Wardle v Agricultural and Rural Finance Pty Ltd

[2012] NSWCA 107

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Wardle v Agricultural and Rural Finance Pty Ltd; Agricultural and Rural Finance Pty Limited v Brakatselos [2012] NSWCA 107

Hearing dates:

14-17 February 2012

Decision date:

26 April 2012

Before:

Campbell JA at [1]
Barrett JA at [371]
Sackville AJA at [372]

Decision:

(1) Appeal allowed.

(2) Set aside the judgments in the court below against each Appellant.

(3) Enter judgment for Mr Holmes, with costs of the hearing at first instance.

(4) Grant leave to Mr Wardle and Mr Gianuzzi to replead paras [28]-[31] of the Further Amended Defence by inserting into those paragraphs the particulars that had previously been in [27] of the Further Amended Defence, modified to make clear that Mr Lloyd is alleged to have been acting on behalf of both ARF and OAL.

(5) Cross-appeal dismissed with costs.

(6) Remit to the Equity Division for further hearing ARF's claim against each of the Appellants other than Mr Holmes

(7) Reserve further consideration of what other orders should be made to give effect to these reasons for judgment.

(8) Direct the parties within 14 days after delivery of these reasons for judgment to file short minutes of the orders that they agree are required to give effect to these reasons for judgment, and as to the costs of the appeal and the first instance hearing.

(9) To the extent that the parties do not agree upon such orders, direct the Appellants within 21 days from the date of delivery of these reasons for judgment to file short minutes of the further orders they submit are required to give effect to these reasons for judgment, together with their submissions not exceeding four pages in length on the reasons why those orders are appropriate.

(10) In the event that the parties do not agree upon orders pursuant to order 8, direct the Respondents within 35 days of the date of delivery of these reasons for judgment to file short minutes of the further orders they submit are required to give effect to these reasons for judgment, together with their submissions not exceeding four pages in length on the reasons why those orders are appropriate.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

CONTRACTS - performance - general principles - payment placed in post before due date for payment - posted payment arriving after due date for payment - whether "postal rule" requires that payment is made on posting the payment - "postal rule" not a legal principle of general application - passing of risk or making of payment by posting payment depends on terms of contract and surrounding circumstances - postal acceptance rule not wide enough to encompass "postal rule" in this sense - circumstances of agreement and communications regarding individual payments did not imply that posting a cheque was only form of making payment, nor that posting was payment in itself

CONTRACTS - construction of terms - loan contract for investment in tea tree plantation business - loan contract provided discounted rate of interest on repayments of principle in consideration for the borrower paying interest one year in advance as a lump sum - interest payments need only be paid if business producing net income - business not producing net income - consequently no payment of interest made by borrowers beyond second year - actual payment of interest not required, as adequate consideration in exchange of promises to discount rate and pay interest in advance (when it is payable) - discounted rate of interest to apply until termination

CONTRACTS - performance - general principles - payment placed in post before due date for payment - posted payment arriving at postal box of creditor before due date for payment - endorse bank cheque crossed "Not Negotiable" - creditor's bank unwilling to accept cheque without authorisation from payee of cheque - authorisation sent and cheque banked after due date for payment - whether payment "punctual" - creditor accepted cheque as payment on date of receipt conditional on it being met at presentation and payee completing bank authorisation form - conditions satisfied - payment was punctual

CONTRACTS - performance - where indemnity agreement provided that indemnity effective and enforceable if borrower "punctually" paid amounts under related loan agreement - appellants made payments by cheque in post - where cheques posted before due date for payment, but arrived after that date - appellant argued for existence of "postal rule" whereby posting of payment would equate to actual performance of payment obligation - cases distinguished - no general "postal rule" exists

CONTRACTS - performance - where contract requires payment to be made "punctually" - whether creditor or debtor bears onus of proving punctuality of payment - Vines v Djordjevitch (1955) 91 CLR 512 considered - debtor obliged to prove enforceability of indemnity if in the form of an exculpation or exclusion - indemnity in this case was in the form of an exclusion - no error by primary judge in assuming debtor bore onus

PRACTICE - general principles - test cases - undertakings given to Court at first instance by sundry defendants agreeing to be bound on common questions by findings in test case - test case proceedings heard at first instance, by the New South Wales Court of Appeal and ultimately by the High Court of Australia - certain arguments struck out by primary judge as being precluded by undertakings in relation to test case - whether applicants' undertaking to be bound by findings of test case on common questions precluded the bringing of certain claims - anticipation of significant overlap between issues raised by test case and proceedings below - yet test defendant only defendant who had filed defence or cross claim at time of giving undertakings - failure to have parties agree in advance what common questions would be - appellants argue "postal rule" defence not raised in test case - "common questions" does not preclude defendants from raising a defence on an issue not decided in the test case- appellants bound to the extent that findings of fact in test case could not be disputed - "postal rule" defence concerned not with the time of payment, but what acts count as payment - primary judge struck out defence for incorrect reason - but conclusion of Court of Appeal on "postal rule" mean it was correct to strike the defences out as the particulars disclosed no arguable case

PRACTICE - general principles - undertakings to be bound by findings of test case - whether abuse of process to use evidence advanced in failed prospectus liability claim in claim under Contracts Review Act 1988 - primary judge decided litigants were changing form of the proceedings to set up the same case again - primary judge in error - provided appellants observed findings of fact of test case litigation, particulars were being put to a substantially different purpose

PRACTICE - general principles - undertakings to be bound by findings of test case - appellants argued that a Mr Lloyd had made certain representations on behalf of the respondents and that the respondents should be estopped from contradicting these representations - findings made in test case about authority of Mr Lloyd to act for respondents - findings should be read in context to refer to authority of Mr Lloyd in relation to particular representations, not in general - appellants not to be precluded from arguing Mr Lloyd had authority to make certain other representations - estoppel argument to be repleaded

PRECEDENT - whether a decision of the Full Court of the New South Wales Supreme Court, which has been affirmed in the High Court, for reasons different to those adopted by the Full Court, is binding as a matter of law on the New South Wales Court of Appeal

PRECEDENT - general principles - authority of reasons for decision of higher court where that decision was affirmed on other grounds

Legislation Cited:

Australian Securities and Investments Commission Act 2001 (Cth)
Bills of Exchange Act 1882 (Imp)
Bills of Exchange Act 1909 (Cth)
Contracts Review Act 1980
Corporations Law
Equal Pay Act 1970
Suitors' Fund Act 1951
Trade Practices Act 1974 (Cth)
Uniform Civil Procedure Rules, 51.53(1)

Cases Cited:

Abalos v Australian Postal Commission (1990) 171 CLR 167
Acraman v South Australian Gas Company [1910] SALR 59
Adams v Lindsell (1818) 1 B & Ald 681; 106 ER 250
Agricultural & Rural Finance Pty Ltd v Atkinson [2010] NSWSC 1396
Agricultural & Rural Finance Pty Ltd v Atkinson [2010] NSWSC 311
Agricultural & Rural Finance Pty Ltd v Atkinson [2010] NSWSC 425
Agricultural and Rural Finance Pty Ltd v Atkinson [2010] NSWSC 635
Agricultural and Rural Finance Pty Ltd v Atkinson [2006] NSWSC 202
Agricultural and Rural Finance Pty Ltd v Atkinson [2011] NSWSC 555
Agricultural and Rural Finance Pty Ltd v Brakatselos [2012] NSWCA 17
Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570
Alexander v Steinhardt, Walker & Co [1903] 2 KB 208
Andrews v Calori (1907) 38 SCR 588
Ashmore v British Coal Corporation Ashmore v British Coal Corporation [1990] 2 QB 338
Australian Mutual Provident Society v Derham (1979) 25 ACTR 3
Baker v Lipton (Limited) (1899) 15 TLR 435
Balabel v Air-India [1988] 1 Ch 317
Beevers v Mason (1978) 37 P & CR 452
Blackmore v Browne; Kara Kar Holdings Pty Ltd v Blackmore [2011] NSWCA 114
Blair v Curran (1939) 62 CLR 464
Blumberg v Life Interests and Reversionary Securities Corp [1897] 1 Ch 171
Blumberg v Life Interests and Reversionary Securities Corp [1898] 1 Ch 27
Brewer v Brewer (1953) 88 CLR 1
Channon v English, Scottish & Australian Bank (1918) 18 SR (NSW) 30
Comber v Leyland [1898] AC 524
D & J Fowler Limited v French [1914] SALR 254
Dunlop v Higgins (1848) 1 HLC 381; 9 ER 805
Eaglehill Ltd v J Needham Builders Ltd [1973] AC 992
Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373
Ex parte Cote; in re Deveze (1873) LR 9 Ch App 27
Fox v Percy (2003) 214 CLR 118
Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235
George v Cluning (1979) 28 ALR 57
Hannaford v Smallacombe (1993) 69 P & CR 399
Head v Kelk (1963) 63 SR (NSW) 340
Henthorn v Fraser [1892] 2 Ch 27
Holwell Securities Ltd v Hughes [1973] 1 WLR 757
Household Insurance Co v Grant (1879) LR 4 ExD 216
Hunter v Chief Constable [1982] AC 529
In re Imperial Land Co of Marseilles (Harris' Case) (1872) LR 7 Ch App 587
In re Imperial Land Co of Marseilles (Wall's Case) (1872) LR 15 Eq Cas 18
In Re National Savings Bank Association (Hebb's Case) (1867) LR 4 Eq 9
James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296
Johnston v Boyes [1899] 2 Ch 73
Kendall v London Bank of Australia Ltd (1918) 18 SR (NSW) 394
Kendall v London Bank of Australia Ltd (1920) 28 CLR 401
Kirkpatrick v Kotis [2004] NSWSC 1265; (2004) 62 NSWLR 567
Lahoud v Lahoud [2011] NSWSC 994
Lindholdt v Merritt Madden Printing Pty Ltd [2002] FCA 260
Luttges v Sherwood (1895) 11 TLR 233
Marreco v Richardson [1908] 2 KB 584
Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234
McCann v Switzerland Insurance Australia Limited [2000] 203 CLR 579
Mid-City Skin Cancer & Laser Centre Pty Ltd v Zahedi-Anarak [2006] NSWSC 844; (2006) 67 NSWLR 569
Mitchell-Henry v Norwich Union Life Insurance Society Ltd [1918] 1 KB 123
Mitchell-Henry v Norwich Union Life Insurance Society Ltd [1918] 2 KB 67
Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15
National Australia Bank Ltd v KDS Construction Services Pty Ltd (1987) 163 CLR 668
Norman v FCT (1963) 109 CLR 9
Norman v Ricketts (1886) 3 TLR 182
Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74
Panoutsos v Raymond Hadley Corporation of New York [1917] 2 KB 473
Pennington v Crossley and Sons (Limited) (1897) 13 TLR 513
Potter v Sanders (1846) 6 Hare 1; 67 ER 1057
Re Steam Stoker Co (1875) LR 19 Eq 416
Reed v The Kilburn Co-operative Society (1875) LR 10 QB 264
Rogers v The Queen (1994) 181 CLR 251
Shepherd v FCT (1965) 113 CLR 385
Stocken v Collin (1841) 7 M & W 515; 151 ER 870
Stocken v Collins (1841) 9 C & P 853; 173 ER 997
Tallerman and Company Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93
Tankexpress A/S v Compagnie Financiere Belge Des Petroles SA [1949] AC 76
Thairlwall v Great Northern Railway Company [1910] 2 KB 509
Tilley v Official Receiver in Bankruptcy (1960) 103 CLR 529
Vines v Djordjevitch (1955) 91 CLR 512
Wallaby Grip Limited v QBE Insurance (Australia) Ltd [2010] HCA 9; (2010) 240 CLR 444
Walton v Gardiner (1993) 177 CLR 378
Warwicke v Noakes (1791) 1 Peake 98; 170 ER 93
Whitworth Street Estates Ltd v James Miller and Partners Ltd [1970] AC 583
Woodcock v Houldsworth (1846) 16 M & W 124; 153 ER 1126
Woolworths Limited v Strong (No 2) [2011] NSWCA 72

Texts Cited:

