ORDERS

THE COURT ORDERS THAT:

1.    The first applicant's claim be dismissed with costs.

2.    The second applicant's claim be dismissed with costs.

3.    The further amended statement of cross-claim dated 29 September 2017 be dismissed with costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GLEESON J:

INDEX

Introduction

1    This proceeding concerns a vastly over-complicated dispute arising out of the failed Coonawarra Wine-Grape Project (Project or Scheme), an agricultural managed investment scheme established to develop and operate a vineyard on land in the Coonawarra wine-producing region of South Australia. Investors were invited to invest in the Project by two prospectuses, issued in 1999 and 2001 (first prospectus and second prospectus, respectively).

2    On 9 March 2012, after finding that it was "abundantly clear" that the Project would not be profitable, Emmett J directed the then responsible entity (RE) for the Scheme, Huntley Management Limited (Huntley), to wind up the Project: Huntley Management Ltd, in the matter of Huntley Management Ltd as responsible entity for the Coonawarra Winegrape Project [2012] FCA 330. The winding up was completed on 31 December 2014 and the Australian Securities and Investment Commission (ASIC) deregistered the Project on 5 February 2018.

3    The respondents (Rockliffs) lost all of the monies that they invested in the Project. In the case of the first respondent/cross-claimant (Mr Rockliff), this amount is claimed to be $125,967.80.

4    The first applicant/second cross-respondent (Koonara) is a company that was incorporated in June 1998 by Burke Reschke (Mr Reschke), the first cross-respondent, for the purpose of his proposed business of vineyard development and management and sale of wine from those vineyards. Koonara is referred to in the Project prospectuses as the "Vineyard Manager". Koonara's claims in the proceeding are made as assignee of debts allegedly due to Huntley by each of the Rockliffs. The debts were allegedly assigned by Huntley to Koonara by deeds of assignment dated 27 November 2014, shortly prior to the completion of the winding up of the Project.

5    Mr Rockliff was the holder of three "participations" in the Project. The second respondent (Ms Rockliff) is Mr Rockliff's daughter and was the holder of one "participation" in the Project. Both invested in the Project pursuant to the second prospectus.

6    Koonara's principal claim against Mr Rockliff is for a total amount of $62,861.99 plus interest. Its principal claim against Ms Rockliff is for a total of $20,954.00 plus interest.

7    The second applicant/third cross-respondent (RCF) is another company that was incorporated by Mr Reschke in June 1998. RCF was identified as the "Lender" in the Project prospectuses.

8    RCF principally seeks to recover amounts from the Rockliffs pursuant to loan deeds allegedly entered into when they invested in the Project in late June 2001. The amount claimed by RCF against Mr Rockliff is $37,440.00 plus interest. The amount claimed by RCF against Ms Rockliff is $12,480.00 plus interest.

9    The Rockliffs filed an elaborate and convoluted defence to the claims made by Koonara and RCF. In closing addresses, the Rockliffs submitted that it was not possible to make a proper assessment of the claims without understanding the entire conduct and operation of the scheme. I do not accept that submission. In my view, the claims made by Koonara fail simply because they were not proved. The claims made by RCF fail because RCF did not make the loans to the Rockliffs upon which the claims were based.

10    By further amended statement of cross-claim dated 29 September 2017 (cross-claim), Mr Rockliff seeks a multiplicity of relief including on the basis of alleged misrepresentations contained in the second prospectus upon which he relied to invest in the Project and misconduct in the operation of the Scheme. Mr Rockliff also seeks orders to the effect that the Reschke parties repay or provide compensation for all monies paid by Mr Rockliff in connection with the Scheme.

11    Ultimately, Mr Rockliff's cross-claim is based on the following three broad propositions:

(1)    Mr Reschke and his corporate entities were responsible for, and substantially and relevantly controlled the entire setting up, conduct and operation of the Scheme;

(2)    the Scheme was misconducted at all stages; and

(3)    the outcome of the Scheme involved Mr Reschke and his corporate entities taking "unconscientious commercial advantage of investors, receiving benefits they were not entitled to (including the obtaining of purported rights to sue in debt) and causing loss and other detriment to [Mr Rockliff]".

12    The Rockliffs argued that an appreciation of that involvement and control was "critical" to their case because it constituted misconduct by Mr Reschke or his companies, or their involvement in relevant misconduct, and it led to and caused the REs of the Project not to be able to meet their obligations to investors.

13    Although I accept many of the criticisms made by the Rockliffs as to the conduct of the Reschke parties, in the end those criticisms go nowhere. That is because, firstly, the principal claims were not proved by Koonara and RCF and, secondly, I am not persuaded that Mr Rockliff is entitled to any of the relief sought in the cross-claim.

Koonara's claims

14    Koonara's claims against Mr Rockliff are based on the following invoices issued by Huntley:

(1)    Invoice 2011182 dated 7 December 2010 for $6,300;

(2)    Invoice 120317 dated 8 November 2011 for $35,784.18;

(3)    Invoice 140359 dated 10 February 2014 for $3,192.90; and

(4)    Invoice 015177 dated 27 November 2014 for $3,192.90 plus interest on the earlier invoices.

15    Koonara's claims against Ms Rockliff are based on four invoices issued by Huntley on the same dates as the invoices set out above, for lower amounts corresponding to her single participation in the Project.

16    Koonara alleged that the amounts claimed in the invoices were due pursuant to the provisions of the "Constitution for the Coonawarra Winegrape Project" (Project Constitution) and the joint venture agreements (JVAs) which, Koonara alleged and the Rockliffs disputed, were agreed between the Rockliffs, the "Manager", and the "Land Owner" at the time of their initial investment in the Project. The relevant provisions of the Project Constitution and the JVAs are set out in full later in these reasons.

17    Koonara relied on the following terms of the Project Constitution to support the invoices:

(1)    Clause 3, by which the Constitution had effect as a contract between, relevantly, Huntley as "Manager" and the Rockliffs each as a "Member", and the Rockliffs agreed to observe and perform the Constitution insofar as it applied to them.

(2)    Clause 4.2, by which the Rockliffs were obliged to pay the "Manager" certain "Annual Management Fees".

(3)    Clause 4.4, by which the Rockliffs were obliged to pay the "Manager" a "Lease Rent Contribution Fee".

(4)    Clause 4.5, by which the "Manager" was entitled to be paid "Winery Expenses" and a "Winery Fee". As amended in October 2005, cl 4.5 permitted the "Manager" to require the Rockliffs to pay the Winery Expenses annually in advance at the same time and in the same manner as the Annual Management Fees, if there was insufficient "Gross Estate Wine Proceeds" or "Gross Income".

(5)    Clause 4.6, by which the "Manager" was entitled to be paid a "Harvest Fee".

(6)    Clause 4.7, by which the "Manager" was entitled to be paid "any other expenses required to be paid by the Member as provided in this Constitution".

18    Additionally, Koonara relied on the following terms of the JVAs:

(1)    Clause 2.9, by which the Rockliffs each became a member of the Scheme and were bound by the terms of the Project Constitution.

(2)    Clause 5.1, by which the "Manager" was entitled to be paid certain "Annual Management Fees" by the Rockliffs.

(3)    Clause 5.4, by which certain expenses of the Project not to be borne by the "Manager" were to be borne by the Rockliffs "in proportion to their interest in the Joint Venture out of the Gross Income of the Joint Venture".

(4)    Clause 6.1, by which the Rockliffs were required to pay the "Lease Rent Contribution Fee" to the "Manager".

(5)    Clause 9, by which the Rockliffs bore liabilities for goods and services tax or taxes.

19    In addressing Koonara's claims, I proceed upon assumptions (in Koonara's favour) that the Rockliffs were bound by the terms of the Project Constitution and the JVAs, that Huntley was the "Manager" who was entitled to be paid any amounts owing by the Rockliffs pursuant to the Project Constitution and the JVAs, and that any debts owed by the Rockliffs to Huntley pursuant to the invoices were validly assigned to Koonara.

2010 invoices

20    The 2010 invoices are expressed to be for "Various Fees and charges". Although they include the words, "[p]lease refer to the attached sheet listing the fees and charges", no sheet was attached to the invoices that were in evidence.

21    In closing submissions in reply, Koonara sought leave to re-open its evidence to tender a chain of emails, the last of which was sent by John Knox, the managing director of Huntley, to Mr Reschke. The emails were sent between 18 February and 8 March 2011. The final email contained two attachments, including one described as "CWGP Invoicing 2008-2010-P2 debtor sheet.pdf". Other emails in the chain show that Mr Knox had asked Therese Melville to review an attached schedule and say if "these amounts are those that would be invoiced if Burke was to purchase the wine stocks on the original basis of his proposal". Ms Melville appears to have been Huntley's accountant.

22    In response, Ms Melville stated, relevantly, that she had prepared invoices "for P1 $3,179.22 (BR $3,179.18) & P2 $2,100 (BR $2,102.70)". The references to "P1" and "P2" are probably a single participation pursuant to the first and second prospectuses respectively.

23    The second attachment to the email chain is entitled "Coonawarra Wine Grape Project Combined Invoice P2", which sets out a list of 23 items totalling $2,100.00 next to the words "Total Invoice Amount Per Lot - P2". The 23 items include 15 itemised fees and charges and eight deductions. The deductions are expressed to be referrable to particular project years and comprise two refunds and six amounts for sales, variously of stock, bottled wine and bulk wine.

24    Koonara sought to tender the documents to prove the fees and charges that were the subject of the 2010 invoices.

25    I indicated that I would rule on Koonara's application for leave in these reasons.

26    In F.Y.D Investments Pty Ltd v Promptair Pty Ltd [2017] FCA 1097 at [30]-[33], White J set out the relevant principles on an application for leave to re-open as follows:

[30]    The principles upon which the Court acts on applications of the present kind are settled. The overriding principle is the interests of the administration of justice having regard to all the circumstances of the case: Inspector General in Bankruptcy v Bradshaw [2006] FCA 22 at [24], [26]; Brown v Petranker (1991) 22 NSWLR 717 at 728; Urban Transport Authority of NSW v Nweiser (1992) 28 NSWLR 471 at 478; Harrington Smith (on behalf of the Wongatha People) v Western Australia (No 8) [2004] FCA 338, (2004) 207 ALR 483 at [121]; Walsh v Greater Metropolitan Cemeteries Trust (No 2) [2014] FCA 456, (2014) 243 IR 468 at [48].

[31]    In Bradshaw, Kenny J identified at [24] four overlapping classes of cases in which a court may grant leave to reopen: fresh evidence; inadvertent error; mistaken apprehension of the facts; and mistaken apprehension of the law. Although it is not necessary to categorise the present case into any of those classes, the second and fourth seem to be the most apt.

[32]    The matters bearing on the interests of justice in a case like the present are various. They include:

•    the public interest (and the interest of the particular parties) in litigation being conducted efficiently and expeditiously;

•    the public interest in the finality of litigation, with the consequent expectation that litigants will present all their evidence and submissions at the one hearing;

•    the significance of the proposed new evidence and submissions in the context of the trial;

•    the explanation for the evidence not having been led at the trial;

•    the likely prejudice to the opposing party if the application is allowed;

•    the potential detriment to the applying party if the application is refused, and;

•    any delay by an applicant in seeking leave to reopen.

[33]    Regard should be had generally to the overarching purpose stated in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). It is a relevant consideration that evidence was not led, or submissions were not made, at trial because of a tactical decision from which the applying party wishes to resile. It is also relevant that a mistake leading to the matter not having been agitated at trial is attributable to the litigant's legal representatives and not to the litigant personally. However, the circumstance that the evidence was not led, or the submissions were not made, by reason of the negligence of the party or its legal representatives, is not necessarily fatal to an application for reopening being allowed. In LED Builders Pty Ltd v Eagle Homes Pty Ltd [1999] FCA 1141 at [34] Lindgren J said:

Clearly, the fact that a failure to make submissions on a point is, as here, solely attributable to the neglect or default of the party seeking leave will militate against the granting of the application for leave. But it will not necessarily defeat the application in all cases.

27    I will not grant leave to Koonara to re-open to tender the chain of emails and accompanying attachment for the following reasons:

(1)    The significance of the proposed new evidence is uncertain. Although it may provide some explanation of the fees and charges referred to in the 2010 invoices, the email chain post-dates the invoices by some months and refers to invoices yet to be sent. Accordingly, it is not clear that the email chain relates to the 2010 invoices. More importantly, the relationship between the 15 itemised fees and charges and the amounts liable to be paid by the Rockliffs under the Project Constitution and the JVAs is unclear. There is no evidence explaining how the 15 items were calculated or verifying that the 15 items are proper charges under the Project Constitution and the JVAs. Further, there is no supporting documentation for the 15 items.

(2)    No explanation was given for why the evidence had not been adduced earlier including following a claim made by senior counsel for the Rockliffs, Mr Clarke SC, from the bar table that his instructors had previously requested the "attached sheet" referred to in the 2010 invoices.

(3)    If the evidence was admitted, the Rockliffs would be entitled to an opportunity to make inquiries to test the evidence. It would be contrary to the public interest in the efficient and expeditious conduct of litigation to delay the resolution of this matter for further inquiries to be made on the issue of proof of debt, which has been central to Koonara's claim from the time that it was made.

28    If I am wrong in the exercise of my discretion to refuse leave, I note that I would not have been satisfied on the balance of probabilities from that material, taken together with the 2010 invoices, that the amounts claimed were due by the Rockliffs in the absence of evidence verifying the Rockliffs' liabilities to pay the amounts claimed or contemporaneous financial records supporting the existence of the liabilities.

29    Finally, I note that Koonara submitted a schedule containing a statement about the 2010 invoices that "Huntley calculated the Invoices by reconciling prior invoices issued for the years 2007, 2008, 2009, 2010". There was no evidence given by any person to verify that statement. Although the Rockliffs agreed in cross-examination that they had ceased making payments in relation to invoices issued by the previous RE, Koonara did not point to particular amounts that were admitted by the Rockliffs to have been owing and that were included in the 2010 invoices.

30    The evidence is manifestly insufficient to prove that the Rockliffs owed any liability pursuant to the 2010 invoices.

31    Accordingly, Koonara's claim based on those invoices fails.

2011 invoices

32    The 2011 invoices include amounts described as:

(1)    "Annual Vineyard Management Fees" for 2010-2011 and 2011-2012.

(2)    "Lease Payment" for 2010-2011 and 2011-2012.

(3)    Selling Costs for 2008 Vintage.

(4)    Bottling Expenses for 2008 Vintage adjustment.

