Equuscorp Pty Ltd (formerly Equus Financial Services Ltd) v Haxton & Ors [2011] HCATrans 51 (10 March 2011)

Last Updated: 10 March 2011

[2011] HCATrans 051

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Melbourne No M128 of 2010

B e t w e e n -

EQUUSCORP PTY LTD (FORMERLY EQUUS FINANCIAL SERVICES LTD) (ACN 006 012 344)

Appellant

and

IAN ALEXANDER HAXTON

Respondent

Office of the Registry
Melbourne No M129 of 2010

B e t w e e n -

EQUUSCORP PTY LTD (FORMERLY EQUUS FINANCIAL SERVICES LTD) (ACN 006 012 344)

Appellant

and

ROBERT SAMUEL BASSAT

Respondent

Office of the Registry
Melbourne No M130 of 2010
No M131 of 2010
No M132 of 2010

B e t w e e n -

EQUUSCORP PTY LTD (FORMERLY EQUUS FINANCIAL SERVICES LTD) (ACN 006 012 344)

Appellant

and

CUNNINGHAM’S WAREHOUSE SALES PTY LTD

Respondent

FRENCH CJ
GUMMOW J
HEYDON J
CRENNAN J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 10 MARCH 2011, AT 10.00 AM

(Continued from 9/3/11)

Copyright in the High Court of Australia

FRENCH CJ: Yes, Mr Merralls.

MR MERRALLS: May it please the Court. Yesterday I was referring to matters affecting the equity and good conscience considerations which, in our submission, would preclude the allowance of restitutionary recovery. The loans were advanced as part of round robin transactions, by which investors received cheques from Rural Finance, which they immediately endorsed to JFM – JFM being the management company that performed the farming operations – in prepayment of certain management fees. In fact, the fees extended to the establishment of the plants in some cases. JFM then returned the cheques to Rural Finance and debts were recorded in Rural Finance’s books to JFM. That appears in paragraph 129 of Mr Justice Byrne’s judgment at page 586 of the appeal book:

It is true that Rural Finance drew a cheque for the advance on its bank account and delivered it to the investor. The investor, however, was directed not to bank it but to endorse it in favour of JFM in performance of the investor’s obligation to prepay management fees. JFM then banked the cheque in the Rural Finance bank account.

In fact, that is not what happened. What happened was described by Mr Couper who appeared as senior counsel at the trial and also appeared on the appeal to the Court of Appeal. We have had photocopies made of the relevant passages of the transcript at the trial – pages 258 and 259 which have been handed up. Mr Couper was speaking at the end of his case after evidence had been presented and he was referring to the tendering of certain witness statements. Then the passage beginning with marginal notes, the notational figures, 1, at the foot of the page:

we proceed on the conventional basis that in the case of each loan to each defendant cheques were made payable to the defendant, the defendant endorsed the cheque in favour of Johnson Farm Management Pty Ltd and Johnson Farm Management in turn made the proceeds of the cheque payable to Rural Finance Pty Ltd –

HIS HONOUR: So this appears on the documents or are you asking me to take this as a note - - -

MR COUPER: It is common ground between the parties that that was the - - -

HIS HONOUR: So Rural Finance cheque in favour of the borrower.

MR COUPER: In favour of the borrower, endorsed by the borrower, in favour of Johnson Farm Management Pty Ltd.

HIS HONOUR: Yes.

MR COUPER: And then the proceeds of cheque deposited by Johnson Farm Management with Rural Finance Pty Ltd.

HIS HONOUR: So it wasn’t banked by Johnson - - -

MR COUPER: It wasn’t banked by Johnson. It was taken as deposited with Rural Finance.

HIS HONOUR: When you say “deposited”, do you mean deposited under some loan account arrangement or just physically deposited?

MR COUPER: Deposited under a loan account arrangement, treated by Johnson Farm Management and Rural Finance as having been in effect lent by Johnson Farm Management to Rural Finance.

HIS HONOUR: So this is the round robin idea?

MR COUPER: Yes, that my learned friend has been speaking of.

HIS HONOUR: All right. I will note that at transcript 259 –

and then he closed his case. In the same paragraph, 129, in our submission Mr Justice Byrne wrongly rejected a submission about the significance of the round robin arrangement when he said that it could not survive the decision in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; 218 CLR 471, that similar loan “agreements should be given their legal effect”. That was a case which also involved the Johnsons and Equuscorp as an assignee. It involved aquaculture projects. In that case a prospectus had been issued so there was no issue of illegality.

The issues were two. One was whether the whole transaction was a sham and the other was whether it was affected by oral representations that had been made before the investors entered into the scheme. It is important to note that it was a case of breaches of contract, not restitution. Of course, we do not deny the effect that the contracts would have had here if they had not been illegal.

In that respect Glengallan Investments is not distinguishable, but we are raising a different matter affecting the conscionability payment or the claim by Equuscorp in the shoes of Rural for the repayment of funds which were lent by the arrangement. We refer to the round robin arrangement to demonstrate the absence of benefit obtained by the so-called borrowers.

FRENCH CJ: There was an obligation, was there not, under the farm agreements to carry out farming works on the investor’s interest?

MR MERRALLS: Yes, under the management agreements, not under the farm agreements. The farm agreement was a simple agreement which simply allowed an interest in the farm. The operating agreement was the management agreement. The farm agreement was for a nominal rent, an allowance of a lease or a licence for particular areas. The obligation to plant and tend and maintain the blueberry plants was imposed by the management agreement and rates were fixed per hundred trees.

One cannot calculate the amount payable for management by perusing the management agreement alone. One has to go to the farm agreement to find how many trees there were, so the two are in tandem, as it were. Even though the parties were different, they were all, of course, Johnson Group companies, but they were separate companies.

FRENCH CJ: Yes, I appreciate that.

MR MERRALLS: The land was not owned by the manager or the - - -

FRENCH CJ: I am just looking at the Haxton farm agreement at 274 and 275 and I may misunderstand this, but looking at 4.2 there is an obligation on the farmer to “carry out enhancement work” - 5.2 and 5.2(b) picks up enhancement works:

described in annexure A to the management agreement –

So it incorporates, by reference, materials in the management agreement?

MR MERRALLS: The farmer is the investor there.

FRENCH CJ: Yes, that is right. That is why I am saying my understanding is that under the farm agreement there was an obligation on the investor to carry out works in respect of the interest that the investor has acquired.

MR MERRALLS: Certainly, yes, yes there was.

FRENCH CJ: And that links it into the management agreement arrangements and, of course, that has to be funded through the loan agreement or some other means.

MR MERRALLS: Yes.

FRENCH CJ: Indeed, if one looks at 275 at 9.5 –

default by the Farmer pursuant to Clause 7A of the loan agreement –

is a default of the farm agreement. I mean what Mr Walker says against you is that through the loan agreement arrangements it is not just a mechanism to enter the scheme. There is an acquisition of an interest, a benefit to the investor.

MR MERRALLS: Yes, well that is what we have been saying, that it was a means of entering into the - - -

FRENCH CJ: But there was also the acquisition of a benefit, of an interest.

MR MERRALLS: The scheme. Well, there was a potential benefit, yes. It was a benefit if the scheme was successful.

FRENCH CJ: They did not get money, but they got an interest in the farm.

MR MERRALLS: Well, you had an interest in the farm subject to the farm being managed and tended in a particular way.

FRENCH CJ: Which you are obliged to do.

MR MERRALLS: Which we were obliged to do and which a company associated with the owner of the farm was obliged to do for us.

CRENNAN J: Is there anywhere in the papers, Mr Merralls, where we can easily see common directorships of the companies which are forming part of the Johnson Group?

MR MERRALLS: I do not know. I think that it was simply an agreed fact. My learned junior will ascertain whether that is so, but my recollection is that there is no document which exhibits the directors of the companies at particular times. I do not know, but they may have been some of the documents that Mr Couper did not tender because of agreement about the facts. He had a bundle of documents which he said, “I am not going to tender these because it will just clutter the proceedings and the facts are not in dispute”. My learned junior has referred me to page 251 of the appeal book, paragraph 2 of agreed facts:

Each of the Defendants entered into a Loan Agreement and a number of other written agreements with a variety of companies associated with Frank and Tony Johnson (Johnson companies) as part of the Defendants’ investment in a blueberry farming project –

and page 539 in paragraphs 5 and 6 of his Honour’s judgment.

FRENCH CJ: It is picked up in paragraph 3 as well, I think.

MR MERRALLS: Yes. It is really 2 to 6. The Johnsons, it seems, were men of many parts. They were also involved in the aquaculture schemes in Glengallan.

