to the management fees, to reimbursement from ACL of other costs and expenses incurred by it in carrying out its obligations under the OMA.
[5] Orchard was defined in terms that excluded the parts of the Land the subject of the Project.
The Cherry Marketing Agreement
The Cherry Marketing Agreement (CMA) was entered into between FABAL, ACL and PJN on 20 December 2011. An earlier version of the agreement had been circulated (perhaps as early as 2007) but it was never signed or executed by the parties.
According to Mr Dundon (and accepted by Mr Nash), prior to the formal execution of the CMA in 2011, PJN carried out its marketing of the cherries in accordance with the principles of the earlier unexecuted version of the agreement. Those principles were relevantly similar to those applicable under the executed CMA, and involved PJN having exclusive responsibility for marketing and selling the cherries grown on the Land, and then remitting the net proceeds to FABAL after deducting its marketing commission, and certain levies and rebates. PJN assumed responsibility and liability for the cherries, and was to provide regular reports and reconciliations in relation to the cherries sold. FABAL was to manage the intake, grading and packing of the cherries, and to be responsible for ensuring the cherries were of appropriate quality.
Following the discovery during 2010 that an agreement had not been executed, steps were taken to arrange for execution of what became the CMA.
The recitals to the CMA, and in particular recital A, made reference to both the cherry trees within the Project (referred to as the ‘Tassie Cherries Project’) and the cherry trees owned by ACL in its own right (referred to as ‘the Cherry Orchards’) both of which were situated on the Land owned by ACL. Recital C mentioned that “FABAL has entered into a management agreement [the OMA] with Aussie Cherries which authorises FABAL to act on behalf of Aussie Cherries in regard to the marketing of cherries grown by Aussie Cherries and Aussie Cherries confirms this authority by executing this Agreement.” And recital E stated that PJN (referred to as Westmores) was to be the exclusive agent for the purposes of the marketing and sale of all cherries grown by the Tassie Cherries Project and Aussie Cherries.
Clause 1 of the CMA stated that every aspect of the recitals was true and correct, agreed by the parties, and comprised an integral part of the agreement.
Clause 2 provided for FABAL’s appointment of PJN, for the term of the Project, as “its exclusive agent for the purpose of the marketing and sale of all and any cherries grown on the Land.”
Clause 3 provided for PJN to market and sell the cherries and then, prior to remitting net funds to FABAL on behalf of the Tassie Cherries Project and Aussie Cherries, deduct from the gross proceeds of sale various identified commissions and expenses, being PJN’s commission (to be agreed from time to time at between 12.5 per cent and 15 per cent), the commissions of other agents or distributors engaged by PJN, and certain levies and rebates.
The obligations of PJN in marketing and selling the cherries, and reporting to FABAL, were set out in clause 4. And the obligations of FABAL in managing the intake, grading and packing of the cherries, and using reasonable endeavours to ensure the quality of the cherries, were set out in clause 5.
Clause 13 provided that the CMA shall continue to be binding upon the parties to it until 30 June 2023, unless terminated by any party in accordance with clauses 15, 16 or 17.
Clause 15 provided for termination in the event of various insolvency-type events. Clause 16 provided for FABAL, by notice in writing to Westmores, to terminate the agreement in the event that PJN did not pay the net and proper sale proceeds payable to FABAL under the CMA on behalf of the Tassie Cherries Project and Aussie Cherries within 30 days of the required date, or PJN was otherwise in breach or default of other material obligations owed to FABAL or ACL under the CMA.
Clause 17 provided that PJN may at any time, by notice in writing to FABAL, terminate the CMA in the event that any fee payable to it by FABAL under the agreement was not paid within 30 days, or FABAL was otherwise in breach or default of its material obligations under the CMA.
Clause 21 provided that the parties to the agreement were excused from their obligations under the agreement whenever and to the extent that they were prevented from performing those obligations by reason of an Uncontrolled Event. Uncontrolled Event was defined to include various types of natural events, and various other forms of unavoidable delay and other matters not reasonably within the control of the parties.
The operation of the Project through to late 2014
There is no dispute over the harvests that occurred prior to the 2014/15 harvest.
By way of overview, the first harvest of cherries for both the Project and ACL trees occurred in January 2009. This harvest was from the pre-existing mature trees on the Land.
For each of the subsequent years up to the 2014/15 harvest, FABAL conducted (or at least arranged) the harvest. It did so by engaging labour hire companies which provided the labour for the harvests. The harvests involved the manual picking of the cherries. They generally commenced in January of a given year, and continued for a period of about four or five weeks.
Once harvested, the cherries were taken in bins to the packing sheds of ACL where details of the bins, and the weight of the cherries, were recorded. Prior to leaving the packing sheds, a document entitled ‘Cherry Fruit Receival Docket’ was generated. That document recorded details of the cherries picked and where they were to be transported.
The bins were then forwarded by truck to the contractor packing sheds to grade, wash and pack the cherries. The cherries were graded into three categories, referred to as grade 1 (premium), grade 2 (class 1) and grade 3 (suitable only for juicing or waste). Once graded, sorted and inspected, the cherries were packed by the packing shed contractor. At the same time, packout reports were prepared detailing the breakdown of the cherries packed (including by class). The packing contractors also prepared despatch documents once notified by PJN where the cherries were to be sent for sale.
The cherries were then marketed and sold by PJN. Following the sale of the cherries, PJN generated Grower Remittance Recipient Created Tax Invoices which recorded the lot number for the cherries sold, the reference number from the despatch document, and the quantity and price of the cherries sold.
Over the years from 2008, a number of Growers defaulted on their obligations. As mentioned earlier, these Interests were initially purchased by ACL, with the relevant trees subsequently reverting to ACL ownership.
FABAL kept Grower records, including a Growers Register. The Register as at 12 December 2014 recorded that there were 19 remaining Growers, with a total of 73 Interests (and hence an interest in 7,300 trees). There was no change in the Register throughout the period relevant for these proceedings (that is, until at least April 2015).
Disputes between the parties

Over time, various disputes arose between FABAL and the other promoters of the Project.
One of these disputes, which arose in late 2012, concerned the status of the Cherry Marketing Agreement (CMA). In particular, by letter dated 24 December 2012, FABAL terminated the CMA on the ground that it considered that PJN was insolvent. The 2012/13 and 2013/14 harvests nevertheless went ahead in accordance with interim arrangements that were agreed between the parties. This dispute was ultimately resolved in September 2014. FABAL withdrew its 24 December 2012 notice of termination of the CMA, and the parties agreed to reinstate the CMA for the purposes of the 2014/15 harvest.
Meanwhile, it seems that Mr Nash and Mr Holt had become concerned about FABAL’s control or influence over ACL. This appears to have motivated a motion put forward by these two men at an extraordinary general meeting of ACL’s shareholders in June 2014 to have FABAL’s appointees, Mr Day and Mr Tonkin, removed from ACL’s board. The motion was passed, and Mr Day and Mr Tonkin both ceased to be directors of ACL.
There was subsequently a dispute as to the minutes of that meeting, with each of Mr Day, Mr Tonkin and Mr Dundon taking issue with the accuracy of the draft minutes. On 2 September 2014, Mr Dundon resigned as the company secretary of ACL.