(5)    Winery Fee (bottle sales) 2011.

(6)    "Sale of Stock – did not proceed as Project not wound up".

33    Again, the amounts claimed by Huntley in the invoices are unverified and are not supported by contemporaneous records.

34    Koonara's submissions acknowledged that, insofar as the claims were for the Manager's remuneration payable pursuant to cl 5.1 of the JVAs and the "Lease Rent Contribution Fee" payable pursuant to cl 6.1 of the JVAs, they could not be explained by simple calculations in accordance with the formulae set out in those clauses. Rather, they simply noted that the differences between the invoiced amounts and the projected figures in the second prospectus were relatively small amounts (in the order of about $300 per participation for the Manager's remuneration and less than $50 per participation for the "Lease Payment" charges).

35    Without more evidence, I am not satisfied on the balance of probabilities that Huntley was entitled to charge the "Annual Vineyard Management Fees" and the "Lease Payment" charges in the amounts claimed.

36    Nor am I satisfied that Huntley was entitled to charge the other amounts included in the invoices. The evidence does not disclose how the amounts were calculated, or satisfy me on the balance of probabilities that Huntley was entitled to charge them under the JVAs.

37    There is, however, a further question: to what extent does the evidence prove that Huntley was entitled to charge a portion of the "Annual Vineyard Management Fees" and the "Lease Payment" amounts pursuant to the entitlements to charge amounts under cl 5.1 and cl 6.1 of the JVAs (together with cl 4.2 and cl 4.4 of the Project Constitution)?

38    As to cl 5.1, the "Annual Management Fees" were required to be paid "[i]n consideration of the Manager carrying out the Management Services". Koonara did not seek to prove that Huntley had provided the necessary consideration for the relevant periods. I infer from the invoices that the relevant periods were 1 July 2010 to 30 June 2011 and 1 July 2011 to 30 June 2012. As to the former period, the evidence as to what services were performed that fall within the meaning of "Management Services" in the JVAs is sparse. However, I note that the Reschke parties sought a finding, which I make, that no wines were produced by the Project in 2011. As to the latter period, Huntley was directed to wind up the Project on 9 March 2012. Without more evidence, I am not satisfied, on the balance of probabilities, that the necessary consideration was provided to support an entitlement on the part of Huntley to receive from the Rockliffs any amount pursuant to cl 5.1 of the JVAs for the periods 1 July 2010 to 30 June 2011 and 1 July 2011 to 30 June 2012.

39    As to cl 6.1, that clause requires payment of the "Lease Rent Contribution Fee", which is defined in cl 1.1 of the JVAs as the "annual amount that the Farmer must pay to the Manager in accordance with clause 6 hereof as the Farmer's contribution to the Lease Rent for that year". The "Lease Rent" is also defined in cl 1.1 to mean the "annual rental payable by the Manager to the Land Owner under the Lease". In turn, "Lease" is defined in cl 1.1 to mean "the lease of the Land entered into between the Land Owner as Lessor and the Custodian as agent for the Manager as Lessee for a period of twenty (20) years commencing on the Commencement Date".

40    As explained below, there was no "Lease" within the meaning of the JVAs, although that is not to say that the Project did not have access to land for its purposes. Thus, there was no "Lease Rent" within the meaning of the JVAs. It follows that cl 6.1 does not provide a basis for the charges described as "Lease Payments" in the 2011 invoices.

41    For these reasons, Koonara's claims based on the 2011 invoices also fail.

2014 invoices

42    The February 2014 invoices are for items described as:

(1)    Responsible Entity Fee 1/7/2010 - 31/12/2013;

(2)    Responsible Entity Expense Recovery; and

(3)    Winery Fee (Bottle Sales).

43    The November 2014 invoices are for items described as:

(1)    Interest payable on outstanding amounts in accordance with the Constitution;

(2)    Annual management fees for the 2012/2013 and 2013/2014 financial years;

(3)    Annual vineyard lease fees for the 2012/2013 and 2013/2014 financial years;

(4)    Winery expenses for 2012 vintage;

(5)    Winery expenses for 2008, 2009 and 2010 vintages – adjustment for undercharged fees; and

(6)    Responsible Entity Expense Recovery.

44    As for the earlier invoices, Koonara did not adduce evidence from Huntley to verify its entitlements to charge the various amounts in the invoices, or other evidence to prove those entitlements, apart from the Project Constitution and the JVAs. As for the 2011 invoices, I am not satisfied, on the balance of probabilities, that any of the amounts charged was a proper charge under the Project Constitution and the JVAs.

45    Accordingly, Koonara's claims based on Huntley's February and November 2014 invoices must fail.

Framework governing the winding up of the Project

46    There is an additional reason why I am not satisfied that Huntley was entitled to the amounts claimed in the 2014 invoices, arising out of the fact that the Project was being wound up when the invoices were issued.

47    Clause 7.7 of the Project Constitution provides that the Scheme must be wound up by the Manager if the Court makes an order directing the Manager to wind up the Scheme. As noted above, an order in those terms was made in March 2012.

48    Clause 7.11 provides:

Subject to clause 7.13, the Law and any orders of any relevant court, as soon as practicable after determination of the scheme, the Manager must on behalf of the Members:

a)    sell, call in and convert into money or cause to be sold, called in and converted into money, that part of the scheme property which does not consist of ready money;

b)    pay thereout all proper costs and disbursements commissions brokerage fees legal fees and other outgoings required of the Manager and all proper provisions for liabilities; and,

c)    pay the balance to each Member in proportion to each Member's interest therein subject to deduction therefrom of any monies required to be paid to the Manager ... that are owed at that date by that Member ... AND PROVIDED ALWAYS that the Manager is entitled to retain its respective costs charges and expenses and such further amount for such reasonable period of time which in its opinion may be required to meet all claims demands and expenses incurred or expected to be incurred by the scheme."

49    The Rockliffs submitted, based on cl 7.11, that the process of winding up the Project involved only the three steps set out in that clause.

50    The Rockliffs noted that cl 7.11(c) provides for the deduction from any final distribution to Members of any amounts owed at that date by the Member. The Rockliffs submitted that amounts owed must be amounts that had become payable to the Manager as at the date of the winding up order. I accept this general proposition, although the fact that they have not been invoiced prior to the date of the winding up order would not prevent an amount from being payable if otherwise payable under the Project Constitution and the JVAs.

51    However, cl 7.11 does not contemplate the making of claims for payments by Members in the course of the winding up. Rather, any outstanding liabilities of Members are to be deducted from the payments to Members in accordance with cl 7.11(c).

52    Clause 9 of the Project Constitution is also relevant. It provides:

9.1    The Manager is hereby indemnified only out of the assets for the time being comprising the Scheme Property against liabilities incurred by it in the proper performance of its duties as the responsible entity.

9.2    The liability of any Member hereunder is limited to the amount unpaid (if any) and payable by him under the Scheme Agreement and to any other amounts he may become liable to pay under the terms of this Constitution.

53    Having regard to cl 9 and cl 11, I accept that the Constitution makes no provision for the rendering of invoices by the Manager to Members once the winding up of the Project has commenced, including in respect of expenses that may be incurred during the winding up or expenses that may otherwise have been referable to the operation of the Scheme.

54    Support for this interpretation of the Project Constitution is found in Young J's description of the nature of a winding up of a trust in Horwath Corporate Pty Ltd v Huie [1999] NSWSC 583; (1999) 32 ACSR 413 at [16] to [18], as follows:

[16]    One must also focus on what a winding up really is. Traditionally it has been described by saying that it is the process of turning the horse around and leading him back to the stable; that is, that the corporation, figured by the horse, makes its way out of the stable, goes about its business, at the moment of winding up the horse turns around and starts moving back towards the stable. Thus the horse is still there, it is the same animal, it has got the same burdens, but it gradually releases its burdens until the moment of dissolution when it gets put back in the stable and dies. Thus winding up or liquidation is a process whereby assets are realised, claims are assessed and the assets cease to be assets of the corporation, the claims are satisfied, as much as they can be, and then the company dies.

[17]    Putting that concept into the realm of trust law is rather difficult. As Grbich and others say in Winding Up Trusts (CCH, Sydney, 1984) at p 28 and following, it is very difficult indeed to release the equitable obligations and fiduciary duties that flow between trustees and beneficiaries, and to a more limited extent in the reverse direction. It is not feasible just to say that a trust comes to an end. One has not only got to deal with the assets and liabilities, one has also got to consider what is to happen to the equitable obligations.

[18]    Thus when looking at the word "termination" in cl 23.1 of the trust deed there is a lot to be said for the proposition that the word merely means that the business of the trust is to terminate. It cannot mean that the equitable obligation of trustee to beneficiaries, or beneficiaries to trustee ceases. In fact the opposite must be the case. The trustee in realising the assets will have expended money. There will be some implied right, at least prima facie, for the money to be reimbursed, which there would not be if the trust as a whole had come to an end.

55    Based on the framework I have set out above, I do not accept that Huntley was entitled to issue invoices to the Rockliffs after the commencement of the winding up of the Project. In respect of amounts owing to it by the Rockliffs as Members, it was entitled only to deduct those amounts in accordance with cl 7.11.

Conclusion

56    Koonara's claims must be dismissed.

Other matters

57    In case I am wrong, I have considered the following defences raised by the Rockliffs.

Defence based on breach of fiduciary duty

58    The Rockliffs contended that Koonara breached a fiduciary duty owed to them by procuring Huntley to issue the invoices the subject of Koonara's claim. Except to the extent that Huntley's invoices charged fees for its expenses, it is fair to say that they were issued at Koonara's request (although not on their instructions).

59    In making those requests and in subsequently obtaining an assignment of Huntley's rights under the invoices, Koonara was undoubtedly acting in its own interests and preferring its interests to those of the Rockliffs, but I do not accept that this involved any breach of fiduciary duty. Koonara's fiduciary duties did not extend to refraining from seeking to exercise rights acquired by assignment. Nor is that conduct fairly characterised as an attempt to profit from Koonara's position at the expense of the Rockliffs.

Rockliffs' claim that they had no obligation to pay fees

60    The proposition was that the Rockliffs had no obligation to pay until the RE was "ready and willing" to perform its obligations, which the Rockliffs say was never the case.

61    The starting point for this argument was that, in the absence of an express provision, a right to withhold performance may arise as a matter of contractual construction or implication. The Rockliffs noted that "[w]here A's obligation to perform is dependent on prior performance by B, A is entitled to withhold its performance until B has performed": Carter JW, Breach of Contract (2nd ed, LexisNexis Butterworths, 2011) at [33-32]. The Rockliffs did not identify any relevant dependency in this case.

62    Next, the Rockliffs referred to Professor Carter's observation (at [29-28]) that:

It might be argued that where A must perform prior to B, but A reasonably doubts the ability of B to perform, A should be permitted both to demand an assurance of performance from B and to suspend its own performance in the meantime.

63    In that passage, Professor Carter continues:

However, the common law does not recognise any general right to demand an assurance or to suspend performance until resolution of an apparent doubt as to a promisor's ability to perform. The most that can be said is that if a promise demands an assurance, the failure of the promisor to provide a satisfactory response may be taken into account when deciding whether the promisor is able to perform.

64    The Rockliff's reference to Professor Carter's text does not advance their case in any respect, whether or not it is read in its proper context.

65    The Rockliffs next identified several obligations imposed upon the "Manager" under the JVAs and observed that the remuneration of the "Manager" was payable by way of "Annual Management Fees" in advance "in consideration of the Manager carrying out the Management Services".

66    The next proposition was that, by at least 2007, after Huntley became the RE, it "admitted that it did not stand ready and willing to perform its obligations as RE and Manager going forward, through the fault of Koonara as the true manager of the Scheme". The label "true manager" is not useful. Based on the evidence set out below, after its appointment as RE, Huntley expended significant effort seeking to discharge its roles as RE and Manager. In December 2007, Huntley had formed the view that Koonara's failures were placing Huntley in default of its own obligations. However, it continued to seek to perform its obligations under the Scheme.

67    I accept that Huntley found itself in a position where it was unable to perform all of its obligations under the Scheme. However, I do not accept that Huntley's inability to perform all of its obligations had the consequence that investors were entitled to withhold performance of their own obligations. The only legal basis apparently identified for that contention is set out above and is no basis at all.

RCF's claims

68    As set out in more detail below, investors in the Project had an option to finance their investment by way of a loan from RCF. RCF's claims are based upon the following allegations:

(1)    The Rockliffs each entered into an agreement with RCF on terms contained in a "loan deed" in a form that appears in the second prospectus (loan deeds), described in more detail below.

(2)    By cl 3.1 and cl 4.1 of the loan deeds which RCF alleged, and the Rockliffs disputed, were entered into between them around the time of the Rockliffs' initial investments, the Rockliffs agreed to repay funds advanced to them by payments of $1,560 per participation per annum each commencing on the fifth anniversary of the "Settlement Date" and thereafter on each anniversary of the Settlement Date until the principal was repaid in full, as well as payments of interest.

(3)    RCF advanced to Mr Rockliff five amounts totalling $46,800 between 30 June 2001 and 30 June 2005, which were paid to the then RE, Australian Hardwood Management Ltd (AHM) in discharge of Mr Rockliff's obligations to AHM.

(4)    Similarly, RCF advanced to Ms Rockliff five amounts totalling $15,600 between 30 June 2001 and 30 June 2005, which were paid to AHM in discharge of Ms Rockliff's obligations to AHM.

(5)    By cl 5.1 of the loan deeds, the whole of the amount outstanding became repayable on the happening of certain events and without the necessity of any notice of demand.

(6)    By cl 7.1 of the loan deeds, the Rockliffs were also liable to pay RCF's expenses and costs of and incidental to enforcement of the loan deeds.

(7)    A certificate complying with cl 7.2 of the loan deeds would be prima facie evidence of the facts stated therein.

(8)    Between 2001 and 2007, the Rockliffs made partial repayments of amounts due and owing to RCF.

(9)    Those payments are admissions of the Rockliffs' liabilities under the loan deeds and confirmation of those liabilities.

(10)    In breach of their respective obligations under the loan deeds, the Rockliffs failed to make payments owing to RCF and, consequently, the whole of the remaining amounts owing became immediately due and payable.

Efficacy of loan deeds

69    By their defence, the Rockliffs admitted only that the loan deeds were "purported to be entered into" between them, RCF and Mr Reschke.

70    The loan deeds relied upon by RCF were in evidence. Both are dated 30 June 2001 and are signed "for and on behalf of" each of the Rockliffs by Alan Jessup as the borrower's attorney under an undated power of attorney.