Byles on Bills of Exchange and Cheques 28th ed (2007) Sweet & Maxwell
Chitty on Contracts, 30th ed (2008) Thompson Reuters vol 1
CL Pannam "Postal Regulation 289 and Acceptance of an Offer by Post" (1960) 2 Melbourne University Law Review 388
JC Campbell, "Should the 'rule in Hastings-Bass' be followed in Australia?" - Trustees' duty to enquire and trustees' mistakes" (2011) 34 Australian Bar Review 259
JW Carter, E Peden and GJ Tolhurst, Contract Law In Australia, 5th ed, LexisNexis, Butterworths (2007)
Meagher, Heydon & Leeming, Meagher Gummow & Lehane's Equity Doctrines & Remedies 4th ed (2002) LexisNexis, Butterworths
RA Samek "A Reassessment of the Present Rule Relating to Postal Acceptance" (1961) 35 Australian Law Journal 38
Simon Gardner "Trashing with Trollope: A Deconstruction of the Postal Rules in Contract" (1992) 12 Oxford Journal of Legal Studies 170

Category:

Principal judgment

Parties:

2011/236264
David James Wardle (First Appellant)
Gavin Winston Long (Second Appellant)
Agricultural and Rural Finance Pty Limited (First Respondent)
Oceania Agriculture Pty Limited (Second Respondent)

2003/92819
Peter Brakatselos (First Appellant/First Cross-Respondent)
Geoffrey Nevell Fredericksen (Second Appellant/Second Cross-Respondent)
Allan Patrick Holmes (Third Appellant/Third Cross-Respondent)
Nicholas Charles Rowe (Fourth Appellant/Fourth Cross-Respondent)
Maria Francesca Russo (Fifth Appellant/Fifth Cross-Respondent)
David James Wardle (Sixth Cross-Respondent)
Jennifer Dianne Wallace (Sixth Appellant/Seventh Cross-Respondent)
Franco Giannuzzi (Seventh Appellant/Eighth Cross-Respondent)
Gavin Winston Long (Ninth Cross-Respondent)
Maria Michael (Tenth Cross-Respondent)
Christina Spyrakis (Eleventh Cross-Respondent)
Agricultural and Rural Finance Pty Limited (Respondent/Cross-Appellant)
Oceanic Agriculture Pty Limited (Respondent/Twelfth Cross-Respondent)

Representation:

Counsel:
SD Epstein SC; A Tsekouras (Appellants/Cross-Respondents)
TS Hale SC; CJ Bevan (First Respondent/Cross-Appellant)
P Condon, solicitor (Second Respondent/Twelfth Cross-Respondent)
Solicitors:
Abadee Dresdner & Freeman (Appellants/Cross-Respondents)
Evangelos Patakas & Associates (First Respondent/Cross-Appellant)
Peter Condon & Associates (Second Respondent/Twelfth Cross-Respondent)

File Number(s):

2011/236264; 2003/92819

 Decision under appeal 

Citation:

Agricultural and Rural Finance Pty Limited v John Edward Atkinson & Ors [2011] NSWSC 555

Date of Decision:

2011-06-09 00:00:00

Before:

Einstein J

File Number(s):

2011/236264

HEADNOTE

(This headnote does not form part of the Court's judgment)

FACTS

On 28 April 1997, Oceania Agriculture Ltd ("OAL") filed a prospectus with the Australian Securities Commission in relation to a project identified as the "Port Macquarie Tea Tree Plantation". Investors in the project acquired rights in respect of particular allotments of land on which tea trees would be planted. The project was intended to run for 17 years.

The investment scheme involved a financing arrangement whereby a company known as Agricultural and Rural Finance Pty Ltd ("ARF") provided finance. Most investors also entered into an indemnity agreement under which OAL agreed to indemnify their obligations of repayment under the loan contracts in particular circumstances.

ARF received an initial capital contribution from the promoter of the project, Gerard Cassegrain & Co Pty Ltd, of $300,000 to cover the cost of the loans. Thereafter, it obtained further funds through a "round-robin" arrangement, whereby the application moneys lent to investors were paid to OAL and then on-lent to ARF, which lent the funds to further investors. The project was ultimately a failure, due largely to a dramatic fall in the price of tea tree oil. The project terminated in January 2003.

On termination, ARF commenced proceedings in the Equity Division against 216 borrowers, seeking payment of loan moneys that it claimed were repayable by each investor on cessation of the scheme. The proceedings involving Mr Bruce Gardiner were pursued as a test case. The defendants gave undertakings to be bound on common questions arising from the construction of the loan agreements and the indemnity agreements.

The borrowers argued that the indemnity agreement was effective and enforceable, thereby releasing them from any obligation to repay amounts under the loan agreements. Mr Gardiner also filed a cross-claim, asserting breaches of s 52 of the Trade Practices Act 1974 (Cth), ss 995 and 996 of The Corporations Law and ss12DA and 12DB of the Australian Securities and Investments Commission Act 2001 (Cth).

Young CJ in Eq gave judgment in favour of ARF and dismissed the cross-claim by Mr Gardiner. Mr Gardiner appealed from this decision.

The Court of Appeal allowed Mr Gardiner's appeal in part and dismissed the cross-appeal by ARF.

ARF and OAL in turn appealed to the High Court.

The High Court appeal ultimately turned on whether Mr Gardiner had made payments under the loan agreements "punctually" (punctual payment of interest was required by the indemnity agreement). The High Court decided that Mr Gardiner had not made his payments punctually, thus he (and, by extension, other defendants who had not made their payments punctually) was not protected by the indemnity agreement. After the conclusion of the High Court case, the Supreme Court entered judgment in favour of those defendants who had uncontroversially made their payments punctually.

A number of the remaining defendants contended that the test case did not produce the effect that ARF should have judgment for the amount it claimed against them. These remaining defendants sought to advance various defences not relied upon by Mr Gardiner, including a defence based on the provisions of the Contracts Review Act 1980. ARF argued that these defences were precluded by the undertakings the defendants had given in relation to the test case.

Einstein J presided a six-day hearing on the notice of motion for the striking out of certain paragraphs of the defences and cross-claims of the remaining defendants. The judge held that certain paragraphs should be struck out (Agricultural & Rural Finance Pty Ltd v Atkinson [2010] NSWSC 311) on the basis that they went behind the undertakings given by the defendants. This led to the remaining defendants' "postal rule" defence, whereby it was argued that payment was made punctually if placed in the post before the due date, being struck out

The primary judge also rejected certain evidence concerning the remaining defendants' Contracts Review Act defence (Agricultural & Rural Finance Pty Ltd v Atkinson [2010] NSWSC 425). That particular evidence had been advanced in the test case in relation to a prospectus liability claim, which ultimately failed.

The primary judge decided the substantive remaining issues against the remaining defendants, including the Contracts Review Act defence and the claim that payments had been made punctually (Agricultural & Rural Finance Pty Ltd v Atkinson [2010] NSWSC 635)

On appeal, the remaining defendants (the "Appellants") contended that the primary judge had been in error in:

1. his construction of the undertakings given by the Appellants and the extent to which they were bound by the test case;

2. striking out the Appellant's "postal rule" defence;

3. assuming that the borrower bore the onus of proving that the payments had been made punctually;

4. finding that one Mr Holmes, who had posted an endorsed bank cheque that arrived before the due date, but which ARF's bank did not accept until after the due date, had not paid "punctually";

5. striking out a defence based on estoppel by representation and waiver;

6. striking out the prospectus evidence advanced to support the Contracts Review Act defence; and

7. reaching the conclusion that he did in relation to the Contracts Review Act defence because he had incorrectly rejected the prospectus evidence.

ARF sought leave to cross-appeal concerning the manner in which the primary judge had calculated interest on the sums owed to it by the Appellants under the loan agreements.

The Court held, allowing the appeal in part, allowing the cross-appeal and dismissing the cross-appeal:

Construction of the separate trial order and undertakings

(per Campbell JA; Barrett JA & Sackville AJA agreeing)

Consent orders should be construed having regard to the surrounding circumstances [104].

Kirkpatrick v Kotis [2004] NSWSC 1265 cited.

At the time the orders were given, no defendants other than Mr Gardiner had filed defences. Proper reading of undertaking was an agreement to be bound by the findings of the test case concerning what might ultimately turn out to be common questions between Mr Gardiner's case and their own [116].

The primary judge was in error in finding that the "postal rule" defence was a collateral attack on the findings of the High Court in the test case. The Appellants were free to raise as a defence an issue that had not been decided in the test case. The Appellants were not, however, free to disprove factual findings made in the test case [117-126].

Blair v Curran (1939) 62 CLR 464, Brewer v Brewer (1953) 88 CLR 1 distinguished

The High Court rejected an argument that both ARF and OAL had waived the requirement for punctuality. It did not consider an election by ARF alone, and its decision turned on the particular conduct alleged by Mr Gardiner. The High Court's finding did not cover all arguments that ARF and/or OAL had abandoned or renounced rights under the loan and indemnity agreements [127-129].

The High Court's findings on the meaning of "punctuality" did not preclude the raising of the "postal rule" defence, which is concerned not with the time of payment, but what acts count as payment [130].

The postal rule

(per Campbell JA; Barrett JA & Sackville AJA agreeing)

The postal acceptance rule is a principle of convenience. The Post Office is not an agent but a public institution under a duty to carry the mails. Formation of a contract by the posting of an acceptance is only justified if the offeror contemplated and intended that the offer might be accepted by that act. It is not a rule robust enough to fit a "postal rule" within its ambit. Nor does the pragmatic justification for the postal acceptance rule apply to the "postal rule" [132 - 148].

Tallerman and Company Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93, Holwell Securities Ltd v Hughes [1973] 1 WLR 757, Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74 cited.

Adams v Lindsell (1818) 1 B & Ald 681, Potters v Sanders (1846) 6 Hare 1, Dunlop v Higgins (1848) 1 HLC 381, In re National Savings Bank Association (1867) LR 4 Eq 9, In re Imperial Land Co of Marseilles (1872) LR 7 Ch App 587, In re Imperial Land Co of Marseilles (1872) LR 15 Eq Cas 18, Household Insurance Co v Grant (1879) LR 4 ExD 216, Henthorn v Fraser [1892] 2 Ch 27 considered.

It is not a general rule that requests for payment via cheque or remittance create an assumption analogous to the "postal rule" [149-151].

Comber v Leyland [1898] AC 524 distinguished.

The posting of a cheque to pay a debt does count as a manifestation of intention to assign and so creates an equitable assignment, but that mere fact does not assist in determining the moment at which payment occurred [152-153]. That is because a cheque is not an assignment at all, it is an instruction to a banker, that has the quality of negotiability.

Alexander v Steinhardt, Walker & Co [1903] 2 KB 208 distinguished.

The rule that a notice of dishonour will be adequately given if, notwithstanding delays in the mail, it was placed in the post at a time as to arrive, in the ordinary course of things, on the day following the day on which the bill was dishonoured, does not apply analogously to the "postal rule" [154-159].

Stocken v Collins (1841) 9 C & P 853, Stocken v Collin (1841) 7 M & W 515, Woodcock v Houldsworth (1846) 16 M & W 124 distinguished.

Eaglehill Ltd v J Needham Builders [1973] AC 992 cited.

When a creditor accepts a cheque in payment of debt it is a question of fact whether the cheque is accepted as conditional payment or as total discharge of the debt. Only where it is clear from the facts and construction of the contract that the creditor would accept posting of the cheque itself as payment will this be so [160-202].

Tilley v Official Reciever in Bankruptcy (1960) 103 CLR 529, National Australia Bank Ltd v KDS Construction Services Pty Ltd (1987) 163 CLR 668 cited.

Norman v Ricketts (1886) 3 TLR 182, Thairlwall v Great Northern Railway Company [1910] 2 KB 509, Tankexpress A/S v Compagnie Financière Belge Des Petroles SA [1949] AC 76, Beevers v Mason (1978) 37 P & CR 452 distinguished.

There is no "postal rule" of general application that applies to all transactions and has the effect that, where the use of the post in payment is contemplated, payment is completed when the payment is placed in the post by the debtor [211-218].

Despite the primary judge's error in reasons for striking out postal rule defence, the primary judge did come to the correct conclusion in doing so. The "postal rule" defence of Ms Russo, as a fair sample of all "postal rule" defences, disclosed no legal basis for the argument that she had paid the required repayments punctually [228-231].

The onus in showing punctuality of payments

(per Campbell JA; Barrett JA & Sackville AJA agreeing)

Young CJ in Eq had made a finding concerning who bore the onus of proving punctuality or lack of punctuality, from which the parties were not free to depart [242-250]

(per Campbell JA; Barrett JA & Sackville AJA not deciding)

In this case, the debtor was obliged to prove the enforceability of the indemnity because it was in the form of an exculpation or exclusion. There was no error by the primary judge in assuming debtor bore the onus of proof [251-255].