Purported termination of the OMA and withdrawal of authority under the CMA
From around the time of the removal of the FABAL representatives from ACL’s board, further disputes arose between ACL and FABAL. ACL began to assert an entitlement to terminate Growers in the Project for unpaid licence fees. It purported to revoke FABAL’s authority to collect licence fees from Growers on its behalf. It also asserted that FABAL was in breach of the OMA (and the Services Agreement). There was correspondence between ACL’s and FABAL’s solicitors in respect of these issues throughout the second half of 2014.
This correspondence culminated in a letter dated 19 December 2014 from ACL’s solicitors (Mills Oakley) to FABAL, in which ACL purported to terminate the OMA. The letter made several very general allegations of breach of the OMA by FABAL. Those allegations included an allegation that FABAL was in breach of its management obligations under clauses 6, 7 and 8 of the OMA by not installing the rain covers over the orchards that had been mentioned in the PDS. They also included an allegation of a repudiatory breach by FABAL on the basis that it had not commenced the harvest. The letter provided notification that ACL was accepting the repudiation of the OMA by FABAL and/or itself terminating the OMA.
The letter proceeded to inform FABAL that ACL intended to undertake the harvest of the orchards itself. The letter appeared to acknowledge FABAL’s ongoing responsibility in respect of the Allotments forming part of the Project. However, it stated that in order to overcome any practical difficulties arising from the interspersion of those Allotments within the ACL trees, ACL proposed harvesting the entirety of the orchards, with the Allotments being harvested at cost based on a pro-rated allocation of the total harvest cost. It sought FABAL’s consent to this proposal.
The letter concluded by making reference to the CMA between FABAL, ACL and PJN, and purported to revoke FABAL’s authority under that agreement to receive the proceeds of the harvest of non-Project trees. In particular, the letter stated:
Our client hereby revokes any authority, agency or trust (generally, and to the extent it would otherwise have survived termination of the OMA) pursuant to which, under the CMA, FABAL was to be paid or to receive, on behalf of ACL, proceeds of harvest of cherry trees on land in the Orchards owned by ACL not subject to a performing Licence Agreement (ACL Orchard Land).
ACL’s solicitors also wrote the same day to PJN, informing it that ACL had notified FABAL of the termination of the OMA, effective immediately. The letter then referred to clauses 3 and 4.9.4 of the CMA, observing that they provided for PJN to pay FABAL, on behalf of ACL, the net proceeds of sale of relevant cherries and account for and pay to FABAL on behalf of ACL the net and proper sale proceeds of relevant cherry sales. The letter purported to revoke the authority of FABAL to receive those proceeds. It stated:
ACL hereby revokes any authority, agency or trust pursuant to which, under the CMA, Westmores was required to pay or give to FABAL, on behalf of ACL, proceeds of harvest of cherry trees referable to Orchard land in the possession or control of ACL.
FABAL, through its solicitors (McMahon Clarke) responded the same day, denying any breach of the OMA and indicating that it was ready, willing and able to perform its obligations under the OMA and to undertake the 2014/15 harvest, and that it intended to do so. FABAL denied any repudiation of the OMA by it. In respect of the allegation relating to the rain covers, FABAL said that insofar as there was any obligation to install them, it was ACL’s obligation. FABAL noted that despite this, ACL had made it known to FABAL that it could not afford to install the rain covers.
The letter from FABAL’s solicitors not only stated that FABAL was ready, willing and able to perform the OMA, including the harvest, and intended to do so, but also identified the steps that FABAL had already taken in respect of the harvest. It rejected ACL’s proposal in relation to the harvest. The letter from FABAL’s solicitors also stated that PJN remained obliged to pay FABAL the proceeds of the harvest.
As elaborated upon below, there remains a dispute between the parties as to the status and effect of this purported termination of the OMA by ACL. And while ACL purported to revoke FABAL’s authority under the CMA to receive the proceeds from the harvest of the non-Project cherries, no steps were taken at this stage to terminate the CMA.
By letter dated 18 December 2014, FABAL’s solicitors had written to PJN (copied to ACL), seeking confirmation that PJN would perform its obligations under the CMA, including that it would account for and pay to FABAL the net and proper sale proceeds within 45 days after the sale of the cherries. In particular, having referred to the CMA, the letter relevantly included:
4. The purpose of this letter is to put you on notice of your obligations to our client both at law and pursuant to the Agreement and to ask you to confirm in writing that you intend to comply with each of the following obligations:
(a)The obligation to seek our client’s formal approval before engaging any other agent or distributor. Clause 3.2 of the Agreement requires PJ Nash Pty Ltd (PJ Nash) to seek formal agreement from our client before incurring any other agent or distributor. Please confirm you have not, or will not engage any other party to perform any of your duties pursuant to the Agreement without first asking for our client’s approval.
(b)The obligations in clause 4.8 and particularly clause 4.9.4 which requires you to account for and pay to our client (on behalf of the Tassie Cherries Project and ACL) the net and proper sale proceeds not more than 45 days after the sale of any lot of cherries.
(c)The obligation not to use any of the net and proper sale proceeds to meet any other obligations of Westmores or ACL, in particular payment for packing, picking or distribution (from the pack sheds to your premises). FABAL, as the responsible entity of the Tassie Cherries Project and on behalf of ACL will attend to any validly presented payments once the net and proper sales proceeds have been received.
There was no immediate response to this letter by PJN, other than an indication that it was obtaining legal advice.
On 30 December 2014, Mr Westmore sent an email to Mr Nash, Mr David Butterfield and Mr Baker. The email was addressed to “Phil and ACL Directors”. It mentioned that Mr Dundon (of FABAL) had “stepped up a gear in terms of ‘managing’ the harvest”, and in his communications about the same. Mr Westmore then described the predicament in which PJN found itself. He wrote:
PJN is in no man’s land a bit at present. We have advice from ACL that the Management Agreement has been terminated and we should be dealing with ACL. Some of the initiatives we took on behalf of the project have been partially implemented by FABAL and FABAL are working to meet their obligations under the Marketing Agreement. In the interim, we have no indemnity from ACL in the event we follow the directions from their lawyers.
…
From the perspective of the Marketing operation we need to have some clear and unambiguous understanding as to who is providing the management. I would urge the warring parties to come to some interim understanding for the period of the harvest so as to ensure they have something worthwhile to argue about once the crop is sold. My suggestion is that Dundon and myself be “permitted” to liase and sort out the appropriate protocols to achieve the best outcomes for the harvest and packing so the management staff have no ambiguity as to who is to do what. I am reluctant to embark on that course on PJN’s behalf without some direction as I am very conscious of the fact that it could be construed that PJN is endorsing the ongoing FABAL management at a stage where it has been advised it is no longer in place.
It appears this prompted an email communication on 31 December 2014 from ACL’s solicitors to FABAL’s solicitors. That email referred to Mr Dundon’s communications in relation to the harvest, and expressed concern that Mr Dundon was “in Tasmania and purporting to be acting in some official capacity and/or on behalf of ACL in respect of harvest.” The email continued:
To be clear, Mr Dundon, and FABAL, have no power or authority to conduct or direct harvest of fruit on ACL Land or be involved at all in the harvest of that fruit.