FRENCH CJ: How, in a principled way does the round robin character of this loan transaction feed into the question of whether there is some unconscionability bar, to use the term loosely, on restitution in this case?

MR MERRALLS: It does not seem that the money actually got to the managers.

FRENCH CJ: But you are not saying it is a sham?

MR MERRALLS: No, we are not saying that the loan was a sham but the amount represented by the cheques did not find its way to JFM, the manager, in the course of the round robin because it went through JFM to Rural and JFM did not call upon Rural. There is no evidence that JFM called upon Rural to ever get the funds for management purposes. The next point is that the investments failed entirely. There is no evidence of any traceably surviving value in the hands of the respondents.

FRENCH CJ: I am sorry, just to come back, are you inviting us to conclude that this was all just book entries, no real money changed hands and therefore restitution is based on a kind of – if not a sham, a sort of fictional benefit to the investors.

MR MERRALLS: Yes. The entries were there. If the contract had not been illegal we would have been liable on the loan contract, but in reality there were no funds being used and applied. The next stage is that the investments failed entirely. There is no evidence of any traceably surviving value in the hands of the respondents arising from the investments or the loans. That is in contrast with some of the other cases like Vestcorp where the investors obtained interest in films and Amadio where they obtained a building although, in fact, it was much reduced in value.

The schemes, of course, depended very much upon the accuracy of the projected income from the blueberry operations and in the absence of a prospectus the investors did not have the advantage of having an independent assessment of the viability of the project or the estimates of returns which were very precise in the sale agreement which would be required to refund the amount of the loan.

FRENCH CJ: We are in an area of speculation here. We do not really know whether a compliant prospectus would have exposed the risks that led to the failure of this scheme.

MR MERRALLS: Well, we know what sort of information compliant prospectuses were required to provide.

FRENCH CJ: Yes.

MR MERRALLS: And it is, I think, a matter of general knowledge that for pine plantation schemes and such there are independent assessments and verifications of the promoter’s expectations. Finally, on these matters, in considering the position of Equuscorp itself and the equity is between Equuscorp as assignee – if we use an assignee - and the respondents, we say that it is significant that Equuscorp paid only $500,000 for the so-called assignment of 638 loans with a face value of $52,584,005. They are our submissions.

I do not intend to address the Court upon the assignability of restitutionary rights. Here, we simply rely upon paragraphs 38 to 43 of our written submissions and my learned friend, Mr Pearce, will present oral submissions and on the actual assignment, if the rights were capable of being assigned, we rely upon the judgment of Justice Dodds-Streeton at paragraphs 311 to 325 in the appeal book, pages 783 to 788 and paragraphs 44 to 50 of our written submissions and my learned friend will present oral submissions about assignment too. If it please the Court.

FRENCH CJ: Thank you, Mr Merralls. Yes, Mr Pearce.

MR PEARCE: Could I just have a moment, your Honours.

MR MERRALLS: One matter that I had intended to mention was that the statement in paragraph 24 of the appellant’s submission that JFM would bank the cheques into Rural’s bank account is contradicted by Mr Couper’s statement. That is, in fact, on page 65 of their written submissions. It is the last sentence.

MR PEARCE: Your Honours, I want to begin with an issue concerning the limitations defences to the claims in contract and how we say they are relevant to the claims in restitution. We accept the analysis of the appellant based on the decision of this Court in Commonwealth Homes v Smith that the right to restitution in these cases did not arise until the investors avoided their contracts and it is common ground that that occurred by the filing of defences in all the proceedings.

The consequence of that, also in accordance with the decision of this Court in Commonwealth Homes v Smith is that there could be no limitations defence to the claims in restitution. There were, however, successful limitations defences to the claims in contract in a number of the cases below and I would just like to take your Honours to the pleading in the Haxton Case No 128 to explain how this was pleaded and at page 19 of the court book - this is the defence in Haxton No 128 in this Court, one of the two matters in which I appear.

KIEFEL J: I am sorry, what was the reference again?

MR PEARCE: Page 19, volume 1 of the court book. This is the defence of Mr Haxton and paragraph 26 alleges:

if the Defendant breached the Loan Agreement . . . then pursuant to clause 7 of the Loan Agreement the balance of the principal sum together with any outstanding interest became immediately due and payable not later than 1 December 1989.

Therefore, the claim is statute barred, the writs having been issued in March 1998. You will see that we plead that the Victorian Act does not make that explicit, but what is referred to there is the Victorian Limitations Act. The response of the plaintiff is at page 38 of the court book in their reply. Their reply at page 38 says in what is part of paragraph 11(g):

pursuant to s 5 of the Choice of Law (Limitations Periods) Act 1993 (Vic) the relevant limitation law is that of New South Wales –

and so we responded to that back on page 19 by pleading in the alternative the Limitation Act (NSW) - it is incorrectly written there as “Limitations”. It should be “Limitation Act 1969”. Like pleadings are found in the other cases, the only one of which is before your Honours today, the Cunningham’s matter, No 130 in which I also appear, and the relevant paragraphs can be found at page 117 of the court book. Mr Justice Byrne in these two cases, and indeed in two other cases that were before him but are not before your Honours, upheld the limitations defences to the claims in contract, and that can be seen in volume 2 of the court book at page 582.

GUMMOW J: It says it is statute barred, it does not say by what statute.

MR PEARCE: Yes, neither his Honour nor the Court of Appeal specified which Act they relied on. It may not matter, it may matter for reasons I will come to in a moment, but section 14(1)(a) of the New South Wales Act is to the same effect as section 5 of the Victorian Act.

FRENCH CJ: It is said at 118 the limitation defence has been made out. I suppose that might be taken as a cross-reference to the pleading.

MR PEARCE: Correct, your Honour, yes, and you will see - - -

GUMMOW J: Yes, but the pleading was in the alternative.

MR PEARCE: Yes. What is referred to there are four cases that were before his Honour - CWS 5223, which is No 130 in this case, Haxton 5261 which is not before this Court, Haxton 5154 which is No 128 in this Court, and CWS, or Cunningham’s 4989 which is not before this Court. It is significant that in the matter of Haxton 5261 which is not before this Court, the only claim in that case below was in contract. That was a case in which there was a prospectus. There was no illegality defence, and therefore no alternative claim in restitution was made, and in the Haxton case 5261, the upholding of the limitations defence was dispositive of the claim against Mr Haxton in that matter.

FRENCH CJ: Is the relevant limitation period the same under both the Victorian and the New South Wales Act?

MR PEARCE: Yes, six years under both – for a claim in contract, six years under both. It may not matter. It may matter for a reason I will come to in a moment, but in the other three cases that were before his Honour Justice Byrne – that is Haxton 5154, which is the Haxton matter before your Honours, Cunningham 5223 which is the Cunningham 130 before your Honours, and the other Cunningham matter – because there were alternative claims in restitution, his Honour at trial proceeded to decide those claims, and he upheld the claim in restitution against Mr Haxton in 5154 – 128 in this Court – but disallowed it, or dismissed it, in the two Cunningham matters.

This can be seen at paragraph 150 of his Honour’s judgment and this produced the result that in the Haxton matter, which is before your Honours, notwithstanding that there was a limitations defence to the claim in contract, his Honour upheld the claim in restitution.

GUMMOW J: Does that mean a claim in money had and received, does it? There is no such thing as an action in restitution.

MR PEARCE: Had and received. I am sorry, your Honour. I am using the shorthand.

GUMMOW J: You get hopelessly muddled.

MR PEARCE: I will try and get the right expression, your Honour – for money had and received. The matter then went to the Court of Appeal - - -

CRENNAN J: Does the difference turn on whether or not there was a non-recourse provision?

MR PEARCE: No, not in these cases, your Honour. The matter then went to the Court of Appeal.

GUMMOW J: Is there anything in these limitation statutes about common money count statute barred?

MR PEARCE: That is an interesting question with respect, your Honour. The Victorian Act talks about claims in implied contract. The New South Wales Act talks about claims in quasi contract. Yes, well, your Honour, in any event, for reasons - - -

GUMMOW J: The answer is yes.

MR PEARCE: Yes. For the reasons I explained earlier though, the limitations could not be raised to the claim for money had and received because that did not - - -

GUMMOW J: Yes. Well, that is a question of when the period starts.

MR PEARCE: Correct. I simply wanted to explain why no limitations defence was pleaded to the claim for money had and received, but to explain that limitations defences were pleaded and succeeded to the contract claim.

GUMMOW J: In contract. Yes. Well, this is not rocket science.