Vines v Djordjevitch (1955) 91 CLR 512 considered.

Mr Holmes' payment

(per Campbell JA; Barrett JA & Sackville AJA agreeing)

The cheque that Mr Holmes submitted for payment, which was received on time but only sent for collection by ARF's banker after the date for payment, had been accepted by ARF as punctual payment on condition of it being honoured on presentation. As it was, in the event, honoured on presentation, it was a punctual payment [269-274].

George v Cluning (1979) 28 ALR 57 cited.

Striking out estoppel and "waiver" defences

(per Campbell JA; Barrett JA & Sackville AJA agreeing)

The primary judge's construction of the test case undertakings let him into error in striking out the Appellants' estoppel and waiver defences. The findings made in the test case about the authority of Mr Lloyd to act for respondents should be read in context to refer to authority of Mr Lloyd in relation to particular representations, not his general authority or employment relationship. Appellants not to be precluded from arguing Mr Lloyd had authority to make certain other representations. The estoppel argument should be repleaded, but the waiver defence would serve no additional purpose [296-303].

Contracts Review Act defence and cross-claim

(per Campbell JA; Barrett JA & Sackville AJA agreeing)

The primary judge was in error in deciding that it was an abuse of process to use evidence advanced in a prospectus liability claim that failed in the test case proceedings in a new defence under the Contracts Review Act 1988. Providing that the appellants observe the findings of fact made in the test case litigation, the particulars rejected were being put to a substantially different purpose [319-355].

Hunter v Chief Constable of the West Midlands Police [1982] AC 529, Ashmore v British Coal Corporation [1990] 2 QB 338 distinguished.

Walton v Gardiner (1993) 177 CLR 378, Rogers v The Queen (1994) 181 CLR 251 cited.

Because of the primary judge's error in rejecting the prospectus evidence, his judgment on the merits of the Contracts Review Act defence and cross-claim is unsound [336-340].

ARF cross-appeal on interest

(per Campbell JA; Barrett JA & Sackville AJA agreeing)

ARF cross-appeal could have been brought as of right as total amount of interest sought from Appellants collectively exceeded $100,000. Leave to cross-appeal is granted [344].

Blackmore v Browne; Kara Kar Holdings Pty Ltd v Blackmore [2011] NSWCA 114 cited.

Primary judge was in error by construing terms of the loan agreement by taking into account subsequent conduct [359].

Whitworth Street Estates Ltd v James Miller and Partners Pty Ltd [1970] AC 583, Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234, Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570 cited.

However, this error did not affect the correctness of his decision. Interest payments were not required because the business was not producing a net income. The actual payment of interest was not required to secure discounted interest rate, as the adequate consideration was already provided for in the exchange of promises to discount rate and pay interest in advance (when it is payable). Cross-appeal dismissed [359-365].

Judgment

CAMPBELL JA:

TABLE OF CONTENTS

Para
Nature of the Case	2
Court Proceedings Leading to the Judgments Appealed Against	7
The Issues and Conclusions in this Appeal	16
PART A - THE GARDINER TEST CASE	18
The Separate Trial Order and the Undertakings	19
The Agreements Sued On	29
Outcome of the Gardiner Test Case	34
Dates of Mr Gardiner's Payments	37
Decisions Concerning Punctuality of Mr Gardiner's Payments	41
Mr Gardiner's Estoppel and Waiver Defences	47
Mr Gardiner's Estoppel Defence	47
Mr Gardiner's "Waiver" Defence	53
Mr Gardiner's Misleading and Deceptive Conduct Claims	70
Misleading and Deceptive Conduct Through Representations	71
Misleading and Deceptive Conduct Through Prospectuses	76
PART B - THE SEPARATE TRIAL ORDER AND UNDERTAKINGS	104
The Primary Judge's Construction of the Separate Trial Order and Undertakings	104
The Primary Judge's Decision on the Postal Rule Defence	106
Construction of Separate Trial Order and Undertakings - Decision	113
The Strike Out Judgment Concerning the "Postal Rule"	127
PART C - THE "POSTAL RULE"	132
Relevant Cases	134
Contract Formation	134
Service Out of the Jurisdiction	149
Equitable Assignment	152
Notice of Dishonour of the Bill of Exchange	154
Payment of a Debt	160
Title to a Bill of Exchange	203
Conclusions About the "Postal Rule"	211
Conclusions About the Law Concerning the "Postal Rule"	211
Application to the Facts	219
PART D - CONSEQUENCES OF DECISION ON "POSTAL RULE" DEFENCES	232
Futile to Remit?	232
Set Aside Findings of Lack of Punctual Payment Even If No "Postal Rule" Defence?	241
Was there a Finding in the Gardiner Test Case Concerning Onus?	242
Who Had the Onus Concerning Punctuality?	251
PART E - DID MR HOLMES PAY ON TIME?	256
Facts Concerning Mr Holmes' Payment	256
Mr Holmes' Payment - Decision	269
PART F - STRIKING OUT MR WARDLE'S ESTOPPEL AND "WAIVER" DEFENCES	275
Mr Wardle's Waiver and Estoppel Defences	277
The Strike out Judgment on Waiver and Estoppel	282
PART G - THE CONTRACTS REVIEW ACT DEFENCE AND CROSS-CLAIM	304
The Contracts Review Act Defence and Cross-Claim	304
The Original Contracts Review Act Defence and Cross-Claim	304
The Amendment to the Contracts Review Act Defence and Cross-Claim	309
The Strike Out Judgment Concerning the Contracts Review Act	313
Consideration of the Striking Out of the Contracts Review Act Defence and Cross-Claim	319
The Contracts Review Act Judgment	336
The Principal Judgment Concerning Contracts Review Act	338
PART H - ARF's APPLICATION FOR LEAVE TO CROSS-APPEAL	341
The Interest and Costs Judgment	341
ARF's Cross-Appeal Concerning Interest	345
PART I - CONSEQUENTIAL MATTERS AND ORDERS	366

**********

Nature of the Case

1. The First Respondent, Agricultural and Rural Finance Pty Ltd ("ARF"), lent money to over 200 borrowers to enable them to invest in one or more of two prescribed interest projects known as the Port Macquarie Tea Tree Plantation Project No 1 and the Port Macquarie Tea Tree Plantation Project No 2. The Loan Agreement under which those people borrowed was in a standard form. It required payments of interest and payments of principal to be made on specified dates.

1. Each of the borrowers had entered two agreements with the Second Respondent, Oceania Agriculture Limited ("OAL"), and ARF. Under one of them ("the Licence and Management Agreement"), OAL agreed to develop on behalf of the borrower a business of cultivating, harvesting and processing tea trees to produce tea tree oil on an identified area of land near Port Macquarie that the borrower had a licence to occupy. The borrower was obliged to pay certain fees to OAL, but under the Loan Agreement ARF agreed, and was irrevocably directed, to make those payments direct to OAL on behalf of the borrower from the money that was lent. Under the second agreement ("the Indemnity Agreement") OAL agreed that, in certain circumstances, it would indemnify the borrower against the borrower's liability to repay principal and interest to ARF.

1. It is not now disputed that the business of conducting the tea tree plantations failed and that circumstances then arose that made the Principal Sum due and payable under each Loan Agreement at the option of ARF. ARF exercised that option. The present dispute relates to a provision of the loan agreement whereby the borrower would have no liability to repay any part of the Principal Sum outstanding, or interest thereon, if the indemnity granted under the Indemnity Agreement was effective and enforceable in accordance with Clause 2 of the Indemnity Agreement. Clause 2 of the Indemnity Agreement stated that one of the conditions for the indemnity being effective and enforceable was that the borrower "punctually paid" both the interest and the reductions of the Principal Sum payable pursuant to the relevant Loan Agreement.

1. On 9 June 2011, Einstein J ordered that judgment be entered for ARF against eleven of the borrowers, each in a stated amount of money: Agricultural and Rural Finance Pty Ltd v Atkinson [2011] NSWSC 555. Judgment has also been entered against other borrowers, but they are not involved in the applications now before this Court.

1. These reasons for judgment relate to an appeal as of right that is brought by two of those eleven borrowers, Mr Wardle and Mr Long. They also relate to an application for leave to appeal brought by another seven of those borrowers, Mr Brakatselos, Mr Fredericksen, Mr Holmes, Mr Rowe, Ms Russo, Mrs Wallace and Mr Giannuzzi. As well, the reasons relate to an application for leave to cross-appeal that is brought by ARF against the two Appellants, the seven Applicants for Leave to Appeal, and another two borrowers against whom Einstein J ordered judgment be entered on 9 June 2011, Ms Michael and Ms Spyrakis.

Court Proceedings Leading to the Judgments Appealed Against

1. ARF began proceedings against over 200 borrowers in the Commercial List of the Equity Division of the Supreme Court in June 2003. The proceedings sued each of them for unpaid principal and interest.

1. Many, but not all, of the defendants to ARF's claim were at one time represented by Clayton Utz. The borrowers to whom these reasons for judgment relate were all so represented.

1. The court adopted a procedure whereby the proceedings against one of the borrowers, Mr Bruce Gardiner, would be treated as a test case concerning certain issues ("the Gardiner Test Case"). Young CJ in Eq (as his Honour then was) heard and determined Mr Gardiner's case: Agricultural and Rural Finance Pty Ltd v Atkinson [2006] NSWSC 202. From that decision there was an appeal to the Court of Appeal: Gardiner v Agricultural and Rural Finance Pty Ltd [2007] NSWCA 235. There followed a further appeal to the High Court of Australia: Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570. The outcome of the High Court's decision was that ARF succeeded in its claim against Mr Gardiner concerning three of the four loans it had made to him. The three loans in relation to which ARF succeeded were ones in respect of which Mr Gardiner had not "punctually paid" all of the interest payments and reductions of Principal Sum.

1. After the High Court decision in the Gardiner Test Case, Hammerschlag J ordered that there be a verdict for approximately sixty-six of the defendants who had made wholly punctual payments on all of their loans.

1. Some of the ongoing defendants, including all those involved in the present hearing, contended that the Gardiner Test Case did not entitle ARF to judgment for the amount it claimed against them. Those defendants and ARF disagreed about the manner in which the orders and undertakings on the basis of which the Gardiner Test Case had been conducted, affected certain defences that they wished to advance. Einstein J resolved that dispute by a judgment given on 21 April 2010 after a six-day hearing of a Notice of Motion brought by ARF that sought to strike out certain paragraphs of the defences and cross-claims of the continuing defendants. The judge held that certain paragraphs should be struck out: Agricultural & Rural Finance Pty Ltd v Atkinson [2010] NSWSC 311 ("the Strike Out Judgment").

1. Part, but not all, of the defences that the ongoing defendants had pleaded under the Contracts Review Act 1980 survived the strike out application. In the course of the final hearing, ARF and OAL objected to certain evidence that the continuing defendants sought to bring in support of the Contracts Review Act defence. In a judgment given on 10 May 2010 the primary judge rejected the evidence: Agricultural & Rural Finance Pty Ltd v Atkinson [2010] NSWSC 425 ("the CRA Judgment").

1. Many of the questions argued before us relate to whether the primary judge was correct in the decisions he made in the Strike Out Judgment and the CRA Judgment concerning the effect of the Gardiner Test Case on the ongoing defendants. The Appellants and the defendants who are applicants for leave to appeal, contend that the incorrectness of the primary judge's decision to strike out part of the Contracts Review Act defence provides one reason why his rejection of the evidence was incorrect, but they also rely on other matters for that contention.

1. The primary judge decided the substantive issues that remained in the case after the Strike Out Judgment in a judgment delivered on 17 June 2010: Agricultural and Rural Finance Pty Ltd v Atkinson [2010] NSWSC 635 ("the Principal Judgment"). He rejected what remained of each defendant's Contracts Review Act defence. He also rejected a submission that each of the continuing defendants escaped liability because he or she had paid punctually each instalment of interest or principal in question. Other issues argued before us relate to whether the Principal Decision was correct in those two respects.

1. Apart from one discrete issue that relates to Mr Holmes, all the issues that are raised by the defendants who now seek leave to appeal are identical to issues raised in the appeal brought by Mr Wardle and Mr Long. ARF does not object to the Court granting leave to appeal to those seven defendants. It is appropriate that leave be granted to them. I will refer to them henceforth as Appellants.

The Issues and Conclusions in this Appeal

1. In this Court, the Appellants have been represented by Mr SD Epstein SC and Ms A Tsekouras. ARF and OAL have been represented by Mr TS Hale SC and Mr CJ Bevan.

