Commonwealth of Australia v Wyuna Community Incorporated [1989] ACTSC 14 (31 March 1989)

SUPREME COURT OF THE ACT

COMMONWEALTH OF AUSTRALIA v. WYUNA COMMUNITY INCORPORATED
S.C. No. 800 of 1985
Commonwealth Grant

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Miles C.J.(1)

CATCHWORDS

Commonwealth Grant - Community Housing Expansion Program - grant to be applied in certain manner - whether conditions of grant complied with.

HEARING

CANBERRA
31:3:1989

Counsel for the Plaintiff Mr. I. Curlewis

Solicitors for the Plaintiff Australian Government Solicitor

Counsel for the Defendant Mr. S. Walmsley

Solicitors for the Defendant Pamela Coward & Associates

ORDER

There be judgment for the defendant.

The plaintiff pay the defendant's costs.

DECISION

This is an action for money alleged to be due under the covenants of a deed (the deed) executed on 28 May 1985 between the plaintiff (the Commonwealth) and the defendant (Wyuna).

2. Wyuna was incorporated under the Associations Incorporation Ordinance 1953 on 21 January 1985. Soon after incorporation Wyuna successfully applied for a grant under the Community Housing Expansion Program (CHEP) administered by the Commonwealth. The terms and conditions on which the grant was made are set out in the deed. In brief, the Commonwealth paid Wyuna the sum of $133,000 for the purpose of purchasing and providing housing for members of Wyuna at 24 Morant Circuit, Kambah.

3. The whole of the deed is set out in paragraph 2 of the amended statement of claim of 14 January 1988, which was filed after the hearing commenced on 15 December 1987. In particular clause 1(b) of the deed provided as follows:
"1(b)The grant shall be applied in the following

manner:
Purchase of the property $97,500
Repair, renovation and
extension of and to the property $28,000
Establishment, legal and other
necessary costs associated with
the purchase of the property and
the provision of housing
thereat $ 7,500"

4. Paragraph 3 of the amended statement of claim is in the following terms:

"3(a)In breach of the terms of the Deed of Grant
the defendant paid the sum of $27,938.10 to
the Commissioner for Housing, the sum of
$54,752.16 to the Commonwealth Bank, Manuka
branch, the sum of $11,648.00 to Mr. Jim
Cairns and the sum of $2,361.74 for sundry
items, such money not being applied for the
purchase of the property, the repair
renovation and extension of and to the
property; the establishment of legal and
other necessary costs associated with the
purchase of the property and the provision
of housing thereat.
(b)In breach of the terms of the Deed of Grant
the defendant paid the sum of $27,938.10 to
the Commissioner for Housing, the sum of
$54,752.16 to the Commonwealth Bank, Manuka
Branch, the sum of $11,648.00 to Mr. Jim
Cairns and the sum of $13,969.81 for sundry
items such money not being applied for the
purchase of the property, the repair
renovation and extension of and to the
property; the establishment of legal and
other necessary costs associated with the
purchase of the property and the provision
of housing thereat."

5. The further amended defence filed on 25 August 1988 denies in general terms any breach of the terms of the deed, and admits the various payments of the particular sums of money set out in paragraph 3 of the amended statement of claim. It then makes the following assertions:

"3. .....
(h)it says that the payment of the monies in
(b), (c) and (d) above were for the precise
purpose of complying with the terms of the
Deed of Grant, namely for the purchase of
the property;
(i)it says that the payment of the sums in (b)
and (c) above were to discharge mortgages on
the property so that it could obtain the
title to the property;
(j)it says that the payment of the sum of
$11,648.00 to Mr. Jim Cairns was to
discharge a debt owed to Mr. Jim Cairns by
the registered proprietors of the property
and those for whom the registered proprietors
held the property in trust, it being
money lent by Mr. Jim Cairns for the
building of a dwelling house on the property
and it being necessary to discharge that
debt so as to secure the title to the
property;
(k) further as to the sum of $2,361.40 part of
that sum was paid for establishment, legal
and other necessary costs associated with
the purchase of the property and the
provision of housing thereat;
(l) it says further that if (which is denied)
the sum of $2,361.40 was not paid in accordance
with the terms of the Deed of Grant the
money used for the expenditure of the sum of
$2,361.40 was from funds which came
partially from the plaintiff pursuant to the
terms of the Deed of Grant and partially
from other funds of the defendant and
accordingly it cannot be said that the
monies expended were those paid to the
defendant by the plaintiff pursuant to the
Deed of Grant or at all;
(m) further or in the alternative to the last
preceding sub-paragraph if (which is denied)
the sum of $2,361.40 was not paid in
accordance with the terms of the Deed of
Grant the money was temporarily advanced by
the defendant from the fund or part of the
funds paid to it by the plaintiff pursuant
to the Deed of Grant and repaid to the fund
by the defendant in or about the month of
July 1985."