MR PEARCE: No, it is not, your Honour. I apologise for labouring the point, but in the Court of Appeal Equuscorp, the appellant here today, appealed in the Haxton 5261 matter on the question of limitations. That was the case in which there was solely a claim in contract. That appeal failed. In the other three matters, in one of which the investor was the appellant and in the other two of which Equuscorp was the appellant, we argued in the Court of Appeal that it was a relevant consideration to the claim for money had and received that the contractual claims were statute barred.

You will see that that argument is recorded on transcript which is included in the appeal book at 690 to 691. I will not take your Honours to it, but just to show your Honours that we made that argument. We did not make that argument below, but we made that argument in the Court of Appeal.

GUMMOW J: I do not quite understand what the argument is.

MR PEARCE: I am going to develop it in a moment, your Honour. In the Court of Appeal, in the Haxton matter where limitations was the only live point, that appeal failed and the limitations defence was upheld. That is at paragraph 349 of the decision of Justice Dodds-Streeton which is in the appeal book page 794. In the other three matters where we argued limitations to the claim in restitution in the manner that I am going to elaborate on, the Court of Appeal made no decision about that. They did not deal with that point, though it had been argued by them. Now, if it assists your Honours, I have prepared a table that summarises these matters just to avoid any potential confusion. I will just hand your Honours the table just so that there is no confusion about which cases we are and are not talking about.

Now, the last of the cases, Cunningham’s 4989, we need not be further concerned with, because that is not before this Court. In the Haxton 128 before this Court and Cunningham’s 130, we seek to rely on this limitations issue in answer to the claim in restitution. Haxton 5261 is not before this Court and that is significant, in my submission, for these reasons, because what the appellant must be saying to Mr Haxton is this, that in respect of the contract which was legal, valid and enforceable against you, because there was no contravention of the Companies Code, in respect of that matter you, do not have to pay.

In respect of the other contract, though, the one which is before your Honours, 128, where there was a contravention of the Companies Code, if not by my assignor then by its associates, where the contract is illegal and unenforceable against you, you do have to pay. In the former case, 5261, you do not have to pay because the statute of limitations says you do not have to pay, but in the latter case we can circumvent the statute of limitations. The reason we can do that is because of the illegality of the contract itself. That must be the proposition for which the appellant contends as against Mr Haxton.

We say that is not right and we say that for two principal reasons. The first is this, that it is well accepted that restitution plays a gap-filling role in the other areas of private law, in particular, contract, tort and trust. Your Honour Justice Gummow explained that in Roxborough at page 545, paragraph 75 citing, I think, a passage from an article of Professor Stoljar that the use of restitution is to fill gaps where the other areas of private law leave such gaps that need filling. Indeed, the decision of this Court in Lumbers is an application of that principle where this Court held that there was no gap to be filled and, therefore, no recourse to restitutionary principles would be permitted.

In that case, the contractual regime between the parties dealt exhaustively with the rights of the parties and, therefore, restitution was excluded. In this case, we submit that the contract and the statute of limitations dealt exhaustively with the parties’ rights. Once the statute had cut in sometime before the issue of the writ, any residual operation of the contract in accordance with the principles stated in Commonwealth Homes v Smith and relied on by our learned friends, any residual operation of the contract was extinguished and there is no gap to fill.

Now, if recourse is allowed to restitutionary principles in a case like this, the law of restitution would not be so much as filling a gap but driving a horse and coach through the statute of limitations and that cannot be right. The other reason we say is this and it is perhaps another way of looking at the same point. Under section 63(1) of the New South Wales Act – and I point out there is no counterpart in the Victorian Act and that could be significant, but we have accepted that the New South Wales Act applies – section 63(1), contractual rights are extinguished by the operation of the statute.

That has been said by Justice Dawson in Commonwealth v Mewett (1997) 191 CLR 471. I will not take your Honours to it. It is referred to in our written outline. Justice Dawson at 509 said that section 63(1) has the effect of the statute and imposes a substantive rather than merely procedural bar. That would operate in this way, your Honours, that by our defences in which we alleged illegality, and perhaps I will just take your Honours briefly to the defence in Haxton beginning at page 19 of the appeal book - beginning at the bottom of 19, paragraphs 28 through to 37. You have already been taken on a couple of occasions to some of this pleading but we plead out the facts and then state our conclusion. There were contraventions in 36, contraventions of Code. The loan agreement was unenforceable at the defendant’s option.

In the case of Mr Haxton and Cunningham 130, that pleading had no effect because the contract already was gone by then - the purported avoidance of the contract on the theory advanced by the appellant, the contract was extinguished. The purported avoidance of the contract therefore had no effect and therefore no claim for moneys had and received could have arisen because that claim is said to be predicated on the avoidance of the contract.

Perhaps a third way of looking at this is to say at the moment that any claiming moneys had and received arose, that is upon the avoidance of the contract, were the consciences of the defendants affected as against the plaintiff in such a way that restitution should be ordered. In my submission they were not because they had no liability at that point in contract. They could not be ordered pursuant to contract at law to pay the moneys and so how could their consciences be affected, or if it is permissible to engage in this method of reasoning there was no unjust enrichment at that moment of the defendants at the expense of the plaintiff because the statute of limitations had taken away any rights that the plaintiff had.

GUMMOW J: This, perhaps, would be added to Mr Merralls’ list on page 3 of his summary in paragraph 8.

MR PEARCE: In these two cases, yes, your Honour.

GUMMOW J: It would be paragraph (h).

MR PEARCE: It only arises in the two cases in which I appear. In the other cases there was no limitations defence. That is all I wish to say about the matter of limitations. I want to say something just briefly now about the question of assignment. I would like to begin with a passage of the decision of Justice Deane in Pavey & Matthews [1987] HCA 5; 162 CLR 221.

GUMMOW J: Just before we get into that, as the pleadings were structured, am I right in thinking that Rural Finance or the receivers were not parties?

MR PEARCE: Correct. They were not parties.

GUMMOW J: So that would be difficult then for any equitable assignment to be relied upon.

MR PEARCE: The receivers were defendants to the counterclaim but the counterclaim was staid. It has not been proceeded with.

GUMMOW J: Yes. We have become aware of that.

MR PEARCE: Now, your Honours, I wanted to go to the well-known passage of Mr Justice Deane beginning at page 255 in Pavey & Matthews and there is a long passage on which I rely and it begins eight lines from the bottom of page 255. The last word of that line:

It suffices to say -

and goes over the page to the conclusion of that paragraph and it is a long passage and I will not read it but invite your Honours to read the entire paragraph. But I would like to highlight the beginning and the ends of that paragraph where his Honour after reviewing extensively the common indebitatus count says:

it is clear that the old common indebitatus count could be utilised to accommodate what should be seen as two distinct categories of claim: one to recover a debt arising under a genuine contract, whether express or implied; the other to recover a debt owing in circumstances where the law itself imposed or imputed an obligation or promise to make compensation for a benefit accepted.

Then in reference to that second category of claim, his Honour at the end of that paragraph said:

In such a case -

This is now five lines from the bottom:

it is the very fact that there is no genuine agreement or that the genuine agreement is frustrated, avoided or unenforceable that provides the occasion for (and part of the circumstances giving rise to) the imposition by the law of the obligation to make restitution.

To like effect a passage at page 260 at about point 7 of the page, the middle paragraph, the last five lines:

As has been seen, the basis of such an action -

Again, talking about the second kind of claim -

lies not in agreement but in restitution and the claim in restitution involves not enforcing the agreement but recovering compensation on the basis that the agreement is unenforceable.

Now, with that distinction in mind, could we turn to the terms of the deed of assignment which is at the back of the first volume of the court book, beginning page 417 appeal book 1. The deed itself is quite short, your Honours will have seen. It comprises two recitals and two operative parts and it was made pursuant to the asset sale agreement that my learned friend, Mr Walker, took your Honours to yesterday. If we can begin in recital A, it recites that:

The persons or corporations identified as borrowers -

I am at 417 of the appeal book in the schedule -

are indebted to Rural under certain investor loans -

In my submission what is meant by the word “loans” there is loan contracts -

regarding the Blueberry Project at Corindi, New South Wales, more particularly described in Annexure “A” to the Asset Sale Agreement -

One peculiarity - - -

GUMMOW J: Your short point is that this document has been framed simply having regard to contractual matters?

MR PEARCE: Correct.

GUMMOW J: Without regard to what might be - - -

MR PEARCE: The second category referred to by Justice Deane.

GUMMOW J: - - - an action as a result of a failure of the contract.

