HP Mercantile Pty Limited v Dominic MarinelliHP Mercantile Pty Limited v Mario TurcoHP Mercantile Pty Limited v Victor Turco

[2008] NSWDC 118

CITATION:	HP Mercantile Pty Limited v Dominic MarinelliHP Mercantile Pty Limited v Mario TurcoHP Mercantile Pty Limited v Victor Turco [2008] NSWDC 118
HEARING DATE(S):	3/3/08 - 6/3/08, 10/3/08 - 12/3/08, 10/6/08
JUDGMENT DATE:	14 July 2008
JURISDICTION:	Civil
JUDGMENT OF:	Rolfe DCJ
DECISION:	See paragraphs 94-97 of Judgment
CATCHWORDS:	Agricultural Project Investment Schemes - Assignments of Debts - Whether earlier Assignments were effected prior to Assignments of debts in favour of Plaintiff - Whether Assignment partial only
LEGISLATION CITED:	Evidence Act 1995 (NSW) Conveyancing Act 1912 (NSW)
PARTIES:	HP Mercantile Pty Limited (Plaintiff) Dominic Marinelli (Defendant) Mario Turco (Defendant) Victor Turco (Defendant)
FILE NUMBER(S):	4413/02; 5593/02; 5594/02
COUNSEL:	R Margo SC (Plaintiff) G Ellis SC (Defendants)

JUDGMENT

1 There are three proceedings before the Court all of which were heard together, so that the evidentiary rulings in one matter applied to all three. In all three proceedings HP Mercantile Pty Limited is the plaintiff. In all three proceedings the plaintiff seeks to recover from the defendants monies lent to the defendants for investment in three agricultural projects described in the evidence as the Coonabarabran Orchard Project, the Queensland Orchard Project and the Treetop Project. The plaintiff was not the original lender. Relevantly, the lender was Tumut River Orchard Management (“TROM”). The plaintiff, as an assignee of the debts, seeks to recover the loans through a number of assignments.

2 The background of the case is as follows.

3 A prospectus was issued to attract investors to each of the three projects. For example, the structure of the Coonabarabran Project is diagrammatically depicted on page 8 of the prospectus for that project (exhibit A, annexure A pp 20-100). The Queensland Orchard Project is diagrammatically depicted on page 8 of the prospectus for that project (exhibit A, annexure F pp 216-312). For the Treetop Project see exhibit A, annexure K pp 448-572.

4 Because the structure of each project was in a common form it may be conveniently summarised as follows. First, the Manager managed the project in accordance with an Investment Deed. The other parties to the Deed were a Growers’ Representative and the Growers. Through a Licence Agreement the Manager provided licences to growers for farming allotments. A Farming Agreement provided for the Manager to provide services for the Grower in relation to the allotments. An investor became a Grower by subscribing for a Licence and entering into a Farming Agreement. To reduce their cash outlay, investors had the option of obtaining a loan from the Manager, in this case TROM. Investors secured tax deductions by reason of the way in which the Projects were structured. In each case, the three defendants before the Court obtained a loan from TROM as the Manager. For convenience, loans made in relation to the Coonabarabran Project will be referred to as the “Coonabarabran Loans”, loans in relation to the Queensland Project will be referred to as the “Queensland Loans” and loans in relation to the Treetop Project will be referred to as the “Treetop Loans”.

5 To make good its claim, in each case the plaintiff relies on a number of assignments, the last of which is recorded in the document headed “Asset Sale Agreement” dated 31 August 2001 (exhibit E) entered into between the plaintiff and Merilbah Investments Pty Limited (“Merilbah”). Merilbah was formerly known as Arnott-Smith Holdings Pty Limited (“ASH”).

6 Counsel for the defendants helpfully prepared a diagrammatic representation of various assignments for the assistance of the Court (MFI 3) and it is reproduced below in much the same form:

Column 1	Column 2	Column 3	Column 4
Coonabarabran & Queensland Project loans TROM (28/6/96) Core Finance (15/3/00) Merilbah Investments (31/8/01) Plaintiff	Treetop & Plum Project loans TROM (28/6/97) Symsung (15/3/00) Merilbah Investments (31/8/01) Plaintiff	Coonabarabran Queensland & Treetop Harvesting & Marketing costs Treetop (15/3/00) Merilbah Investments (31/8/01) Plaintiff	Tumut, Apple & Harcourt project loans TROM (29/5/98) Treetop (15/3/00) Merilbah Investments (31/8/01) Plaintiff

7 Columns 1 & 2 are relevant to all three defendants because Dominic Marinelli invested in the Queensland and Treetop Projects and Mario Turco and Victor Turco both invested in the Coonabarabran, Queensland and Treetop Projects.

8 Column 1 shows the assignments relied on by the plaintiff in relation to the loans made for the Coonabarabran and Queensland Projects as follows:

(a) First assignment from TROM to Core Finance Pty Limited (“Core”) dated 28 June 1996.

(b) Second assignment by Core to Merilbah dated 15 March 2000. I will refer to this as the “Core Assignment”.

(c) Third assignment by Merilbah to the plaintiff dated 31 August 2001.

9 Column 2 shows the assignments relating to the loans made for the Treetop Project as follows:

(a) First assignment from TROM to Symsung Pty Ltd (“Symsung”) dated 28 June 1997.

(b) Second assignment from Symsung to Merilbah dated 15 March 2000. I will refer to this as the “Symsung Assignment”.

(c) Third assignment from Merilbah to the plaintiff dated 31 August 2001.