1. The issues that arise in this judgment, and the conclusions I have come to concerning them, are:

1. Whether the judge was correct in the construction he placed on the separate trial order and undertakings pursuant to which the Gardiner Test Case was conducted, and in particular the extent to which matters decided in the Gardiner Test Case bound the Appellants. I have concluded that the judge incorrectly construed the order and undertakings, by attributing to the Gardiner Test Case more extensive consequences than were justified.

2. Whether the judge was in error in striking out defences whereby borrowers contended that they had paid punctually if they had put a cheque into the post by the date on which the debt fell due. I conclude that although the judge's reasons for striking out these defences should not be accepted, his conclusion was correct. I conclude that there is no general rule of law whereby, if the parties to a transaction contemplate that the post might be used for communication between them, a document is treated as being notionally in the hands of the recipient as soon as it is posted. I conclude that the payments that the Appellants were obliged to make to ARF were not made at the time an appellant posted a cheque to ARF for the purpose of making that payment.

3. Whether, if I were wrong in my conclusion that the judge was right to strike out the defences contending that posting a cheque was the equivalent of payment, it would in any event have been futile to remit the case because of factual findings. I conclude that it would not have been futile to do so.

4. Whether, when ARF sues a borrower for debt, the borrower bears the onus of proving that a payment has been made punctually, or ARF bears the onus of proving that the payment was not made punctually. I conclude that the borrower bears the onus. In consequence I conclude that the judge's findings that certain payments were not made punctually have not been vitiated by the judge adopting an incorrect onus of proof.

5. Whether the judge correctly concluded that one particular borrower, Mr Holmes, had failed to pay punctually. Mr Holmes had posted a bank cheque that ARF received before the due date, but ARF's bank required proof that ARF had title to the cheque, which Mr Holmes did not provide to ARF until after the due date. I conclude that Mr Holmes had paid on time.

6. Whether the judge was in error in striking out a defence that alleged that ARF had waived strict compliance with provisions of the Loan Agreement requiring payment to be made punctually, or was estopped from denying that payment had been made punctually. I conclude that he was in error in striking out the estoppel defences, but that no separate purpose is served by the waiver defence and it should remain struck out.

7. Whether the judge was in error in striking out part of the defence under the Contracts Review Act. That part of the defence contended that the contracts on which ARF sued were unjust because the prospectus, pursuant to which investors made investments in the prescribed interest schemes, did not disclose a material fact. The undisclosed fact was that when an investor borrowed money from ARF and paid it to OAL, OAL did not keep it for the purpose of operating the scheme but rather lent it back to ARF, which then lent it to another borrower, a process that went on repeatedly. I have concluded that the judge was in error in striking out this defence.

8. Whether the judge was in error in evidentiary rulings that were dependent in part on relevance to the Contracts Review Act defence. I have concluded that those rulings should be set aside.

9. Whether leave should be granted to ARF to cross-appeal concerning the manner in which the judge calculated interest on the judgment to which the primary judge held ARF was entitled. I have concluded that leave to cross-appeal on that question should be granted, but that the judge's manner of calculation of interest was correct, and thus the cross-appeal should be dismissed.

PART A - THE GARDINER TEST CASE

1. Determining whether the primary judge was correct in striking out parts of the defence of the Appellants, and in refusing to permit them to lead certain evidence in support of their Contracts Review Act defence, requires an examination of the extent to which the Appellants were bound by the Gardiner Test Case. That in turn requires consideration of the separate trial order and undertakings that led to the Gardiner Test Case being conducted, and detailed consideration of the issues and findings made in the Gardiner Test Case, and of the defences that the Appellants were prevented from pursuing.

The Separate Trial Order and the Undertakings

1. ARF began proceedings against 216 borrowers by a Summons filed on 18 June 2003. By 29 August 2003 the defendants for whom Clayton Utz acted, including all the present Appellants, had been served with a summons, and filed an appearance. On 29 August 2003 the Court made orders by consent:

"1) The defendants for whom Clayton Utz acts [Tea Tree Investor Group] nominate a defendant [Nominated Defendant] to file and serve its, his or her defence on or before 12 September 2003.

2) The Nominated Defendant to file and serve its, his or her defence on or before 12 September 2003.

3) The Tea Tree Investor Group identify those parts of the defence of the Nominated Defendant said to be common with other persons in the Tea Tree Investor Group on or before 12 September 2003."

Notwithstanding a direction on 19 September 2003 to comply with the third of these orders, it appears never to have been complied with.

1. At some time between 22 and 25 September 2003 (the evidence is unclear) Mr Gardiner filed a defence. By 7 November 2003 he had also filed a cross-claim against ARF and OAL.

1. There were then further directions from the Court that sought to resolve appropriate questions for preliminary determination. On 21 November 2003 the Court directed that the parties "agree on the common issue questions" on or before 28 November 2003.

1. That evidently was not done, because on 28 November 2003 there was a further direction requiring the plaintiff to provide to the defendants:

1) ...Draft questions for preliminary determination together with an outline of contentions of fact and law in support of the construction for which the plaintiff contends either as outlined in the questions or following from them by 10 December 2003.

2) The defendants are to confer with the plaintiff in respect of any proposed amendments to those questions and provide to the plaintiff contentions of fact and law in support of the contention for which they contend on the construction issue arising from the questions posed by 16 December 2003.

3) The parties are to endeavour to settle the agreed issues or questions by no later than 18 December 2003.

1. That direction also was evidently not complied with, because on 19 December 2003 there was a direction that on 19 March 2004:

... directions are to be made in relation to either:

(a) the separate questions to be determined; or

(b) the case against Mr Gardiner and the associated cross claims.

1. By consent between ARF, OAL and the defendants for whom Clayton Utz acted (other than a Mr Stephen Lloyd, who neither consented nor opposed), the court made orders on 19 March 2004, in these terms:

"The Court orders, by consent and subject to written undertakings by each of the defendants for whom Clayton Utz acts to be bound on common questions by the findings of the 'Gardiner Test Case' that:

Pursuant to Part 31 Rule 2 of the Supreme Court Rules, there be decided separately from any other question in these proceedings all issues arising from the following:

(a) The claim by Agricultural and Rural Finance Pty Limited against Bruce Gardiner;

(b) The cross-claim filed by Bruce Gardiner on 19 September 2003;

(c) The second cross-claim filed by Oceania Agricultural Pty Limited on 13 November 2003.

(the 'Gardiner Test Case')."

At the time those orders were made the only defendant represented by Clayton Utz who had filed a defence was Mr Gardiner.

1. Numerous defendants, including all those involved in these present reasons for judgment, then gave an undertaking in the form of a letter addressed to Clayton Utz that referred to the proceedings, and said "I undertake to be bound by the findings of the Gardiner Test Case".

1. By the time the Gardiner Test Case came on for hearing, OAL's cross-claim had fallen away.

1. On 29 July 2005, the final day of the first instance hearing of the Gardiner Test Case, Young CJ in Eq gave leave to Mr Gardiner to amend his defence to plead "waiver" by adding a new paragraph 34A. Young CJ in Eq made orders that redefined the separate issue to take account of the falling away of the OAL cross-claim, and of the amendments to Mr Gardiner's cross-claim. Those orders also noted some agreements that gave some greater precision to the extent to which findings in the Gardiner Test Case bound the other defendants:

"The Court orders by consent and subject to written undertakings by each of the defendants for whom Clayton Utz acts to be bound on common questions by the findings of the 'Gardiner Test Case', that:

i. Pursuant to Part 31 rule 2 of the Supreme Court Rules, there be decided separately from any other question in these proceedings all issues arising from the following (the 'Gardiner Test Case'):

(a) the claim by Agricultural and Rural Finance Pty Limited against Bruce Gardiner; and

(b) the Further Amended Cross-Claim filed by Bruce Gardiner on 26 July 2005.

ii. The Court Notes the agreement of the parties that, insofar as any question decided in the Gardiner Test Case extends to the proper construction of the Loan Agreements and/or the Indemnity Agreements sued on in the claim by Agricultural and Rural Finance Pty limited against Bruce Gardiner, each of the Defendants is bound by the Court's determination of that question, subject to the Defendant seeking to rely upon surrounding circumstances, upon which the agreement entered into by that defendant is to be construed, being different to the surrounding circumstances relied upon by Bruce Gardiner.

iii. The Court Further Notes that this does not preclude any Defendant form bringing a further Cross-Claim based upon any representations or statements made to the Defendant which induced them to invest in the Projects, subject to any available limitation point.

iv. The Court Further Notes that the Defendants are not precluded from raising any contention based upon the particular circumstances of a Defendant in answer to any contention that a failure to strictly comply with clauses 3.2, 3.3(a) and 4.1 of the Loan Agreements denied the Defendant an entitlement to indemnify be reason of the operation of clauses 2(a) and 2(b) of the Indemnity Agreements."

1. On 11 April 2006, at the time of ordering that judgment be entered against Mr Gardiner, Young CJ in Eq gave directions for the filing of any defence which any of a long list of defendants (which included all the Appellants) wished to pursue. Mr Hale told us, and Mr Epstein accepted, that the defendants other than Mr Gardiner filed defences in July 2006.

The Agreements Sued On

1. Mr Gardiner, and each of the Appellants, borrowed money from ARF under a standard form of loan agreement. The standard form had been an annexure to the prospectuses pursuant to which the prescribed interests were made available to investors.

1. The only parties to a loan agreement were ARF (called "the Lender") and the particular borrower to whom the loan was made. By Clause 1.1 of the Loan Agreement, ARF agreed to make the loan to the borrower. Clause 2.1 provided:

"Subject to the specific requirements of this agreement in respect of payments and repayments from time to time, and subject further to Clause 7, the Principal Sum outstanding and all interest outstanding must be paid to the Lender on demand on or after seventeen (17) years from the date of this agreement ..."

1. Clause 3 of the Loan Agreement created an obligation to make periodical payments of interest on the Principal Sum. Clause 4 created obligations to make certain repayments of principal. Clause 5.1 provided:

"The parties agree that subject to Clause 7 below the whole of the Principal Sum remaining outstanding shall become immediately repayable at the option of the Lender on the happening of any one or more of the following events without the necessity of any notice of demand:

(a) if the Borrower defaults in the due and punctual payment of interest or the Principal Sum or any repayment instalment or any other moneys payable under this agreement;

(b) if the Borrower defaults in the observance or performance in any of his other covenants or obligations contained in this agreement;

(c) if the Borrower ceases to carry on the Business."

1. Clause 7 of the Loan Agreement provided:

"The Lender acknowledges and agrees that the Borrower shall have no liability to repay any part of the Principal Sum outstanding or any interest thereon if the indemnity granted under the Indemnity Agreement as defined in the Project Deed is effective and enforceable in accordance with Clause 2 of the Indemnity Agreement."

1. Mr Gardiner and each of the Appellants also entered an Indemnity Agreement in a standard form. The parties to each Indemnity Agreement were OAL, ARF, and the particular borrower to whom a loan was being made. Recitals to the Indemnity Agreement referred to the Borrower having entered a Loan Agreement, with ARF, and a Licence and Management Agreement with OAL. The Agreement continues:

"C. The Indemnifier wishes to indemnify the Borrower for any amounts owing to and payable to the Lender subject to certain conditions and upon the occurrence of certain events set forth in this agreement.

D. The Borrower wishes to protect its interests by entering into this Agreement and paying the Indemnity Fee.

E. The Lender agrees to limit its recourse for repayment of any principal amount outstanding and any interest thereon to the Indemnifier as set out herein.

NOW THE PARTIES HERETO AGREE AS FOLLOWS:

1. Subject to the terms of this Agreement and in consideration of the payment on the date hereof of the Indemnity Fee as provided in Clause 5 by the Borrower to the Indemnifier, receipt of which payment is acknowledged by the Indemnifier, the Indemnifier agrees to indemnify and save harmless the Borrower against any demand by the Lender for repayment of any Principal Sum outstanding and any interest thereon under the Loan Agreement subject to the terms of this agreement ('the Indemnity').