71    Mr Jessup was a solicitor who was also a director of AHM as at 30 June 2001.

72    Participation application forms signed by the Rockliffs in connection with the Project contained the following words:

D.    Power of Attorney

This section of the form comprises a Power of Attorney made on the day specified at the end of the form, by the person or company that executes the Application Form.

Who and how you appoint

1.    You hereby appoint Australian Hardwood Management Limited ACN 079 695 051 and each of its directors, company secretary and such other person as that company may nominate separately as your attorneys. Specifically and only for the purposes of executing the Management Agreement with the annexed Licence Agreement and where applicable, the Loan Deed on your behalf.

2.    You agree to formally approve what the attorney does under this Power of Attorney. You agree and declare that this Power of Attorney is given for valuable consideration and agree that you may not revoke the appointment. The powers you give under the Power of Attorney.

3.    Your attorney may, in your name:

a]    do everything required to sign, seal and deliver the Coonawarra Winegrape Project Joint Venture Agreement and the Loan Deed, if a loan has been applied for under the Application Form.

b]    do anything that you can do as a participant in the Coonawarra Winegrape Project or anything that you can do or are obliged to do in relation to the transactions contemplated by the Coonawarra Winegrape Project Joint Venture. Agreement and the Loan Deed, if a loan has been applied for under the Application Form;

c]    stamp and register this Power of Attorney and any of those documents if necessary.

73    The Rockliffs contended that, as the forms were signed in Sydney, the powers of attorney were governed by New South Wales law. The Reschke parties did not dispute this, or that the relevant law was the common law and any applicable provisions in the Conveyancing Act 1919 (NSW).

74    At the time that the Rockliffs signed the participation application forms, s 163(2) of the Conveyancing Act provided that, where an instrument is executed creating a power of attorney, any deed (not being a lease or agreement for a lease for a term not exceeding three years) executed by the attorney under the power in pursuance of the power was not of any force or validity whatsoever unless the instrument creating the power had been registered. RCF did not dispute that the loan deed was a deed. Section 163(2) was subject to a proviso that relevantly, on registration of the instrument creating the power, every deed executed by the attorney under the power shall take effect as if the instrument creating the power had been registered before the execution of the deed.

75    There was no evidence that the powers of attorney in the Rockliffs' participation application forms were ever registered.

76    The Reschke parties' submissions concerning the efficacy of the powers of attorney were as follows:

(1)    Mr Rockliff acknowledged that he understood that he had appointed certain people as his attorneys when he signed the participation application form and he was familiar with how powers of attorney operated and that it was not "controversial" to him;

(2)    Mr Rockliff acknowledged various other facts concerning his appointment of attorneys, including that the power was given for valuable consideration and was not revoked, and that anything done in exercising the power would be binding on him; and

(3)    accordingly, the claim that the power of attorney had no relevant effect could not be seriously advanced.

77    These submissions do not engage with the effect of s 163(2). Based on that provision, I accept that the loan deeds purportedly executed by Mr Jessup on behalf of the Rockliffs were of no force or validity whatsoever.

78    It follows that RCF is not entitled to relief against the Rockliffs pursuant to the loan deeds and its claims made pursuant to the loan deeds must fail.

79    The Rockliffs also contended that in the absence of evidence that AHM separately nominated Mr Jessup as the attorney of each of the Rockliffs, the Court should not be satisfied that Mr Jessup's execution of the loan deed was a valid exercise of the power of attorney. This submission involves a misinterpretation of the form of the power of attorney set out above. The form has the effect of appointing each of AHM's directors (including Mr Jessup) as an attorney of the Rockliffs and "such other person as [AHM] may nominate separately".

Alleged advances

80    In their opening written submissions, the Reschke parties stated that RCF made the relevant advances to the Rockliffs by promissory notes issued by it to AHM and endorsed by AHM to Koonara.

81    Mr Reschke acknowledged that, on or before 30 June of each of 2001-2005 (and 2000), he arranged for RCF to draw, execute and deliver to Fergus McLachlan, one of the original directors of AHM, on behalf of AHM, promissory notes for the total amounts lent by RCF to borrower-investors in each of the first five years of the Project under both the first and second prospectuses. The notes contained provisions for subsequent endorsements by AHM to Koonara and by Koonara to RCF.

82    In Rocky Castle Finance Pty Ltd v Taylor [2014] SASCFC 1; (2014) 118 SASR 349 (Taylor), the Full Court of the Supreme Court held that the issue of and dealings with promissory notes in connection with the Project did not comprise advances or payments within the meaning of loan deeds in the same terms as the loan deeds in this case. As explained below, the Reschke parties contended that the "factual landscape" presented to this Court is materially different from the facts in Taylor. However, on its face, the reasoning in Taylor applies to the effect of the promissory notes relied upon by RCF to make its claims against the Rockliffs.

83    Taylor concerned claims by RCF against two investors pursuant to the first prospectus. RCF relied on different promissory notes but the transaction relied upon by RCF was similar in nature to the transactions upon which it now seeks to rely. That is, the relevant transaction (as identified by Blue J (Stanley J agreeing) at [79]) was the delivery of a promissory note by RCF to AHM and the acceptance of the note by AHM as evidenced by its endorsement in favour of Koonara. As Blue J recorded at [79], RCF contended that, by this transaction, advances and payments within the meaning of cl 2.1 of the relevant loan deeds were effected.

84    In their closing submissions, the Reschke parties contended that, through the use of the promissory notes, debts were created and satisfied including the Rockliffs' liabilities to AHM for management fees. The latter submission corresponds with RCF's argument in Taylor, referred to by Blue J at [82], that "the discharge pro tanto by AHM, procured by Rocky Castle, of the obligations of Mr Taylor and Mr Gillen to pay Participation Fees was sufficient by itself to establish the defendants' liability under the Loan Deeds and that 'payment' may extend to any form of discharge of a pecuniary obligation".

85    At [19] and [20], Vanstone J concluded that RCF did not make any payment to AHM but only made a promise to pay, which was not performed. At [15], her Honour observed:

It is true that the Loan Deed did not specify in what form the advance was to be made; but neither did it purport to redefine the words advance or payment in such a way as to rob the words of their usual meaning. The Loan Deed required no less than a payment. While Hardwood's acknowledgment that the obligation had been met might affect legal relations between Hardwood and the investors, it could not affect the question whether or not an advance of the balance of the management fee had been made, which is a question of fact.

86    At [135], Blue J concluded that there was no "advance" or "payment" within the meaning of cl 2.1 of the loan deed, construed in accordance with the relevant participation application forms and the Project Constitution. At [115], his Honour accepted that the Constitution required that all "Participation Fees" and "Lease Fees" received from Participants be paid into the Scheme Bank Account, whether paid directly by a Participant to AHM or paid on behalf of a Participant by a lender. At [117] and [118], Blue J referred to terms of the first prospectus, which his Honour concluded:

… explicitly contemplate that AHM will utilise the funds received by way of Participation Fees to pay the viticulture, establishment and maintenance expenses and lease rent. They contemplate that the Participants have an interest in AHM having adequate funds to meet those expenses and completing the tasks required of it. The Other Undertakings section discloses that AHM was the manager of two other managed investment schemes. The Participants had an interest in AHM keeping its activities and funds for their Joint Venture separate from its other activities.

87    The second prospectus, pursuant to which the Rockliffs invested in the Project, contained most of the terms identified by Blue J, although it did not contain a similar breakdown of the expenses of the RE that referred explicitly to expenditure on "viticulture, establishment and maintenance expenses and lease rent".

88    Blue J concluded:

(1)    "The delivery and acceptance of each Promissory Note was not in accordance with, and was contrary to, the mandate by the Borrowers to Rocky Castle contained in clause 2.1 of the Loan Deed and section B clause 2 of the Application Form. It did not comprise a "payment" within the meaning of clause 2.1(a)-(e) or form part of an "advance" within the meaning of clause 2.1 of the Loan Deed" (at [119]).

(2)    It followed "that the indebtedness of Mr Taylor and Mr Gillen to AHM was not affected by the making or the indorsement of the Promissory Notes. As the transaction involving each Promissory Note was outside the mandate conferred by Mr Taylor and Mr Gillen on Rocky Castle, their indebtedness to the Manager remained the same as it had been before the transactions" (at [121]).

(3)    As a matter of construction of cll 4.2, 4.3, and 4.4 of the Project Constitution and cll 5.1, 6.1, and 7.1 of the JVAs, participants were not entitled to effect "payment" by the delivery of a promissory note to the Manager (at [124]).

(4)    "Given the wording, context and apparent purpose of clause 2.1 of the Loan Deeds and the overall context of the Joint Venture, the references to "advance" and "payment" are to payments capable of being banked into a bank account of the Manager. A promissory note does not qualify" (at [127]).

89    The Reschke parties' argument that RCF advanced funds to the Rockliffs relied on the following matters of fact:

(1)    RCF's balance sheet as at 30 June 2001 included a current asset described as "Loan –Various External Investors" in an amount of $1,437,000. This asset, in different amounts, appears in later balance sheets, as at 30 June 2003, 30 June 2004 and 30 June 2005.

(2)    AHM issued invoices to the borrowers recording receipt of the full amount of the management fees and showing that part of the required fees had been paid by RCF by way of advance or loans.

(3)    As between RCF and AHM, it was agreed and acknowledged that the delivery of the promissory note by RCF to AHM would be accepted as part payment of the management fees of the borrowers on the understanding that Koonara would accept AHM's subsequent endorsement of the note.

90    RCF's balance sheets record that RCF had made loans to investors and the "Various External Investors" probably include the Rockliffs. The balance sheets are prima facie evidence of the matters they record: s 1305 of the Corporations Act 2001 (Cth) (Corporations Act).

91    AHM's invoices record amounts paid on account of fees due by the Rockliffs pursuant to the Project Constitution and the JVAs. They also record amounts "financed" in reduction of the fees due.

92    Based on Mr Reschke's evidence, I also accept that, as between RCF and AHM, it was agreed and acknowledged that the delivery of the promissory note by RCF to AHM would be accepted as part payment of the management fees of the borrowers on the understanding that Koonara would accept AHM's subsequent endorsement of the note.

93    In oral evidence, Mr Reschke maintained that RCF had funds available to it in the ANZ account to support its promissory notes issued in June 2001. He said that, to ensure the amounts on the notes fitted within RCF's capacity, he cancelled a promissory note in the sum of $912,000 and replaced it with the two notes for $456,000 each.

94    However, the only relevant bank statements in evidence were for a fully drawn advance account with a debit balance of $3,391,286 as at 29 June 2001 and a cheque account with a balance of $255.19 as at 29 June 2001. In the face of those bank statements, I do not accept that RCF had the requisite funds available to it at that time in the ANZ account or at all.

95    Concerning the financial position of RCF as at 30 June 2001, the parties agreed that RCF had fully drawn its advance facility of $3.33 million from ANZ and had on-lent funds to Koonara of approximately $969,000 and had loaned Reschke Vineyards Pty Ltd (Reschke Vineyards) (another company associated with Mr Rescke) over $400,000 and Mr Reschke himself over $440,000. The balance sheet referred to by RCF shows that the Rocky Castle Finance Trust had net assets of $10.00.

96    The significance for the Reschke parties' case of RCF's asserted capacity to support its promissory notes was not immediately obvious. It may have related to advice given by Mr Jessup in July 2000 referred to at [318] below. In any event, on the facts set out above and in the absence of any other identified source of funds, I do not accept that RCF had the financial capacity to honour the promissory notes by which it purported to advance funds to the Rockliffs in June 2001.

97    The Reschke parties argued that, on the proper interpretation of the loan deeds, the words "payment" and "advance" permitted the Rockliffs' liabilities to AHM to be satisfied by the mode adopted. That submission is contrary to the conclusion of the Full Court in Taylor. The relevant provision of the loan deeds is cl 2, which provides:

2.    LOAN

2.1    The Lender hereby agrees to advance the Principal to the Borrower or as he may direct, and the borrower hereby authorises and directs the Lender to so advance the Principal as follows:

(o)    no later than the Settlement Date to the Manager the sum of $8,000.00 per Participation in part payment of the first year's Annual Management Fee payable by the Borrower as a Farmer under the terms of the Joint Venture Agreement;

(p)    provided that the Borrower is not in default under this Loan Deed, no later than the first anniversary of the Settlement Date to the Manager the sum of $2,500.00 per Participation in part payment of the second year's Annual Management Fee payment by the Borrower as a Farmer under the terms of the Joint Venture Agreement;

(q)    provided that the Borrower is not in default under this Loan Deed, no later than the second anniversary of the Settlement Date to the Manager the sum of $2,500.00 per Participation in part payment of the third year's Annual Management Fee payment by the Borrower as a Farmer under the terms of the Joint Venture Agreement;

(r)    provided that the Borrower is not in default under this Loan Deed, no later than the third anniversary of the Settlement Date to the Manager the sum of $1,500.00 per Participation in part payment of the third year's Annual Management Fee payment by the Borrower as a Farmer under the terms of the Joint Venture Agreement; and

(s)    provided that the Borrower is not in default under this Loan Deed, no later than the fourth anniversary of the Settlement Date to the Manager the sum of $1,100.00 per Participation in part payment of the fourth year's Annual Management Fee payment by the Borrower as a Farmer under the terms of the Joint Venture Agreement.

98    For the same reasons given by their Honours in Taylor, set out above, I do not accept that RCF advanced funds to the Rockcliffs by means of the promissory note transactions.

99    In particular, I do not accept the Reschke parties' contention that the meaning and purpose of the loan deeds was that, if the creditor AHM accepted that the borrower's debt to AHM was discharged by the financial transaction with RCF, there was a "payment" to AHM sufficient to achieve satisfaction of RCF's loan deed obligation to make an "advance" to that extent.

100    The premise of the argument is that the promissory notes transactions had the effect of satisfying Rockliffs' liabilities to AHM for management fees, as evidenced by AHM's invoices. However, as Vanstone J observed in Taylor at [15], while AHM's acknowledgements that the investors' obligations had been met might affect the relationship between the Rockliffs and AHM, they do not prove that an "advance" or a "payment" was made.

101    As part of their argument, the Reschke parties submitted that each borrower directed RCF "to apply the proceeds of the loan to be advanced" to AHM towards payment of the total liability of each investor for management fees payable to AHM. The relevant direction is contained in the participation application form and is the same language that Blue J found gave rise to the mandate by the borrowers to RCF. It is a direction "to apply the proceeds of the loan to be advanced to you to payment of the Management Fees for each such Participation".