10 Although there was a reference in the evidence to a back-up assignment in December 2004 from Treetop Projects Limited (“Treetop”) to the plaintiff, that related to the Harvesting and Marketing costs and the Tumut Apple and Harcourt Project Loans referred to in Columns 3 & 4 in the above diagram. Although initially the plaintiff brought a claim in each of the three proceedings for recovery of the Harvesting and Marketing costs, these claims were not dealt with at the hearing because of the parties’ intention to have them dealt with in the Supreme Court of New South Wales at the same time as certain other related matters are heard in that Court.

11 Although at the commencement of the hearing the defendants were given leave to amend their defences to introduce new issues, none of the individual defendants’ affidavits was read. At the conclusion of the case the defendants had abandoned many issues. At the end of the day, there are only two issues for the Court to determine. First, in relation to the Core and Symsung Assignments, whether there was an assignment or agreement to assign prior to 31 August 2001. If there was no such assignment or agreement to assign, it follows that under the Asset Sale Agreement between Merilbah and the plaintiff of 31 August 2001, Merilbah could not have assigned the Coonabarabran, Queensland and Treetop loans to the plaintiff because they had not been validly assigned to Merilbah prior to that date. If the first issue is decided in the plaintiff’s favour, the second issue will need to be determined. That issue is whether the assignment of the Treetop Loans by TROM to Symsung was only partial and not absolute.

12 The plaintiff accepts that the Core Assignment and the Symsung Assignment were not executed on 15 March 2000. The plaintiff’s submissions about when these documents were executed are in paragraphs 125 and 147 of the plaintiff’s submissions in chief. In a nutshell, the plaintiff seeks to establish that the Core and Symsung Assignments were executed well before 31 August 2001.

13 The plaintiff relied on the affidavit evidence of Andrew Purcell, Ross Chapman and Brenton Arnott-Smith. All three witnesses were cross-examined. The plaintiff’s solicitor, Peter Ton, also gave evidence and was cross-examined.

14 Very shortly after senior counsel for the defendants commenced his cross-examination of Mr Purcell, Mr Purcell was given a Certificate under Section 128 of the Evidence Act 1995 (NSW). At the end of that cross-examination Mr Purcell was then cross-examined by senior counsel for the plaintiff after the plaintiff applied to do so pursuant to Section 38 of the Evidence Act 1995 (NSW).

15 When cross-examined by counsel for the defendants, Mr Purcell was shown the Core Assignment (exhibit B, annexure JJJ p 771) and then referred to para 165 of his affidavit (exhibit B) in which he stated:

“165 Exhibited by me and marked with the letter “JJJ” is a masked copy of the contract between Core and ASH dated 15 March 2000.”

Mr Purcell signed this document on behalf of Core. Mr Arnott-Smith signed it on behalf of ASH.

16 Mr Purcell was also taken to paragraph 36 of his affidavit of 23 June 2006 (exhibit B, Vol 3) in which he stated:

“36 On 15 March 2000, Core entered into an Agreement with Merilbah (formerly ASH) to effect the transfer and assignment of various assets (including the defendants’ Coonabarabran Loan and Queensland Loan) from Core to Merilbah. At the time I was the Managing Director of Core. I am currently a consultant to Merilbah.”

17 At T 113.39-45 Mr Purcell said that the statement that “on 15 March 2000 Core entered into an Agreement with Merilbah” was not true.

18 Mr Purcell was then referred to para 168 of his affidavit of 17 November 2003 (exhibit B, Vol 1) in which he stated:

“168 Exhibited by me and marked with the letter “MMM” is a masked copy of the Contract between Symsung and ASH dated 15 March 2000.”

Mr Purcell signed this document on behalf of Symsung. Mr Arnott-Smith signed it on behalf of ASH.

19 Mr Purcell was then shown a copy of the Symsung Agreement being Annexure MMM at exhibit B, p 776.

20 Mr Purcell then said that the statement in his affidavit of 23 June 2006 that “on 15 March 2000 Symsung entered into an Agreement with Merilbah” was not true (T 114.17-26).

21 Exhibit 9 (formerly MFI 11) was a statement given by Mr Purcell to the defendants the day before the hearing commenced (T 153.26-30). Mr Purcell was not asked to affirm it, and did not affirm it.

22 Counsel for the plaintiff was not given a copy of MFI 11 before it became exhibit 9 until the fourth day of the hearing, 6 March 2008 (T 209). Having regard to the discussion at T 209-210 and having regard to the fact that Mr Purcell did not affirm exhibit 9, I propose to grant the application made by the plaintiff under Section 136 of the Evidence Act 1995 to admit exhibit 9 only to identify the basis upon which the defendants had further amended their defences on 4 March 2008. In this respect, I accept the submissions set out in paragraphs 33 and 34 of the plaintiff’s outline of submissions dated 28 April 2008.

23 At T 131.3-8 Mr Purcell said he was 99 per cent sure that the Core Assignment and the Symsung Assignment documents were not signed by him until after 31 August 2001. Then, at 279.25-20-44 Mr Purcell said he did not adhere to such evidence. Then he said much later at T2 29.37 that if he had not been shown exhibits N-R (inclusive) he would not have changed his assessment and it would have been 99 per cent likely the Core Assignment and the Symsung Assignment occurred after 31 August 2001.

24 Mr Purcell presented himself to the Court as a person who had decided to come clean and tell the truth and as a person who had no financial or other motive in giving his oral testimony. In reality, however, Mr Purcell had very real personal and financial motives for changing the evidence he had given in his affidavits.