2. The Indemnity referred to in Clause 1 shall be effective and enforceable if:

(a) the Borrower has punctually paid the interest payable pursuant to Clauses 3.2 and 3.3(a) of the Loan Agreement; and

(b) the Borrower has punctually paid the reductions of the Principal Sum set forth in Clause 4.1 of the Loan Agreement; and

(c) the Borrower is not otherwise in default of any covenant or obligation contained in the Loan Agreement (save and except for any covenant or obligation to repay principal and interest which is subject to the Indemnity) or the Licence and Management Agreement; and

(d) the Borrower has ceased to carry on the Business as a result of:

[certain identified types of circumstances]

3. Subject to Clause 2 hereof the Indemnifier agrees to pay to the Lender upon demand of the Lender or the Borrower any Principal Sum outstanding under the Loan Agreement and any interest thereon and the Borrower irrevocably directs the Indemnifier to make such payment and agrees that the Lender may demand such payment from the Indemnifier. The Indemnifier acknowledges the terms of the Loan Agreement, in particular clause 7 of the Loan Agreement.

4. The Lender agrees and acknowledges that the Borrower may rely upon the Indemnity set forth herein and that notwithstanding any failure on the part of the Indemnifier to punctually perform any covenant or obligation contained herein the Lender shall not have recourse to the Borrower if the Indemnity herein contained is effective and enforceable in accordance with the terms of Clause 2."

The "Indemnity Fee" was $250. Each borrower relevant to this judgment paid it.

Outcome of the Gardiner Test Case

1. Though it will be necessary to consider some aspects of the various decisions in the Gardiner Test Case in detail later in these reasons, it is convenient at this stage to give an overview of that litigation.

1. ARF made four loans to Mr Gardiner. Young CJ in Eq entered judgment against him concerning all four loans. By the time of the trial before Young CJ in Eq, it was uncontroversial that the Project had terminated on 4 January 2003, that thereby Mr Gardiner had ceased to carry on the Business within the meaning of Clause 5.1(c) of the Loan Agreement, and that ARF had exercised its option to accelerate payment under Clause 5.1 by reason of Mr Gardiner ceasing to carry on the Business.

1. Clearly, all four of the conditions listed in paragraphs (a)-(d) of Clause 2 of the Indemnity Agreement had to be satisfied before the indemnity was effective and enforceable. A sufficient reason for his Honour holding Mr Gardiner liable on all four loans was that he held that one of the conditions for the indemnity being effective and enforceable, namely that the Borrower had ceased to carry on the Business as a result of one of the circumstances identified in Clause 2(d) of the Indemnity Agreement, was not satisfied concerning any of the four loans. However, the Court of Appeal later held, contrary to the conclusion at first instance, that that condition for enforceability of the indemnity had been satisfied. That aspect of the decision of the Court of Appeal was not questioned in the High Court.

Dates of Mr Gardiner's Payments

1. The critical factor determining the outcome of the case in both the Court of Appeal and the High Court, so far as all judges involved in those decisions were concerned, was that the applicability of the Indemnity Agreement depended upon whether payments had been made punctually. The situation concerning payments under Mr Gardiner's first loan contract was, as set out by Handley AJA at [360]:

Amount Due	Due Date	Date Paid
$4375	31 January 1998	30 January 1998
$4375	30 April 1998	13 August 1998
$4375	31 July 1998	13 August 1998
$2696 (interest)	29 October 1998	10 November 1998
$4375	31 October 1998	10 November 1998

1. In this and the following table "Date Paid" refers to the date shown in ARF's records as when the debt in question was paid. The situation concerning payments under Mr Gardiner's second loan contract was, as set out by Handley AJA at [363]:

Amount Due	Due Date	Date Paid
$2187.50	30 June 1998	30 June 1998
$2187.50	30 September 1998	10 November 1998
$2187.50	31 December 1998	30 December 1998
$2187.50	31 March 1999	23 March 1999
$1348 (interest)	7 April 1999	30 June 1999

1. As Basten JA recorded at [246] there was no suggestion that any payment due under the third loan agreement had not been made punctually.

1. Concerning the fourth loan, Mr Gardiner accepted that payment had been made late. The only reasons that he advanced why that the lateness in payment did not deprive him of the benefit of the indemnity arose from his "waiver" defence, and under his cross-claim.

Decisions Concerning Punctuality of Mr Gardiner's Payments

1. Notwithstanding the discrepancies between the dates due and dates paid of some of the payments relating to the first and second loans, Spigelman CJ and Basten JA both held that the payments had been made in accordance with the required agreement. Spigelman CJ held that, as a matter of construction of the particular documentation involved in its context, the requirement to pay punctually was adequately satisfied if the person who is entitled to the benefit of the original obligation accepts an actual payment as constituting punctual payment. He held that ARF had accepted as being punctual the payments that Mr Gardiner made after the due date. Basten JA held that certain dealings between ARF and Mr Gardiner (the details of which need not be explained at this stage) had the effect that ARF was obliged to treat the payments made concerning the first and second loans as made punctually. Thus, Spigelman CJ and Basten JA both held that the indemnity applied concerning the first and second loan, and that in consequence Mr Gardiner had no liability to ARF concerning those loans. Handley AJA dissented on both of those points, and thus would have held Mr Gardiner liable to repay both the first and second loans.

1. Mr Gardiner brought a cross-claim against ARF and OAL, seeking (so far as presently relevant) orders that the Loan Agreement and Indemnity Agreement operated so as not to impose liability on him to repay the loans. He sought this relief in exercise of the Court's powers to do so under the Trade Practices Act 1974 (Cth), Corporations Law, or the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act"). The basis for his claim was a contention that OAL and ARF had engaged in misleading and deceptive conduct in breach of s 52 Trade Practices Act, ss 995 and 996 Corporations Law, or ss 12DA and 12DB of the ASIC Act. That claim was dismissed both by Young CJ in Eq and in the Court of Appeal. Special leave to appeal to the High Court was not granted concerning it.

1. The outcome in the Court of Appeal was that Mr Gardiner was not liable concerning the first, second or third loan, but was liable for the fourth loan.

1. In the High Court, ARF did not dispute that Mr Gardiner had no liability concerning the third loan. Nor did Mr Gardiner dispute that he was liable concerning the fourth loan.

1. The High Court reached an opposite conclusion to that of the Court of Appeal concerning the first and second loans. In broad terms, Gummow, Hayne and Keifel JJ held that nothing in the text or context of the agreements justified reading "punctually" in any fashion other than as requiring exact observance of the appointed time. They held that nothing in the dealings between ARF and Mr Gardiner justified a conclusion that the payments concerning the first and second loan had been made punctually. Kirby J, in separate reasons, reached the same conclusions. Heydon J agreed with the conclusions of the plurality. He also agreed, subject to two qualifications, with their reasons, apart from four particular paragraphs that the plurality judges recognised were dicta.

1. Thus the outcome of the Gardiner Test Case in the High Court was that Mr Gardiner was liable to ARF concerning the first, second and fourth loan, but not concerning the third loan.

Mr Gardiner's Estoppel and Waiver Defences

Mr Gardiner's Estoppel Defence

1. Paragraph [26] of Mr Gardiner's defence pleaded an estoppel by representation. The pleaded representation was:

"... in or about June 1997, ARF and OAL represented to the defendant that if an investor were not in default, the indemnity provided for in the Indemnity Agreement would apply to indemnify a farmer in circumstances where the projects terminated as a result of any reason other than the farmers' electing to terminate the projects.

Particulars

The representations were express and oral. They were made by Stephen Lloyd on behalf of inter alia ARF and OAL at an investment seminar held at the offices of Ord Minnett in Sydney in or around June 1997, which was attended by the defendant. At the seminar Mr Lloyd said words to the effect of those identified in paragraph 26."

1. He contended that in reliance on the representation he entered into the various documents that were related to becoming an investor in the project. He contended that ARF was thereby estopped "from asserting that the proper construction of the indemnity agreement is other than in accordance with the representation pleaded in paragraph 26."

1. Mr Gardiner also contended at [30] of his defence that that representation was confirmed by further representations. The particulars of that allegation were:

"The representations were express and oral and were made by Stephen Lloyd on behalf of inter alia OAL and ARF either during a telephone conversation between the defendant and Stephen Lloyd in late 1997, or during a visit to the Project site by the defendant in January 1998, in response to specific questions from the defendant. Further representations were made by Stephen Lloyd on behalf of inter alia OAL and ARF in conversations in or about March 1998 in response to questions from the defendant. These further representations were made following an audit by the Australian Taxation Office upon the defendant's investment in the projects."

1. He pleaded that in reliance upon all these representations he entered into the documents connected with investing in Project No 2. He asserted that thereby ARF was estopped:

"... from asserting that the proper construction of the indemnity agreement is other than in accordance with the representation pleaded in paragraphs 26 and 30."

1. In substance, paras [26] and [30] of Mr Gardiner's defence pleaded an estoppel against ARF and OAL which prevented them from contending that one of the circumstances identified in clause 2(d) of the Indemnity Agreement had not arisen. Whether any such estoppel existed was ultimately of no importance to the outcome of the Gardiner Test Case . A majority of the Court of Appeal held (although for different reasons) that the circumstances identified in Clause 2 of the Indemnity Agreement existed in relation to the first, second and third loans. Thus, the majority held that Mr Gardiner was entitled to enforce the indemnity against OAL.

1. The High Court held that Mr Gardiner failed to satisfy Clause 2(a) and (b) of the Indemnity Agreement because he failed to make all payments "punctually". For that reason, contrary to the conclusion reached by the Court of Appeal, Mr Gardiner was not entitled to enforce the indemnity against AOL. The estoppel defence pleaded by Mr Gardiner in paras [26] and [30] was not relevant to the punctuality issue and was not addressed by the High Court. Even so, this part of Mr Gardiner's defence remains of some significance because the topic of Mr Lloyd's authority to act on behalf of ARF, and some aspects of the law concerning estoppel, were considered by reference to that estoppel pleading in various of the courts that considered the Gardiner Test Case.

Mr Gardiner's "Waiver" Defence

1. Mr Gardiner did not plead an estoppel defence in relation to the punctuality issue. However, the "waiver" defence (para [34A]) that was added to Mr Gardiner's defence on the last day of the first instance hearing ([27] above) contended that, concerning the first, second and fourth loans,

"... ARF and OAL waived any non-compliance with the requirements to pay strictly in accordance with:

(a) clauses 3.2 and 3.3(a) of the Loan Agreements; and

(b) clause 4.1 of the Loan Agreements,

as a basis for denying the effectiveness or enforceability of the indemnity provided for in clause 1 of each Indemnity Agreement applicable to each of those investments, and therefore as a basis for denying that the defendant's obligation to repay the loans was to be performed by OAL and that ARF had no right of recourse against him.

Particulars

During the course of his site visit in January 1998, Mr Gardiner in substance requested Mr Lloyd to put in place a procedure whereby Mr Gardiner would receive contact a couple of days in advance of the due date of quarterly payments. Mr Lloyd said in substance that would not be a problem. That procedure was put in place.

On or about 16 July 1998 Mr Gardiner had a conversation with Mr Lloyd in which Mr Lloyd informed Mr Gardiner in substance that:

(a) OAL effectively acted as agent for ARF;

(b) 'we are pleased to receive payments from farmers at any time within reason';

(c) there was no need to pay additional interest;

(d) Mr Gardiner need not be concerned about the indemnity;

(e) Mr Gardiner was 'fine'.

On or about 27 October 1998 Mr Gardiner telephoned Ms Edwards and requested that she confirm with Mr Lloyd that there would be no adverse circumstances as a result of delay in payment. If there was a problem he requested that either Mr Lloyd or Mr Henry contact him. Neither Mr Lloyd nor Mr Henry advised Mr Gardiner that there were any adverse consequences arising.

On 2 June 1999 Mr Gardiner received a letter from Ms Edwards which recorded that, as a consequence of ARF's failure to send a reminder notice, the payment due on 7 April 1999 would be accepted as 'on time' up until 30 June 1999."

1. Relevantly for the significance of the dates of the activities that were thus pleaded as giving rise to a "waiver", ARF had made the loans to Mr Gardiner as follows:

(a) first loan (ref TT 081) - 29 October 1997;

(b) second loan (ref TT 094) - 30 March 1998;

(c) third loan (ref TT 131) - 25 June 1998;

(d) fourth loan (ref TT 214) - 10 May 1999.

1. The plurality in the High Court decision of the Gardiner Test Case made three observations about the particulars given of the "waiver":

"41 ... First, the Mr Lloyd mentioned in the particulars was the managing director of OAL. Ms Edwards was described [[2006] NSWSC 202 at [51]] by the trial judge as 'financial controller' of ARF. In this Court the appellant described her as ARF's bookkeeper and OAL's compliance officer. The particulars do not identify the party or parties for whom Mr Lloyd or Ms Edwards was allegedly acting when taking the steps described in the particulars. Given the way in which the pleading itself was framed ('ARF and OAL waived any non-compliance') it may well be that each was alleged to be acting on behalf of both ARF and OAL (emphasis added).