102    Thus, it is not a direction to pay a "liability", but rather a direction to pay "Management Fees". The direction reveals that the purpose of the loan deeds was to enable payment of fees for participation in the Project.

103    Accordingly, even if the Rockliffs' liabilities to AHM were satisfied by the promissory note transactions, those transactions did not involve any advance of monies by RCF to the Rockcliffs in the absence of any payment which, as Blue J put it, was capable of being banked into a bank account held by AHM.

104    Thus, I find that RCF did not advance funds to the Rockliffs in about June 2001 pursuant to the relevant loan deeds. Further, RCF did not provide funds to AHM in about June 2001 pursuant to the loan deeds for the purposes of the Project.

105    In the light of these findings, it is not necessary to make findings concerning the authenticity of various promissory notes relied upon by RCF or whether they were created on the dates they bear. It is also unnecessary to make detailed findings about the "round robin" transactions involving promissory notes, which took place around 30 June 2002, 30 June 2003, 30 June 2004 and 30 June 2005, except to find that they are not relevantly different to the 30 June 2001 "round robin" transaction. Consequently, I find that RCF did not advance funds to the Rockliffs by any of these transactions.

106    Finally, I do not accept that the Rockliffs' payments to RCF between 2001 and 2007 are admissions of the Rockliffs' liabilities under the loan deeds in the absence of evidence that they were aware that RCF had purported to advance funds to them by way of the promissory note transactions, and not by way of actual funds paid to AHM. Similarly, I do not accept that the Rockliffs' payments can give rise to an estoppel in RCF's favour concerning the effect of the promissory note transactions or that the Rockliffs were unjustly enriched by the promissory note transactions in which RCF chose to participate.

Conclusion

107    RCF's claims fail because the loan deeds are unenforceable or, alternatively, because it did not make the pleaded advances to the Rockliffs.

108    RCF's claims must be dismissed. Costs should follow the event.

Mr Rockliff's cross claim

109    Before entering into the detail of the cross-claim, it is appropriate to consider what Mr Rockliff seeks to achieve by the cross-claim. As ultimately formulated, the principal relief sought was recorded in a seven page proposed short minute of orders. The short minute contains 43 separate orders, although they are not numbered consecutively. The proposed orders are organised under the following headings and sub-headings:

(1)    Misleading and deceptive conduct:

(a)    Section 12DA of the Australian Securities and Investments Commission Act 1989 (Cth) (ASIC Act 1989) and s 995 Corporations Act 1989 (Cth) (Corporations Law).

(b)    Section 12DB ASIC Act 1989.

(c)    Section 12DC ASIC Act 1989.

(d)    Section 12DF ASIC Act 1989.

(e)    Section 999 Corporations Law.

(2)    Unconscionable conduct in respect of the second prospectus: ss 12CA and 12CB ASIC Act 1989.

(3)    Unconscionable conduct in operation of the Scheme: s 12CA Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act 2001).

(4)    Unconscionable conduct in operation of the Scheme: equity.

(5)    JVA not to be enforced.

(6)    Loan Deed not to be enforced.

(7)    Involvement in breaches by RE.

(8)    Breach of fiduciary duty.

110    On examining the precise relief sought, it is apparent that some claims fall away as a result of the failure of the claims made by Koonara and RCF. These claims are:

(1)    Ten proposed orders expressed to be sought "to the extent that" amounts are claimed or continued to be claimed against Mr Rockliff by the Reschke parties (proposed orders 4, 4A, 4B, 5, 5A, 8, 8A, 9, 13 and 14). The closing submissions did not identify the relevant amounts or explain the basis upon which orders to this effect might be made. There was no evidence of any amount claimed by Mr Reschke against Mr Rockliff. Nor was there evidence of claims by Koonara and RCF against Mr Rockliff apart from the claims that have failed in this proceeding. Assuming that the orders sought were intended to operate against the failed claims made by Koonara and RCF, there is no basis for the proposed orders. I note that proposed orders 4A, 4B and, implicitly, proposed orders 4 and 14, are predicated on the misconception that the Reschke parties might seek to enforce the JVA to which Mr Rockliff is a party. None of the Reschke parties were a party to the JVA with any right to enforce the JVA.

(2)    Three proposed orders that concern the debts claimed by Koonara (proposed orders 17, 18 and 19). Proposed order 17 seeks a complicated form of declaration directed to Koonara's alleged instructions to charge fees to investors and the 2014 deed of assignment from Huntley. Since I have dismissed Koonara's claims, it is unnecessary to address the proposed relief in any detail. There is also no outstanding issue concerning the enforceability of the November 2014 invoice rendered to Mr Rockliff (proposed order 18) or whether the deed of assignment between Huntley and Koonara was "voidable and unenforceable and should be set aside" (proposed order 19).

Claims for declaratory relief

111    Mr Rockliff seeks 17 declarations that various of the Reschke parties contravened various laws or were involved in contraventions of various laws.

112    As appears below, with one exception, I have not found any relevant contravention.

113    However, in any event, I do not consider that this is an appropriate case for the exercise of the power to make a declaration in relation to the conduct of a party in contravention of the law.

114    Such orders may be made to mark disapproval of a party's conduct: Australian Competition and Consumer Commission v Chen [2003] FCA 897; (2003) 132 FCR 309 at [35] and [36], and are frequently made in cases brought in the public interest by a regulator. It is necessary to consider whether the party seeking the declaration has a real interest in obtaining that relief and that sufficient consequences flow from the making of the declaration so that it is appropriate for the Court to exercise its discretion: Forster v Jododex Australia Pty Ltd [1972] HCA 61; (1972) 127 CLR 421 at 437.

115    In Warramunda Village Inc v Pryde [2001] FCA 61; (2001) 105 FCR 437 at [8], the Full Court said:

The remedy of a declaration of right is ordinarily granted as final relief in a proceeding. It is intended to state the rights of the parties with respect to a particular matter with precision, and in a binding way. The remedy of a declaration is not an appropriate way of recording in a summary form, conclusions reached by the Court in reasons for judgment. This is even more strongly the case when the conclusion is not one from which any right or liability necessarily flows.

116    Mr Rockliff submitted that it was appropriate in the circumstances of this case to make a declaration to mark disapproval of the contravening conduct. I am not satisfied that Mr Rockliff has any real interest in obtaining such relief or that there is any utility in making a declaration to record a contravention in the circumstances of this case, which is essentially a commercial dispute between private litigants. Further, Mr Rockliff did not identify any significant public interest in making such a declaration: cf. Tobacco Institute of Australia v Australian Federation of Consumer Organisations Inc (No 2) [1993] FCA 105; (1993) 41 FCR 89 at 94 (Sheppard J), 106 (Foster J) and 107 (Hill J).

Claims for monetary relief

117    Although the cross-claim refers to a claim for loss "by not obtaining the income and benefits which should have been received from participation in the Project", ultimately Mr Rockliff essentially sought to be put in the same monetary position as if he had never invested in the Project.

118    Proposed order 21 of the short minutes is an order for payment of damages in the sum of $125,967.80, comprising seven amounts paid by Mr Rockliff between 26 June 2001 and 30 June 2008, and any further amount Mr Rockliff is required to pay as a result of or arising from an undertaking given to lodge amended personal income tax returns. As particularised in the cross-claim, the total of $125,967.80 comprises:

(1)    $35,130.00 paid to Australian Rural Group Limited (ARG), which had been appointed as the "Custodian" for the Project, on or about 26 June 2001;

(2)    $12,697.20 to ARG on or about 28 June 2002;

(3)    $13,365.30 to AHM on or about 29 June 2003;

(4)    $14,948.39 to AHM on or about 30 June 2004;

(5)    $11,899.56 to AHM on or about 29 June 2005;

(6)    $14,555.31 to AHM on or about 1 June 2006;

(7)    $13,754.76 to Huntley on or about 30 June 2007;

(8)    $7,862.40 to RCF on or about 30 June 2007; and

(9)    $1,754.88 to Huntley on or about 30 June 2008.

119    These payments were not admitted in the defence to the cross-claim and were not agreed in the parties' agreed narrative of facts. Despite its length, Mr Rockliff's affidavit proves the payment of only the first amount in terms. As for the others, he merely says: "I subsequently paid monies from time to time to AHM following receipt of invoices relating to the Project from AHM and subsequently to Huntley …".

120    Specifically, Mr Rockliff did not give evidence of his asserted payment of $7,862.60 to RCF.

121    In accordance with Mr Rockliff's affidavit evidence, the parties agreed only that Mr Rockliff paid monies from time to time to AHM and then to Huntley following receipt of invoices of the Project.

122    The evidence included several invoices issued to Ms Rockliff (including an invoice from RCF), but not the invoices allegedly paid by Mr Rockliff.

123    Without more evidence, I am not satisfied that Mr Rockliff made payments in the amounts asserted except for the payment of $35,130.00 in June 2001.

124    In oral closing submissions, Mr Clarke SC clarified that the amount claimed by way of equitable compensation (proposed order 20 in the short minutes) corresponds to the damages claim in proposed order 21.

125    The amounts sought by way of repayment, refund or return in proposed orders 6, 6A, 10 and 15 and the amounts sought by way of compensation in proposed orders 7, 7A, 11 and 16 are also amounts included in the total claim of $125,967.80. The orders refer to various different legal bases for the making of the orders, namely, ss 12GM(1), (2) and (7) and s 12GF of the ASIC Act 2001, equity and ss 1325(1), (2) and (5) of the Corporations Act.

Relief sought pursuant to s 12GM of ASIC Act 2001

126    Section 12GM provides relevantly:

(1)    Without limiting the generality of section 12GD, if, in a proceeding instituted under, or for an offence against, this Division, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in in contravention of a provision of this Division, the Court may, whether or not it grants an injunction under section 12GD or makes an order under section 12GF, 12GLA or 12GLB, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (7) of this section) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage.

(2)    Without limiting the generality of section 12GD or 12GNB, the Court may, on the application of:

(a)    a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in in contravention of a provision of this Division; …

(b)    make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (7)) if the Court considers that the order or orders concerned will:

(c)    compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage; or

…

(7)    Without limiting the generality of subsections (1) and (2), the orders referred to in those subsections include the following:

…

(d)    an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage;

(e)    an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage;

…

127    The power conferred by s 12GM(1) is engaged where the following pre-conditions are satisfied:

(1)    There is a proceeding instituted under or for an offence against Div 2 of Pt 2 of the ASIC Act 2001;

(2)    The court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage by conduct of another person; and

(3)    The relevant conduct was engaged in in contravention of a provision of Div 2 of Pt 2 of the ASIC Act 2001.

128    In this case, the cross-claim satisfies the first requirement because it includes a claim for damages under s 12GF: cf. New Cap Reinsurance Corporation v Daya [2008] NSWSC 64; (2008) 66 ACSR 95 at [38].

129    The power conferred by s 12GM(2) is engaged where the following pre-conditions are satisfied:

(1)    There is an application by a person who has suffered loss or damage by conduct of another person that was engaged in in contravention of a provision of this Division; and

(2)    The court considers that an order will compensate the person who made the application in whole or in part for the loss or damage.

130    Division 2, entitled "Unconscionable conduct and consumer protection in relation to financial services" includes, relevantly, ss 12CA, 12CB, 12DA, 12DB, 12DC and 12DF of the ASIC Act 2001.

Claims for repayment, refund or return of monies

131    The relief sought by Mr Rockliff includes orders, expressed to be pursuant to s 12GM(1) or s 12GM(7) of the ASIC Act 2001, that:

(1)    Koonara and Mr Reschke repay, refund or return all moneys paid by Mr Rockliff under the JVA (proposed order 6); and

(2)    RCF and Mr Rescke repay, refund or return all moneys paid by Mr Rockliff under the purported loan deed between RCF and Mr Rockliff (proposed order 10).

132    These proposed orders broadly reflect the terms of s 12GM(7)(d).

133    However, Mr Rockliff did not pay any sums to Koonara or Mr Reschke pursuant to the JVA and there is no evidence that money paid by Mr Rockliff pursuant to the JVA was transferred to Koonara or Mr Reschke. Any monies payable by Mr Rockliff pursuant to the JVA were payable to AHM or Huntley. On his own case, Mr Rockliff did not pay any amount to either Koonara or Mr Reschke.

134    Nor did Mr Rockliff pay any amount to Mr Reschke pursuant to the loan deed.

135    Finally, there is no evidence that Mr Rockliff made the alleged payment of $7,862.40 to RCF.

136    It follows that there is no basis upon which any of the Reschke parties can be ordered to "repay, refund or return" monies paid by Mr Rockliff.

137    By parity of reasoning, there can be no basis for making such an order by reference to equitable principles (proposed order 6A) or pursuant to s 1325 of the Corporations Act (proposed order 15).

Claims for compensation

138    The relief sought by Mr Rockliff includes orders, expressed to be pursuant to s 12GM(1) or s 12GM(2) of the ASIC Act 2001, that:

(1)    Koonara and Mr Reschke compensate Mr Rockliff for all loss and damage suffered by him "by reason of participating as an investor in the Scheme" (proposed order 7).

(2)    RCF and Mr Reschke compensate Mr Rockliff for all loss and damage suffered by him "by reason of participating as an investor in the Scheme" (proposed order 11).

139    In order to grant relief under either s 12GM(1) or s 12GM(2), the Court must first find that Mr Rockliff has suffered loss or damage by conduct of another person that was engaged in in contravention of a provision of Div 2 of the ASIC Act 2001.

140    Mr Rockliff alleged contraventions of the following provisions:

(1)    sections 12DA, 12DB, 12DC, 12DF, 12CA and 12CB of the ASIC Act 1989; and

(2)    section 12CA of the ASIC Act 2001.

141    For the reasons set out below, there was no relevant contravention and the claims for compensation pursuant to s 12GM(1) or s 12GM(2) fail.

Relief sought pursuant to s 1325 of the Corporations Act

142    Section 1325 provides relevantly:

(1)    Where, in a proceeding instituted under, or for a contravention of … Chapter 5C … or Part 7.10, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage because of conduct of another person that was engaged in in contravention of … Chapter 5C … or Part 7.10, the Court may, whether or not it grants an injunction, or makes an order, under any other provision of this Act, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5)) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage.

(2)    The Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage because of conduct of another person that was engaged in in contravention of … Chapter 5C … make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5)) if the Court considers that the order or orders concerned will compensate the person who made the application … in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person.