MR PEARCE: Correct, and that is how the document reads. The distinction was clearly drawn by Justice Deane between the two types of action and all that is conveyed is the right to the former kind of action and not the latter, and the way that is suggested to achieve that by my learned friend, Mr Walker, is to fasten on the words in paragraph 2(b):

all legal and other remedies for [those] matters –

those matters being the legal rights to the debts referred to in paragraph (a), but those debts are defined as debts arising under contracts. What we have here is debts arising instead of contract, not under contract. Mr Walker says that the second category of claim referred to by Mr Justice Deane – though his Honour refers to it as a distinct kind of claim – the second category is a remedy for the first category - - -

GUMMOW J: Well, obviously they are distinct. They have different limitation periods, for starters.

MR PEARCE: Yes, but I think we are in agreement about that.

GUMMOW J: Do not take what I am saying too - - -

MR PEARCE: Anyhow, your Honours, the matter does not admit of much elaboration. The terms of the deed, in my submission, are plain. What was contemplated by the deed was an assignment of the contractual rights.

GUMMOW J: And in 1997, would the contractual limitation bar have been operative?

MR PEARCE: Yes, it would have. I can give your Honour the dates in the two cases when the trial judge held that the time ran from. In the Haxton matter his Honour said time ran from 30 November 1989, therefore expiring in 1995, and in the Cunningham matter, No 130, his Honour held that it ran from 29 September 1988, therefore expiring in 1994, so your Honour is quite correct that even at - - -

GUMMOW J: That is true in either New South Wales or Victoria?

MR PEARCE: Yes, six years in both States.

FRENCH CJ: Sorry, did you say the extinguishment provision was also to be found in the Victorian Act?

MR PEARCE: No, it is not to be found in Victoria.

FRENCH CJ: No, it is not, yes.

MR PEARCE: There is no comparable provision.

FRENCH CJ: That may be of significance here.

MR PEARCE: That leg of my argument about limitations probably does not apply if the Victorian statute is applicable, but my other argument - - -

FRENCH CJ: But we have no analysis of which statute.

MR PEARCE: No, they rely, I think correctly, on the Victorian Choice of Law Act that is referred to. It is a very short Act, and it simply says that if the governing law of a transaction is the law of a particular State, then it is the Limitation Act of that State that applies in a proceeding in Victoria.

GUMMOW J: I thought that was an initiative that had been copied in other States.

MR PEARCE: It may be uniform.

GUMMOW J: Initiated by Justice Mason on your Solicitor-General of New South Wales, I think.

MR PEARCE: It may be uniform, and we accept the correctness of that, which is why we say that we accept that the New South Wales Act applies, but back on the question of assignment, really, we simply invite your Honours to read the - - -

GUMMOW J: The practical effect of this may have been to achieve nothing unless there was a waiver of the Victorian statute.

MR PEARCE: Yes, possibly.

GUMMOW J: Would one ordinarily construe the deed as achieving nothing, if there was another construction?

MR PEARCE: Well, no, the deed did achieve something where there were valid contractual claims. The limitations did not apply in every case. There are 500, 600 investor loans covered by the deed, so in some respects there is no doubt that the deed had effect. But in the relevant respects, in these two cases, we would say it did not in contract and did not by its terms in any claim for money had and received. I just invite your Honours to go to the passages - the judgment of Justice Dodds-Streeton at 324 and 325 where her Honour expresses her - - -

FRENCH CJ: Just before you do that can I just clarify, just looking at the Haxton agreement, the loan agreement, how is it said that the law of New South Wales applies to that?

MR PEARCE: Mr Haxton resides in New South Wales. The property is in New South Wales. It is the usual analysis of a collection of matters.

FRENCH CJ: I see. All right. There is no provision in any of - - -

MR PEARCE: There is no choice of law clause, no. Probably the most significant fact here is that this was an investment in a farm in New South Wales. That is the most significant connecting factor. In Mr Haxton’s case there is the added factor that he resides in New South Wales, not the case of Cunningham’s, which is a company based in South Australia. So just in conclusion on the question of assignment, I just invite your Honours to - - -

GUMMOW J: Are you taking us to Justice Dodds-Streeton?

MR PEARCE: Yes, at 324 to 325 where her Honour – it is at appeal book 788 to 789. Her Honour, after a thorough review of the terms of the deed of assignment and the assets sale agreement there expresses her conclusion in terms that, in my respectful submission, are unimpeachable and ought to be adopted by this Court.

The final point, your Honours, is the more difficult point about assignability and, your Honours, the right that is purported – that is assuming that any rights for money had and received were purported to be assigned by the deed of assignment. The right we know is not a right in contract. It is not a tortious right. It is a bare cause of action, which traditionally had not been held to be assignable.

GUMMOW J: It is said it is attached to some properties, is it not, it is said against you - - -

MR PEARCE: I am not sure what the property is. It might be said to be the securities, but in fact as the appellant points out no securities were actually entered into. The only securities that were held were the contractual charge. But this Court in Poulton v The Commonwealth (1953) 89 CLR 540 held that a right to restitution based on waiver of tort was not assignable. It is a decision of this Court and I do not propose to – sorry I do not propose to take your Honours to it unless your Honours would be assisted.

GUMMOW J: Which page?

MR PEARCE: Perhaps we will go to page 602 where that conclusion is stated in the joint judgment there, the judgment of the Court. The facts of the case were this, that there were Commonwealth regulations that expropriated wool from growers and gave the grower an entitlement to compensation for the expropriated wool. This is in the immediate post-wartime period. A wool dealer took an equitable assignment of the growers’ right to the compensation. He then alleged that the Commonwealth regulations were invalid for not offering this acquisition of property without just terms. He said if that were correct and the regulations were invalid, the Commonwealth had committed the tort of conversion by taking the wool, that the grower was entitled to waive the tort and claim restitution and he, the dealer, had an assignment of that right to restitution.

That is how the case was argued and judgment of the Court at the bottom of 602 - there were a number of arguments run on other points but this is the relevant part for our purposes - at the bottom of 602, judgment of the Court:

if it were true that the Commonwealth were guilty of conversion of the Donlons’ wool –

that is the growers –

it would be the Donlons alone who could elect to waive the tort and take the proceeds of sale. This would be so, both because there was not in fact any purported assignment to the plaintiff of the right of action for the tort, and because, according to well-established principle, the right was incapable of assignment either at law or in equity -

Now, I should point out - - -

GUMMOW J: The pleading was at 548.

MR PEARCE: Yes, there is a passage where that is explained.

GUMMOW J: Damages for conversion, alternatively on waiving conversion, money had and received.

MR PEARCE: Yes. This argument that I have explained to your Honours is set out in the judgment of the Full Court at the bottom of 601 to 602 in four or five steps. So that is the authority of this Court on that question. There have been conflicting dicta in the case of Mutual Pools & Staff Pty Ltd v Commonwealth [1994] HCA 9; (1994) 179 CLR 155 and there are conflicting dicta of Chief Justice Mason in that case at 173, conflicting with later dicta of Justice Brennan. The dicta of Justice Mason appear at 173. At the bottom of that page there is a reference to the decision in Werrin. His Honour says seven lines from the bottom:

in Werrin the cause of action in question was a claim for restitution of taxes mistakenly paid and was not based on a contractual right. As such, the cause of action, if there was one, which the Court in Werrin assumed but did not decide, was not assignable and his Honour may have thought that it did not amount to property for the purpose of s. 51(xxxi).

But to contrary effect, Justice Brennan, at 176, at the top of that page, fourth line down:

It is conceded that, in consequence of that decision –

that is the earlier decision in Mutual Pools & Staff –

the Commonwealth was indebted to the plaintiff in the amount which the plaintiff had paid purportedly as tax in accordance with the impugned legislation and interest on that amount. That debt . . . was not a claim created or governed by a statute. It was a common law chose in action vested in the plaintiff and assignable by it. The debt was “property” within the meaning of that in s 51(xxxi) of the Constitution.

Then finally in Campbells Cash and Carry Pty Limited v Fostif [2006] HCA 41; (2006) 229 CLR 386, dicta of your Honours Justices Callinan and Heydon, at 484. This is a case, your Honours will recall, which concerned a litigation funding agreement and there was an attack on a litigation funding agreement as being contrary to public policy and tending to result in an abuse of process. In the Court of Appeal in New South Wales, bearing in mind there was no assignment involved in this case, no purported assignment but a cause of action in this case, the case concerned a litigation funding agreement but the President of the Court of Appeal had expressed the view that had there been an assignment, the assignment would have been valid. I need to point out, too, that the underlying cause of action was for money had and received.