42 Secondly, the particulars suggested that the waiver of 'any non-compliance with the requirements to pay strictly in accordance with [the relevant provisions]' was constituted by the combination of four separate events: Mr Lloyd's response to a request made of him at a site visit in January 1998, a conversation with Mr Lloyd in July 1998, a conversation with Ms Edwards in October 1998 and a letter from Ms Edwards dated 2 June 1999. Yet at trial, it would seem that attention was directed for the most part, perhaps even exclusively, to the alleged conversation between Mr Gardiner and Ms Edwards in October 1998 and what followed.

43 The third observation to make is a temporal observation. The defaults in punctual payment under the first and second loan agreements included defaults that had occurred before the last of the dates mentioned in the particulars (2 June 1999) and one that had occurred before that date (on 7 April 1999) but was remedied by payment on 30 June 1999 (the date mentioned in the letter of 2 June 1999 as the last day on which ARF would 'accept payment as "on time"'). Some of the defaults under the first and second loan agreements occurred before the alleged conversation of October 1998; some occurred after that date."

1. Even though their Honours said at [41] that it "may well be" that each of Mr Lloyd and Ms Edwards was alleged to be acting on behalf of both ARF and OAL they made a stronger comment at [45]:

"... The plea of waiver added at trial alleged that 'ARF and OAL waived any non-compliance with the requirements' to pay punctually (emphasis added). It was not alleged, and it was not submitted in argument, that one of ARF or OAL might be bound to treat the indemnity as effective and enforceable even if the other was not. It is not necessary, therefore, to consider any such differential outcome."

1. Young CJ in Eq gave no specific reasons that related to the conversations relied on in the particulars to Mr Gardiner's paragraph 34A that had occurred between Mr Gardiner and Mr Lloyd in January 1998 and July 1998. However, concerning the conversations particularised in paragraph [30] of the defence (late 1997 or January 1998, and March 1998) he observed, at [87], that in cross-examination Mr Gardiner had admitted that the particulars given in his defence in this respect were incorrect. Young CJ in Eq rejected the defence of "waiver" said to arise from a conversation on 27 October 1998 between Mr Gardiner and Ms Edwards primarily because Ms Edwards denied that any such conversation had occurred, and Young CJ in Eq accepted her denial. At [52] he also gave some other reasons why, even if he were wrong about accepting her denial, the conversation would not give rise to a waiver. However, as his acceptance of Ms Edwards' denial was never overturned, it is not necessary to consider those additional reasons in [52].

1. In the Gardiner Test Case in the Court of Appeal Handley AJA at [387] gave a fuller explanation of why it was not appropriate to find that the various representations that Mr Gardiner had alleged in the particulars to [30], and the representations of January 1998 and 16 July 1998 that were alleged in the particulars to paragraph 34A had been made:

... the appellant conceded that there was no relevant phone conversation in 1997. He gave affidavit evidence about his meeting with Mr Lloyd at the site in January 1998 but did not say that the later representations were made either on that occasion or in March (Black 72-6). He gave affidavit evidence of the later representations being made by Mr Lloyd on the telephone in May in the context of the ATO investigation (Blue 1/16-18). He conceded in cross-examination that the relevant particulars in his defence were incorrect (Black 73, 74-5), but then said that the later representations were made at the site meeting in January, and during the ATO investigation in May (75). The Judge appears to have rejected the appellant's evidence about the later representations during his visit to the site in January (Red 162 para 140)."

1. At [85] Young CJ in Eq recorded, and evidently accepted, a submission by the then counsel for ARF that "whilst Mr Lloyd was an officer of OAL, he was never an officer of the plaintiff". His reasons for rejecting the estoppel alleged to arise from Mr Lloyd's representations at the Ord Minnett seminar around June 1997 were, at [88]:

"I cannot find sufficient nexus between what Mr Lloyd said at an investment seminar and the lender to found any estoppel against the lender. Although the lender played a vital part in the scheme, it was not one of the principal actors in the drama. Mr Lloyd was not employed by it and I cannot see how, on the evidence that was adduced, it can be said that the plaintiff is to be estopped by anything that Mr Lloyd may have said."

1. Insofar as the estoppel was alleged to arise against OAL, Young CJ accepted, at [150], that a representation of the type Mr Gardiner had alleged had been made at the Ord Minnett seminar. However, he found that no estoppel arose against OAL because (at [167]) Mr Gardiner had not relied on the representation in entering into the transactions.

1. In the Gardiner Test Case in the Court of Appeal, Handley AJA considered the effect of a letter that Ms Edwards wrote to Mr Gardiner on 2 June 1999. That letter recorded that the interest payment that had been due on 7 April 1999 concerning the second loan contract was overdue. It said: "As we failed to send reminder notices we will accept payment as 'on time' up until 30 June." Mr Gardiner made the overdue payment on 30 June.

1. Because Mr Gardiner had been late in making the payment that fell due under the second loan contract on 30 September 1998 he was (absent any relevant variation, estoppel or election concerning that payment) disentitled to the benefit of the indemnity. Handley AJA held that, notwithstanding the letter of 2 June 1999 and the payment pursuant to it, Mr Gardiner had also failed to pay punctually concerning the payment due on 7 April 1999. He said, at [370]:

"The appellant did not rely on this letter as a release of these loan debts or as a contractual variation, and an estoppel based on the letter was not pleaded. There was no consideration moving from the appellant or his wife which could have supported a release or contractual variation. Late payment of an amount already overdue is neither consideration nor detrimental reliance which could support an estoppel. An agreed variation of the due date before the event, even if it was not supported by fresh consideration, would normally establish an estoppel by convention. A non-contractual variation, when a payment is already overdue, does not have this effect, and the accrued breach remains."

1. Another reason that led Handley AJA to hold Mr Gardiner liable concerning the first and second loan contracts was that any "waiver" by ARF did not bind OAL. He said, at [375]:

"A waiver by ARF of late payment for the purposes of the loan agreement cannot, without more, be a waiver by OAL of late payment for the purposes of the Indemnity Agreement. Although both OAL and ARF were parties to the latter this did not make ARF the agent of OAL to vary or waive the condition precedent in cl.2(a) and (b) of the Indemnity Agreement. It is not competent for two parties to a tripartite agreement to alter the rights of the third party without its consent. Any variation or waiver of the requirement for punctuality would transfer liability for the unpaid balance from the appellant as borrower to OAL as indemnifier. There is no evidence that ARF had authority to do this, and no evidence of conduct by OAL which could establish a binding variation, waiver, or estoppel."

1. Basten JA at [255] held that the letter of 2 June 1999 was "an express variation of the borrowers' obligations under the first and second loan agreements". At [261] his Honour said that the letter of 2 June 1999 "should be understood as an extension of the time for due and punctual payment of that amount". In [263] his Honour said that the apparent intention of the letter "was to provide reassurance to the borrowers that they were not to be treated as in default".

1. Basten JA appears to have taken the view that it was of no consequence that the rights of OAL were not affected by the letter of 2 June 1999. At [257] his Honour said that it "may follow" that acceptance of the payments by ARF as a sufficient satisfaction of the financial obligations between it and the borrowers also satisfied the requirements for punctual payment under Clause 2(d) of the Indemnity Agreement. Amongst the reasons he gave were that ARF:

"... was itself a party to the indemnity agreement and, to the extent that it waived default by a borrower under the loan agreement, it may be taken to have waived any reliance on such default by the borrower for the purposes of the indemnity agreement. Secondly, that approach is confirmed by the fact that the effect of default under the indemnity agreement is incorporated into the loan agreement, by virtue of cl 7, so that absence of default (subject to satisfaction of the other conditions) would mean that the borrower had no further liability under the loan agreement. If the lender were intending to accept the borrower's tender of payments as sufficient compliance with obligations under the loan agreement, otherwise than for the purposes of cl 7 and the operation of the indemnity agreement, that distinction should have been made clear. Nor can the indemnifier, [OAL], suggest otherwise, because it will have no obligation to make any payment to [ARF] in respect of a borrower who has no obligation under the loan agreement."

1. The plurality in the High Court identified at [49] the precise ways in which it was contended before them that Mr Gardiner escaped the consequences of some of his payments concerning the first and second loans not being made strictly on or before the due dates:

"The Borrower submitted that there was a 'waiver' in one or more of three different senses: an election between inconsistent rights; an application of the common law doctrine of forbearance; or the abandonment or renunciation of a right. The Borrower accepted that the plea of waiver was not a plea which sought to allege that there had been a variation of any relevant agreement, or that the doctrine of promissory estoppel was engaged. There was no consideration for a variation of agreement. There was no detrimental reliance for a promissory estoppel."

Their Honours then analysed in detail why there had been no election, no forbearance, and no abandonment or renunciation of a right.

1. Their Honours reiterated at [72] that:

"... the appeal to this Court was conducted on the footing that estoppel was not in issue and was not in issue because Mr Gardiner could not show detrimental reliance upon any representation that the indemnity remained effective and enforceable despite failure to make payment punctually."

1. There is one aspect of Ashmore that bears some similarity to the present case. In Ashmore, all fifteen-hundred claimants had been represented by their industrial union, which instructed one firm of solicitors to act on their behalf. During interlocutory stages there was a split in the union ranks, Ms Ashmore and some other applicants joined a different union, and that union instructed different solicitors to act on behalf of those of its members who were claimants. However, one of the chosen fourteen was a member of the new union. One matter that Stuart-Smith LJ mentioned as relevant to whether it would be an abuse of process to allow Ms Ashmore's claim to continue was (at 352) that she and her advisors had had the opportunity to put forward Ms Ashmore's case as one of the sample that the tribunal would investigate fully, but they did not do so.

1. In the present case, the Appellants were acting by the same solicitors as Mr Gardiner. Mr Epstein accepts that the Appellants were contributing to the cost of running Mr Gardiner's defence. Further, it would have been open to Mr Gardiner to rely on the Contracts Review Act, but he did not try to. Even recognising those matters, in my view it would not be an abuse of process for the Appellants to litigate that part of para (ba) of [33] of their defence that is based on the round robin arrangement, and the corresponding part of their cross-claims. The extent to which they are bond by the manner in which the Gardiner Test Case was run is that contained in the Separate Trial order and the undertakings.

1. Even though the addition of para (ba) was made to the Contracts Review Act part of the defence very close to the trial, the judge did not place any reliance on case management considerations in ordering its striking out. Mr Hale does not now seek to invoke such considerations.

1. Uniform Civil Procedure Rule 51.53(1) provides:

"The Court must not order a new trial on any of the following grounds:

(a) misdirection, non-direction or other error of law,

(b) improper admission or rejection of evidence,

(c) that the verdict of the jury below was not taken on a question that the trial judge was not asked to leave to the jury,

(d) on any other ground,

unless it appears to the Court that some substantial wrong or miscarriage has been thereby occasioned."

In circumstances where it cannot be said that the Contracts Review Act defence, as supplemented by the new para (ba), concerning the round robin transactions is bound to fail, this is a case where the striking out of that part of the Contracts Review Act defence has resulted in a substantial wrong or miscarriage. There would cease to be a substantial wrong or miscarriage if this Court were able to deal adequately with the allegations that were struck out. However, that depends on considerations that include whether the judge has wrongly excluded evidence that relates to the Contracts Review Act defence and cross-claim. I now turn to that topic.

The Contracts Review Act Judgment

1. The rulings on evidence that were made in the Contracts Review Act Judgment were made by reference to the pleading of the Contracts Review Act as it was at the time. It is inevitable that if the Contracts Review Act defence is amended, any questions of admissibility of evidence must be decided by reference to the new defence. It has not been suggested that it is possible to segregate the ruling into ones that depend upon the state of the Contracts Review Act defence, and ones which do not.

1. The Contracts Review Act Judgment ended with a direction from the judge for the parties to bring in short minutes or order to give effect to his Honour's reasons. The appeal papers did not contain those orders. Hence, it will be necessary for the parties to bring in short minutes of orders to give effect to this aspect of the decision. It may be that they are as simple as setting aside all the orders made, but without seeing the orders, I cannot tell. The need for at least some of the evidentiary rulings to be reconsidered means that it is not possible for this court to deal finally with the Contracts Review Act defence and cross-claim, expanded to include reliance on the round robin allegations.