6. Paragraph 4 of the further amended defence repeats the substance of paragraph 3, substituting the figure of $13,969.81 for the figure of $2,361.40.

7. In paragraph 5 of the further amended defence Wyuna asserts that if any breaches occurred then:

"(i) the plaintiff suffered no damage as a result
of the breaches or any of them;
(ii) the breaches are so minor as not to entitle
the plaintiff to the return of the sum of
$133,000.00 or any part thereof;
(iii) the defendant has substantially complied
with the terms of the Deed of Grant.
(iv) the defendant seeks to be relieved from forfeiture
of its benefit under the deed on
such terms as the Court shall think fit."

8. Finally, paragraph 6 of the further amended defence alleges a condition precedent to any claim under the deed for repayment of the grant that the plaintiff will give notice in writing requiring its repayment, and no such notice having been given before the commencement of the proceedings, the plaintiff is not entitled to commence them.

9. In a letter of further and better particulars (which was not tendered in evidence but which was in the bundle of documents filed in accordance with Practice Direction No. 2 of 1981) the Australian Government Solicitor confined the allegation of breach to breach of the obligation imposed by the terms of paragraph 1(b) of the deed. Although these particulars were furnished prior to the amendment of the statment of claim, they are consistent with the conduct of the case for the Commonwealth at the hearing. The central issue for determination is whether the payment by Wyuna of each of the amounts referred to in paragraphs 3(a) and 3(b) of the amended statement of claim was an application of the grant in accordance with clause 1(b) of the deed for the purchase of the property, or for any other purpose for which the money might be applied under the terms of the deed.

10. Although this issue is on the face of it simple, it involves findings of fact about the nature of the payments made by Wyuna preliminary to the decision whether such payments were applied in the manner specified by clause 1(b) of the deed. There was a good deal of evidence both oral and documentary relating to these factual matters. Although in the end there was little dispute between counsel as to what in fact had happened, some of the details are still obscure.

11. I deal first with the events prior to the incorporation of Wyuna. During that period the land at 24 Morant Circuit was acquired by Mr. Mark Morosi and his wife Leonore (also known as Policarpio) and a house was constructed using funds from various sources. It is necessary to look at how that came about.

12. The group of people who eventually became the members of Wyuna began to associate in about 1980. They were interested in promoting and following what might be called an alternative lifestyle. That included providing low-cost housing to members, particularly members on low incomes. By 1981 the group had gained sufficient cohesion to be interested in purchasing the land at 24 Morant Circuit. They proposed building a house on it which could be occupied by members. That land was next to land at 22 Morant Circuit which was purchased by Mr. David Ditchburn and Ms. Junie Morosi on 1 July 1981. Ms. Morosi and Mr. Ditchburn built a house on their land for which purpose they borrowed money secured by first mortgage to the Commonwealth Savings Bank, registered on 6 May 1982. There was a second mortgage on 22 Morant Circuit to the Commonwealth Trading Bank, registered on 1 December 1982. I will make reference to that second mortgage in a moment.

13. The proposal to purchase and build on 24 Morant Circuit received the support of Dr Jim Cairns, although he was not at any time a member of Wyuna. Dr Cairns gave evidence, which I accept, that he offered and in due course rendered financial assistance to the project to purchase the land and build the house at 24 Morant Circuit. At a meeting or meetings of people who came to regard themselves as Wyuna members it was decided that the land should be purchased in the name of one or more members to hold the property on behalf of all the other members. The decision was made in late 1980 or early 1981. It may be that at that stage the concept of membership of Wyuna (at that stage unincorporated) was rather nebulous, but I do not think that that is of any importance. At one stage during this preliminary period it was proposed that Dr Cairns together with a Wyuna member, Mr. Mark Morosi, should apply for the Crown lease on the land, but that proposal was dropped. On 1 July 1981 the Crown lease issued to Mark and Leonore Morosi. The evidence about the price paid for the land is from Dr Cairns. He said that he advanced $11,400 to that end. He raised that sum by borrowing $11,648 by way of overdraft on an account with the Commonwealth Trading Bank, Belgrave, Victoria. The documentary evidence on this aspect is lacking, although the Bank was subpoenaed to produce and did in fact produce all relevant documents in its possession. Dr Cairns added that the police had also taken some documents.