25 When pressed in cross-examination Mr Purcell admitted he had not only sought out the three defendants in these proceedings but other borrowers as well who were defendants in proceedings brought against them by the plaintiff and that he had charged and been paid money for assisting those parties in defending claims brought against them by the plaintiff. Mr Purcell admitted he had suggested to the three defendants in the proceedings before the Court the implementation of a scheme to appoint a liquidator to Merilbah with a view to possibly setting aside the Assignment by Merilbah to the plaintiff. I have no doubt that Mr Purcell was motivated to have the plaintiff out of the picture and to get rid of Mr Chapman, who is the driving force behind the plaintiff. Mr Purcell’s desire was to resurrect some of the agricultural projects, particularly the Apple and Harcourt projects with assistance from the defendants and he wanted to play a leading role in this to achieve a financial gain.

26 At T 176.35-38, when asked if there was no possible financial or career prospects for him arising out of his attack on the Core Assignment and the Symsung Assignment, Mr Purcell said that was correct. This answer was false. Mr Purcell subsequently admitted that he had discussed with the Messrs Turco the possibility of potential recoveries from Managers of Projects the subject of the Assignments because fruit had been produced and misappropriated by the Managers. The truth came out when he gave the following evidence at T 177.6-24:

“Q So please refine anything I put to you to the degree you want to, you’ve had discussions along the broad lines, that you’ve somehow reached an accommodation with people who owe debts, if you manage to upset the chain of assignments to HP Mercantile, that you’ll reach some sort of accommodation with growers, assist them with the ATO, somehow generate funds for the resurrection of the orchardist projects which was always your main interest, is that so far very broadly the line of the discussions?

A I’ve advised them that they might be able to do and I might be able to assist them in that, but there’s been no discussion of my involvement other than I can help you do this.

Q But you obviously have a reasonable expectation that having been so helpful to them, if it succeeds, you’d have a role to play in the resurrected project?

A Yes, I would hope that would happen, but I don’t know.”

And at T 177.48 – T 178.3:

“Q And this project, there’s hope this long bow of resurrecting the projects of some of them, the big obstacle to that ever succeeding is of course HP Mercantile and Mr Chapman, is there?

A That’s one of them, yes.

Q It’s a major one?

A Certainly.

Q And if you can get rid of HP Mercantile’s claims, the project has prospects of success and otherwise it doesn’t?

A Yes that’s true.”

27 After Mr Purcell had given his evidence in the witness box I was left in no doubt that he carried a grudge towards the plaintiff and Mr Chapman in particular because he had a very strong but entirely false sense of entitlement to be paid substantial monies by the plaintiff through Merilbah or SS Growers Pty Limited (“SS Growers”). As well, even though the plaintiff had acquired all of Merilbah’s files and business records, Mr Purcell maintained an irrational sense of ownership of those documents. In the end, because Mr Purcell did not receive from the plaintiff what he perceived to be his due entitlement, he decided to help the defendants by giving untruthful evidence in these proceedings in order to spite the plaintiff and Mr Chapman and defeat the plaintiff’s claims.

28 In 2003 Mr Purcell reached an agreement with the plaintiff for services he was going to supply to it on behalf of Merilbah to assist the plaintiff in recovering debts which had been assigned to it. As at 2003, the plaintiff put a value of $120,000 on the work done (T 178.48) and agreed to pay Mr Purcell $3,000 per month for future work in assisting the plaintiff recover receivables which it had purchased from Merilbah.

29 Mr Purcell was not satisfied with this arrangement. Shortly before the Anzac Day weekend of 2004 Mr Purcell demanded a new arrangement of Mr Chapman. I prefer Mr Chapman’s evidence about the conversation. Mr Chapman said (T 2, 35.46) that Mr Purcell told him he was not getting enough and wanted a percentage of the recoveries, or at least the beneficial ownership of some of the loans or portions of them, or a royalty type payment. When Mr Chapman refused this demand I am satisfied that Mr Purcell said he would not sign any further affidavits or support the plaintiff unless his demand was met (T 185.17-45); (T 269.27-270.33).

30 I am satisfied that Mr Purcell kept a set of ghost invoices which recorded what he thought he was entitled to for the work he did assisting the plaintiff with its recoveries. These invoices were in the name of Merilbah but Mr McDonald, a director of Merilbah, objected to having the amounts shown in the ghost invoices in Merilbah’s accounts and had them removed. As a result, Mr Purcell transferred the ghost invoices to a different company, SS Growers (T 186 and T 187).

31 Mr Purcell later attempted to sell to Mr Di Lallo and others what he claimed was a debt owed by the plaintiff to SS Growers, evidenced by the Ghost invoices, for an amount of $848,705.00. If effective, such a sale could have given Mr Di Lallo a set-off against the amount claimed against him by the plaintiff.

32 The draft agreement is at pp 3-45 of exhibit J and has annexed to it the ghost invoices on the letterhead of SS Growers.

33 Included in exhibit J at p 45 is a letter dated 1 July 2004 which Mr Purcell handed over for the purposes of the proposed arrangement with Mr Di Lallo and others. The letter purported to be on the letterhead of the plaintiff and to be signed by Mr Chapman. It purportedly acknowledged a debt of $848,705.00.

34 In the event, Mr Di Lallo and the others decided not to go ahead with the transaction. No doubt this was because Mr Di Lallo and others conducted a search of SS Growers and discovered that Mr Purcell had been removed as a director and so they became mightily suspicious that all was not well. Nevertheless, it had progressed to the stage where Mr Di Lallo and the others had deposited $150,000 into the trust account of Comino Prassas, solicitors acting for Mr Purcell. This amount was to be released on completion. Had the transaction gone ahead the amount of $150,000 would have been paid out of the trust account in accordance with Mr Purcell’s directions because he had told no-one else at SS Growers, even its shareholder, that he was purporting to sell an SS Growers’ debt for $150,000, substantially less than what it was worth on the face of things.