Our client has terminated the Orchard Management Agreement, has terminated the Service Agreement and revoked any relevant authority, agency or trust under the Cherry Marketing Agreement with Westmores as per our letter of 19 December 2014.
Our client acknowledges, as per our letter of 19 December 2014, that your client has an interest in the harvest of fruit on land subject to a valid and continuing Licence Agreement (Remaining MIS Land). That is the limitation of your client’s interest.
We also refer to the offer in our letter of 19 December 2014 to conduct harvest of the fruit on the Remaining MIS Land at cost, in light of the logistical difficulties in separate harvesting. Your client rejected that offer.
I am instructed that all harvest is being directed by ACL’s staff at the orchards and the labour hired by ACL.
The email went on to request information (namely a register of Growers, allotment detail and an allotment map) to enable identification of the ‘Remaining MIS Land’, and to indicate that ACL’s offer to conduct the whole of the harvest remained open. The email concluded by emphasising ACL’s position that neither Mr Dundon nor FABAL had any power, authority or role in relation to the harvest of cherries on ACL’s land.
FABAL’s solicitors responded to ACL’s solicitors by letter dated 6 January 2015. Referring back to their letter of 19 December 2014, FABAL’s solicitors stated that FABAL did not accept ACL’s position that it had validly terminated the OMA.[6] The letter stated that ACL did not have the ability to revoke any authority, agency or trust under the CMA; that the CMA remained on foot; and that FABAL intended to correspond with PJN in relation to its obligations pursuant to it.
[6] The letter added that neither had ACL validly terminated the Services Agreement. ACL had invited FABAL to agree that it be terminated, but FABAL refused to do so.
By letter dated 6 January 2015 from FABAL’s solicitors to PJN (addressed to Mr Nash), FABAL referred to its earlier letter of 18 December 2014, and sought the confirmation in writing that it had requested in that letter.
A response to this letter came by email dated 9 January 2015. The email was sent by Mr Westmore to one of FABAL’s solicitors, and copied to not only Mr Dundon of FABAL but also two email addresses associated with PJN (namely [email protected] and [email protected]). The email referred to the letters from FABAL’s solicitors dated 18 December 2014 and 6 January 2015.[7] The email then included a statement that “I confirm that Westmores will comply with the obligations detailed at subparagraphs 4(a), (b) and (c) in your letter” of 18 December 2014. (Significantly for present purposes, subparagraph 4(b) of this earlier letter had sought confirmation of PJN’s intention to comply with the obligations in clause 4.8 and 4.9.4 of the CMA requiring it to account for and pay to FABAL the net and proper proceeds not more than 45 days after the sale of any lot of cherries.) The email concluded with the signature block of Mr Westmore as general manager of Westmores Fruit Wholesalers.
[7] Mistakenly referred to as 6 January 2014.
There is a dispute between the parties as to whether Mr Westmore was authorised to send this email, and whether it involved an election to affirm the CMA.
During the balance of January 2015, there was a chain of correspondence between ACL’s and FABAL’s solicitors in relation to the status of the Services Agreement and the parties’ obligations under that agreement, as well as a request by ACL for information and documents. The detail of the disputes the subject of these communications is not relevant to these proceedings.
Then, by letter dated 9 February 2015 from ACL (through its directors, Mr Butterfield and Mr Baker) to PJN (c/- [email protected]), ACL with the authority of its board reiterated its view that clause 4.9.4 of the CMA no longer applied to the extent of requiring PJN to pay the proceeds from cherries on ACL trees to FABAL; and confirmed PJN’s agreement to act in accordance with that view, and ACL’s agreement to indemnify PJN.
The 9 February 2015 letter was in the following terms:
I write on behalf of Aussie Cherries Limited (ACL) with the authority of its board.
We refer to the letter to you from Dan Mackay of Mills Oakley Lawyers dated 19 December 2014 (Letter).
1.   The Letter:
(a)Revokes any authority, agency or trust pursuant to which, under the Cherry Marketing Agreement dated 20 December 2011 (CMA) between Food and Beverage Australia Limited (FABAL), ACL and PJ Nash Pty Ltd trading as “Westmores” (Westmores) was required to pay or give to FABAL, on behalf of ACL, proceeds of harvest of cherry trees referrable to Orchard land in the possession or control of ACL (ACL Proceeds); and
(b)Directs Westmores to pay all ACL Proceeds directly to ACL and not, as the CMA requires, to FABAL.
2.   ACL considers that:
(a)The CMA is a tripartite agreement between FABAL, ACL and Westmores with, in effect, two separate agreements under which Westmores:
(i)   Acts on behalf of ACL to market cherries grown on ACL land not subject to performing Licence Agreements pursuant to the Tasmanian Premium Cherries Project (Project) (ACL Orchard Land); and also
(ii)     Acts on behalf of FABAL as responsible entity of the Project to market cherries grown on that part of ACL’s land that is subject to performing Licence Agreements and controlled by the Project (Project Land).
(b)Any agency or trust arrangement whereby FABAL held the ACL Proceeds on trust or as agent for ACL under clause 4.9.4 of the CMA is at an end, therefore Westmores has no authority to pay the ACL Proceeds to FABAL;
(c)Clause 4.9.4 of the CMA no longer applies to the extent that it requires Westmores to pay the ACL Proceeds to FABAL (this does not affect the requirement for Westmores to account for and pay to FABAL sale proceeds from cherries on behalf of the Project).
3.   ACL is of the view that clause 4.9.4 of the CMA no longer applies to the extent that Westmores is required to pay the ACL Proceeds to FABAL and there would be no basis for FABAL to make any claim for loss or damages arising from ACL directing Westmores to pay the ACL Proceeds directly to ACL.
4.   However, correspondence from or on behalf of FABAL indicates that FABAL may nonetheless seek to enforce clause 4.9.4 of the CMA.
5.   We confirm your agreement to act in accordance with the revocation direction detailed in paragraph 1 above.
6.   In consideration of this, ACL will indemnify Westmores for:
(a)any damages claimed and awarded to FABAL; and
(b)Westmores’ reasonable costs (including legal costs) associated with any such claim,
which are incurred as a consequence of Westmores paying the ACL Proceeds directly to ACL, in reliance upon the revocations and directions provided in the Letter and not to FABAL per clause 4.9.4 of the CMA.
The 2014/2015 harvest
FABAL did not ultimately have any involvement in the 2014/15 harvest, and did not incur any of the costs associated with that harvest. Mr Dundon was present on the Land between 17 – 20 November 2014, 22 – 24 December 2014 and 12 – 14 January 2015, but did not have any involvement in the harvest. His apparent efforts to involve himself in the harvest were referred to in the late December 2014 communications summarised above. However, he was ultimately permitted only to observe the harvest. FABAL contends that despite it being willing and able to carry out the harvest, it was prevented from having any involvement by reason of the events and correspondence outlined above.
Having terminated the OMA, and having taken the view that it was unviable to manage the ACL and Project trees separately given that they were interspersed, ACL assumed responsibility for the 2014/15 harvest of all trees, and it seems bore the costs of the harvest.
Throughout the period from February 2015 to April 2015, Mr Westmore (on behalf of PJN) provided FABAL with the detail of the cherries that were being sold. This was in accordance with what he had said PJN would do.