143    The power conferred by s 1325(1) is engaged where the following pre-conditions are satisfied:

(1)    the proceeding is instituted under or for a contravention of Ch 5C or Pt 7.10;

(2)    the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, loss or damage because of conduct of another person; and

(3)    the relevant conduct was engaged in in contravention of Ch 5C or Pt 7.10.

144    The cross-claim satisfies the requirement that it be a proceeding instituted for a contravention of Ch 5C because it includes claims that Koonara was involved in contraventions of s 601FC(1) by AHM as RE. Section 601FC(5) provides that any person who is involved in an RE's contravention of s 601FC(1) contravenes s 601FC(5).

145    The power conferred by s 1325(2) is engaged where the following pre-conditions are satisfied:

(1)    there is an application by a person who has suffered loss or damage because of conduct of another person that was engaged in in contravention of Ch 5C; and

(2)    the court considers that an order will compensate the person who made the application in whole or in part for the loss or damage.

146    As explained above, Mr Rockliff has made an application based on an allegation that he has suffered loss or damage because of conduct of persons that was engaged in in contravention of Ch 5C.

Claim for repayment, refund or return of money

147    Mr Rockliff seeks an order that Koonara and Mr Reschke repay, refund or return all moneys paid by Mr Rockliff under the JVA "after the contraventions referred to in the preceding order" pursuant to s 1325(1) or s 1325(5) (proposed order 15).

148    As explained above, I do not accept that there is any basis for an order to this effect where there is no evidence that Mr Rockliff paid any amount to Koonara or Mr Reschke pursuant to the JVA and there is no evidence that money paid by Mr Rockliff under the JVA was transferred to Koonara or Mr Reschke.

Claim for compensation

149    Mr Rockliff seeks an order that Koonara and Mr Reschke compensate Mr Rockliff for all loss and damage suffered by him "after the contraventions referred to in the preceding order, by reason of participating as an investor in the Scheme" pursuant to s 1325(1) or s 1325(2) (proposed order 16). I understand the relevant contraventions to be the alleged contraventions of s 601FC(1), in which Koonara and Mr Reschke were allegedly involved.

150    For the reasons set out below, Mr Rockliff did not demonstrate an entitlement to the relief claimed.

Claim based on contravention of s 995 of the Corporations Law

151    As appears below, I have found that Koonara contravened s 995 of the Corporations Law.

152    The seven page short minute of orders does not set out a claim for relief expressly based on this alleged contravention except for a declaration of contravention of s 995 by Koonara and RCF.

153    There is a single reference to s 1041H of the Rockliff parties' closing submissions, which reflects an intention to claim damages for contravention of this provision on the basis that it was "carried over": see s 1400 of the Corporations Act. Assuming in Mr Rockliff's favour that any liability under s 995 was indeed carried over, that it is not statute barred and that it may give rise to an entitlement to relief under s 1325, as explained below, I am not persuaded that Mr Rockliff suffered any loss or damage "because of" Koonara's conduct in contravention of s 995. As also explained below, I do not find that RCF contravened s 995 or was involved in Koonara's contravention of s 995.

Equitable compensation

154    I have found below that none of the Reschke parties engaged in unconscionable conduct under the general law. Consequently, Mr Rockliff's claim in equity against Koonara and Mr Reschke in respect of loss and damage suffered by reason of his participation as an investor in the Scheme (proposed order 7A) must fail.

155    Mr Rockliff made a general claim for equitable compensation (proposed order 20), which was said to seek recovery of the amounts paid by him pursuant to the Scheme. In the absence of any identified basis for equitable compensation apart from unconscionable conduct, this claim must fail. In particular, Mr Rockliff did not seek equitable compensation for breach of a fiduciary duty by the misuse of or failure to protect scheme property.

Damages

156    Mr Rockliff claimed damages under s 12GF of the ASIC Act 2001, s 1005 of the Corporations Act and at common law in the amounts that he paid pursuant to the Scheme and any further amount that he is required to pay as a result of or arising from his undertaking to lodge amended personal tax returns (contained in the cross-claim) (proposed order 21).

157    Section 12GF operates upon a finding of conduct in contravention of a provision of Subdiv C or Subdiv D of Pt 2 Div 2 of the ASIC Act 2001. In the absence of such a finding, Mr Rockliff has no basis for relief pursuant to s 12GF.

158    The reference to s 1005 of the Corporations Act was not explained. It suffices to say that Mr Rockliff has not demonstrated an entitlement to damages under statute or at common law.

Conclusion

159    It follows that Mr Rockliff's cross-claim fails and must be dismissed. Costs should follow the event.

Introduction to findings and detailed analysis of cross-claim

160    The findings set out below provide the basis for my conclusion that Mr Rockliff's cross-claim must fail. The findings also set the terms of the documents that governed the Project and which Koonara and RCF relied upon in support of their debt claims.

161    Of particular significance, I have found that the second prospectus, upon which the Rockliffs relied to make their investments in the Project, was misleading or deceptive in the following two respects:

(1)    it represented that no director of Coonawarra Property Holdings Ltd (CPH) had an interest in any property proposed to be acquired for the purposes of CPH in connection with its formation or promotion, when Mr Reschke owned five shares in Trevor Reschke Nominees Pty Ltd (TRN), the registered proprietor of section 235, which was part of the land identified in the second prospectus as land available to be acquired by CPH; and

(2)    it represented that RCF was able to and would advance loan funds to investors upon a loan deed being entered into when, at the time of the issue of the second prospectus, this was not the case.

162    Otherwise, I was not satisfied that the second prospectus was deficient in the respects alleged by Mr Rockliff.

163    Further, I have found that the operation of the Project deviated from the terms of the Project agreements in several respects. Most notably:

(1)    despite the published arrangements for assisting investors to finance their investments in the Project, RCF did not advance funds to the investors but instead purported to discharge its obligations through its participation in round robin transactions with AHM and Koonara by which promissory notes were transferred; and

(2)    when income was generated from grapes grown on the Project vineyard, those proceeds were not deposited into the Scheme Bank Account.

164    As explained below, the adverse conclusions that I have reached concerning the second prospectus and the operation of the Project more generally are insufficient to justify the grant of relief in Mr Rockliff's favour on the cross-claim.

Background to the establishment of the Coonawarra Wine- grape Project

Land and ownership

165    In 1997, Trevor Reschke, Mr Reschke's father, was the registered proprietor of land in Coonawarra including sections 226, 227 and 228 in the Hundred of Comaum contained in Certificate of Title Volume 5585 Folio 237. TRN, as trustee for the Reg Reschke Family Trust, was also the registered proprietor of land in Coonawarra, being section 235 in the Hundred of Comaum contained in Certificate of Title Volume 5789 Folio 31 (formerly Volume 867 Folio 45).

166    TRN was registered as a company on 30 December 1986. Vivian Reschke and Dru Reschke, Mr Reschke's mother and brother respectively, are now the directors and shareholders of TRN. Mr Reschke owned five of the original issued capital of 20 ordinary shares. The evidence does not disclose when his shares were transferred to his mother or brother. According to ASIC records, Mr Reschke was also a director of TRN from its registration until 30 January 2002.

167    In about 1997, Mr Reschke resolved to exploit part of the land then owned by Trevor Reschke and TRN to develop a vineyard by obtaining capital from outside investors to finance the vineyard establishment and development. This resolution appears to have been made in the context of a statement by Trevor Reschke to Mr Reschke that, upon his death, Trevor Reschke intended to leave part of his substantial property holdings to Mr Reschke, including sections 226, 227 and 228. Trevor Reschke told Mr Reschke that he could establish and develop a vineyard business on the land that Mr Reschke could expect to inherit.

168    In February 1998, Mr Reschke sought preliminary advice from his accountant, Shaun Allan, about obtaining control of the land upon which he sought to develop a vineyard. It is unnecessary to make findings about the various steps taken (and not taken) by Mr Reschke to explore and develop plans for the establishment of vineyards on land that included sections 226, 227 and 228, including the grant of a mortgage over those lands to secure a loan facility obtained in connection with another vineyard project. What is not in dispute is that Mr Reschke made very substantial personal, physical and financial commitments to establishing a series of new enterprises on the "family farm", which led to the planting of a significant area of the farm to vines for the first time, and Mr Reschke took responsibility for the conduct of the farming business as a whole and the management of the farming properties.

169    Trevor Reschke died on 21 June 2008, leaving sections 226, 227 and 228 to Reschke Vineyards under his will. This is one of several facts, not in dispute between the parties, concerning ownership of the land the subject of the Project. It is unhelpful to recount the details of that land ownership, in the context of this overly complex dispute. It is sufficient to note that Mr Reschke has expressed and acted in a manner that reflects beliefs as to his proprietary entitlement to the "family farm", which apparently includes sections 226, 227 and 228 as well as other properties, and as to his position as the current custodian of that land. One point sought to be made by the Rockliffs, as I understood it, was that Mr Reschke did not appreciate and did not acknowledge the interests of investors in the land the subject of the Project. I accept the point. Its significance, and the significance of other points made concerning sections 226, 227, 228 and 235 (Project Land), is considered below.

Henry Albert Project

170    The Rockliffs sought detailed findings concerning another vineyard project, which Mr Reschke put together during 1997 using other sections of land that formed part of the "family farm" (Henry Albert Project). Except as set out below, I have not made detailed findings about the Henry Albert Project because it is not relevant to this proceeding.

Development of the Project

171    Between 1998 and 2002, Mr Reschke spent the majority of his working hours on the initiation, structuring, promotion, sale and establishment of the Henry Albert Project and the Project. It is not in dispute that Mr Reschke ultimately determined the essential structure of the Project, after discussions with various persons including his father and Fergus McLachlan, the then directors of Koonara, and his professional advisers.

172    In early 1998, Mr Reschke retained Thomson Playford, lawyers, in relation to plans involving both the land to be used for the Henry Albert Project and the Project Land.

173    Immediately after the closure of the Henry Albert Project to investors in June 1998, Mr Reschke began to explore the possibility of an information memorandum offering to a small group of investors for the establishment of a vineyard on land including the Project Land. Soon after, Mr Reschke decided to investigate the raising of funds through a prospectus.

June 1998: Incorporation of Koonara, RCF and Reschke Vineyards

174    Koonara and RCF were registered as companies on 12 June 1998.

175    At all relevant times, the sole shareholder, managing director and company secretary of Koonara has been Mr Reschke. Mr Reschke has been the sole director of Koonara since 8 October 2003.

176    Between September 1998 and October 2003, the following individuals were also directors of Koonara: Richard Blair Mollison (a friend of Trevor Reschke), Andrew Tolley (a winemaker) and Stanislaw Gawel (also known to Trevor Reschke).

177    At all material times, Koonara was and is the trustee of the Koonara Management Trust. In its day to day operations, Koonara acted as trustee of that trust of which Mr Reschke is a beneficiary.

178    At all relevant times, the sole shareholder, sole director and company secretary of RCF has been Mr Reschke. At all relevant times, RCF was and is the trustee of the Rocky Castle Finance Trust and in its day to day operations, RCF acts as trustee of that trust of which Mr Reschke is also a beneficiary. RCF's involvement in the Project was in its capacity as trustee of the Rocky Castle Finance Trust.

179    Reschke Vineyards was also registered as a company on 12 June 1998. At all material times, it was the trustee of the Koonara Property Trust.

180    At all material times, Mr Reschke was the sole shareholder and sole director of Reschke Vineyards and was a beneficiary of the Koonara Property Trust.

181    It was not in dispute that these three companies (Koonara, RCF and Reschke Vineyards) were incorporated by Mr Reschke for the purposes of his proposed business of vineyard development and management and sale of wine from the proposed vineyards. Mr Reschke has described Reschke Vineyards as his "property holding trustee company".

182    The parties agreed that, as at 12 June 1998, Mr Reschke's intention was that:

(1)    Koonara would be the vineyard manager for his proposed business;

(2)    RCF would be the company which could obtain the necessary finance for the proposed vineyards; and

(3)    Reschke Vineyards would be the land holding company, that is, the company that would own or lease the land for proposed vineyards.

183    Neither of Koonara and RCF traded in their own right and neither of them owned any significant assets in their own right.

Initial approach to AHM

184    AHM was incorporated as a company in August 1997. On 18 October 2006, AHM changed its name to Advanced Horticultural Management Ltd. In 2012, the company's name was again changed, to Advanced Horticultural Management Pty Ltd.

185    The original directors of AHM included Fergus and Dugald McLachlan. On 13 February 1998, Mr Jessup was appointed a director of AHM.

186    Mr Reschke had known Fergus McLachlan since 1988 and his father, Ian McLachlan, was a friend of Trevor Reschke.

187    Sometime in 1998, Mr Reschke approached Fergus McLachlan to obtain AHM's advice and assistance with obtaining capital from outside investors to assist in the finance of the establishment and development of a vineyard.

188    In late 1998, Mr Reschke asked Fergus McLachlan whether AHM would be interested in acting as a responsible entity for a vineyard project on land that comprised at least part of the Project Land.

August 1998: Financing arrangements

189    In August 1998, the ANZ Bank offered RCF, as trustee for the Rocky Castle Finance Trust, loan facilities totalling $2,510,000. Part of the proposed security for the loans was first registered charges over sections 226, 227 and 228. The parties agreed that ultimately, a registered mortgage dated 20 August 1998 was given over sections 226, 227 and 228 by Trevor Reschke to secure a finance facility granted in favour of RCF in connection with the Henry Albert Project.

190    In his December 2010 affidavit in proceedings brought by Koonara and others against Thomson Playford (Thomson Playford proceeding), Mr Reschke explained that he and his father partly financed the establishment of the vineyard for the Henry Albert Project out of this facility. Mr Reschke stated that initially the facility was $2.5 million, and it later increased "in steps" to $4.5 million.

September 1998 and March 1999: Appointment of additional directors of Koonara

191    In September 1998, Mr Reschke procured the appointments of Mr Mollison and Mr Gawel as directors of Koonara.

192    In March 1999, Mr Reschke procured the appointment of Mr Tolley as a director of Koonara.

Late 1998/early 1999: Development of structure of the Project

193    In late 1998 and early 1999, Mr Reschke decided to establish the project that came to be known as the "Coonawarra Wine-Grape Project". His plan became to raise funds by way of a managed investment scheme, for the establishment of a vineyard on up to 240 hectares.

