Halliday & Matthiessen (2014: 519):
As pointed out earlier, the hypotactic relationship implies a different perspective. If we contrast the following pair of examples:
(a) Mary said: ‘I will come back here to-morrow’.
(b) Mary thought she would go back there the next day.
then in (a) the standpoint in the projected clause is that of the Sayer, Mary; she is the point of reference for the deixis, which thus preserves the form of the lexicogrammatical event, using I, here, come, tomorrow. In (b) on the other hand the standpoint in the projected clause is simply that of the speaker of the projecting one; so Mary is ‘she’, Mary’s present location is ‘there’, a move towards that location is ‘going’, and the day referred to as that immediately following the saying is not the speaker’s tomorrow but simply ‘the next day’. Furthermore, since the saying clause has past time the projected clause carries over the feature of temporal remoteness: hence would (future in past – the past defined by thought), not will (simple future). Hypotactic projection preserves the deictic orientation of the projecting clause, which is that of the speaker; whereas in paratactic projection the deixis shifts and takes on the orientation of the Sayer. And while paratactic projection can represent any dialogic features of what was said, hypotactic projection cannot; for example, vocative elements and minor speech functions can be quoted but not reported …