35 Even though the transaction did not go ahead, nevertheless Mr Purcell received the amount of $22,000 out of the funds held in trust in payment of his solicitor’s costs. This was authorised by Mr Di Lallo and others (exhibit J p 46). The amount of $22,000 was split into two amounts of $9,000 and $13,000 respectively. Of this, Mr Purcell received $13,000 (exhibit J p 55-56). Although Mr Purcell asserted this was a loan to him by Mr Prassas which was interest free and had no date of repayment, I reject such evidence as fanciful. Mr Purcell pocketed the money.

36 When pressed in cross-examination, Mr Purcell agreed he had fabricated the letterhead of the plaintiff and had typed the 1 July 2004 letter himself. He had faxed it from the offices of the plaintiff’s solicitors, no doubt to support its authenticity. The letter purported to record an agreement by Mr Chapman on behalf of the plaintiff that an amount was owing to Merilbah and SS Growers in the sum of $848,705 for services rendered for the period from September 2001 to June 2004 and that interest was accruing at ten per cent per annum from the invoice dates. First, there is no evidence of any agreement between the plaintiff and SS Growers at any stage. Secondly, Mr Purcell did not tell SS Growers or Merilbah’s director that Mr Chapman had signed the letter, an astonishing omission if in fact the letter had been genuine (T 192). Additionally, Mr Purcell had asserted that he had picked the letter up from Mr Chapman who had signed it in his presence (T 190), but he changed this evidence shortly after he gave it and said that Mr Chapman had refused to give him the letter after he signed it (T 192). He also said he presented about $100,000 worth of the ghost invoices to Mr Chapman for payment at the end of 2004 and that Mr Chapman had rejected them (T 187). However, Mr Purcell did not fax the letter from the plaintiff’s solicitor’s office to his accountants until March 2005 which would mean that, even though Mr Chapman was not prepared to give the letter to Mr Purcell (according to Mr Purcell), nevertheless, Mr Chapman was prepared to leave a letter with his signature on it acknowledging a large debt simply lying around.

37 I found Mr Purcell’s evidence about the 1 July 2004 letter fanciful. I accept Mr Chapman’s evidence about the matter to the effect that he had never signed any such letter and that he had never agreed to what was stated in the letter. Mr Chapman gave detailed evidence about the matter at T 2, 37 and 35-42. Mr Chapman gave evidence in a very straightforward way about what he was doing on 1 July 2004, about the signature on the letter of 1 July 2004 being similar to what his signature had been prior to 2002 and about the fact that he had changed his signature in 2002. I found Mr Chapman’s evidence about these matters quite compelling, particularly his evidence about the difficulties he experienced with his bank as a result of the change in his signature. The evidence was given in a straightforward, unhesitating way and was undoubtedly truthful. In any event, it was supported by the documents in exhibit W containing samples of Mr Chapman’s true signature in January, May and June 2004. In addition to all that, I accept Mr Chapman’s evidence that he had totally rejected Mr Purcell’s demand for more money in April 2004. There would be no reason why he would want to sign an acknowledgement a bit over two months later to the effect that an amount of $848,705 plus interest was outstanding.

38 In all the circumstances the Court is comfortably satisfied that Mr Purcell forged Mr Chapman’s signature on the letter in question.

39 The evidence also disclosed that Mr Purcell was a deceitful person in other ways. Without obtaining permission or consent, Mr Purcell spent days copying documents that belonged to the plaintiff (T 203) even though he knew the plaintiff had an issue with him about him misusing information which belonged to it. Moreover, Mr Purcell showed no embarrassment about this when cross-examined about it, maintaining he had a right to copy the material for his own records. Again, in my assessment, this was derived from a false sense that he owned something which did not in fact belong to him.

40 The evidence that Mr Purcell received at least $20,000 from the Messrs Turco also demonstrates that Mr Purcell was not the disinterested witness he sought to make himself out to be. Although it was suggested by counsel for the defendants that the monies paid to Mr Purcell by his clients were reimbursement for accommodation and expenses, it is clear from his evidence that they included charges he made for services rendered to the defendants: $15,000 of the amount had already been paid to him by March/April 2007 (exhibit K).

41 Moreover, although Mr Purcell would have it that he spoke to a Registrar of the District Court in 2006 (T 117 FF), out of an ethical concern, I am satisfied, having heard him give evidence, that the reason he did this was to gain access to other persons who were defendants in other proceedings in this Court in which the plaintiff is involved. He saw them as potential clients who might be prepared to remunerate him. The fact was that, once Mr Chapman refused to increase Mr Purcell’s level of remuneration, he began looking for another way to achieve that outcome. He also tried unsuccessfully to get similar information from Mr Myers (T 270). Mr Myers was a director of Merilbah who took the view that the address list of the debtors belonged to the plaintiff and could not be released without its authority. Mr Purcell also withheld from Mr Myers critical information about a statutory demand that was about to be made on Merilbah for the payment of an alleged debt owed by Merilbah to Mrs Purcell which had been assigned to the Messrs Turco (T 277 FF).

42 I have also taken into account other matters in concluding that Mr Purcell’s oral evidence about the Core Assignment and Symsung Assignment being executed after 31 August 2001 should not be accepted. For example, with regard to SS Growers, Mr Purcell demonstrated further deceit on his part when he used a blank share transfer form to transfer a share from Mr Versace to Mr Arnott-Smith without consulting either of them. Mr Arnott-Smith objected to the transfer, it was reversed by ASIC and Mr Purcell was removed as a director of the company (T 195 FF and exhibit V). Notwithstanding, after Mr Purcell had been advised of his removal as a director of SS Growers, without authority he withdrew money from a company account (T 198 and exhibit V).