The Principal Judgment Concerning Contracts Review Act

1. In the Principal Judgment, the primary judge held that none of the Appellants was ineligible to invoke the Contracts Review Act by reason of the exception in s 6(2) of that Act, relating to a contract "entered into in the course of or for the purpose of a trade, business or profession". ARF and OAL do not challenge that aspect of the Principal Decision.

1. The primary judge decided the Contracts Review Act defence (as it existed once para (ba) had been struck out) by reference to the defence of Mr Atkinson. It is not suggested that that was different in any material respect to the defence of any of the Appellants. The judge came to the conclusion that the matters relied on in that defence did not lead to the conclusion that the contractual provisions were unjust. The Appellants have appealed against that decision. However, in light of the conclusion that they should have been permitted to run the Contacts Review Act defence on a broader basis than the primary judge permitted them, and that the court at first instance should reconsider the Contracts Review Act defence expanded to include reliance on the non-disclosure of the round robin arrangements, and the other matters I have set out in [312], it is not appropriate for that aspect of the appeal to be considered. Because the basis on which the Contracts Review Act defence is to be put will now be wider, any views that we expressed concerning the Contracts Review Act defence in its narrower form would be views concerning a question that has now become moot.

1. Thus, the orders striking out para (ba) of the Contracts Review Act defences, insofar as para (ba) depends upon the round robin allegations, should be set aside. The orders striking out corresponding allegations in the various cross claims should likewise be set aside. That will in turn mean that the verdict entered against all the Appellants who sought to rely upon such a Contracts Review Act defence should be set aside. A new trial will be needed concerning the question of liability of all those Appellants.

PART H - ARF's APPLICATION FOR LEAVE TO CROSS-APPEAL

The Interest and Costs Judgment

1. The primary judge delivered another judgment on 2 December 2010: Agricultural & Rural Finance Pty Ltd v Atkinson [2010] NSWSC 1396 ("the Interest and Costs Judgment"). So far as presently relevant, it dealt with two topics. The first involved questions of construction of the loan agreements concerning interest. The particular questions concerned the rate at which interest on each Principal Sum was payable in the period up to when ARF became entitled to repayment of the whole Principal Sum, the rate of interest payable after ARF became so entitled, and whether during each of those periods the interest was compounded, and if so on what rests. ARF has sought leave to cross-appeal for the purpose of contending that the judge should have awarded it a higher rate of interest during the period up to termination, and a higher amount of interest after termination.

1. ARF also sought leave to appeal against the Interest and Costs Judgment concerning the decision of the primary judge not to award it indemnity costs for the period after a Calderbank offer was served on 8 July 2009. Another decision of the primary judge left ARF to bear its own costs concerning a hearing on 7 June 2011 that related to some aspects of the orders that were appropriate in light of the primary judge's earlier decisions: Agricultural and Rural Finance Pty Ltd v Atkinson [2011] NSWSC 555. ARF lastly sought leave to appeal concerning being deprived of its costs relating to 7 June 2011.

1. At the hearing of the appeal on 16 February 2012, ARF withdrew its application for leave to appeal concerning the costs of the hearing on 7 June 2011. The Court heard argument concerning the application for leave to appeal against the primary judge's refusal to order indemnity costs and, in an ex tempore judgment delivered on that day, rejected it: Agricultural and Rural Finance Pty Ltd v Brakatselos [2012] NSWCA 17. Thus, only the application for leave to appeal concerning interest remains alive.

1. The amount of interest that ARF sought from each Appellant that was additional to the amount for which the judge had entered judgment was less than $100,000. However, the total amount of interest that it sought from all Appellants plus Ms Michael and Ms Spyrakis exceeded $100,000. For the reasons given in Blackmore v Browne; Kara Kar Holdings Pty Ltd v Blackmore [2011] NSWCA 114 at [29]-[37], if ARF had brought a single cross-appeal against the Appellants, Ms Michael and Ms Spyrakis, it could have been brought as of right. That provides a powerful reason why leave to cross-appeal on the questions concerning interest should be granted. Mr Epstein does not contend otherwise. Thus, as was foreshadowed at the hearing of the appeal on 16 February 2012, ARF will be granted leave to cross-appeal concerning the questions relating to interest.

ARF's Cross-Appeal Concerning Interest

1. At the hearing on 16 February 2012, the Court told the parties that it had reached a conclusion that ARF's cross-appeal concerning interest should be dismissed, and that reasons for taking that course would be provided in the final reasons for judgment. The Court took the view that it was relevant for Mr Hale to know, before embarking on his argument concerning the application for leave to cross-appeal concerning costs, that it was not a possible outcome of these proceedings that ARF receive a higher judgment against any of the Appellants than it had obtained in the court below. What follows are my reasons for joining in that announcement of the result of the cross-appeal concerning interest.

1. The relevant provisions of the Loan Agreements are as follows:

"Recitals

...

D The Borrower has requested that the Lender lend and the Lender wishes to lend to the Borrower the sums set out in Item 2 of the Schedule (individually defined as provided in the Schedule and collectively referred to as the 'Principal Sum' which term also includes capitalised interest as provided in clause 3.4) upon the terms and conditions of the agreement.

...

3. Interest

3.1 Subject to Clauses 3.2 and 3.3 below, interest shall be chargeable on the Principal Sum outstanding from time to time at the rate of 10.5% per annum payable monthly in advance.

3.2 In consideration of the Lender discounting the rate of interest set out in Clause 3.1 by 2% per annum the Borrower agrees to pay upon the execution of this agreement the first year's interest on the Principal Sum advanced at the rate of 8.5% [or 7.75%] per annum computed from 30 June 1997 [or date of execution] unless otherwise agreed between the parties.

3.3(a) In further consideration for the Lender:

(i) reducing the rate of interest during the second year of this agreement to 8.5%[ or 7.75%].

the Borrower will pay to the Lender on or before 30 June 1998 [or beginning of the second year] interest for 12 months in advance on the Principal Sum then outstanding; and

(ii) reducing the rates payable from and including the commencement of year 3 until repayment in full of the outstanding Principal Sum to 8.5% [or 7.75%] per annum,

the Borrower will pay the Lender interest as set out in paragraph (b) below or, where applicable, paragraph (c) below.

(b) Interest set out in clause 3.3(a)(ii) above shall be calculated monthly in advance on the Principal Sum then outstanding and shall become due and payable subject to such payment being made from the income of the Borrower from the Business as contemplated in clause 42.2 of the Project Deed after payment of:

i) all licence fees;

ii) all management fees and charges; and

iii) any other amount payable prior to interest in accordance with Clause 42.2 of the Project Deed;

and subject further to Clauses 3.4 and 7

(c) In the event that a Farmer makes an election under clause 18.2 of the Licence and Management Agreement, interest that the Farmer would have paid in accordance with paragraph (b) had the Farmer not made the election must be paid by the Farmer on demand of the Lender.

3.4 Any interest which becomes due and payable during the previous 12 months which is not paid by 30 June at the end of that year pursuant to clause 3.3(c) will be capitalised so as to form part of the Principal Sum then outstanding.

...

5. Default

5.1 The parties agree that subject to clause 7 below the whole of the Principal Sum remaining outstanding shall become immediately repayable at the option of the Lender on the happening of any one or more of the following events without the necessity of any notice of demand:

(a) if the Borrower defaults in the due and punctual payment of interest or the Principal Sum or any repayment instalment or any other moneys payable under this agreement;

(b) if the Borrower defaults in the observance or performance in any of his other covenants or obligations contained in this agreement;

(c) if the Borrower ceases to carry on the Business.

5.2 Notwithstanding anything contained in this agreement if the Lender elects to call up the whole of the Principal Sum remaining outstanding pursuant to any default by the Borrower, interest on the whole of the Principal Sum remaining outstanding shall then be calculated at the rate of 10.5% per annum and shall be payable on demand."

1. The primary judge referred to the date on which ARF elected to make the principal sum immediately repayable pursuant to Clause 5.1 as the date of "termination". It is convenient to adopt that terminology. Termination occurred on 4 January 2003.

1. There never was any income from the Business from which payment of interests that accrued during the third and subsequent year could be made. The primary judge awarded interest on the basis that interest at 8.5% on the outstanding Principal Sum would accrue during the third year of the agreement and each subsequent year thereafter, until termination. Because the amount of interest that accrued during any of those years was not paid, it was capitalised on 30 June of each year, and the increased Principal Sum thereafter bore interest at 8.5%. Once termination occurred, interest accrued at 10.5% simple interest on the Principal Sum that was outstanding on the date of termination.

1. The primary judge's construction was consistent with the construction that Handley AJA had given to the interest provisions in the Loan Agreement at [368] of the Court of Appeal decision in the Gardiner Test Case:

"The Lender had stipulated for an interest rate of 10.5% but agreed to reduce this to 8.5% (Blue 2/853 cll.3.2, 3.3). On default ARF could only charge the higher rate if it called up the whole of the principal (Blue 2/855 cl.5.2). It had no other right to charge the higher rate. The letter of 2 June was undoubtedly a waiver by ARF of its right to call up the whole of the principal provided the overdue interest was paid by 30 June. When payment was made within the extended time ARF lost its right to call up the unpaid balance of the principal, and to charge interest at the higher rate."

1. However, no other judge who considered the Gardiner Test Case had occasion to construe the interest provisions of the Loan Agreement in this degree of detail. Thus, there was no finding on that topic in the Gardiner Test Case that precluded ARF from arguing for a different interpretation.

1. The convenient way to deal with this question is to state how the interest provisions operate on their correct construction. Clause 3.1 starts out by providing for interest to be charged at 10.5% per annum payable monthly in advance. However, that obligation to pay interest at 10.5% is subject to Clauses 3.2 and 3.3. As it happens, Clauses 3.2 and 3.3 exhaustively state what the rates of interest will be until termination, so Clause 3.1 is deprived of content during that period. No doubt the purpose of Clause 3.1 was to provide the basis for an argument that Clause 5.2, which operated in practical terms to impose a higher rate of interest after termination than would be applicable prior to termination, was not a penalty. When it had that purpose, I do not accept Mr Hale's argument that construing Clause 3.1 as imposing a rate of interest that is then immediately un-imposed by Clauses 3.2 and 3.3 is failing to give the loan agreement "a business-like interpretation" (cf McCann v Switzerland Insurance Australia Limited at [22]).

1. Clause 3.2 records an agreement by the Lender to discount the 10.5% rate of interest by 2%, in return for the Borrower agreeing to pay the first year's interest at the reduced rate, in advance. Clause 3.2 is effective as a contract because it is an exchange of the Lender's promise to discount the 10.5% rate for the Borrower's promise to pay it the whole of the first year's interest at the reduced rate in advance.

1. Clause 3.3(a)(i) is, likewise, contractually binding because it is an exchange of the Lender's promise to reduce the rate of interest by 2% during the second year for the Borrower's promise to pay the whole of the second year's interest in advance at the reduced rate.

1. Clause 3.3(a)(ii) is, likewise, an exchange of the Lender's promise to reduce the rate by 2% during year three and subsequent years for the Borrower's promise to pay interest as set out in paragraph (b) or (c).

1. Clause 3.3(b) operates only concerning the interest set out in Clause 3.3(a)(ii) - ie, from the commencement of year three until repayment in full of the Principal Sum. That interest, at the reduced 8.5% rate, is to be calculated monthly in advance, and becomes due and payable (by fairly clear implication) also monthly in advance. However, even though it is due and payable on that date, payment only need actually be made if there is net income of the business.

1. If there is no net income of the business, the interest still becomes due and payable, in the third and subsequent years, monthly in advance. The effect of Clause 3.4 is that even if there is no income of the Business the interest that has fallen due, at 8.5%, but is not paid by 30 June in any year, is capitalised. It is capitalised on annual rests, and the newly arising Principal Sum, that includes that capitalised interest, will then bear interest at 8.5% pursuant to Clause 3.3(a)(ii).

1. Mr Hale has submitted that Clause 3.3(a)(ii) requires interest to be paid in accordance with Clauses 3.3(b) or 3.3(c) by the due date in order for the Borrower to qualify for the discounted rate specified in Clause 3.3(a). Otherwise, he submits, the "standard rate" of 10.5% pa specified in Clause 3.1 applies. He submits that it is clear that no interest was ever paid under Clause 3.3(b) for the third and subsequent years, because there was no income of the Business from which to pay it. He submits that payment of interest, during the third and subsequent years, is a condition precedent for Clause 3.3(a)(ii) to be engaged.