The evidence establishes that the gross proceeds from the sale of the cherries from the 2014/15 harvest was $1,315,696. After PJN’s commission of $164,462, GST of $16,446 a levy of $9,206, that left net and proper proceeds in the amount of $1,125,581.[8]
[8] Rounded to the nearest dollar.
On 21 April 2015, FABAL’s solicitors wrote to PJN demanding that it pay the net proceeds to FABAL. FABAL’s solicitors followed up this demand by letters dated 14 May 2015 and 2 June 2015.
PJN did not pay the net proceeds to FABAL. Instead it paid those proceeds to ACL, through a series of payments made between late February and early April 2015.
Principles of contractual interpretation
Both FABAL’s claim, and various of the matters raised in response by PJN, raise issues involving the construction of the contracts mentioned above, and in particular the CMA.
In construing the relevant provisions of these documents, I have sought to ascertain the objective intention of the parties to the particular contracts, having regard to the language used by the parties in the context of the relevant contract as a whole, the surrounding circumstances known to the parties, and the commercial purpose or objects to be achieved by the contract.
The approach to be taken was conveniently summarised in the following terms by French CJ, Hayne, Crennan and Kiefel JJ in Electricity Generation Corporation v Woodside Energy Ltd:[9]
… this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”.
[9] Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]; see also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46]-[51], and Byrnes v Kendle (2011) 243 CLR 253 at [98].

In construing the contractual documents relevant to the present proceedings, their commercial context includes their role in together giving effect to the managed investment scheme constituted by the Project, or in the case of the OMA and Services Agreement as contracts intended to operate alongside the Project. Support for this approach is found in Agricultural and Rural Finance Pty Ltd v Gardiner[10] and Rocky Castle Finance Pty Ltd v Taylor.[11] In the former, the High Court considered the construction of loan agreements and indemnity agreements that formed part of an investment scheme. Gummow, Hayne and Kiefel JJ said:[12]
Further, the loan agreements and the indemnity agreements must be construed in their commercial context. Each was an important constituent document in a publicly marketed investment scheme. It is not readily to be supposed that documents of that kind are to be given meanings other than the meaning ordinarily conveyed by the words used.
[10] Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570.
[11] Rocky Castle Finance Pty Ltd v Taylor (2014) 118 SASR 349.
[12] Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 at [38].
In the latter, Blue J (with whom Stanley J agreed) considered the approach to the construction of various agreements that formed part of a managed investment scheme, and indeed cross-referenced one another. His Honour approached the construction of the agreements on the basis they were cognate documents.[13]
[13] Rocky Castle Finance Pty Ltd v Taylor (2014) 118 SASR 349 at [106]-[109].
FABAL’s claim in debt or for damages under the CMA
As summarised at the outset of these reasons, FABAL’s claim relates to the amount it claims is payable to it by PJN under the CMA from the sale of the cherries that were part of the 2014/15 harvest. It is agreed that the gross proceeds from the sale of those cherries was $1,315,696, and that after deduction of PJN’s commission, levy and GST the net proceeds were $1,125,581.
The terms and effect of the CMA have been summarised earlier. In essence the CMA was a tripartite agreement between FABAL, ACL and PJN that provided for PJN to market and sell all of the cherries grown on the Land; that is, both the cherries grown as part of the Project and the cherries grown as part of ACL’s own business. In support of its claim to be entitled to be paid the net proceeds of sale of the cherries by PJN, FABAL relies in particular upon clauses 3 and 4.9.4 of the CMA.
Clause 3 provided for PJN to “market and sell all and any cherries grown on the Land” and to remit the net funds “to FABAL on behalf of the [Project] and [ACL]” after deducting from the gross proceeds the various commissions and expenses identified in the balance of the clause. Clause 4.9.4 provided for PJN to “account for and pay to FABAL on behalf of the [Project] and [ACL] the net and proper sale proceeds not more than forty five (45) days after the sale of any lot of cherries”.
On the face of it, these clauses obliged PJN to pay FABAL, and entitled FABAL to be paid by PJN, the net proceeds of $1,125,581. It is thus necessary to address the matters raised by PJN in purported answer to FABAL’s claim under those clauses. As mentioned when summarising the answers raised by PJN earlier in these reasons, some raise different issues in respect of the proceeds from the sale of the Project cherries as opposed to ACL’s cherries.
ACL’s purported termination of the OMA
The first matter relied upon by PJN in purported answer to FABAL’s claim under the CMA is its contention that the OMA had been terminated by ACL. This raises two issues; first whether the OMA was validly terminated, and secondly the effect, if any, that any termination of the OMA had upon the parties’ rights and obligations under the CMA.
Was there a valid termination of the OMA?
As outlined earlier, the OMA was an agreement between FABAL and ACL. It related only to ACL’s Business (as defined) on the Land, and hence not to the Project cherries. In very general terms it appointed FABAL (referred to in the OMA as the Manager) as an independent contractor to manage ACL’s Business on the Land. It entitled FABAL to be paid management fees, and in return imposed certain management obligations upon FABAL in clauses 5 to 9 (outlined earlier).
There is no doubt that ACL purported to terminate the OMA. It purported to do so in the correspondence sent on behalf of ACL in the second half of 2014, culminating in the letter dated 19 December 2014 from ACL’s solicitors to the directors of FABAL to the effect that ACL was accepting what it contended were repudiatory breaches of the OMA by FABAL.
However, in my view, it is not enough for PJN to merely point to this correspondence as establishing termination of the OMA. Given that the validity of the termination was contested by FABAL at the time, I consider that it was incumbent upon PJN to establish (or at least satisfy an evidentiary onus as to) the validity of the purported termination by ACL in order for it to rely upon that termination of the OMA in answer to FABAL’s claim under the CMA.
I commence by observing that I do not accept FABAL’s submission that the right to terminate for repudiatory breach was impliedly excluded by the terms of the OMA, and in particular the clause 4 provision to the effect that the agreement was to continue until terminated pursuant to clause 18. While authority suggest that the terms of a contract may expressly or impliedly exclude the right to terminate for repudiatory breach, the OMA does not do so expressly. And in my view there is no basis for an implication to this effect. The mere existence of express termination rights is not sufficient for this purpose.
However, even allowing for the potential for termination for repudiatory breach, there are difficulties with PJN’s case in this respect.
In its defence, PJN did not plead the basis for ACL’s termination other than by reference to its letter of 19 December 2014. It did not identify the breaches of the OMA by FABAL said to have been repudiatory of that agreement. In my view, this deficiency in PJN’s pleading is fatal to its reliance upon the termination of the OMA.
But even if recourse were permitted for this purpose to the terms of ACL’s letter of 19 December 2014, and the evidence adduced at trial, there remains no sufficient basis in the evidence for finding of a breach, let alone repudiatory breach, by FABAL. Insofar as the letter went beyond mere general assertions of breach, the only alleged breaches it identified related to FABAL’s conduct in not having commenced the 2014/2015 harvest, and in not having installed rain covers.