43 When initially cross-examined about the matter, Mr Purcell said at T 175 that he was not really involved in the attempt by the Messrs Turco to have a liquidator appointed to Merilbah, but it turned out, as he conceded in evidence, that he was the architect of the scheme. Not only that, Mr Purcell was prepared to encourage the Messrs Turco to treat a debt allegedly owed to his wife with a face value of $2.4 million as genuine in circumstances where he told his wife to sell it for $2,500 (T 272-3).

44 Mr Purcell also claimed in evidence that some of his affidavits, which were relied on by the plaintiff in these proceedings, had been signed by him without the annexures attached. He asserted that at the time he signed some of the affidavits no one was present to witness his signature and the witnesses’ signatures had been added later. I reject his evidence about these matters. My assessment was that he gave this evidence in order to discredit Mr Chapman. The attempt was unsuccessful. Likewise, an attack was launched on the credit of Mr Ton, the solicitor for the plaintiff, concerning his conduct with regard to one of the affidavits. It was said by senior counsel for the defendants that he was not present as a witness when he signed as such one of the affidavits which was made. The submission is not supported on the evidence. The evidence clearly demonstrated that on those occasions when Mr Purcell had signed an affidavit without anyone being present to witness his signature, the plaintiff’s solicitors did not accept such affidavits. Rather, they required Mr Purcell to swear them properly in the presence of a witness (T 163, 168, 169). In this regard I am satisfied Mr Purcell made up his evidence about Mr Ton. Having had the opportunity of hearing Mr Ton in the witness box about it I was entirely convinced that Mr Ton’s evidence about the matter was truthful.

45 Mr Purcell also asserted that Mr Chapman behaved unethically claiming he was aware that one of the Di Lallo loans had been forgiven. I reject the assertion. It is not substantiated on the evidence and I accept Mr Chapman’s evidence about the matter. Further in this respect, Mr Purcell sought to cast aspersions on Mr Chapman’s character by referring to some documents which had been destroyed, the inference being that the evidence was relevant to the proceedings. However, further cross-examination on the topic at T 216 disclosed that such documentation had no relevance to the proceedings whatsoever.

46 I now turn to consider the evidence of Mr Arnott-Smith. Mr Arnott-Smith made his affidavit (exhibit X) late in the proceedings on 10 March 2008. The reason for this is quite plain, namely, the contents of exhibit 9, which resulted in the defendants filing their further amended defence on the first day of the hearing, 4 March 2008, as a result of which, for example, the defendants changed their plea of non-admission in relation to the Symsung Assignment to one of denial.

47 Mr Arnott-Smith’s evidence in chief in exhibit X was that ASH was a family investment company of which he was the sole director and shareholder when he met Mr Purcell in 1998, having been introduced to him by his accountant. At that time ASH had accumulated significant tax losses and was in debt to Mr Arnott-Smith as a shareholder to the tune of approximately $2.4 million.

48 Mr Arnott-Smith and his accountant spoke to Mr Purcell many times during the second half of 1999 and into the first quarter of 2000 about ASH acquiring loan books relating to various agricultural projects being managed by Treetop. Mr Arnott-Smith could not recall the precise details of the discussions although he remembered that some of the loan books were owned by Treetop and others were owned by companies associated with Mr Purcell. He recalled that one of the companies was Core. He also recalled that Treetop was in some financial difficulty at that time and Mr Purcell was particularly anxious for ASH to acquire the loan books of Treetop as soon as possible. In this respect, when shown the Asset Sale Agreement dated 15 March 2000 between Treetop and ASH (the “Treetop Assignment”) (Diagram Column 3), he could not recall the date on which it was executed. However, in his evidence in chief he said that each of the Core and Symsung Assignments, both dated 15 March 2000, were executed after the Treetop Assignment.

49 In cross-examination Mr Arnott-Smith accepted that the Core and Symsung Assignment documents were backdated (T 2 62.25).

50 In this regard, when asked in the witness box about whether an agreement had been reached prior to the execution of the Treetop Assignment document, Mr Arnott-Smith’s evidence was that he thought it had but he was not so sure (T 2 61.12). As best as he could recall, agreement had been reached in relation to the loans the subject of the Core and Symsung Assignments before the Core and Symsung documentation had been signed (T 61.32). At T 62 he said that the in principal agreement was reached in late 2000 or something like that in his offices at Sydney or at the accountant’s office at Cootamundra. His accountant, Mr McNamara, Mr Purcell and he himself were present. He thought it was unlikely the discussions occurred in the second half of 2001 because he recalled he had resigned as a director of ASH in early August 2001. That latter explanation was demonstrably incorrect because Mr Arnott-Smith acknowledged that he had signed an agreement (BAS1 to exhibit X) with Mr Mishra on behalf of ASH in February 2003. In that respect, although initially he said that the Mishra agreement was executed on 20 May 2000, when pressed in cross-examination, he agreed the document had been backdated. He then agreed that the document was in fact signed in February 2003 (T 72.9).

51 I am not satisfied that the Mishra ssignment document was not signed by Mr Arnott-Smith and Mr Mishra when they were both in Vancouver. On balance, I accept Mr Arnott-Smith’s evidence that that is where the documents were signed.

52 At the end of the day Mr Arnott-Smith could not remember exactly when he signed the Core Assignment document and the Symsung Assignment document (T 2 90) because to put it in his words, he had “no reason to remember particularly”.