14. After the Crown lease issued, Mark and Leonore Morosi borrowed a further sum of $28,000 from the Commissioner for Housing some time in early 1982, secured by first mortgage registered on 21 May 1982. I am satisfied that that sum was used towards the construction of the house at 24 Morant Circuit.

15. On 30 June 1982 a second mortgage was registered on the title relating to 24 Morant Circuit. The second mortgage was in favour of the Commonwealth Savings Bank. The second mortgage was not in evidence. There is no direct evidence of the amount advanced by the Commonwealth Savings Bank nor is there any evidence relating to the application for any such loan. However, I conclude that whatever was advanced was used for the construction of the house at 24 Morant Circuit. (The amount owing on the loan secured by the second mortgage on 24 Morant Circuit at the end of May 1985 was $14,621.62.)

16. On 12 October 1982 Mark and Leonore Morosi together with Dr Cairns made a joint application to the Commonwealth Trading Bank at Manuka for a loan of $15,327.73. The loan application proposed that the loan be secured by a registered second mortgage over the adjoining property at 22 Morant Circuit which by that time was held by Mr. Ditchburn, Ms. J. Morosi and Dr Cairns as tenants in common. The certificate of title relating to 22 Morant Circuit shows a second mortgage to the Commonwealth Trading Bank registered on 1 December 1982. On the evidence I am satisfied that the second mortgage on 22 Morant Circuit relates to the loan application of 12 October 1982 and that the principal sum advanced of $15,327.73 went into the account of Dr Cairns conducted at the Manuka branch of the bank and was utilised for the construction and furnishing of the dwelling at 24 Morant Circuit, even though the mortgage granted to secure the loan was over the adjoining property in which Mark and Leonore Morosi had no interest. (According to the Bank records this loan was not treated as repaid until June 1986 by which time the sum owing was $9,889.66.)

17. On 10 February 1983 Dr Cairns, Mr. Ditchburn and Ms. J. Morosi made a joint application to the Commonwealth Trading Bank, Manuka Branch, for a personal loan of $28,011.07. The internal Bank loan enquiry form shows that the application was made for the purpose of refinancing overdrawn personal cheque accounts of Ms. J. Morosi and Dr Cairns and also for the purpose of completing the dwelling at 22 Morant Circuit. It appears that those accounts had been overdrawn in completing the buildings on both No. 22 and No. 24 Morant Circuit. In accordance with that loan application $28,011.07 was paid into an account held by Dr Cairns and Ms. J. Morosi. Dr Cairns said in evidence that it was expended wholly on building the house at 24 Morant Circuit, a matter to which I will return. The Bank seems to have regarded repayment of that loan as already secured by the existing second mortgage over No. 22 Morant Circuit. Whether and how any repayments of any part of these various loans were made before or after incorporation is not clear, but nothing seems to turn on it. (According to the Bank records, this loan was repaid in May 1985.)

18. That was the position until about the end of 1984. I turn now to the events surrounding incorporation and obtaining of the CHEP grant. Evidence was given on this aspect by Mr. Mark Morosi and by Ms. Bernadette Morosi. I accept their evidence, although their memory was sometimes lacking on matters of detail. Mr. Mark Morosi was the public officer of Wyuna by the time of the hearing. Ms. Bernadette Morosi was the public officer from the time of incorporation until some time in late 1985. Ms. Leonore Morosi did not give evidence.

19. Towards the end of 1984, the members of the unincorporated association began to consider taking some steps to place the association on a more regular and formal basis. Enquiries were made of the then Department of Territories about the lease to Mark and Leonore Morosi being transferred to Wyuna. The response was that for the association to obtain a transfer of the lease it was necessary to be incorporated. Ms. Bernadette Morosi also made enquiries about obtaining a CHEP grant. She told a Departmental officer that "nobody was going to profit, it was just buying a house and paying off the mortgages". She offered to obtain an independent valuation.