194    As noted earlier, it is not disputed that Mr Reschke determined the essential structure of the Project.

195    A point emphasised by the Rockliffs was that the essential structure did not involve the acquisition of the Project Land by CPH, but rather that the Project Land would be leased from Trevor Reschke (and, presumably, TRN, if section 235 was ultimately used for the Project), who would also give CPH an option to purchase the land. In turn, CPH would grant an under-lease to the custodian trustee for the benefit of investors. As I understood the point, it was that investors were never intended to have their interest in the Project Land adequately protected in the manner represented in the prospectuses. However, it was not suggested that the Project was affected by want of access to the Project Land.

196    According to the Reschke parties, another essential aspect of the Project structure was that Koonara, in the course of providing management services, would sell the Project's wine through a related entity, being Reschke Pty Ltd, which would hold the liquor licence required for that purpose.

197    At a time which is not clear, Mr Reschke calculated that the initial vineyard establishment and management costs would likely be more than adequately funded by the cash component of each grower's investment. Accordingly, Mr Reschke's view was that it was unlikely for there to be any need for the Project to obtain external funds to provide any of the finance requested by investors to be provided by RCF by way of loan to investors, at least in the first three years of the project. Mr Reschke determined that such loans could be provided by a "round robin" of cheques or promissory notes.

198    Mr Reschke and Fergus McLachlan decided that the minimum subscription under the first prospectus would be 100 units. This was based on Fergus McLachlan's assessment of the "break even situation for sale of units given the fee structure for AHM".

199    Mr Reschke and Fergus McLachlan also discussed the fee structure for Koonara. Mr Reschke calculated a figure of $9 per bottle of bottled wine, which was to be relied upon to set a "winery fee" payable by investors. Mr Reschke also determined, or at least participated in the determination of amounts to be charged to investors, including by identifying a figure of $5,900 per tonne (subsequently contained in the formula in the JVA for "Winery Expenses"), comprising $2,000 per tonne wine making, $2,500 per tonne labelling and $1,400 per tonne selling costs, which Mr Reschke considered would be close to actual costs.

200    In January 1999, Mr Reschke, together with Fergus and Dugald McLachlan and his accountant, Mr Allan, met with lawyers from Thomson Playford. At this meeting, Mr Reschke outlined to the lawyers the broad structure of the Project. The meeting discussed the requirements for capital raising by prospectus and the requirements for a product ruling request to be made to the Australian Taxation Office (ATO). Thereafter, Mr Reschke attended a meeting with lawyers from Thomson Playford, and also with Mr Jessup, to advance the preparation of the prospectus for the Project. Mr Reschke contributed suggestions for the content of the proposed prospectus. In particular, Mr Reschke instructed Mr Jessup and the Thomson Playford lawyers that the prospectus was to have an expiry date 12 months after issue, and that it was to be open for the maximum term permissible. The first prospectus reflected these instructions.

201    Mr Jessup was engaged to draft the Project Constitution, the form of JVA attached to the Constitution, a form of loan deed, a Compliance Plan and agreements between AHM and Koonara. In turn, Thomson Playford was retained to comment on Mr Jessup's draft documents. Mr Reschke also reviewed and made comments on the draft documents.

February 1999: Agreement between Koonara and AHM to establish Project

202    On 3 February 1999, Fergus McLachlan attended a meeting of the board of Koonara. Minutes of the meeting record that Fergus McLachlan informed the board that he was happy to be the single RE for Koonara's next project and, so that AHM could become the single RE, several things were required to happen. The meeting records, relevantly:

•    The budgets must be in order as soon as possible and sent to Denis Lear so that he may apply for a product ruling from the ATO.

•    An agreement must be signed by Koonara and AHM.

…

•    The risk and controls of the two companies' must be finalised so as to clearly differentiate the role that each company will play. Fergus explained that Koonara could be relinquishing a lot of control over the Project if they have an outside SRE.

203    On 24 February 1999, Koonara entered into a written agreement with AHM for the establishment of a managed investment scheme (First AHM/Koonara agreement). The agreement contains the following recitals:

A.    AHM has or will obtain a licence from the Australian Securities & Investments Commission ("ASIC") authorising AHM to act as the responsible entity for a proposed managed investment scheme of interests in a vineyard development in the Coonawarra region of south-east South Australia ("Scheme").

B.    Koonara has experience and expertise in managing and operating vineyard developments.

C.    AHM is proposing to register and issue a prospectus offering interests in the Scheme to the public ("Prospectus"). Koonara will assist in the preparation of the Prospectus and development of the Scheme.

D.    AHM has agreed to engage Koonara as its subcontractor to manage the operations of the Scheme. The parties intend that this Agreement will be supplemented by a more detailed agreement recording the terms on which AHM sub-contracts the management of the Scheme operations to Koonara at a later date.

204    Clause 6 of the First AHM/Koonara agreement provides:

COMMERCIAL DECISIONS

AHM agrees that Koonara shall be solely responsible for all Commercial Decisions regarding the Scheme and Prospectus, other than any decision relating to the remuneration, compensation, entitlement or any other right or obligation of AHM under the documents constituting the Scheme or the Prospectus.

205    "Commercial Decisions" is defined in the agreement to mean "decisions relating to matters which do not involve compliance with the Corporations Law or any other law or enactment and matters which do not involve considerations of risk or liability to AHM".

February – April 1999: Land and soil surveys, viticultural report and valuation; product ruling application and drafting prospectus

206    In February 1999, Mr Reschke commissioned a land survey of the proposed vineyard for the Project and a soil survey.

207    Around this time, Mr Reschke arranged the clearing of the Project Land. He also obtained a property valuation for the purpose of preparing a prospectus.

208    There is a valuation report dated 27 March 1999 from Colin Gaetjens in relation to the Project Land, included in each of the two prospectuses for the Project. The valuation is based, relevantly, on instructions provided by Mr Reschke, including as to the existence of grape supply contracts.

209    In March 1999, Dennis Lear was retained to prepare an application to the ATO for a product ruling. Fergus McLachlan and Mr Reschke instructed Mr Lear to write the taxation opinion for the proposed prospectus and to apply for a product ruling. The applicant for the product ruling was AHM.

210    On 5 March 1999, there was another meeting of Koonara's directors. The minutes of the meeting noted the various steps that had been taken to develop the proposed new vineyard, including that Mr Jessup "had commenced writing agreements, but would require budgets to complete them". In March 1999, Thomson Playford provided a letter of advice to Koonara following a review of the Constitution and Compliance Plan for the Project. Thomson Playford noted that they had focused on risks to Koonara as subcontractor for the Project. The advice included relevantly:

Koonara is only obliged to discharge obligations specified in the subcontract. Accordingly, Koonara should not be concerned with the constitution or the compliance plan as this is AHM's concern, except to the extent that these documents impact on AHM's ability to pay Koonara the fees under the subcontract.

211    In April 1999, Mr Reschke commissioned a viticultural report on the suitability of the land for a vineyard. Reports by Davidson Viticultural Consulting Services appear in both prospectuses.

212    There is no dispute that Mr Reschke was involved in the drafting of the first prospectus, with the benefit of advice from Thomson Playford, mostly in regard to implementing the commercial aspects of the vineyard from planting through to the selling of the final product. Mr Reschke was also concerned to ensure that the first prospectus reflected accurately the scope of the proposed roles of Koonara, RCF and CPH.

March and April 1999: Incorporation of CPH and Reschke Pty Ltd

213    CPH was registered as an unlisted public company on 24 March 1999. At the time of registration of the Project in May 1999, CPH's directors were Mr Reschke, Mr Tolley and Mr Mollison. On 10 June 1999, Mr Gawel was also appointed as a director of CPH. Mr Mollison ceased being a director on 20 March 2002, and Mr Tolley and Mr Gawel ceased being directors on 8 October 2003. On 9 December 2003, Fergus McLachlan and Guy Stratford were appointed as directors. Mr McLachlan ceased being a director on 6 May 2005 and Mr Stratford ceased being a director on 13 September 2005. Mr Stratford was a fellow student with Mr Reschke and an employee of Koonara.

214    On 2 December 2004, CPH was converted to a proprietary company and changed its name to Coonawarra Property Holdings Pty Ltd. After 13 September 2005, Mr Reschke was the sole director of CPH.

215    At all material times, Reschke Vineyards has been the majority shareholder of CPH.

216    The parties agreed that the purpose of CPH's incorporation was to take a head lease over the land for the Project and to receive the grant of an option to purchase the land from Trevor Reschke. Further, its purpose was to "grant an underlease to a custodian trustee who would hold the underlease for the benefit of investors under the Project".

217    There was also no dispute that CPH and Reschke Pty Ltd were incorporated by Mr Reschke for the purposes of his business of vineyard development and management and sale of wine from vineyards that included the vineyards established for the Project.

218    Reschke Pty Ltd was registered as a company on 1 April 1999. At all material times, Mr Reschke was the sole shareholder and sole director of Reschke Pty Ltd.

219    The parties agreed that the reason Mr Reschke wished to incorporate Reschke Pty Ltd was to establish a separate vehicle to carry on the business of selling wine, to own the intellectual property in the brands that he intended to establish, and to sell wines from vineyards managed by Koonara.

220    The parties agreed that Mr Reschke intended that Reschke Pty Ltd would also be the maker of the wine for Koonara, in relation to the Project, and he regarded its activities as being different from the activities of Koonara. The parties also agreed that Mr Reschke considered, both before and after the incorporation of Reschke Pty Ltd, that there might be some taxation benefit to him from being able to "spread" profits and losses over a further company that he wholly owned.

221    The parties further agreed that Mr Reschke caused the incorporation of each of Koonara, RCF, Reschke vineyards, CPH and Reschke Pty Ltd for the purpose of carrying on the businesses of developing and managing vineyards on the "family's land" and the subsequent sale of wine from grapes produced by those vineyards and related activities.

222    The parties also agreed that the separation of the winemaking and selling activities from the vineyard management activities of Koonara was effected by the incorporation of Reschke Pty Ltd in 1999 and was a decision of Mr Reschke.

April 1999: Approval of Project Constitution

223    In about April 1999, Mr Reschke read and approved the Project Constitution.

May 1999: Agreement between Koonara and AHM to sub-contract management services

224    By letter dated 23 April 1999, Mr Jessup wrote to Thomson Playford concerning a proposed agreement between Koonara and AHM, and suggested various amendments. Concerning the Project Land, Mr Jessup stated relevantly:

The Land Owner will grant a lease to the Custodian who holds the same as agent for the Manager who holds the same on trust for the Members. The Members pay a rent contribution fee to the Manager who then pays the same as rent to the Land Owner.

225    On or about 5 May 1999, Koonara and AHM entered into a written agreement entitled "Sub-contract of Management Services" (AHM/Koonara management services agreement). The agreement describes AHM as "Manager" and Koonara as "Contractor". The agreement contains the following recitals:

A.    The Manager expects to enter into numerous joint venture agreements in the form annexed in Schedule 1 ("Joint Venture Agreements") with various persons ("Farmers") and Coonawarra Property Holdings Limited ACN 086 860 933 ("Land Owner") for the purpose of carrying on an investment in the business of acquiring, planting, growing and cultivation of grape vines for the production of wine grapes, and the harvesting, marketing and sale of the wine grapes and bulk wine produced therefrom ("Project").

B.    The Land owner will lease the land ("Lease") which is used in the Project ("Vineyard") to an independent custodian who will hold the benefit of the Lease as agent of the Manager who, in turn, will hold the benefit of the Lease for the Farmers generally. Each Farmer will have an interest in the Project equal to their proportionate interest in the joint venture ("Participation").

C.    The Manager will be, by the terms of the Joint Venture Agreements, appointed as the manager of the Project.

D.    The Manager will, in the Joint Venture Agreements, reserve the right to sub-contract to a third party the management of the Project.

E.    The Manager, in exercise of its right to sub-contract, wishes to engage the Contractor to perform its management obligations under the Joint Venture Agreements.

226    Clause 1 of the AHM/Koonara management services agreement sets out Koonara's obligations under the agreement. Clause 1.1 sets out the following general obligations:

1.1.1    The Contractor will manage all land subject to Joint Venture Agreements ("Vineyards") for the term of the Joint Venture Agreements ("the Management Period").

…

1.1.3    The Contractor shall use reasonable endeavors to assist the Manager in carrying out the Manager's obligations under the Joint Venture Agreements.

1.1.4    The Contractor shall conduct the Project in a commercial manner and in accordance with accepted industry standards.

227    Clause 1.2 sets out specific management services required to be performed by Koonara, and is directed to the operation of the Project "in keeping with accepted horticultural standards in the viticultural industry".

228    Clauses 1.3, 1.4 and 1.5 provide:

1.3    Maximise Return and Viticultural Methods

1.3.1    The Contractor must in carrying out the Management Services do so with a view to maximising the return from the wine grapes, bulk wine or bottled wine from the vineyard and must market the sale of the same with a view to maximising the profit and long term viability and profitability of the joint venture with respect to the Project.

1.3.2    The Contractor must use good viticultural methods in the preparation and maintenance of the grape vines for the purpose of maximising the return from marketable wine grapes, bulk wine or bottled wine therefrom.

1.4.    Compliance with Laws and Regulations

The Contractor must comply with all laws and regulations that apply with respect to the Project including (without limitation) taking such measures as are in accordance with good viticultural practice to keep the Vineyard free of noxious pests, noxious animals, noxious weeds and noxious plants and exterminating any of the same that may enter or grow upon the Vineyard.

1.5    Viticultural Consultant

The Contractor must engage the services of a reputable expert in the field of viticulture and wine production to provide the Contractor and Manager with all such expert advice and assistance that the Contractor requires to carry out its obligations under this Agreement and to provide expert reports to the Farmers.

229    Clause 1.9 provides:

All contracts for sales of wine grapes, bulk wine and bottled wine produced using wine grapes Harvested from the Vineyard shall require the purchaser to make all cheques payable to "Coonawarra Winegrape Project – Scheme Bank Account".

230    Clause 3A.1 provides:

By 31 May of each year of the term of the Project, the Contractor must submit an annual budget and operational plan to the Manager for the Project for the next financial year (1 July to 30 June). The budget and operational plan must show cash flow projections including projected income and expenses.

231    There is no dispute that Mr Reschke caused Koonara to enter into this agreement.

232    On 18 May 1999, there was a meeting of the directors of Koonara. An action list, apparently prepared following the meeting, notes various tasks to be done to advance the Project. Fergus McLachlan provided an update to the meeting. Clearly, at this stage both Koonara and AHM were actively working to advance the Project.