53 The attempt to discredit Mr Arnott-Smith when he was asked about the documents which became exhibits 2, 3 & 4 failed. Mr Arnott-Smith was not prepared to deny that his signature appeared on these documents when shown the originals or that Mr Kelso’s signature appeared to be on them. Nonetheless, Mr Arnott-Smith adhered to his understanding that the assignment to Mrs Purcell had never taken effect. There are objective indications supporting that understanding. First, exhibit 2 has “2002” typed on both pages where Mr Arnott-Smith’s purported signature appears. Secondly, the loan the subject of the alleged assignment was not made by Mrs Purcell until mid 2002. Thirdly, neither the assignment document nor the notice of assignment was dated. Fourthly, the $100 was never paid by Mrs Purcell. Finally, the notice of assignment was never given to Merilbah. Even if an assignment did take place, the evidence establishes that it was only intended to operate by way of security for a loan and the loan had been repaid before the assignment to Mr Mishra. In any event, Mr Purcell knew about the assignment to Mr Mishra when he got his wife to sell her alleged debt to the Messrs Turco.

54 When looked at in isolation, Mr Arnott-Smith’s evidence does not of itself support a conclusion that the Core Assignment document and the Symsung Assignment document were executed before 31 August 2001. However, although Mr Arnott-Smith gave false evidence initially about the date of execution of the Mishra Assignment because it concerned his tax affairs, I am satisfied Mr Arnott-Smith had no motive to lie about the date the Core and Symsung Assignment documents were executed. Moreover, counsel for the defendants did not put it to Mr Arnott-Smith that Mr Chapman had anything to do with procuring his signature on the Core and Symsung Assignments. In this respect, the defendants pleaded that at the request of Mr Chapman, Mr Purcell signed the documents after 31 August 2001, later in 2001 or early in 2002. Mr Chapman denied having any such involvement and I completely accept his evidence about this. I have therefore given some weight to Mr Arnott-Smith’s evidence that he recalled that the Core and Symsung Assignments were executed during 2000 because such evidence is corroborated by documents which were in evidence and as well as the concessions extracted from Mr Purcell in cross-examination. I shall now detail those matters.

55 Exhibit L is a fax from Mr Purcell to Mr Arnott-Smith dated 6 March 2000. Exhibit L records the contemplated acquisition by Merilbah of all the loans, “including those from Symsung and Core Finance”. This document supports Mr Arnott-Smith’s recollection as set out in his affidavit, exhibit X at paragraphs 8-10 and 12. Although Mr Purcell endeavoured to suggest in his evidence that exhibit L had been backdated, I reject such evidence, particularly having regard to the fax number on the document: fax numbers in 2000 had only 7 digits as was the case with exhibit L.

56 The Treetop Assignment to Merilbah (MFI 10 in exhibit 5) had been agreed about 15 March 2000 and was executed only weeks thereafter. The assignment document envisaged that Treetop would procure the transfer of all loans held by Core and Symsung. In this respect, when taken to the various provisions of the Treetop Assignment, Mr Purcell agreed in cross-examination that it was in contemplation of the parties (therefore including Merilbah) in March 2000 that the loans owned by Core and Symsung would be acquired by Merilbah (T 231). Moreover, Mr Purcell confirmed in evidence that the Treetop Assignment assigned the Growers’ account to Merilbah: Schedule 2 of the copy of MFI 11 in evidence lists all the investment schemes in relation to Growers’ accounts. See also Recital E which would have made no sense if the Coonabarabran Project was not part of this agreement.

57 There is also incontrovertible documentary evidence, including the Australia Post date stamped “Return to Sender” envelopes and contents being notices of both the Core and Symsung Assignments which had been given to borrowers in October 2000. There are also documents in the nature of letters of demand and follow-up payments which were dated prior to May 2001 (exhibit N, exhibit O, exhibit P, exhibit Q, exhibit R, exhibit U). When asked about when notices of the Core and Symsung Assignments would have been sent out, the effect of Mr Purcell’s evidence was that the notices would have been sent out around the same time as the Assignment itself was executed. Mr Purcell agreed he was not surprised in the witness box to see that in his affidavit evidence he had said that notices of assignment were sent to all growers in respect of receivables on 9 October 2000.

58 When one of the return-to-sender envelopes addressed to Mr & Mrs Lampley and its contents were shown to Mr Purcell, he agreed that he had no doubt that notices of assignment had been sent to those investors in October 2000. He also agreed that the evidence given about such notices being sent out after 31 August 2001 was incorrect (T 266).

59 When exhibits N-R were put to him by the plaintiff’s counsel, Mr Purcell said nothing to cast any doubt on their provenance as contemporary business records created on the dates that they show. Nor did Mr Purcell try to explain them away on some other basis.

60 The dates of the documents in exhibits N-R and U are very important, not only because the dates are well before 31 August 2001, but because Mr Purcell’s evidence was that he had no dealings with Mr Chapman between March or April 2000 and his meeting with Mr Chapman in May 2001. Many of the letters in exhibit N-R and U are dated before May 2001.

61 Commonsense suggests and Mr Purcell agreed at T 241 that Merilbah would not have been able to claim any payments in respect of the Coonabarabran or Plums Projects unless and until there had been an assignment to Merilbah of those receivables. The variety and range of the documents in exhibits N-R and U are very strong support for the probability that the Core and Symsung Assignments were executed long before September 2001 and most probably during 2000.

62 Exhibit M is a document created by Mr Purcell dated 16 May 2001. Its contemporaneity is not in issue and it was created at or around the time of Mr Purcell’s meeting with Mr Chapman in May 2001 and Mr Chapman received it on the date it bears (T2 42.45). Importantly, Exhibit M shows that Merilbah/ASH had an interest by that date in all the project loans including those the subject of the Core and Symsung Assignments.