20. An application for a CHEP grant was made by letter written on behalf of Wyuna dated 1 February 1985. The letter outlined the objects and traced the history of the association. The letter included the following statement:

"Our community started with one house as the base
for our members, which is 24 Morant Circuit,
Kambah. The house was purchased in the names of
two of our members to facilitate obtaining loans
from the DCT and the Commonwealth Trading Bank.
The adjacent complex, 22a and 22b (whose
occupants are not all members of our community)
gave us support financially and by extending the
use of communal facilities, i.e. kitchen, lounge,
playroom, as well as the basement area for office
space, library and meetings room."

21. The application stressed the overcrowding in the house at 24 Morant Circuit and mentioned that "divorce proceedings between the nominal owners have been instigated and the house may have to be put on the market". The letter sought a grant of $421,820 for the purchase of four houses, including 24 Morant Circuit. The application was successful only to the extent that it obtained a grant for the purchase of 24 Morant Circuit.

22. The letter of 1 February was the subject of a reply of 7 February 1985 from a CHEP officer which is not in evidence. A letter in response was written on behalf of Wyuna (the copy in evidence is undated). This letter states the following:

"As we were unable to attract finance, we
arranged for two of our members to obtain finance
with the assistance of a guarantor. In this way,
loans were obtained to purchase 24 Morant Circuit
and the list of these loans are as follows:
DCT $28,000.00
Commonwealth Savings Bank $14,750.00
Commonwealth Trading Bank $55,000.00
Total: $97,750.00
The above were loans taken progressively as the
house was being constructed as was required by
the lending institutions."

23. A valuation was obtained and submitted to the Department. The value of the property was assessed at $94,400.

24. On 9 April 1985 the Minister for Territories approved the grant of $133,000 to Wyuna. On 28 May 1985 the deed of grant was executed and the Commonwealth handed over cheques drawn on the Reserve Bank of Australia, one for $105,000 and another for $28,000. Both were made payable to Wyuna Community Incorporated.

25. On those primary facts I find that at the date of the grant Mark and Leonore Morosi held the property at 24 Morant Circuit on behalf of Wyuna. They were entitled to be indemnified by Wyuna in respect of any obligation they had to the Commissioner for Housing, the Commonwealth Savings Bank, the Commonwealth Trading Bank and Dr Cairns for monies advanced for the purchase of the land and the construction and furnishing of the house.

26. I am satisfied that the obligations incurred by Mark and Leonore Morosi under the first mortgage to the Commissioner for Housing and the second mortgage in favour of the Commonwealth Savings Bank were incurred prior to incorporation, and continued after incorporation. Mark and Leonore Morosi were entitled to be indemnified in respect of those obligations by Wyuna. I am satisfied that Dr Cairns was entitled to repayment from Mark and Leonore Morosi or Wyuna of the sum of approximately $11,400 advanced by him in 1981 for the purchase of the lease of the land. I am satisfied that Dr Cairns (jointly with Mr. Ditchburn and Ms. J. Morosi) was entitled to reimbursement from Mark and Leonore Morosi or Wyuna for the sum of approximately $15,000 obtained as a result of the joint loan application in October 1982. With respect to the loan of approximately $28,000 in or on 24 May 1983, the Commonwealth submits that the proceeds of that loan were used not towards the completion of the construction of No. 24 Morant Circuit but solely for completion of No. 22 Morant Circuit. The onus is on the Commonwealth on this issue. Dr Cairns' evidence was that the whole of the proceeds were used for "building the house at 24 because that money was owing and had to be paid". Dr Cairns said in his evidence that at that stage there was "just no room from the bank's point of view to secure anything on 24 and they had to secure it on 22". I accept that evidence. It was not broken down in cross-examination and it was contradicted only by the Bank's notation on the loan enquiry form as to the purpose of the loan. The reference in the letter from Wyuna to the Department of Territories of 7 February 1985 to a loan from the Commonwealth Trading Bank of $55,000 can be explained only upon the basis that it is a reference to the aggregate obtained and advanced by Dr Cairns (some of it jointly with Mr. Ditchburn and Ms. J. Morosi). I am satisfied that Dr Cairns was entitled to reimbursement of the proceeds of that loan.