As to the first of these, it does not appear to have been pressed at trial. But insofar as it was pressed, no evidential basis for the existence or repudiatory nature of the alleged breach was made out. Not only was the harvest not due to commence in any significant way until January 2015, but also the position and evidence of FABAL, which I accept, was to the effect that as at 19 December 2014 it was ready, willing and able to undertake the harvest. And throughout late December 2014, Mr Dundon was endeavouring to organise (or at least participate in the organisation of) the harvest, as referred to in the 30 and 31 December 2014 communications from PJN and ACL summarised earlier in these reasons. The only reason it ultimately did not do so was because it was prevented from doing so by ACL and PJN.
As to the second alleged breach, the essential contention of PJN was that under the OMA (and, indeed, the various Management Agreements with the individual Growers), FABAL assumed various general obligations in respect of the management of the cherry orchards, and the Land, with a view to optimising the quality of the cherries to be grown. Reference was made in this respect to clauses 6, 7 and 8 of the OMA. Based upon the various references in the PDS to the proposed installation of rain covers, and some general references in the evidence to the desirability of these, it was contended that FABAL breached its obligations under the OMA by not installing these covers.
There is no dispute that rain covers were initially contemplated by the Project promoters, and that they were not ever installed. The reason for this is also relatively obvious; there simply was not enough capital available for it to be undertaken given the significant expense it would have involved. While there were differing views expressed as to why the capital was not available, I do not think the reasons matter for present purposes. It is sufficient for me to conclude, as I have, that the evidence does not establish any repudiatory breach by FABAL in respect of the rain covers.
To the extent that the Project documentation was prescriptive at all about the rain covers, it contemplated (as one might expect in relation to an item of capital expenditure of this nature) that they would be the responsibility of the Land Owning Company, or ACL. There was reference, for example, in clause 7.7 of the MIS Agreement to the Land Owning Company installing rain covers. Documentation and financial modelling provided to the ATO and included in the ACL prospectus also had ACL purchasing the rain covers. Further, there continued to be discussions at ACL Board meetings that were premised upon the rain covers being an ACL responsibility.
In the circumstances, I am not satisfied that there is any basis for concluding that the non-installation of rain covers involved a breach by FABAL of its obligations, whether under the OMA or otherwise. Certainly there was no express obligation placed on FABAL under the OMA to install the rain covers. And in the circumstances, and given the capital nature of the expenditure, I do not consider that the general orchard management responsibilities placed upon FABAL under that agreement should be construed as extending to the installation of rain covers by FABAL.
Alternatively, and in any event, even if FABAL’s general obligations under the OMA might be construed as potentially extending to the installation of rain covers, the evidence led at trial fell well short of what would have been necessary to establish that the failure to do so involved a breach of those obligations. While there were references in the evidence at trial to the anticipated benefits of rain covers, there was no direct expert evidence (as opposed to hearsay references) to support a conclusion that FABAL’s obligations to manage the orchards in accordance with good horticultural practices and modern industry practices, and otherwise optimise the quality of the trees and cherries, required the installation of rain covers.
For these reasons, I am not persuaded that FABAL breached the OMA at all, let alone that it did so in a manner that was repudiatory of its obligations under the OMA. It follows that I am not persuaded that ACL validly terminated the OMA.
Significance of termination of the OMA?
In any event, even if the OMA had been validly terminated by ACL in December 2014, I do not consider that this would have disentitled FABAL from relying upon its rights to be paid the net proceeds of the sale of the harvested cherries under clauses 3 and 4.9.4 of the CMA.
While related agreements, the OMA and CMA were nevertheless separate agreements with overlapping but different parties and fields of operation. The OMA was an agreement between ACL and FABAL in relation to the latter’s management of the ACL trees on the Land, and the CMA was an agreement between ACL, FABAL and PJN which provided for PJN to market and sell, and account for the net proceeds of sale of, the cherries from both the ACL and Project trees on the Land. The termination of the OMA did not automatically terminate the CMA or otherwise bring to an end the rights and obligations of FABAL and PJN under that agreement.
In contending for a different conclusion, I understand PJN’s essential contention to be that as the OMA was the source of FABAL’s right to be paid the proceeds of sale, it must follow that when the OMA was terminated the basis for the rights in clauses 3 and 4.9.4 of the CMA somehow fell away.
There are at least two difficulties with this contention. The first is that while the OMA did provide FABAL with certain rights to act on behalf of ACL, it was not only confined in its operation to ACL’s trees (as opposed to the Project trees) but in any event was also not the only source of those rights. The CMA did not simply assume that FABAL was entitled to act on behalf of ACL. It was not predicated solely upon the creation or existence of those rights under some other agreement. Rather, the CMA, which included as parties not only FABAL and PJN, but also ACL, itself confirmed and provided for those rights.
It is true that recital C of the CMA referred to the OMA as authorising FABAL to act on behalf of ACL in relation to the marketing of the ACL cherries, but it also added that ACL “confirms this authority by executing this Agreement.” I note also in this respect that clause 1 of the CMA provided that each aspect of the recitals is “true and correct and is agreed to by the parties to this Agreement to be and comprise an integral part of this Agreement.” Further, each of clauses 3 and 4.9.4 was expressed in terms of an obligation on the part of PJN to pay the net proceeds to FABAL “on behalf of” the Project and ACL.
As such, even if the OMA had been validly terminated (which has not been established), I do not think this of itself would have provided PJN with an answer to FABAL’s claim in respect of even the ACL cherries, let alone the Project cherries.
While it would otherwise follow from this that the CMA continued to operate in accordance with its terms, PJN makes two further related submissions to the effect that quite apart from the formal status of the OMA, FABAL’s right to payment of the net proceeds of sale (and PJN’s corresponding obligation to pay FABAL) was nevertheless defeated either by ACL’s withdrawal or revocation of FABAL’s rights, or by reason of the CMA having been frustrated. It is convenient to next address these two submissions before then turning to address PJN’s further submission to the effect that the CMA itself was terminated by reason of a repudiatory breach or breaches of that agreement by FABAL.
Purported revocation of ACL’s authority
In addition to ACL’s purported termination of the OMA, PJN also relies upon ACL’s purported revocation of FABAL’s authority to require or receive payment of the proceeds of sale from PJN under the CMA. PJN contends that this revocation of FABAL’s authority meant that FABAL was not entitled to payment of the net proceeds from PJN, and PJN was not obliged to pay FABAL those net proceeds, under clauses 3 or 4.9.4 of the CMA.
It is true that ACL purported to withdraw FABAL’s authority. It first purported to do so in the 19 December 2014 letter from ACL’s solicitors to FABAL. I have earlier summarised the relevant aspects of this letter, and set out the passage in which it was said that ACL revoked any authority or agency pursuant to which, under the CMA, FABAL was to be paid or receive, on behalf of ACL, the proceeds from the cherry trees on land in the Orchards owned by ACL and not subject to a performing Licence Agreement. On the same day, ACL’s solicitors wrote to PJN in relevantly similar terms.
ACL’s purported revocation of FABAL’s authority or agency to receive the proceeds was repeated in similar terms in the email from ACL’s solicitors to FABAL’s solicitors dated 31 December 2014, and the letter from ACL’s directors to PJN dated 9 February 2015.
On my reading of these items of correspondence they were confined to a purported revocation of authority or agency in respect of the receipt of the proceeds from the sale of cherries from the ACL trees, as opposed to the Project trees. While PJN has at times asserted a broader construction of this correspondence, its counsel at trial accepted this more confined view of the correspondence.