63 The documents referred to above are not the only evidence that the arrangement between Mr Purcell and Mr Arnott-Smith in early 2000 extended to all the loans being managed by Treetop including those held by Core and Symsung. For example, at T 159.5 Mr Purcell said:

“I think the Core Assign – the Core Symsung thing are very, we were very relaxed about that because it was not under threat from anyone.”

64 This evidence shows that it was accepted by Mr Purcell and Mr Arnott-Smith in early 2000 that Merilbah was going to buy all the loans, including the Core and Symsung loans, exactly as had been proposed in exhibit L.

65 At T 157 and158 Mr Purcell confirmed that an oral agreement had been reached by him and Mr Arnott-Smith on or before 15 March 2000 and that this preceded the documentation of the Treetop Assignment. Documentation of the Treetop Assignment was urgent because Treetop was under threat of liquidation or something similar but Core and Symsung were not, so Mr Purcell and Mr Arnott-Smith could be more relaxed about documenting the Core and Symsung Assignments.

66 Importantly, Mr Purcell’s first and freshest recollection when being cross-examined by counsel for the defendants was that the Core and Symsung Assignments were executed about six months after 15 March 2000, in other words, by September 2000. That recollection is consistent with Mr Arnott-Smith’s evidence in exhibit X.

67 Part of the consideration for each of the Treetop, Core and Symsung Assignments was to be determined by a valuation of Treetop’s loan book in respect of what was known as the SuperSweet Project. The SuperSweet valuation dated 31 May 2000 is at exhibit B p 375. Covering letters each dated 5 June 2000 enclosing the valuation in respect of each of the Treetop, Core and Symsung Assignments are at exhibit A Vol 2, p 303 and exhibit A Vol 3, pp 17 & 24. In respect of these matters, in my assessment, the answers given by Mr Purcell in cross-examination demonstrate that he and Mr Arnott-Smith were contemplating the assignment of all the loans in their discussions in early 2000. The provisions of the Treetop Assignment itself which contemplated assignments by Core and Symsung show that the valuation was intended for use in respect of all three assignments.

68 Although the defendants sought to submit that exhibits N-R did not assist the plaintiff and were not inconsistent with the Core and Symsung Assignments having been executed after 31 August 2001, I reject their submission.

69 Exhibit N is a pro-forma letter dated 9 October 2000 bearing exactly the same date referred to by Mr Purcell in his affidavits. Exhibits R and U establish that exhibit N was used in October 2000 for both the Coonabarabran and Plum loans.

70 Although exhibit O is a form letter, it is dated and the date fits in with that of exhibit N, as do the words “you will by now have received notification of your loan being assigned to” Merilbah.

71 Exhibit P shows a payment by Mr Brysse of interest as at 31 August 2000 in respect of his Coonabarabran loan being addressed to and received by Merilbah and Merilbah giving the receipt for that payment. This would not make sense if Core had not assigned the Coonabarabran and Queensland receivables to Merilbah until after 31 August 2000.

72 Although there is no signature on the letter from Mr Brysse to Merilbah dated 19 October 2000, the cheque referred to in it was signed by him, the letter was stamped “received 03 November 2000”, the photocopy of the cheque was kept by Merilbah’s accounting staff with the letter and handwritten notes of the accounting entry relating to the received payment were made on the letter. That Mr Brysse sent the letter is further evidenced by the insertion of his tax file number on the return copy of his interest statement.

73 Given the 19 October 2000 date of Mr Brysse’s letter, the 31 August 2000 date of the Treetop Manager’s statement to him of the interest due and the fact that similar statements were sent by Treetop with its letters to growers dated 9 October 2000 enclosing assignment notices (see for example exhibits R and U), the inference the Court draws is that Mr Brysse wrote to Merilbah, not in response to a letter from Merilbah, but in response to a letter from the Manager, Treetop, on or about 9 October 2000, enclosing project information and the relevant assignment notification which gave him Merilbah’s address.

74 Exhibits R and U show that assignment notices were given by Core and Symsung respectively in October 2000. There is no reason for the Court to draw any other inference.

75 Exhibit 2 is a series of demands by Merilbah requiring investors to pay it in respect of Plum loans as early as March 2001. There are verified lists of documents in exhibit Q which confirm that the letters were received by the investors and Mr Purcell did not suggest that any letter in exhibit Q had not been sent. The defendants concede that Mr Bulley and Mr Christ received letters similar to those in exhibit Q and the Court therefore infers that Merilbah sent the letters in exhibit Q to the other addressees. The fact that “without prejudice” appears on the documentation is neither here nor there. Most likely, the words were put on the letters because the letters contained compromise offers to defaulters and so the draftsperson must have thought it necessary to protect the lender’s full legal rights.

76 Insofar as the defendant asserted that the plaintiff had made an election not to call Mr Myers and that the Court should draw some sort of adverse inference, such submission has no foundation because there was no issue at the hearing which required his evidence. This is because although his name was on the letters referred to above, Mr Purcell did not question that they were ordinary business records.

77 Contrary to the defendants’ submission, the Court comfortably accepts that the contents of the envelopes in exhibits R and U were the documents tendered with them respectively because Mr Purcell confirmed that the photocopy sets matched the originals before they were tendered (T2 31).

78 The defendants sought to make something out of the difference between the more detailed format of the Treetop Assignment compared with the format of the Core and Symsung Assignment documents. There is nothing sinister about this. I am satisfied on the evidence that the Core and Symsung Assignment documents were executed after the Treetop Assignment. The Treetop Assignment obliged Treetop to procure their execution of the other two. Moreover, the Treetop Assignment assigned not only loans but Growers’ accounts (including harvesting and marketing), licences, equipment leases, intellectual property, trademarks, business assets, cash, trading assets and a catch all category of any other assets owned by Treetop. The Core and Symsung Assignments only dealt with the assignment of loans.