GUMMOW J: Which is a liquidated claim.

MR PEARCE: Yes, it was.

GUMMOW J: Is that the idea.

MR PEARCE: This came out of Roxborough. Your Honours will recall it came out of Roxborough. The class action was launched on behalf of a number of retailers to recover the same sorts of moneys that this Court in Roxborough had said were recoverable, but there was no purported assignment of the restitutionary right or the claim for money had and received, but the President of the Court of Appeal expressed a view that such an assignment would have been enforceable but their Honours Justices Callinan and Heydon, in paragraph 260, expressed doubt about that view and referred there - - -

HEYDON J: It was a sort of a satellite on a sideshow on a sideshow.

MR PEARCE: Yes, it was, your Honour.

HEYDON J: The Court of Appeal was speaking on an issue not debated before it and you are referring us to a passage which says there is a question in a dissenting judgment. It is a long way from the scrum, as it were.

MR PEARCE: Your Honours, I will not take it any further. That is really the state of the authority in this Court on that question. The case that we understand is put against us about this is that – your Honours know the decision in Trendtex which said that there might be circumstances in which there could be an assignment, a valid assignment, of a bare cause of action where the assignee had a genuine commercial interest in the underlying subject matter. In light of that, in light of the decision in Campbells Cash and Carry and in light of the abolition by the States of the crimes and the torts of maintenance and possibly also in light of the extensive powers invested in receivers and liquidators to get in and deal with property of companies under their control, in light of all these matters, the traditional view that causes of action are not assignable should now be reconsidered by this Court. That, as we apprehend it, is how the matter is put.

GUMMOW J: Are there Australian decisions applying Trendtex?

MR PEARCE: I think there is a decision of Justice Finkelstein in the Federal Court, TS & B Retail Systems [2007] FCA 151; 158 FCR 444, which we refer to in our written outline. It is not in our list of authorities, I do not think. We did not include it in our list of authorities, but I think Justice Finkelstein deals with that. In the Court of Appeal her Honour Justice Dodds-Streeton reviewed these authorities in some detail, considered Trendtex and considered, yes, TS & B Retail Systems. My submission about this, your Honours, is that accepting all of that and accepting that it may now be appropriate to reconsider whether there should be a blanket prohibition on assignments of bare causes of action, it still leaves you with this question.

This is a claim based on equitable principles, based on the manner in which the respective consciences of the plaintiff and defendant are affected and that is well known and well established and your Honour Justice Gummow in the decision in Roxborough at the long passage – and I will not take your Honours back to it, it has been referred to already – but really beginning at page 543 all the way through to 554 where your Honour plotted the development of the action for money had and received and drew on its equitable antecedents and highlighted the crucial consideration in a claim of this kind being the extent to which the consciences of the parties are affected.

Having regard to those matters, those personal matters, the question would still remain whether a cause of action of this kind ought to be regarded as assignable because of the inherently personal and equitable nature of the cause of action. Your Honours, those are my submissions, unless your Honours have any – I think my learned friend, Mr Merralls, has asked me to clarify that he did not mention the so-called taxation benefits aspect of the appellant’s case because he is not sure how Mr Walker advances the argument. I should simply point out that the investors were conscious of the advantage of obtaining accelerated tax deductions, but there was no evidence that any investor did, in fact, obtain them and if they did, how much and what the value of the taxation benefit was.

GUMMOW J: Looking at your opponent’s written submissions on assignment, paragraph 62, they seem to be limited to construction of the deed.

MR PEARCE: I think they did say something further about assignability.

HEYDON J: In their reply, paragraph 8.

MR PEARCE: They responded in reply because it was a contention point. I will perhaps let Mr Walker say that.

GUMMOW J: Paragraph?

HEYDON J: Paragraph 8 onwards.

FRENCH CJ: Yes, Mr Walker.

MR WALKER: If it please the Court. At the outset of his address, my learned friend, Mr Merralls, developed a point about the unenforceability following from the illegality affecting the loan agreements and, in particular, focused on the proposition that it did not in any way depend upon the choice or election of the borrowers. If by that is meant that the state of affairs providing that choice or election obviously precedes the exercise of it, then it is axiomatically correct. If, however, it is intended to suggest that there is willy-nilly what the borrower decides, an infirmity in the contract affecting in particular the capacity of the borrower to take advantage of its terms, then it is plainly, and on authority, wrong.

In our submission, the unenforceability in question needs unpacking. The single word needs to be understood in the various possible ways it can apply. This is a case where it appears to be common ground. It applies in the sense that it is unenforceable against the borrower if the borrower so chooses to take that position. I am sorry - my friend says that is not common ground. I had understood, and I apologise for my failure of comprehension, that the proposition was that this was a Smith’s Case situation. We still advance that. That is our ground upon which we stand.

We certainly reject and refute the notion that this is a case where even if the borrowers had wanted to stay in a successful project, they were unable to maintain their right to continue the terms of the borrowing, being unable to continue the terms of the farming, being unable to continue the terms of the lease or licence.

FRENCH CJ: What does that mean that an investor is unable to continue the terms of the borrowing? What is more to do, apart from repaying?

MR WALKER: The terms of the borrowing, of course, entitle the borrower to say, “This money you lent me is not repayable until, say, three years from now. You have no claim. Your claim for repayment is regulated by its terms. You must accept interest at a particular rate with stipulated discounts”, et cetera. In other words, a loan agreement is not an agreement under which a borrower has no rights. The rights are exactly correlative with the limits of the rights of the lender, but because it is obvious that the unenforceability of the farming agreements and the management agreements, it does not mean that the borrower cannot take advantage of them if the borrower so chooses, the investor or farmer so chooses. The same, with respect, must follow in relation to the associated loans.

In short, my learned friend’s argument, particularly given his interjection that there is no common ground on this, must be saying that there is no distinction between the unenforceability which they were maintaining and voidness and that, with respect, lacks any foundation either in the facts, common sense, principle or authority. In relation to the statutory effect, that is, the interpretation of section 170 of the Companies Code, in order to ascertain whether it precludes the arising of a claim for money had and received - - -

GUMMOW J: I do not think it is just 170. It is 170 plus the penalty provisions.

MR WALKER: Quite.

GUMMOW J: Otherwise you have just a normal conduct floating around.

MR WALKER: Quite, yes. It is 170, as I said in-chief, with all the contexts, as my friend puts it. We both refer to and rely upon the same provisions. It includes the severe penalties. It includes 174(2). I do not wish to repeat what I have said in-chief about that. Now, my friend puts it thus, that in terms of in pari delicto, his clients are simply known in delicto and we have no interest or basis in the way in which this case has been fought to contest that proposition, but rather, do they have any basis on the way in which this case has been fought to say of Rural that it was in delicto either? The more matters of common directorship were clear, as I put it in-chief, the more obvious it was that if any such case was to be run, it was to be maintained and proved and the subject of findings and holdings in the courts below and there is, of course, no such finding at all, there was no such argument at all.

HEYDON J: Your point is that there would have had to have been an examination of why it was that there was no prospectus; who made that decision in matters of that kind, and that was not looked at.

MR WALKER: Quite so. The next matter in relation to the statute is to draw to attention the way in which my learned friend put it yesterday similar to the way in which appears in the last sentence of our friend’s written submissions, paragraph 31. Yesterday it was put thus, that you ask whether you can see in the statute or infer any right to claim other relief such as money had and received. The short answer to that is, this is an inversion, and fallaciously so, of the appropriate question.

The only appropriate question on authority and surely in principle, bearing in mind the relation between personal liberty, common law and statute, must be, does the statute either expressly or by necessary implication, the process of inference my friend was referring to, does it show that such other claim is precluded? That, of course, is an exercise which is a workaday practical exercise for lawyers and courts to engage in. The will-o’-the wisp involved in seeing whether a statute which expressly precludes certain conduct permits some other kind of conduct in the same breath is, in our submission, extremely difficult, impractical and is not to be found in any of the books. It is the way in which one proceeds.

Finally on the question of the involvement of Rural in relation to the loan agreements and the other agreements with which it was associated, my learned friend used yesterday the phrase that Rural Finance was to be identified with the promoters of the scheme, if not one itself, and, in our submission, at the heel of the hunt in this long litigation, that is a phrase which is striking for its vagueness and all the more so when, after all, yesterday a reference was made, quite explicitly, to section 38 of the Interpretation Code which stipulated the way in which one might be involved with contraventions by promoters. In our submission, such a number of attempts to identify Rural Finance either as or as if it were a contravener should be rejected.