27. The two cheques from the Commonwealth totalling $133,000 were paid into the Wyuna account at the Manuka branch of the Commonwealth Trading Bank. On 30 and 31 May 1985 cheques were drawn on the account and paid as follows:

The Commissioner for Housing $27,938.10
Commonwealth Trading Bank at Manuka $54,752.16
Dr Cairns $11,648.00
Total: $94,338.26

28. The disbursement of part of the grant in this way is substantially in accordance with what was set out in Wyuna's undated letter to the Department of Territories in February 1985 relating to the financing of the purchase of the lease and the construction of the house.

29. Further sundry items were paid which Wyuna maintains were paid pursuant to the grant and these, depending upon what view is taken of the evidence, total either $2,361.40 or $13,969.81. I shall return to this aspect in a moment.

30. It should be observed here that the $133,000 was not paid into a special account but into the general Wyuna account with the Commonwealth Trading Bank at Manuka and that Wyuna continued to operate the account for purposes which it concedes were not authorised by the deed. Solicitors acting for Wyuna then prepared a formal transfer of the lease which was executed by Mark Morosi. However on 22 July 1985 Leonore Morosi, by then known as Policarpio, refused to sign the transfer.

31. On 23 July 1985 an ex parte order was obtained from the Court whereby the Wyuna bank account was frozen and on 26 July the Court order was varied by consent to allow the sum of $36,383.10 then on term deposit to so remain to abide the further order of the Court. This sum appears to represent the balance of the grant after the disbursement referred to above.

32. The sum of $54,752.16 paid to the Commonwealth Trading Bank was disbursed by the Bank as follows:

Discharge of second mortgage over
24 Morant Circuit $14,621.62
Repayment of balance of personal loan
to Mark and Leonore Morosi and Cairns $ 9,889.66
Repayment of personal loan to Cairns,
Ditchburn, and Morosi $21,393.20
Discharge of personal loan to
Dr Cairns, Belgrave $ 8,847.68
Total: $54,752.16

33. The aggregate of the amounts paid to discharge the liabilities to the Bank of Dr Cairns and the direct payment to Dr Cairns of $11,648.00 is $51,778.54. Of this $9,889.66 represents a joint liability of Dr Cairns and Mark and Leonore Morosi, and $21,393.20 a joint liability of Dr Cairns, Mr. Ditchburn and Ms. J. Morosi.

34. Counsel submitted on behalf of the Commonwealth that the payment to Dr Cairns of $11,648.00 and the payment to the Commonwealth Trading Bank to repay loans made to Dr Cairns individually or to Dr Cairns and others were not made by way of payment for the purchase of the property, and were therefore disbursed in breach of clause 1(b) of the deed. It may be observed that the amended statement of claim goes further. It alleges that the payment to the Commissioner for Housing (which was to discharge the first mortgage) and the whole of the payment to the Commonwealth Trading Bank (including the payment of $14,621.62 to discharge the second mortgage on 24 Morant Circuit) was not for the purchase of the property. Counsel for the Commonwealth, as I understand it, did not in the end maintain that allegation. In any event, in my view, the payments which were made with the purpose of discharging the vendors' obligation to the first and second mortgagees and to enable Wyuna the purchaser to obtain unencumbered title were made for the purchase of the property and do not constitute a breach of clause 1(b) of the deed. Clearly the problem in the present case might have been avoided if more orthodox conveyancing procedures had been followed. First and foremost, immediately before the Commonwealth parted with the CHEP monies, the Commonwealth could have insisted upon a settlement procedure whereby the vendors, Mark and Leonore Morosi, produced an executed transfer in favour of Wyuna together with certificate of title and executed discharges of mortgage to be handed over upon payment by the purchasers of the purchase price from the grant monies. Because there were registered mortgages on the title, the Commonwealth, instead of paying the purchase price direct to the vendor, might have handed over on settlement, in exchange for executed discharges and releases, cheques payable not to the vendor but at the vendors' direction to the first and second mortgagees and any other creditors of the vendor whom the vendor nominated. Instead of adopting or even suggesting such procedures, the Commonwealth handed the cheques to the purchaser, Wyuna, thereby relinquishing control on how the money was to be disbursed except to the extent that the Commonwealth was entitled to observance by Wyuna of Wyuna's obligations under the deed of grant. In my view, clause 1(b) of the deed is clearly directed to the purpose of the application of the grant monies and so long as the sum of $97,500 was applied for the purpose of the purchase of the property, it was applied in accordance with the terms of the deed. The fact that the purchase was not completed immediately or might not be completed immediately is of little relevance particularly where, as in the present case, the impediment to completion was outside the purchaser's control. In any event, the purchase was in fact completed on 27 November 1987. (Any time limit fixed by the deed for completion of the purchase is not raised as an issue on the pleadings.)