1. I do not agree. There is nothing in the wording of Clause 3.3 to make actual payment of any interest a condition precedent for the reduction in the rate. The reduction in the rate had already occurred, long prior to the start of the third year, as a result of the Lender exchanging its promise to reduce the rate by 2% during the third and subsequent years for the Borrower's promise to pay interest as set out in Clause 3.3(b).

1. Mr Hale submits that the primary judge was in error in [119] of the Interests and Costs Judgment by referring to the actual way in which the parties performed their agreement as support for the construction that his Honour found was correct. I agree that that use of subsequent conduct was not a legitimate aid to the construction of a contract that was wholly in writing: Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570 at [37]; Whitworth Street Estates Ltd v James Miller and Partners Ltd [1970] AC 583 at 603; Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234 at [114] and cases there cited. The primary judge was in error to rely upon it as an aid to construction of the contract, but his construction was correct notwithstanding that error.

1. At [120] of the Interest and Costs Judgment the primary judge referred to the construction of the provisions concerning interest that ARF was propounding as being inconsistent with advice that ARF had obtained from its own legal advisors. That is not an available aid to construction, for the same reasons as the manner of actual performance of the agreement is not an available aid to construction. However, notwithstanding that he mentioned this advice that ARF had received, the construction that the judge arrived at was correct.

1. For these reasons, the construction of the Loan Agreement by reference to which the judge granted pre-termination interest is correct.

1. It is common ground that Clause 5.2 requires post-termination interest to be calculated at 10.5% simple interest on the amount of the Principal Sum that was owing at the time of termination. ARF contends that the judge allowed too small an amount for post-termination interest, because the judge started that calculation using a Principal Sum that was too small. That Principal Sum was too small solely because of the manner in which the judge had calculated the pre-termination interest. When I have upheld the judge's manner of calculation of pre-termination interest, I likewise uphold the basis for his calculation of post-termination interest.

1. At [121] of the Interest and Costs Judgment the primary judge remarked that the summons claimed the various principal amounts including interest capitalised at the lower rate together with a future daily rate for interest at the higher rate. He said that, "what the plaintiff is now seeking amounts to an application for the amendment of the summons after the hearing and the final reasons for judgment."

1. It is far from clear to me what role this remark plays in the judge's overall reasoning process. ARF submits that it should be read as a statement that even if ARF's interpretation of Clause 3 of the Loan Agreements were correct, the judge would not allow ARF to contend for that interpretation because of the manner in which it had made a claim for interest in the summons.

1. In circumstances where the judge's interpretation of Clause 3 was correct, it is unnecessary to consider this submission any further. Insofar as it has not already been disposed of, the application for leave to cross-appeal should be dismissed with costs.

PART I - CONSEQUENTIAL MATTERS AND ORDERS

1. Mr Epstein informed us that some, but not all, of the Appellants have paid the judgment debts. They claim restitution with interest in their applications for leave to appeal. Lahoud v Lahoud [2011] NSWSC 994 at [34]-[43] pointed out that no argument had been put in Woolworths Limited v Strong (No 2) [2011] NSWCA 72 about whether the rate of interest payable when restitution is ordered of a judgment set aside on appeal was more appropriately the usual rate of interest payable on judgments, or the usual rate of prejudgment interest. In light of that discussion, Mr Epstein does not seek interest on the judgment amount at anything higher than the usual rate of prejudgment interest. However, provision will need to be made in the orders of the Court for more precise orders relating to restitution, on an individual basis concerning each of the defendants who seek restitution.

1. Some orders can be made now to give effect to these reasons for judgment. Others will need to await the bringing in of short minutes of order. The orders that I propose be made now are:

(1) Appeal allowed.

(2) Set aside the judgments in the court below against each Appellant.

(3) Enter judgment for Mr Holmes, with costs of the hearing at first instance.

(4) Grant leave to Mr Wardle and Mr Gianuzzi to replead paras [28]-[31] of the Further Amended Defence by inserting into those paragraphs the particulars that had previously been in [27] of the Further Amended Defence, modified to make clear that Mr Lloyd is alleged to have been acting on behalf of both ARF and OAL.

(5) Cross-appeal dismissed with costs.

(6) Remit to the Equity Division for further hearing ARF's claim against each of the Appellants other than Mr Holmes

(7) Reserve further consideration of what other orders should be made to give effect to these reasons for judgment.

(8) Direct the parties within 14 days after delivery of these reasons for judgment to file short minutes of the orders that they agree are required to give effect to these reasons for judgment, and as to the costs of the appeal and the first instance hearing.

(9) To the extent that the parties do not agree upon such orders, direct the Appellants within 21 days from the date of delivery of these reasons for judgment to file short minutes of the further orders they submit are required to give effect to these reasons for judgment, together with their submissions not exceeding four pages in length on the reasons why those orders are appropriate.

(10) In the event that the parties do not agree upon orders pursuant to order 8, direct the Respondents within 35 days of the date of delivery of these reasons for judgment to file short minutes of the further orders they submit are required to give effect to these reasons for judgment, together with their submissions not exceeding four pages in length on the reasons why those orders are appropriate.

1. Without seeking to limit the parties' submissions, draft orders would need to deal with at least the following topics, though with greater specificity:

(a) The orders striking out para (ba) of the defences of the Appellants under the Contracts Review Act, in so far as it relied upon the round robin allegations, and striking out the corresponding versions of the cross-claims, be set aside

(b) Set aside the orders giving effect to the decision made in the Contracts Act Review Judgment in the court below.

(c) Costs of the appeal and of the first instance proceedings, including any certificate under the Suitors' Fund Act 1951.

(d) Any orders for restitution

1. Without the benefit of submissions, my preliminary impression is that the Appellants should receive an order for the costs concerning the appeal that have not been disposed of by orders already made, but not the whole of those costs. The postal rule submissions were not the dominant issue in the appeal, but they were a separable issue, on which the Appellants lost: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373. My present impression is that the Appellants ought receive something in excess of 25% of the costs that have not already been disposed of by orders already made. In putting it that way I am not seeking to foreclose the possibility that the Appellants receive considerably more than 25%.

1. When a case is remitted for a new trial an order frequently made is that the costs of the first hearing follow the event of the remitted hearing. However, this common practice does not detract from the obligation of the court to exercise its discretion concerning costs in each case by reference to the facts of that particular case: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [54]-[61] and cases there cited. At present I am not aware of any matters that would warrant any different order to the one that is commonly made, but the parties should have the opportunity to point to any such matters.

1. BARRETT JA: The many and complex issues in this appeal are dealt with comprehensively in the judgment of Campbell JA. I agree that the orders and directions that his Honour proposes be made now should be made now. I also agree with his reasons and with the observations in the last three paragraphs of the judgment.

1. SACKVILLE AJA: The perils of identifying a separate question for determination before deciding other issues in the proceedings are well known. Even if care is taken in identifying the separate question, the procedure can actually prolong the proceedings and increase costs, instead of saving time and money.

1. The identification of a separate question in the present proceedings was intended not only to assist in resolving the case brought by the respondent ("ARF") against Mr Gardiner, but in resolving ARF's claims against the many other borrowers it had sued. This was to be achieved by the other borrowers giving undertakings to be bound "on common questions by the findings of the 'Gardiner Test Case'" (see at [115] above).

1. I think it fair to say that undertakings in this form always had the potential to generate disputes as to what were "common questions", particularly since, as Campbell JA has explained (at [114]-[115]), Mr Gardiner was the only defendant who had filed a defence and cross-claim when the other borrowers gave their undertakings. As events have transpired, much of the argument on this appeal concerned the effect of the orders identifying the separate questions for determination and the meaning of the associated undertakings given by the other borrowers.

1. An unusual feature of this case is that the High Court granted leave to appeal to argue certain issues arising on the separate questions for determination: Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570. However, the High Court did not need to consider the terms of the undertakings given by borrowers other than Mr Gardiner. Nor did the Court need to consider the significance of its decision on the issues of punctuality and waiver for the future conduct of the litigation. The plurality judgment simply noted (at [26]) that of the 216 persons sued by ARF, "179 had agreed to be bound by the findings made on [the] separate determination".

1. I agree with the construction given by Campbell JA to the borrowers' undertakings (at [120], [121]). I also agree that the undertakings did not justify the conclusions reached by the primary Judge in the Strike Out Judgment (Agricultural & Rural Finance Ltd v Atkinson [2010] NSWSC 311). Nor should the primary Judge have held that Mr Wardle and Mr Gianuzzi were precluded from proceeding to trial on their estoppel defences (at [304] above).

1. The issue presented by the so-called "postal rule" defence relied on by some of the borrowers is whether the posting of a cheque by a borrower for the requisite amount of principal or interest, before the due date for payment, constitutes punctual payment for the purposes of the Indemnity Agreement, notwithstanding that the cheque was not received by ARF until after the due date. I agree with Campbell JA that there is no general rule of law that deems the posting of a cheque by a debtor to be payment of the debt on the day the cheque is posted, as distinct from the date of receipt of the cheque.

1. Whether a borrower "has punctually paid" the amounts payable under the Loan Agreement in the circumstances I have described must depend on the proper construction of the Loan Agreement and the Indemnity Agreement and on the course of dealings between the parties. If, as a matter of construction, the Agreements provide that the posting of a cheque is to be taken as payment of an instalment on the date of posting, the posting of a cheque by a borrower on, say, 28 June 1998, would constitute punctual payment of an instalment of interest due and payable on 30 June 1998. This would be so notwithstanding that the cheque was not received by ARF until after the due date. If the course of dealings between the parties established a mutual intention that the posting of a cheque was to be taken as payment of the amount due on the date of posting, the same result might follow. (I leave to one side the questions that might arise if the cheque was not met on presentation or was otherwise not capable of being negotiated.)

1. If, however, the Agreements, properly construed, required the borrower to ensure that funds were actually received by ARF on or before the due date, the posting of a cheque, of itself, would not have constituted payment of the instalment due and payable. (The position may be different if the course of dealings between the borrower and ARF prior to payment varied the terms of the Agreements or otherwise prevented ARF from relying on its contractual entitlement.) The critical question is, therefore, whether the Loan Agreement and Indemnity Agreement required the borrower to ensure that the instalment of principal or interest actually reached ARF by the due date, or whether the Agreements permitted the borrowers to discharge their obligation to pay punctually by posting a cheque on or before the due date.

1. The Loan Agreement (cl 5) provided that the whole of the Principal Sum outstanding was to become immediately repayable at ARF's option if the Borrower defaulted in the "due and punctual payment of interest or the Principal Sum or any repayment instalment". The Indemnity Agreement (cl 2) provided that OAL's indemnity would be "effective and enforceable" if (relevantly) the Borrower had "punctually paid" the interest payable under the Loan Agreement and the reduction of the Principal Sum set forth in the Loan Agreement.

1. As Kirby J pointed out in ARF v Gardiner, at 609 [116], in a legal document with commercial purposes such as the Loan Agreement and the Indemnity Agreement, the word "punctually":

"would be given an objective meaning to facilitate a business-like approach to the implementation of the agreement between the several parties that depend upon the payments ... [C]ommercial reality requires that such obligations be complied with strictly, without a need to specify an identified time or to stipulate that time was of the essence."

1. It is difficult to see how a construction of either the Loan Agreement or the Indemnity Agreement that deemed payment to be made when a borrower posted his or her cheque "facilitate[s] a business-like approach to the implementation of the agreement". In the event of a dispute, how would ARF determine with certainty when a cheque, which had been received shortly after the due date, had been posted? Similarly, as the plurality pointed out (at 582-583 [37]-[38]), the Second Respondent, ("OAL") had a clear financial interest in determining whether it remained liable on its indemnity. One circumstance where OAL was not liable on the indemnity was if a borrower had not made punctual payments of instalments of interest or principal. How could OAL determine with certainty whether its indemnity had been enlivened, if it was enough for a borrower to post a cheque by the due date, regardless of the date of its receipt by ARF?

1. In my opinion, neither the Loan Agreement nor the Indemnity Agreement, as a matter of construction, contemplated that payment by a borrower would be made on the date a cheque was posted, as distinct from the date on which it was received by ARF. Nor, for the reasons given by Campbell JA, was there anything in the course of dealings between ARF and the borrowers that leads to any other conclusion.

1. I agree with Campbell JA (at [250] above) that Young CJ in Eq made a finding as to onus and that, by reason of their undertakings, the borrowers are not free to depart from that finding in the present appeal. I do not think it necessary to visit the question of onus afresh.

1. I agree with Campbell JA on the remaining issues addressed in his Honour's judgment.

1. For the above reasons, I agree with the orders proposed by Campbell JA.

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Decision last updated: 26 April 2012