79 Accordingly, taking into account all of the above, the Court makes the following findings.

80 First, there was an oral agreement made in about March 2000 that Merilbah would buy all the loans being managed by Treetop including those held by Core and Symsung using a SuperSweet valuation for all of them. Secondly, none of the Assignment Agreements was executed on 15 March 2000. After the oral agreement was made, the Core and Symsung Assignments were executed and backdated to 15 March 2000. Thirdly, the Treetop Assignment was executed before the Core and Symsung Assignments because Treetop was going into administration or liquidation but there was less urgency about executing the other two assignments.

81 On the balance of probabilities, therefore, the Court is satisfied that the Core and Symsung Assignments were executed sometime after March 2000 but before the notices of those assignments were sent to investors in October 2000.

82 I now turn to consider the second issue, namely, whether the assignment of the Treetop Loans, being the first assignment in Column 2, was partial. This issue was only raised by the defendants when their Amended Defence was filed in Court on the first day of the hearing.

83 In cross-examination by senior counsel for the defendants, Mr Purcell accepted propositions put to him in a leading form that TROM had assigned to Symsung only part of the Treetop Loans. Counsel referred to two documents he had given to Mr Chapman being MFI’s 8 and 9, now part of exhibit 5. These documents recorded certain comments made by the administrators of TROM in their report (MFI 7, now part of exhibit 5). Mr Prentice was one of the administrators. Mr Purcell confirmed in cross-examination that he got the idea of there being a partial assignment of the Treetop Loan from what Mr Prentice said in the administrators report. Mr Purcell agreed, however, that when he received the report he read it but did not speak to anyone at Mr Prentice’s firm to complain about anything in the report.

84 At the time the administrators provided their report they had not seen the various assignments, including the TROM to Symsung Assignment (MFI 7, now part of exhibit 5) and importantly, the liquidators of TROM made no claims in respect of the Treetop Loans on behalf of TROM before it was deregistered on 7 January 2006. It would be expected that any such claims would have included claims against the defendants in these proceedings.

85 In all of his affidavits sworn on 23 June 2006 (exhibits A, B & C), Mr Purcell, the principal mover and shaker behind the assignments, gave evidence that it was the parties’ intention, on acceptance of TROM’s offer, for Symsung to acquire all rights, title and interest in the Treetop loans and that the written offer would represent the terms of the contract between the parties and that the transaction would be an absolute assignment under 12 of the Conveyancing Act 1912 (NSW).

86 Mr Purcell departed from what he said in his affidavits when cross-examined by senior counsel for the defendants. Because I do not accept Mr Purcell’s evidence for the reasons previously given (except in those specific instances identified in the Judgment), I do not give any weight to what Mr Purcell said.

87 Accordingly, as the plaintiff submits, whatever the administrators may have said in their report, the effect of the TROM – Symsung Assignment must be determined as a matter of construction of the document itself.

88 The written offer made by TROM to Symsung (exhibit B, vol 2, p 740) provided that (typographical errors included from original):

“Herby offers to sell to Symsung the whole of its right, title and interest in the loans thedetails of which are set out in annexure A heretoo, including but not limited to the rights to the loan documents, any security interests conferred thereby or referred to therein (the loans) …”

89 The offer recorded that title to the loans would vest in Symsung on acceptance of the offer and payment, that on request TROM would do everything necessary to transfer the loans into the name of Symsung and TROM warranted that it was the beneficial owner of the Loans and had “full right and power to make this offer and to give effect to the sale so as to confer good title to the Loans to Symsung”. All of these words are consistent with the document being an absolute assignment.

90 Attached to the offer of sale at exhibit B, vol 2, p 740 are two pages of schedules, pages 741 and 742. The defendants submit that these copies are partial copies only and submits it is necessary to look at MFI 9, which is now part of exhibit 5 because that shows pages recording entries for the defendants. When applying the headings on the defendants’ pages (MFI 9) to the schedules at pages 741 and 742, the defendants submit that these documents reveal an intention only to assign:

(a) $37,500 out of $59,500 in the case of Mario Turco

(b) $37,500 out of $59,500 in the case of Victor Turco and

(c) $15,100 out of $21,700 in the case of Dominic Marinelli

91 As the plaintiff points out, different parts of the pages attached to the written offer appear to have come from different sources. The inference the Court draws is that the documents were not prepared for the purpose of being annexed to the offer. Moreover, nothing in the attachments overrides the clear and unambiguous wording of the offer document. As I have already said, those words are entirely consistent with an absolute assignment. Moreover, all the contemporary notices of assignment of the Treetop Loans by TROM to Symsung, by Symsung to Merilbah and by Merilbah to the plaintiff were given with the knowledge and consent of both assignors and assignees and referred to the assignment of the whole loan in each case.

92 The construction the defendants seek to put on the schedules is inconsistent with the matters referred to.

93 Accordingly, the Court is comfortably satisfied that the Core and Symsung Assignments were both absolute and the Symsung Assignment was not partial.

94 Accordingly, the plaintiff is entitled to succeed in respect of all three claims against the three defendants.

95 The amounts claimed by the plaintiff are set out in paragraph 178 of the plaintiff’s submission in chief. I did not understand there to be any dispute about the plaintiff’s arithmetic. That being so, I stand the proceedings over before me for mention at 10am on Monday 21 July 2008 and direct the plaintiff to bring in Short Minutes of Order on that occasion to give effect to these reasons for Judgment.

96 Costs should follow the event on the ordinary basis, but I will make a direction for the parties to serve short written submissions if either of them wishes to contend otherwise.

97 I direct that the exhibits be retained in the Court Registry for a period of six weeks.

**********