However, and in any event, I consider that there is a more fundamental difficulty with PJN’s reliance upon these purported revocations of authority or agency as an answer to FABAL’s claims based upon its rights under clauses 3 and 4.9.4 of the CMA. The difficulty is similar to the one I have explained in the context of PJN’s reliance upon ACL’s purported termination of the OMA. It is that the rights and obligations of FABAL and PJN under clauses 3 and 4.9.4 of the CMA do not depend for their existence or effectiveness upon some conferral of authority or agency external to the CMA. That conferral occurred by reason of the CMA itself. As such, the authority or agency inherent in clauses 3 and 4.9.4 of the CMA could only be revoked or withdrawn in accordance with the CMA or by a valid termination of the CMA. But the correspondence I have identified did not rely upon any power under the CMA; nor did it purport to terminate the CMA.
I acknowledge that, as a general rule, the authority of an agent may be revoked unilaterally by a principal at any time, and regardless of any express provision for that to occur in the contract appointing the agent. However, there are exceptions to this general rule,[14] and I do not think it operated in the present context. Given the tripartite nature of the CMA, and the broader rights and obligations conferred upon FABAL under that agreement, I do not consider that ACL was entitled to unilaterally withdraw the authority conferred upon FABAL under that agreement to receive the net proceeds of the cherries sold by PJN.
[14] Bailey v Angove’s Pty Ltd [2016] UKSC 47 at [6]-[10]; Temple Legal Protection Ltd v QBE Insurance (Europe) Ltd [2009] EWCA Civ 453 at [49]-[53].
Alleged Frustration of the CMA
In purported answer to its obligation to pay FABAL the net proceeds under clauses 3 and 4.9.4 of the CMA, PJN contends that the CMA was frustrated by reason of ACL’s termination of the OMA and/or revocation of FABAL’s agency or authority to receive the net proceeds of the cherry sales from PJN.
In light of my earlier conclusions that the OMA was not validly terminated and that, in any event, the CMA was itself an independent and sufficient source of FABAL’s agency or authority to receive the net proceeds, it follows that there was no barrier or obstacle to the performance of the CMA in accordance with it terms. Nor had performance of the CMA been rendered fundamentally or radically different from what the parties had contemplated.[15] PJN has thus not established that the CMA was frustrated.
[15] Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 360.
Alleged repudiatory breaches of the CMA
In a further purported answer to its obligation to pay FABAL the net proceeds under clauses 3 and 4.9.4 of the CMA, PJN contends that FABAL engaged in a repudiatory breach of the CMA, which it accepted thereby terminating the CMA. There are several difficulties with this contention.
The first is that I am not satisfied that PJN has established any repudiatory breach of the CMA by FABAL.
Repudiation involves conduct, or an accumulation of conduct, which entails or conveys an inability or unwillingness to perform the contract, or to only perform it in a manner substantially inconsistent with the terms of the contract. It is a serious matter that will not lightly be inferred.[16]
[16] Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625-626, 633; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 648, 657-658.
Here, PJN pleaded breaches of FABAL’s general obligations under clause 5 of the CMA in relation to the management of the intake, grading and packaging of the cherries, and the use of reasonable endeavours to ensure the quality of the cherries. However, the only particulars of the alleged breaches were that “from at least 14 December 2014 to 16 January 2015, no representative of [FABAL] attended, or was present on the Land”, and that “from 16 January 2015 to June 2015, a representative of [FABAL] attended, or was present on the Land on one occasion.”

The first point to make in response to this contention is that its factual premise has not been established. I accept the evidence of Mr Dundon of FABAL that he was present at the orchards on the Land between 22 and 24 December 2014, and again between 12 and 14 January 2015. More fundamentally, I accept that far from evincing an intention not to be bound by the CMA, these attendances by Mr Dundon were evidence of FABAL’s desire and intention to perform the CMA; that is, for FABAL to oversee and undertake the harvest and associated services in the manner it had in previous years. This is consistent with the email communication of 30 December 2014 from Mr Westmore to Mr Nash and two other ACL directors which I have summarised earlier in these reasons, which made reference to Mr Dundon having “stepped up a gear in terms of ‘managing’ the harvest”. It is also consistent with the email of 31 December 2014 from ACL’s solicitor referring to Mr Dundon’s communications and presence in Tasmania “purporting to be acting in some official capacity and/or on behalf of ACL in respect of harvest.”
Thus, not only did FABAL make it plain in its correspondence in December 2014 and January 2015 that it intended to comply with its obligations under the CMA, but it also took steps in an effort to do so. While it is true that it did not ultimately play any role in the 2014/15 harvest, this was only as a result of the intervention of ACL and PJN in preventing it from doing so.
For these reasons, I reject PJN’s contention that FABAL evinced an intention not to be bound by the CMA, or otherwise engaged in any repudiatory breach of the CMA, in or about December 2014.
However, there is a further difficulty with PJN’s case in this respect. Even if it had been established, repudiatory conduct does not of itself terminate the contract or otherwise bring it to an end. Rather, the repudiation must be accepted by the other party before that occurs.
Here, PJN pleads that it accepted FABAL’s (alleged) repudiation, and thereby terminated the CMA, on or about 20 June 2016. Acceptance of any repudiation on this date – being about a year and a half after the relevant events – would have been too late to avail PJN. It would not gainsay, and indeed assumes the existence of, the enforceability of any obligation to pay net proceeds that accrued in the early part of 2015.
Finally, there is the additional difficulty for PJN that, in my view, it had earlier elected to affirm the CMA rather than accept any repudiation of that agreement. I refer in this respect to Mr Westmore’s email of 9 January 2015 to Mr Dundon and FABAL’s solicitors, summarised earlier in these reasons. As mentioned, that email referred to the letters from FABAL’s solicitors dated 18 December 2014 and 6 January 2015, and included a statement that “I confirm that Westmores will comply with the obligations detailed at subparagraphs 4(a), (b) and (c) in your letter” of 18 December 2014. As the subparagraphs cross-referenced from the 18 December 2014 letter from FABAL’s solicitors had sought PJN’s confirmation that it would comply with various of its identified obligations under the CMA (including express reference to the clause 4.9.4 obligation to pay the net proceeds to FABAL), this email involves a clear affirmation of the CMA.
I do not think it matters that the email was sent by Mr Westmore rather than Mr Nash. The email included the signature block of Mr Westmore as general manager of Westmores (which is the trading name of PJN). I am satisfied that as general manager he had actual and ostensible authority to correspond in these terms. As Mr Nash acknowledged in his evidence, given Mr Westmore’s knowledge, expertise and legal background, he delegated a number of roles to him, including legal and technical aspects of the business. While Mr Nash said that Mr Westmore usually discussed such matters with him before acting, he did not suggest that his authority was contingent upon this occurring.
But even if Mr Westmore was not authorised to send the email, I am satisfied that Mr Nash was aware of the communication. While I accept that at the time of trial Mr Nash could not recall whether he saw the email at the time, it was copied to his email address, and given his involvement in the other significant communications at the time, it is difficult to conceive that it did not come to his attention in January 2015. In the circumstances I am satisfied that Mr Nash did receive and read the email and hence, regardless of whether he saw it, or expressly authorised it, prior to it being sent, I am satisfied that PJN elected to affirm the CMA rather than to accept any repudiation by FABAL.