May 1999: Project registration and constituent documents

233    On 11 May 1999, Mr Jessup in his capacity as director of AHM, lodged an application for registration of the "Coonawarra Wine-Grape Project" as a managed investment scheme with ASIC. The application was accompanied by the Project Constitution. The Constitution was executed by AHM as "Manager" and CPH as "Landowner".

234    The Project was registered by ASIC as a registered managed investment scheme on about 4 June 1999. Chapter 5C of the Corporations Law and, subsequently, Chapter 5C of the Corporations Act set out a detailed regime for the regulation of the Project as a managed investment scheme.

Project Constitution

235    The Constitution identifies the name of the Project and states that it is a "Managed Investment Scheme for primary production purposes".

236    The Project is defined by cl 30.1 of the Constitution to mean:

[T]he carrying on by the Joint Venture in the business of acquiring, planting, growing and cultivation of grape vines for the production of wine grapes, and the harvesting, marketing and sale of the wine grapes and bulk wine produced therefrom to be managed by the Manager pursuant to the Joint Venture Agreement upon the Vineyard. The Manager may engage in the production of bottled wine.

237    Clause 2.1 of the Constitution provides that the parties to the Constitution are:

a]    [AHM] ("Manager") who is the responsible entity for this Scheme;

b]    [CPH] ("Land Owner") who is or will become the registered proprietor of the Scheme Land upon which the Vineyard is located; and,

c]    Each person who becomes a Member of this Scheme (referred to as a "Farmer" in the Joint Venture Agreement).

238    As to cl 2.1(a), by cl 30.1, the "Scheme" means the scheme established by the Constitution and "Manager" is defined to include "the Manager for the time being hereof and any person authorised by this Constitution to act in that capacity".

239    As to cl 2.1(b), by cl 30.1, "Land" is defined to mean "the Land upon which the Vineyard acquired by Members are located"; "Vineyard" is defined to mean "that area of Land upon which the Project is to be carried out"; and "Member" is defined to mean "a person who becomes a Member to this Constitution and his or her legal personal representatives [referred to as a "Farmer" in the Joint Venture Agreement]".

240    As to both cl 2.1(b) and (c), by cl 30.1, "Joint Venture Agreement" is defined to mean "the agreement entered into between a Member, the Manager and the Land Owner the terms and conditions of which are set out in the Prospectus being substantially in the form contained in Schedule Two hereof". Clause 30.1 also defines "Land Owner" to mean CPH, its successors and assigns.

241    Clause 3 of the Constitution provides:

3.1    This Constitution has effect as a contract between:

a]    the Manager, the Land Owner and each Member; and,

b]    each Member and each other Member.

3.2    Each person referred to in clause 3.1 above agrees to observe and perform this Constitution insofar as they apply to that person.

242    Clause 4 of the Constitution sets out the consideration payable by "Members" of the "Scheme". Clause 4 provides relevantly:

4.2    Annual Management Fees Payable to the Manager

A member must pay the Manager the following Annual Management Fees;

…

d]    for the 12 month period commencing on the third anniversary of the Settlement Date, the sum of $1,300.00 per Participation in advance on that date;

e]    for each 12 month period thereafter an amount per Participation being the greater of:

i]    the amount calculated in accordance with the following formula:

M    =    $1,300 x A

                   B

Where –

M is the Annual Management Fee for the relevant year

A is the CPI for the last quarter in the year immediately prior to the start of the year for which this calculation is made

B is the CPI for the quarter ended 30 June, 1999, or

ii]    the Annual Management Fee for the previous 12 month period plus three per centum (3%),

annually in advance on the relevant anniversary of the Settlement Date thereafter until the termination of the Joint Venture.

…

4.4    Lease Rent Contribution Fee

Each Member must pay a Lease Rent Contribution Fee to the Manager being:

a]    for the Initial Period the sum of $300.00 per Participation in advance on the Settlement Date:

  b]    for each 12 month period thereafter the greater of:

i]    an amount per Participation calculated in accordance with the following formula:

R    =    $300 x A

                  B

Where –

R is the Lease Rent Contribution Fee for the relevant year

A is the CPI for the last quarter in the year immediately prior to the start of the year for which this calculation is made

B is the CPI for the quarter ended 30 June, 1999, or

ii]    the amount of the Lease Rent Contribution Fee for the previous 12 months plus three per centum (3%);

annually in advance on the relevant anniversary of the Settlement Date until the termination of the Joint Venture

4.5    Winery Expenses

Where the Manager engages in the production and sale of private or estate labelled wine produced from wine grapes produced from the Vineyard then the Manager must be paid:

  a]    the Winery Expenses; and,

b]    the Winery Fee of 40% of the amount by which the Gross Estate Wine Proceeds exceeds an amount of $9.00 per bottle sold.

The above costs and expenses and fees may be deducted by the Manager from the Gross Estate Wine Proceeds or if there be insufficient then from the Gross Income. The balance of the Gross Estate Wine Proceeds shall form part of the Gross Income for distribution to Members.

4.6    Harvest Fee

The Manager shall also be entitled to be paid the Harvest Fee out of the Gross Grape Sales Proceeds.

4.7    Other Expenses

In addition to the consideration referred to in clauses 4.2 to 4.7 above the Manager shall be entitled to be paid any other expenses required to be paid by the Member as provided in this Constitution.

243    Clause 4.5 was amended on about October 2005, as set out at [537] below.

244    By cl 30.1, "Lease" is defined to mean:

[T]he lease of the Land entered into between the Land Owner as Lessor and the Custodian as agent for the Manager as Lessee for a period commencing on the Commencement Date and expiring on 30th June, 2021.

245    There is a similar definition of "Lease" in the JVA.

Scheme Property

246    The Constitution defines the "Scheme Property" to mean:

[A]ll the property of the Scheme including without limitation:

 a]    contributions of money or money's worth to the Scheme; and

b]    money that forms part of the Scheme Property under provisions of the Law; and

c]    money borrowed or raised by the Manger for the purposes of the Scheme; and

d]    property acquired, directly or indirectly, with, or with the proceeds of, contributions or money referred to in paragraph (a), (b), (c) or (d); and

e]    income and property derived, directly or indirectly, from contributions, money or property referred to in paragraph (a), (b), (c), or (d).

247    The "Scheme Property" included the wine grapes produced pursuant to the Project and the wine produced from those grapes.

248    Mr Rockliff relied upon cl 15.2 and cl 15.8 of the Constitution, which provide:

15.2    Application Monies

The Manager must on receipt of application monies and the completed and signed Application Form, if the Application Form is not rejected by the Manager pay those monies as soon as practicable after their receipt but not later than the close of business on the next working day after the day of receipt into the Applications Bank Account and must, in all prospectuses and other representations relating to the Scheme Interests, direct that all cheques and other payment orders in respect of applications for Scheme Interests be drawn in favour of the Manager, or the Custodian where there is one, on account of the Scheme and the applicant.

…

15.8    Scheme Bank Account

Upon acceptance of an Application Form pursuant to clause 15.4, the Manager shall, or the Custodian, as the case may be, transfer the relevant application monies from the Application Bank Account to the Scheme Bank Account.

249    The "Scheme Bank Account" is defined to mean:

[T]he bank account maintained by the Manager or the Custodian as the agent of the Manager, as the case may be, into which all monies received by the Manager for and on behalf of Members are to be paid other than any monies required to be banked into the 'Applications Bank Account'.

250    Mr Rockliff noted cll 18.1, 18.2, and 18.3 of the Constitution, which provide:

18.1    Gross Income

All Gross Income received with respect to the Scheme must be paid by the Manager into the Scheme Bank Account.

18.2    Payment of Monies Out of Scheme Bank Account

The Manager shall be entitled to pay all monies required to be paid by or for and on behalf of the Members pursuant to this Constitution or the Joint Venture Agreement in accordance with the relevant provisions out of the Scheme Bank Account including without limitation the Annual Management Fees, the Vineyard Establishment, Lease Rent Contribution Fee, Winery Expenses and Winery Fee.

18.3     Expenses of the Scheme Paid out of Fees

All expenses of the Scheme other than:

  a]    Lease rent;

  b]    Winery Expenses and Winery Fee;

c]    any other expenses to be paid by the Member under the terms of this Constitution, during the term of the Scheme to the extent that they relate to the management duties of the Manager set out in the Joint Venture Agreement to be performed by the Manager hereunder shall be borne and paid by the Manager out of the Annual Management Fees and the Vineyard Establishment Fees.

251    "Gross Income" was defined to mean:

"Gross Income" in respect of a Scheme Interest all amounts which are or would be liable to be included in the total assessable income of a Scheme if that Scheme were a taxpayer and liable to pay income tax thereon under the provisions of the Income Tax Assessment Act, 1936 or Income Tax Assessment Act, 1997 ["1997 Act"] (together with exempt income under those Acts) and includes money or property which is or would be included in the total assessable income by virtue of Parts 3-1, 3-3 and 3-5 of the 1997 Act or any other provision of those Acts although such receipts may be of a capital nature.

Duties and obligations of RE

252    Mr Rockliff further noted that the duties and responsibilities of the "Manager" are set out in cl 22.1 of the Constitution, in terms said to mirror the provisions of s 601FC(1) of the Corporations Law (and subsequently the Corporations Act). In particular, he noted that the Manager was required to comply with the Project's Compliance Plan; ensure that "Scheme Property" was clearly identified as scheme property; and held separately from property of the Manager and property of any other scheme.

253    Mr Rockliff also noted the following obligations on the "Manager" under the Constitution:

19.4    Manager to Comply

The Manager must comply with the terms of the Compliance Plan.

19.5    Compliance Committee

The Manager must establish a compliance committee if less than half of the directors of the Manager are external directors as defined in section 601JA(2) of the Law. Further, the Manager must establish a compliance committee within 14 days after it is required to do so by section 601JA(1) of the Law or within any longer period that the Commission has agreed to in writing.

…

25.1    Financial Records

The Manager must keep written financial records that:

a]    correctly record and explain the Scheme's transactions and financial position and performance; and

 b]     would enable true and fair financial statements to be prepared and audited.

The financial records must be retained for 7 years after the transactions covered by the records are completed. If financial records are kept in electronic form, they must be convertible into hard copy. Hard copy must be made available within a reasonable time to a person who is entitled to inspect the records. The Scheme Auditor have a right of access to the records.

…

25.7    Report to Members

The Manager must report to Members for a financial year within 3 months after the end of the financial year by either:

a]    sending Members copies of the financial report for the year, the directors' report for the year and the Scheme Auditor's report on the financial report; or

b]    sending Members a concise report for the year that consists of:

i]    a concise financial report for the year drawn up in accordance with accounting standards;

ii]    the directors' report for the year, and

iii]    a statement by the Scheme Auditor that the financial report has been audited, whether, in the auditor's opinion, the concise financial report complies with the accounting standards and a copy of any qualification in, and of any statements included in the emphasis of matter section of, the auditor's report on the financial report; and

iv]    a statement that the report is a concise report and that the full financial report and auditor's report will be sent to the Member free of charge if the Member asks for them.

Joint Venture Agreement

254    As previously noted, the JVA was an agreement between a Member, the Manager and the Land Owner. Each of these terms was defined in the Constitution. AHM and CPH were also defined in the JVA as the "Manager" and "Land Owner" respectively.

255    The recitals to the JVA states:

A.    The Farmers have each agreed to enter into this Agreement to carry out the Project [as herein after defined] as a Joint Venture and to appoint the Manager as the manager of the Joint Venture on the terms therein after set forth.

B.    The Land Owner is or will become the registered proprietor of the Land.

C.    The Land Owner has granted or will grant to the Custodian as agent for the Manager a Lease of the Land and the Manager is holding or will hold the same upon trust for the Farmers.

256    Thus, the JVA contemplated CPH's acquisition of the "Land" on which the "Vineyard" was to be located by CPH, and a lease over that land that would be held on trust for the investors in the Project, defined as "Farmers" in the JVAs.

257    Clause 2.7 of the JVA provides:

The parties agree:

a]    to be just, true and faithful to each other in all matters concerned with the Joint Venture and the Project;

b]    to act in the best interest with due diligence and to the best of their abilities in all matters concerned with the Joint Venture and the Project; and

c]    to at all times furnish to each other all information and details in respect of matters undertaken relating to the Joint Venture or the Project.

258    Clause 3.1 of the JVA provides:

The Farmers hereby appoints the Manager as the Manager of the Joint Venture and the Project in accordance with this Agreement and the Manager hereby agrees to so act.

259    Clauses 3.3 to 3.8 of the JVA provide:

3.3    The Manager agrees with the Farmer to perform the Management Services and to do so in an efficacious and timely manner and must do all things as may be necessary or incidental thereto.

3.4    The Manager must in carrying out the Management Services do so with a view to maximizing the return from the wine grapes or bulk or bottled wine from the Vineyard and must market the sale of the same with a view to maximising the profit and long term viability and profitability the Joint Venture with respect to the Project.

3.5    The Manager must use good viticultural methods in the preparation and maintenance of the grape vines for the purpose of maximising the return from marketable wine grapes, bulk wine or bottled wine therefrom.

3.6    The Manager must conduct the Project in a commercial manner and in accordance with accepted industry standards.

3.7    The Manager must comply with all laws and regulations that apply with respect to the Project including without limitation taking such measures as are in accordance with good viticultural practice to keep the land free of noxious pests, noxious animals, noxious weeds and noxious plants and exterminating any of the same that enter or grow upon the Land.

3.8    The Manager must engage the services of a reputable expert in the field of viticulture and wine production to provide the Manager with all such expert advice and assistance that the Manager requires to carry out the Management Services and to provide the expert reports to the Farmers which the Manager has agreed to provide under the Scheme Constitution.

260    The "Management Services" are defined in cl 1.1 of the JVA to mean "the services the Manager is to provide to the Joint Venture with respect to the Project", including 14 specified matters.

261    The Reschke parties relied on the following provisions of the JVA to support their claims:

(1)    Clause 2.9, which provides:

The Famer by entering into this Agreement becomes a member of the Scheme and is bound by the terms of the Scheme Constitution.

(2)    Clause 4.2, which provides:

The Manager must maintain proper books of accounts, ledgers, cash books, journals and other financial records that properly record and reflect the transactions and financial affairs of the Joint Venture.