35. In the circumstances, it made commercial sense for the monies to be disbursed as they were, by discharging the vendors' obligations to the mortgagees and to Dr Cairns rather than by Wyuna paying the purchase price to the vendors without some means of ensuring that the vendors discharged not only the debts that were secured upon the property but also the obligations of the vendors to repay Dr Cairns for monies lent in respect of the purchase of the land and the construction of the house. As the letter of 7 February 1985 suggested, it was already known to Wyuna that divorce proceedings were imminent, and there were obvious difficulties in paying the monies direct to the vendors or paying out the creditors only on the written direction of both vendors. Clearly the procedure that took place did so at the direction express or implied of Mr. Mark Morosi.

36. I therefore hold that the disbursement of the monies paid under the deed of grant to the Commissioner for Housing, the Commonwealth Trading Bank and to Dr Cairns was for the purchase of the property and was not in breach of clause 1(b) of the deed.

37. The remaining issue is whether $2,361.40 or alternatively $13,969.81 paid out for sundry items was paid other than for the purchase of the property, the repair, renovation and extension of and to the property or the establishment of legal and other necessary costs associated with the purchase of the property and the provision of housing thereat. Ms. Bernadette Morosi conceded in her evidence and by the production of exhibit 7 that during the period 4 June 1985 to 23 July 1985, Wyuna paid out in sundry expenses a total of $15,658.71. Of this amount only $2,374.30 can be shown to be referable to repairs and establishment costs under clause 1(b) of the deed. On the face of it then it would appear that the balance of $13,284.41, if paid out of the proceeds of the grant, would have been paid contrary to the provisions of the deed. On the other hand, during the same period the bank account was credited with a total of $13,883.20 which was received from other sources and did not represent the proceeds of the grant. Whilst the mingling of the proceeds of the grant with other funds of Wyuna was unwise, it results in the Commonwealth being unable to show on the balance of probabilities that the $13,284.41 was paid out of the proceeds of the grant contrary to the provisions of clause 1(b).

38. The Commonwealth's claim was limited to an allegation of breach of clause 1(b) of the deed and the case was never presented upon the basis that Wyuna was in breach of clause 1(c) (providing that the grant should be used for the purpose specified within three months of the date of the deed) or of clause 2 (authorising retention by Wyuna of any unspent portion of the grant only in specified circumstances).

39. One final matter needs consideration. On 30 or 31 May 1985 Dr Cairns was paid direct by Wyuna a sum of $11,648 which was intended, and accepted, as repayment of the money advanced by Dr Cairns to enable the land at 24 Morant Circuit to be purchased in 1981. Dr Cairns raised the advance by overdraft on his account at the Commonwealth Trading Bank, Belgrave, Victoria. Yet it is clear that of the $54,752.16 paid to the Bank out of the proceeds of the grant, $8,847.68 went to discharge Dr Cairns' liability in respect of a personal loan from the Belgrave branch of the Bank. Counsel for neither party drew attention to this discrepancy. On the face of it, it looks as though Dr Cairns may have been repaid twice for advancing the purchase price, and if this were so it might be difficult to categorize such overpayment as for the purchase of the property within clause 1(b). On the other hand, such overpayment, if it be such, appears to have been as a result of a mistake only. Rectification, if appropriate, is a matter between Wyuna and Dr Cairns or possibly between Mark and Leonore Morosi and Dr Cairns. Other explanations are possible in any event. The accuracy of a Bank notation that the loan was to be used to develop property in Victoria was denied by Dr Cairns. This curious feature of the case was not relied upon by the Commonwealth and I do not think that it should be allowed to affect the findings made above, nor my ultimate decision.

40. The matters raised by paragraphs 3 and 4 of the further amended defence are made out to my satisfaction. It is unnecessary to consider paragraphs 5 and 6.

41. The plaintiff's claim must accordingly fail and there will be judgment for the defendant. I shall hear from counsel as to the disposal of the $36,383.10 which was the subject of orders on 23 and 26 July 1985 and of any other sum which may represent the unspent balance of the proceeds of the grant. The plaintiff is to pay the defendant's costs. Liberty to apply.