In relation to the point that my learned friend started on yesterday and completed today – I will call it the round robin point though it extends beyond simply that aspect – it is obviously important to bear in mind that, as I pointed out in-chief, page 21 of volume 1 of the appeal book, in paragraph 35 of their own pleading, in order to make good the connection between the loan agreement and the prospectus-free agreements so as to produce the illegality effect upon the loan agreement, so an issue at the heart of their claim by way of defence, it was asserted quite simply that the defendant acquired his prescribed interest – there are no inverted commas there or so-called – that is the acquisition of an interest in a joint venture. No one has ever suggested that that did not exist and did not until, I think, it is 1991. It went on until 1991 producing and selling fruit – with funds provided to him under the loan agreement. I do not wish to labour any more than I did in-chief that point.

So when one is considering questions of the way in which issues were both contended for by the investors – the farmers – as well as subject of holdings, which have not in themselves been canvassed, one can then turn to the way in which Justice Byrne dealt with it. My friend, I think, has noted this already, page 577 in volume 2 of the appeal book, paragraph 107.

As we understand there was never any canvassing, let alone by way of an appellate argument, in the Court of Appeal that his Honour erred by holding, as he does in the second and third lines of paragraph 107, that “this sum was paid by them”, et cetera, et cetera. Of course it was. Indeed, it would be utterly remarkable that people who engaged in these transactions could in any arena at all be heard to say that they had not made those payments, particularly as we know there was a highly explicit and deliberate motivation that there be payments in order that there be deductions upfront, as it is called.

Now, that is not merely a tax benefit, though that would suffice to show that of course these were payments, and that it simply does not lie in the mouth of those who made them to now deny it, but also they acquired by that payment, as his Honour held and as was never challenged – and is surely beyond challenge here – they acquired rights to have the manager perform the services they themselves had undertaken to perform by way of improvement and maintenance and enhancement of the farms, all of which, as my friend himself points out this morning, includes actual concrete work, planting and tending and harvesting blueberry plants.

Now, those are not matters, to move to my next point of reply, of which one can ever seriously say that the venture failed entirely. If I run a grazing property, turning off cattle for five years and then by a combination of drought, other financial restraint and disease, I lose my whole herd and the bank sells me up leaving nothing over for me, one could understand emotionally describing that I have failed entirely as a grazier. But the venture, of course, produced income for the first earlier years and the risk of that kind of eventuality is not one which permits anyone to say, when it happens, that there has been such an entire failure as to show that no value was ever given when I first purchased the run, the cattle and the labour to produce beef with them. The same is exactly true with these blueberry farmers. There was nothing merely potential about the rights that they obtained, producing revenue during the years when fruit was harvested and sold, as it was.

At page 586 in volume 2 of the appeal book in paragraph 129, there appear findings which were the subject of a somewhat shadowy canvassing in this Court. However, the basic answer remains that there cannot be some halfway point between asserting the legal effect of the movement of funds for some purposes and for other purpose saying nothing, in fact, happened. It appears the choice is finally made in relation to what is the position of the investors by statements such as the following by my learned friend this morning. We do not deny the legal effect of the contracts if they had not been illegal.

Now that, of course, is referring to the very flow of funds which Justice Byrne held were real in terms of a loan actually being made and payments actually being made in paragraph 129. My friend explicitly accepted that Glengallen would stand for that and that, in our submission, is all that is necessary in this Court. There is, indeed, a question as to whether there was any canvassing of paragraph 129, either as to its factual holdings or its legal conclusion, in the Court of Appeal at the suit of the investors. Perhaps, the answer is in a way there was. See, for example, the way in which the argument the Court of Appeal is recorded at page 726, paragraph 101. In relation to the claim in restitution, it was said:

the practical effect of the scheme transactions was that the investors received no benefit.

I stress “the practical effect was that they received no benefit”. They did not effectively receive a loan but, at most, gained entry into an investment which failed resulting in a total loss of their interests.

The notions contained in that recorded argument need to be unpicked and they reflect some confusion. One cannot lose what you never had. So here is an essential premise of their argument “We got interests”. How did they get their interests? They purchased them. What was involved in the purchase? It involved the pre-payment for the management obligations, the enhancement obligations that they had undertaken and which they contracted to be supplied to them. All of those amounts to what is in the metaphor of gaining entry, the acquiring the interest in the business or the joint venture, the business venture, the existence of which as a reality, that is, as really having prospects of profit, was, of course, vital for one of the motivating factors of their decision to undertaken these obligations, namely, the upfront deduction.

So for those reasons, in our submission, properly understood, it is either too late or impossible in this Court for there to be an argument that says, in effect, nothing happened, no funds were being paid by what is called the round robin. The failure, the eventual failure, might be that which my learned friend this morning referred to as the absence of benefit obtained by so-called borrowers – his expression “so-called borrowers”. It is too late, in our submission, for there to be any reversion to, if there ever had originally been, the proposition that they were not ever borrowers. Of course they were borrowers, unless there be a suggestion of sham, probably never available and certainly not raised.

In relation to absence of benefit the same point about the risks of all continuing business endeavours and quintessentially agricultural endeavours can be made. It is not fair to say that there is an absence of benefit when some years crops succeed and some years crops fail. That is not a proper description, however emotionally it may accord with the feeling at the end of it all.

In relation to that question of sham my friend this morning, in fact, said that he was not saying the loan was a sham. He is saying instead that the money was not paid to JFM because it went through JFM. This, with respect, is to mistake the very sequence with which Mr Couper is recorded as explaining and which his Honour, with respect, correctly paraphrases in paragraph 129, to which I have gone. Money going through is a metaphorical way of my friend saying that money was paid to JFM, which then paid it on.

Now, a point was taken this morning that it was not banked as we said in our written submissions, paragraph 24. Paragraph 24 is supported by the citation that we have given, including paragraph 129. I do not need to say anything further about it. There seems to be a difference of no moment at all being taken between the notion of deposited and banked. It went to Rural’s bank account. I do not, with respect, have a position of preference between banked or deposited to describe that.

There is no case that completes the train of thought commenced this morning by the assertion that JFM did not receive or keep the money. It does not matter which it is, receive or keep. The image was raised in this Court of JFM who had to do work not having money to do it with, but nothing is pleaded or proved or indeed openly argued about JFM being at a standstill, not able to tend the plants or arrange for harvesting on account of its financial position leaving it bereft of the capacity to do the work because it, instead of having cash, it rather had a loan account in its favour with Rural.

This simply was not gone into at all, nor is it suggested that the supposed entire failure, with all its weakness of concept, was in fact due to any failure on the part of JFM to manage. The investors, the farmers, the borrowers chose to run their resistance to enforcement of their loan obligations, including by the money had and received alternative, without laying either at Rural’s feet or, indeed, at any particular person or entity’s feet a blame, actionable or good as a defence, for the agricultural failure.

Thus, the way my learned friend concluded his address this morning in relation to the absence of any objective or third party vouching for the accuracy of projections of production or sales from the blueberry farm, is, with respect, entirely out of court. It does not fit with any pleaded issue. It does not fit with any facts canvassed at trial or raised in the Court of Appeal. It does not fit, with respect, in any aspect that can be germane to and answer to a claim for money had and received. Could I then turn to the matters my learned friend, Mr Pearce, raised - - -

KIEFEL J: Just before you go on. Could you please remind me what your position is in relation to, dare I say it, counter-restitution?

MR WALKER: Whether you call it counter-restitution – of course your Honour may there, it is in the books – or just allowance, as we have preferred simply as a matter of terminology, our position is that all payments by the borrowers to the lender are taken into account, given credit for, in the amount for which judgment may be obtained on the count for money had and received.

KIEFEL J: I had in mind the relevance of the inquiry which the stay on the counterclaim may have affected, that is, the valuation of the benefits. Do you say anything results from that in terms of your case?

MR WALKER: No, it does not. If I understand your Honour to be talking about the valuation of tax benefits - - -

KIEFEL J: Tax benefits, yes.

MR WALKER: As I said in-chief, our position is that though there is reference to that being left for another day, probably more than one, in truth we submit that in principle they have absolutely nothing to do with it.

KIEFEL J: You regard it as totally irrelevant to - - -

MR WALKER: Totally irrelevant.

KIEFEL J: - - - the claim that you make for moneys had and received on the basis of a partial failure.

MR WALKER: Yes. It is not an inquiry into what might be called the consequential ramifications of the initial benefit of receiving money. Whether I invest it wisely, whether I squander it, is nothing to the point in account for money had and received. Similarly, if I am successful in my dealings with the Commissioner of Taxation to one degree or another, is not to the point in relation to the count for money had and received.