In the circumstances, I have not found it necessary to consider FABAL’s alternative contentions that even if it did not affirm the CMA, PJN nevertheless waived, or is estopped from exercising, any right to terminate the CMA that it might have had in late 2014 or early 2015.
The significance of the payment to ACL
It will be recalled that between late February and early April 2015 PJN paid the entirety of the net proceeds of the 2014/15 harvest of $1,125,581 to ACL rather than FABAL. It did so in response to the direction from ACL in its letter to PJN dated 9 February 2015.
As explained earlier, the direction in that letter in fact only related to payment of the net proceeds attributable to the cherries from the ACL trees as opposed to the Project trees. As such, and because FABAL’s entitlement under the CMA to receive the proceeds from the cherries from the Project trees was not as the agent for ACL, or otherwise on behalf of ACL, I do not think that the direction by ACL can assist PJN in respect of the proceeds from the sale of the Project trees. That is so regardless of the difficulty that I accept PJN likely had in differentiating between the proceeds from the sale of cherries from ACL trees and the proceeds from the sale of cherries from Project trees.
However, in my view, the direction and payment do assist PJN in respect of the ACL cherry proceeds; that is, the proceeds from the sale of the cherries from the ACL trees.
I have earlier rejected the effectiveness of ACL’s attempts to revoke the authority or agency conferred upon FABAL in respect of the ACL cherry proceeds in clauses 3 and 4.9.4 of the CMA. It follows that FABAL retained that authority or agency.
However, while the CMA contemplates that the ACL cherry proceeds will be paid to FABAL, it expressly provides that FABAL is to receive those proceeds “on behalf of” ACL (that is, as the agent of ACL). In those circumstances, even though the CMA did not expressly contemplate that the ACL cherry proceeds be paid directly to ACL, I consider that the payment of those proceeds to ACL was sufficient to discharge PJN’s obligations in respect of those proceeds under the CMA.
This conclusion is consistent with, and indeed dictated by, an application of the principles of agency law. The general principle is that where an agent makes a contract with a third party on behalf of a disclosed principal pursuant to the agent’s actual authority, the principal alone can sue, and be sued by, the third party on that contract.[17] However, this is subject to the qualification that the terms of the contract may indicate that the agent also assumes some personal liability, and that both the agent and the principal can sue on the contract.[18] In the circumstances of the present case, including the tripartite nature of the CMA, I accept that FABAL, even though its entitlement to receive the ACL cherry proceeds was as the agent of ACL (as a disclosed principal), may well have been entitled to sue PJN in respect of that right.
[17] G E Dal Pont, Law of Agency (LexisNexis, 3^rd ed, 2014) at [19.1].
[18] G E Dal Pont, Law of Agency (LexisNexis, 3^rd ed, 2014) at [19.2].
However, even in circumstances where the agent would otherwise be entitled to sue to enforce a contractual right, the right of the principal nevertheless prevails over that of the agent, and the right of the agent to enforce the contract is destroyed by the intervention of the principal in the exercise of its own right.[19] If the principal sues the third party in respect of that right, then the agent cannot sue in respect of that same right;[20] a fortiori if the principal settles with, or recovers from, the third party.[21]
[19] Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 at 150; CFIRentals Pty Ltd v Roussos [2017] QCA 308 at [13]-[15]; Mooney v Williams (1905) 3 CLR 1 at 8; G E Dal Pont, Law of Agency (LexisNexis, 3^rd ed, 2014) at [19.2], [19.31].
[20] Atkinson v Cotesworth (1825) 3 B & C 647; 107 ER 873.
[21] Pople v Evans [1969] 2 Ch 255 at 261-262.
Here, ACL, as principal, intervened by directing PJN to make payment to it of the ACL cherry proceeds. And in conformity with this direction, PJN paid those proceeds to ACL. I can see no reason as a matter of legal principle or common sense not to give practical effect to this, and to treat it as discharging PJN’s obligations under the CMA to FABAL in respect of the ACL cherry proceeds. It follows that FABAL’s claim in debt or for damages for breach of contract fails in respect of the ACL cherry proceeds.
The position is different in respect of the Project cherry proceeds. Despite PJN having also paid this portion of the net proceeds to ACL, I do not regard this as a basis for discharging PJN’s contractual obligation under the CMA to pay that portion of the net proceeds to FABAL. I do not think ACL’s direction to PJN extended to the Project cherry proceeds. But even if it were to be construed as extending to the Project cherry proceeds, I do not accept that this would have been a sufficient basis to invoke the agency law principles referred to above. The reason for this is that FABAL’s contractual right to receive that portion of the net proceeds from PJN under clauses 3 and 4.9.4 was not as agent for or otherwise “on behalf of” ACL. Rather, those clauses of the CMA referred to FABAL receiving that portion of the net proceeds on behalf of the Project; that is, in its capacity as responsible entity for the Project, and to distribute in accordance with the Project documentation. While some of those net proceeds would likely have ultimately been received by (or at least credited to the benefit of) ACL, that does not mean that FABAL was acting as ACL’s agent in receiving the Project cherry proceeds. As such, ACL’s intervention in respect of that portion of the net proceeds was not an intervention by a principal sufficient to discharge or destroy the right of its agent to sue in respect of the same.
Entitlement to recover the Project cherry proceeds
The net effect of the above is that I am satisfied that FABAL was, and remains, entitled under clauses 3 and 4.9.4 of the CMA to payment by PJN of the net proceeds from the sale of the Project cherries. In other words, it is entitled to the proportion of the net proceeds referable to the sale of the cherries from the trees that remained Project trees.
Before turning to consider the competing submissions from the parties as to what proportion of the trees remained Project trees, I mention that I am satisfied that FABAL is entitled to recover the Project cherry proceeds as a contractual debt and is not merely reliant upon a claim for damages in respect of the same. These proceeds are recoverable as a liquidated sum due under the contract, and in my view, that is so regardless of the fact that as events transpired FABAL did not carry out the harvest. The CMA did not make payment of the net proceeds by PJN to FABAL dependent upon FABAL carrying out the harvest, and FABAL was in any event only prevented from undertaking the harvest by the conduct of PJN and ACL.
There is, of course, a well-recognised distinction between a claim in debt and a claim in damages.[22] And as a sum recoverable as a contractual debt there is no occasion or need in the present case to consider what, if any, loss was suffered by FABAL as a result of it not being paid the Project cherry proceeds, including by reference to what would have happened to those proceeds had they been paid over.
[22] Young v Queensland Trustees Ltd (1956) 99 CLR 560 at 567; Commonwealth Bank of Australia v Butterell (1994) 35 NSWLR 64 at 67; Sansom Nominees Pty Ltd v Meade [2005] WASC 9 at [60]; HL Diagnostics Pty Ltd v Psycadian Ltd [2005] WASC 234 at [27].
It is also well recognised that a claim in debt that has accrued (by reason of the debt falling due) prior to termination of the relevant contract will survive that termination.[23] It is hence no barrier to FABAL’s claim that the CMA may subsequently have been terminated or have been treated as terminated by the parties.