(3)    Clause 5.1, which provides:

In consideration of the Manager carrying out the Management Services the Manager must be paid the following Annual Management Fees by the Farmer as follows:

a]    for the Initial Period the sum of $13,430.00 per Participation in advance on the Settlement Date;

b]    for the 12 month period commencing on the first anniversary of the Settlement Date, the sum of $5,000.00 per Participation in advance on that date;

c]    for the 12 month period commencing on the second anniversary of the Settlement Date, the sum of $5,000.00 per Participation in advance on that date;

d]    for the 12 month period commencing on the third anniversary of the Settlement Date, the sum of $1,300.00 per Participation in advance on that date;

e]    for each 12 month period thereafter an amount per Participation being the greater of:

  i]    the amount calculated in accordance with the following formula:

M    =    $1,300 x A

                   B

Where –

M is the Annual Management Fee for the relevant year

A is the CPI for the last quarter in the year immediately prior to the start of the year for which this calculation is made

B is the CPI for the quarter ended 30 June, 1999, or

ii]    the Annual Management Fee for the previous 12 month period plus three per centum (3%), annually in advance on the relevant anniversary of the Settlement Date thereafter until the termination of the Joint Venture.

(4)    Clause 5.4, which provides:

Any expenses of the Project not to be borne by the Manager pursuant to clause 5.3 above, must be borne by the Farmer in proportion to their interest in the Joint Venture out of the Gross Income of the Joint Venture.

(5)    Clause 6.1, which provides:

The Farmer must pay the Lease Rent Contribution Fee to the Manager being:

a]    for the Initial Period the sum of $300.00 per Participation in advance on the Settlement Date;

b]    for each 12 month period thereafter the greater of:

  i]    an amount per Participation calculated in accordance with the following formula:

    R    =    $300 x A

                   B

Where –

R is the Lease Rent Contribution Fee for the relevant year

A is the CPI for the last quarter in the year immediately prior to the start of the year for which this calculation is made

B is the CPI for the quarter ended 30 June, 1999, or

 ii]    the amount of the Lease Rent Contribution Fee for the previous 12 months plus three per centum (3%),

annually in advance on the relevant anniversary of the Settlement Date until the termination of the Joint Venture.

(6)    Clause 9, which provides:

9.    GOODS AND SERVICES TAX

9.1    The Famer must in addition to any other amounts payable by the Famer herein bear and pay any goods and services tax or taxes payable with respect to any taxable supplies including without limitation those for which payments are made by the Farmer to the Manager or on the sales of wine grapes and wine from the Vineyard or on any other goods supplied or services provided for or in respect of the Project.

9.2    the Manger shall be entitled to deduct from any amounts due or payable to the Farmer any liability for goods and services tax or taxes referred to in clause 19.1.

Lease Rent Contribution Fee

262    One of Mr Rockliff's contentions is he should not have been charged any amount for the "Lease Rent Contribution Fee". The "Lease Rent Contribution Fee" is defined in the JVAs to mean "the annual amount that the Farmer must pay to the Manager in accordance with clause 6 hereof as the Farmer's contribution to the Lease Rent for that year". The "Lease Rent" is defined to mean "the annual rental payable by the Manager to the Land Owner under the Lease". The "Lease" is defined to mean "the lease of the Land entered into between the Land Owner as Lessor and the Custodian as agent for the Manager as Lessee for a period of twenty (20) years commencing on the Commencement Date".

263    The "Commencement Date" is defined to mean "the day when the Manager has accepted Application Forms from Farmers [including the Farmer] taking up a total of 200 Participations in the Joint Venture". Based on the figures set out below, this day occurred when AHM accepted Applications Forms received pursuant to the second prospectus, since 102 participations were acquired following the issue of the first prospectus and 130 participations were acquired following the issue of the second prospectus.

264     By cl 6.1 of the JVAs, the "Lease Rent Contribution Fee" was $300 per participation for the first year of the investment and the higher of a figure calculated by reference to a formula taking into account changes in the Consumer Price Index for each year thereafter or "the amount of the Lease Rent Contribution Fee for the previous 12 months plus three per centum (3%)".

265    Clause 6.2 of the JVAs provides: "The Manager must apply the Lease Rent Contribution Fee to payment of the annual rent payable by the Manager under the Lease to the Land Owner."

266    As explained below, although CPH and ARG entered into an "underlease" in respect of sections 226, 227 and 228 (which was the land on which the Project vineyards were established), that agreement did not satisfy the definition of "Lease" in the JVAs. However, in my view, there was probably a tenancy by estoppel on the terms of the underlease and there is no suggestion that ARG did not acquire the right to exclusive possession of the land.

267    Accordingly, while there was no rental payable under the "Lease", ARG was probably estopped from denying the existence of the "underlease", including the obligation to pay rent under that agreement. Further, it was not suggested that the "Manager" did not apply amounts received on account of the "Lease Rent Contribution Fee" to the payment of the annual rent payable by ARG under the underlease to CPH in accordance with cl 6.2 of the JVAs.

268    Accordingly, while I accept that Mr Rockliff was not liable to pay the "Lease Rent Contribution Fee", it is not clear that he was not otherwise liable to pay a commensurate amount on the basis of a tenancy by estoppel.

Winery Expenses

269    Clause 8.2 of the JVAs provides that "the Manager must be reimbursed the Winery Expenses out of the Gross Estate Wine Proceeds". Clause 8.3 provides "[i]n addition the Manager shall be entitled to be paid a Winery Fee of "40% of the amount by which the Gross Estate Wine Proceeds exceeds the sum of $9.00 per bottle sold".

270    "Winery Expenses" is defined to mean an amount of $5,900 per tonne of wine grapes adjusted in accordance with a formula for changes to the Consumer Price Index. The definition does not specify what types of expenses fall within the definition. However, an indication is given by cl 8.1, which provides:

The Manager may engage in the production, marketing and sale of private or estate labelled wine using grapes grown on the Vineyard including without limitation the establishment of a Winery.

271    "Vineyard" is defined to mean "that area of the Land upon which the Project is to be carried out".

272    "Winery Fee" is defined to mean "the fee payable to the Manager in addition to the Winery Expenses being the amount referred to in clause 8.3".

Compliance Plan

273    There is a compliance plan for the Project, dated 29 April 1999. The stated purpose of the plan is "to ensure that the Manager complies with the Law and the Scheme's Constitution and to ensure that the interests of Members are protected". Among other things, the Compliance Plan identified major areas of risk to Members and states what the Manager will do to protect Members in relation to those risks.

274    The plan includes the following, concerning the proceeds of sale of the harvest and the collection of income:

5.    How will the Manager ensure that it accounts for the proceeds of sale of the harvest and the collection of income?

5.1    The Compliance Officer for the Manager will check that the Custodian opens and maintains a Scheme Bank Account which will be a trust account and entitled "Coonawarra Winegrape Project – Scheme Bank Account" or similar name. Because the Scheme Bank Account is a trust account it is fully protected in the event of the failure of the Manager or the Custodian and will always remain the property of the Members.

5.2    The Compliance Officer for the Manager will check that all cheques from the proceeds of sale of the harvest or other income of the Scheme are drawn to the Custodian as trustee for the "Coonawarra Winegrape Project – Scheme Bank Account" and will bank all such cheques into the Scheme Bank Account not later than the next working day after receipt.

5.3    The Compliance Officer will check that the Custodian has an accounting system that records receipts and cheques in numerical order, enters the same into the cash book and relevant ledger and prints out monthly cash book receipts and payments journal entries and trial balance. The cash book must be reconciled with the bank statement within 21 days of the end of each month.

5.4    Before withdrawing any monies from the Scheme Bank Account there shall be a cheque requisition prepared by the Compliance Officer that sets out the reason for the drawing of the cheque and other appropriate evidence as to entitlement to payment which must be retained in duplicate one copy to be retained by the Manager with its records and another copy by the Custodian with its records.

5.5    The Compliance Officer will ensure for the Manager that no monies are drawn from the Scheme Bank Account except to meet expenses that are permitted under the Constitution to be paid from that account.

5.6    The Farm Manager will undertake all reasonable measures to ensure that all grapes harvested will be stored securely until collected by or transported to the purchaser and will use an invoicing system to ensure that all produce that leaves the Vineyard arrives at the point of sale of place of further processing without loss.

5.7    The Farm Manager will ensure that while goods are under the care of a wine-maker that the wine-maker will be responsible for ensuring the quality and quantity of the Scheme assets are protected in accordance with the contracts between the Manager and the wine maker and will ensure that invoices are used to track progress of bottles and cases that are Scheme Property until such time as the produce is paid for.

5.8    The Farm Manager will endeavour to inform the Custodian of critical factors such as the date of harvest and the purchaser.

Arrangements for financing investments in the Project

275    The prospectuses contained a form of the loan deed that would be entered into between RCF and each investor who sought a loan.

276    There was an intended arrangement, which the Reschke parties acknowledged to involve "round robins" of promissory notes, described by the parties as follows:

(1)    AHM Deposit Agreement between AHM and RCF: AHM agreed to deposit with RCF the proportion of the joint venture fees which RCF had lent to the investors which was paid by RCF to AHM at the direction of those investors, repayable on demand on written notice by AHM to RCF;

(2)    CPH Deposit Agreement between CPH and RCF: CPH agreed to deposit with RCF the rent paid to CPH (pursuant to the underlease between CPH and ARG as agent for AHM), repayable on demand on written notice by CPH to RCF;

(3)    Koonara Deposit Agreement between Koonara and RCF: Koonara agreed to deposit with RCF the first year's management fees paid to it by AHM, repayable on demand on written notice by Koonara to RCF;

(4)    Promissory note from RCF to AHM to have inserted the amount of the advances made by RCF to investors for their first year's fees, with provision for endorsement by AHM to RCF for the deposit of that amount pursuant to the AHM Deposit Agreement who accepted the same for payment;

(5)    Promissory note from RCF to AHM to have inserted the amount of the advances made by RCF to investors for their first year's rent contribution fees with provision for endorsements by AHM to CPH in payment of the rent under the underlease with provision for a further endorsement by CPH to RCF for deposit pursuant to the CPH Deposit Agreement;

(6)    Promissory note from RCF to AHM to have inserted an amount to be withdrawn by AHM from RCF pursuant to the AHM Deposit Agreement equivalent to the fees payable by AHM to Koonara out of the first year's management fees received by AHM on settlement with provision for endorsement by Koonara to RCF for deposit of that amount pursuant to the Koonara Deposit Agreement.

June 1999: Appointment of Custodian and "lease" of sections 226, 227 and 228

277    By agreement dated 7 June 1999, AHM appointed ARG as the Custodian for the Project. By that agreement, ARG was appointed to hold the "Project Property" as agent for AHM. The "Project Property" was defined to mean:

All assets of the Project required by the Law to be held by the Custodian and which are collectively held by the Custodian under this Agreement. Without limiting the generality of this definition this includes –

(a)    application money paid by applicants to the Project pending its use to acquire interests in the Project;

(b)    primary produce and products produced therefrom generated under the Project and held pending sale on behalf of Members.

278    The evidence included a "Memorandum of Underlease" dated 30 June 2000, but possibly executed after that date, by which CPH purported to lease to ARG the whole of the land comprising sections 226, 227 and 228 for the period of 21 years from 1 July 1999, at a rent being:

[T]he total amount of the Lease Rent Contribution Fees which the Lessee (or the Manager on its behalf) is entitled to receive pursuant to the Joint Venture Agreement in each twelve (12) month period of the term of this Lease commencing on the 1st day of July. The rent is subject to review as provided for in the Joint Venture Agreement and set out in clause 1.14 of this Lease. The rent shall be payable upon receipt by the Manager or the Lessee (as the case may be) or within one month of the date upon which the Manager is entitled to receive the relevant Lease Rent Contribution Fees (whichever occurs first)".

279    The Memorandum of Underlease contains the handwritten notation "Received 11.9.00". There is a letter dated 7 July 2000 from Thomson Playford to Mr Reschke, which enclosed a lease to CPH and an underlease to ARG for execution. The executed underlease was provided by ARG to Mr Jessup under cover of a letter dated 30 August 2000. By letter dated 5 September 2000, Mr Jessup forwarded the underlease to Thomson Playford for stamping and registration.

280    By letter dated 12 September 2000, Thomson Playford told Mr Jessup that the document was not in a format acceptable to the Land Titles Office for registration purposes. Thomson Playford requested three executed copies of the underlease, in the required format and with certain blanks completed. Thomson Playford also requested advice about the status of the lease to CPH and copies of that lease which, according to their letter, needed to be lodged for registration prior to the underlease.

281    Thereafter, the correspondence suggests that Mr Jessup did not respond to the 12 September 2000 letter. By letter dated 27 April 2001, Mr Jessup wrote to Thomson Playford requesting a copy of the "Lease" for the Project, for provision to ARG. By facsimile dated 23 May 2001, David Beer of Thomson Playford wrote to James Dickson of Piper Alderman, copied to Mr Jessup, saying that he believed both lease and underlease were with Mr Jessup.

282    The evidence does not reveal what, if anything, was done by either Mr Jessup or Thomson Playford to resolve the question of the location of a relevant lease or leases.

CPH's interest in the Project Land

283    CPH did not ever become the registered proprietor of any of the Project Land, as foreshadowed by the Constitution and the JVA. Although it may have acquired an option to purchase the land, or some of the land, the option was not exercised.

284    As previously noted, the Constitution and the JVA contemplated the existence of a "Lease", meaning "the lease of the Land entered into between the Land Owner as Lessor and the Custodian as agent for the Manager as Lessee for a period of twenty (20) years commencing on the Commencement Date". Although the precise "Commencement Date" is unclear, it must have been after 1 July 2000, because insufficient "Application Forms" were received pursuant to the first prospectus for 200 participations, and therefore the underlease was not for the duration required by the definition of "Lease".

285    There is also a question about whether the underlease is a "Lease" in circumstances where CPH did not have title to the subject land. In order to grant a leasehold interest in the relevant land, it was necessary for CPH to give the Custodian the right to exclusive possession of the land. CPH was never able to give that right to the Custodian in respect of any of sections 226, 227, 228, or 235.

286    Accordingly, there was never a "Lease" within the meaning of either the Constitution or the JVA.

287    However, that is not to say that CPH had no rights in relation to sections 226, 227 and 228. A tenancy by estoppel arises where A, having no title to grant a lease, purports to grant a lease to B: Edgeworth B, Butt's Land Law (7th ed, Thomson Reuters, 2017) p 337-338. That text notes that a tenancy by estoppel gives the tenant no interest in the land, since by definition it arises only where the landlord has no title to the land, and so it is not strictly within his definition of "lease". However, "as both parties are prevented from denying the existence of a lease between them, it is as though they held under a tenancy – a tenancy which gives the parties and their successors the rights and liabilities of a legal tenancy on the terms which they purported to create."