KIEFEL J: You do not regard it as in any practical sense the consideration that they entered into?

MR WALKER: No, of course not.

KIEFEL J: Yes, I follow.

MR WALKER: The motivation one has in buying anything will always, one hopes, go far beyond simply what would be stated as consideration, either in the 19th century Ansonian sense, or even in a broader sense of the occasion for purpose of or justification for the promise being binding. Your Honours, can I then move then in relation to - - -

GUMMOW J: Just before you do that, what do you seek from us? I am looking at page 850, taking up with what Justice Kiefel was putting to you. It is some strange sort of order, page 850.

MR WALKER: Yes.

GUMMOW J: It is a declaration, is it? You cannot have judgment for some to be determined, really, can you?

FRENCH CJ: I think Justice Byrne made an order in those terms, but, yes, it raises the question.

MR WALKER: Yes. The answer to your Honour’s questions are, I think, yes and yes to each of them, but my answer to Justice Gummow is that is not a judgment that one can give to the sheriff for there to be execution. It is a form of order which reflects the state at which these proceedings are, bearing in mind what I will call the fragmentation that has been inflicted upon them. It is as far as we can go in light of the orders that had been made at earlier stages preventing all issues being determined.

GUMMOW J: It would have to be remitted, would it not?

MR WALKER: Yes, it has to be remitted.

GUMMOW J: You really want some sort of declaration from us, and then a remitter.

MR WALKER: Yes, your Honour.

GUMMOW J: I have just never seen this before. I can understand if it is an account of profits, but this is not an account of profits; this is a liquidated claim, and you have not liquidated it.

MR WALKER: No. Because we have been prevented by orders made concerning how the litigation is to be conducted.

GUMMOW J: Quite.

MR WALKER: I am not for a moment suggesting, your Honour, that is desirable, let alone ideal, but it is - - -

GUMMOW J: It is another example of case management strangling itself in my view. It is not your fault

MR WALKER: I hope your Honour will forgive me if I do not respond. Your Honours, page 21 of the volume 1 of the appeal book, paragraph 37 this time, could I remind your Honours that the pleading of unenforceability at the defendant’s option, pace what my learned friend, Mr Merralls, had said about that, is explicitly the foundation of the so-called counterclaim, which is the counter-restitution that you see on the very next, page 22, paragraph 42. That is the thing that was stayed apparently, and that is a claim for – see paragraph 43(b):

Restitution of amounts paid and repaid by it pursuant to the Loan Agreement.

So the way in which the defendants, and this is Mr Haxton, proceeded was to say of the loan agreement that it was unenforceable. True, there was the limitations plea against the claim in contract for breach of the loan agreement as well. My friend has drawn attention to them but they contended outright that the loan agreement was unenforceable and they contended, again outright, that that entitled them to what I will call counter-restitution. As to the substance of that assertion we, of course, as I have most recently in answer to Justice Kiefel made clear, and as I repeated in-chief, we of course agree.

GUMMOW J: It is not a counter anything. It is not a cross-claim, is it?

MR WALKER: Your Honour, I do not suggest it should be. We say of course they get credit for what they paid. It does not go without saying but once said that defines the limit of our claim.

KIEFEL J: Do they get credit for what they do not receive?

MR WALKER: No. They only get credit for what they paid. If your Honour is talking, for example, about not getting tax benefits, whatever that means - - -

KIEFEL J: Yes.

MR WALKER: No, of course not, any more than they get credit for the fact that there was an uninsured consignment of blueberries that fell off the road.

GUMMOW J: We have to be quite clear about it because if we are remitting something we have to know what we are remitting.

MR WALKER: Yes. All that should be remitted, in our submission, is the credit in our favour, taking account only of payments made by the lender and payments made - - -

GUMMOW J: To your predecessor in title?

MR WALKER: Yes, to the lender, and payments made by the lender and payments made to the lender by the borrowers.

HEYDON J: This is a calculation of about 90 seconds, is it not?

MR WALKER: Yes, or less.

HEYDON J: Is it not something that can be agreed?

MR WALKER: Yes, I am sorry, it should be agreed.

HEYDON J: Really, their position, I suppose, is this, that if you fail, then they are entitled to get back, perhaps, the two instalments they paid, but if you succeed, it must follow that they get nothing back. Credit will have been given - - -

MR WALKER: That is right.

HEYDON J: - - - in their favour and you will get the balance.

MR WALKER: That is correct. I am not sure about the first proposition being correct, with respect, your Honour. It seems a bit hard on the lender that we get nothing and we get put in an even worse position, namely, the borrower gets back what they did pay.

HEYDON J: Well, it may be harsh, but it is the logic of the respondent’s position, I think.

MR WALKER: Why from Equuscorp though, your Honour?

HEYDON J: Pardon?

MR WALKER: Why from Equuscorp, with respect?

HEYDON J: You want me to answer the question?

MR WALKER: I should not ask questions, your Honour, I am sorry, in particular lest there be an answer. Certainly, in our submission, that working out of that proposition - - -

GUMMOW J: It is not a simple case of lender and borrower because there is the intrusion of the assignment.

MR WALKER: Your Honour, there is the intrusion of the assignment, but that cannot, in principle, affect the extent of the rights we seek to enforce. If as assignee we can enforce - - -

GUMMOW J: They have this so-called counter-restitution floating around, did they?

MR WALKER: Well, the counter-restitution - - -

GUMMOW J: Is that floating around in the deed of assignment somehow?

MR WALKER: No. We obviously take the claims with all its attributes, including what its limit can be. The counter-restitution so-called, is no more – I think I pointed this out in-chief – than saying they cannot be made, as it were, to disgorge money, part of which they have already paid. That is all. That is what we understand as the meaning of the expression “amounts paid and repaid by it pursuant to the loan agreement”. The short answer is that, yes, you do not need a counterclaim for that. That is inherent in the limits on our claim and, your Honours may recall, in-chief I said that if you like, one could ponderously say, yes, the defendant proves they have made those payments, but we are saying that all and any payments they made are, of course, a pro tanto reduction of that which justice and equity requires them to pay to us.

Now, my learned friend, Mr Pearce, said nonetheless of paragraph 37 and standing in defence, not just as incorporated in the so-called counterclaim, that if the pleading had no effect and, in our submission, that is, it would appear, a relatively new element in the case, we have not been able to track –and I do apologise if we have missed something – through to find any reference to the extinguishing provision peculiar to New South Wales in section 63 of the Limitation Act 1969 as being any part of a pleaded issue, as in any part of an argument or a holding at first instance or in the Court of Appeal. So far as issues are joined between the parties, thinking in terms of Coulton v Holcombe, in our submission, one answer to any argument that needs section 63 is that it is just too late for it to be relied upon, particularly where one sees that the pleading outright took the position that they had an answer by saying that the loan agreement was unenforceable on account of illegality.

CRENNAN J: But they added the limitation point?

MR WALKER: Yes, they did. I was focusing, as I think your Honours saw, just on section 63, the distinguishing effects. If their argument needs that, then that really is entirely novel in this Court. However it is clear, as Justice Crennan has just noted, that there was a reference to – and more than a passing reference – there was a discrete argument based upon the contract claim being statute barred, and one sees at appeal book page 691 the passage to which my learned friend referred you this morning, it is dealt with in terms of no “unjust enrichment”. We do not embrace, with respect, that phrase as a tool to be used in analysis, but if one is considering this argument as being – adapting Lord Mansfield’s words – among the all and any answers which in justice and equity would either remove or qualify our claim, then the first thing to be said about the operation of a statutory limitations period is that its virtue is its arbitrariness.

One day you have a claim in full vigour, and the next day you have zero. To call it arbitrary is not to cast any aspersions on the law which so enacts – I stress, it probably is a distinct virtue that it so operates – but it rather removes it from the area of discourse required by consideration of a defendant’s response to a claim for money had and received to the plaintiff’s use based upon the justice and equity of the position. That is reflected, of course, in the fact that it has never been the case for any litigants that the court, as it were, expects them to plead all limitation periods of which they may take advantage.

Limitation defences are not, as it were, anything which might be like certain illegality matters, part of the duty of the court to insert into the adjudication of the private party’s dispute. It is for those reasons that, in our submission, the mere fact that there has been the tolling of a limitation period under a statute for the contract claim does not, as appears to have been argued, automatically, axiomatically or inherently involve a conversion from one day to the next of that which was a just claim to something which was unjust. There is nothing unjust about the situation of somebody responding and paying in full a claim which was statute-barred.