[23] Westralian Farmers Ltd v Commonwealth Agricultural Service Engineers Ltd (1936) 54 CLR 361.
The proportion of trees that remained Project trees
As recounted earlier, the evidence establishes that the gross proceeds from the sale of the cherries from the 2014/15 harvest was $1,315,696. After PJN’s commission of $164,462, GST of $16,446 and a levy of $9,206, that left net and proper proceeds in the amount of $1,125,581 (rounded).
On the assumption that it is only entitled to the net proceeds from the Project trees, FABAL contends that it is entitled to 13.9 per cent of this sum, or $156,456. The basis for this percentage is the evidence, confirmed by the Growers Register, that as at December 2014 (and throughout early 2015) there remained 19 Growers with a total of 73 Interests. As each Interest entailed an Allotment of 100 trees, it follows that 7300 out of the total of 52,518 trees were Project trees; that is, 13.9 per cent of the total trees were Project trees.
PJN challenges FABAL’s use of 13.9 per cent. It contends that this overlooks the Growers who had their Licence Agreements cancelled by ACL during the second half of 2014 for non-payment of their licence fees. PJN relies upon evidence to the effect that ACL purported to terminate the licences and Interests of six Growers who had a total of 47 Interests. On PJN’s case, that left a total of only 13 Growers with 26 Interests. This meant that the percentage of trees that remained Project trees was in fact 4.95 per cent (2,600 out of a total of 52,518 trees), although PJN was content to adopt the slightly higher figure of 5.9 per cent that had been asserted at the time by ACL.
In support of ACL’s purported termination of not just the Grower’s licences but also their Interest in the Project, reliance was placed upon clause 10.4 of the Licence Agreement. That clause provided that if the Licence Agreement is terminated pursuant to clause 10 (for example, for a default in the payment of licence fees), then the Grower loses all rights as a Grower in the Project; they remain liable to pay all amounts under the Licence Agreement; the Grower’s Interest in the Project is terminated; the Responsible Entity (FABAL) may take steps to sell the Grower’s Interest in accordance with the Constitution; and the Responsible Entity may terminate its Management Agreement with the Grower.
There is a tension between this clause of the Licence Agreement, and the Constitution. In particular, clause 22 of the Constitution, while treating the default of a Grower under a Licence Agreement as a matter that enabled the termination of their Interest in the Project, was nevertheless drafted in terms that assumed that FABAL, as the Responsible Entity, had a discretion whether or not to terminate the Interest in that circumstance. FABAL contends that there is thus an inconsistency between the Licence Agreement and the Constitution in this respect, and that the Constitution must prevail to the extent of this inconsistency.
While there is, as I have observed, a tension between the termination provisions of the Licence Agreements and the Constitution, I am not satisfied that there is an inconsistency sufficient to ignore the plain terms of the Licence Agreements. I accept PJN’s submission that where a Grower’s Licence Agreement has been terminated (as opposed to a Grower merely being in default), then their Interest is automatically terminated. This leaves the Responsible Entity with an additional discretion under the Constitution to terminate (or, indeed, not terminate) in circumstances where the Grower is merely in default under their Licence Agreement (but without that Licence Agreement having been terminated by ACL).
However, despite this conclusion, I do not think it provides PJN with an answer to FABAL’s use of 13.9 per cent. The first difficulty with PJN’s position is FABAL’s contention that ACL was not in a position to terminate the Licence Agreements for the late payment of licence fees because FABAL had earlier entered into payment plans with the relevant Growers. While there is reference to these matters in the evidence, there is insufficient evidence for me to determine the validity of ACL’s purported termination of the various Licence Agreements.
But more fundamentally, even accepting that some Licence Agreements were validly terminated and hence that some further Growers ceased to have an Interest in the Project, it does not mean that the trees in which they held an Interest ceased to be Project trees. Put another way, the trees did not, without more, become ACL’s trees with the result that payment of the net proceeds in respect of those trees to ACL discharged PJN’s obligation to pay FABAL the net proceeds under the CMA.
Even accepting that the further Grower Interests were terminated by reason of their Licence Agreements being terminated, the evidence does not establish that those Interests, or the trees to which they related, had been acquired by ACL by the time PJN became obliged to pay over the net proceeds of sale from the 2014/15 harvest. In my view, the proceeds from these trees remained Project proceeds that were to be paid to FABAL as the Responsible Entity of the Project, for it to then apply and distribute in accordance with the Project documentation. It follows that FABAL is entitled to recover 13.9 per cent of the total net proceeds, or $156,456.
I note that in addition to challenging the percentage used by FABAL to determine the net proceeds referable to the Project trees, PJN also contended that the percentage should be applied to a lesser sum to reflect the costs incurred in harvesting, packing and grading the cherries from the 2014/15. I do not accept this contention. As explained earlier, FABAL is entitled to recover as a debt the sum owed to it by PJN under the CMA. While FABAL, as the Responsible Entity of the Project, will be required to deal with the sum it recovers in accordance with the Project documentation, I do not think it is necessary or relevant for present purposes for me to inquire into such matters. I do not think such inquiry is relevant to the amount owed by PJN to FABAL under the CMA.
Conversion
As mentioned at the outset of these reasons, FABAL pleaded a claim in conversion in respect of the net proceeds of the cherries from both the ACL trees and Project trees. However, as noted, FABAL acknowledged at the outset of the trial that the claim in conversion would stand or fall with the contractual claim, and hence did not press it as an independent basis for the recovery of any relief against PJN. As such, I do not need to say anything further about that claim.
Conclusion
For the reasons set out, FABAL is entitled to judgment against PJN in the amount of $156,456. I will hear from the parties in relation to interest and costs.

Overview of Grower Fees Years 1-4
Project Year	Financial Year Ending		Initial Management Services Fee $		Ongoing Management Services Fees $		Irrigation, Licence Fees & Planting Fee $		Rent $	Total $		Payment Date
1	30 June 2008		6,964		-		2,228		312	9,504		31 May 2008
2	30 June 2009		-		2,707		1,356		2,019	6,082		31 Aug 2008
3	30 June 2010		-		2,971		-		2,216	5,187		31 July 2009
4	30 June 2011		-		2,780		-		2,951	5,731		31 July 2010
Total	6,964		8,458		3,584		7,498	26,504
Overview of Grower Fees Years 5-16
Project Year		Financial Year Ending		Ongoing Management Service Fees $		Horticulture Costs (estimate only) $		Rent $			Total $
5		30 June 2012		507		2,657		3,676			6,839
6		30 June 2013		569		3,269		3,679			7,518
7		30 June 2014		599		3,551		3,743			7,893
8		30 June 2015		627		3,815		3,784			8,226
9		30 June 2016		643		3,911		3,834			8,388
10		30 June 2017		659		4,007		3,862			8,528
11		30 June 2018		675		4,107		3,907			8,689
12		30 June 2019		692		4,210		3,919			8,821
13		30 June 2020		709		4,315		3,973			8,998
14		30 June 2021		727		4,424		4,007			9,158
15		30 June 2022		745		4,534		4,054			9,333
16		30 June 2023		764		4,646		4,100			9,510