It is for those reasons, in our submission, that so long as our claim is understood as being based only upon the unenforceability by reason of illegality, there is no prospect of success for us driving the horse and coach through the Limitation Act. We accept, of course, that that would be an apt way of scotching any such argument as this, namely, there should be a claim for money had and received to the plaintiff’s use if the plaintiff could have sued the defendant on a contract, but failed to do so in time and the defendant has pleaded the statute of limitations, thereby rendering the contract unenforceable in that sense because statute barred by the plaintiff. Any argument that said that that was a situation which, without anything else or inherently of its own force, gave rise to a claim for money had and received would be absurd.

We do not say that at all. We rather respond to the plea in paragraph 37, namely, unenforceable on account of illegality. It is said, as my learned friend aptly put it, another way of casting the same argument is to use the language of the conscience of the defendant not being affected because the defendant was at the stage in question, that is, at the stage when illegality was relied upon, not itself liable under the contract because of the limitation period. Of course, the same is precisely true in relation to unenforceability on account of illegality. What that means is you are not liable under the contract because the contract cannot be enforced on account of illegality.

The authorities which are at the heart of the argument we put in-chief and which have not been challenged by our learned friends to the slightest degree say that that gives rise to a question whether the statute that produced that illegality and its effect on the contract also produces an illegality effect precluding any claim for money had and received. Now, that question could not exist, let alone the affirmative answers that have been given – sorry, the negative answers that have been given to it by cases such as Amadio could not be true if it simply sufficed to say that the absence of liability under the contract meant that there could not be a claim in justice and equity for money had and received.

I next come to the interpretation of the assignment. With respect, the discussion of matters by Justice Deane involving the conceptual analysis of the difference between as well as the relation of claims in contract and claims in that case for quantum meruit are not really, with respect, the stuff of extraneous material, the background or setting in which one would construe the words of these commercial parties.

I have said enough in-chief and in our written submissions about the force of the expressions “all other” and “remedies for”. I do not wish to repeat what we have said there. Obviously a remedy for is something which provides judicial relief to make good the situation before the Court. The overpowering circumstance which, in our submission, should outweigh the arguments of literal interpretation relied upon by our learned friends is that on the reading proffered, notwithstanding all and other and not withstanding the context being a receiver turning to account the property of the company by way of administering its estate, that somehow or other these claims were left with assignor. To what end commercially, one would have no idea.

FRENCH CJ: You say you get there under section 199 anyway, do you not?

MR WALKER: Yes, I am going to come back to that in just one moment. Yes, is the short answer. But it is to be recalled that the contractual setting, as I pointed out in-chief, which produced the obligation to execute the assignment included clause 7 of the asset sales agreement found at appeal book pages 407 to 408 – I do not need to go back there – where your Honours will recall the repeated, somewhat tautologous and emphatic way by which all sorts of problems with what was being sold was to be at the risk of the assignee.

They included lack of recoverability of all and any kind. So that these parties executed this deed passing the risk of all of that to the assignee. Is it really to be supposed that if that risk fell in, the assignor, by reason of the words of the deed, could say, “It is me, not you, who can enforce whatever claim for money had and received arises from this defect in the book debt.” In our submission, that need only be raised to be rejected. There would be – to attribute sharp practice, surely, particularly bearing in mind the more perfect assurance provision to which I made reference in-chief.

FRENCH CJ: Is there any relevant difference between the construction to be accorded to clause 2(b) and the construction of section 199(1)(b) in terms of effect?

MR WALKER: No. I have made remarks about that in-chief and it amounts to no.

FRENCH CJ: Okay.

MR WALKER: There are differences. There may be one element added by the argument I have just completed, namely, there is material which must be taken into account in construing 2(b), namely, the asset sales agreement, and clause 7 which has no analogue, obviously enough, in understanding section 199. That is the only possible difference.

FRENCH CJ: Yes.

GUMMOW J: What is the force of “inter alia” in the second line of page 418?

MR WALKER: Your Honour, I do not know. It is easy for me, but with respect, glib for me to say it means that there can be other things. There is not an exhaustive listing, but I regret to say I cannot give you anything of substance or real content. It looks like a draftsman’s caution. I am not saying draftsmen should not be cautious, but it sometimes means one is left floundering for putting content on it.

FRENCH CJ: Anyway, it is not a vehicle for restitutionary relief.

MR WALKER: Your Honour, if it was, I would have argued it.

FRENCH CJ: Indeed, you would.

MR WALKER: And probably even if it was not even arguably so. Your Honours, then briefly in relation to what my learned friend has said about Poulton’s Case, may I simply adopt and urge the way in which we have put the matter in paragraphs 10 to 13 of our written submissions in reply. It is to be recalled, of course, that all of this is against the background of the statute upon which we rely, giving the receiver power to do this, which in our submission governs in any event.

Justice Gummow asked my friend about Trendtex and its reception in Australia. It is most conveniently to be found in the embedded reference at page 782 of the appeal book, volume 2, in the reasons of Justice Dodds-Streeton to which my learned friend made a reference. In her Honour’s paragraph 307, there is the reference to the authority my learned friend told your Honours about, namely TS & B Retail Systems v 3Fold Resources (No 3) [2007] FCA 151; (2007) 158 FCR 444 but, within it, could I draw to attention about line 42 on the page to Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2004] NSWSC 1041; (2004) 188 FLR 278. The fact is yes, there has been reception, if I can call it that way, and we, as your Honours have seen in our written submissions, submit that there is a most evident commercial interest.

GUMMOW J: This is your paragraph 12 in reply.

MR WALKER: Yes, a most evident commercial interest. We, on any view, got the debts. The money had and received is parasitical upon, that is, arises to fill the gap created by the debts imploding under illegality, and it is in that sense that we submit that obviously if Trendtex provides, in its real commercial interest aspect, a part of the law of this country then, of course, it would fit it.

CRENNAN J: Do you want to say anything about Mr Pearce’s submission that even if developments in relation to Trendtex were to continue, you still have the possible obstacle to assignability of the highly personal nature of the - - -

MR WALKER: Yes, I do, and that is, in fact, the last thing I wanted to say in reply subject to anything your Honours may raise with me and it is this. That is no more an obstacle in the way of an assignee suing than the proof of execution of a document or breach of contract or, indeed, formation of contract would be in relation to claims of a kind that do not have that attribute, that is, do not have notions of conscience or equity.

In our submission, it is obviously for the plaintiff, as assignee, to make good the cause of action, whatever it be, with all its attributes in a contract, that the contract was made and that has been breached, a debt, that the money was advanced and not repaid and in this case, simply that the advance and the circumstances show that in justice and equity the defendant holds money for the use of the plaintiff which the defendant should therefore pay.

GUMMOW J: Can you just go back to page 406 for a moment?

MR WALKER: Yes, your Honour.

GUMMOW J: Clause 5.2(a).

MR WALKER: I am so sorry. Did your Honour say 5.2?

GUMMOW J: Clause 5.2(a) at page 406.

MR WALKER: Yes, your Honour.

GUMMOW J: “[P]rovided that, in relation to any component of the Asset”, and then asset is defined by reference to item 1.

MR WALKER: Yes, that is page 413.

GUMMOW J: Which is the investor loans.

MR WALKER: Investor loans more particularly described being loans.

GUMMOW J: “[A]ny component of the Asset”, what does that mean? Any component of the loans?

MR WALKER: Yes.

GUMMOW J: “[W]hich is a . . . right of action, the Vendor’s obligations will extend to the provision of a Bare Assignment”, then that is defined.

MR WALKER: Page 405, line 20.

GUMMOW J: Yes.

MR WALKER: It seems it is bare apparently of representations or warranties.

GUMMOW J: Yes, and then the deed of assignment has recitals.

MR WALKER: Recital B, my learned friend, understandably relies on and I went to in-chief - 417, line 30 of the - - -

GUMMOW J: Yes, but then the operative part talks about “pursuant to 5.2(a)”. A question then is what is meant by “the debts and its interests under the loan contract”?

MR WALKER: Yes, and that is sooner or later one always lands on the words in 2(b). That does not necessarily answer the question that your Honour just raised with me, but you must to go that in order to understand, from the operative parts, what is being conveyed.

GUMMOW J: Yes, thank you.

MR WALKER: May it please the Court.

FRENCH CJ: Yes, thank you, Mr Walker. The Court will reserve its decision. The Court adjourns until 9.30 tomorrow morning in Sydney and 9.30 tomorrow morning in Melbourne.

AT 12.01 PM THE MATTER WAS ADJOURNED